Chaston v SWP Group Plc [2002] EWCA Civ 1999 (20 December 2002)

Chaston v SWP Group Plc [2002] EWCA Civ 1999 (20 December 2002)

The incurring and payment of D&T's fees by DRC constituted financial assistance within section 151 Companies Act 1985, as a matter of commercial reality, because it facilitated SWP's due diligence and acquisition of shares, relieving SWP and the vendors of costs. The assistance was 'for the purpose of' the acquisition, and bona fide director motivation or benefit to DRC did not remove the statutory prohibition. The judge erred in law in holding otherwise.

Citation
[2002] EWCA Civ 1999
Parties
Claimant/respondent: Robert Chaston; Defendant/appellant: SWP Group plc
Jurisdiction
England and Wales
Judgment Date
20 December 2002
Procedural Posture
Civil Appeal / Court of Appeal Judgment on Appeal From High Court (queen's Bench Division)
Outcome
Appeal allowed
Legal Topics
Financial Assistance for Acquisition of Shares, Directors' Fiduciary Duties, Section 151 Companies Act 1985, Section 152 Companies Act 1985, Section 153 Companies Act 1985
Company Law Financial Assistance for Acquisition of Shares Directors' Fiduciary Duties Section 151 Companies Act 1985 Section 152 Companies Act 1985 Section 153 Companies Act 1985

Case Brief

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Parties

Robert Chaston

Claimant/respondent

SWP Group plc

Defendant/appellant

Procedural Posture

Civil Appeal / Court of Appeal Judgment on Appeal From High Court (queen's Bench Division)

Legal Issues

  1. 1 Whether incurring or payment of professional fees by DRC constituted unlawful financial assistance under section 151 Companies Act 1985 for the acquisition of shares in DRCH by SWP
  2. 2 Whether such assistance was given to the purchaser or vendor
  3. 3 Whether the assistance was 'for the purpose of' the acquisition within the meaning of the statute

Ratio Decidendi

The incurring and payment of D&T's fees by DRC constituted financial assistance within section 151 Companies Act 1985, as a matter of commercial reality, because it facilitated SWP's due diligence and acquisition of shares, relieving SWP and the vendors of costs. The assistance was 'for the purpose of' the acquisition, and bona fide director motivation or benefit to DRC did not remove the statutory prohibition. The judge erred in law in holding otherwise.

Court Disposition

Appeal allowed

Orders

  • Judgment of the High Court set aside insofar as it dismissed SWP's Part 20 claim against Chaston for breach of fiduciary duty relating to unlawful financial assistance.
  • Matter remitted for further proceedings consistent with the Court of Appeal's findings.