The Director's Fiduciary Obligations - a Fresh Look?

Publication Type

Journal Article

Publication Date



It is a pillar of equity that a person in a fiduciary position must not make a profit out of his trust which is part of the wider rule that a trustee must not place himself in a position where his duty and his interest may conflict (per Lord Upjohn in Phipps v. Boardman [1967] 2 A.C. 46, 123). The House of Lords in Regal (Hastings) v. Gulliver [1942] 1 All E.R. 378 demonstrated the unrelenting nature, and some have argued inequitable severity (see, e.g., Jones, (1968) 84 L.Q.R. 472), of the director-fiduciary’s obligations to his company. Such absolutism (Lowry and Edmunds, [2000] J.B.L. 122) is necessary because human infirmity makes it difficult to resist temptation, and it is only thus that the level of conduct for fiduciaries can be kept at a level higher than that trodden by the crowd (per Cardozo C.J. in Meinhard v. Salmon (1928) 249 N.Y. 456, 464). The principle that a director is free to act as a director of or otherwise engage in a competing business, established at the turn of the 19th century by Chitty J. in London and Mashonal and Exploration Co. Ltd. v. New Mashonal and Co. Ltd. [1891] W.N. 165 and assumed correct by Lord Blanesburgh in Bell v. LeverBros. Ltd. [1932] A.C. 161, 195, is therefore clearly an aberration and somewhat difficult to defend. A reconsideration of the rule would be timely. In this light, the decision of the Court of Appeal in Plus Group Ltd.andothers v. Pyke [2002] EWCA Civ 370 is something of a missed opportunity as both Brooke L.J. and Jonathan Parker L.J. thought it unnecessary to attempt a resolution. Sedley L.J., although perspicuous about his discomfort with it, nevertheless admitted that Mashonaland is the law that binds us. His Lordship did however observe that if one bears in mind the high standard of probity which equity demands of fiduciaries, and the reliance which shareholders and creditors are entitled to place upon it, the Mashonal and principle is a very limited one.


Business Organizations Law

Research Areas

Commercial Law


Cambridge Law Journal





First Page


Last Page







Cambridge University Law Society

Additional URL