Aberdeen Railway Company v Blaikie Brothers

JurisdictionEngland & Wales
CourtHouse of Lords
Judgment Date20 Jul 1854
Docket NumberNo. 13

Lord Cranworth, C. Ld. Brougham

No. 13
Aberdeen Railway Co.

Partnership—Joint-Stock Company—Director.—

(SEE ante, 19th November 1851, vol. xiv., p. 66.)

Messrs Blaikie, the respondents, iron-founders in Aberdeen, entered into a contract with the Aberdeen Railway Company, appellants, to supply a quantity of iron railway chairs at L.8, 10s. per ton. The contract was made by letters dated 6th February 1846. On 9th June 1846, Mr Gibb, the railway engineer, wrote to the respondents, requesting that in the manufacture of the chairs still to be supplied, the respondents should adopt Ransome and May's patent; the respondents agreed to do so on 12th June 1851. One of the respondents' firm was a director of the Railway Company previous to 6th February 1846, and continued in the direction until he resigned on the 25th February. The defenders having received a portion, refused to accept delivery of the whole chairs contracted for, and on various grounds sought to be free of the contract. An action was raised against them by the respondents in the Court of Session, concluding for implement of the contract, or damages. The case came before the Court on the report of the Lord Ordinary. The defence, founded on the provision of Companies Clauses Act, 8 Vict. c. 17, sects. 88 and 89, that the contract was void, being entered into while one of the pursuers' firm acted as a director of the railway, was repelled.

The Railway Company appealed, and pleaded, without reference to the Companies Clauses Act;—That Blaikie, the principal partner of the respondents' firm, was a trustee as chairman for the Railway Company. The common law, as applied to all such relations, interdicted him from contracting. The doctrine as to purchases by trustees rested upon the principle, that the general interest of justice required such contracts should be void in every case.

The respondents answered, that the effect of the provision of the statute was not to annul the contract, but to incapacitate the party entering into such a contract from continuing to act as a director.

It was held in the House of Lords that the plea of the appellants, that ‘under the Companies Clauses Act any such contract to which the ‘pursuer was a party, while he remained a director, was illegal, and ‘cannot be enforced,’ sufficiently raised the question as to the invalidity of the contract, on the general principles of law, to entitle the Court to decide according to these principles. It was a rule of...

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