Eastford Ltd v Gillespie & Ors [2011] ScotCS CSIH_12 (18 February 2011)

Eastford Ltd v Gillespie & Ors [2011] ScotCS CSIH_12 (18 February 2011)

The only sound reason advanced by the Lord Ordinary was that, as directors of a company with no assets, Steven and Gary Gillespie owed a duty to creditors and faced real risk of personal liability for litigation expenses if the company was wound up. This meant they had no real prospect of avoiding personal liability, so there was no real sensible possibility of conflict of interest disqualifying them from voting on ratification. The ratification was valid.

Citation
[2011] ScotCS CSIH_12
Parties
Pursuer and Respondent: Eastford Limited; First Defender and Reclaimer: Thomas Graham Gillespie; Second Defender and Reclaimer: Airdrie North Limited
Jurisdiction
Scotland
Judgment Date
18 February 2011
Procedural Posture
Civil Appeal (reclaiming Motion) / Appeal Against Interlocutor Refusing Dismissal of Action
Outcome
Reclaiming motion refused; interlocutor of Lord Ordinary affirmed.
Legal Topics
Directors' Fiduciary Duties, Conflict of Interest, Corporate Authority to Litigate, Ratification of Director Actions, Personal Liability for Company Litigation Expenses
Company Law Civil Procedure Directors' Fiduciary Duties Conflict of Interest Corporate Authority to Litigate Ratification of Director Actions Personal Liability for Company Litigation Expenses

Case Brief

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Parties

Eastford Limited

Pursuer and Respondent

Thomas Graham Gillespie

First Defender and Reclaimer

Airdrie North Limited

Second Defender and Reclaimer

Procedural Posture

Civil Appeal (reclaiming Motion) / Appeal Against Interlocutor Refusing Dismissal of Action

Legal Issues

  1. 1 Whether directors who instigated litigation in the company's name were disqualified from voting on ratification due to conflict of interest
  2. 2 Whether ratification of the litigation was valid given the voting and interests involved

Ratio Decidendi

The only sound reason advanced by the Lord Ordinary was that, as directors of a company with no assets, Steven and Gary Gillespie owed a duty to creditors and faced real risk of personal liability for litigation expenses if the company was wound up. This meant they had no real prospect of avoiding personal liability, so there was no real sensible possibility of conflict of interest disqualifying them from voting on ratification. The ratification was valid.

Court Disposition

Reclaiming motion refused; interlocutor of Lord Ordinary affirmed.

Orders

  • Refusal of reclaiming motion
  • Affirmation of Lord Ordinary's interlocutor repelling plea-in-law for dismissal