Scottish Court of Session Decisions

In 1879 the Morayshire Railway Company desired, for the purpose of enlarging their station accommodation at Elgin, to acquire a field of the extent of 6 acres or thereby immediately adjoining their station there, and forming part of a small estate called Milnfield. At that time, and up to the amalgamation of the company with the Great North of Scotland Railway Company, which took place in February 1881, the defender in this case, Alexander Urquhart, was a shareholder and chairman of the board of directors, and James Jameson, solicitor in Elgin, was also a shareholder and one of the directors—he was also law-agent of the company, and was the defender's man of business.

The estate of Milnfield was advertised for sale by auction on the 4th of April 1879, but the sale was afterwards adjourned to the 14th. On the forenoon of the 4th a meeting of the directors of the Morayshire Railway Company was held, at which the defender and Jameson among others were present. The minute of this meeting bore, inter alia—“The secretary stated that the lands of Milnfield are advertised to be sold by public auction on the 14th current, and that it would be desirable, in the interest of the company, to purchase the park, of about 6 acres, adjoining the railway station at Elgin, for railway purposes. After consideration, it was resolved to make an effort to secure the park referred to, and Mr Jameson was instructed to watch the sale and endeavour to secure it for the company.” … This minute was signed by the defender as chairman of the company. The instruction had reference to the sale on that afternoon which did not takeplace. Thedate “14th” April was filled in by the secretary in the evening after the sale was adjourned.

Milnfield was exposed on the 14th, and bought by Jameson in his own name for £2610, being £150 above the upset price.

The next meeting of directors was held on 2d May following, the minute of which bore:—“ Last Minutes.—The minutes of meeting of 4th April 1879 were read and approved of.

“ Lands of Milnfield.—Mr Jameson reported that he had purchased the Milnfield property for the chairman, for the sum of £2610; that the park adjoining the station was secured for the railway company; and that the whole property would have to be conveyed to Mr Urquhart in the first place, and the park would then be reconveyed by Mr Urquhart to the railway company at the price to be agreed upon. The price to be fixed at next meeting, after Mr Urquhart had time to consider the matter.”… This minute also was signed by the defender as chairman.

Immediately after the purchase on the 14th of April, Jameson had notified the fact to the secretary of the company, who at once wrote the defender as follows:—“… After a very keen competition ‘Milnfield’ was knocked down to Mr Jameson for you and the railway company for £2610; the park adjoining the station to go to the railway company.”

Jameson subsequently, acting as law-agent for the defender, obtained a disposition and assignation of the whole lands in favour of the defender, he (Jameson) being a consenting party thereto, and expede a notarial instrument thereupon.

The present action was raised against the defender Urquhart by the Great North of Scotland Railway Company—Jameson being also called for his interest—in May 1883, concluding that the defender ought to be ordained to dispone the six-acre park to the company, the pursuers paying in return for the said disposition the sum of £400, or such other sum as the Court should fix as the proportion effeir—ing to the park, of £2610, the price of the whole of Milnfield. In the event of the defender's failure to comply, there was a conclusion for adjudication of the park from him on consignation by the pursuers of £400.

The agreement alleged by the pursuers was to the effect that Jameson, acting for the company, on the instructions of the directors (including the defender), was to watch the sale, and endeavour to secure the park, and that he being also agent for the defender had agreed with him that he (Jameson) was to attend the sale for both the company and the defender, and bid for the whole of Milnfield, the defender to convey the six—acre park to the company for a price proportionate to the price of the whole lands on a fair valuation. They averred that in actually making the purchase Jameson acted as agent for the company in purchasing the park, and for defender in purchasing the rest of the property. The manner in which the title was taken to the whole in defender's name they averred to be merely for convenience in making up the title.

The defender denied that it was resolved at the meeting on 4th April to secure the park for the company, and averred that at a previous meeting he had expressed his disapproval of that project for certain reasons. At the meeting on the 4th, when calculations were submitted by the secretary as to the purchase of the park on the footing that it could be got only by his buying the whole estate in the first instance, he (defender) said that if he was to be the purchaser he would not agree to these calculations, but would make his own arrangements on a different basis, and would not agree to a joint purchase. He gave no instructions to Jameson to purchase the property or any part of it for him. He was from home from the 11th to the 24th of April, and only heard of the purchase on his return, when, after considerable hesitation, he agreed to take over the subjects. He had received the letter above quoted from the secretary, but as he considered that the latter had no authority to write the letter, he did not reply to it. He disputed the accuracy of the minute of meeting of 2d May. He had at that meeting denied that there was any joint purchase made by his authority. He was willing to let the company have the park at a fair price, which he fixed at £1244, brought out by a detailed statement.

The pursuers pleaded—“(1) The said James Jameson having, with the consent and approval of the defender, accepted the mandate of the

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Morayshire Railway Company to purchase the park in question for them, and having purchased the same accordingly, and having subsequently taken the title in the defender's name with the defender's consent, as mere matter of convenience in conveyancing, the defender is bound to convey the said subjects to the pursuers, as representing the said company, on payment of a sum representing the just and proportionate value thereof as compared with the price of the whole of the estate of Milnfleld. (2) The defender having been a director of the said company, and having acted as such in the matters alleged, he is not entitled to found as against the company upon a title obtained by him in his own name. (3) Assuming that the purchase of the park in question was made by the said James Jameson and the defender solely for the defender's own behoof, the said purchase was fraudulent, and was made in breach of good faith, and in violation of the defender's duty as director of and trustee for the shareholders of the Morayshire Railway Company, and the defender was bound to communicate the benefit of the said purchase to the Morayshire Railway Company; he therefore is now bound to convey the said park to the pursuers at the purchase price thereof. (4) On whatever footing the park in question was purchased, it having been agreed between the parties that the same should be conveyed to the Morayshire Railway Company, the defender is now bound to convey the same to the pursuers at the purchase price thereof, and is not entitled to make a profit from the re-sale of the same to them.”

The defender pleaded, inter alia—“(3) The pursuers not being entitled to buy, and not having bought, the park in question, the present action is unfounded, and the defender ought to be assoilzied. (4) Separatim, the defender being willing to sell the park in question to the pursuers at a fair price, the present action is unnecessary.”

The Lord Ordinary allowed a proof.

The secretary of the company deponed that the minutes above quoted were accnrate as to what took place at the meeting, and that the defender concurred in the resolution set forth in the minute of the meeting of 4th April. He stated also that the defender did not dispute the accuracy of the calculations which he (witness) had submitted to him at the meeting. He could not say whether anything was then said about a joint purchase, but instructions were given to Jameson to secure the park for the company, and to arrange his own mode of doing so. On the evening after the adjournment of the sale on 4th April the defender called on him and told him “that he had decided to try and purchase the estate for himself with the view of giving us the park. He had notes with him with reference to the prices and allocations. He proposed to buy the whole property including the park, that the park should be given to the railway company, and that he Should feu the rest of the ground.” They then went into calculations, and witness stated £400 as the sum the company would give for the park. Defender did not object to that calculation; but first objected to £400 as the price at a meeting of directors on 14th May. The company meant at the meeting on the 4th that the defender should make a joint purchase, but he could not say that the term “joint purchase” was ever used between him and the defender.

His evidence so far as related to what took place at the meetings was corroborated by several other directors.

Mr Jameson's evidence was to the following effect — The defender had disapproved of the proposed purchase of Milnfleld when it was first mentioned previous to 4th April. The proposal anent the purchase which was made at the meeting on the 4th was made in an informal conversation among those present after the regular business was over. The defender expressed total disagreement with the calculations then submitted by the secretary, and said that if he were to buy the property he would have his own way of counting, that he would have nothing to do with a joint purchase, and that if he were to buy he would buy it for himself. The minute of meeting of the 4th was accurate in stating that he was to make an effort to secure the park. After that he went to the defender and said—“‘Now you must buy the ground and give us the park, and if you buy the ground you will be liberally treated by your co-directors, and if there is any extra sum paid it will be put on the price you are to get for the park.’ (Q) Anything extra beyond what?—(A) Beyond his idea of the valuation, which was £2200. Defender was angry, and I did not get much civility from him; he was dry and disagreeable… He told me that he would attend the sale himself, and buy it for himself—he would have no joint purchase; at the same time he said it was too high, and would not bring the upset price. I heard no more from him, so far as I remember, till he returned from the south about the 20th April.” … “(Q) On whose behalf did you attend the sale on 14th April?—(A) In point of fact I had no authority from Mr Urquhart to attend the sale. (Q) Did you attend on his behalf?—(A) I did net; I took out the park on my own responsibility. (Q) Did you attend the sale on behalf of the Morayshire Railway Company?—(A) I did not; I took the park—the property—on my own responsibility.” He then deponed that he made the purchase in the expectation that the defender would take it over and hand over the park to the company. He made an entry in his scroll diary under 14th April a few days after that—‘Mr A. Urquhart, attendance at the sale purchasing Milnfleld for you.” He made this entry merely on (he chance of the defender becoming the purchaser. He afterwards pursuaded him into taking Milnfleld. “We were to get the park on the understanding that wo would pay a fair and honest price to him—a price that would reimburse him, and not let any loss fall on him for the rest of the ground.” He (witness) considered himself bound to do everything he could to secure the park for the company, and he tried to act fairly for both parties.

The defender deponed that the arrangement in contemplation when Jameson attended the sale was that defender should purchase the property and give the park to the company, getting a bonus of £300 over and above the proportional share of the price. He told Jameson that unless he got it at a price that would return him a fair interest he would have nothing to do with it. He did not recollect having a meeting with the secretary on the evening of the 4th April. He never went into calculations with the secretary at any other time than that at the meeting of directors on the 4th April. He did not, before

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going to Greenock on the 12th April, tell him that he had instructed Jameson to buy Milnfield for him. After his return home on 21th April he agreed to take the property out of friendship for Jameson. Since the purohase he had made some outlay on the property. He was willing then to hand over the whole estate to the company on getting what he paid for it, and the interest on the money he had laid out, or to keep it, including the park.

The Lord Ordinary pronounced this interlocutor—“Finds that the defender Alexander Urquhart is bound by agreement to convey the subjects libelled and claimed by the pursuers at the fair price or value thereof, assesses said value at £700, and on payment of that amount by the pursuers to the defender, ordains the defender forthwith to dispone and convey to the pursuers by disposition the six-acre park, and decerns.

“ Opinion.—This claim is one well fitted to be disposed of by arbitration, because there really has been no legal question raised between the parties before me, and I may say I regret that the proposal made by the pursuers, the North of Scotland Railway Company, to refer this matter to arbitration, had not been agreed to. I keep in view in making this remark that the present pursuers were not parties to the contract which they are seeking to enforce. That contract was made with the Morayshire Railway Company, which has now been merged in the Great North of Scotland; and one cannot therefore altogether impute to the Great North of Scotland Company knowledge of the negotiations which preceded this sale, if sale it was. They have taken over the undertaking of the Morayshire Railway Company, and found this unsettled claim remaining; and I think it cannot be said that they took an unreasonable course when they made an offer of, I think, £660, with the alternative of arbitration. However, that has been declined, and I must now deal with the case upon its merits.

The claim is for the conveyance of the piece of land consisting of 6 acres 2 roods and 13 perches, which has been referred to as the 6-acre field, part of a little estate of 30 acres called Milnfield, and that estate immediately adjoins the station of what was the Morayshire Railway Company at Elgin. The Company very urgently desired to become the possessors of this field with a view to increased station accommodation. It appears from the evidence that this had been in the view of the directors and of the secretary for a considerable time before the property came into the market, and as soon as Milnfield was advertised for sale the secretary. very properly called together the directors and pointed out to them the importance of acquiring Milnfield, or at least so much of it as was needed for their purpose. The first meeting which he called failed to take effect, because there was not a quorum of directors present, and the matter was considered on the 4th of April, the day on which the sale had been advertised to take place, although in point of fact it did not take place till ten days later. Now, at this meeting of 4th April it does not appear from the minutes that any reference had been made to Mr Urquhart, the chairman, as a possible competitor with the company, or as a person who might be willing to join with them in the acquisition of the estate; but we know that before the meeting took place it had been proposed to Mr Urquhart by the secretary of the company that he should purchase the estate under an arrangement by which the company were to acquire the 6 acres from him; and although no agreement was made, that proposal was under consideration at the time when the meeting of 4th April was held. Now, the minute bears that ‘it was resolved to make an effort to secure the park referred to, and Mr Jameson (that is, the company's agent) was instructed by the directors to watch the sale, and endeavour to secure it for the company. ‘I am quoting from the record, and I have no doubt it is substantially, if not textually, a correct representation of the minute. Mr Urquhart was present at this meeting, and it appears to me, that being a party to the minute under which the company's agent was instructed to secure the park for the company, he could not be a competitor with the company for those 6 acres without giving them due notice of his intention. At least, he could not do so without separating his interests in the sale from those of the company. Now, Mr Jameson was the agent both for the company and for Mr Urquhart individually, and if Mr Urquhart was to take up an antagonistic position, I think he was bound to make such a statement either then or before the sale, as would have enabled the company to secure the services of an independent representative at the sale. But if Mr Urquhart intended, while purchasing the property, to carry out the wishes of the directors for the acquisition of the 6-acre field, then he was quite entitled to go on, saying it may be nothing to anyone—nothing that would be likely to raise the price of the property—and employing a gentleman who had the interests both of himself and the company in his hands. Now, although under the influence of disagreement parties have come to differ in their accounts of what actually took place in the interval between the meeting of 4th April and the sale, I think there is a high degree of probability that all the intermediate arrangements were in fact made in the view of carrying out the resolution of the company according to its spirit and intention, and certainly I see nothing in the evidence inconsistent with such an intention. I don't think it necessary to attempt an analysis of the different conversations that took place between Mr Urquhart and the secretary on the one hand, and Mr Urquhart and Mr Jameson, who held a twofold relation, on the other; but I think that before Mr Urquhart started for Greenock, which I think he did on the 11th or the morning of the 12th April, he had left it to Mr Jameson to act according to his judgment and discretion in the purchase of this property for the benefit of himself and of the company. It is quite true that before the defender went so far, it had been suggested to him by Mr Jameson that in the event of the property going too high, going above its fair value, and in respect it was important for the company to secure their part at any price, the company might not be unwilling to relieve the defender of any loss that might be sustained on the purchase within the limit of £300. I think no blame attaches to Mr Jameson for that suggestion. I don't think he had any power to make such an agreement, and certainly it was a delicate thing for a gentleman in the position of the chairman of a board of directors to stipulate in such terms. But it is quite plain

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that the £300 was named as an outside sum, and the conversation really amounted to nothing more than this, that in the opinion of the two gentlemen, the chairman and the agent of the company, they might safely make this purchase, trusting to the fairness and liberality of the directors to take into consideration any loss that might be incurred, the defender purchasing the property as an investment, and at the same time with a wish to oblige the company of which he was chairman. Mr Jameson gives a different account of the matter altogether, because he says that even with this proposal before him Mr Urquhart had declined to have anything to do with the property, and that he (Jameson) really purchased the property entirely on his own responsibility, trusting to his client ratifying it. No doubt something must have been said, or left unsaid, that made Mr Jameson think he was entitled so to represent the matter. But I prefer to take Mr Jameson's impressions at the time as deduced from his actings—from what he did after the conversation—rather than his present impressions; and we know that he bought the estate, feeling, as he told us, quite sure that his purchase would be ratified, which I think is just equivalent to saying that he had authority to make the purchase. Then to complete this matter, in the minute of the next meeting of the directors of the Morayshire Railway Company, held on 2d May, it is recorded, ‘Mr Jameson reported that he had purchased the Milnfield property for the chairman for the sum of £2610, and that the park adjoining the station was secured for the railway company.’ What follows is not very material, and then it concludes, ‘The price to be fixed at next meeting after Mr Urquhart has had time to consider the matter.’ Mr Urquhart was present at this meeting and agreed to this minute, and even if there were more doubt than I think there is as to the meaning of the agreement, he cannot be allowed to maintain, as it has been maintained for him today, that there was no agreement, because it appears under his hand that as the result of the purchase which he had made, the park adjoining the station had been secured for the railway company. Mr Mackintosh's view was, that it must either be held that Mr Jameson had made the purchase to the extent of the 6 acre field for the company, with all the conditions which he says Mr Jameson, as representing the company, had attached to it, or if that is not agreed to,—if there is a misunderstanding—then there shall be no contract. This would be a very unfavourable case for applying that rule of law,—which is sometimes used for the resolution of extreme cases,—where the parties are not agreed, that there is no contract, and the parties are to be remitted to their rights, because in this case it would be impossible by such a solution to do equity between the parties; there could be no restitutio in integrum. The sellers of the property—the representatives of the deceased Mr Milne—of course could not be asked to take back their property, and the result is that the property must either be divided or it must go to one or other of the two parties to this action. If I give it to either the one or the other, I think that would not be disaffirming the contract. But the conclusion I have come to is, that there was a oontract, but that no price was fixed. Mr Urquhart had not consulted any of his co-directors as to the price at which the 6-acre field was to be given off, and I do not think that the company can be bound by an alleged agreement as to price between their chairman and his agent, one of them professing to represent his own interest, and the other the interest of the company. I don't think that they professed to do anything of the kind, and there was no agreement about the price. It is quite a legal sale—a sale for a price to be afterwards settled. Under such a contract the law implies a sale for a reasonable price. Now, I think Mr Urquhart would have probably obtained some concession from the directors if he had not taken up the position that he was entitled to fix his own price. That is a position which no director of a public company can take up in dealing with his company. The law naturally looks with great jealousy at all contracts between a director and a company for whom he acts; but there may be cases such as the present, where it is so clearly for the interest of both parties that they should contract, that it would be too doctrinaire to apply the disabling rule, and where all that is necessary is that proper precautions are taken to ensure fairness in the transaction. In such cases a fair and reasonable price must be either settled by agreement between the director and his colleagues, or by neutral arbitrament, that being, I think, the proper course to be taken in this case.

“It falls to me, then, to determine the true value of the field which is to be conveyed to the company, and various modes of valuation have been suggested.”

[His Lordship then mentioned the grounds on which he arrived at the conclusion that the value of the field was £700].

The defender reclaimed—The pursuers had failed to prove any agreement with the defender to make a joint purchase of the estate and hand over the park to the company. In that event his position was not affected by his being a director of the company. He was an independent purchaser, and was entitled to offer the ground at his own price, which was a fair one. In a contract of sale where no price was fixed, the price was the market price—Benjamin on Sales, 3d ed., p. 83.

The pursuers replied—The evidence showed an agreement to make a joint purchase, from which defender could not now resile. But even apart from any agreement, he was precluded by his position as a director from making a profit out of the transaction to the prejudice of the company — Benson v. Heathorn, 1 Younge & Collyer's Chan. Rep. 326.

At advising—