Restatement of the fundamental rule, Business Law and Ethics

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Restatement of the fundamental rule:

In Bray v Ford Lord Herschell stated that the aforesaid rule is not "founded upon principles of morality" but is based on the consideration that human nature being what it is, there is danger, in such circumstances, of the person holding a fiduciary position being swayed by interest rather than by duty and thus prejudicing those whom he was bound to protect".

A director is not, unless otherwise expressly provided, entitled to make a profit: Boston Deep Sea Fishing Co v Ansell (71). This rule is essentially a restatement of the fundamental rule of the law of agency that an agent must not make a secret profit. The cases in company law are just examples of how a particular agent (the company director) committed a breach of his duties to a particular principal (the company).

In Percival v Wright (72) it was held that the directors owe their fiduciary duties to the company alone and not to the members. The decision raises a problem that has become known as "insider dealing".


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