Wrexham Association Football Club Ltd. v Crucialmove Ltd.

A company fiduciary must give single-minded loyalty. A fiduciary may neither exploit the principal’s opportunity nor enter a transaction in which duty and personal interest may conflict without fully disclosing the nature and extent of that interest and obtaining informed consent. The rule applies even if the principal could not itself exploit the opportunity.

A third party who knows circumstances indicating an improper purpose cannot rely upon the officers’ ostensible authority or the indoor management rule. Good faith may require inquiry into authorisation and disclosure. Dishonesty need not be proved unless accessory liability is alleged.

Serious allegations concerning integrity do not automatically preclude summary judgment. Their nature is an important factor, but judgment may be entered where the evidence leaves no real prospect of a successful defence and no compelling reason for trial.

Crucialmove Ltd appealed from an order of HH Judge Norris QC in the Chancery Division, Birmingham District Registry. On the football club’s application for summary judgment, the judge declared that Crucialmove held the freehold of the Racecourse Ground on trust for the club, subject to a charge securing the purchase price, acquisition costs and any further allowable sums.

A director and chairman of the club had executed a declaration that the club held the freehold for Crucialmove. He also had a personal interest in a joint venture with Crucialmove’s controller to obtain profits from redevelopment of the club’s property. The evidence disclosed no authorisation by the board or full disclosure of that interest.

The appeal concerned whether Crucialmove’s controller lacked good faith, whether Crucialmove could rely on the officers’ authority and statutory protections, and whether such matters could properly be decided by summary judgment.

1. Appeal dismissed. Sir Peter Gibson, with whom Dyson LJ and the President of the Queen’s Bench Division agreed, held that Crucialmove had no real prospect of successfully defending the challenge to the declaration of trust. The evidence established a breach of fiduciary duty and an absence of good faith without requiring a trial.

2. A fiduciary may not place himself in a position where duty and personal interest may conflict, profit from the fiduciary position, or act for personal benefit without the principal’s informed consent. Disclosure must extend beyond the existence of an interest to its nature and extent. The rule applied although the club might have lacked the funds to purchase the freehold itself. The opportunity remained the club’s opportunity. Bhullar v Bhullar [2003] 2 BCLC 241, Bristol & West Building Society v Mothew [1998] Ch 1 and Keech v Sandford (1726) Sel Cas Ch (t King) 61 applied.

3. Dishonesty was not an essential ingredient of the club’s claim. Satnam Ltd v Dunlop Heywood Ltd [1999] 3 All ER 652 concerned accessory liability for dishonest assistance and did not establish that dishonesty was required for the form of constructive trust asserted here. Crucialmove had actual or constructive notice that the director was acting otherwise than wholly for the club’s purposes and without full disclosure.

4. Crucialmove could not rely upon actual or ostensible authority or the rule in Royal British Bank v Turquand (1856) 6 E & B 327. The transaction’s unusual nature, the controller’s knowledge of the director’s conflicting interest and the absence of board documentation put Crucialmove on inquiry. No inquiry was made. Rolled Steel Products Holdings Ltd v British Steel Corporation [1986] Ch 349 applied.

5. Sections 35A, 35B and 36A of the Companies Act 1985 did not protect Crucialmove. Sections 35A and 35B did not remove the need to inquire into authorisation when the known circumstances put the counterparty on inquiry. Section 36A likewise required a purchaser in good faith, which Crucialmove was not.

6. The court may give summary judgment on a single issue where that causes no unfairness. Although an adverse finding about integrity will often favour oral examination at trial, it creates no automatic bar. Here the conclusion rested upon common-ground material and evidence advanced by Crucialmove’s controller. There was no real prospect of a successful defence and no other compelling reason for trial.

1. Court of Appeal (Civil Division): The appeal was dismissed. The declaration and consequential inquiry ordered below remained in force: [2006] EWCA Civ 237.

2. Chancery Division, Birmingham District Registry: HH Judge Norris QC granted the club summary judgment. He declared that Crucialmove held the freehold on trust for the club, subject to a charge securing the purchase price, acquisition costs and other allowable sums, and directed an inquiry into those sums. The judge refused permission to appeal.