Pass a resolution at a members meeting declaring that

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pass a resolution at a members’ meeting declaring that the company (Toronto Construction Company) had no interest in the project, effectively freezing out Cook from the project. - Decision: The directors acted in breach of their fiduciary duty and the shareholders’ resolution was invalid because the directors/shareholders were acting under a conflict of interest. This case shows that there are special limitations on the ability of the majority of members to exploit corporate opportunities. No Secret Profits – Case Law The issue of breach of fiduciary duty often relates to disclosure and this will vary depening on the case Green v Bestobell Industries Pty Ltd (1982): Green was a senior manager of Bestobell (company involved in construction projects). Green became aware that the construction project that Bestobell was involved in was calling for a new round of tenders (offer) for construction work. Without obtaining approval from Bestobell, Green submitted a tender for the new construction work through a company he set up called Clara Pty Ltd. Green knew Bestobell would also submit a tender and he knew Bestobell’s construction costs so he ensured
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that Clara’s tender was for a lower price that Bestobell. After Green left his position, the construction contract was awarded to Clara Pty Ltd. Bestobell sued Green for breaching his fiduciary duty and sought to claim the secret profit he made (an ‘account of profits). Decision: Court had found that Green had breached his fiduciary duty by acting under a conflict of interest through the misappropriation Bestobell’s business opportunity. Regal (Hastings) Ltd v Gulliver [1967]: Regal owned a cinema in Hastings (England) and wanted to purchase the two competing cinemas in Hastings. Directors of Regal established a subsidiary company to purchase the two cinemas. The subsidiary owned only a small amount of paid up capital because it was with the intention that Regal would own all the shares in the sub. The landlord who owned the land where the two cinemas were situated asked for the sub. to have capital fully paid up to the value of $5k(pounds), or alternatively for the directors to provide a personal guarantees to ensure the payment of the rent. Regal could only contribute $2k(pounds), so the directors and solicitor gave the remaining $3k. Therefor directors or regal and the solicitor became the owner of shares in the sub which were intended to have the property of Regal. The sub. shares were later sold at a profit. New directors of Regal were appointed, the former director and solicitor were sued for breah if fiduciary duty. Regal sought an account for profits from the directors and solicitor. Decision: House of Lords (HOL) found that the directors of Regal were in a fiduciary relationship with Regal and therefore were liable to account for the profit made by selling the subsidiary’s shares. The HOL found that the solicitor was not acting in a fiduciary capacity with respect to financing the sub. and therefore was not liable to account for the profit he made.
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