Directors' Duties

Cases:

Re D'Jan of London [1994] 1 BCLC 561 Re Simmon Box (Diamonds) Ltd [2002] BCC 82; [2000] 1 BCLC 176 Howard Smith v Ampol Petroleum [1974] AC 821 Aberdeen Rly Co. v Blaikie Bros (1854) 1 Macq. 461 Guinness Plc v Saunders [1990] 2 AC 663 Scottish Co-operative Society v Meyer [1959] AC 324 Fulham Football Club v Cabra Estates [1992] BCC 863 Williams v Natural Life Health Foods [1998] 1 WLR 830; [1998] 2 All ER 577

Question 1.

Stripey plc ('Stripey') supplies a range of traditional printing services. It has three directors, Luke Bolton, Sara Francis and Kurt Olsen. Luke and Kurt are also shareholders. The board of directors holds weekly management meetings. All three directors have service contracts that are terminable on notice. In recent months, a number of Stripey's customers have asked Stripey whether it could also provide more advanced 3D printing, a service it has not previously offered. Last month, Zen plc, a manufacturer of state-of-the-art 3D printers, contacted Stripey. It told Stripey that it had a surplus 3D printer, which it had been about to sell to one of Zen's customers, but the sale had fallen through because of the customer's insolvency. Zen offered to sell the printer to Stripey for a hugely discounted price. Stripey's board met to discuss this very attractive offer.

Sara, with Luke's support, persuaded Kurt that Stripey could not afford to purchase the 3D printer offered by Zen, and that 3D printing was so different from Stripey's existing line of business that it would be too risky, and too unprofitable, for Stripey to embark upon. They therefore declined Zen's offer, and have told Stripey's customers that it will not be providing 3D printing services.

It now transpires that Sara subsequently purchased the printer from Zen herself. It seems that she has now begun providing 3D and other printing services to some of Stripey's customers. She is making a substantial personal profit by doing so, whilst Stripey's turnover and profits have begun to fall. Kurt is understandably unhappy with the situation.

Advise Stripey plc if Sara has breached any duties owed by a director of a company.

Question 2

What duties of skill and care are owed to a company by a director? To what extent have these duties been altered by the Companies Act 2006 codification of directors duties?