McLaughlin v. Solloway et al.

McLaughlin v. Solloway et al.

Plaintiff, having elected to retain the January-delivered 7,000 shares after discovering the company's fraudulent system, waived any conversion claim and limited his remedy to an equitable accounting against the agent; directors are personally liable for the overcharge on the 7,000 shares because company fraud and plaintiff loss were proved, but plaintiff's claim for secret profits on the collateral fails against the directors because there is no proof the directors received or benefited from those profits.

Citation
[1936] SCR 127
Parties
Plaintiff Appellant: J.P. McLaughlin; Defendant Respondent: Isaac W.C. Solloway; Defendant Respondent: Harvey Mills; Defendant (ontario Company): Solloway, Mills & Co. Ltd. (Ontario Company); Defendant (dominion Company, Bankrupt, Later Struck Out): Solloway, Mills & Co. Ltd. (Dominion Company)
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
28 February 1936
Procedural Posture
Appeal / On Appeal to the Supreme Court of Canada From the Court of Appeal for Ontario
Outcome
Appeal allowed in part and dismissed in part: judgment against respondents restored in part concerning the 7,000 shares; appeal dismissed as to the collateral secret profits claim.
Legal Topics
Brokerage, Conversion, Secret Profits, Directors' Liability, Margin Trading, Agency Duties, Waiver, Accounting
Source Language
English
Agency Company Law Equity Tort Commercial Law Securities Law Brokerage Conversion +6 more

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Parties

J.P. McLaughlin

Plaintiff Appellant

Isaac W.C. Solloway

Defendant Respondent

Harvey Mills

Defendant Respondent

Solloway, Mills & Co. Ltd. (Ontario Company)

Defendant (ontario Company)

Solloway, Mills & Co. Ltd. (Dominion Company)

Defendant (dominion Company, Bankrupt, Later Struck Out)

Procedural Posture

Appeal / On Appeal to the Supreme Court of Canada From the Court of Appeal for Ontario

Legal Issues

  1. 1 Whether plaintiff by retaining delivered shares elected to adopt the agent's purchase and waived conversion claims
  2. 2 Whether directors can be held personally liable for fraudulent acts of their company absent proof of benefit or loss attributable to them
  3. 3 Whether secret profits made by an agent may be recovered from directors of the agent company without proof that directors received or benefited from those profits

Ratio Decidendi

Plaintiff, having elected to retain the January-delivered 7,000 shares after discovering the company's fraudulent system, waived any conversion claim and limited his remedy to an equitable accounting against the agent; directors are personally liable for the overcharge on the 7,000 shares because company fraud and plaintiff loss were proved, but plaintiff's claim for secret profits on the collateral fails against the directors because there is no proof the directors received or benefited from those profits.

Court Disposition

Appeal allowed in part and dismissed in part: judgment against respondents restored in part concerning the 7,000 shares; appeal dismissed as to the collateral secret profits claim.

Orders

  • Judgment entered against Solloway and Mills (and Ontario Company) for the moneys paid by plaintiff in excess of the company’s actual market price for the 7,000 shares on January 13, 1930, and for proper brokerage charges based on that price, with interest on the excess from January 13, 1930.
  • Appeal dismissed in respect of the claim for secret profits on the 14,000 collateral shares; plaintiff’s claim against the directors for those profits is dismissed for lack of proof that directors received or benefited from the profits.