The Farmers' Mart, Ltd v. Milne [1913] ScotLR 137 (02 December 1913)

The Farmers' Mart, Ltd v. Milne [1913] ScotLR 137 (02 December 1913)

The agreement was void as it placed the manager in a position of direct and necessary double interest, creating a conflict between his fiduciary duty as trustee or factor and his personal interest in sharing fees with the company. Such an arrangement is contrary to public policy and unenforceable, regardless of whether actual corruption or disloyalty occurred.

Citation
[1913] ScotLR 137
Parties
Pursuer: The Farmers' Mart, Limited; Defender: John Milne
Jurisdiction
Scotland
Judgment Date
02 December 1913
Procedural Posture
Action of Accounting / Appeal (reclaiming Motion) From Lord Ordinary to Inner House, Second Division
Outcome
action dismissed; interlocutor of Lord Ordinary recalled; defender's pleas sustained
Legal Topics
Pactum Illicitum, Double Interest, Public Policy in Contracts, Fiduciary Duties, Illegality of Contract
Contract Law Bankruptcy Law Pactum Illicitum Double Interest Public Policy in Contracts Fiduciary Duties Illegality of Contract

Case Brief

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Parties

The Farmers' Mart, Limited

Pursuer

John Milne

Defender

Procedural Posture

Action of Accounting / Appeal (reclaiming Motion) From Lord Ordinary to Inner House, Second Division

Legal Issues

  1. 1 Whether an agreement between a company and its manager to pool and share fees earned by the manager as trustee or factor is void as corrupt and illegal due to conflict of interest and public policy.
  2. 2 Whether the agreement places the manager in a position of direct and necessary double interest, conflicting with his fiduciary duties.

Ratio Decidendi

The agreement was void as it placed the manager in a position of direct and necessary double interest, creating a conflict between his fiduciary duty as trustee or factor and his personal interest in sharing fees with the company. Such an arrangement is contrary to public policy and unenforceable, regardless of whether actual corruption or disloyalty occurred.

Court Disposition

action dismissed; interlocutor of Lord Ordinary recalled; defender's pleas sustained

Orders

  • The interlocutor of the Lord Ordinary was recalled.
  • The first and third pleas-in-law for the defender were sustained.