Directors’ hidden profits disclosable
Promoters of a company had acquired a property intending its resale through the sale of shares in the company. In doing so the original directors made a substantial profit which they did not disclose (though it was discoverable). The company became insolvent and investors sought repayment of the hidden profit.
Held: The action succeeded. As promoters they were under a duty to make explicit declarations of the profits already made.
Lord Robertson said: ‘To my thinking, the central fact in the history is, that while the object of the syndicate was to make profit out of the resale, it was a essential part of the enterprise, as originally designed and as actually carried out, that the same individuals who sold as syndicate should buy as directors. This was provided by the third head of the agreement which set up te hsyndicate, and it has a far-reaching effect at all stages of the argument. Frst of all, it seems to to conclude the question whether these gentlemen were promoters when they bought the mortgages.’
Lord Macnaghten said that: ‘Everybody knows that sometimes half a truth is no better than a downright falsehood.’
Lord MacNaghten, Lord Robertson
[1900] AC 240, [1900] 69 LJ CH 385, [1900] 82 LT 393, [1900] 16 TLR 321, [1900] 7 Mans 321
England and Wales
Cited by:
Cited – HIH Casualty and General Insurance Limited and others v Chase Manhattan Bank and others HL 20-Feb-2003
The insurance company had paid claims on policies used to underwrite the production of TV films. The re-insurers resisted the claims against them by the insurers on the grounds of non-disclosure by the insured, or in the alternative damages for . .
Cited – Advanced Industrial Technology Corporation Ltd v Bond Street Jewellers Ltd CA 4-Jul-2006
The claimant left a valuable necklace with the defendant jewellers for sale. The jewellers fell into financial difficulties, and the director gave the necklace as security for a loan to the company. The jeweller failed to maintain payments on the . .
Cited – Stolzenberg and others v CIBC Mellon Trust Co Ltd and others CA 30-Jun-2004
The court considered the issue of the use of a strike out as a sanction for non-compliance with a court order.
Held: The approach of the court in a case considering relief for sanctions – exemplified by RC Residuals v Linton Fuel was bound to . .
These lists may be incomplete.
Updated: 12 July 2021; Ref: scu.219459