1529674
Agency
- Actual
- Hely-Hutchinson v Brayhead Ltd - chairman
of co. acted as its de facto MD. Held as de
facto MD, he did have implied actual
authority. implied from the circumstance
that the board by its conduct over months
had acquiesced in his acting as MD.
- Clear that CEO & CFO
have actual authority.
- Hierarchy of authority where board has greatest
actual & apparent authority, with CEO & CFO
within their scopes. Indiv directors may have least
express actual authority, but they have implied
actual authority consistent with scope of office.
- Re Capitol Films Ltd, Rubin v Cobalt Pictures Ltd -
director only has actual authority to act in a manner
in the interests of his coy. otherwise, his actions will
be w/o authority, and agreement will not bind the
company unless 3rd P can rely on apparent authority.
- Panorama Devs v Fideli Furnishing Fabrics -
coy's secretary job scope inc administrative
contracts therefore coy was liable.
- Hely-Hutchinson v Brayhead Ltd - chairman
of co. acted as its de facto MD. Held as de
facto MD, he did have implied actual
authority. implied from the circumstance
that the board by its conduct over months
had acquiesced in his acting as MD.
- Apparent
- Definition: authority of an agent as it
appears to others and can enlarge
actual authority or create authority
where no actual authority exists.
- BUT cannot be relied on if 3rd P
knows that agent has no actual
authority or is put on inquiry as
to absence of authority
- By nature of proposed transaction which indicates
that director is acting for improper purpose.
Criterion Properties plc v Stratford UK Properties
LLC - Lord Scott: 'if person... has reason to believe
that transaction is contrary to commercial interests
of agent's principal, ..difficult for person to assert
that he believed agent had actual authority.'
- A L Underwood Ltd v Bank of Liverpool -
Bank put on inquiry when director paid
cheques drawn in favour of co. into his
personal bank account. 3rd P should
make inquiries as ought reasonable to
ensure agent's authority.
- Hopkins v TL Dallas Group Ltd - 3rd P was
unable to hold a company to undertakings
by dep MD when transactions were
abnormal and suspicious.
- Wrexham AFC Ltd v Crucialmove Ltd -
3rd P knew that director had a conflict
of interest b/w his personal interests
and his duty to coy when he entered
into JV agreement with 3rd P for
redevelopment of footbal ground.
- British Bank of Middle East v Sun Life
Assurance of Canada - If A says B has
authority; A has to be sufficiently senior.
- Newcastle Intl Airport v
Eversheds LLP - only if 3rd P
was dishonest/belief was
irrational, reckless, deliberately
not wanting to know.
- Houghton & co v Northard, Lowe & Wills -
article suggesting more authority than
normal for directors doesn't increase
constructive notice on part of 3rd P.
- By nature of proposed transaction which indicates
that director is acting for improper purpose.
Criterion Properties plc v Stratford UK Properties
LLC - Lord Scott: 'if person... has reason to believe
that transaction is contrary to commercial interests
of agent's principal, ..difficult for person to assert
that he believed agent had actual authority.'
- Freeman and Lockyer v
Buckhurst Park Properties
(Mangal) Ltd - co. had held
director out as being the MD
which conferred on him an
ostensible authority which bound
the company. Board had
acquiesced in his conduct.
- BUT cannot be relied on if 3rd P
knows that agent has no actual
authority or is put on inquiry as
to absence of authority
- Acts of principal must
constitute a representation
that agent has particular
authority and must be
reasonably so understood by
the other party who deals
with agent on faith of rep.
- through appointment to
position, course of conduct
where agent has a course of
dealing and principal
acquiesces and honours
transactions arising.
- through appointment to
position, course of conduct
where agent has a course of
dealing and principal
acquiesces and honours
transactions arising.
- Definition: authority of an agent as it
appears to others and can enlarge
actual authority or create authority
where no actual authority exists.
- Protection for 3rd P
- Statutory protection
- CA 2006 s40
- A person dealing in good faith
- Constitutional
limitations may be
disregarded
- Possible redress for shareholders
- Directors in breach are responsible for
them under s171(a) to act in
accordance with constitution and
liable to indemnify the coy for any loss.
- Directors in breach are responsible for
them under s171(a) to act in
accordance with constitution and
liable to indemnify the coy for any loss.
- Assuming conditions for above are met,
limitations by coy's constitution on
powers of directors may be disregarded
- found in coy's articles but s40(3) includes
limitations from resolution of coy, or from any
agreement b/w members or any class of SH.
- found in coy's articles but s40(3) includes
limitations from resolution of coy, or from any
agreement b/w members or any class of SH.
- Ford v Polymer Vision - court accepted that
specific provisions concerning holding of board
meetings were limitations for s40(1)
- Meaning of 'directors'
in s40(1) covers acts of
the board and of any
director authorised.
- Possible redress for shareholders
- 'person'
- Smith v Henniker-Major & Co. - s40 wld not
apply to insider (director). cannot rely on his
fault to rectify his own fault.
- EIC Services Ltd v Phipps -
s40 does not apply to
shareholders too
- Smith v Henniker-Major & Co. - s40 wld not
apply to insider (director). cannot rely on his
fault to rectify his own fault.
- 'good faith'
- s40(1) - difficult for a person dealing with a
coy to be in bad faith, imposes a presumption
of good faith and absolving 3rd P from
obligation to inquire to certain extent.
- Wrexham AFC Ltd v Crucialmove
Ltd - 3rd P knew director had a
conflict of interest, was put on
duty to inquire. But it negates any
knowledge (actual/constructive) of
constitutional limitations on the
powers of the directors to bind the
coy and relieve 3rd P from
obligation to inquire then.
- s40(1) - difficult for a person dealing with a
coy to be in bad faith, imposes a presumption
of good faith and absolving 3rd P from
obligation to inquire to certain extent.
- Constitutional
limitations may be
disregarded
- 'in favour of a person dealing with a
company in good faith, the power of
the directors to bind the company, or
authorise others to do so, is deemed to
be free of any limitation under the
coy's constitution.'
- s40 has effect subject to s41 where
parties to transaction incl a director
or a person connected with him.
- Application of s41 may give rise to situation
where transaction is valid wrt one party,
because they are unaffected by s41, and
voidable with respect to another party to
same transaction if they are a director or
connected person. Court can affirm, sever,
or set aside transaction (s41(6))
- Re Torvale Group Ltd - contract b/w coy and 5
trustees. 4 were indivs in good faith; 1 director.
procedural error made but held whole transaction
was bona fide and s41 need not apply.
- Application of s41 may give rise to situation
where transaction is valid wrt one party,
because they are unaffected by s41, and
voidable with respect to another party to
same transaction if they are a director or
connected person. Court can affirm, sever,
or set aside transaction (s41(6))
- A person dealing in good faith
- CA 2006 s40
- Common Law Protection
- Indoor Management Rule
- Royal British Bank v Turquand - persons dealing with a coy are
not obliged to inquire into the internal proceedings of a coy but
can assume that all acts of internal management have been
properly carried out, unless outsider knows/put on inquiry.
- subsumed under s40? Relevant: reliance on apparent
authority of an indiv director, but it does not
enable a party to hold the coy to an
unauthorised transaction. 3rd P can assume that
a transaction w/in authority of the directors has
been properly carried out, but requires 3rd P to
establish the fact of authority, in the 1st place.
- Royal British Bank v Turquand - persons dealing with a coy are
not obliged to inquire into the internal proceedings of a coy but
can assume that all acts of internal management have been
properly carried out, unless outsider knows/put on inquiry.
- Indoor Management Rule
- Statutory protection
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