## Facts

- A family company, Bhullar Bros Ltd, was jointly owned (50/50) by two branches of the Bhullar family; relevant family members served as directors.
- The company operated grocery businesses and held investment property, including “Springbank Works,” leased to a bowling alley business.
- After a family dispute, negotiations began to divide the company’s business and assets; one side indicated the company did not wish to buy further investment property.
- While at the tenant’s premises, a director (Inderjit) learned that an adjacent property (“White Hall Mill”), used by the tenant as a car park, was for sale.
- Inderjit and another director (Jatinderjit) caused a company they controlled (Silvercrest Ltd) to buy the adjacent property without informing the board or offering the opportunity to Bhullar Bros Ltd.
- Shareholders/directors from the other family branch brought unfair prejudice proceedings alleging breach of fiduciary duty for misappropriating a corporate opportunity.

## Issues

1. Whether directors breached fiduciary duties by acquiring, for themselves through a separate company, a commercially attractive property opportunity connected to the company’s existing investment property during ongoing internal disputes and breakup negotiations.
2. Whether the duty to avoid conflicts required the directors to disclose the opportunity to the company before pursuing it personally.
3. Whether liability depended on proof that the company would or could have acquired the property if told about the opportunity.

## Decision

- The Court of Appeal held the directors breached their fiduciary duty of loyalty by acquiring the property through Silvercrest without disclosure to, or consent from, the company.
- The court found a “real sensible possibility of conflict” between the directors’ personal interests and their duties to the company, sufficient to trigger the strict no-conflict rule.
- The court held it was irrelevant whether the company would or could have taken the opportunity had it been informed.
- A constructive trust remedy was ordered so the property (or its value) was held for the benefit of Bhullar Bros Ltd, supporting relief in the unfair prejudice proceedings.

## Legal Principles

- Directors must not place themselves in a position where there is a real sensible possibility of conflict between personal interest and duty to the company.
- The no-conflict duty applies even where an opportunity is discovered fortuitously and the company is not actively pursuing acquisitions.
- The duty to avoid conflicts includes a duty to communicate to the company information about opportunities that are relevant to the company’s interests.
- A director cannot justify taking an opportunity by asserting the company would not have pursued it; doubts are resolved against the fiduciary.
- Where a director wrongfully appropriates a corporate opportunity, equity may impose a constructive trust over the property or its proceeds in favor of the company.

## Conclusion

The court held that directors, even amid internal disputes and prospective division of the business, must disclose and refrain from personally exploiting opportunities that present a real possibility of conflict with the company’s interests; misappropriation can result in a constructive trust in the company’s favor.


Bhullar v. Bhullar, [2003] EWCA Civ 424 (Eng. Ct. App. 2003)