Today the High Court gave judgment in Stobart Group
Ltd v Tinkler [2019] EWHC 258 (Comm),
a high profile boardroom dispute at the FTSE 250 company involving its former
CEO. As the judge put it: “Reduced to
basics, the essential questions stem from what became a confrontation between
the majority on the company’s main board, on the one hand, and, on the other, a
dissenting director who has generated support from shareholders”.
Following his decision to step down as CEO, Mr Tinkler was
an executive director at the company, and over the course of late 2017 and the
first half of 2018 became disgruntled with the senior leadership of the
company.
A number of conversations took place in early 2018 between
Mr Tinkler and various shareholders, leading to a point by May 2018 at which Mr
Tinkler was actively and openly campaigning for the company’s Chairman, Mr
Ferguson, to be replaced. On 14 June
2018 the Board (acting by committee) resolved to dismiss Mr Tinkler as an
employee, and under a term in his Service Agreement consequently to remove him
as a director.
At the company’s AGM shortly thereafter, though, Mr Tinkler
was elected back onto the Board by shareholders. The other directors re-elected to the Board
at the AGM acting unanimously used a power within the company’s Articles to
remove him the next day.
By these proceedings the company sought declarations that Mr
Tinkler had been validly and lawfully dismissed as an employee and removed as a
director, as well as financial remedies for various breaches of duty by Mr
Tinkler; while Mr Tinkler sought inverse declarations that he had been
unlawfully dismissed/removed, was still a director and employee, and that four
of the company directors had been acting in breach of their duties to the
company.
The court found that a number of actions taken by Mr Tinkler
during that the first half of 2018 amounted to serious breaches of his
fiduciary duties (as a director) and contractual duties (as an employee). He had thus been lawfully and validly
dismissed as an employee and (twice) removed as a director. Those breaches were:
- speaking to the company’s significant
shareholders and criticising the Board’s management and the group’s business
and agitating for the removal of Mr Ferguson; - improperly sharing confidential information;
- writing to shareholders and company employees
regarding his dispute with the other directors; and - orchestrating a ‘petition’ and letter to the
Board from senior staff.
The judgment sets out principles as to the actions required
of a ‘dissenting director’, who is duty-bound to exercise independent judgment,
but does so as part of a collegiate board.
The judge described the position of the dissenting director as follows:
“413 In my judgment, the
authorities cited to me by each side support the unsurprising proposition that
the duty to exercise independent judgment is one that operates upon each
director in the context of him operating as a member of the board of directors.
This obligation comes with the office of director and does not carry with it
some kind of entitlement or licence for an individual director to go off and do
his own thing, independently of the board, in relation to matters that fall
within the sphere of management of the company’s business. It is only as a
member of the board that the director has been entrusted within information
about management matters in the first place. Therefore, any discussion by him
of those matters with shareholders should either be in the presence of the rest
of the board or with the prior approval of the board…
414 The individual director
should therefore (as appropriate) raise, debate, reflect upon and then decide
upon his own position on such matters at the level of the board, either as part
of the majority or as a dissenting voice. Only by doing so will he facilitate
his fellow directors’ compliance with their own duties to exercise an independent
judgment and to act in the best interests of the company. The duty upon each
director to exercise an independent judgment exists in order to support the
board’s management of the company’s business in an efficient and competent
manner. By invoking it to justify what might be, or border upon, freelance
activity on his part, a director is likely to hinder rather than contribute to
the board’s management of the business.”
Richard Leiper KC and Daniel Isenberg appeared for the
company, instructed by Rosenblatt Limited.
Media coverage of the judgment can be found here,
here
and here.
