¹ Charitable Corpn. v. Sutton (1742) 2 Atk. 400.

² e.g., Keeton, “The Director as Trustee” (1952) 5 C.L.P. 11, 13, 15; Cooke, , Corporation, Trust and Company (Manchester, 1950), pp. 110–111, 154;Google ScholarGower, , Modern Company Law, 1st ed. (London, 1954), p. 136Google Scholar (but cf. ibid. p. 33, and 2nd ed., pp. 32, 471).

³ An alternative suggestion, viz., that, since the corporate property was considered to be vested in the corporation as trustee for the members, the directors were to be treated as “constructive trustees” under this theoretical trust (Gower, op. cit., 2nd ed., p. 471) cannot, it is submitted, be supported. Apart from the fact that none of the reported cases uses this reasoning, there is the difficulty that early corporations were competent to alienate without restriction as to “corporate purpose ” (Mayor of Colchester v. Lowten (1813) 1 V. & B. 226), so that there could be no breach of trust by the corporation in which the director could be involved; and, further, if this view were correct, the proper plaintiffs in Charitable Corpn. v. Sulton (1742) 2 Atk. 400 would have been the members, and not the corporation.

⁴ Supra. See also R. v. Watson (1788) 2 Term Rep. 199; Mayor of Colchester v. Lowten, supra; Att.-Gen. v. Wilson (1840) Cr. & Ph. 1; Att.-Gen. v. Compton (1842) 1 Y. & C.C.C. 417.

⁵ Benson v. Heathorn (1842) 1 Y. & C.C.C. 326.

⁶ See, e.g., the following textbooks, each of which incorporates one or more model deeds of settlement: C. F. F. Wordsworth, The Law Relating to Railway, Bank, Insurance, Mining and other Joint-Stock Companies, 2nd ed. (London, 1837); J. Collyer, Practical Treatise on the Law of Partnership, 2nd ed. (London, 1840); G. Taylor, Practical Treatise on the Act for the Registration, Regulation and Incorporation of Joint Stock Companies (London, 1847).

⁷ The precedent in Collyer (note 6, supra) constitutes four different sets of “trustees for the company”: (i) the “vendor” or trustee who had purchased property on its behalf before it was formed, (ii) three covenantees, to enforce the provisions of the deed against all the other subscribers, (iii) a fourth covenantee with whom these three covenanted to observe the deed, (iv) trustees in whom the property was to be vested.

⁸ Cf. DuBois, , The English Business Company after the Bubble Act (New York, 1938), p. 266, n. 104, p. 274Google Scholar, n. 163; Benson v. Heathorn (1842) 1 Y. & C.C.C. 326; Gleadow v. Hull Glass Co. (1849) 19 L.J.Ch. 44 (where the directors were chosen); York and North-Midland Ry. v. Hudion (1853) 16 Beav. 485.

⁹ Cf. the following companies: Hand-in-Hand Fire and Life Insurance Society (1696), quoted in Walford, The Insurance Cyclopaedia (London, 1878), Vol. 5, p. 634: 20 directors, 6 trustees, separately appointed; Phoenix Fire Office (1781–83): three successive deeds provided for 5 directors and 5 (different) trustees, 10 and 5, and 15 and 5, respectively; proposed Norwich Union Association (1785), mentioned Relton, Account of the Fire Insurance Companies including the Sun Fire Office (London, 1893), p. 230: 15 directors, 5 trustees (and cf. the General Insurance Office (1720), ibid. pp. 81–83, where the proposal cited makes it plain that the directors and trustees were to be independent); Birmingham Mining & Copper Co. (1790), cited DuBois,op. cit., p. 233: committee of management 21, one or more trustees; Norwich Equitable Assurance Co. (1807), in Long v. Yonge (1830) 2 Sim. 369: 12 directors, 9 trustees; British Iron Company (1825), in Attwood v. Small (1838) 6 Cl. & F. 232: 16 directors, 5 trustees; Imperial Bank of England (1837) in Wallworth v. Holt (1841) 4 My. & Cr. 619: 8 directors, 2 trustees, 3 ”public officers” (for the purposes of litigation).

¹⁰ e.g., the Sun Fire Office (1707), DuBois, op. cit., p. 244; the British Society (1779), DuBois, pp. 231, 271 (27 directors of whom 5 trustees); Chilean and Peruvian Mining Assn., in Ducarry v. Gill (1830) M. & M. 450 (3 trustees, also directors but not enough for a quorum of directors).

¹¹ See the discussion of the practice of four insurance companies in the Report of the Select Committee on Joint Stock Companies of 1844, Evidence, Qs. 1879–93, Parliamentary Papers (1844), Vol. VII, pp. 148–149.

¹² See, further, Re Norwich Yarn Co., ex p. Bignold (1856) 22 Beav. 143; Evans v. Coventry (1856) 25 L.J.Ch. 489 (subsequently on appeal, (1857) 8 De G.M. & G. 835); Maxwell v. Port Tennant Patent Steam Fuel and Coal Co. (1857) 25 Beav. 495. Trustee savings banks, however, were exceptional, in that trustees did as a rule constitute the executive; and this was probably true also of one or two building and friendly societies.

¹³ See note 4, supra, and also Foss v. Harbottle (1843) 2 Hare 461; Aberdeen Ry. v. Blaikie Bros. (1854) 1 Macq. 461.

¹⁴ See especially Benson v. Healhorn (1842) 1 Y. & C.C.C. 326; Re German Mining Co., ex p. Chippendale (1853–54) 4 De G.M. & G. 19.

¹⁵ Grimes v. Harrison (1859) 26 Beav. 435. The explanation is that the trustees in these early companies were simply in the position of “holding” trustees, who exercised no discretion but simply did what the directors ordered. Cf. the “Widows' Case” an unreported decision of Lord Thurlow in 1785, mentioned by Lord Eldon in Pearce v. Piper (1809) 17 Ves. 1, 15–18; and Cornell v. Hay (1873) L.R. 8 C.P. 328.

¹⁶ See, e.g., York and North-Midland Ry. v. Hudson (1853) 16 Beav. 485, 491, per Lord Romilly M.R.

¹⁷ See further on this topic [1962] C.L.J. 69, 70–72.

¹⁸ See, e.g., Chancey v. May (1722) Prec.Ch. 592; the “Widows' Case,” note 15, supra; Hichens v. Congreve (1828) 4 Russ. 562.

¹⁹ Re Kingston Cotton Mill (No. 2) [18%] 1 Ch. 331, 345.

²⁰ Re Exchange Banking Co., Flitcroffs Case (1882) 21 Ch.D. 519, 525.

²¹ See [1963] C.L.J. 119, 119–122.

²² There may, of course, be express provision for trustees to act by a quorum or majority: cf. Maitland, Equity, 2nd ed., by Brunyate, (Cambridge, 1936), p. 88.Google Scholar Charitable trustees are a regular exception to the requirement of unanimity.

²³ In practice, a trustee who has acted reasonably may be relieved under statutory provisions, e.g., Trustee Act 1925, s. 61. He may also sometimes have a right of indemnity against a co-trustee: Re Partington, Partington v. Allen (1887) 57 L.T. 654.

²⁴ A trustee may, of course, consult experts and employ agents, but he does not thereby divest himself of the responsibility of making decisions personally.

²⁵ Cf. Burland v. Earle [1902] A.C. 83, 93, per Davey, Lord.Google Scholar

²⁶ York and North-Midland Ry. v. Hudson (1853) 16 Beav. 485, 500.

²⁷ Charitable Corpn. v. Sutton (1742) 2 Atk. 400 (where the solution adopted was t o make the passive directors liable in the second degree to those actively involved); Benson v. Heathorn (1842) 1 Y. & C.C.C. 326; York and North-Midland Ry. v. Hudson, supra; Burt v. British Nation Life Assce. Assn. (1859) 4 De G. & J. 158.

²⁸ See, e.g., Re Cardiff Savings Bank, Marquis of Bute's Case [1892] 2 Ch. 100; Re Forest of Dean Coal Mining Co. (1878) 10 Ch.D. 450.

²⁹ The decisive case is probably Land Credit Co. of Ireland v. Lord Fermoy (1870) L.R. 5 Ch.App. 763.

³⁰ This approach is given especial emphasis when relief is sought by summary proceedings in a winding up, under the Companies Act 1948, s. 333, or the equivalent section in earlier Acts: cf. Re Liverpool Household Stores Assn. Ltd. (1890) 59 L.J.Ch. 616, 620, per Kekewich J.

³¹ Cf. the ready implication of borrowing powers in favour of directors in Re Norwich Yarn Co., ex p. Bignold (1856) 22 Beav. 143.

³² Ashbury Ry. Carriage & Iron Co. v. Riche (1875) L.R. 7 H.L. 653.

³³ Trevor v. Whitworth (1887) 12 App.Cas. 409.

³⁴ Salomon v. Salomon & Co. Ltd. [1897] A.C. 22.

³⁵ Automatic Self-Cleansing Filter Syndicate Co. Ltd. v. Cunninghame [1906] 2 Ch. 34Google Scholar; Shaw & Sons (Salford) Ltd. v. Shaw [1935] 2 K.B. 113Google Scholar.

³⁶ The directors in the exercise of their powers still owe fiduciary duties to the members as a whole in any matter where the interest of the company as an economic entity is not affected—e.g., in the making of calls, the declaration of a dividend, or the issue of further shares, they may not give some members an advantage at the expense of others: see p. 93, infra.

³⁷ Cf. Gower, op. cit. (note 2, supra), 2nd ed., pp. 475–476.

³⁸ See [1962] C.L.J. 69, 73.

³⁹ Cf. 17 Halsbury's Laws of England (Simonds ed.), p. 678 et seq. But undue influence may be shown to exist in fact: Robinson v. Randfontein Estates Gold Mining Co. Ltd., 1921Google Scholar A.D. 168.

⁴⁰ Maitland, op. cit. (note 22, supra), p. 93.

⁴¹ Re Exchange Banking Co., Flitcroft's Case (1882) 21 Ch.D. 519, 535–536, per Cotton L.J.

⁴² Re Railway & General Light Improvement Co., Marzetti's Case (1880) 42 L.T. 206, 209, per Cotton L.J.; Re Sharpe [1892] 1 Ch. 154, 165–166, per Lindley L.J.

⁴³ Re Mercantile Trading Co., Stringer's Case (1869) L.R. 4 Ch.App. 475; Re Kingston Cotton Mill (No. 2) [1896] 1 Ch. 331.

⁴⁴ Hutton v. West Cork Ry. (1883) 23 Ch.D. 654, 673, per Bowen L.J.

⁴⁵ Ibid.; and cf. Re Liverpool Household Stores Assn. Ltd. (1890) 59 L.J.Ch. 616, 626, per Kekewich J.

⁴⁶ Re Lands Allotment Co. [1894] 1 Ch. 616; cf. London Trust Co. Ltd. v. Mackenzie (1893) 62 L.J.Ch. 870.

⁴⁷ Bell Houses Ltd. v. City Wall Properties Ltd. [1966]Google Scholar 2 W.L.R. 1323.Cf. Gower, op. cit. (note 2, supra), pp. 476, 511.

⁴⁸ Land Credit Co. of Ireland v. Lord Fermoy (1870) L.R. 5 Ch.App. 763; Re Denham & Co. (1883) 25 Ch.D. 752; Grimwade v.Mutual Society (1884) 52 L.T. 409; Dovey v. Cory [1901]Google Scholar A.C. 477; note 43, supra. At best, a trustee who relied on a fellow-trustee would be jointly liable, but entitled to an indemnity.

⁴⁹ Re City Equitable Fire Insce. Co. Ltd. [1925] Ch. 407Google Scholar.

⁵⁰ Grimwade v. Mutual Society (1884) 52 L.T. 409, 416, per Chitty J.

⁵¹ Charitable Corpn. v. Sutton (1742) 2 Atk. 400; cf. Overend Gurney & Co. v. Gurney (1869) L.R. 4 Ch.App. 707n., 709n., per Malins V.-C.

⁵² Re Cardiff Savings Bank, Marquis of Bute's Case [1892] 2 Ch. 100.

⁵³ Lagunas Nitrate Co. v. Lagunas Syndicate [1899] 2 Ch. 392, 437.

⁵⁴ (1851) 3 Mac. & G. 440, 448.

⁵⁵ See note 36, supra.

⁵⁶ Cf. Re Anglo-French Co-operative Soc, ex p. Pelly (1882) 21 Ch.D. 492 (benefit to directors and stranger): Re New Travellers' Chambers Ltd. (1896) 12 T.L.R. 529 (injury to stranger).

⁵⁷ Wilson v. London Midland & Scottish Ry. [1940]Google Scholar Ch. 393; cf. Button v. West Cork Ry. (1883) 23 Ch.D. 654, 671.

⁵⁸ Hirsche v. Sims [1894] A.C. 654; Seligman v. Prince & Co. [1895] 2 Ch. 617, 625; Mills v. Mills (1938) 60 C.L.R. 150, 163.

⁵⁹ Re Smith & Fawcett Ltd. [1942]Google Scholar Ch. 304; Legion Oils Ltd. v. Barron [1956]Google Scholar 2 D.L.R. (2d) 505; Mills v. Mills, supra.

⁶⁰ Cf. Cannon v. Trask (1875) L.R. 20 Eq. 669 (intention to injure not denied). The same distinction is made in the tort of conspiracy: see Crofter Hand Woven Harris Tweed Co. v. Veitch [1942] A.C. 435Google Scholar, 445, per Viscount Simon.

⁶¹ Cf. Aberdeen Ry. v. Blaikie Bros. (1854) 1 Macq. 461. In contrast, the bona fides of majority shareholders may be inquired into even when they have an adverse interest: North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589.

⁶² Piercy v. S. Mills & Co. Ltd. [1920]Google Scholar 1 Ch. 77; Punt v. Symons & Co. Ltd. [1903]Google Scholar 2 Ch. 506; Hogg v. Cramphorn Ltd. [1966]Google Scholar 3 W.L.R. 995.

⁶³ See p. 33, supra.

⁶⁴ Cf. Bermingham v. Sheridan (1864) 33 Beav. 660, 664; Re Englefield Colliery Co. (1878) 8 Ch.D. 338; J. & P. Coats Ltd. v. Crossland (1904) 20 T.L.R. 800Google Scholar; Leeds Estate Building & Investment Co. v. Shepherd (1887) 36 Ch.D. 787. But directors may commit themselves bona fide in the company's interests: Thorby v. Goldberg (1965) 112 C.L.R. 597Google Scholar.

⁶⁵ See p. 100, infra.

⁶⁶ e.g., Learoyd v. Whiteley (1887) 12 App.Cas. 727; Ashburner, , Principles of Equity, 2nd ed. by Browne, (London, 1933), pp. 123, 127.Google Scholar

⁶⁷ Overend & Gurney Co. v. Gibb (1872) L.R. 5 H.L. 480, 486, per Lord Hatherley L.C. (obiter).

⁶⁸ (1869) L.R. 4 Ch.App. 701, 720 (the same judge in the court below).

⁶⁹ Re Crenver & Wheal Abraham United Mining Co., ex p. Wilson (1872) L.R.8 Ch.App. 45.

⁷⁰ Charitable Corpn. v. Sutton (1742) 2 Atk. 400, 404.

⁷¹ (1842) 1 Y. & C.C.C. 326.

⁷² (1854) 1 Macq. 461.

⁷³ Cavendish Bentinck v. Fenn (1887) 12 App.Cas. 652, 658, 661 (per Lord Herschell), 671 (per Lord Macnaughten); cf. Chesterfield & Boythorpe Colliery Co. v. Black (1877) 37 L.T. 740; Re General Exchange Bank Ltd., ex p. Preston (1868) 37 LJ.Ch. 618, 621; Re Dover Coalfield Extension Co. [1908] 1Google Scholar Ch. 65; Transvaal Lands Co. v. New Belgium (Transvaal) Land & Development Co. [1914] 2 Ch. 488Google Scholar, 497.

⁷⁴ i.e., the organic theory of corporate acts, and recognition of the fact that directors may function by a quorum.

⁷⁵ Cf. Companies Act 1948, Table A, Art. 84.

⁷⁶ Unfortunately, many articles (including the provisions made in Table A from 1856 to 1929) provide for the removal or punishment of a director who fails to disclose an interest to the rest of the board, without indicating whether this is sufficient to validate the contract. Unless this can be implied from the context. there must presumably be disclosure to the members as well. The penal provisions of s. 199 of the Companies Act 1948 perpetuate this duplicity, although they make it clear that the equitable rules are unaffected.

⁷⁷ Bell v. Lever Bros. Ltd. [1932]Google Scholar A.C. 161, 195, per Lord Blanesburgh; London & Mashonaland Exploration Co. v. New Mashonaland Exploration Co. [1891] W.N. 165.

⁷⁸ Employees and partners, whose situation is based in part on contract, are subject to special rules.

⁷⁹ Re Thomson [1930] 1 Ch. 203Google Scholar is to the contrary, but cannot stand with Bell v. Lever Bros. Ltd., supra.

⁸⁰ Re Thomson, supra, may perhaps be supported on this ground. Cf. Hivac Ltd. v. Park Royal Scientific Instruments Ltd. [1946] 1 All E.R. 350Google Scholar.

⁸¹ Henderson v. Huntington Copper & Sulphur Co. (1877) 5 R. (Ct.Sess.) 1; Hutton v. West Cork Ry. (1883) 23 Ch.D. 654, especially 672, per Bowen L.J.; Re George Newman & Co. [1895] 1 Ch. 674, 686, per Lindley L.J.

⁸² See [1962] C.L.J. 69, 79–81; [1963] C.L.J. 119, 128–136; Brunyate, , Limitation of Actions in Equity (London, 1932)Google Scholar; Gower, op. cit. (note 2, supra), 2nd ed., pp. 510–511. The distinction is not always made clearly in the cases which follow; but it is the essential factor in determining whether the interested directors may use their votes as members in order to sanction the retention of a profit made by them.

⁸³ Metropolitan Bank v. Heiron (1880) 5 Ex.D. 319; Re North Australian Territory Co., Archer's Case [1892] 1 Ch. 322; Regal (Hastings) Ltd. v. Gulliver [1942] 1 All E.R. 378Google Scholar (but see note 85, infra).

⁸⁴ Hichens v. Congreve (1828) 4 Russ. 562.

⁸⁵ Cook v. Deeks [1916] 1 A.C. 554Google Scholar. It is disappointing that Regal (Hastings) Ltd. v. Gulliver was argued only as a claim for profits owed to the company, based in quasi-contract. If the plaintiff company had relied on Cook v. Deeks (supra), and alleged that the profits belonged in equity to it, it is submitted that the plea would have been unanswerable. There could then have been no suggestion that the directors as shareholders could have ratified the transaction, and, moreover, the defendants who escaped liability would probably not have done so. It was irrelevant that that company could not have afforded to take the shares itself through which the profits were made: a plaintiff can own in equity what it cannot own at law; and evidence of impossibility, like any other evidence tendered to show bona fides, is not admissible (see note 61, supra). Cf. Keech v. Sand ford (1726) Sel.Cas. t. King 61 (landlord's refusal); Fine Industrial Commodities Ltd.v. Pawling (1954) 71 R.P.C. 253Google Scholar (ultra vires); Zwickcr v. Stanbury [1954] 1 D.L.R. 257Google Scholar (beyond company's means).

⁸⁶ Robinson v. Randfontein Estates Gold Mining Co. Ltd., 1921Google Scholar A.D. 168, 179, per Innes C.J.

⁸⁷ Parker v. McKenna (1874) L.R. 10 Ch.App. 96. Peso Silver Mines Ltd. v. Cropper (1966Google Scholar) 56 D.L.R. (2d) 117 is difficult to reconcile with the older authorities.

⁸⁸ Cook v. Deeks [1916] 1 A.C. 554Google Scholar; Canada Safeway Ltd. v. Thompson [1951] 3 D.L.R. 295Google Scholar, further proceedings [1952] 2 D.L.R. 591; Zwicker v. Stanbury [1954] 1 D.L.R. 257Google Scholar.

⁸⁹ Robinson v. Randfontein Estates Gold Mining Co. Ltd. [1921]Google Scholar A.D. 168 (where one director completely dominated the board); G. E. Smith Ltd. v. Smith [1952]Google Scholar N.Z.L.R. 591 (single director with plenary powers).

⁹⁰ Cook v. Deeks, supra.

⁹¹ Canada Safeway Ltd. v. Thompson, supra (information obtained at company's expense). In the case of a service director, this includes inventions made in his company's time: Fine Industrial Commodities Ltd. v. fowling (1954) 71 R.P.C. 253Google Scholar.

⁹² See [1962] C.L.J. 119, 130.

⁹³ Benson v. Heathorn (1842) 1 Y. & C.C.C. 326, 340, per Knight Bruce V.-C.; York and North-Midland Ry. v. Hudson (not reported on this point, but referred to in Great Luxembourg Ry. v. Magnay (No. 2) (1858) 25 Beav. 586, 593, per RomiUy M.R.; Re Cape Breton Co. (1885) 29 Ch.D. 795, 803–804, per Cotton L.J.

⁹⁴ [1902] A.C. 83. Cf. P. & O. Steam Navigation Co. v. Johnson (1938) 60 C.L.R. 189Google Scholar, 213.

⁹⁵ Cf. Robinson v. Randfontein Estates Gold Mining Co. Ltd., 1921Google Scholar A.D. 168, 195: “justified in inferring a mandate wide enough to include the transaction.”

⁹⁶ Re Cape Breton Co. (1885) 29 Ch.D. 795; Jacobus Marler Estates Ltd. v. Marler (1916) 85 L.J.P.C. 167Google Scholar (where the possibility of a claim in negligence is referred to).

⁹⁷ (1874) L.R. 10 Ch.App. 96.Cf. Zwicker v. Stanbury [1954] 1 D.I.R. 257Google Scholar, where directors who acquired a member's shares without cost, in the course of negotiations for a reorganisation, were required to surrender them to the company.

⁹⁸ Cf. Gower, op. cit. (note 2, supra), 2nd ed., p. 104.

⁹⁹ There is no duty to the selling shareholder in the absence of agency: Percival v. Wright [1902] 2 Ch. 421Google Scholar. But if their position as directors gives them an advantage they may be accountable to the company for the resulting profit: see Gower, op. cit., p. 493.

¹ See Zwicker v. Stanbury [1954] 1 D.L.R. 257Google Scholar, where the director was found to have had a mandate, and accordingly debarred from enforcing the security at its face value.

² Overend Gurney & Co. v. Gurney (1869) L.R. 4 Ch.App. 701, 720, per Lord Hatherley L.C. A modern variant reads: “If we pay in peanuts, we must expect to get monkeys”— The Observer, December 18, 1966Google Scholar.

³ The leading modern case is Re City Equitable Fire Insce. Co. Ltd. [1925] Ch. 407Google Scholar, where the language is objective. In earlier cases either subjective and objective tests are suggested, even sometimes both in the same case. Cf. Re German Mining Co., ex p. Chippendale (1853) 4 De G.M. & G. 19, 34; Overend & Gurney Co. v. Gibb (1872) L.R. 5 H.L. 480; Re Railway & General Light Improvement Co., Marzetti's Case (1880) 42 L.T. 206; Re Denham & Co. (1883) 25 Ch.D. 752; London Financial Assn. v. Kelk (1884) 26 Ch.D. 107, 146; Re Liverpool Household Stores Assn. Ltd. (1890) 59 LJ.Ch. 616, 618; Merchants' Fire Office Ltd. v. Armstrong (1901) 17 T.L.R. 709Google Scholar.

⁴ “He is acquitted of dishonesty in the usual sense of the word. But in another sense he is not honest. It seems to me that a man who accepts such a trustee-ship, and does nothing, … never asks for explanation, and accepts flimsy explanations, is dishonest”: Re Second East Dulwich 745th Starr-Bowkett Building Soc. (1889) 68 LJ.Ch. 196, 198, per Kekewich J.

⁵ Re City Equitable Fire Insce. Co. Ltd. [1925]Google Scholar Ch. 407, 428, per Romer J.

⁶ Cf. Lister v. Romford Ice & Cold Storage Co. Ltd. [1957]Google Scholar A.C. 555. There are suggestions in some cases that a remedy in negligence, sounding in damages, lies against any director. Cf. Lagunas Nitrate Co. v. Lagimas Syndicate [1899] 2 Ch. 392, 437; Jacobus Marler Estates Ltd. v. Marler (1916) 85 L.J.P.C. 167Google Scholar; Re B. Johnson & Co. (Builders) Ltd. [1955] Ch. 634Google Scholar; Pavlides v. Jensen [1956] Ch. 515Google Scholar. It would be difficult to base this remedy in contract against a director qua director: cf. Beattie v. E. & F. Beanie Ltd. [1938] Ch. 708Google Scholar.

⁷ See note 35, supra.

⁸ e.g., Companies Act 1948, Table A, Art. 80.

⁹ Shaw & Sons (Salford) Ltd. v. Shaw [1935] 2 K.B. 113Google Scholar.

¹⁰ If the board cannot function, e.g., through deadlock or, semble, conflicting interest, its functions revert to the general meeting: Foster v. Foster [1916] 1 Ch. 532Google Scholar—a rule apparently overlooked in Re Cleadon Trust Ltd. [1939] Ch. 286Google Scholar.

¹¹ Grant v. United Kingdom Switchback Rys. (1888) 40 Ch.D. 135.

¹² Greenhalgh v. Arderne Cinemas Ltd. [1951]Google Scholar Ch. 286.

¹³ Cf. Millers (Invercargill) Ltd. v. Maddams [1938] N.Z.L.R. 490Google Scholar; Ngurli Ltd. v. McCann (1953) 90 C.L.R. 425Google Scholar.

¹⁴ North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589; Dominion Cotton Mills Co. Ltd. v. Amyot [1912]Google Scholar A.C. 546; Ving v. Robertson & Wood-cock Ltd. (1912) 56 S.J. 412Google Scholar; Harris v. A. Harris Ltd., 1936Google Scholar S.C. 183; Baird v. J. Baird & Co. (Falkirk) Ltd., 1949Google Scholar S.L.T. 368.

¹⁵ Cook v. Deeks [1916] 1 A.C. 554Google Scholar.

¹⁶ Cf. Gower, op. cit. (note 2, supra), 2nd ed., p. 511.

¹⁷ Pavlides v. Jensen [1956]Google Scholar Ch. 515. in Long v. Yonge (1830) 2 Sim. 369: 12 directors, 9 trustees; British Iron Company (1825), in Attwood v. Small (1838) 6 CI. & F. 232: 16 directors, 5 trustees; Imperial Bank of England (1837) in Wallworth v. Holt (1841) 4 My. & Cr. 619: 8 directors, 2 trustees, 3 “public officers” (for the purposes of litigation).

¹⁰ e.g., the Sun Fire Office (1707), DuBois, op. cit., p. 244; the British Society (1779), DuBois, pp. 231, 271 (27 directors of whom 5 trustees); Chilean and Peruvian Mining Assn., in Ducarry v. Gill (1830) M. & M. 450 (3 trustees, also directors but not enough for a quorum of directors).

¹¹ See the discussion of the practice of four insurance companies in the Report of the Select Committee on Joint Stock Companies of 1844, Evidence, Qs. 1879–93, Parliamentary Papers (1844), Vol. VII, pp. 148–149.

¹² See, further, Re Norwich Yarn Co., ex p. Bignold (1856) 22 Beav. 143; Evans v. Coventry (1856) 25 L.J.Ch. 489 (subsequently on appeal, (1857) 8 De G.M. & G. 835); Maxwell v. Port Tennant Patent Steam Fuel and Coal Co. (1857) 25 Beav. 495. Trustee savings banks, however, were exceptional, in that trustees did as a rule constitute the executive; and this was probably true also of one or two building and friendly societies.

¹³ See note 4, supra, and also Foss v. Harbottle (1843) 2 Hare 461; Aberdeen Ry. v. Blaikie Bros. (1854) 1 Macq. 461.

¹⁴ See especially Benson v. Heathorn (1842) 1 Y. & C.C.C. 326; Re German Mining Co., ex p. Chippendale (1853–54) 4 De G.M. & G. 19.

¹⁵ Grimes v. Harrison (1859) 26 Beav. 435. The explanation is that the trustees in these early companies were simply in the position of “holding” trustees, who exercised no discretion but simply did what the directors ordered. Cf. the “ Widows' Case,” an unreported decision of Lord Thurlow in 1785, mentioned by Lord Eldon in Pearce v. Piper (1809) 17 Ves. 1, 15–18; and Cornell v. Hay (1873) L.R. 8 C.P. 328.

¹⁶ See, e.g., York and North-Midland Ry. v. Hudson (1853) 16 Beav. 485, 491, per Lord Romilly M.R.

¹⁷ See further on this topic [1962] C.L.J. 69, 70–72.

¹⁸ See, e.g., Chancey v. May (1722) Prec.Ch. 592; the “ Widows' Case,” note 15, supra; Hichens v. Congreve (1828) 4 Russ. 562.

¹⁹ Re Kingston Cotton Mill (No. 2) [1896] 1 Ch. 331, 345.

²⁰ Re Exchange Banking Co., Flitcroft's Case (1882) 21 Ch.D. 519, 525.

²¹ See [1963] C.L.J. 119, 119–122.

²² There may, of course, be express provision for trustees to act by a quorum or majority: cf. Maitland, Equity, 2nd ed., by Brunyate, (Cambridge, 1936), p. 88.Google Scholar Charitable trustees are a regular exception to the requirement of unanimity.

²³ In practice, a trustee who has acted reasonably may be relieved under statutory provisions, e.g., Trustee Act 1925, s. 61. He may also sometimes have a right of indemnity against a co-trustee: Re Partington, Partington v. Allen (1887) 57 L.T. 654.

²⁴ A trustee may, of course, consult experts and employ agents, but he does not thereby divest himself of the responsibility of making decisions personally.

²⁵ Cf. Burland v. Earle [1902]Google Scholar A.C. 83, 93, per Lord Davey.

²⁶ York and North-Midland Ry. v. Hudson (1853) 16 Beav. 485, 500.

²⁷ Charitable Corpn. v. Sutton (1742) 2 Atk. 400 (where the solution adopted was to make the passive directors liable in the second degree to those actively involved); Benson v. Heathorn (1842) 1 Y. & C.C.C. 326; York and North-Midland Ry. v. Hudson, supra; Burt v. British Nation Life Assce. Assn. (1859) 4 De G. & J. 158.

²⁸ See, e.g., Re Cardiff Savings Bank, Marquis of Bute's Case [1892] 2 Ch. 100; Re Forest of Dean Coal Mining Co. (1878) 10 Ch.D. 450.

²⁹ The decisive case is probably Land Credit Co. of Ireland v. Lord Fermoy (1870) L.R. 5 Ch.App. 763.

³⁰ This approach is given especial emphasis when relief is sought by summary proceedings in a winding up, under the Companies Act 1948, s. 333, or the equivalent section in earlier Acts: cf. Re Liverpool Household Stores Assn. Ltd. (1890) 59 L.J.Ch. 616, 620, per Kekewich J.

³¹ Cf. the ready implication of borrowing powers in favour of directors in Re Norwich Yarn Co., ex p. Bignold (1856) 22 Beav. 143.

³² Ashbury Ry. Carriage & Iron Co. v. Riche (1875) L.R. 7 H.L. 653.

³³ Trevor v. Whitworth (1887) 12 App.Cas. 409.

³⁴ Salomon v. Salomon & Co. Ltd. [1897] A.C. 22.

³⁵ Automatic Self-Cleansing Filter Syndicate Co. Ltd. v. Cunninghame [1906] 2 Ch. 34Google Scholar; Shaw & Sons (Salford) Ltd. v. Shaw [1935] 2 K.B. 113Google Scholar.

³⁶ The directors in the exercise of their powers still owe fiduciary duties to the members as a whole in any matter where the interest of the company as an economic entity is not affected— e.g., in the making of calls, the declaration of a dividend, or the issue of further shares, they may not give some members an advantage at the expense of others: see p. 93, infra.

³⁷ Cf. Gower, op. cit. (note 2, supra), 2nd ed., pp. 475–476.

³⁸ See [1962] C.L.J. 69, 73.

³⁹ Cf. 17 Halsbury's Laws of England (Simonds ed.), p. 678 et seq. But undue influence may be shown to exist in fact: Robinson v. Randfontein Estates Gold Mining Co. Ltd., 1921Google Scholar A.D. 168.

⁴⁰ Maitland, op. cit. (note 22, supra), p. 93.

⁴¹ Re Exchange Banking Co., Flitcroft's Case (1882) 21 Ch.D. 519, 535–536, per Cotton L.J.

⁴² Re Railway & General Light Improvement Co., Marzetti's Case (1880) 42 L.T. 206, 209, per Cotton L.J.; Re Sharpe [1892] 1 Ch. 154, 165–166, per Lindley L.J.

⁴³ Re Mercantile Trading Co., Stringer's Case (1869) L.R. 4 Ch.App. 475; Re Kingston Cotton Mill (No. 2) [1896] 1 Ch. 331.

⁴⁴ Hutton v. West Cork Ry. (1883) 23 Ch.D. 654, 673, per Bowen L.J.

⁴⁵ Ibid.; and cf. Re Liverpool Household Stores Assn. Ltd. (1890) 59 L.J.Ch. 616, 626, per Kekewich J.

⁴⁶ Re Lands Allotment Co. [1894] 1 Ch. 616; cf. London Trust Co. Ltd. v. Mackenzie (1893) 62 L.J.Ch. 870.

⁴⁷ Bell Houses Ltd. v. City Wall Properties Ltd. [1966]Google Scholar 2 W.L.R. 1323. Cf. Gower, op. cit. (note 2, supra), pp. 476, 511.

⁴⁸ Land Credit Co. of Ireland v. Lord Fermoy (1870) L.R. 5 Ch.App. 763; Re Denham & Co. (1883) 25 Ch.D. 752; Grimwade v. Mutual Society (1884) 52 L.T. 409; Dovey v. Cory [1901]Google Scholar A.C. 477; note 43, supra. At best, atrustee who relied on a fellow-trustee would be jointly liable, but entitled to an indemnity.

⁴⁹ Re City Equitable Fire Insce. Co. Ltd. [1925]Google Scholar Ch. 407.

⁵⁰ Grimwade v. Mutual Society (1884) 52 L.T. 409, 416, per Chitty J.

⁵¹ Charitable Corpn. v. Sutton (1742) 2 Atk. 400; cf. Overend Gurney & Co. v. Gurney (1869) L.R. 4 Ch.App. 707n., 709n., per Malins V.-C.

⁵² Re Cardiff Savings Bank, Marquis of Bute's Case [1892] 2 Ch. 100.

⁵³ Lagunas Nitrate Co. v. Lagunas Syndicate [1899] 2 Ch. 392, 437.

⁵⁴ (1851) 3 Mac. & G. 440, 448.

⁵⁵ See note 36, supra.

⁵⁶ Cf. Re Anglo-French Co-operative Soc., ex p. Pelly (1882) 21 Ch.D. 492 (benefit to directors and stranger): Re New Traveller' Chambers Ltd. (1896) 12 T.L.R. 529 (injury to stranger).

⁵⁷ Wilson v. London Midland & Scottish Ry. [1940]Google Scholar Ch. 393; cf. Hutton v. West Cork Ry. (1883) 23 Ch.D. 654, 671.

⁵⁸ Hirsche v. Sims [1894] A.C. 654; Seligman v. Prince & Co. [1895] 2 Ch. 617, 625; Mills v. Mills (1938) 60 C.L.R. 150Google Scholar, 163.

⁵⁹ Re Smith & Fawcett Ltd. [1942]Google Scholar Ch. 304; Legion Oils Ltd. v. Barron [1956] 2 D.L.R. (2d) 505Google Scholar; Mills v. Mills, supra.

⁶⁰ Cf. Cannon v. Trask (1875) L.R. 20 Eq. 669 (intention to injure not denied). The same distinction is made in the tort of conspiracy: see Crofter Hand Woven Harris Tweed Co. v. Veitch [1942]Google Scholar A.C. 435, 445, per Viscount Simon.

⁶¹ Cf. Aberdeen Ry. v. Blaikie Bros. (1854) 1 Macq. 461. In contrast, the bona fides of majority shareholders may be inquired into even when they have an adverse interest: North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589.

⁶² Piercy v. S. Mills & Co. Ltd. [1920] 1 Ch. 77Google Scholar; Punt v. Symons & Co. Ltd. [1903]Google Scholar 2 Ch. 506; Hogg v. Cramphorn Ltd. [1966] 3 W.L.R. 995Google Scholar.

⁶³ See p. 33, supra.

⁶⁴ Cf. Bermingham v. Sheridan (1864) 33 Beav. 660, 664; Re Englefield Colliery Co. (1878) 8 Ch.D. 338; J. & P. Coats Ltd. v. Crossland (1904) 20 T.L.R. 800Google Scholar; Leeds Estate Building & Investment Co. v. Shepherd (1887) 36 Ch.D. 787. But directors may commit themselves bona fide in the company's interests: Thorby v. Goldberg (1965) 112 C.L.R. 597Google Scholar.

⁶⁵ See p. 100, infra.

⁶⁶ e.g., Learoyd v. Whiteley (1887) 12 App.Cas. 727; Ashburner, Principles of Equity, 2nd ed. by Browne, (London, 1933), pp. 123Google Scholar, 127.

⁶⁷ Overend & Gurney Co. v. Gibb (1872) L.R. 5 H.L. 480, 486, per Lord Hatherley L.C. (obiter).

⁶⁸ (1869) L.R. 4 Ch.App. 701, 720 (the same judge in the court below).

⁶⁹ Re Crenver & Wheal Abraham United Mining Co., ex p. Wilson (1872) L.R. 8 Ch.App. 45.

⁷⁰ Charitable Corpn. v. Sutton (1742) 2 Atk. 400, 404.

⁷¹ (1842) 1 Y. & C.C.C. 326.

⁷² (1854) 1 Macq. 461.

⁷³ Cavendish Bentinck v. Fenn (1887) 12 App.Cas. 652, 658, 661 (per Lord Hersichell), 671 (per Lord Macnaughten); cf. Chesterfield & Boythorpe Colliery Co. v. Black (1877) 37 L.T. 740; Re General Exchange Bank Ltd., ex p. Preston (1868) 37 LJ.Ch. 618, 621; Re Dover Coalfield Extension Co. [1908] 1 Ch. 65Google Scholar; Transvaal Lands Co. v. New Belgium (Transvaal) Land & Development Co. [1914] 2 Ch. 488Google Scholar, 497.

⁷⁴ i.e., the organic theory of corporate acts, and recognition of the fact that directors may function by a quorum.

⁷⁵ Cf. Companies Act 194S, Table A, Art. 84.

⁷⁶ Unfortunately, many articles (including the provisions made in Table A from 1856 to 1929) provide for the removal or punishment of a director who fails to disclose an interest to the rest of the board, without indicating whether this is sufficient to validate the contract. Unless this can be implied from the context. there must presumable be disclosure to the members as well. The penal provisions of s. 199 of the Companies Act 1948 perpetuate this duplicity, although they make it clear that the equitable rules are unaffected.

⁷⁷ Bell v. Lever Bros. Ltd. [1932]Google Scholar A.C. 161, 195, per Lord Blanesburgh; London & Mashonaland Exploration Co. v. New Mashonaland Exploration Co. [1891] W.N. 165.

⁷⁸ Employees and partners, whose situation is based in part on contract, are subject to special rules.

⁷⁹ Re Thomson [1930] 1 Ch. 203Google Scholar is to the contrary, but cannot stand with Bell v. Lever Bros. Ltd., supra.

⁸⁰ Re Thomson, supra, may perhaps be supported on this ground. Cf. Hivac Ltd. v. Park Royal Scientific Instruments Ltd. [1946] 1 All E.R. 350Google Scholar.

⁸¹ Henderson v. Huntington Copper & Sulphur Co. (1877) 5 R. (Ct.Sess.) 1; Hutton v. West Cork Ry. (1883) 23 Ch.D. 654, especially 672, per Bowen L.J.; Re George Newman & Co. [1895] 1 Ch. 674, 686, per Lindley L.J.

⁸² See [1962] C.L.J. 69, 79–81; [1963] C.L.J. 119, 128–136; Brunyate, , Limitation of Actions in Equity (London, 1932)Google Scholar; Gower, op. cit. (note 2, supra), 2nd ed., pp. 510–511. The distinction is not always made clearly in the cases which follow; but it is the essential factor in determining whether the interested directors may use their votes as members in order to sanction the retention of a profit made by them.

⁸³ Metropolitan Bank v. Heiron (1880) 5 Ex.D. 319; Re North Australian Territory Co., Archer's Case [1892) 1 Ch. 322; Regal (Hastings) Ltd. v. Gulliver [1942] 1 All E.R. 378Google Scholar (but see note 85, infra).

⁸⁴ Hichens v. Congreve (1828) 4 Russ. 562.

⁸⁵ Cook v. Deeks [1916] 1 A.C. 554Google Scholar. It is disappointing that Regal (Hastings) Ltd. v. Gulliver was argued only as a claim for profits owed to the company, based in quasi-contract. If the plaintiff company had relied on Cook v. Deeks (supra), and alleged that the profits belonged in equity to it, it is submitted that the plea would have been unanswerable. There could then have been no suggestion that the directors as shareholders could have ratified the transaction, and, moreover, the defendants who escaped liability would probably not have done so. It was irrelevant that that company could not have afforded to take the shares itself through which the profits were made: a plaintiff can own in equity what it cannot own at law; and evidence of impossibility, like any other evidence tendered to show bona fides, is not admissible (see note 61, supra). Cf. Keech v. Sandford (1726) Sel.Cas. t. King 61 (landlord's refusal); Fine Industrial Commodities Ltd. v. Powling (1954) 71 R.P.C. 253Google Scholar (ultra vires); Zwicker v. Stunbury [1954] 1 D.L.R. 257Google Scholar (beyond company's means).

⁸⁶ Robinson v. Randfontein Estates Gold Mining Co. Ltd., 1921Google Scholar A.D. 168, 179, per Innes C.J.

⁸⁷ Parker v. McKenna (1874) L.R. 10 Ch.App. 96. Peso Silver Mines Ltd. v. Cropper (1966) 56 D.L.R. (2d) 117Google Scholar is difficult to reconcile with the older authorities.

⁸⁸ Cook v. Deeks [1916] 1 A.C. 554Google Scholar; Canada Safeway Ltd. v. Thompson [1951] 3 D.L.R. 295Google Scholar, further proceedings [1952] 2 D.L.R. 591; Zwicker v. Stanbury [1954] 1 D.L.R. 257Google Scholar.

⁸⁹ Robinson v. Randfontein Estates Gold Mining Co. Ltd. [1921]Google Scholar A.D. 168 (where one director completely dominated the board); G. E. Smith Ltd. v. Smith [1952]Google Scholar N.Z.L.R. 591 (single director with plenary powers).

⁹⁰ Cook v. Deeks, supra.

⁹¹ Canada Safeway Ltd. v. Thompson, supra (information obtained at company's expense). In the case of a service director, this includes inventions made in his company's time: Fine Industrial Commodities Ltd. v. Powling (1954) 71Google Scholar R.P.C. 253.

⁹² See [1962] C.L.J. 119, 130.

⁹³ Benson v. Heathorn (1842) 1 Y. & C.C.C. 326, 340, per Knight Bruce V.-C.; York and North-Midland Ry. v. Hudson (not reported on this point, but referred to in Great Luxembourg Ry. v. Magnay (No. 2) (1858) 25 Beav. 586, 593, per Romilly M.R.; Re Cape Breton Co. (1885) 29 Ch.D. 795, 803–804, per Cotton L.J.

⁹⁴ [1902] A.C. 83. Cf. P. & O. Steam Navigation Co. v. Johnson (1938) 60 C.L.R. 189Google Scholar, 213.

⁹⁵ Cf. Robinson v. Randfontein Estates Gold Mining Co. Ltd., 1921Google Scholar A.D. 168, 195: “justified in inferring a mandate wide enough to include the transaction.”

⁹⁶ Re Cape Breton Co. (1885) 29 Ch.D. 795; Jacobus Marler Estates Ltd. v. Marler (1916) 85 L.J.P.C. 167Google Scholar (where the possibility of a claim in negligence is referred to).

⁹⁷ (1874) L.R. 10 Ch.App. 96. Cf. Zwicker v. Stanbury [1954] 1 D.L.R. 257Google Scholar, where directors who acquired a member's shares without cost, in the course of negotiations for a reorganisation, were required to surrender them to the company.

⁹⁸ Cf. Gower, op. cit. (note 2, supra), 2nd ed., p. 104.

⁹⁹ There is no duty to the selling shareholder in the absence of agency: Percival v. Wright [1902] 2 Ch. 421Google Scholar. But if their position as directors gives them an advantage they may be accountable to the company for the resulting profit: see Gower, op. cit., p. 493.

¹ See Zwicker v. Stanbury [1954] 1 D.L.R. 257Google Scholar, where the director was found to have had a mandate, and accordingly debarred from enforcing the security at its face value.

² Overend Gurney & Co. v. Gurney (1869) L.R. 4 Ch.App. 701, 720, per Lord Hatherley, L.C. A modern variant reads: “If we pay in peanuts, we must expect to get monkeys”—The Observer, December 18, 1966Google Scholar.

³ The leading modern case is Re City Equitable Fire Insce. Co. Ltd. [1925]Google Scholar Ch. 407, where the language is objective. In earlier cases either subjective and objective tests are suggested, even sometimes both in the same case. Cf. Re German Mining Co., ex p. Chippendale (1853) 4 De G.M. & G. 19, 34; Overend & Gurney Co. v. Gibb (1872) L.R. 5 H.L. 480; Re Railway & General Light Improvement Co., Marzetti's Case (1880) 42 L.T. 206; Re Denham & Co. (1883) 25 Ch.D. 752; London Financial Assn. v. Kelk (1884) 26 Ch.D. 107, 146; Re Liverpool Household Stores Assn. Ltd. (1890) 59 LJ.Ch. 616, 618; Merchants' Fire Office Ltd. v. Armstrong (1901) 17 T.L.R. 709Google Scholar.

⁴ “He is acquitted of dishonesty in the usual sense of the word. But in another sense he is not honest. It seems to me that a man who accepts such a trustee-ship, and does nothing, … never asks for explanation, and accepts flimsy explanations, is dishonest”: Re Second East Dulwich 745th Starr-Bowkett Building Soc. (1889) 68 L.J.Ch. 196, 198, per Kekewich J.

⁵ Re City Equitable Fire Insce. Co. Ltd. [1925]Google Scholar Ch. 407, 428, per Romer J.

⁶ Cf. Lister v. Romford Ice & Cold Storage Co. Ltd. [1957]Google Scholar A.C. 555. There are suggestions in some cases that a remedy in negligence, sounding in damages, lies against any director. Cf. Lagunas Nitrate Co. v. Lagunas Syndicate [1899] 2 Ch. 392, 437; Jacobus Marler Estates Ltd. v. Marler (1916) 85 L.J.P.C. 167Google Scholar; Re B. Johnson & Co. (Builders) Ltd. [1955]Google Scholar Ch. 634; Pavlides v. Jensen [1956]Google Scholar Ch. 515. It would be difficult to base this remedy in contract against a director qua director: cf. Beattie v. E. & F. Beattie Ltd. [1938]Google Scholar Ch. 708.

⁷ See note 35, supra.

⁸ e.g., Companies Act 1948, Table A, Art. 80.

⁹ Shaw & Sons (Salford) Ltd. v. Shaw [1935] 2 K.B. 113Google Scholar.

¹⁰ If the board cannot function, e.g., through deadlock or, semble, conflicting interest, its functions revert to the general meeting: Foster v. Foster [1916] 1 Ch. 532Google Scholar—a rule apparently overlooked in Re Cleadon Trust Ltd. [1939]Google Scholar Ch. 286.

¹¹ Grant v. United Kingdom Switchback Rys. (1888) 40 Ch.D. 135.

¹² Greenhalgh v. Arderne Cinemas Ltd. [1951]Google Scholar Ch. 286.

¹³ Cf. Millers (Invercargill) Ltd. v. Maddams [1938]Google Scholar N.Z.L.R. 490; Ngurli Ltd. v. McCann (1953) 90 C.L.R. 425Google Scholar.

¹⁴ North-West Transportation Co. Ltd. v. Beatty (1887) 12 App.Cas. 589; Dominion Cotton Mills Co. Ltd. v Amyot [1912]Google Scholar A.C. 546; Ving v. Robertson & Wood-cock Ltd. (1912) 56 S.J. 412Google Scholar; Harris v. A. Harris Ltd., 1936Google Scholar S.C. 183; Baird v. J. Baird & Co. (Falkirk) Ltd., 1949Google Scholar S.L.T. 368.

¹⁵ Cook v. Deeks [1916] 1 A.C. 554Google Scholar.

¹⁶ Cf. Gower, op. cit. (note 2, supra), 2nd ed., p. 511.

¹⁷ Pavlides v. Jensen [1956]Google Scholar Ch. 515.