ABERDEEN BLAIKIE [ 476 ] [ *477 ] desire, to modify it." To hold that this in any manner cured the invalidity of the original contract, would be to open a wide door for enabling all persons to make the rule in question of no force. It was further contended that whatever may be the general principle applicable to questions of this nature the Legislature has in cases of corporate bodies like this Company modified the rule. The statute, i.e. the Companies Clauses Act, it was argued, has impliedly if not expressly recognised the validity of the contract, by enacting that its effect shall be to remove the director from his office; indicating thereby that a binding obligation would have been created, which would render the longer tenure of the office of director inexpedient; and your Lordships were referred to the case of Foster v. The Oxford, Worcester, and Wolverhampton Railway Company. That was an action for breach of a contract under seal, whereby the defendants covenanted with the plaintiffs (as in the case now before your Lordships) to purchase from them a quantity of iron. The defendants pleaded that, at the time of the contract, one of the plaintiffs was a director of their Company, and to this plea there was a general demurrer. That such a contract would in this country be good at common law is certain. The rule which we have been discussing is a mere equitable rule, and therefore all the Court of Common Pleas had to consider was how far the contract was affected by the statute. The decision was that the statute left the contract untouched, and that its operation was only to remove the director from his office. The 85th and 86th sections of the English statute 8 & 9 Vict. c. 16, on which the COURT proceeded, are in the same words as the 88th and 89th sections of the Scotch statute, and the counsel at your Lordships' Bar relied on this decision as being strictly applicable to the case now under appeal. But there is a clear distinction. between them. In Scotland there is no technical division of law and equity. The whole question, equitable as well as legal, was before the Court of Session. All that the Court of Common Pleas decided was that a contract clearly good at law was not made void by an enactment that its effect should be to deprive one of the contracting parties of an office. This decision will not help the respondents unless they can go further and show that the statute has had the effect of making valid a contract which is bad on general principles, that is to say, principles enforceable here only in equity, but not recognised in our courts of common law. I can discover no ground whatever for attributing to the statute any such effect. Its provisions, however, will still be applicable to the case of directors who become interested in contracts, as representatives or otherwise, and not by virtue of contracts made by themselves. I have therefore satisfied myself that the Court of Session came to a wrong conclusion. I therefore move your Lordships that this interlocutor be reversed. THE LORD BROUGHAM: My Lords, the opinion, or rather the doubt, at the very utmost the inclination of opinion, upon the third plea, indicated by my Lord FULLERTON, I quite agree with my noble and learned friend in thinking ought not to weigh in this case; and, therefore, we have only to dispose of the general question. I also arrive at exactly the same conclusion with my noble and learned friend, that the law of Scotland differs in no respect from the law of England upon this matter; as to which it is very important to have it understood, that there is really no difference between the two systems of jurisprudence. The cases of Whelpdale v. Cookson, and Ex parte James, clearly lay down what the law of England upon this point is. And it is observable that Lord ELDON, both in Ex parte James and in Ex parte Lacey, goes even further than Lord HARDWICKE did in Whelpdale v. Cookson, and considers (though he expresses it, no doubt, with the respect due to that eminent Judge, *rather as a grave doubt than as a well-matured opinion), that Lord HARDWICKE had scarcely given full effect to the principle, when he said that it was possible that the assent of the creditors might validate the sale (1). How far the two systems of law are the same upon this very important question appears, not only from the case of The York Buildings Company v. Mackenzie, which is the ruling case upon this subject, and which was decided upon an appeal from Scotland, and according to the principles of Scotch law, in this House; but it also appears from the fact that in that case a distinct reference was made to the English law authorities, and to the very case, before Lord Hardwicke, of Whelpdale v. Cookson. The case of Ex parte James, indeed, could not have been there cited, because it was not decided till 1803; but the case of Whelpdale v. Cookson is referred to in the argument at the Scotch Bar, and in the printed Appeal Cases; and so likewise is the passage from the Pandects, which my noble and learned friend has read. It is also to be observed, that not only were the English cases cited in Scotland, in that instance, but, conversely, the Scotch case of The York Buildings Company v. Mackenzie, has been referred to (1) What Lord HARDWICKE said was the "majority of the creditors;" and this was apparently what Lord ELDON dissented from: 6 R. R. 12 ABERDEEN v. BLAIKIE BROTHERS. [*478] RAILWAY COMPANY v. BLAIKIE BROTHERS. [ *479 ] ABERDEEN since, in the English cases, repeatedly at the Bar, and once or twice, I think, by Lord ELDON himself, in disposing of English cases. My Lords, the judgment in The York Buildings Company v. Mackenzie was after eleven years of possession, and it is remarkable, too, that there was no fraud whatever found imputable to Mr. Mackenzie, the purchaser. I think that in the account of the subsequent proceedings, though not in the Court below, it *appears that so entirely bonâ fide was Mr. Mackenzie's possession found to have been, that the rule of the civil law, happily the rule in Scotland, though most unfortunately never introduced into our jurisprudence, namely, that "Fruges bond fide perceptæ et consumptæ " are held to be the property of the party who is ultimately found not to have the title, was applied in the case of Mackenzie. So entirely free from all imputation of fraud was he found to be, that he was allowed to remain in undisputed and undisturbed possession of the rents and profits of the estate during those eleven years, that is, up to the period of the judgment on the appeal, because the rule applies not only to the extent that the bona fides avails the party in possession up to the time of a decree against him in the Court below, but his right to the possession of the "fruges bona fide perceptæ et consumptæ" is held to enure up to the final decision in the Court of Appeal. And accordingly Mr. Mackenzie's bona fides was found to have been so unimpeachable in the case, and his conduct in the whole transaction was found to have been so entirely without fraud, that not only did the COURT below find the other party liable to costs because they had charged him with fraud, but afterwards he was adjudged to have the whole of the expenses allowed him to which he had been put in ornamental improvements upon the estate (1). That is certainly one very strong instance of the application of the rule; perhaps it is stronger than any other within our recollection, because in that case it clearly shows that so entirely was the opinion of the Court in favour of the rule, that even while they held that the transaction could not be sustained, but that the purchase was invalid, they nevertheless decreed the purchaser *possession of the rents and profits, and also to be allowed for the expenses of ornamental improvement. [*480 ] In that case, my Lords, I must also observe that it was not merely the decision of this House which set the Court below right upon a point of Scotch law, as it has once and again done; but the Scotch law appears to have been by no means distinctly and uniformly maintained by the Court below to be, as it was ultimately found not to be, by your Lordships' decision. It was an action of (1) It appears that there were three more appeals by the Company against Mr. Mackenzie, in all of which they were unsuccessful. reduction for setting aside the sale; and, in the first instance, the COURT below decided against the pursuers, and repelled the reasons for reduction. On a reclaiming petition, however, the COURT, by a narrow majority, sustained the reasons of reduction, and set aside the sale. Then again came both parties to reclaim against this second decision; and by a narrow majority again, the COURT assoilzied the defender, and found, as I have already stated, that, in respect of the charge of fraud, the defender, Mr. Mackenzie, was entitled to his expenses. Therefore, it cannot be said to have been at all the understanding of the Court of Session that the law was clearly in favour of such purchases at the time, when you find these two conflicting decisions in the Court below, and each by such a very narrow majority. At that time, unfortunately, the course of reporting in Scotland was, that the Judges' opinions were not given; and it is only accidentally and rarely that you find any reference made to what passed upon the Bench; but, in this case, it is stated in the report, that several of the Judges expressed strong opinion against the validity of the purchase, and the reasons are given. And the very ground which had been urged for sustaining the purchase, and the validity of the transaction, namely that in judicial sales it had been a very usual practice for common agents to become the purchasers, and that though in eighteen out of one hundred and thirty-five instances they became the purchasers, yet no instance had been found of an attempt made, or certainly of an attempt succeeding, to set aside such a purchase (but the report would rather go the length of stating that no instance had been found of an attempt made to set aside any such purchase)-the learned Judges, I say, who held such purchases illegal, were of opinion that the occurrence of them in practice was a ground which afforded all the stronger reason for the Court laying down what the law of honesty, and what the law of common sense was, in disapproving of such transactions (1). (1) The case of The York Buildings Company v. Mackenzie, so far as its legal principle is concerned, is better known and more attended to in England than in Scotland. The argument at the Bar of the House of Lords (during two sessions of Parliament, 1794 and 1795) lasted sixteen days. Judgment was given on the seventeenth. Lord Loughborough indeed Chancellor then; but the tradition (there is no report) is that Lord THURLOW (who had decided Fox v. Mackreth very shortly before) took the chief part in the hearing and deliberation. He is recorded in the journals of the House as present every day. The judgment pronounced is not a mere was ABERDEEN v. BLAIKIE BROTHERS. [ *481 ] ABERDEEN v. BLAIKIE BROTHERS. [ 482 ] [ *483 ] [ 484 ] My Lords, I also agree with my noble and learned friend that the decision in the case of Foster v. The Wolverhampton Company in the Common Pleas, upon which great reliance was placed, and Which appears, to a certain degree at least, to have been the ruling decision in the Court below, does not apply to this case; because there the transaction was, past all doubt, valid at common law though not in equity-but had the Court of Common Pleas had an equitable jurisdiction as well as a common law jurisdiction, the anomaly never could have happened, of a transaction being found legal and valid in that Court which could not stand an examination on the other side of Westminster Hall. It has not often occurred to me to see a stronger instance of the great inconvenience, to say the very least of it, of that division between the two sides of Westminster Hall, I will not say that impassable barrier between them, for, on the contrary, the barrier is constantly, and must be for the sake of justice constantly, passed-but I have seldom seen a more striking instance of the inconvenience of the existence of that division, and of not allowing the Court to exercise both jurisdictions, at all events whenever a case arises in which entire justice cannot be done without the exercise of both jurisdictions. My Lords, upon the whole I entirely agree with my noble and learned friend that there has been here a miscarriage in the Court below, and that the interlocutor in this case should be reversed. LORD CHANCELLOR : I shall not propose to your Lordships to allow costs, because I think the Company misled the other party by putting the plea upon a wrong issue. LORD BROUGHAM: There cannot be costs here. It is ordered and adjudged that the said interlocutor of the 15th November, 1851, complained of in the said appeal, be, and the same is hereby, reversed. And it is declared that the third plea in the defences lodged by the defenders in the action in the Court below (appellants here) was a sufficient answer to the case of the pursuers (respondents here), and that the said defenders (appellants) ought to be assoilzied from the said action, but without expenses : and it is further ordered, that, with this declaration, the cause be remitted back to the Court of Session in Scotland, to do therein as shall be just and consistent with this judgment and declaration, |