Trace Your Case

GLUCKSTEIN V. BARNES

Gluckstein v. Barnes, [1900] AC 240

ISSUE:

  • Whether the promoters breached their fiduciary duties to the company?

RULE:

  • Promoters of a company had acquired a property intending its resale through the sale of shares in the company. In doing so the original directors made a substantial profit which they did not disclose (though it was discoverable). The company became insolvent and investors sought repayment of the hidden profit.

FACTS:

  • Gluckstein and 3 others allegedly purchased the property for £140,000 and then promoted a company to which they on-sold the property for £180,000.
  • These persons then made up the first directors of the newly formed company. They disclosed the £40,000 profit, but not another £20,000 profit as they originally purchased the land for £120,000 and not £140,000.

HELD:

  • The House of Lords held that the syndicate had breached their fiduciary duties and were liable to account to the company for the secret profit that they had made as the company lacked independent directors.