1934 (11) TMI 11 - HC - Companies Law

Articles of association - Regulations required in case of unlimited company, company limited by guarantee or private company limited by shares

Summary

Issues:
1. Interpretation of company's articles of association regarding managing agents' authority and responsibilities.
2. Liability of a firm and a bank for handling company's funds without proper execution of scheduled agreement.
3. Application of legal principles regarding actions for money had and received.

Interpretation of Company's Articles of Association:
The case involved a limited company with a firm acting as managing agents as per the agreement scheduled in the company's articles of association. The articles specified that the firm was appointed as agents with defined terms and conditions. The directors were authorized to execute the agreement, which was a prerequisite for the firm to act as managing agents. The company was registered, but the scheduled agreement was never executed by the directors, leading to a dispute regarding the firm's authority.

Liability of Firm and Bank:
The firm, as managing agents, operated the company's bank account between registration and their resignation, using the funds for remuneration and preliminary expenses. The company sought to recover all funds paid to the firm and drawn from the bank. The court held that the bank, being a stranger to the company, could assume that the scheduled agreement was executed, thus not liable. The firm, however, was found to have acted properly, as if the agreement had been sealed, and the expenses incurred were legitimate. The court emphasized that the firm was not suing the company, and the action was for money had and received, which required a contractual basis for recovery.

Application of Legal Principles:
The judgment analyzed legal precedents regarding company contracts pre and post-incorporation, emphasizing that no action lies for a contract made before incorporation. The court distinguished between actions against the company and actions for money had and received, highlighting the need for a contractual foundation for the latter. The judgment discussed the importance of a mistake in claiming money back and concluded that in this case, where there was no mistake regarding the firm's role, the company could not recover the funds paid to the firm. The appeal was dismissed against both respondents, with costs awarded to the bank and no costs against the firm due to their absence during the proceedings.