Discuss whether there has been a breach of fiduciary duty by Snagsby and Guppy as directors of

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Discuss whether there has been a breach of fiduciary duty by Snagsby and Guppy as directors of Dedlock in relation to the Vholes contract, and if so, what would be an appropriate remedy?

The Dedlock Construction Company Limited (“Dedlock”) was incorporated in 2000 under the Companies Act 1993. Prior to its incorporation, three of its directors had been carrying on business in New Zealand as building contractors. These were Snagsby Guppy and Krook who were in partnership. The partnership had just completed a subway under the railway track at Tulkinghorn for KiwiRail, a New Zealand state-owned enterprise responsible for rail operations in New Zealand.

In 2005 KiwiRail was asking for tenders for the construction of a railway line from Summerson to Carstone, known as the Summerson Line, and the tenders of Snagsby, Guppy and Krook made on behalf of the partnership (“the firm”) were accepted by KiwiRail. Before tendering, arrangements had been made by the firm with another building contractor, Caddy, that he should take an interest in the contract to the extent of one-half if the firm was successful. Dedlock was formed to define their interests, and its share capital distributed in the proportions agreed: 50-50 between the firm (compris- ing Snagsby, Guppy and Krook) and Caddy.

The board of directors of Dedlock was comprised of Snagsby, Guppy, Krook and Caddy. Guppy is also general manager.

Dedlock successfully carried out the work of laying the Summerson Line and the company continued to tender and obtain a considerable number of other contracts of great value from KiwiRail.

The Vholes contract – a rail electrification contract in South Auckland – is the one which has given rise to the present dispute. Bucket, a representative of KiwiRail, had arranged most of the contracts between Dedlock and KiwiRail. Her negotiations had always been either with Snagsby or Guppy – she had never dealt with Caddy or Krook.

In 2017, due to a disagreement with Caddy, Snagsby, Guppy and Krook decided that they would no longer continue a business relationship with him.

Whilst still retaining their position as directors and their respective roles in Dedlock, Snagsby and Guppy proceeded to negotiate with Bucket for the new Vholes contract with KiwiRail, in reality on behalf of the firm, but in exactly the same manner as they had always acted for Dedlock.

After all the preliminaries of the Vholes contract had been concluded, Snagsby said to Bucket, "Remember, if we get this contract it is to be the firm, and not Dedlock".

Caddy had been excluded from all negotiations and discussions even though he was one of the direc- tors of the company – he did not find out about the Vholes contract until it had been signed.

Subsequently Snagsby, Guppy and Krook formed another company called the Honoria Construction Company Limited (“Honoria”) to carry out the work for the Vholes contract. The contract was ac- cordingly taken over by Honoria by whom the work was carried out and the profits made.