Edinburgh Northern Tram Ways Co. v. Mann and Beattie

Five years afterwards the company called on M and B to account for the sum they had received under their agreement with the contractors. In answer the defenders maintained that the company were barred from challenging the agreement, in respect that everyone interested in the shares of the Page: 829 ↓

Held (1) that the agreement was of an illegal character, as it had been entered into by the defenders for their own advantage, at a time when they occupied a pecuniary relation to the company; and (2) that whether all the existing members of the company at the date of the agreement had assented thereto or not, the company were entitled to call the defenders to account in the interest of subsequent allottees who had never assented thereto.

Opinion (by Lord Kinnear) that where a shareholder was personally barred from challenging an illegal agreement in consequence of having been a party thereto, the plea in bar did not transmit against his onerous transferee.

These two agreements were in reality part of the same arrangement. At the time when they were entered into, Messrs Mann and Beattie were respectively the agent and the engineer of the Tramways Company, and were especially charged with the duty of arranging the contract for the construction of the company's works.

In February 1889 the Edinburgh Northern Tramways Company brought an action against Mann and Beattie, concluding in the second place for decree ordaining them to render account of all moneys, shares, or debentures received by them in virtue of the agreement of October 25, 1884, on the ground that when occupying a fiduciary relation towards the company they had entered into an agreement to their own advantage and the company's prejudice, and were bound to communicate to the company the benefit received by them at its expense.