Something I was thinking about while I was doing the assignment: how does the rule from Stilk v Myrick play into directors transferring their powers to officers?
Take, for example, the scenario from assignment #2. A sole director transferring his powers to a sole officer. Officers derive their powers from directors–essentially, any powers they possess in their capacity as officers come from the powers that are inherent in the board. Therefore, if a sole director transfers any powers to himself as sole officer, then any powers and responsibilities he has as officer he already had in his capacity as director. He is not taking on anything new.
For those of you who can stretch your minds back to the beginning of 1L, recall that Stilk v Myrick stands for the proposition that already existing legal duties do not constitute valid consideration. Without consideration, there is no contract.
In the case of our assignment, was Williams’ contract invalid for want of consideration à la the rule from Stilk v Myrick? “Williams the officer’s” consideration was to perform duties that he was already obligated to perform in his role as director. No consideration, no contract.
What do you think? Am I missing something?
Hi Piers,
I think I see two errors in your reasoning, or at least in how I am understanding what you’re writing.
The first is that you’re saying Gates used his director power to transfer that director power to himself as an officer and transform that power into officer power.
The problem I see with this is that the Articles are the vehicle for transferring directorial powers in BC, and they must expressly say they are transferring their powers, in accordance with s. 137(1.1) in order for 137(2) to be in effect, and for the director to be relieved of his or her powers. Absent any express indication that he wanted the Articles to allow for such, it seemed to me more like Gates was simply appointing himself (probably for that fat fat pay cheque), and not expressly transferring his powers (more in line with s. 141).
Second, in reference to the Stilk v Myrick rule: without going deeper into 1L contract law (because how dare you make me remember things) it is my understanding that a CEO and president are sufficiently dissimilar from a director to not engage the consideration aspect you reference — and for that matter… are BC employment contracts even beholden to the same standards as a 1805 English contract for services?
So I think I have the solution to your problem. You haven’t accounted for the fact that the director loses his legal responsibilities upon transfer to the officer. It says so in the statute: BCBCA 137(1)(b). By “freeing up” these responsibilities as director, the person is free to take them on as officer as consideration for the salary. Granted, the two happen simultaneously, so there’s some weirdness in the timing, but I imagine it would look like this.
Time 1: Person is under Contract as director with full director’s responsibilities
Time 2: Person relinquishes some of the director’s powers and responsibilities
Time 3: Person takes on the same powers and responsibilities as officer (as consideration)
Time 4: Profit
Satisfied?