Directors Duties - Duties to Creditors

Question 1

Who do directors owe a fiduciary duty to?

Answer 1

s. 227(1) Companies act
* Directors owe their duties to the company and the company alone.

Percival v Wright
* Firmly established that general duties owed by directors are to the company

Dawson International - Cullen L.J
* ‘Directors have but one master, the company.’

Question 2

What duties are owed to persons other than the company?

Answer 2

1. Shareholders
2. Creditors (New!)
3. Employees

Question 3

When does a director owe a duty to shareholders?

Answer 3

Percival v Wright: Directors are not trustees for individual shareholders

Thuiller: idea being to protect directors from multiplicity of litigation from shareholders

Stein v Blake: Court recognised that a director may owe a duty to shareholders where there is evidence of a fiduciary relationship between them.

Question 4

When is there a fiduciary relationship with shareholders?

Answer 4

Coleman v Myers: Directors, by withholding information as to the value of shares from shareholders had acted in breach of their fiduciary duty.

Woodhouse J gave general guidelines on the factors that would influence a court to find a fiduciary relationship such as shareholder dependence on info and advice and the presence of a relationship of confidence

Crindle Investments v Wymes: Keane J approved of Coleman

Allen v Hyatt: When Directors step outside of their normal role and make certain representations to shareholders, this will create a fiduciary relationship. Directors made themselves agents of the shareholders and thus owed a duty.