5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 1/30
CASE TOPIC SUMMARY
Royal BritishBank v
Turquand
turquand'srule: doctrineof
constructivenotice
Ashbury
Railway &Iron Co v
Riche
constitution The objects were to make and sell railway carriages. The directors made anultra vires contract to build a railway.
Eley v.Positive
GovernmentLife Security.
Assurance Co
constitution-contract to
only members
co's constitution: Eley should be solicitor for life. 11 months later Eley became member. Company then ceased to use him, he sued company for
breach of articles
Twycross v Grant
promotersone who undertakes to form a company with reference to a given projectand to set it going, and who undertakes the necessary steps to accomplish
that purpose
Pender v Lushington
powers of voting
Mr John Pender had bought 1000 shares. Company allowed one vote perten shares and not more than 100 shares. Mr Pender had split his votes
and registered the holders under the names of a number of nominees, andpassed a resolution. Chairman refused to count votes.
Erlanger v
New Sombrero
Phosphate Co
promoterfiduciary duty of
disclosure:disclosure toindependent
board
syndicate of Erlanger, promoters of New Sombrero Phosphate Co boughtland for 55000 and sold to compay for 110000. Made disclosure to board
but the board wasn’t independent: one never attended meetings, two
werent in town, one was puppet for agents, another trustee. Shareholderssued for profit made by Erlanger.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 2/30
Kelner v Baxter
pre-
incorporation contracts
Baxter and two others agreed on behalf of a company yet to be formed to
purchase trade stock for its business. Later the company was formed andaccepted and used the trade stock, but failed to pay for the stock.
Wood v
Odessa WaterworksCo
constitution
The company declared a dividend and passed a resolution to pay it by
giving their shareholders debenture bonds bearing interest. The articlesprovided that the company declare a dividend to be "paid in cash"
Salomon v Salomon
legalpersonality
S transferred to his own company the business of making boots and shoes. The company bought the business for ™39,000 and issued shares and a
debenture for £10,000 secured by a floating charge on the assets. Thebusiness became insolvent and the trade creditors argued that the
company and Salomon were one and the same. As a consequence, they claimed, his debenture was void since a man cannot be a creditor of
himself.
Gluckstein v Barnes
promoterfiduciary duty of
disclosure:partial
disclosure
not enough
A syndicate bought property to sell. They bought it for £140,000 but atdiscount got for 120,000. They then sold it to the newly formed company,of which they had become directors, for £180,000. prospectus disclosed
40,000 profit but not 20,000. liquidator claimed the secret profit
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 3/30
Natal Land &ColonizationCo v Pauline
Colliery
Syndicate
pre-incorporation contracts
Automatic Self Cleansing
FilterSyndicate Co
Ltd v
Cuninghame
Distributionof powerbetween
BOD andGM-
majority view
mgt vested in directors. GM passed resolution of sale of asset but directorsrefused as they believed it was not in best interest of company
Salmon v Quinn &
Axtens Ltd
Distributionof power
betweenBOD and
GM-majority view
Axtens and Salmon, who were both appointed directors along with oneother person. The articles permitted either Axtens or Salmon to veto any
board decision. Salmon vetoed a decision,. GM was held and they passedsimilar resolutions.
Marshall's
Valve Gear Co v Manning
minority
view
marshall was major shareholder of company he had formed to exploitpatent of his invention.alledged that patent was being infringed by
Manning. Marshall wanted to bring order against him but the directorsoutvoted him because they had an interest in Manning's company. mashall
then instituted action as a majority shareholder
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 4/30
Hickman v Kent orRomney
Marsh Sheep
Breeders Assocn
constitution
The articles provided that disputes between members and the association
be resolved by arbitration. Hickman brought an action against thecompany in the courts.
Lennard'scarrying co v
Asiatic
Performanceco
organic
theory
Damler Co
Ltd v Continental Tyre andRubber Co
Judicial LTV-enemy
character
Dadoo v KrugersorpMunicipal
Council
legalpersonality-
property
statute prohibited Asiatics from buying land in Transvaal. Two asiaticsformed company and bought land to run bs.
Macaura v
Northern Assurance Co
legal
personality-property
M was a landowner who sold timber from his estate to a company of which he was the sole owner. he insured the timber that lay on his land in
his own name as the person insured under the policies issued by the
insurance company. A few weeks later the timber was destroyed by fire. Mclaimed on the insurance policy. Northern Assurance claimed that the
timber belonged to the company and as a consequence it was not properly insured.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 5/30
Gilford Motor
Co Ltd v Horne
veil of
incorporation
Horne left the Gilford Motor Company in order to set up his own
business. When he left he agreed that he would not solicit any of hisformer employers customers. As a way around this restriction he set up acompany.
Gilford MotorCo v Home
judicial LTV-
due to fraudor improper
conduct
Home had been employed by Gilford Motor Company under a contract in
which he undertook not to compete with the company. He tried to evadethe covenant by getting his wife to set up a company. All the shares in the
company were held by Home's wife and an employee. The new company then carried on business in competition with Home's employer.
Shaw v Shaw
Peter, John and Percy Shaw had a company together. settlement formanagement of co: hand over financial affairs to 'independant
directors'.The independent directors resolved to bring a claim againstthem. Just before the hearing, an extraordinary general meeting was called,
where as the majority shareholders Peter and John procured a resolution
to discontinue the litigation. The company, and Percy, contended theresolution was ineffective.
Re FG FilmsLtd
judicialLifting the
Veil-company acting as
agency
American company wanted to register a film as British to avoid taxes. Setup company in Britain to prove it was made in Uk. No property or staff
was found to
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 6/30
Newborne v Sensolid (GB)
Ltd
pre-incorporation contracts
Tinned ham was sold to Sensolid under a contract headed "LeopoldNewborne (London) Ltd" and ending "Yours faithfully, Leopold
Newborne (London) Ltd" and signed by Leopold Newborne. Sensolidrefused to take delivery of the ham.
Rayfield v Hands
constitutionas contract,
fiduciary duties of
directors
Mr Rayfield sued the directors of Field Davis Ltd to buy his shares. Article11 of the company’s constitution said ‘Every member who intends to
transfer shares shall inform the directors who will take the said shares
equally between them at a fair value.’ The directors were refusing to follow
this rule, and Mr Rayfield sought an injunction.
Re El
Sombrero Ltd
impracticability of
meetings
company had 3 members and shareholders. Qourum for meeting: 2.
directors frustrated applicants effort to call an extraordinary GM by refusing to attend. Applicant gave special notice of intention to move
ordinary resolution to remove directors at next extraordinary GM. askedcourt to call meeting.
Lee v Lee Air
Farming Ltd
legal
personality-contracts
The husband of the plaintiff was the controlling shareholder and directorof a company formed by him. He was also employed by the company as apilot. The company had employer's liability insurance. He was killed in an
accident when flying a company plane on company business and his wifeclaimed compensation from the company (effectively claiming from the
insurers).
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 7/30
Jones v Lipman
judicial LTV-due to fraudor improper
conduct
Lipman agreed to sell house to Jones but later changed his mind. To avoidcontractual obligations, he made a company in which he was in full
control and sold the house to it. Jones sued for specific performance
Hogg v Cramphorn
Ltd
directorsfiduciary
duty directors issued shares to gain voting power to avoid a take over
Re Duomatic resolutions
company had 2 shareholders that were directors. Articles provided thatremuneration would be fixed in a GM that was never held. Directors
approved co acc by signing them in a meeting with co's auditors and thendrew certain sums as remuneration. liquidator sued sums as unathorized
withdrawals
Bamford v Bamford
Shares:Fiduciary duty of
directors-issue of
shares with
impropermotive
The directors of a company wished to fight a takeover bid. They allottedshares to a company which distributed their products because the
distributors agreed not to accept the takeover bid. A shareholder broughtan action claiming that the allotment was invalid, as it was not bona fide in
the best interests of the company .
DHN FoodDistributors v
Tower
HamletsLondon
BoroughCouncil
Judicial LTV-ignoring
groups of
companiesor
subsidiariesand treating them as one
DHN was a holding company which ran its business through two wholly owned subsidiaries: Bronze Investments Ltd and DHN Food TransportLtd. Bronze owned the premises from which the business was conductedand Transport ran the business. The Council compulsarily purchased the
land. Compensation could be paid under two heads: (a) the value of theland, and (b) disturbance of business. The Council was prepared to pay for
the value of the land but refused to pay for disturbance of businessbecause neither DHN or DHN Food Transport had any rights of ow
nership in the land.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 8/30
Lategan v Boyes
judicial LTV-due to fraudor improper
conduct
Cane v Jones resolutions chairman had casting vote. Shareholders signed resolution in differenttimes and places to remove chairman's casting vote.
Silverston (pty)Ltd & Anor v Lobatse Clay Works (pty)
Ltd
judicialLifting the
Veil-corporatepersonality
must beupheld
Barron v Potter
board isdeadlocked
two directors in company. Qourum:2. however, Barron refused to attendmeetings, therefore no decisions could be taken. "meeting" held by
defendant at railway station where plaintiff ignored him. Potter casted vote
for appointment of two directors.
Alexander
Ward v Samyang
Navigation
board isdeadlocked
company's shareholders sued to recover money owed to company. Action was brought on behalf of company. The defendant claimed that the
shareholders sued and not the co's directors.
Foster v Foster
board isineffective
company had 3 directors, qourum: 2. however, a director couldn’t vote on
matters of his interest. 2 directors had an interest in matter brought tothem and therefore the board was deemed ineffective. The matter was of
appointment of a Managing Director of the company
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 9/30
Grant v Switchback
Rvs
directors
have acted inexcess of
their powersand
shareholderscan ratify thetransaction
The company’s articles prohibited any director from votingon a
transaction in which he was interested; but they entered into a contrac in which all but one were interested. therefore, as it stood, thetransaction was
voidable. However, a general meeting was called, which an ordinary
resolution approving and adopting the transaction,
Irvine v UnionBank of
Australia
directorshave acted in
excess of their powers
andshareholderscan ratify thetransaction
Percival v Wright
Fiduciary duty of
directors
Re W & M
Roith Ltd
Fiduciary
duty of directors: actbonafides
directors altered company' constitiution to pay widow of worker thepension of a retired employee
Abardeen Rly Co v Blaikie
Bros
Fiduciary
Duty of directors: when
directorscontract withcompanies
where a company entered into acontract to purchase chairs from apartnership when, at the time, one of its directors was a partner in the
partnership. Conflict of interest as director of Abardeen's duty ws to buy chairs at lowest price but his personal interest was to buy chairs at highest
price possible from Blaikie Brothers, where he was a partner
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 10/30
North-west
Transportation v Beatty
if director isshareholder
in company,he is free to
use shares asshareholderand vote to
ratify contract
director (Beatty) sold steamer to N.W transportation. Then he used his
votes as a majority shareholder to ratify the contract in the GM. Oneshareholder challenged the ratification
Cook v Deeks
directorshould not
have conflictof interestand duty/majority touse powerbona fides
The Toronto Construction Co had four directors. It helped inconstruction of railways in Canada. The first three directors wanted to
exclude Mr Cook from the business. Each held a quarter of the company's
shares. Deeks, Deeks and Hinds took a contract with the Canadian PacificRailway Company (for building a line at the Guelph Junction andHamilton branch) in their own names. They then passed a shareholder
resolution declaring that the company had no interest in the contract. MrCook claimed that the contract did belong to the Toronto ConstructionCo and the shareholder resolution ratifying their actions should not be
valid because the three directors used their votes to carry it. cook excludedfrom voting
Robinson v Randfontein
director
should nothave conflict
of interestand duty
Robinson was chairman of co. co asked him to purchase land for the co.Robinson in his personal capacity, purchased land at 60,000 and then soldit to company at 275,000 and never disclosed his interest. Company sued
for secret profit
Peso SilverMines v Cropper
directorsfiduciary
duty
Re City Equitable FireInsurance Co
Ltd
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 11/30
Dovey v Cory
Diretctorsduty to
exercise careand skill
where a director relied on the judgment and advice of the chairman andgeneral manager of the company when he assented to the payment of
dividends and to loans from the company’s funds. He had no reason to
doubt the balance sheets presented to board meetings nor did he have any reason to doubt the competence of the general manager. In fact, thedividends were paid out of capital and the loans were made without
proper security.
Percy v Mills
directorexcercisespowers for
proper
purposes
Treasure Trove
Diamonds Ltd v Hyman
directorexcercisespowers for
properpurposes
Directors of company issued shares to an Investment Corporation.
Shareholders were informed that the shares were deferred in matter of dividends but not voting powers. They were interested in the InvestmentCorporation as one of co's directors was chairman and other secretary of IC. company was not in need of extra capital. purpose of scheme: gain
control of company
Burland v Earle
director and
shareholderduties. Duty of majority
Burland sold land to the company for 60,000 and made profit of 38,000.
He was both a shareholder and Director in company. The contract was voidable but by using his powers as a majority shareholder, he ratified the
contract; a minority shareholder sued for secret profit
Daten TinplateCo v Hanelly
Steel
member'sduties:
expropriation of othermembers
property
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 12/30
MacDougall v Gardiner
membersduties:
internal mgtprinciple in
foss v harbottle
Gardiner was a director in Emma Silver Mining co. at a GM, a vote was
requested on a matter and Gardiner ignored this request from theshareholder and adjourned the meeting. McDougall went to court against
Gardiner, seeking a declaration that Gardiner's conduct was improper
Trevor v
Withworth
rulesgoverning
maintanenceof capital
Foss v Harbottle
member'sduties:
harbottle, director, sold land to the company, Victoria Park Company.Foss was a shareholder in the company and sued the director to compelthem to make good the loss sustained on transaction on grounds that the
directors had paid themselves a price in the land
Lipchitz No v UDC Bank
Ltd
rulesgoverning
maintanenceof capital
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 13/30
Lewis v Oneanate Pty
Ltd
rulesgoverning
maintanenceof capital
Re ExchangeBanking Co(Fletcrofts
case)
dividendsmay not bepaid out of
capital
director presented in GM reports that misrepresented the financial affairs
of the co. f/ss showed apparent profit when there was no real proft.Shareholders relied on the fss and passed a resolution approving a
dividend. Liquidator demanded director repay amount of dividends paidout of capital
TomkwaneSawmill Co
Ltd v Filmater
auditorsduties
Re London &General Bank
auditorsduties
appalent auditor of Bank. Co made out certain loans and some wererealisable. When preparing balance sheet, auditor entered loans as assets
when he was aware of their status, stated in opinion: value of assets in bsdependant on realization. Based on this, shareholders declared dividends which were paid out of capital,. co went into liquidation, liquidator sued
auditor
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 14/30
Re KingstonCotton Mill
auditorsduties
co's MD falsified co's acc. He wanted the affairs to appear better than they actually were. Deliberately overstated the value of stock. Auditor adoptedentries made by MD and inserted them in Bs. If auditor had done further
investigation, would have realized falsification. nothing on face of acc,auditor acted honestly. based on BS, shareholders declared dividends
which was paid out of capital. capital went into liquidation and liquidator
sued auditor for breach of duty
Re ThomasGerrard and
Sons
auditorsduties
Co's MD falsifisied acc in many ways including alteration of invoices. Auditor accepted explanation of MD on matter, didn’t investigate further.
Co paid dividends from capital and went into liquidation. Liquidator suedto recover sum paid as dividends
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 15/30
HELD
people transacting with companies areentitled to assume
that internalcompany rules arecomplied with, even
if they are not. Check only publishedcompany doc:
constitution andspecial resolutions
Contract could notbe valid even if it
were subsequently approved by theshareholders ingeneral meeting
he sued in capacity of solicitor not memberso the constitution as
a contract was notbinding on company
meaning of promoter
company member'sright to vote may not
be interfered with,because it is a right
of property
contract rescinded
and disclosure toindependent board
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 16/30
The company wasnot liable as it could
not ratify a preincorporationcontract with
retrospective effectto a date before thecompany existed.Baxter and friends were therefore
unable to recovertheir money
The words meantpaid in cash and in
consequence a
shareholder couldrestrain the company
from acting ultra vires
It is possible for the
sole owner of acompany to assert
rights against it as asecured creditor,
because the company is a separate legal
person distinct from
its members.
liquidator claim'sheld
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 17/30
common law:company cant by
adoption orratification obtainbenefit of contractpurporting to have
been made on itsbehalf beforeincorporation
based on
construction of thearticles that unless
directions were giventhrough special
resolution, then it was impossible for a
mere majority tooverride the views of
the directors
Salmon as a memberhad the right to
enforce the
provisions of thearticles and to
prevent the company acting unconstitutionally -
he sued as a member,not as a director
majority shareholderhad right to bring
action as company had been formed to
exploit the company
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 18/30
association wereentitled to have theaction stayed as thearticles constituted a
contract betweenHickman and the
association in respectof their rights as
members.
faults of MD of company were faults
of company
LTV as Germancompany had nolocus standi in Uk
courts
since company hadseparate legalpersonality,
legislation didn’t
prohibit Asiatic cofrom owning land
The timber belongedto the company andnot to M. As a result
his claim failed as hedid not have an
insurable interest inthe property.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 19/30
Horne left theGilford Motor
Company in order toset up his own
business. When he
left he agreed that he would not solicit any of his former
employers customers. As a way around thisrestriction he set up a
company.
Home's company barred from
competing with
Gilford Motors.Home's device a
mere device to helpHome breach
contract.
shareholderresolution invalid.
Cant usurp powers
British company came into existancedeliberately for thepurpose of making the American filmpass for a British
film. Sham
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 20/30
Neither the thenunincorporated
company nor MrNewborne personally
could sue on the
contract. as thecompany was not inexistence when thecontract was signedthere never was a
contract, and MrNewborne cannotcome forward and
sav: "Well, it was mv contract."
granted theinjunction and heldthe article imposedan obligation on the
directors
directors in breach of statutory duty by not
holding GM
Lee and thecompany hadseparate legal
personalities and thedeceased could, as
director, enter into acontract on behalf of
the company between the
company and himself as an employee.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 21/30
company was sham,mere mask formedfor defendant toavoid contractual
obligations
new shares issued areinvalid. Shares should
only be issued toraise capital
sums authorized.Directors were
shareholders and hadinformally and
unanimously agreed
to payments
The allotment of shares was valid. It
was an improper useof the directors'
powers, but was not
ultra vires, thereforethe members couldratify the directors'actions by ordinary
resolution in generalmeeting.
Lord Denning pierced the veil of
incorporation to treatDHN as the ownersof the land, which
entitled them topayment of
compensation. Hefelt that the group of
companies was asingle economic
entity.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 22/30
LTV whenfraudulent use is
made of corporatelegal personality
resolution valid as it was an unanimousagreement
LTV done to fixliability elsewhere for what are obsensibly acts of the company.
LTV done whenelements of fraud,
dishonesty orimproper conduct areavailable in co affairs
there was nomeeting. Sincedirectors weredeadlocked,
shareholders couldtake the decision
since the company had no directors at
that time, it wasproper for
shareholders at theGM to sue to recover
the debts of thecompany that wereindirectly owed to
them.
since only 1 director was left to vote, theshareholders couldtake the decision
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 23/30
ratification valid
company in GM
could ratify thedirectors borrowing in excess of the limit
in the company'sarticles.
directors owe theirfiduciary duties not
to shareholdersindividually but
collectively
130(5)
BOD wasshortsighted and
werent acting for the
best interests of thecompany as a whole.
Made ultristicdecision
172
the contract couldbeavoided by the
company.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 24/30
ratification valid
company was entitled
to benefit of contract. Majority'sattempt to ratify
contract wasineffective. Contractinvalid for directors
130/131
director's interestconflicts with duty.
Compnay canrecover secret profit.
Director violatedfiduicary duty of
disclosure
A director can takeover a corporate
opportunity that hasreasonably beenconsidered and
rejected by thecompany in bona
fides
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 25/30
Director notnegligent. Justified toput faith in officers
of company
130and158
breach of directors’
fiduciary duties tomake allotments of shares to maintain
control of the
company
company or to defeatthe wishes of an
existing majority of shareholders
Burland, in his
capacity as majority shareholder, had
right to vote
such a power on thepart of the majority to expropriate the
shares of any member at the
majorities will orpleasure was not for
the benefit of the
company as a wholebut tailored to be of
the benefit of themajority
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 26/30
if the wrong
complained of what was in respect of
something which themajority of the co
was entitled to do orif the thing
complained could beregularized by a
majority view, thenthere will be no pointin litigating about it.
co cant purchase
own shares since thatresults in capital loss 65
alledged wrong had
been done to thecompany and there
was nothing toprevent it from suing.
The action wasn’t
maintainable as it
wasn’t brought
forward by thecompany itself
a co which has givenfinancial assistance
out of profit forpurpose of purchase
of own sharesbecomes poorer and
is adversely affectedby the transaction
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 27/30
rationale for notgiving fin assistance
in purchase of shares:protection of
creditors of co who
have right to look topaid up capital of co
as fund from whichdebts will be paid
directors were held
liable to pay. They had breached
fiduciary duty of careand skill
If auditor fails toaudit the co's booksin required manner,the co may sue forbreach of contract
and recover damagesfor any losses
incurred
auditor has duty otbe honest. Mustcertify what he
believes is true andmust take reasonable
care and skill beforehe what believes that what he certifies istrue. Auditor failedto discharge duty,liable to reimburse
co.
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 28/30
not auditor's duty totake stock.justified in
relying on honesty and accuracy of MD
auditor negligent.Exhaustive enquiry
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 29/30
Twycross v Grant
promoters
one who undertakes to form acompany with reference to a
given project and to set it going,and who undertakes the necessary steps to accomplish that purpose
meaning of promoter
Erlanger v New
SombreroPhosphate
Co
promoterfiduciary duty of
disclosure:
disclosure toindependent
board
syndicate of Erlanger, promotersof New Sombrero Phosphate Co
bought land for 55000 and sold tocompay for 110000. Made
disclosure to board but the board
wasn’t independent: one neverattended meetings, two werent intown, one was puppet for agents,
another trustee. Shareholderssued for profit made by Erlanger.
contract rescindedand disclosure to
independent board
Gluckstein v Barnes
promoterfiduciary duty of
disclosure:partial
disclosure notenough
A syndicate bought property to
sell. They bought it for £140,000but at discount got for 120,000. They then sold it to the newly formed company, of which they
had become directors, for£180,000. prospectus disclosed40,000 profit but not 20,000.
liquidator claimed the secretprofit
liquidator claim'sheld: fulldisclosure
FIDUCIARY DUTY OF DISCLOSURE
PROMOTERS
PRE INCORPORATION CONTRACTS
5/13/2018 Law Case Summaries - slidepdf.com
http://slidepdf.com/reader/full/law-case-summaries 30/30
Kelner v Baxter
pre-incorporation
contracts
Baxter and two others agreed on
behalf of a company yet to be
formed to purchase trade stock for its business. Later thecompany was formed and
accepted and used the tradestock, but failed to pay for the
stock.
The company wasnot liable as it
could not ratify a
pre incorporationcontract with
retrospectiveeffect to a date
before thecompany existed.Baxter and friends were therefore
unable to recover
their money
24
Top Related