Equitable Life Assurance Society v Bowley & Ors

Summary judgment is inappropriate where a claim raises fact-sensitive or complex issues requiring investigation at trial, unless the court can confidently conclude that the claim has no real prospect of success and there is no compelling reason for trial. The duty of a non-executive director is governed by the same legal standard as that of an executive director, although its application depends on the director’s role and the circumstances. Directors may rely reasonably on executives and professional advisers, but delegation does not remove the duty to supervise. Relief under section 727 of the Companies Act 1985 is possible before trial but will be exceptional because the court must understand all relevant circumstances.

Equitable brought negligence and breach of fiduciary duty claims against former non-executive directors concerning the adoption and continuation of a differential terminal bonus policy, the handling of guaranteed annuity rates, bonus decisions, and communications with policyholders. The defendants sought summary judgment under CPR rules 24.2 and 3.4(2), relief under section 727 of the Companies Act 1985, and, in one case, dismissal of the claim.

The central questions were whether Equitable’s pleaded case had no real prospect of success, whether the claims involved issues requiring factual investigation at trial, and whether the individual position of one director who had not attended certain formal meetings justified dismissal.

1. Applications dismissed. The claims were not shown to have no real prospect of success. The court emphasised that summary disposal is unsuitable where material facts require disclosure, oral evidence and cross-examination, particularly in complex and fact-sensitive litigation.
2. The standard for a director’s duty of care is that of a reasonably diligent person having both the general knowledge, skill and experience reasonably expected of a person performing the relevant functions and the actual knowledge, skill and experience of that director. The same legal duty applies to executive and non-executive directors, although its application may differ according to role and circumstances.
3. Directors have a continuing duty to acquire and maintain sufficient knowledge of the company’s business. They may delegate functions and rely to a reasonable extent on competent and honest executives or professional advisers, but delegation does not absolve them from supervision. The extent of reasonable reliance is fact-sensitive.
4. Equitable’s allegations concerning the directors’ failure to question the differential bonus policy, obtain legal advice, take precautions against the risks identified in the Hyman litigation, reduce bonuses, and communicate risks to policyholders were arguable and required trial. The mis-selling claim should also proceed, despite defects in the way it was pleaded.
5. The fact that Mr Wilson did not attend the formal February meetings did not make the claim against him fanciful. His attendance at earlier meetings, receipt of the papers and opportunity to question the policy left a triable issue.
6. Section 727 contemplates that an officer may be negligent yet have acted reasonably, and may permit relief without a full trial. However, relief on an interlocutory application would be exceptional because the court must be satisfied that the officer acted reasonably and must know all relevant circumstances. The section was not applied because the negligence claims were proceeding to trial.

Not an appeal. The judgment records related proceedings concerning Equitable’s auditors, including decisions at first instance and an appeal, but those proceedings were separate from the applications determined here.