1. This ownership approach is referred to in this article as the corporate opportunities approach or framework.

2. Company Law Review Steering Group Modern Company Law for a Competitive Economy: Final Report Urn 01/942 and Urn 01/943: Annex C: Statement of Director's Duties.

3. Modernising Company Law (Cm 5553, 2002).

4. Principle 6 provides that: ‘a director or former director of a company must not use for his own or anyone else's benefit any property or information of the company, or any opportunity of the company which he became aware of in the performance of his functions as director, unless (a) the use has been proposed to the company and the company has consented to it by ordinary resolution; or (b) the company is a private company, the use has been proposed to and authorized by the board, and nothing in the constitution invalidates that authorization; or (c) the company is a public company, its constitution includes [a] provision enabling the board to authorize such use if proposed, and the use has been proposed to and authorized by the board in accordance with the constitution.’

5. Company Law Reform (Cm 6456, 2005).

6. Clause B6(1) sets forth the duty in traditional no-conflicts terms (see below, text to nn 13–30): ‘(1) As a director of a company you must avoid a situation in which you have, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company’.

7. Clause B6(2): ‘This applies in particular to the exploitation of any property, information or opportunity (and it is immaterial whether the company could take advantage of the property, information or opportunity)’.

8. [1967] 2 AC 46.

9. [1891] 2 Ch 244.

10. [1876] 8 Ch D 345.

11. [1986] BCLC 460.

12. [2001] 2 BCLC 704.

13. Per Lord Cranworth, Aberdeen Railway v Blaikle (1854) 1 Macq HL 461 at 471.

14. H Collins Regulating Contracts (Oxford: Oxford University Press, 1999) p 38 argues that: ‘doctrinal concepts are closed in the sense that they direct the legal examination of the facts of a dispute with strict criteria of relevance. Some facts will be relevant to legal reasoning, because they need to be established to satisfy the legal rule, whereas others will be irrelevant to the legal inquiry’.

15. [1967] 2 AC 134.

16. [2003] BCC 711.

17. [2004] EWHC 1815.

18. [2000] Ch 291 at 341. See also Gencor ACP Ltd v Dalby [2000] 2 BCLC 734; and John Taylors v Masons [2001] EWCA 2106.

19. (1984) 154 CLR 178 at 198.

20. P Koh ‘Once a Director, Always a Fiduciary’ (2003) 62 CLJ 403 at 406. See also, R P Austin ‘Fiduciary Accountability for Business Opportunities’ in P D Finn (ed) Eqity and Commercial Relationships (Sydney: The Law Book Company Ltd, 1987) pp 146–147.

21. [1967] 2 AC 46 at 125. See also Upjohn LJ's judgment in Boulting v Association of Cinematograph Television and Allied Technicians [1963] 2 QB 606 at 635.

22. Aberdeen Railway v Blaikle (1854) 1 Macq HL 461 at 471.

23. [1967] 2 AC at 124.

24. [2003] BCC 711 at 721.

25. [2005] ICR 450.

26. It should be noted, however, that Arden LJ's suspicion of separate, independent rules may not extend to the no-profit rule given her Ladyship's judgment in John Taylors v Masons [2001] EWCA 2106 in which she cites with approval Morritt LJ's judgment in Don King Productions Inc v Warren [2000] 1 BCLC 607 and his approval of Chan v Zucheria (1984) 154 CLR 178.

27. [2005] ICR 450 at 462.

28. Commentators who take this position include: B Pettet Company Law (Harlow: Longman, 2nd edn, 2005) p 168, arguing that in Regal making a profit by reason and in the course of a directorship was ‘sufficient for liability under the no-conflicts rule’; G Moffat Trusts Law: Text and Materials (London: Butterworths, 3rd edn, 1999) p 631, arguing that the primary duty is that a fiduciary may not have a conflict between his personal interest and that of his principal…As a corollary of that principle, the courts have developed the rule that the fiduciary will be liable to account to the ‘principal’ for any unauthorized profit made by virtue as his position as fiduciary or through use of the principal's property (emphasis added).

29. Koh. above n 20, at 406. See also Ellas J's judgment in Nottingham University v Fischel [2001] RPC 367 at 401 noting that the no-profit rule ‘overlaps with, but is sometimes wider than, the strict no-conflict of duty and interest rule’.

30. F Schauer Playing By The Rules: A Philosophical Examination of Rule Based Decision Making In Law and Life (Oxford: Clarendon Press, 1991). Schauer contrasts two modes of decision making. First, a conversational model where if a rule's application would diverge from its underlying principle (what Schauer calls ajustification) the application is corrected to ensure it is compliant with the justification. In this case ‘over inclusiveness would be but a temporary impediment’ corrected by a controlling principle (p 48). Second, an entmchment model where the rule not its justification ‘control[s] the decision even in those cases in which that generalization [the rule] failed to serve its underlying justification’ (p 49). In this model, over- and under-inclusiveness are inevitable (p 35).

31. For example, in Re Digex, Inc Shareholders Litigation 789 A 2d 1176 at 1188 (Del, 2000) the Delaware Chancery Court's task was to ‘evaluate the plaintiffs claim that the defendants have usurped a corporate opportunity belonging to Digex’.

32. In Graham v Mimms 111 Ill App 3d 751 at 762 (III, 1982). the Appellate Court of Illinois held that ‘the corporate opportunity doctrine prohibits a corporation's fiduciary from taking advantage of business opportunities which are considered as “belonging” to the corporation (at least as far as the fiduciary is concerned)’. In Re Trim-Lean Meat Products, Inc 4 BR 243 at 247 (Del, 1980) with regard to the corporate opportunities doctrine the court noted that ‘it essentially treats a corporation's expectations regarding certain business opportunities which are in the corporation's line of business and of practical advantage to it as corporate property which may not be appropriated for personal gain’ (emphasis added) (cited in Rapistan Corpn v Michaels 203 Mich App 301 at 3 15 (Mich, 1994) (applying Delaware law).

33. Corporate law in the US is state-based law. Each corporation is subject to the corporate law of the state in which it is incorporated. Certain aspects of corporate life are regulated by federal statutes such as the Securities Exchange Act 1934, but the internal governance of a corporation, including directors’ duties and opportunities regulation, is for the most part a matter for state law.

34. 5 A 2d 503 (Del, 1939).

35. In Guth v Loft 5 A 2d 503 (Del, 1939) the Delaware Supreme Court set forth a slightly modified test where the director encountered the opportunity in his personal capacity, namely that the opportunity is not essential to the company, that it does not have any interest or expectancy in the opportunity and that the company's resources were not used in pursuing the opportunity. This is known as the Guth Corollary.

36. Guth v Loft 5 A 2d 503 at 511 (Del, 1939). See further, Johnston v Greene 121 A 2d 919 (Del, 1956); and Broz v Cellular Information Systems, Inc 673 A 2d 148 (Del, 1996).

37. See, for example, Schreiber v Bryan 396 A 2d 512 at 519 (Del, 1978) summarising the ‘essential ingredients to finding that a corporate opportunity has been usurped’ without reference to the conflicts test. In Miller v Miller 301 Minn 207 (Minn, 1974), the Supreme Court of Minnesota conducting a review of the various corporate opportunities rules deployed in US states, including Delaware, identified three rule-themes, namely, the interest and expectancy test, the line of business test and the fairness test. The Guth Corollary does not refer to the conflicts test: see, for example, Johnston v Greene 121 A 2d 919 (Del, 1956); Rapistan v Michaels 203 Mich App 301 (Mich, 1994).

38. Where referred to the conflicts issue receives limited direct attention in the legal analysis, rather it seems that if a director takes an opportunity that falls within the line of business, expectations and financial capacity tests then it follows automatically that his self-interests conflict with the interests of the company. See, for example, Broz v Cellular Information Systems, Inc 673 A 2d 148 (Del, 1996) where conflicts issues are considered; however, the determination of conflict is clearly a direct function of the prior tests (at 157). This is, perhaps, unsurprising if one understands the line of business, expectations and financial capacity tests as trying to identify whether or not the company would actually be interested in the opportunity.

39. Graham w Mimms 111 Ill App 3d 751 at 766 (Ill, 1982).

40. Independent Distributors v Katz 99 Md App 441 at 457 (Md, 1994).

41. Meiselman v Meiselman 309 NC 279 at 310 (NC, 1983).

42. See. for example, Johnston v Greene 121 A 2d 919 at 924 (Del, 1956).

43. Lagarde v Anniston Lime & Stone Co 126 Ala 496 (La, 1899).

44. Abbott Redmorit Thinlite Corpn v Redmont 475 F 2d 85 (1973).

45. [2003] BCC 711 at 720.

46. Regarding Principle 6, P Koh ‘Principle 6 of the Proposed Statement of Director's Duties’ (2003) 66 MLR 894 at 896 notes that ‘information, for the purposes of the corporate director's obligations of loyalty, is to be treated as if it was property’. For Koh, Principle 6 treats information like property as it is juxtaposed next to the ‘property… of the company’ (at 895). In contrast, this article looks to the preposition ‘of’ for the relationship of belonging between information, opportunities and the company.

47. D Prentice and J Payne ‘The Corporate Opportunity Doctrine’ (2004) 120LQR 198 at 198.

48. P L Davies (ed) Gower and Davies: The Principles of Modern Company Law (London: Sweet & Maxwell, 7th edn, 2003) p 416. The section in which these cases are considered is entitled ‘Use of Corporate Property, Opportunity or Information’.

49. S Worthington ‘Reforming Director's Duties’ (2001) 64 MLR 439 at 452.

50. Company Law: Flexibility and Accessibility Consultation (2004) p 9, available at http://www.dti.gov.uk/cld/pdfs/powerscondoc_final.pdf (last checked 4 May 2005).

51. Modern Conrpany Law for a Competitive Economy: Developing the Framework URN 00/656, p 39: ‘the second area in which a conflict of interest issue arises is where the director uses or exploits an asset including a business opportunity, which is properly treated as belonging to the company, for his own purposes.’

52. Section 3.21 of the CLR Final Report is entitled ‘Personal Exploitation of Corporate Opportunities’ and notes, in no-conflicts terms, that ‘the key issue we need to address here is the process for addressing director's conflicts of interest and in particular which company body… should have the authority to permit a director to exploit for his personal benefit… which he has encountered as a director’ (p 46, emphasis added). Annex C: Statement of Directors Duties - Draft Clause and Schedule and Explanatory Notes: ‘Paragraph 6 (Personal Use of the Company's Property, Information or Opportunities) covers the so called “corporate opportunity rule” which prevents a director from exploiting company assets for his personal purposes’ (emphasis added).

53. Corporate opportunity is a proprietary concept, which, interestingly, a Lexis search reveals was first used in English case law in Island Export Finance v Ummuna [1986] BCLC 460, an English corporate opportunities case considered in this article (see below, text to nn 79–84).

54. For example, Lowry and Edmunds note that for over 60 years the United States courts have been developing what has become compendiously known as the ‘corporate opportunity doctrine’: J Lowry and R Edmunds ‘The No-Conflict-No-Profit Rules and the Corporate Fiduciary: Challenging the Orthodoxy of Absolutism’ (2000) JBL 122 at 123. Austin, above n 20, p 141 argues that ‘over the last century or so. United States courts have developed a supplementary rule for the fiduciaries of business corporations, called “the corporate opportunities doctrine”’.

55. Koh, above n 20, at 411 noting that ‘in the United States, the corporate opportunities doctrine regulates circumstances under which a business opportunity is considered a corporate asset’. See also Austin, above n 20, p 153.

56. S Scott ‘The Corporate Opportunity Doctrine and Impossibility Arguments’ (2003) 66 MLR 852 at 857.

57. Koh, above n 46, at 896.

58. Prentice and Payne, for example, above n 47, at 202 seem to draw such an inference when arguing that ‘Principle 6 is very much a maturing business opportunity test’, one of two possible English corporate opportunity approaches discussed below. Koh, above n 46, at 897 noting that ‘the reference in principle 6 to “opportunity of the company” is generally taken to refer to the “corporate opportunity doctrine”’.

59. Koh, above n 46, at 900.

60. As Pearlie Koh insightfully points out the distinction between information about an opportunity and an opportunity is unclear and the reliance in Principle 6 on this distinction is problematic (Koh, above n 46, at 897). An opportunity is always in the first instance information about an opportunity. As Morritt LJ in Brown v Bennett [1999] 1 BCLC 649 points out the presentation of an opportunity ‘forms knowledge’ for the directors. Intuitively the idea of an opportunity suggests progression towards the realisation of the information about the opportunity. But until a contract is awarded or an investment made, it is difficult to distinguish between the earlier and later stages of the development of the initial information. But the distinction in Principle 6 assumes that such a distinction can be made because it assumes the opportunity exists in a way distinct from information prior to it being ‘used’ by the director. However, prior to its ‘use’ an opportunity is always information and knowledge. It does not make sense, therefore, to regulate ‘opportunities’ differently than ‘information’.

61. On confidential information see generally Lord Goff and G Jones The Law of Restitution (London: Sweet & Maxwell, 6th edn, 2002) pp 754–756. Authority for the proposition that confidential information is property include: Re Keene [1922] 2 Ch 475 where the Court of Appeal held that an unwritten formula was ‘property’ as understood by the bankruptcy Acts; A-G v Guardian Newspapers Ltd [1989] 2 FSR 81 at 99–100 where Sir Nicholas Browne-Wilkinson, whilst equivocal about his own view and its consistency with Boardman v Phipps, held that although ‘information as such is not property in any sense’, if it is communicated in such a way as to generate a duty of confidence this may create a property right in the information. Authority for the proposition that confidential information is not property include: Donaldson J's decision in North and South Trust Company v Berkeley [1970] 2 Lloyd's Rep 467 at 481 noting that ‘it is by no means clear that information is property in this context’; and Lord Denning MR's judgment in Fraser v Evans [1969] 1 QB 349 at 361 where he held that any restraints on the publication of confidential information were ‘based not so much on property or on contract as on the duty of good faith’.

62. For a summary of this commentary see T K Leng and S H S Leong ‘Contractual Protection of Business Confidence’ (2002) JBL 513 at 521.

63. [1967] 2 AC 46 at 107.

64. [1967] 2 AC 46 at 115.

65. [1967] 2 AC 46 at 90.

66. [1967] 2 AC 46 at 102.

67. [1967] 2 AC 46 at 128.

68. Austin. above n 20, p 145. See also Koh, above n 46, at 896 foregrounding Lord Upjohn's dissenting judgment in considering this issue; Koh above n 20, at n 108; and G Jones ‘Unjust Enrichment and the Fiduciaries Duty of Loyalty’ (1968) 84 LQR 472 at 484–485.

69. [1967] 2 AC 46 at 127.

70. Goff and Jones, above n 61, p 755 make a similar argument in relation to the regulation of confidence when they note that ‘to categorise information as property does not necessarily solve satisfactorily such complex questions as the scope of a duty of a confidant or a third person to make restitution’.

71. [1876] 8 Ch D 345 at 354.

72. [1891] 2 Ch 244 at 258.

73. [1891] 2 Ch 244 at 256. Interestingly, in giving an example of when a partner could use information for personal benefit, Lindley LJ also uses the phrase ‘line of business’ (at 256).

74. For Lindley LJ ‘all such matters were quite foreign to [the partnership's] business’ [1891] 2 Ch 244 at 255.

75. [1967] 2 AC 46 at 90.

76. [1967] 2 AC 46 at 109–110.

77. [1964] 1 WLR 993 at 1011.

78. [1965] Ch 992 at 1019.

79. [1986] BCLC 460.

80. [2001] 2 BCLC 704.

81. [1974] SCR 592.

82. [1974] SCR 592 at para 24.

83. [2001] 2 BCLC 704 at 733.

84. [1974] SCR 592 at para 25.

85. [2003] BCC 711 at 723.

86. See M Bazerman, K Morgan and G Lowenstein ‘The Impossibility of Auditor Independence’ (Summer 1997) Sloan Management Review at 91, arguing that: ‘when people are called upon to make impartial judgements, those judgements are likely to be unconsciously and powerfully biased in a manner that is commensurate with self-interest… People tend to confuse what is personally beneficial with what is fair or moral.’ See generally G Lowenstein ‘Behavioural Decision Theory and Business Ethics: Skewed Trade Offs Between Self and Other’ in D M Messick and A E Tenbrunsel (eds) Codes of Conduct: Behavioural Research and Business Ethics (New York: Russell Sage, 1996).

87. Prentice and Payne, above n 47, at 202.

88. See generally, R M Grant Conremporaty Strategic Analysis (Oxford: Blackwell, 5th edn, 2005) pp 130–185.

89. J Armour ‘Corporate Opportunities: If in Doubt Disclose (But How?)’ (2004) 63 CLJ 33 at 34.

90. It is noteworthy that clause B6(1) of the Company Law Reform White Paper (Cm 6456, 2005) makes no attempt to resolve this issue.

91. [1972] 2 All ER 162.

92. Following Koh, above n 20, at 418, liability in IDC v Cooley [1972] 2 All ER 162 is understood to be based upon the application of the no-conflicts rule. See also: Item Software v Fassihi [2005] ICR 450 at 462; and Gower and Davies, above n 48, p 89.

93. Austin, above n 20, pp 145–147 See also D Prentice ‘Director's Fiduciary Duties - The Corporate Opportunity Doctrine’ (1972) Can BR 623 at 629 arguing that following IDC v Cooley, English law could be formulated in a manner similar to the line of business test used in several US states.

94. [2003] BCC 711.

95. Prentice and Payne, above n 47, at 202 noting that ‘it would be in keeping with the approach in Bhullar to treat anything of economic value to the company as potentially falling within the company's line of business’.

96. Armour, above n 89, at 34.