Going it alone‐Queensland Mines v. Hudson
| Date | 01 November 1979 |
| DOI | http://doi.org/10.1111/j.1468-2230.1979.tb01564.x |
| Author | G. R. Sullivan |
| Published date | 01 November 1979 |
Nov.
19791
NOTES
OF
CASES
711
by shares who desire to have the concern in the hands of themselves
and their friends, and to keep its shares out of the market ought
to use their own money for that purpose and not the trading capital
of the company.”80 Surely there can be no difference in point of
law between, on the one hand, directors using the company’s money
to
place
its
shares in the hands of themselves and their friends, and,
on the other, directors using such money to get out of the company
and place its shares in the hands of their friends (which happened
in
Belmont’s
case).81 The liability of the participants in the
agreement
of
October
3
could have been based on the principles
applicable to trustees who apply monies contrary
to
the trust
instrument and the doctrine of
uffra
vires,
so
that allegations of
fraud were not necessary in the pleadings.88
It is submitted, therefore, that by forcing the plaintiff into fraud
the Court of Appeal made Belmont’s task very much harder than it
ought
to
have been.
ROGER GREGORY.
GOING
IT
ALONE-QUEENSLAND
MINES
v.
HUDSON
JUDGED
purely as precepts, the fiduciary duties
of
directors are rigo-
rous-even draconian ]-but sporadically enforced. With assembly
line
regularity reports of the inspectors appointed by the Department
of
Trade detail various facets
of
the
‘‘
unacceptable face of capitalism
”
but civil litigation rarely follows the revelations of
gross
breaches
of
duty.
A
recent Privy Council decision,
Queensland Mines
v.
Hudson
a
threatens to strengthen directors’ immunity from suit.
The appellant. Queensland Mines Ltd., was formed to exploit the
~ ~~
80
Ibld.
p. 430. Lord Herschel1 makes exactly the same
point
using the example
(at p. 417)
of
a company’s capital being used
to
buy out shareholders who hamper
the
company.
81
The
excess
OP
f440,OOO
can only be regarded as a gift In the hands
of
G.,
D.,
M
and
C.
There
is
a
hint at
ultra vires
in
Selongor
(No.
3)
11968) 2 All E.R.
at p. 1141 and much more than a hint in
Gray
v.
Lewis
(1874) 43 L.J.Ch. 281, 290,
per
James
L.J.
82
Counsel’s argument In
Steen
v.
Law
[
19641 A.C. at
p.
293.
88
So
held by Lord Langdale In
Sulomons
v.
Laing,
19 L.J.Ch. 291, 293, approved
by kssel
M.R.
Russell
v.
Wakefield
Worenvorks
(supra).
1
Of what
is
perhaps the leading case,
Regal Husrlngs
V.
Gulllver
119671 2
A.C.
134n, it has been said that the result “yay well be thought to be carrying equitable
principles
to
an inequitable conclusion
(Prlnclples
of
Modern
Company
Lmu
(3rd
ed., 1969).
at
p. 536. See also similar observations
of
Jones (1968)
85
I,.Q.R. 472,
496).
It
is worth recalling, howevcr, that the directors
of
Regal subscribed for
3/5 of the share capital
of
a
company without creditors for E3,000 knowing that
a third party was prepared
to
pay E15.000
for
its
chief asset ([1967] A.C. at pp.
145-146). Although Regal’s claim may have lacked conspicuous merit its success
was probably regarded with equanimity by the former fifteen independent shareholders
in Regal who had not been invited by the former directors
to
take shares
in
the
subsidiary.
a
(1978) 52 A.L.J.R. 399.
To continue reading
Request your trial