The Elusive Nature of the ‘Public Function’: Poplar Housing and Regeneration Community Association Ltd v Donoghue

DOIhttp://doi.org/10.1111/1468-2230.6601006
Publication Date01 January 2003
AuthorMorag McDermont
conclusion that Mashonaland was not good law: ‘If one bears in mind the high
standard of probity which equity demands of fiduciaries, and the reliance which
shareholders and creditors are entitled to place upon it, the Mashonaland principle
is a very limited one.’
31
As a matter of general principle, therefore, the proposition that a director may
be released from his duties short of resignation or of securing the company’s
consent, merely because the director has been unfairly treated, seems substantially
to compromise the objectives of the fiduciary duty of loyalty. A company can now
no longer absolutely be assured of the loyalty of its directors until they resign.
Rather, loyalty is now a function of the extent of the director’s involvement in the
affairs of the company and of the company’s loyalty to the director. With respect,
the rather extreme facts of the case, where the director’s exclusion from the
management of the company may well have amounted to constructive dismissal,
may have led his Lordship to do justice at the expense of principle and doctrine.
In this respect it is interesting to compare Pyke with the decision of Robert
Reid QC (siting as a Deputy High Court judge) in Coleman Taymar Ltd vOakes.
32
Although not referred to in Pyke, the case also involved a director competing with
his company. Reid QC approached the matter on the basis that such competition
was a breach of the director’s fiduciary duty. As in Pyke, however, at the time
of the competition the director had had no involvement in the company and
was a director in name only. Reid QC held that the director was nevertheless
in breach of his duty, but that in the circumstances it was appropriate to
relieve him of liability pursuant to section 727 of the Companies Act 1985.
33
Such
an approach is, it is suggested, to be preferred. In taking account of the
defendant’s exclusion from the company’s affairs only at the remedial stage, Reid
QC was able to reach an intuitively fair result on the facts while respecting both
the objective and methodology of the fiduciary concept in its application to
company directors.
The Elusive Nature of the ‘Public Function’: Poplar
Housing and Regeneration Community Association Ltd
vDonoghue
Morag McDermont
n
Introduction
The significance of the courts’ response to increasing privatisation and
contractualisation of the state has been recognised as ‘‘one of the most important
33 The section empowers the court to grant relief to directors from liability for, inter alia, breach of
duty where the director has acted honestly and reasonably.
n
ESRC CASE Studentship, University of the West of England.
Poplar Housing vDonoghueJanuary 2003]
113rThe Modern Law Review Limited 2003

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