Advice
The Privy Council advised that the three directors had breached their duty of loyalty to the company, that the shareholder ratification was a fraud on Mr Cook as a minority shareholder and invalid. The result was that the profits made on the contractual opportunity were to be held on trust for the Toronto Construction Co.
Lord Buckmaster said that the three had,
| “ | deliberately designed to exclude and used their influence and position to exclude, the company whose interest it was their first duty to protect... the benefit of such contract... must be regarded as held on behalf of the company... quite certain that directors holding a majority of votes would not be able to make a present to themselves. This would be to allow a majority to oppress the minority... Such use of voting power has never been sanctioned by the court. | ” |
| “ | it appears quite certain that directors holding a majority of votes would not be permitted to make a present to themselves. This would be to allow a majority to oppress the minority....if directors have acquired for themselves property or rights which they must be regarded as holding on behalf of the company, a resolution that the rights of the company should be disregarded in the matter would amount to forfeiting the interest and property of the minority of shareholders in favour of the majority, and that by the votes of those who are interested in securing the property for themselves. Such use of voting power has never been sanctioned by the Courts | ” |
Read more about this topic: Cook V Deeks
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