Hutton v West Cork Railway Co (1883) 23 Ch D 654
Citation:Hutton v West Cork Railway Co (1883) 23 Ch D 654
Rule of thumb:What happens if a director is spending money from the company’s bank account on things which do not benefit the company in any way? This is a breach of director’s duty, a material breach of duty, and the director can legally be removed as a director for doing so.
Judgment:
‘money which is not theirs but the company’s, if they are spending it for the purposes which are reasonably incidental to the carrying on of the business of the company. That is the general doctrine. Bona fides cannot be the sole test, otherwise you might have a lunatic conducting the affairs of the company, and paying away its money with both hands in a manner perfectly bona fide yet perfectly irrational… It is for the directors to judge, provided it is a matter which is reasonably incidental to the carrying on of the business of the company… The law does not say that there are to be no cakes and ale, but there are to be no cakes and ale except such as are required for the benefit of the company ...a kind of charitable dealing which is for the interest of those who practise it, and to that extent and in that garb (I admit not a very philanthropic garb) charity may sit at the board, but for no other purpose’. Bowen LJ
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