PROMOTERS OF COMPANIES.

Taranaki Herald, Volume XXXV, Issue 7172, 16 September 1886, Page 4

PROMOTERS OF COMPANIES.

It is now a broad principle of law tbtt the promoters of a company stan-1 in a fiduciary relation to the company, and in dealing with that company they are subject to all the incapacities, disqualifications and conaeqaencea of trustees or agents eellins? to or dealing with the persons whom they represent. This equitable principle was practically applied in the recent case of the Sydney Iron Ore Go. v. Biro in a more far-reaching way than usual. That wan an action by the company against the defendant as tho promoter asking for an account of a sum of £10,800, on the ground that this consisted of payments eetretly rnarle to the defendants out of purchase money paid by the company to tho vendors of the mining Property which was to be worked, he defence was that there was no fiduciary relationship between the company and tho defendant, who was acting aa a^ent for the vendors. Mr. Justice Pearson had adopted that view, but his ruling was now reserved in the Court of Appeal, where it was held that tho defendant had, in fuct, acted aa a promoter of tho company, although nominally appear ing as agent for the vendors, and thus that he was bound to account for all moneys aecreth obtained by him from tho company, just aB if the relation of trusteeship fcxißtec between him and them. The proir otion money had, in effect, come out of >he pockets of the shareholders, because the defendant had raised tho price first agreed upon by tho veudors, in order to increase his commission. The Court -of Appeal therefore declared that the .defendant must ri Ml<-r sin account of this £10,800 received b) him, and th-t he was only entitled lo deduct hucli moneys as were properly expended by him in forming and bringing out tho company.