The directors of a bank acquired for themselves, and made a profit on, certain shares the subject of a new issue that were not taken up by the bank’s shareholders.
Held: James LJ said: “I do not think it is necessary, but it appears to me very important, that we should concur in laying down again and again the general principle that in this court no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal; that that rule is an inflexible rule, and must be applied inexorably by this court, which is not entitled, in my judgment, to receive evidence, or suggestion, or argument as to whether the principal did or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal in the danger of such an inquiry as that.”
Lord Cairns LC said: ‘The Court will not inquire, and is not in a position to ascertain, whether the bank has or has not lost by the acts of the directors. All that the Court has to do is to examine whether a profit has been made by an agent, without the knowledge of his principal, in the course and execution of his agency, and the Court finds, in my opinion, that these agents in the course of their agency have made a profit, and for that profit they must, in my opinion, account to their principal.’
Judges: James LJ, Lord Cairns LC
References: (1874) LR 10 Ch 124,