Bishopsgate Investment Management Ltd v Maxwell (No 2)

Bishopsgate Investment Management Ltd v Maxwell (No 2)
Court	Court of Appeal of England and Wales
Citation(s)	[1993] BCLC 814
Keywords
Fiduciary duty, proper purpose

Bishopsgate Investment Management Ltd v Maxwell (No 2) [1993] BCLC 814 is a UK company law case concerning a director's duty to act for proper purposes of the company. This case is an example of what would now be CA 2006 s 173.

Facts

Robert Maxwell, who controlled Maxwell Group plc and bought the Daily Mirror in 1984, fell off his yacht in the Canary Islands on 5 November 1991. It transpired he had used the company pension funds to fund his own lifestyle. Ian Maxwell was Robert’s son and a director of Bishopsgate Investment Management Ltd, which was meant to be safeguarding the company pension plans. He had signed share transfers from Bishopsgate to Maxwell Group plc for no consideration. The shares had been held on trust for a number of pension schemes. The liquidators of Bishopsgate sued Ian Maxwell to compensate for the value of the shares, on the basis that it was an improper use of the company's property.

Judgment

Hoffmann LJ held that Ian Maxwell was liable for the value of the shares, not even on the basis of any negligence, but merely by misapplying the assets.

In the older cases the duty of a director to participate in the management of a company is stated in very undemanding terms. The law may be evolving in response to changes in public attitudes to corporate governance, as show by the enactment of the provisions consolidated in the CDDA 1986. Even so, the existence of a duty to participate must depend upon how the particular company’s business is organised and the part which the director could reasonably have been expected to play… Mr Ian Maxwell was in breach of his fiduciary duty because he gave away the company’s assets for no consideration… In the case of breach of the fiduciary duty, it seems to me that the cause of action is constituted not by failure to make inquiries but simply by the improper transfer of the shares…

Ralph Gibson LJ and Leggatt LJ concurred.

See also

• Re Maxwell Communications Corp plc (No 2) [1994] 1 BCLC 1, Vinelott J, agreement of contract to avoid pari passu allowed, when a subordinating creditor merely agreed to fewer rights in insolvency than under the statutory scheme.
• Re an Inquiry into Mirror Group Newspapers plc [2000] Ch 194, Kevin Maxwell, and MGN of which Kevin was a director, was investigated by the Department of Trade and Industry. The delay was due to criminal proceedings, from which he was acquitted. He had been cross examined and questioned for 61 days. He objected that the inspectors tried to make him sign a form that he would not disclose information about their questioning and that it was unreasonable that he had no legal representation. Sir Richard Scott VC held that his objections were mostly justified.
• Re Pergamon Press Ltd [1971] Ch 388, Lord Denning MR held that there was no need for assurances that inquiries under the Companies Acts would be like a court
• Maxwell v Department of Trade and Industry [1974] QB 523, Wien J, Robert Maxwell claimed that inspectors did not act in accordance with natural justice.
• Bishopsgate Investment Management Ltd v Maxwell [1993] Ch 1, no privilege against self incrimination when under investigation according to IA 1986 s 236. An investigation can still be ordered if a company is in voluntary liquidation, IA 1986 ss 122(1), 133.
• Macmillan Inc v Bishopsgate Investment Trust plc (No 3) [1996] WLR 387

External links

• This would now fall under CA 2006 s 171.