West Cork Railway
Hutton v West Cork Railway Co (1883) 23 Ch D 654 is a UK company law case, which concerns the limits of a director's discretion to spend company funds for the benefit of non-shareholders. It was decided in relation to employees in the context of a company's insolvency proceedings.
The case's practical significance was limited by cases and statute as in "Re Horsley &amp; Weight Ltd" [1982] Ch 442 where the Court of Appeal held that a company's substantive object may include making gifts, and under Companies Act 2006, section 172 which entitles and obliges directors to regard interests other than shareholders as a proper exercise of their power.
Facts.
According to the law report,
Judgment.
Cotton LJ and Bowen LJ held that the money payment was invalid. Baggallay LJ dissented. In the course of his "dicta", Bowen LJ held that there is..
So according to Bowen LJ, directors can only spend,
The upshot for a company in insolvency was that directors were not free to make payments to employees, because payments could only be made which were incidental to the business, and an insolvent business had no further business. In English law, the position has been altered by the Insolvency Act 1986, s.187 and the Companies Act 2006, s.247, which allow directors to consider employees directly when a company has gone insolvent.
Significance.
The value of the judgment today lies in the general doctrine that during the life of the company, it may conduct itself in a way which benefits stakeholders other than shareholders, but only insofar as that will in the end, albeit indirectly, be in the shareholders' interest.
See now, section 172 Companies Act 2006.
Notes.
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