Laughland v. Millar, Laughland, & Co. [1904] ScotLR 41_325 (19 February 1904)

Laughland v. Millar, Laughland, & Co. [1904] ScotLR 41_325 (19 February 1904)

A contract between a director and managers to share a bonus voted by shareholders, where the director did not disclose his interest and agreed to support the bonus in exchange for a personal share, is a corrupt agreement contrary to public policy and fiduciary duty. Such a contract cannot be sued upon, and subsequent shareholder inaction does not amount to ratification.

Citation
[1904] ScotLR 41_325
Parties
Pursuer: David Laughland; Defender: Millar, Laughland, & Company; Defender: Edward Millar; Defender: William Laughland
Jurisdiction
Scotland
Judgment Date
19 February 1904
Procedural Posture
Civil / Appeal (inner House, Court of Session)
Outcome
appeal sustained, action dismissed, defenders assoilzied
Legal Topics
Pactum Illicitum, Director's Duties, Fiduciary Duty, Ratification, Public Policy
Contract Law Company Law Pactum Illicitum Director's Duties Fiduciary Duty Ratification Public Policy

Case Brief

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Parties

David Laughland

Pursuer

Millar, Laughland, & Company

Defender

Edward Millar

Defender

William Laughland

Defender

Procedural Posture

Civil / Appeal (inner House, Court of Session)

Legal Issues

  1. 1 Is a contract between a director and managers to share a bonus voted by shareholders, where the director did not disclose his interest, enforceable?
  2. 2 Does subsequent shareholder knowledge and inaction amount to ratification of such a contract?

Ratio Decidendi

A contract between a director and managers to share a bonus voted by shareholders, where the director did not disclose his interest and agreed to support the bonus in exchange for a personal share, is a corrupt agreement contrary to public policy and fiduciary duty. Such a contract cannot be sued upon, and subsequent shareholder inaction does not amount to ratification.

Court Disposition

appeal sustained, action dismissed, defenders assoilzied

Orders

  • Action dismissed
  • Defenders absolved from liability