Wey Education Plc and Zail Enterprises Ltd v Zenna Atkins

The claimants, Wey Education Plc and Zail Enterprises Ltd, brought claims for breach of fiduciary and contractual duties by their director and employee, Dr Zenna Atkins. The principal legal framework included the director's duty to promote the success of the company (Companies Act 2006 s.172) and the general fiduciary duty of loyalty.

The court found that Dr Atkins breached duties in a number of respects: clandestinely appointing additional members and trustees to the charity (TMET) in a way that had the effect of taking control of that vehicle away from Zail/Wey; seeking the repayment of a capacity grant from the Department for Education contrary to Wey/Zail's interests; contacting the Department for Education and making allegations of impropriety without reasonable basis; unlawfully using Companies House access to file misleading information; continuing to act in relation to TMET after suspension; improperly soliciting consultants to dissociate themselves from Wey; and deleting company emails and copying company data in circumstances suggesting concealment.

The court rejected some allegations or causation links: notably it did not find that the claimant companies proved loss from the refusal of the Bristol schools bid causally attributable to Dr Atkins, and rejected that her acceptance of a directorship of TUTC had been shown to have caused recoverable loss. Relief awarded was limited to specified heads: one month's salary for delayed disclosure, reimbursement of certain capacity-grant-qualifying expenditure (£10,300 plus VAT subject to credit), and management/mitigation costs (c. £16,203.88). The claim otherwise failed on causation or quantum.

This was a first instance claim by Wey Education Plc and its subsidiary Zail Enterprises Ltd against their former director and chief operating officer, Dr Zenna Atkins, alleging multiple breaches of fiduciary and contractual duties arising from boardroom disputes in 2012-2013.

Background:

• The companies pursued an education services business model linked to sponsors and academy trusts (TMET), seeking DfE capacity grant funding and contracts to provide services to academies/free schools.
• Tensions arose between Dr Atkins and the majority shareholders/directors (notably Mr Massie) over fundraising, governance and control. Dr Atkins was involved in the incorporation and governance of TMET, a charitable company limited by guarantee intended as the sponsor vehicle.
• Key contested events included Dr Atkins' appointment of additional members and trustees to TMET in October 2012, her resignation and suspension in December 2012, deletion of company emails and files on 6 December 2012, communications with the Department for Education culminating in an email of 25 January 2013 alleging possible fraud, and the return of a capacity grant by TMET.

Nature of the claim/application: The claimants sought declaratory and monetary relief for breaches of fiduciary duties and contractual obligations, quantified losses (including lost contracts such as the Bristol schools), repayment of unauthorised payments and salaries, and damages for wasted management time and other losses.

Issues framed by the court:

• Whether Dr Atkins validly acted as sole director/member of Zail when passing the 22 October 2012 TMET resolution.
• Whether the appointments and related conduct were in breach of fiduciary duty and, if so, what losses flowed from them.
• Whether Dr Atkins' communications with the DfE (including the 25 January fraud allegation) and the return of the grant caused the claimed losses.
• Whether deletion or copying of company data and misuse of Companies House access constituted breaches and caused loss.
• Causation and quantum of asserted losses including the Bristol schools contract, the Tottenham UTC opportunity and management/mitigation costs.

Court reasoning and findings:

• The judge found Dr Atkins did have the power to act as Zail's sole director when she executed the 22 October resolution and that the appointments were made to vest control of TMET in persons loyal to her; this was a breach of her duty of loyalty.
• The court concluded Dr Atkins acted disloyally in seeking repayment of the capacity grant and in her communications with the DfE including making unfounded allegations; those actions were in breach of duty and caused some loss.
• Her conduct after suspension (continuing to act for TMET, soliciting consultants to dissociate from Wey, filing misleading Companies House notices and deleting emails) was found to be wrongful and in breach of duty; deletion of emails was found to have been intended to conceal misconduct.
• The court rejected causation for the major item claimed — the loss of the Bristol schools contracts — concluding the Department for Education's later concerns about financial viability could be attributed to its own due diligence and not solely or effectively to Dr Atkins' actions.
• The claim that acceptance of a directorship of the TUTC caused loss was not proved causally; loss of a chance was not established on the evidence.
• On quantum the judge awarded limited sums where causation and quantification were supportable: one month's salary (as an estimate for the delay in disclosure), £10,300 plus VAT (subject to credit) in respect of capacity-grant-qualifying expenditure, and amounts for management/mitigation costs (~£16,203.88). Other heads failed for lack of causation or evidence.

The judgment summarises that there will be judgment for the claimants for the damages assessed and directions were to be agreed for the final order.

This was a first instance judgment. The court entered judgment for the claimants in part. The judge held that Dr Atkins breached fiduciary and contractual duties in multiple respects (notably by clandestinely appointing members/trustees to TMET to secure control, procuring repayment of the capacity grant, making unfounded allegations to the Department for Education, misusing Companies House access, acting after suspension and deleting company emails/data). The court awarded damages limited to heads for which causation and quantum were established, including one month's salary for delayed disclosure, £10,300 plus VAT (subject to credit) for grant-eligible expenditure, and management/mitigation costs of c. £16,203.88. The court dismissed the claim that Dr Atkins caused the loss of the Bristol schools contracts and most wider consequential losses for lack of causal proof.