Re Smith and Fawcett Ltd. [1942] Ch 304
Citation:Re Smith and Fawcett Ltd. [1942] Ch 304
Rule of thumb:If a director has a conflict of interest of some sort, and they are entering a bad commercial bargain, can they be stopped from doing so? If ‘bad faith’ falling short of a clear conflict of interest can be shown then, possibly, yes, however, this is a very difficult argument to make.
Judgment:
‘The principles to be applied in cases where the articles of a company confer a discretion on directors are, for present purposes, free from doubt. They must exercise their discretion bona fide in what they consider – not what a court may consider – is in the interests of the company, and not for any collateral purpose. The question, therefore, simply is whether on the true construction of the particular article the directors are limited by anything except their bona fide view as to the interests of the company ... I strongly dislike being asked on affidavit evidence alone to draw inferences as to the bona fides or mala fides of the actors. If it is desired to charge a deponent with having given an account of his motives and his reasons which is not the true account, then the person on whom the burden of proof lies shall take the ordinary and obvious course of requiring the deponent to submit himself to cross-examination. That does not mean that it is illegitimate in a proper case to draw inferences as to bona fides or mala fides in cases where there is on the face of the affidavit sufficient justification for doing so, but where the oath of the deponent is before the court, as it is here, and the only grounds on which the court is asked to disbelieve it are matters of inference, many of them of a doubtful character, I decline to give to those suggestions the weight which is desired’, Lord Greene
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.