Director did not disclose his interest in a loan transaction to other directors. Company entered into loan transaction, and director made a personal profit. Company found out and sued. D argued that he was not liable for account of profits, as the liability of any director for an account of profits for self-dealing transactions was exempted by one of Articles of company. Held:
Equitable Compensation
· Where director dishonestly fails to disclose his interest in a transaction, equitable compensation is available as a remedy.
· Liability of directors for loss caused by non-disclosure of an interest in proposed transaction is strict
Ø As soon as director conceals his interest, is breach of duty
· However where company would still have entered transaction even if director had disclosed interest, can be no claim for equitable compensation.
Ø i.e. as company has suffered no loss
Exemption
· The self-dealing rule itself cannot be excluded.
· Thus D was only exempted from liability if he actually disclosed his interest to the directors.
Facts
· Is probable that company would have entered transaction nonetheless had they known of D’s interest.
· Therefore equitable compensation is not appropriate remedy.
· Better remedy is account of profitsreceived by D.
