O'Donnell v Shanahan [2009] EWCA Civ 751 is a UK company law case concerning the strict prohibition on any possibility of a conflict of interest between a director's duty to promote her company's success and her own gain.

Facts

Allied Business & Financial Consultants Ltd was a small company, with its office above the Charles Dickens pub at 160 Union Street in Southwark

Southwark

Southwark is a district of south London, England, and the administrative headquarters of the London Borough of Southwark. Situated east of Charing Cross, it forms one of the oldest parts of London and fronts the River Thames to the north...

. The directors were former Bank of Ireland

Bank of Ireland

The Bank of Ireland is a commercial bank operation in Ireland, which is one of the 'Big Four' in both parts of the island.Historically the premier banking organisation in Ireland, the Bank occupies a unique position in Irish banking history...

 employees, who had set up the company in 1988, and included Ms O'Donnell and Mr Shanahan who were both directors. Ms O'Donnell had fallen out with the other members allegedly after (among other things) Mr Shanahan had diverted a property investment opportunity - to buy an interest in the fifth floor of Aria House, above the Playhouse Theatre

Playhouse Theatre

The Playhouse Theatre is a West End theatre in the City of Westminster, located in Northumberland Avenue, near Trafalgar Square. The Theatre was built by F. H. Fowler and Hill with a seating capacity of 1,200. It was rebuilt in 1907 and still retains its original substage machinery...

, 23 Craven Street, near Embankment

Embankment tube station

Embankment is a London Underground station in the City of Westminster, known by various names during its history. It is served by the Circle, District, Northern and Bakerloo lines. On the Northern and Bakerloo lines, the station is between Waterloo and Charing Cross stations; on the Circle and...

 - to one of his own companies. Ms O'Donnell contended that this diversion was a breach of Mr Shanahan's duty as a director to act without any possibility of a conflict of interest, and because Allied Business Ltd could possibly have taken the opportunity, she was in her interests as a member unfairly prejudiced (under CA 1985 s 459, now CA 2006 s 994). She requested that her shares be bought out at a fair value.

High Court

Richard Sheldon QC held, based on the old case of Aas v Benham [1891] 2 Ch 244 that the particular opportunity taken up by Mr Shanahan's company fell outside the scope of Allied's business. Therefore there was no conflict of interest, and no breach of the no profit rule.

Court of Appeal

Waller LJ, Rimer LJ and Aikens LJ reversed the High Court and allowed the unfair prejudice petition to proceed. In this particular case it was clear that Mr Shanahan had acted without the company's fully informed consent. The opportunity had come to Mr Shanahan in his capacity as a director of Allied Business Ltd, and so must in principle be accountable for any profit. Aas was distinguishable as a case of partnership, where the business relationship had been circumscribed by contract.