fiduciary and statutory duties:

Introduction:

Directors run of the company. They take all the decisions on behalf of the company since they are
decision makers of the company. The numbers of duties imposed on directors to prevent the corporate
abuse or misuse of powers. There are two types of directors in the United Kingdom. The first one is
Executive directors and second one is Non-Executive directors. From the given fact it is clear that Quinn,
Rob and Sara are the directors of the Land Transform Limited (‘the company’). Quinn, Rob and Sara owe
a duty to the company.

Potential breaches of fiduciary duties of Rob:

In Percival v Wright it was established that the directors owe the fiduciary duties to the company solely,
not to the shareholders, employees and creditors of the company. Therefore, all the directors owe
duties to the company. The directors must not abuse their position and as fiduciaries must not profit
from their position being directors. As a fiduciary a directors owes the numbers of duties to the
company. As a director he has a duty to exercise his power for the proper purpose, duty to act bona fide
and in good faith in the interest of the company, duty not to put himself.

From the given fact it is clear that Mr. Rob abused his position as a director of the company and gained
profit from his position being director of the company since the tender obtained by his wife company.
So clearly he made profit from his position. Mr. Rob did not act in the interest of the company rather he
did acted interest of rival company. Therefore, it is highly likely that court may found that Mr. Rob
breached his fiduciary duties.

The potential breaches of the statutory duties of Rob:

Duty to act within powers under section 171 of the Companies Act 2006:

A director of a company must act in accordance with the company’s constitutions, and only exercise
powers for the purposes for which they are conferred under section 171 of the Companies Act, 2006.
This section has imposed two separate duties on a director. The first duty is duty to act within the
company’s constitution. Therefore, a director must act in accordance with company’s article of
association. The director is not allowed to act beyond the power given to him in the article of association
of the company. The second duty imposed by section 171 of Companies Act, 2006 is duty to exercise
their powers for the purpose for which they are conferred. In Re Smith & Fawcett ltd (1942) it was held
that Directors should exercise their powers “bona fide in what they consider, not what a court may
consider is in best interests of the company. Therefore, a director must only exercise his powers for the
purposes for which the powers are conferred on him. This duty is concerned with abuse of director’s
powers, by doing acts which are within its scope but used for inappropriate reasons. From the given fact
it indicates that Mr. Rob did not exercise his powers bona fide in what he considers. He clearly abused

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his power as director by giving the opinion that the land was unsuitable for development since it was
situated by the river and the land is so at high risk of flooding.

The duty to promote the success of the company for the benefit of the members as a whole under
section 172 of the Companies Act 2006:

Under section 172 of the Companies act, 2006 a director shall act in the way he consider , in good faith,
would be most likely to promote the success of the company for the benefits of its members as a whole
not for individual gain for the relevant director. The director must have regarded the following matters:

a. The likely consequence of any decisions in the long term,

b. The interests of the company’s employees,

c. The company’s relationship with suppliers, customers and others,

d. The consequence of the company’s operations on the community and the environment;

e. The desirability of the company maintaining a good reputation for high standard of operation
attitude;

f. The necessity to act fairly as between the members of the company.

Mr. Rob had failed to act as his duty to promote the success of the company for the benefit of its
members as a whole not for individual gain for him. The company did not submit the tender as a result
the company had to cuts cost and make 100 employees redundant. In addition the company had to
terminate agreement with two key material suppliers.

Duty to exercise independent judgment under section 173 of the Companies Act, 2006

Under section 173 of the Companies Act, 2006 a director of a company must exercise independent
judgment. However, a director will not be liable under this section if the director acts in accordance
with an agreement duly entered into by the company that limits the future exercise of discretion by its
directs, or director acts in a way authorized by the company’s article of association. Therefore, directors
must exercise their powers independently, without subordinating their power to the will of others,
whether by delegations or otherwise. Mr Rob did not use his independent judgment to survey the land
might be. He might be biased by wife’s company.

The duty to exercise reasonable care, skill and diligence under section 174 of CA 2006

Mr Rob as a director of a company must exercise reasonable care, skill and diligence. The section further
states that the care, skill and experience that may be reasonable be expected of a person carrying out
the functions carried out by the director in relation to the company and the general knowledge, skill and
experience that the director has. It is clear that individual director must use their own judgment for
deciding any affairs of the company. In Re Westmid Packing Services Ltd (1998) it was held that

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“individual director owes duties to the company to inform himself about its affairs and to join with his
co-directors in supervising or controlling them”. Rob suggested that the land was not perfect for the
housing as a result the company did not submit the tender. It is clear that Mr Rob did not exercise
reasonable care skill and diligence.

The duty to avoid conflict of interest under section 175 of CA 2006

Mr Rob must avoid circumstances in which he has direct or indirect interests that conflict or may conflict
with, the company’s interests. This section particularly deals with the situations such as the exploitation
of property, data, information, or any opportunities regardless the company could grab those
opportunities or not. The director will not be liable under this section if the director can show that the
situation cannot reasonably be regarded as likely to give rise to a conflict of interests; or if the matter
has been authorized by the directors of the company. In Boardman v Phipps (1966) it was held that
“whether a reasonable man looking at the relevant facts and circumstances would think that there is a
real and sensible possibility of conflict”. It is clear that the relevant facts and circumstances are very
crucial to determine whether there was a conflict of interest or not. Therefore, it is highly likely that Mr
Rob failed to avoid conflict of interest.

The duty not to accept benefits from third parties under section 176 of CA 2006

Under section 176 of CA 2006, Mr Rob must not accept any benefit from third party which is conferred
because of his being director or doing or not doing anything as a director of relevant company. The term
benefit is not defined by the section of the CA 2006. However, the term benefit will include any type of
benefits, including no-financial benefits. Therefore, a director must not accept any non-financial benefits
from any third parties. From the given fact it is clear that he is benefited since the advised the company
not to submit the tender.

The duty to declare any interests in a proposed transaction under section 177 of CA 2006

Mr Rob as director of a company must declare the nature and extent of director’s interest if in any way,
directly or indirectly he was interested in a proposed transaction or arrangement under section 177 of
CA 2006.

In summary, Mr. Rob has breached the following duties act within powers, promote success of the
company, exercise independent judgment, conflict of interest, exercise reasonable care, skill and
diligence and finally avoid conflict of interest.

Remedies:

Under section 178 the company has remedies that remedy available is the same that is available under
the provision of common law. The company seeks for court order on equitable ground to claim damages
from Mr Rob. They can also go foe court as Mr Rob received secret profit from the tender. In Regal
(Hasting) v Gulliver it was held that regarding secret profit that this liability to account arises even where
the director has acted honestly and the company could not have obtained the benefit. From the given
principle it is clear that the company will able to return profit from Mr Rob.

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Conclusion:

The court may be found that Rob has breached several directors’ duties. The company may be brought
the claim against Rob. The statutory duties are enforceable in the same way as other fiduciary duties
owed by Rob to the Company.

Ans. to the question no-6 (Part-B)

Introduction:

Insider dealing is a criminal offence in the United Kingdom. Under section 52(1) of the Criminal Justice
Act, 1993, an individual only commit this offence. Therefore, under this section a company or a
corporate body cannot commit the offence of insider dealing.

Section 57(1) of the Criminal Justice Act 1993 states that An insider will be an individual who holds inside
information as an insider if it is , and he knows that it is, inside information and he has it and knows that
has it , from an inside source. So the insider must hold inside information as an insider. Jeff is the
managing director of the Books Plc. Therefore, he is the insider under the section 57(1) of the Criminal
Justice act, 1993.

Under section 57(2) (a) (i) primary insider can be a director, employee or shareholder of an issue of
securities. In addition, any person who has access to the information by virtue of his employment, office
or profession is a primary insider. If someone has obtain information from a director, employee or
shareholder that person is a secondary insider. As Jeff managing director of the Books Plc so he is the
primary insider and Wood is the secondary insider as he got the information from Jeff. From the given
fact it is not clear that whether Bev bought the share or not.

Therefore, there two insiders, the first ne is Jeff and second one is his son Woody. Therefore, an offence
can be done by them as insider dealing offence only committed by the individual not by the company

Section 56(1) deals with the inside information, according to this section inside information is
information which relates to a particular security or to particular issuer and not to securities or issuers of
securities generally. In addition, information which is specific or precise that information will treat as
inside information. Jeff and Woody clearly deal with the insider information when they were giving
information to other person regarding the securities of the company.

With the meaning of section 52 of the Criminal justice Act, 1993, there are three elements need to be
established by the prosecution to establish a crime of insider dealing. These are following:

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The insider is buying and selling price affected securities

The Jeff can be liable as he sold 20,000 of his shares in Brooks Plc intending to use money to pay his
favorite car. So he is the insider who is buying and selling prices affected securities. Therefore, the
prosecution can bring the claim against him under this provision.

Influence another person to buy or sell price affected securities

Jeff influence Lyn and barman to buy Paper Plc.’s shares and he also provoked his son to buy those share
so he was inflicting those people buy those shares affected prices since the price of Paper Plc.’s shares
climbed to £8 each and the price of Books Plc.’s shares fell to £1.

Unauthorized disclosing certain inside information to third parties

Jeff clearly disclosed unauthorized information which is inside information to various people. He did
disclose information to his friend and his son. In R v Staines and Morrrissey it was held that “the
company needs to be certainly named by the person who disclosed the insider information”. Although
Jeff named the company name to his friend and influence him to buy the shares of Paper plc.

Therefore, Jeff can be liable under section 52 of the Criminal justice Act, 1993. From the above
discussion, it is clear that Jeff is highly likely to commit a crime of inside dealing under section 52(1) of
the Criminal Justice Act, 1993. He has committed three offences under the section 52 of the criminal
Justice Act, 1993. Woody is highly likely committing the one count of offence for disclosing the
information to his girlfriend.

Punishment for Insider dealing:

If Jeff convicted of insider dealing under the Criminal Justice Act, 1993 is liable on summary conviction to
a fine or imprisonment for a term up to six month or both. If Jeff is convicted of insider dealing is liable
on conviction of indictment to a fine or imprisonment for up to 7 years or he can be liable for both fine
and imprisonment under the section 61 of the Criminal Justice Act, 1993.

Defences for dealing, encouraging and disclosing for Jeff

Section 53(1) of the Criminal Justice Act, 1993 provides three general defences for dealing, encouraging
and disclosing:

The first defence is dealing, encouraging and disclosing did not at the time expect the dealing to result in
a profit.

The second defence is dealing, encouraging and disclosing believed on reasonable grounds that the
information had been disclosed widely enough. If the person can proof that the information already
widely circulated to the public he may not be liable for dealing, encouraging and disclosing.

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The third defence is dealing, encouraging and disclosing even if he did not have the information, he
would have done what he did. Therefore, if the person can establishes that he did the act regardless of
the information he had on that time.

Conclusion:

In summary, there is highly likely that Jeff has committed three offences of insider dealing. He bought
shares and influenced other people to buy certain shares.