Cook v Deeks

Facts

Three of the four directors negotiated a construction contract on behalf of the company but took it for themselves. As majority shareholders they then passed a resolution that the company had no interest in it.

Issue

Could the majority ratify the diversion of the contract?

Held

No. The contract belonged in equity to the company, and the majority could not make a present to themselves of the company's property.

Principle

A majority cannot ratify its own appropriation of company property; this is fraud on the minority.

Why it matters

It is the classic fraud on the minority case.

For study only. By lanbuk.com. Always check current sources and consult a qualified professional.