Industrial Development Consultants Ltd (IDC) v Cooley [1972] is a landmark decision in English company law on the corporate opportunity doctrine and the strict nature of the director’s fiduciary duty to avoid conflicts of interest.

Facts of the Case

The defendant, Mr Cooley, was the managing director of IDC, a design and construction firm that had unsuccessfully tried to secure a lucrative contract with the Eastern Gas Board. The Gas Board then approached Cooley directly, wishing to engage him personally and making clear they would not contract with IDC under any circumstances. Rather than disclosing this, Cooley concealed the offer and resigned from IDC, falsely claiming ill health, then took up the contract for his own benefit.

Legal Issue

Whether a director could be liable for profits made from an opportunity the company itself could not have obtained, and whether information received in a “personal” capacity was exempt from the duty of disclosure.

Judgment

Roskill J held that Cooley was accountable to IDC for all profits under the contract.

  • Duty to disclose: information that came to Cooley while managing director, relevant and of concern to IDC, was information he had a positive duty to pass on.
  • Irrelevance of rejection: it was legally irrelevant that the Gas Board would have refused to contract with IDC; liability turns on the director making a profit by placing his interests in conflict with his duty, not on company loss.
  • Capacity: even though approached in a “personal capacity”, his status as a fiduciary meant he could not separate his private interests from his corporate obligations.

Significance and Legal Principles

  • Strict prophylactic rule: reaffirms the “no-profit” rule from Regal (Hastings) Ltd v Gulliver — liability for secret profits is strict and needs no bad faith or proof of company loss.
  • Corporate opportunity doctrine: a “paradigm case” that directors must not divert to themselves business opportunities belonging to the company.
  • Post-resignation liability: a director cannot escape liability by resigning where the resignation was part of a plan to exploit an opportunity identified in office — now reflected in section 170(2) of the Companies Act 2006.