Can a corporation be held liable ex contractu for the value of property received by a corporation as a result of a transaction that is ultra vires?
Ontario, Canada
The following excerpt is from Dilworth et al. v. Bala (Town) et al., 1953 CanLII 22 (ON CA):
When property has been received by a corporation as a result of a transaction that is ultra vires, the corporation cannot be held liable ex contractu for the value of the property: Sinclair v. Brougham et al., [1914] A.C. 398. It can only be required to account for and deliver up that property or its proceeds. If and to the extent that money has been received and applied in satisfaction of debts actually owing, then on a principle analogous to subrogation the lender on the ultra vires transaction may recover it. In the present case, since no contractor had any right against the Town ex contractu, there is nothing to which the bank can be subrogated. Money advanced by it was spent illegally by the representatives of the taxpayers and those taxpayers cannot be made answerable through their corporation.
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