Liability & ratification for breach of duty

Question 1

who brings the claim where there has been a breach of duty?

Answer 1

The BOD (on behalf of the company) brings the claim

SH may bring a derivative claim if the BOD are unwilling/unable to bring the claim

Question 2

what type of claim is brought?
what is the cause of action?
what are the potential remedies?

Answer 2

Breach of duty is a breach of fiduciary duty = civil claim.

Possible remedies:
o Account of profits = D pays any unauthorised profits to the company
o Recission of a contract
o Injunction
o Damages

NB - these claims are different:
o S174 is a negligence claim. Remedy = damages
o S182 is a criminal offence

Question 3

how can a breach be ratified?

Answer 3

SHs can ratify a D breach of duty by either:
o Duomatic principle by those entitled to vote; or
o Pass an OR

Question 4

if the breaching D is also a SH, how does this impact voting on the ratification?

Answer 4

If D is a SH (also applied to any SH connected to D):
o They are not an eligible member for the WR procedure;
o Any vote at a GM will not count, but they can count for quorum

Question 5

what is the effect of ratification?

Answer 5

Once ratified, there are no grounds for the company to bring an action against D

It would also be extremely difficult for a SH to found a derivative action against D

Question 6

what breaches can’t be ratified?

Answer 6

Fraudulent, dishonest or breaches during insolvency can’t be ratified

Illegal breaches