1960 (7) TMI 20 - Other - Companies Law

Summary

Issues:
Claim for damages for conspiracy and breach of contract against defendants; Preliminary issue of ultra vires acquisition of building lease by plaintiff company.

Analysis:
The plaintiff company sought damages for conspiracy and breach of contract against the defendants, an architect and a firm of estate agents, regarding the acquisition of a building lease from the Merton and Morden Urban District Council. The company alleged that the defendants conspired to assist a competitor in obtaining the lease, causing the company to lose potential profits from developing the site. The defendants denied the conspiracy and breach of contract, arguing that the acquisition of the lease would have been ultra vires for the plaintiff company. The court was tasked with deciding this preliminary issue.

The defendants invoked the "main objects" rule to assert that the company's memorandum of association limited its activities to the main object of acting as exporters and importers of goods, rendering property development beyond its scope. The rule aims to protect shareholders by ensuring clarity on the company's purpose. The court examined the wording of the company's memorandum of association to determine if the business of property development fell within the company's authorized activities.

The court scrutinized the clauses of the memorandum of association to ascertain the company's established objects. While the defendants argued that the main objects rule restricted the company from engaging in property development, the plaintiff contended that specific language in the memorandum allowed for broader activities. The court analyzed past legal precedents, including Stephens v. Mysore Reefs (Kangundy) Mining Co. Ltd., to interpret the effect of the language in the company's memorandum.

The court considered the wording of the memorandum and the application of the main objects rule in light of legal authorities. The judge examined the specific language in the company's memorandum and compared it to precedents to determine if the project in question was ultra vires the company. Ultimately, the court held that the project was not beyond the company's authorized activities, rejecting the defendants' argument of ultra vires and deciding the issue in favor of the plaintiff company.