Percival v Wright
| Percival v Wright | |
|---|---|
 | |
| Court | High Court of Justice |
| Citation(s) | [1902] 2 Ch 401 |
| Keywords | |
| Duty of care | |
Percival v Wright [1902] 2 Ch 401 is a UK company law case concerning directors' duties, holding that directors only owe duties of loyalty to the company, and not to individual shareholders. This is now codified in the United Kingdom's Companies Act of 2006 section 170.
Facts
Mr Percival owned shares per value of £10 in a company whose shares neither had a market price nor were they quoted on the stock exchange and were only transferable with the director's approval. Mr Percival through his solicitors inquired from the company if any body was willing to purchase their shares £12.55 a priced based on independent valuation. Mr Wright who was the chairman of a company, with two other directors, agreed to buy shares from Mr Percival at £12.10 each. Mr Percival then found out the directors had been negotiating with another person for the sale of the whole company at far more than £12.10 a share. The directors had not told Percival. Percival claimed breach of fiduciary duty.
Judgment
Swinfen Eady J held the directors owed duties to the company and not shareholders individually.
| “ | It was strenuously urged that, though incorporation affected the relations of the shareholders to the external world, the company thereby becoming a distinct entity, the position of the shareholders inter se was not affected, and was the same as that of partners or shareholders in an unincorporated company. I am unable to adopt that view...
There is no question of unfair dealing in this case. The directors did not approach the shareholders with the view of obtaining their shares. The shareholders approached the directors, and named the price at which they were desirous of selling. The plaintiffs’ case wholly fails, and must be dismissed with costs. |
” |
Subsequent decisions
Percival v Wright is still considered to be good law, and was followed by the House of Lords in Johnson v Gore Wood & Co [2000] UKHL 65.
However, it has been distinguished in at least two subsequent cases. In Coleman v Myers [1977] 2 NZLR 225 and Peskin v Anderson [2001] BCLC 372 the court described this as being the general rule, but one which may be subject to exceptions where the circumstances are such that a director may owe a greater duty to an individual shareholder, such as when that shareholder is known to be relying upon the director for guidance, or where the shareholder is a vulnerable person.
See also
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- UK company law
- Johnson v Gore Wood & Co
Notes
If there are different class of shareholders, it has to be fair between classes.