New Judgment: Judge explores the limits of the 'Duomatic' principle

21 May 2020

In his judgment this week in Stubbins Marketing Ltd v Stubbins Food Partnerships Ltd, given after a five-week trial late last year, Mr Justice Trower explores the limits of the well-known ‘Duomatic principle: that acts by company directors that would otherwise constitute breaches of duty may be lawful if done with the informed consent of all the company’s shareholders.

The judge emphasises not only that the court must be ‘scrupulous’ to ensure that the directors have made full disclosure of all material facts, but also that shareholders must be given ‘an adequate opportunity to absorb and understand not just what those facts might be, but also how they might be relevant to the decision which they are being asked to make.’

The judge awarded around £6.3m in compensation to the claimant company, one of the UK’s leading suppliers of salad produce, against its former directors who had caused the company to sell its business to them at an undervalue, and whose attempts to secure shareholder consent to this deal had involved giving a partial and misleading account of the business’s fortunes and of the terms of the sale.

The claim put many other aspects of the directors’ work at the claimant company, over several years, under scrutiny. Mr Justice Trower’s long and detailed judgment contains insights into areas of corporate law including class rights, the lawfulness of directors’ termination payments, the need to justify remuneration-in-kind, and the nature of directors’ duties to take reasonable care in their management of a company’s affairs.  

Thomas Roe QC appeared for the claimant.

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