THE RECOVERY OF A DIRECTOR'S IMPROPER GAINS: PROPRIETARY REMEDIES FOR INFRINGEMENT OF NON-PROPRIETARY RIGHTS
D is a director of a development company, P, a public limited liability company in which D holds a substantial block of shares. He is also the chairman and controlling shareholder of X, a large private limited liability company engaged in a similar line of business. During the course of his travels D meets Charles, a wealthy landowner, who is impressed by D and some months later approaches him to see whether he would be interested in buying a substantial area of land suitable for residential development. A price is agreed and D arranges for X to purchase the land and to construct a highclass residential estate. Several of the houses on the estate are sold, part of the proceeds being used by X to pay for equipment and the rest placed on deposit with X's bank. D also arranges for P to place a contract for the purchase of a substantial quantity of materials with a company owned by Charles's son, for which D receives a secret commission from Charles of £50,000. This sum D invests in quoted securities which rapidly increase in value. He sells some of these for £20,000, which he pays into his bank account, then in credit.
The question examined by this chapter is whether, and in what conditions, P can assert proprietary claims to the land and properties comprising the residential estate still held by X, the equipment purchased with part of the proceeds, the money fund constituted by X's deposit with the bank, and the securities still held by D or the £10,000 in his bank account.
The present section of this chapter deals with certain fundamental concepts and considerations. In Section 2 I shall examine English law as I currently understand it to be. Though set in the context of claims against a director and his associated company much of the analysis applies with equal force to ordinary equitable tracing rights. In Section 3 attention will be focused on what appear to me to be weaknesses in the conventional analysis.