C.A. 1901-2. SON & Co. DANIELL. then there was no acquiescence in letting them go on: De Bussche v. Alt(1). There is no acquiescence where material facts are concealed or unknown: Erlanger v. New D. HENDER Sombrero Phosphate Company (2). There can be no such thing as laches on the part of a body of creditors: Lewin on Trusts(3); anon. case cited in Lister v. Lister(4); Austin v. Chambers(5). There was longer delay in In re Sharpe, Masonic and General Life Assurance Company v. Sharpe,(6) than here. The sale by the company to the syndicate for £5 was ultra vires, and all parties had notice. A mercantile corporation cannot without express power alienate its whole undertaking: Brice on Ultra Vires(7); Lindley on Companies(8); Palmer's Company Precedents(9). In Wilson v. Miers (10) there was a sale for a genuine sum of money; and, further, that case would not be supported at the present day. The exception there was not a substantial one-not sufficient to affect the matter. The proper course was winding up. In any case, the resolutions of the company were that the assets were not to be made over except on certain terms. Those terms were never complied with, and the assets, therefore, never passed. Daniell and the Chamberlains, who were associated with him, had notice of what was being done and of the terms. The original transaction being invalid, nothing subsequent could affect the creditors' rights. No delay could make the ultra vires act good. If laches can affect the matter, then a defaulting trustee is in a better position than a defaulting debtor. A debtor has six years at all events, but a defaulting trustee may set up a much less period. Willmott v. Barber(11) shows the limitations to the doctrine of estoppel. Knowledge that what was being done here was wrong is a matter of legal inference: In re National Funds Assurance Company(12). Sim and Findlay, for the defendant Daniell : The sale of May, 1892, to Harrison for the syndicate was an absolute sale, and determined the fiduciary relationship of Daniell to the company with respect to the property now in question. The sale by the mortgagee to the defendants was made with the consent of the other members of the creditors' (1) 8 Ch.D. 286, 312, 314. (2) 3 App. Cas. 1218. (3) 10th ed. 564. (4) 6 Ves. at p. 632. (5) 6 Cl. & F. 1. (6) [1892] 1 Ch. 154. (7) 3rd ed. 158. (8) 5th ed. 207. (9) 7th ed. Vol. i. 306. (10) 10 C.B. N.S. 348; 3 L.T. 780. (11) 15 Ch.D. 96. (12) 10 Ch.D. 118, 128. C.A. 1901-2. V. DANIELL. syndicate, and that transaction cannot, therefore, be impeached on the ground of any fiduciary relations between Daniell and D. HENDER the syndicate. Even if the syndicate had an equity, Burnett SON & Co. was not a member of it, and he cannot found a claim on it. The Liquidator does not represent the syndicate in any way, and he cannot found any claim on any equity it may have had. If the plaintiffs ever had any rights to relief they have been barred by laches and acquiescence. There is also the defence of the Statutes of Limitation. There was nothing to prevent the sale by the mortgagee to the defendants: Kennedy v. De Trafford(1); and the conveyance and assignment by him vested the legal ownership in them. The original sale to the syndicate was an absolute one, and Daniell, although a director of the company, was free to join in the purchase: Parker v. McKenna (2). If any creditors of the old company did not come into the proposed new one, the new one had to indemnify the old one against their claims. A release may have been a condition precedent in the first instance, but, the contract having been partly performed, this condition became a warranty merely, the remedy for the breach of which would be in damages only: Behn v. Burness(3); Pust v. Dowie(4). The sale to the syndicate having been an absolute one, the sale by the mortgagee could take effect unaffected by any fiduciary relationship. It is immaterial whether the sale to the syndicate was ultra vires of the company, because what took place at all events determined any fiduciary relationship between Daniell and the company, and the defendants claim title simply under the sale by the mortgagee. But the sale was one which the company had power to make. There is a distinction between selling the property of a company as a whole and selling specific goods and chattels of the company: Lindley on Companies(5), citing Wilson v. Miers (6) as law; Brice on Ultra Vires(7). This was not a sale of the whole undertaking such as is referred to in Brice on Ultra Vires (8). The goodwill certainly was not included. The company had a good deal of uncalled capital if it had chosen it could have carried on. The question whether there was legal power to do what was intended cannot affect the question whether Daniell was a constructive trustee. The doctrine of constructive trusts is not to be extended so as to make : (6) 10 C.B. N.S. 348; 3 L.T. 780. (7) 3rd ed. 87. (8) 3rd ed. 158. C.A. 1901-2. SON & CO. v. DANIELL. it unreasonable: Barnes v. Addy(1). Conduct of its shareholders will affect the rights of a company: Erlanger v. New Sombrero Phosphate Company (2). If the property passed in D. HENDERtrust for all the creditors Burnett is barred by laches and acquiescence, and if there was no proper sale the Liquidator is barred: White and Tudor's Leading Cases in Equity(3). There is no rule that a trustee for sale cannot purchase; but if he does the cestui que trust can have the purchase set aside if he comes within a reasonable time: Campbell v. Walker(4). In determining what is a reasonable time the Court must have regard to the source and nature of the trust; and less time will be allowed where the alleged trust is of a vague and doubtful nature: Erlanger v. New Sombrero Phosphate Company (5). There is no strict rule, and the remedy will be refused where it would be practically unjust. It is not time only but the conduct of the parties also which has to be taken into account: Rochefoucauld v. Boustead(6); Evans v. Smallcombe(7). Burnett knew that the property and business were damnosa hereditas, and declined to have anything to do with the syndicate. He did not press for liquidation of the company, because he knew that would produce nothing for the creditors. He allowed the defendants to take all the risk, and now that they have worked the business up into a profitable one he seeks to come in and take the benefit. Where a business involving risks is being carried on it is especially necessary that any one alleging a constructive trust should come promptly: Clegg v. Edmondson (8). That case and also Lehmann v. McArthur(9) show that mere continued assertion of claim without any act to enforce it is not enough. M. Chapman, for the defendants Chamberlain : There is a distinction between the position of a director and that of a trustee Smith v. Anderson(10); In re Faure Electric Accumulator Company(11). A trustee has the property vested in himself. In the cases where purchases by directors are set aside it is a power of the company which is exercised to convey to the director. Here Daniell did not get the property by the exercise of any of the powers of the company: the sale was by the mortgagee. Nor did he take advan (1) L.R. 9 Ch. 244, 251. (2) 3 App. Cas. 1218. (3) 7th ed. Vol. ii. 694, 728. (4) 5 Ves. 677, 680. (5) 3 App. Cas. 1218, 1279. (6) [1897] 1 Ch. 196, 211. (7) L.R. 3 H.L. 249, 255. (8) 8 DeG. M. & G. 787, 807; 26 L.J. (9) L.R. 3 Ch. 496. C.A. 1901-2. SON & Co. It tage of his position to deprive his fellow-shareholders of anything. A transaction will not be set aside in such circumD. HENDER- stances: Naylor v. Winch(1). Further, the Chamberlains are in a totally different position from Daniell. If the sale to the DANIELL. syndicate was an absolute one and intra vires, there is an end of the action. But suppose it was ultra vires, still the intention of the parties was an out-and-out sale. The purchasers did not, therefore, take possession as agents: they were, therefore, not intrusted in any way; at most they could only be constructive trustees. Daniell was not in the syndicate at first. His subsequent admission could not alter the equities. The sale by the mortgagee got rid of the legal difficulty as to title. also got rid of all equitable remedies, so far, at all events, as the Chamberlains were concerned. After that it would be necessary to show moral fraud, which is not alleged. The Court will act by analogy to the Statutes of Limitation. The property consisted of land and chattels, and there is a claim for accounts. The period of limitation for a claim to land has not run, but six years is the period for a claim to chattels, and six years for an action for an account under the statute of James I. Persons who are claiming as the representatives of others are barred by the neglect of those through whom they claim: Hodgson v. Bibby(2); Waterhouse v. Jamieson(3). A director's position is not one of trust towards the creditors, though it is towards the shareholders: Poole, Jackson, and Whyte's case(4). It is the company only, therefore, which can attack, and if it has barred itself there is no remedy. H. D. Bell, in reply: As to the alleged laches and acquiescence: The plaintiff must have led the defendants to believe that he was assenting: Willmott v. Barber(5). The non-disclosure of the negotiations in regard to timber rights is the answer to Clegg v. Edmondson(6). There was a duty to disclose uberrima fide: Clements v. Hall(7). Burnett could not attack the transaction except by putting the company into liquidation. He did so in 1897, since when the Liquidator has taken the steps shown. On the authorities cited the doctrine of laches does not apply against creditors. Cur. adv. vult. DENNISTON, J., delivered the judgment of the Court (1) as follows:- C.A. 1901-2. SON & Co. V. DANIELL. The plaintiff William Boyce Chennells sues as Liquidator D. HENDER of D. Henderson & Co. (Limited), (in liquidation), and with the sanction of the Court in which the liquidation is being conducted. The plaintiff Alexander Burnett is a creditor of the company, and sues on behalf of himself and the other creditors of the company. The plaintiffs allege that in May, 1892, the company being in financial difficulties, the defendants Chamberlain and certain other creditors of the company, with the consent of the directors, assumed the management of the sawmilling and timber business of the company, and that the said creditors of the company appointed the defendant Daniell (who was originally, and continued to be till the winding-up, a director of the company and one of its promoters) to manage the business for their (the creditors') benefit and for the benefit of the company, and that the defendants Chamberlain were associated with him in such management; that Daniell managed the same for the benefit of the said creditors and company till May, 1893; that during such time he purchased for his own use and benefit large quantities of timber belonging to the company; that in May the defendants arranged privately with a mortgagee of the company to purchase from him, at the amount due on the mortgage, substantially all the property of the company; that they took possession of such property and of other property of the company, and have converted the same to their own use and benefit; that they have employed the property in carrying on the business of sawmillers and timbermerchants, have made considerable profits, and obtained further timber rights and concessions, and have refused to account for the same to the plaintiffs or either of them. The plaintiffs claim that Daniell was at the time of the purchase, and still is, a trustee for the company; that he was not entitled to make the purchase except for or on behalf of the company, and that of this the defendants Chamberlain had at the time of the purchase notice; that the defendants were constituted trustees and agents for the company and the creditors of the company by the arrangement of May, 1892; that they continued to be such trustees and agents, and therefore not entitled to make the purchase of May, 1893, except as such trustees or agents; and that such purchase was illegal, and that they hold the (1) Denniston, Conolly, Edwards, and Cooper, JJ. |