Facts
Dorchester Finance, which had gone insolvent, made a claim against Mr Stebbing and two other non-executive director accountants who often signed blank cheques which were later countersigned by Mr Stebbing.Judgment
Foster J held that directors of a company were bound to act in good faith and in the interests of the company (see now, s.172 Companies Act 2006). They also had to display such skill and care as should be reasonably expected from people with their knowledge and experience (see now, s.174 Companies Act 2006). The system of signing blank cheques was held to be negligent, and liable for losses under s.214 IA 1986. Furthermore, no distinction should be drawn in principle between an executive and a non-executive director. Foster J held further that it would not be appropriate for the court to exercise its discretion to relieve the three directors on the basis that they acted "honestly and reasonably" under s.448 of the Companies Act 1948 (see now s.1157(1) Companies Act 2006).Notes
{{reflist, 2 United Kingdom company case law High Court of Justice cases 1977 in case law 1977 in British law