Beatty v. North-West Transportation Co.

Beatty v. North-West Transportation Co.

A sale to the company procured by a director who was vendor and who used his control of votes to secure both board and shareholder approvals is illegal and cannot be validated by a shareholders' resolution carried by the interested director's own votes; directors in fiduciary positions are disqualified from binding the company in transactions where they personally benefit, and such transactions are voidable and set aside.

Citation
(1886) 12 SCR 598
Parties
Plaintiff/appellant: Henry Beatty; Defendant/respondent: The North-West Transportation Company (Limited); Defendant/respondent: James Hughes Beatty; Defendant/respondent: William Beatty; Defendant/respondent: Johned Ward Rose; Defendant/respondent: Robert Laird; Defendant/respondent: John D. Beatty
Court
Supreme Court of Canada
Jurisdiction
Canada
Judgment Date
9 April 1886
Procedural Posture
Civil Appeal Corporate/shareholder Dispute / Final Appeal Heard and Decided by Supreme Court of Canada (appeal From Court of Appeal for Ontario)
Outcome
Appeal allowed with costs; judgment of Court of Appeal reversed and judgment of the Chancellor (Divisional Court) restored
Legal Topics
Director Self Dealing, Fiduciary Duty, Shareholder Ratification, Conflict of Interest, Minority Protection, Ultra Vires, Sale to Company
Source Language
English
Commercial Law Corporations Law Equity Director Self Dealing Fiduciary Duty Shareholder Ratification Conflict of Interest Minority Protection +2 more

Case Brief

Summary, issues, holding and outcome

More case intelligence is available

Unlock the full research layer for this judgment.

Full judgment text Legal principles 4 Authorities cited 11 Party arguments 2 Amounts and remedies 6
Sign in to unlock

Parties

Henry Beatty

Plaintiff/appellant

The North-West Transportation Company (Limited)

Defendant/respondent

James Hughes Beatty

Defendant/respondent

William Beatty

Defendant/respondent

Johned Ward Rose

Defendant/respondent

Robert Laird

Defendant/respondent

John D. Beatty

Defendant/respondent

Procedural Posture

Civil Appeal Corporate/shareholder Dispute / Final Appeal Heard and Decided by Supreme Court of Canada (appeal From Court of Appeal for Ontario)

Legal Issues

  1. 1 Whether a by-law and sale procured by a director who is the vendor can be validated by a shareholders' resolution obtained by votes controlled by that interested director
  2. 2 Whether a director may act and vote in respect of a contract in which he has a personal interest and subsequently have shareholders ratify that act where the director's own votes were decisive
  3. 3 Whether the transaction is a fraud or illegal oppression against the minority and thus voidable in equity

Ratio Decidendi

A sale to the company procured by a director who was vendor and who used his control of votes to secure both board and shareholder approvals is illegal and cannot be validated by a shareholders' resolution carried by the interested director's own votes; directors in fiduciary positions are disqualified from binding the company in transactions where they personally benefit, and such transactions are voidable and set aside.

Court Disposition

Appeal allowed with costs; judgment of Court of Appeal reversed and judgment of the Chancellor (Divisional Court) restored

Orders

  • Sale of the steamer "United Empire" to the company set aside
  • Judgment of the Divisional Court restored