This case concerned a claim brought by the liquidators of Hipgnosis Music Limited (HML) against Merck Mercuriadis, one of its former directors and a former manager of a string of high-profile music artists including Elton John and Beyoncè.
It was alleged he had diverted a burgeoning business opportunity and pursued it through a new entity after HML had been wound up. The opportunity was a music catalogue investment. HML and its subsidiary were incorporated to exploit this opportunity with two Swedish investors but a proposed bond issue failed. HML was later wound up and its subsidiary dissolved and Mr Mercuriadis set up another company, Hipgnosis Songs Fund Ltd (HSF), which did manage to successfully raise funds and built up a substantial music catalogue investment portfolio before listing.
Under section 170(2)(a) Companies Act 2006, a former director remains subject to the duty to avoid conflicts of interest in relation to the exploitation of any property, information or opportunity of which he became aware at a time when he was a director. Did Mr Mercuriadis breach this duty when he exploited the same concept again successfully, through another company? And did the new, now listed, company who exploited the idea dishonestly assist those breaches?
The court said no on both counts. In this case, the court accepted a breach could arise purely in respect of conduct after the director ceased being in office, but it did not accept that the underlying opportunity or concept belonged to HML. It held the director had already been aware of the idea before becoming a director - HML was incorporated afterwards as the mechanism to exploit that idea.
This was not a situation where the director had become aware of the opportunity because of his position as fiduciary, in contrast to Regal (Hastings) v Gulliver, where directors were held liable because the opportunity they exploited arose during the course of their directorship.
The court also went on to say that even if Mr Mercuriadis had breached his duties (and ordered him to account for his gains), it would not have ordered an account against the new company that earned these profits. It applied Novoship (UK) Limited v Mikhalyuk in respect of non-fiduciary assistants. There was no causal link between the acts of the alleged dishonest assistant, HSF, and the profits it earned were not profits HML could ever have earned - HSF was only able to make those profits because its investors, who knew nothing of any wrongdoing, were willing to put their own capital at risk. It would have been disproportionate to order an account in those circumstances.
Hipgnosis Music Ltd (in Liquidation) v Mercuriadis & Others [2026] EWHC 1500 (Ch)
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