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Essay on Smithtn Ltd. Claim for Rights

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Smithton ltd (formerly Hobart) brought a claim for a loss suffered when the two companies Insureprofit ltd and Mariona ltd failed on their obligations to pay margin calls under contract with the claimant. The claim was brought against Mr Naggar who was a majority shareholder of Hobart and himself and his family owned and controlled the two companies who went insolvent. Hobart alleged that Mr Nagger was either a de facto or shadow director and had breached the duties he owed towards the company.

The judge in this case, recognised that there is a distinction in the tests between shadow and the facto directors, as described by David Richards J in the McKillen judgement, however the parties decided not to make a distinction between the
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Hobart claimed that Mr Pincus, Mr Keane and Mr Morley (the nominated directors) effectively did what Mr Naggar instructed them on what to do rather then exercising their own powers. Mr Naggar however denied any involvement with the day-to-day management of Hobart or that he never gave any directions to the directors on what to do at the Board meetings

Re Hydrodam explains that a de facto director is a person who assumes to act as a director. To establish that a person was a de facto director you must prove that he undertook functions in relation to the company that only a director could discharge. It is not sufficient to show that he was concerned in the management of the company’s affairs.
Mr Naggar in contrast to the facts of this case never claimed to be a director of the company or acted as one.
Some of the claims brought forward by Hobart in relation to Mr Naggar being a de facto director are linked to the fact that he was sent daily Open Position Reports that sets out their lists of every client and market position of the company. Hobart insisted that the fact that he was receiving the OPRs proved that he was a director rather than a client or shareholder.
Nevertheless even though Mr Naggar insisted on receiving the OPRs it was merely because is particular situation were he was the joint owner of the group of which both Hobart and the Connected Companies were part of.

In the Matter of Mumtaz Properties ltd it was
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