Industrial Development Consultants v. Cooley

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Industrial Development Consultants v. Cooley [1972] 1 WLR 443 is a UK company law case on the corporate opportunities doctrine, and the duty of loyalty from the law of trusts.

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[edit] Facts

Mr Cooley was an architect and the managing director of IDC. The Eastern Gas Board has a lucrative contract going, to design a depot in Letchworth, but they told Mr Cooley that they did not want to give it to a firm. Mr Cooley told IDC that he felt a bit poorly and could he resign from his job on early notice. They let him go. He went off and got handsomely compensated. IDC found out. They sued him for breach of his duty of loyalty.

[edit] Jugdment

Roskill J held that even though there was no chance of IDC getting the contract, if they had been told they would not have released him. So he was held accountable for the benefits he received. He rejected the argument that because he received information privately, Mr Cooley was under no fiduciary duty. He had ‘one capacity and one capacity only in which he was carrying on business at that time. That capacity was as managing director of the plaintiffs.’ All information which came to him should have been passed on.

Roskill J, quoted, Parker v. MacKenna (1874) 10 Ch.App. 96, James L.J. said, at p. 124:

“I do not think it is necessary, but it appears to me very important, that we should concur in laying down again and again the general principle that in this court no agent in the course of his agency, in the matter of his agency, can be allowed to make any profit without the knowledge and consent of his principal; that that rule is an inflexible rule, and must be applied inexorably by this court, which is not entitled, in my judgment, to receive evidence, or suggestion, or argument as to whether the principal did or did not suffer any injury in fact by reason of the dealing of the agent; for the safety of mankind requires that no agent shall be able to put his principal to the danger of such an inquiry as that.”

In the nuclear age that last sentence may perhaps seem something of an exaggeration, but, nonetheless, it is eloquent of the strictness with which throughout the last century and indeed in the present century, courts of the highest authority have always applied this rule.

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[edit] Notes