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Case briefing: Weavering Macro Fixed Income Fund Ltd v Peterson and Ekstrom

Facts

Two directors of a fund received a quarterly report which should have told them it was insolvent and so led to a timely liquidation. Instead they did nothing. Some early post Lehman Bros redemptions were honoured in full, but when the trickle became a flood the later redemption requests could not be honoured. Ideally all requests should have been handled more equitably.

The directors defended that even if they had breached their duty they could rely upon their exculpation clause which covered all bar wilful neglect or default.

Decision

Annotating minutes to identify them as minutes of a meeting that was actually held on a later date was not evidence of an intent to falsify documents.

It is not evidence of a conscious decision to disregard one’s high level supervisory duty 1) not to keep minutes; 2) not to summons delegates to meetings to be questioned (it is only evidence of a view that written reports will be reliable); 3) not to read documents before signing them, (it is only evidence of a view that those who advised they be signed were assumed to have considered whether it was in the company’s interest to do so).

Principle

To show wilful neglect or default you must show that a director made a deliberate and conscious decision to act (or fail to act), either in knowing breach of duty or having at least appreciated such conduct might be in breach of duty but having then decided to proceed regardless of the consequences.