Regal (Hastings) Ltd v Gulliver

JurisdictionEngland & Wales
CourtHouse of Lords
JudgeViscount Sankey,Lord Russell of Killowen,Lord Macmillan,Lord Wright,Lord Porter
Judgment Date20 Feb 1942
Judgment citation (vLex)[1942] UKHL J0220-3

[1942] UKHL J0220-3

House of Lords

Viscount Sankey

Lord Russell of Killowen

Lord Macmillan

Lord Wright

Lord Porter

Regal (Hastings) Limited
and
Gulliver and Others.

After hearing Counsel, as well on Friday the 14th, as on Monday the 17th, Thursday the 20th, Friday the 21st and Monday the 24th, days of November last, upon the Petition and Appeal of Regal (Hastings) Limited, of Union House, 15 Regent Street, London, S.W.1, praying, That the matter of the Order set forth in the Schedule thereto, namely, an Order of His Majesty's Court of Appeal, of the 12th of February 1941, might be reviewed before His Majesty the King, in His Court of Parliament, and that the said Order might be reversed, varied, or altered, or that the Petitioners might have such other relief in the premises as to His Majesty the King, in His Court of Parliament, might seem meet; as also upon the printed Case of Charles Gulliver, Arthur Frank Bobby, David Edward Griffiths, Henry Charles Bassett and Harry Bentley and also upon the printed Case of Peter Garton, lodged in answer to the said Appeal; and due consideration had this day of what was offered on either side in this Cause:

It is Ordered and Adjudged, by the Lords Spiritual and Temporal in the Court of Parliament of His Majesty the King assembled, That the said Order of His Majesty's Court of Appeal, of the 12th day of February 1941, so far as regard the said Respondents Charles Gulliver and Peter Garton, be, and the same is hereby, Affirmed, and that the said Petition and Appeal be, and the same is hereby, dismissed this House: And it is further Ordered, that the said Order of His Majesty's Court of Appeal, so far as regards the said Respondents, Arthur Frank Bobby, David Edward Griffiths, Henry Charles Bassett and Harry Bentley, be and the same is herby, Reversed, and that judgment he entered against each of the said Respondents, Arthur Frank Bobby, David Edward Griffiths, Henry Charles Bassett and Harry Bentley for the sum of one thousand four hundred and two pounds one shilling and eight pence (£1,402 1s. 8d.), with interest at the rate of four per centum per annum from the 25th day of October as to one thousand three hundred pounds (£1,300) part thereof, and from the 5th day of December 1935, as to the balance: And it is further Ordered, That the Appellants do pay, or cause to be paid, to the said Respondents, Charles Gulliver and Peter Garton, the Costs incurred by them in the Courts below and also the Costs incurred by them in respect of the said Appeal to this House, and that the said Respondents, Arthur Frank Bobby, David Edward Griffiths, Henry Charles Bassett and Harry Bentley do repay, or cause to be repaid to the said Appellants the costs paid by them to the Respondents in the Courts below, so far as the said Costs are attributable to the Respondents other than the said Charles Gulliver and Peter Garton: And it is further Ordered that the said Respondents Arthur Frank Bobby, David Edward Griffiths, Henry Charles Bassett and Harry Bentley do pay, or cause to be paid, to the said Appellants three quarters of the Costs incurred by them in the King's Bench Division of the High Court of Justice, and do also pay to the said Appellants the Costs incurred by them in the Court of Appeal and in respect of the said Appeal to this House, the amounts of the Costs in this House to be certified by the Clerk of the Parliaments: And it is also further Ordered, That the Cause be, and the same is hereby, remitted back to the King's Bench Division of the High Court of Justice, to do therein as shall be just and consistent with this Judgment.

Viscount Sankey

My Lords,

1

This is an Appeal by Regal (Hastings) Limited from an Order of His Majesty's Court of Appeal dated the 15th February, 1941. That Court dismissed the Appeal of the Appellants from a judgment of the Hon. Mr. Justice Wrottesley, dated the 30th August, 1940. The Appeal was brought by special leave granted by this House on the 2nd April, 1941.

2

The Appellants were the plaintiffs in the action and are referred to as "Regal"; the Respondents were the Defendants.

3

The action was brought by Regal against the first five Respondents, who were former Directors of Regal, to recover from them sums of money amounting to £7,010 8s. 4d., being profits made by them upon the acquisition and sale by them of shares in the subsidiary company formed by Regal and known as Hastings Amalgamated Cinemas Limited. This Company is referred to as "Amalgamated". The action was brought against the Defendant, Garton, who was Regal's former solicitor, to recover the sum of £1,402 1s. 8d., being profits made by him in similar dealing in the said shares. There were alternative claims for damages for misfeasance and for negligence.

4

The action was based on the allegation that the directors and the solicitor had used their position as such to acquire the shares in Amalgamated for themselves, with a view to enabling them at once to sell them at a very substantial profit, that they had obtained that profit by using their offices as directors and solicitor and were, therefore, accountable for it to Regal, and also that in so acting they had placed themselves in a position in which their private interests were likely to be in conflict with their duty to Regal. The facts were of a complicated and unusual character. I have had the advantage of reading, and I agree with, the statement as to them prepared by my noble and learned friend, Lord Russell of Killowen. It will be sufficient for my purpose to set them out very briefly.

5

In the summer of 1935 the directors of Regal, with a view to the future development or sale of their Company, were anxious to extend the sphere of its operations by the acquisition of other cinemas. In Hastings and St. Leonards there were two small ones called the Elite and the De Luxe. Negotiations began both for their acquisition or control by lease or otherwise and for the disposal of Regal itself.

6

Part of the machinery for the purpose was the creation by Regal of a subsidiary company, the Amalgamated. It was registered on the 26th September, 1935, with a capital of £5,000 in £1 shares. The directors were the same as those of Regal with the addition of Garton. It was thought that only £2,000 of the capital was to be issued and that it would be subscribed by Regal, who would control it.

7

Then difficulties began with the Elite and the De Luxe as to a lease, amongst others whether the directors of Amalgamated would guarantee the rent. The directors were not willing to do so.

8

At last all difficulties were surmounted at a crucial meeting of October 2nd, 1935. It was a peculiar meeting, the directors both of Regal and Amalgamated were summoned to attend at the same place and at the same time. They did so, but, although separate minutes were subsequently attributed to each Company, it is not easy to say from the evidence at any particular moment for which company a particular director was appearing. It was resolved that Regal should apply for 2,000 shares in Amalgamated. It was agreed that £2,000 was the total sum which Regal could find. The value of the leases of the two cinemas was taken at £15,000. The draft lease was approved. Each of the Regal directors, except Gulliver, the Chairman, agreed to apply for 500 shares, Gulliver saying he would find people to take up 500. The Regal directors requested Garton to take up 500. I will deal later with particular evidence applying to Gulliver and Garton, who delivered separate defences.

9

Thus the capital of Amalgamated was fully subscribed, Regal taking 2,000 shares, the five Respondents taking 500 shares each, and the persons found by Gulliver the remaining 500. The shares were duly paid for and allotted. In the final transaction shortly afterwards these shares were sold at substantial profit and it is this profit which Regal asks to recover in this action.

10

The directors gave evidence and were severely cross-examined as to their good faith. The trial Judge said:

"All this subsequent history does not help me to decide whether the action of the directors of the Plaintiff company and their solicitor on the 2nd October was bona fide in the interests of the company and not mala fide and in breach of their duty to the company",

11

and later on he said:

"I must take it that in the realisation of those facts it means that I cannot accept what has to be established by the Plaintiff, and that is that the Defendants here acted in ill faith",

12

and later, "Finally I have to remind myself, were it necessary, that the burden of proof, as in a criminal case, is the Plaintiffs', who must establish the fraud they allege. On the whole I do not think the Plaintiff company succeeds in doing that and, therefore, there must be judgment for the Defendants."

13

This latter statement was criticised by du Parcq, L.J., in the Court of Appeal, who says:

"To anyone who has read the pleadings but not followed the course of the trial that would seem a remarkable statement on the part of the learned Judge, because it is common ground that there is no allegation of fraud in the pleadings whatever … but the course which the case has taken makes the learned Judge's statement quite comprehensible because it does appear to have been put before him as, in the main at any rate, a case of fraud."

14

It must be taken, therefore, that the Respondents acted bona fide and without fraud.

15

In the Court of Appeal the Master of the Rolls said:

"If the directors in coming to the conclusion that they could not put up more than £2,000 of the company's money had been acting in bad faith, and if that restriction of the company's investment had been done for the dishonest purpose of securing for themselves a profit which not only could but which ought to have been procured for their company, I apprehend that not only could they not have held that profit for...

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