North-West Transportation Co. Ltd. v. Beatty

LANDMARK CASES IN EQUITY, C. Mitchell and P. Mitchell, eds., Oxford: Hart, 2012

29 Pages Posted: 4 Oct 2011 Last revised: 4 Dec 2013

See all articles by Lionel Smith

Lionel Smith

McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law; University of Oxford - Faculty of Law

Date Written: October 4, 2011

Abstract

North-West Transportation Co. Ltd. v. Beatty (1887), 12 App. Cas. 589 (P.C.) is well known throughout the Commonwealth as a foundational decision regarding the ability of corporate directors to contract with their own corporation, and in particular their ability to vote as shareholders for the approval of such conflict-affected contracts. The background to the case reveals a young nation in which enormous numbers of immigrants were seeking to start new lives on the western prairies. Before the trans-Canada railroad was completed in 1885, and long before a full road network was in place, shipping lines on the Great Lakes provided the only feasible way to reach the continental interior (the “North-West”).

The dispute in Beatty was about a contract by which one of the directors of a company, who was also its majority shareholder, sold a steamship to the company over the objections of minority shareholders. In giving its advice, the Privy Council arguably misunderstood the nature of the corporate entity involved in the case, and produced a solution that has puzzled and divided commentators and legislators ever since.

This paper traces the story of the Beattys and their influence in late-19th century Canada, and examines how the dispute arose and how it was resolved by four levels of courts. It goes on to assess the decision against the principles of corporate and fiduciary law, and to show how Canadian legislators have reacted against the Privy Council's decision with the result that in modern Canadian law, shareholder approval is often necessary for certain corporate decisions, but it is never sufficient to insulate such decisions from judicial review.

Suggested Citation

Smith, Lionel, North-West Transportation Co. Ltd. v. Beatty (October 4, 2011). LANDMARK CASES IN EQUITY, C. Mitchell and P. Mitchell, eds., Oxford: Hart, 2012, Available at SSRN: https://ssrn.com/abstract=1938158

Lionel Smith (Contact Author)

McGill University, Faculty of Law, Paul-André Crépeau Centre for Private and Comparative Law ( email )

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Montreal, Quebec H3A 1W9
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HOME PAGE: http://www.mcgill.ca/law/about/profs/smith-lionel

University of Oxford - Faculty of Law ( email )

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