Peskin & Anor v Anderson & Ors

Company directors do not, merely by holding office, owe fiduciary duties to individual shareholders or members. Such a duty may arise only where special facts establish a relationship of trust, confidence and assumed responsibility between directors and particular members.

There is no general duty to disclose proposals which may increase the value of membership. Further, reasonable expenditure to investigate and implement a lawful alteration of a company's constitution is not an unlawful distribution merely because the alteration will permit a later distribution. In the absence of wrongdoing or special circumstances, no personal duty of disclosure arises.

About 355 former full members of the Royal Automobile Club claimed damages against the Club's Committee, who were also directors of its holding company, and against the company. The former members had ceased membership before a de-mutualisation scheme enabled those remaining on 8 July 1998 to receive substantial benefits from the later sale of the motoring-services business.

They alleged that the directors should have disclosed plans, discussions and expenditure concerning de-mutualisation and the disposal of the business. They said that, had disclosure been made, they would have remained members.

Neuberger J summarily dismissed the claims under CPR Part 24 and refused permission to amend the pleading: [2000] 2 BCLC 1. The appeal concerned whether the pleaded claims for breach of fiduciary duty had a real prospect of success.

1. Appeal dismissed unanimously. Mummery LJ gave the principal judgment. Simon Brown LJ expressly agreed with it and gave additional reasons; Latham LJ agreed with both judgments. The claims had no real prospect of success and were properly dismissed under CPR Part 24.

2. Directors' fiduciary duties are ordinarily owed to the company, not to shareholders individually merely because they hold office. A personal duty may coexist only where special facts create a fiduciary relationship. Relevant circumstances may include direct dealings over a specific transaction, an assumption of responsibility, agency, material representations, reliance on advice, or an improper use of inside information to obtain an unfair advantage.

3. Those circumstances were absent. There had been no relevant direct dealings, negotiations, communications or other contact between the directors and the former members. The directors had not caused the members to retire. Before March 1998 there was no sufficiently concrete and specific proposal requiring disclosure.

4. The expenditure on investigating a sale, de-mutualisation and cancellation of the prohibition on distributions was not ultra vires. Clause 4 prohibited distributions to members while it remained in force. It did not prohibit reasonable expenditure to alter or cancel the clause through lawful procedures. Such expenditure was incidental to the authorised sale of the motoring-services business. Sections 4 and 17 of the Companies Act 1985 confirmed that constitutional alteration could lawfully be pursued. Sections 35(2) and 35(3) did not assist the former members because the expenditure did not require restraint or ratification.

5. Alleged personal benefits, conflicts and selective admission of new members did not establish a separate duty to disclose to the former members. Even if some allegations were proved, any relevant fiduciary duty was owed to the company absent special circumstances.

6. The appeal was dismissed with costs on the standard basis, payable by the appellants and those represented by them. Permission to appeal was refused.

• Court of Appeal (Civil Division): Dismissed the former members' appeal and upheld the CPR Part 24 dismissal: [2000] EWCA Civ 326.
• Chancery Division: Neuberger J, on 7 December 1999, summarily dismissed the claims under CPR Part 24, refused permission to amend, and refused permission to appeal: [2000] 2 BCLC 1. Permission to appeal was subsequently granted by a single Lord Justice.