Tonstate Group Ltd & Ors v Wojakovski & Ors

Tonstate Group Ltd & Ors v Wojakovski & Ors

The Duomatic principle cannot be used to ratify breaches of fiduciary duty where the underlying transaction is unlawful and could not have been lawfully carried out by the company, regardless of unanimous shareholder approval.

Parties
Claimant: Tonstate Group Limited; Claimant: Tonstate Edinburgh Limited; Claimant: Dan-Ton Investments Limited; Claimant: Arthur Matyas; Defendant: Edward Wojakovski; Defendant: TH Holdings Limited; Defendant: Tonstate Metropole Hotels Limited; Defendant: Summerhill Cardiff Limited; Defendant: Tonstate (Bournemouth) Limited; Defendant: Tonstate (Retail) Limited; Defendant: Tonstate (St Andrew’s Square) Limited; Defendant: Tonstate (Staple Inn) Limited; Defendant: Tonstate (Yeovil Leisure) Limited; Defendant: Glasgow Airport Hotel Holdings Limited; Defendant: Overseas Holdings Capital Group Limited; Defendant: Firststar Limited
Jurisdiction
England and Wales
Judgment Date
05 December 2019
Procedural Posture
Derivative Action / Ruling on Application to Strike Out Part of Defence
Outcome
Application granted; relevant paragraphs of the defence struck out.
Legal Topics
Directors' Duties, Ratification of Breach of Duty, Duomatic Principle, Illegality in Company Transactions
Company Law Equity and Trusts Directors' Duties Ratification of Breach of Duty Duomatic Principle Illegality in Company Transactions

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Parties

Tonstate Group Limited

Claimant

Tonstate Edinburgh Limited

Claimant

Dan-Ton Investments Limited

Claimant

Arthur Matyas

Claimant

Edward Wojakovski

Defendant

TH Holdings Limited

Defendant

Tonstate Metropole Hotels Limited

Defendant

Summerhill Cardiff Limited

Defendant

Tonstate (Bournemouth) Limited

Defendant

Tonstate (Retail) Limited

Defendant

Tonstate (St Andrew’s Square) Limited

Defendant

Tonstate (Staple Inn) Limited

Defendant

Tonstate (Yeovil Leisure) Limited

Defendant

Glasgow Airport Hotel Holdings Limited

Defendant

Overseas Holdings Capital Group Limited

Defendant

Firststar Limited

Defendant

Procedural Posture

Derivative Action / Ruling on Application to Strike Out Part of Defence

Legal Issues

  1. 1 Whether the Duomatic principle can ratify breaches of fiduciary duty involving unlawful conduct
  2. 2 Whether informal shareholder approval can validate transactions that the company could not lawfully undertake

Ratio Decidendi

The Duomatic principle cannot be used to ratify breaches of fiduciary duty where the underlying transaction is unlawful and could not have been lawfully carried out by the company, regardless of unanimous shareholder approval.

Court Disposition

Application granted; relevant paragraphs of the defence struck out.

Orders

  • Relevant paragraphs of Edward Wojakovski's defence based on the Duomatic principle are struck out.