Gillespie Investments Ltd v Gillespie [2011] ScotCS CSOH_109 (22 June 2011)

Gillespie Investments Ltd v Gillespie [2011] ScotCS CSOH_109 (22 June 2011)

A shareholder who, without knowledge of directors' breaches of fiduciary duty, indemnifies the company by contributing to repayment of its overdraft is entitled to be subrogated to the company's claim against the wrongdoing directors for the amount attributable to the unauthorised transactions. The company's loss is not extinguished by the repayment, and the wrongdoing directors remain primarily liable.

Citation
[2011] ScotCS CSOH_109
Parties
Pursuer: Gillespie Investments Limited; Defender: Thomas Graham Gillespie
Jurisdiction
Scotland
Judgment Date
22 June 2011
Procedural Posture
Civil (company Law Breach of Fiduciary Duty) / Judgment After Proof (trial) and Further Submissions on Loss and Subrogation
Outcome
Defender ordered to pay pursuer £127,040.60 with interest from 12 May 2006; pursuer's motion to amend pleadings refused; expenses reserved.
Legal Topics
Breach of Fiduciary Duty, Directors' Duties, Subrogation, Indemnity, Damages, Shareholder Agreements
Company Law Equity and Trusts Breach of Fiduciary Duty Directors' Duties Subrogation Indemnity Damages Shareholder Agreements

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Parties

Gillespie Investments Limited

Pursuer

Thomas Graham Gillespie

Defender

Procedural Posture

Civil (company Law Breach of Fiduciary Duty) / Judgment After Proof (trial) and Further Submissions on Loss and Subrogation

Legal Issues

  1. 1 Whether the repayment of the company's overdraft by shareholders extinguished the company's loss and claim against directors for breach of fiduciary duty
  2. 2 Whether a shareholder who indemnified the company without knowledge of the breaches is entitled to subrogation to the company's claim against wrongdoing directors
  3. 3 Whether the company can recover damages or account for profits from directors in breach

Ratio Decidendi

A shareholder who, without knowledge of directors' breaches of fiduciary duty, indemnifies the company by contributing to repayment of its overdraft is entitled to be subrogated to the company's claim against the wrongdoing directors for the amount attributable to the unauthorised transactions. The company's loss is not extinguished by the repayment, and the wrongdoing directors remain primarily liable.

Court Disposition

Defender ordered to pay pursuer £127,040.60 with interest from 12 May 2006; pursuer's motion to amend pleadings refused; expenses reserved.

Orders

  • Defender to pay pursuer £127,040.60 with interest at the judicial rate from 12 May 2006.
  • Pursuer's Minute of Amendment refused.