Regal (Hastings) Ltd v Gulliver

Viscount
Sankey

Lord
Russell of
Killowen

Lord
Macmillan

Lord
Wright

Lord
Porter

V.

GULLIVER AND OTHERS.
Viscount Sankey

MY LORDS,

This is an Appeal by Regal (Hastings) Limited from an Order of
His Majesty's Court of Appeal dated the 15th February, 1941. That
Court dismissed the Appeal of the Appellants from a judgment of
the Hon. Mr. Justice Wrottesley, dated the 3Oth August, 1940. The
Appeal was brought by special leave granted by this House on the
2nd April, 1941.

The Appellants we're the plaintiffs in the action and are referred
to as "Regal"; the Respondents were the Defendants.

The action was brought by Regal against the first five Respon-
dents, who were former Directors of Regal, to recover from them,
sums of money amounting to £7,010 8s. 4d., being profits made by
them upon the acquisition and sale by them of shares in the sub^:
sidiary company formed by Regal and known as Hastings Amal-
gamated Cinemas Limited. This Company is referred to as
" Amalgamated ". The action was brought against the Defendant,
Garton, who was Regal's former solicitor, to recover the sum of
£1,402 1s. 8d., being profits made by him in similar dealing in the
said shares. There were alternative claims for damages for mis-
feasance and for negligence.

The action was based on the allegation that the directors and
the solicitor had used their position as such to acquire the shares
in Amalgamated for themselves, with a view to enabling them at
once to sell them at a very substantial profit, that they had obtained
that profit by using their offices as directors and solicitor and were,
therefore, accountable for it to Regal, and also that in so acting
they had placed themselves in a position in which their private
interests were likely to be in conflict with their duty to Regal. The
facts were of a complicated and unusual character. I have had the
advantage of reading, and I agree with, the statement as to them
prepared by my noble and learned friend, Lord Russell of
Killowen. It will be sufficient for my purpose to set them out very
briefly.

In the summer of 1935 the directors of Regal, with a view to the
future development or sale of their Company, were anxious to
extend the sphere of its operations by the acquisition of other
cinemas. In Hastings and St. Leonards there were two small ones
called the Elite and the De Luxe. Negotiations began both for
their acquisition or control by lease or otherwise and for the dis-
posal of Regal itself.

Part of the machinery for the purpose was the creation by Regal
of a subsidiary company, the Amalgamated. It was registered on
the 26th September, 1935, with a capital of £5,000 in £1 shares.
The directors were the same as those of Regal with the addition
of Garton. It was thought that only £2,000 of the capital was to