Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd
February 07, 2023
Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd [2003] BCC 885 (also, Eaton Bray Ltd v Palmer) is a UK insolvency law and company law case concerning directors' duties. It recognized that directors owe fiduciary duties to creditors when a company is on the verge of insolvency.
Colin Gwyer & Associates Ltd v London Wharf (Limehouse) Ltd
London Wharf (Limehouse) Ltd was a company set up to manage three flats at 28 Narrow Street, just near the Thames in London. Colin Gwyer & Associates Ltd owned flat one on the ground floor. Mr Gwyer owned that company. Mr Palmer owned flat two and Eaton Bray Ltd owned flat three. Each had one share in the company, which held the head lease. They did not get along. Mr Gwyer had been carrying out building work. It disturbed them. He did it without their permission, in breach of covenant. It disturbed Eaton Bray Ltd in particular, which brought proceedings to make Mr Gwyer's company forfeit the lease. Meanwhile, London Wharf (Limehouse) Ltd was teetering on the verge of insolvency. Then Mr Gwyer nominated his builder (Mr Howell) to the board of the company. Eaton Bray Ltd was even more upset, and its nominated director refused to attend a board meeting to resolve the dispute. Mr Palmer wanted it settled. Mr Palmer and Mr Howell resolved that Mr Gwyer's terms for settling the matter would be accepted. Eaton Bray Ltd sued, arguing the resolution was ineffective because it was breach of a fiduciary duty.
Judgment
Leslie Kosmin QC held that the board meeting was validly convened and was quorate. Although London Wharf's articles of association allowed Mr Howell to vote on a resolution in which he had an interest, the provision's existence did not relieve him of a general duty to act in good faith for the interests of London Wharf. When they passed the resolution, the two directors were in breach of fiduciary duty. Moreover, since insolvency was imminent, they also had a duty to act in the interests of company creditors. They did not properly consider creditors, either. Therefore, the resolution accepting the settlement was invalid.
See also
West Mercia Safetywear Ltd v Dodd (1988) 4 BCC 30; [1988] BCLC 250
Charterbridge Corp Ltd v Lloyd’s Bank Ltd [1970] Ch 62, ‘could an honest and intelligent man, in the position of the directors, in all the circumstances, reasonably have believed that the decision was for the benefit of the company’.
Credit Lyonnais Bank Netherland, N.V. v. Pathe Communication Corp., Civ. A. No. 12150, 1991 WL 277613, at 34 n.55 (Del. Ch. Dec. 30, 1991)
North American Catholic Education Programming Foundation, Inc. v. Gheewalla, 930 A.2d 92 (Del. 2007) denying direct fiduciary claims against directors by creditors and limiting these duties to situations where the firm is already insolvent
References
J Lowry, 'The Recognition of Directors Owing Fiduciary Duties to Creditors' (2004) International Corporate Rescue
February 07, 2023
colin, gwyer, associates, london, wharf, limehouse, 2003, also, eaton, bray, palmer, insolvency, company, case, concerning, directors, duties, recognized, that, directors, fiduciary, duties, creditors, when, company, verge, insolvency, courthigh, court, chance. Colin Gwyer amp Associates Ltd v London Wharf Limehouse Ltd 2003 BCC 885 also Eaton Bray Ltd v Palmer is a UK insolvency law and company law case concerning directors duties It recognized that directors owe fiduciary duties to creditors when a company is on the verge of insolvency Colin Gwyer amp Associates Ltd v London Wharf Limehouse LtdCourtHigh Court Chancery DivisionDecided13 December 2002Citation s 2003 BCC 885 2003 2 BCLC 153Court membershipJudge s sittingLeslie Kosmin QCKeywordsDirectors duties creditors insolvency Contents 1 Facts 2 Judgment 3 See also 4 ReferencesFacts EditLondon Wharf Limehouse Ltd was a company set up to manage three flats at 28 Narrow Street just near the Thames in London Colin Gwyer amp Associates Ltd owned flat one on the ground floor Mr Gwyer owned that company Mr Palmer owned flat two and Eaton Bray Ltd owned flat three Each had one share in the company which held the head lease They did not get along Mr Gwyer had been carrying out building work It disturbed them He did it without their permission in breach of covenant It disturbed Eaton Bray Ltd in particular which brought proceedings to make Mr Gwyer s company forfeit the lease Meanwhile London Wharf Limehouse Ltd was teetering on the verge of insolvency Then Mr Gwyer nominated his builder Mr Howell to the board of the company Eaton Bray Ltd was even more upset and its nominated director refused to attend a board meeting to resolve the dispute Mr Palmer wanted it settled Mr Palmer and Mr Howell resolved that Mr Gwyer s terms for settling the matter would be accepted Eaton Bray Ltd sued arguing the resolution was ineffective because it was breach of a fiduciary duty Judgment EditLeslie Kosmin QC held that the board meeting was validly convened and was quorate Although London Wharf s articles of association allowed Mr Howell to vote on a resolution in which he had an interest the provision s existence did not relieve him of a general duty to act in good faith for the interests of London Wharf When they passed the resolution the two directors were in breach of fiduciary duty Moreover since insolvency was imminent they also had a duty to act in the interests of company creditors They did not properly consider creditors either Therefore the resolution accepting the settlement was invalid See also EditWest Mercia Safetywear Ltd v Dodd 1988 4 BCC 30 1988 BCLC 250 Re Smith amp Fawcett 1942 Ch 304 Charterbridge Corp Ltd v Lloyd s Bank Ltd 1970 Ch 62 could an honest and intelligent man in the position of the directors in all the circumstances reasonably have believed that the decision was for the benefit of the company US lawGeyer v Ingersoll Publication Co 621 A 2d 784 Del Ch 1992 Credit Lyonnais Bank Netherland N V v Pathe Communication Corp Civ A No 12150 1991 WL 277613 at 34 n 55 Del Ch Dec 30 1991 North American Catholic Education Programming Foundation Inc v Gheewalla 930 A 2d 92 Del 2007 denying direct fiduciary claims against directors by creditors and limiting these duties to situations where the firm is already insolventReferences EditJ Lowry The Recognition of Directors Owing Fiduciary Duties to Creditors 2004 International Corporate Rescue Retrieved from https en wikipedia org w index php title Colin Gwyer 26 Associates Ltd v London Wharf Limehouse Ltd amp oldid 1106393405, wikipedia, wiki, book, books, library,
