Summary
On an application for strike-out and summary judgment, the court may examine whether the pleaded case has a sufficiently arguable evidential foundation. A statement of truth does not substitute for first-hand evidence where the claim depends on disputed factual allegations.
A director is personally liable for statements made in a corporate capacity only where there was an objective assumption of personal responsibility. The corporate veil doctrine cannot be used to create a new liability which would not otherwise exist.
Fiduciary obligations require an undertaking to act for or on behalf of another, creating a relationship of trust and confidence and a legitimate expectation of loyalty. Existing contractual rights will generally militate against imposing additional fiduciary obligations on directors in favour of contractual counterparties.
Factual background
The claim arose from the sale of a healthcare business by Guy’s & St Thomas’ NHS Foundation Trust to ESMS Global Limited. The transaction included an obligation to establish an employee benefit trust and transfer 20 per cent of the company’s issued share capital to it.
The claimants sought to pursue the company’s individual directors, shareholders and associated companies through proprietary estoppel, fiduciary-duty claims and constructive-trust remedies. The Second to Seventh Defendants applied to strike out the claims and sought reverse summary judgment. The central issues were whether the individual defendants had assumed personal responsibility for assurances concerning the employee benefit trust, whether fiduciary duties arose in favour of the employees, and whether the pleaded constructive-trust remedies had any proper foundation.
Held
- Application succeeds. The claims against the Second to Seventh Defendants were dismissed. The proposed amendment application therefore fell away, and the court invited counsel to agree the appropriate form of order.
- For summary judgment, the court was required to consider the factual basis of the pleaded case. The claim had to be coherent, properly particularised and supported by evidence establishing a sufficiently arguable case with some degree of conviction. The claimants’ evidence did not meet that standard.
- The alleged pre-incorporation assurances were made in the context of a proposed corporate acquisition by IPL and ESMS. Objectively, the written communications were made on behalf of the relevant companies, not personally by the directors. The evidence did not disclose a real prospect of proving that personal oral assurances had been given. Any assurance was in any event superseded by the contractual obligation in the Business Purchase Agreement.
- The same conclusion applied to assurances allegedly given after incorporation. The company presentation and later communications were made by the defendants as directors or on behalf of the company. The evidence did not establish personal responsibility, reliance or detriment sufficient to support proprietary estoppel.
- The alleged fiduciary relationship also had no real prospect of success. A fiduciary relationship depends objectively on an undertaking to act for or on behalf of another, giving rise to trust, confidence and an expectation of single-minded loyalty. The employees had direct contractual rights against ESMS and rights concerning the employee benefit trust. They could not reasonably expect the directors to prefer their interests to those of the company.
- The constructive-trust claims failed for the same reasons. A type 1 constructive trust requires property to have been acquired on the basis of an understanding or agreement to hold it for another, with the property coloured from the outset by the relevant trust and confidence. The pleaded facts did not establish that basis, and a purely remedial constructive trust was unavailable.
- The court observed that, had there been a real prospect of establishing proprietary estoppel or fiduciary liability, questions concerning detriment, unconscionability and the appropriate remedy would have required trial. Those observations did not alter the conclusion that the claims failed at the threshold because no personal assurance or assumption of responsibility was supported by the evidence.
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Appellate history
Not stated in the judgment.
Key cases cited
18 authorities cited.
- Guest and another v Guest [2022] UKSC 27
- FHR European Ventures LLP and others v Cedar Capital Partners LLC [2014] UKSC 45
- Williams v Central Bank of Nigeria [2014] UKSC 10
- Prest v Petrodel Resources Limited and others [2013] UKSC 34
- Thorner (Appellant) v Majors and others (Respondents) [2009] UKHL 18
- Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830
- Salomon v A Salomon & Co Ltd [1897] AC 22
- Kawasaki Kisen Kaisha Ltd v James Kemball Ltd [2021] EWCA Civ 33
- Sofer v Swissindependent Trustees SA [2020] EWCA Civ 699
- Ross River Ltd & Anor v Waveley Commercial Ltd & Ors [2013] EWCA Civ 910
- De Bruyne v De Bruyne & Ors [2010] EWCA Civ 519
- Paragon Finance Plc v D B Thakerar & Co (A Firm); Thimbleby & Co v Paragon Finance Plc [1998] EWCA Civ 1249
- Bristol and West Building Society v Mothew [1998] Ch 1
- NATIONAL HOUSE-BUILDING COUNCIL v VASCROFT CONTRACTORS LIMITED [2022] EWHC 1881 (TCC)
- Clarke v Meadus [2010] EWHC 3117 (Ch)
- Ross River v Cambridge City Football Club [2008] 1 All ER (Comm) 1028
- Arklow Investments Ltd v Maclean [2000] 1 WLR 594
- Breen v Williams [1997] 1 LRC 212
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Cases citing this case
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