C.A. 1901-2. SON & Co. v. DANIELL. of the company except book debts, cut timber, and interest in machinery and plant at Dalefield. This last was a mill which had been burned; it represented a claim for compensa- D. HENDERtion. We should hesitate very much to hold such a sale to be within Wilson v. Miers(1), and to be one which could be made under the general powers of a company. It does not follow that such a sale, even if ultra vires, followed by possession by the purchasers, would entitle the company to treat the purchasers as its trustees, and liable to account not only for the property, but for profit made by its use. We are satisfied that no claim for the property or for accounts could be maintained against the defendants solely. This claim has not, indeed, been substantially insisted upon by the plaintiffs. They have used the point of the invalidity of the sale to the syndicate chiefly as a ground for the attack on the subsequent sale under the mortgage, on which they admit they mainly rely. That sale took place in May, 1893. The experiment by the syndicate had been originally limited to twelve months, that being the period for which the mortgagee had agreed to hold over. It was not successful. On the 12th of January, 1893, Dakin gave the syndicate (which, as I have said, had traded as "the Masterton Sawmilling Company") a notice in these terms: 66 Masterton, 12th January, 1893. "The Masterton Sawmilling Company, Masterton. "TAKE notice that, owing to the breach of the covenants re"lating to insurance and maintenance of stock, and the failure "to perform the other agreements and conditions upon which your company was permitted to continue to carry on the mortgage from D. Henderson & Co. to me, I demand payment of the principal sum of £2,250 secured by such mortgage, and all interest now due thereunder; and take further "notice that, if the above sum and interest is not paid to me "by Wednesday next, the 18th instant, proceedings will be "taken to effect a sale under the terms of the mortgage. 66 "CHAS. DAKIN, "By his solicitor, Wm. G. Beard." It will be seen the notice speaks of default by your company," of the bill of sale and mortgage from " your company. At a meeting of shareholders—that is, syndicate on the (1) 10 C.B. N.S. 348; 3 L.T. 780, C.A. 1901-2. SON & Co. V. DANIELL. 66 19th of January it is minuted that "Discussion took place "as to position of the company under foreclosure," and a D. HENDER- resolution was carried "That the present company be wound up." Dakin advertised a sale of the property on the 4th of May. The property was not sold when put up. The highest bid was £2,000. Immediately afterwards the defendants bought all the mortgaged property privately from Dakin, The property was assigned to the defendants by deed dated the 20th of May, 1893. The consideration is stated to be £50. This must, of course, be intended to mean £50 over the moneys due under the mortgage, as appears by the mortgage of the property executed the same day by the defendants to Dakin. The defendants entered into possession of the premises, which comprised all the property possessed by the syndicate, and have since occupied and possessed it, have used it for the purpose of carrying on business, and have acquired and worked in connection with it other rights and other property. I is admitted (we use counsel's own words in opening) that the defendants have not been guilty of any fr d in the sense of moral fraud. It is not suggested that the transaction was not at a fair value, or that any other person could have been found to give a better price, or that any other mode of sale would have been better, or that the company has not benefited by being thereby relieved of the liability under the mortgage. It was carried out openly, the defendants having mentioned their intentions to the plaintiff Burnett, the principal creditor of the company, before it was carried out. The plaintiffs say all this does not matter; the defendant Daniell was, to the knowledge of the defendants Chamberlain, a director of the company, and there is an absolute rule that under no circumstances can a director purchase from his company, and that, if he purports to do so, no property passes, and he holds the property as an express truste for the company, his cestui que trust. For this were cited Ex parte Lacey(1), In re National Funds Assurance Company(2), and other cases. In Ex parte Lacey(1) it is said, As to a purchase by a trustee of the trust property, the "rule is that it shall not prevail under any circumstances "unless the connection appears satisfactorily to have been dissolved (a transaction to be viewed with great jealousy, "from the opportunity of acquiring knowledge as trustee), or "by universal consent." 66 (1) 6 Ves. 625. (2) 10 Ch.D. 118, 128. 66 66 66 In Parker v. McKenna (1) James, L.J., states "the general C.A. 1901-2. SON & CO. V. DANIELL. principle that in this Court no agent in the course of his agency, in the matter of his agency, can be allowed to make D. HENDERany profit without the knowledge and consent of his principal; that that rule is an inflexible rule, and must be applied inexorably by this Court, which is not entitled, in my judgment, to receive evidence, or suggestion, or argument as "to whether the principal did or did not suffer any injury in "fact by reason of the dealing of the agent; for the safety of "mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that." The application of this principle to the present case depends on proof that the mortgaged property was the property of the company; that the defendant Daniell was a director; that as such he was a trustee; that his connection with the company had not been satisfactorily dissolved. The sale was a sale by the mortgagee, not by the company. The company's right to it had been sold — it had purported to have been sold for good consideration to the syndicate. Whatever had been the legal effect of the transaction, it had, in the belief of all parties, been transferred to persons who, in the view we have previously indicated, held in respect of it no fiduciary relation to the company. The demand and notice of intended sale was given not to the company, but to the syndicate. The company, for all practical purposes, was dead. That it was not buried was owing, as far as we can see, only to the desire to save the funeral expenses. The directors were directors only in name. Once since 1892 a meeting of directors (at which Daniell attended) was held (27th April, 1895) to consider a claim made by a creditor. That a director who, as director, uses for his own benefit property of his company is held to be a trustee for such property for the company is not open to dispute. In the present case, as we have already said, the directorship was practically dormant; the knowledge of Daniell that the property was (if, in fact, it was) the property of the company was constructive only, depending on the assumption that he must be taken in law to have known the fact (if it was a fact) that the sale by the company to the syndicate was ultra vires; it was not a transaction effected with the company, or on behalf or as the representative of the company; it was not (in the words of James, L.J.) by an agent in the course of his agency or in the matter of his agency. As said by Lord (1) L.R. 10 Ch. 96, 124. VOL. XX.-47. C.A. 1901-2. SON & CO. บ. DANIELL. Selborne in Barnes v. Addy(1), "It is equally important to "maintain the doctrine of trusts which is established in this D. HENDER "Court, and not to strain it by unreasonable construction beyond its due and proper limits. There would be no better "mode of undermining the sound doctrines of equity than to 'make unreasonable and inequitable applications of them." Looking at the very loose and irregular manner in which the whole of the proceedings up to the purchase in 1893 have been conducted, and to the complications and technicalities which have subsequently been created, we are glad to feel that there is a defence which, in our opinion, satisfactorily disposes of the matter on grounds consistent with good sense and equity. The defendants plead that "it is now over eight years since the defendants purchased from the mortgagee as "aforesaid, and any rights which the plaintiffs or either of "them may have against the defendants have been lost by acquiescence and delay." The purchase was in May, 1893; the petition for winding up the company was brought in August, 1897; the suit was begun on the 5th of June, 1901. Though brought nominally for the benefit of the shareholders and the creditors, it is admittedly brought at the instance of the plaintiff Burnett, a creditor, who was the petitioner in the winding-up. The expenses of the winding-up and of the suit are being found by him. 66 The Official Liquidator, in his evidence, says, "I remember "a meeting of the shareholders, and also a meeting of the "creditors, of the company, to see what action should be taken "on the Judge's judgment. The shareholders passed a resolution relinquishing all claims, and also a resolution pro"testing against further proceedings against the defendants. "The creditors also wanted everything to be dropped. "Burnett wanted proceedings to go on." Burnett was familiar with everything that had taken place. He had an opportunity of joining the syndicate, and declined to have anything to do with it. He could at any time have enforced his claim against the company by having it wound up. He knew Daniell was a director. He knew of the proposed purchase by the defendants. He says, "I happened to "" go into the sale-room on other business, and met Chamber"lain and Daniell, and they told me what was going to happen. They told me Dakin had seized the mill, and they were going to buy it. Edmund Chamberlain said that. I do not (1) L.R. 9 Ch. 244, 251. 66 remember exactly what I said, but I had always the inten C.A. 1901-2. tion of taking the directors to the Court. We talked the "matter over, and I told Chamberlain he would do no good D. HENDER"with it; he would do no good with Daniell, as he was starting 66 SON & Co. V. "a timber-yard and a builder's business, and he would keep DANIELI down the price of timber for his own benefit. I said to “Daniell, talking about the sale, that he could please himself "and do as he liked, but I would be in a position to take him to the Supreme Court for my claim very soon. I meant the "directors. Daniell made a remark that I could go ahead"that I would get nothing; he had nothing." 66 66 66 1 In answer to this defence the plaintiffs relied on cases which show that Courts of equity will not allow mere lapse of time, unless very great, to bar a claim for equitable relief. The law is stated in De Bussche v. Alt(1): "Where a wrongful act has "been completed without the knowledge or assent of the party injured, his right of action is not ordinarily barred by mere "submission to the injury, or even by a voluntary promise not "to seek redress. Some conduct amounting to release or "accord and satisfaction must be shown; although on account "of laches relief may be refused under special circumstances.' In that case the wrong complained of was the sale of a steamer by an agent, without the knowledge of his principal, at a price considerably beyond that at which he accounted for to the principal. The plaintiff, in delaying to assert his rights, had done nothing to prejudice the position of the defendant; and it was held that delay alone was no bar to this action. In the present case, as we have stated, Burnett was aware of the sale, and of the position of Daniell, but made no objection or protest. But, assuming this not to be acquiescence in the sale, his right of action accrued as soon as the sale was completed. His right was to claim that the sale was invalid—that the property was purchased by the defendants as agents, and held as trustees, for the company, and should be then and there accounted for. The plea of the defendants is not that this is a stale claim, but that the conduct of the real and substantial plaintiff has made it inequitable and unconscientious to ask a Court of equity for the relief sought-relief which, in respect of the sale by the mortgagee, is altogether different from that to which the plaintiffs would have been entitled in 1893. In the judgment of the Court in De Bussche v. Alt(2), Thesiger, L.J., says, "If a person having a right, and seeing (1) 8 Ch.D. 286, 287.. (2) 8 Ch. D. 286, 314. |