Cook v Deeks (1916)

Company Law · Remuneration of Directors (Managerial Remuneration)

Facts.

Three directors who controlled a company negotiated a construction contract for the company but took it in their own names, then used their majority to ratify the diversion.

Issue.

Could the controlling majority ratify their own diversion of a corporate opportunity?

Held.

No. The contract belonged in equity to the company; the directors held it in trust and could not use their votes to keep it — a fraud on the minority.

Why it matters.

A leading exception to Foss v Harbottle; controllers cannot ratify their own wrongdoing, and a derivative action lies.

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