Fairford Water Ski Club Ltd V Cohoon

• Published date: 02 June 2021
• Subject Matter: Corporate/Commercial Law, Litigation, Mediation & Arbitration, Corporate and Company Law, Directors and Officers, Contracts and Commercial Law, Trials & Appeals & Compensation
• Law Firm: Moon Beever
• Author: Frances Coulson

In Fairford Water Ski Club Ltd v Cohoon & Anor [2021] EWCA Civ 143 the Court of Appeal allowed an appeal against the decision of HHJ Russen ([2020] EWHC 290 (Comm)) holding Mr Cohoon and two other defendants liable for breaches of duty in proceedings brought by Fairford, a company of which Mr Cohoon had been a director.

Fairford ran a members' water skiing club. Mr Cohoon had also been concerned in a partnership called Watersports which ran a water skiing school and sold water skiing equipment, operating from a building which was leased from Fairford as part of a management agreement with Watersports. As Males LJ noted,

'The two businesses were independent of each other but'they were 'somewhat intertwined' reflecting, no doubt, the informal way in which they were run, without rigorous attention to the requirements of company law. The Club's day to day administration was conducted from Watersports' shop premises, with Craig [Cohoon] and his son Scott effectively running the Club's business as well as that of Watersports. That remained the position until January 2017, when new directors were appointed and Craig resigned as a director of the Club.'

The judge at first instance found that there had been a conflict of interest that had not been properly declared. The Court of Appeal reversed that finding, holding that Mr Cohoon had sufficiently declared the nature of his interest in the management agreement at a board meeting in January 2007, noting in doing so that the purpose of s 317 Companies Act 1985 (then applicable) was to ensure disclosure of the director's interest; it was not directed at whether any contract was in the company's interest, which was covered by different statutory or fiduciary duties.

Dealing with the language and purpose of s 317 Males LJ identified six points which he considered relevant:

1. The terms of the section were wide, so could apply to any kind of interest, direct or indirect, which a director might have in a contract or proposed contract with the company of which he was a director. The nature of the declaration which the director was required to make depended on the nature of the interest and the context. If the nature of the director's interest was clear and obvious, as in the case of an uncomplicated contract between the company and the director, very little may need to be said, but if the director's interest were more indirect, a fuller explanation may be necessary. What was required was a clear declaration so that the board...