Judgment Details

The Court of Appeal has recently given Judgment in Environmental Recycling Technologies Plc & Anr v Daley [2009] EWCA Civ 612 in which Sam Neaman and David Lascelles represented the successful Respondent.

The basic facts were as follows. Mr Daley, a company Chief Executive who ran an enterprise in Kyrgyzstan for a UK employer, was summarily dismissed. On the same day, he was shot four times in a failed apparent assassination attempt (though there is no suggestion that the shooting was linked to the summary dismissal). At the time of his dismissal and shooting Mr Daley had commenced High Court proceedings for c.£400,000 against the company. The company issued a counterclaim alleging (i) that Mr Daley had fraudulently taken more than $250,000 from the company; and/or (ii) that as fiduciary he was under a strict duty to prove what had happened to the money, and he could not do so. 

At first instance Mr Daley (represented by Sam) succeeded in both the claim and the counterclaim. The Judge preferred Mr Daley’s evidence to that of the company on all counts, describing the evidence of the company's chief witness as "dishonest", "pitiful", "abject" and "mendacious". Conversely, the Judge formed, according to Smith LJ, “a favourable view of Mr Daley's credibility". On the counterclaim the Judge again found wholly in favour of Mr Daley, holding (i) that the allegations of fraud had been "improperly made" and (ii) that the counterclaim based on breach of fiduciary duty should be dismissed.

The Court of Appeal (Arden LJ, Smith LJ and Richards J) unanimously rejected all five of the company’s heads of appeal. In doing so, the Court considered various aspects of company law, including the accounting duties owed by a director / fiduciary in relation to transactions in which he was personally involved.  The decision also includes an important and helpful analysis of the law relating to the burden and standard of proof in cases where breach of fiduciary duty is alleged.