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Multinational Gas & Petrochemical Co v National Gas and Petrochemical Services
Ltd 57 stated it differently. Dillon L.J. in that case held that:
An individual trader who is solvent is free to make stupid, but honest
commercial decisions in the conduct of his own business. He owes no duty of
care to future creditors. The same applies to a partnership of individuals. A
company, as it seems to me, likewise owes no duty of care to future creditors.
The directors indeed stand in a fiduciary relationship to the company, as they
are appointed to manage the affairs of the company and they owe fiduciary
duties to the company though not to the creditors, present or future, or to
individual shareholders: A company owes no duty of care to future
creditors… so long as the company is solvent the shareholders are in
substance the company. 58 (Emphasis added)
The same judge decided in West Mercia Safety Ltd (in liq) v Dodd 59 that once
insolvency intrudes, the interests of the creditors overrode those of shareholders,
because in a practical sense the company‟s assets belonged to those who could
displace the power of shareholders and directors to deal with them. Dillon LJ
clarified his earlier remarks because at the time the directors made decisions relating
to the transaction in question, the company was amply solvent and directors were
acting in good faith while in West Mercia Safety Ltd (in liq) v Dodd 60 at the relevant
time the directors knew that the company was insolvent.
The House of Lords in Winkworth v Edward Baron Development Co Ltd 61
acknowledged the duty owed to creditors when the company is insolvent. In that
57 [1983] 2 All E.R 563.
58 [1983] 2 All E.R 563 at 585.
59 (1988) BCLC 250 at 252-253.
60 (1988) BCLC 250 at 252.
61 [1986] 1 W.L.R. 1512 at1517.
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