Parker v McKenna

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Citation: Parker v McKenna (1874) 10 Ch App 96.

This information can be found in the Textbook: Evans, Equity and Trusts, 3rd edition, Lexis Nexis, 2012, pp. 169-70 [13.2].

Contents

Background Facts

  • The Defendants were directors of a bank. They were issuing new shares.
  • After offering and selling some shares to existing shareholders, the Defendants entered an agreement with Stock to buy all the remaining shares.
  • However, Stock was not actually able to pay for all the shares...the Defendants bought those shares and then sold them for a profit.

Legal issues

  • Breach of Fiduciary Duty.
    • Whether the Defendants acquired this profit in breach of their director’s duties (which are fiduciary duties).

Judgment

  • Because Stock couldn't pay, the contact between the bank and Stock was not completed, but remained executory. This meant that the Defendants were still acting in their capacity as directors of the bank, and therefore still owe a fiduciary duty.
  • The court’s only duty is to simply examine whether a profit was made without knowledge of the principal, not whether this harmed the principal in any way.
    • In this case, it was. The directors made a profit as a result of their position as fiduciaries, and this profit was made without knowledge of the principal.
  • The directors must thus account their profits to the principal.

References

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