Stobart v Tinkler: No ‘Freelance’ Directors, Voidable (Not Void) Improper‑Purpose Acts, and a Board’s Power to Remove a Director Even After AGM Election

Introduction

In Stobart Group Ltd v Tinkler [2019] EWHC 258 (Comm), the Commercial Court (England and Wales), applying Guernsey law aligned with English common law fiduciary principles, delivered a landmark judgment on corporate governance, directors’ duties, and the constitutional balance between boards and shareholders. Against the backdrop of a bruising boardroom conflict within a FTSE 250 company, the Court distilled key rules that will steer future conduct in listed and non‑listed companies alike.

The controversy encompassed: (i) a director’s unauthorised communications with select major shareholders; (ii) an Employee Benefit Trust (EBT) receiving large transfers of treasury shares shortly before the AGM and then voting those shares; (iii) the summary dismissal of an executive director and contemporaneous removal from the board; and (iv) the board’s use of an articles power to remove that director the day after he was elected at the AGM.

The central parties were Stobart Group Ltd (a Guernsey company listed in London) and Mr Andrew Tinkler, a founder, former CEO, and then executive director and shareholder. The court (after an expedited 11‑day trial) resolved ten tightly framed issues, producing authoritative guidance on:

How the duty to exercise independent judgment operates within the collegial board setting;
The “proper purposes” rule, especially in relation to share transfers to an EBT ahead of an AGM, and the consequences (voidable vs void);
The board’s ability to remove a director under an articles provision despite an intervening AGM election;
The limits of director communication with shareholders and employees; and
The (non)availability of conspiracy claims on the facts and the mens rea required in principle.

Summary of the Judgment

The Court found that Mr Tinkler had committed serious breaches of duty—both fiduciary and contractual—by:

Privately briefing selected major shareholders against the board on management and strategy without first taking concerns to the board;
Disclosing confidential information (the Duranta budget) to a third party (Mr Day);
Sending a letter to shareholders and an internal communication to all employees that destabilised governance and operations; and
Orchestrating an ELT (Executive Leadership Team) letter/petition to influence board composition.

The Court upheld the company’s summary dismissal of Mr Tinkler and his removal as a director on 14 June 2018 (via a resignation request built into his service contract). It also upheld his removal a second time under Article 89(5) of the Articles the day after the AGM (notwithstanding his election by 51.44% of votes), as a proper exercise of board power in the company’s best interests.

On the pre‑AGM share transfers to the EBT, the Court drew a critical distinction:

The first tranche (~1.7m shares) was transferred for the proper purpose of meeting imminent LTIP vestings—lawful;
The second tranche (~5.32m shares) was transferred for the substantial purpose of procuring the trustee’s vote in support of the incumbent chair—an improper purpose.

Nonetheless, the Court refused to set aside the AGM outcome or unravel the EBT vote. Crucially, it held that a breach of the proper purposes rule renders the transaction voidable, not void—relief is discretionary, especially where an independent trustee has exercised its own fiduciary discretion and where unwinding would be impractical and unjust.

The Court dismissed the alleged unlawful means conspiracy: factually, the elements were not proven. As a matter of principle, it affirmed (following Belmont Finance) that knowledge of unlawfulness is not required for unlawful means conspiracy, but did not need to decide the point to dispose of the claim.

Analysis

Key Holdings in Context

A director’s duty to exercise independent judgment operates within, and for, the collective board. It does not entitle “freelance” lobbying of select shareholders on management matters.
EBT (or share) transactions carried out with the substantial purpose of influencing a general meeting breach the proper purposes rule; however, such acts are voidable, not void, and equitable relief is discretionary.
Boards may, consistent with their fiduciary duties and articles, remove a director even immediately after an AGM election, where required in the company’s best interests.
Directors owe duties to the company (for the benefit of members as a whole), not to particular shareholders (absent special circumstances).
“Sufficient information” duty: where directors put matters to a shareholder vote, the communications must be reasonable, fair and not misleading; but over-communication does not itself found a breach.

Precedents Cited and How They Were Applied

The Court’s reasoning is anchored in leading authorities on directors’ powers and shareholder democracy:

Howard Smith v Ampol [1974] AC 821; Hogg v Cramphorn [1967] Ch 254; Eclairs v JKX [2015] Bus LR 1395
- These cases articulate the proper purposes doctrine—directors may not exercise their powers (e.g., to issue or deploy shares) primarily to manipulate voting or frustrate the will of shareholders.
- Here, the second tranche to the EBT failed the “substantial or primary purpose” test. The Court rejected a purely “best interests” defence (Regentcrest)—best interests and proper purpose are distinct duties.
- As to remedy, following the tenor of Eclairs, the Court treated improper‑purpose acts as voidable and discretionary to unwind; the independent trustee’s own voting discretion was a decisive intervening factor.
Lee v Chou [1984] 1 WLR 1202 (PC)
- Board power to expel under articles is a fiduciary power. The Court followed Lee in treating improper exercise as making the decision voidable, not void, and noted the Court’s caution in interfering with internal management decisions.
John Shaw v Shaw [1935] 2 KB 113; Lee Panavision v Lee Lighting [1991] BCC 620
- Shareholders do not usurp powers vested in directors and vice versa; directors’ management decisions are ordinarily not second‑guessed by courts.
- Applied to uphold the board’s post‑AGM use of Article 89(5).
Item Software v Fassihi [2005] ICR 450; Regentcrest [2001] BCC 494; Madoff v Raven [2013] EWHC 3147 (Comm); Re Southern Counties Fresh Foods [2008] EWHC 2810
- Confirmed the breadth and flexibility of fiduciary loyalty; the subjective nature of the best‑interests duty; and the need to exercise independent judgment within the boardroom, not outside it.
Eclairs and Hunter v Senate Support Services [2004] EWHC 1085 (Ch)
- Reinforced that relief for improper purpose is discretionary; “setting aside” depends on causation, practicality, intervening acts and justice.
Belmont Finance v Williams Furniture (No 2) [1980] 1 All ER 393; First Subsea v Baltec [2014] EWHC 866 (Ch)
- Affirmed (as a matter of principle) that knowledge of unlawfulness is not required for unlawful means conspiracy (though the conspiracy claim failed on the facts).
Geys v Société Générale [2013] 1 AC 523; Chappell v Times Newspapers [1975] 1 WLR 482
- On contracts of employment and remedies: courts will not specifically enforce personal service; declaratory relief as a proxy for specific performance is generally inappropriate—a point the Court revisited when declining reinstatement of Mr Tinkler’s employment.

Legal Reasoning and Principles Applied

1) The “no freelance director” rule

The Court distilled a core governance norm: the duty to exercise independent judgment compels directors to raise, debate, and resolve disagreements at the board table. It does not empower individual directors to bypass the board and selectively lobby major shareholders (or employees) on management or strategy, absent board authority. Private, unilateral briefings risk an information asymmetry among shareholders and undermine the board’s constitutional mandate.

The judge put it plainly: there is “no place for an individual director seeking to ‘pick off’ particular shareholders” in advance of a general meeting. If disagreement persists after proper board process, the right route is a general meeting at which all shareholders receive fair, even‑handed information and can hear both sides.

2) Proper purposes; remedy is voidable, not void

Applying Howard Smith, Hogg v Cramphorn and Eclairs, the Court assessed the primary purpose of each treasury‑to‑EBT transfer:

First tranche (~1.715m): substantially to meet imminent LTIP vestings—proper.
Second tranche (~5.320m): substantially to secure the trustee’s supportive vote at the AGM—improper.

Critically, the improper‑purpose transfer was held voidable, not void. Setting it aside was refused because:

The independent trustee (Jupiter) exercised its own fiduciary discretion—abstaining initially, then deciding (after considering proxy advisers’ reports) to vote for the chair;
Unwinding would be impractical and unjust given intervening events (including LTIP operations); and
On the Company’s re‑cast math, the chair likely still had a bare majority even ignoring the contested votes.

3) Board removal power post‑AGM (Article 89(5))

The board’s unanimous request mechanism (Article 89(5)) is a fiduciary power. The Court held that its exercise the day after Mr Tinkler’s AGM election was proper. Shareholder election does not immunise a director against removal where continued board membership is contrary to the company’s interests. The “golden thread” of shareholder primacy in choosing directors is real, but it coexists with constitutional board powers—including removal powers—which shareholders have adopted in the articles. Proper use of Article 89(5) respects, rather than usurps, the constitutional balance.

4) The 29 May RNS and the “sufficient information” duty

The 29 May RNS was characterised as “unwise and inappropriate” in parts (e.g., including historical matters as “recent challenges”), but did not amount to a fiduciary breach. The Court recognised a “sufficient information” duty (reasonableness, fairness, non‑misleading) when matters go to a shareholder vote, but emphasised that over‑communication per se does not establish breach. Directors relied on legal and broking advice; there was no evidence of company damage attributable to the RNS distinct from the overall conflict dynamics.

5) Employment and contractual issues intertwined

The Court held:

Mr Tinkler’s service agreement (cl 17.4) empowered the Company to require his resignation as a company director on termination—interpreting “Group Company” contextually and commercially;
His orchestrated shareholder and employee campaigns were repudiatory breaches of the implied duties of fidelity and trust and confidence (and fiduciary duty), justifying summary dismissal;
The notorious “AP‑B” email was inappropriate, but not of itself gross misconduct within the contract’s meaning.

6) Unlawful means conspiracy

The conspiracy claim failed on the facts (no combination with the necessary intent; acts not causally referable to an agreement). The Court nevertheless endorsed the Belmont Finance position that knowledge of unlawfulness is not a constituent element of the tort (though left the deeper controversy untouched, as it was unnecessary to decide the case).

Impact and Practical Implications

For boards and company secretaries

Reinforce board process. Require directors to table concerns formally. Minute dissent and the board’s response. Consider independent advice early where conflicts loom.
Directors’ off‑piste communications. Adopt protocols: no “freelancing” with shareholders or employees on management issues without board authority. Prefer plenary communications (circulars, GM/AGM) to selective discussions.
EBT and treasury share hygiene. Where treasury/EBT shares might be enfranchised close to a vote, document the proper (compelling) purpose—e.g., imminent LTIP liabilities. Heed Investment Association principles (avoid voting unvested shares). Keep the trustee’s independence sacrosanct.
RNS discipline. Provide sufficient, fair information without straying into “campaigning” or historical grievances irrelevant to the vote.
Committees. In conflicts, use properly constituted committees with delegated “all powers of the board”, record their remit, and avoid actual voting by conflicted directors while allowing them to provide factual input.
Post‑AGM board action. Confirm that articles’ removal powers (e.g., Article 89(5)) remain operable post‑AGM where the company’s interests require immediate steps.

For individual directors

Independent judgment means “within the board”. Do not bypass the board by lobbying a subset of shareholders on live management issues. If you cannot support a decision, consider minute your dissent and, if fundamental, seek a shareholders’ meeting or resignation.
Confidential information is the company’s property. Sharing internal budgets or sensitive documents externally without board sanction will likely be a breach.
Employee mobilisation is perilous. Orchestrating employee letters/petitions or mass internal communications on governance disputes is likely to be a repudiatory breach of employment and fiduciary duties.

For trustees of EBTs

Maintain demonstrable independence. Consider abstaining pending full information; then form and evidence your own best‑interests judgment. The trustee’s decision can be a key intervening act limiting equitable relief.

Complex Concepts Simplified

Duty to exercise independent judgment: Each director must think for themselves—but within the collective board framework. It is a duty about how directors decide, not a licence to act unilaterally outside the board.
Proper purposes: Directors must use their powers for the purpose those powers were given (e.g., issuing or deploying shares to raise capital or satisfy LTIPs), not to swing a shareholder vote. The test asks: what was the substantial or primary purpose?
Void vs voidable: A void act has no legal effect from the outset. A voidable act is effective unless and until a court sets it aside; equity weighs intervening events, third‑party rights, and fairness.
Treasury shares vs EBT: Treasury shares belong to the company and are disenfranchised while held in treasury. An EBT is a separate trust for employees; once transferred to the EBT, shares are votable by the trustee (subject to applicable policies and trust duties).
Article 89(5) removal: A common articles provision allowing co‑directors unanimously to request the resignation/removal of one director. It is a fiduciary power—used only in the company’s best interests for proper purposes.
“Sufficient information” duty: When directors put a matter to shareholders, they must give reasonable, fair, and non‑misleading information so shareholders can decide properly.

Conclusion

Stobart v Tinkler is a governance watershed. It emphatically rejects “freelance” directorship—reaffirming that independent judgment must be exercised through the boardroom, not by private canvassing of shareholders or staff. It calibrates the proper‑purposes doctrine in high‑stakes AGM contexts, holding that improper‑purpose acts are voidable, not void, and may stand where an independent trustee’s discretion and practical justice so require. And it confirms that a board, acting for proper purposes in the company’s best interests, may remove a director immediately after an AGM election under the articles.

Companies should take from Stobart a governance toolkit: robust board process; clear rules on shareholder and employee communications; scrupulous EBT independence; and careful use of RNSs and committees. Directors should heed the message that loyalty is to the company (for members as a whole), that confidential information is not a campaigning asset, and that orchestrating staff or selectively briefed shareholders to influence control crosses fiduciary and contractual lines.

In sum, the judgment fortifies the constitutional divide: members choose the board; the board manages the company. Courts will protect that settlement—intervening when fiduciary principle is broken, but with equitable restraint when justice and corporate practicality require.