1964 (1) TMI 25 - DSC - Companies Law

General provisions with respect to memorandum and articles - Effect of memorandum and articles

Issues Involved:
1. Liability for payment of fees.
2. Authority of Kapoor to engage the plaintiffs.
3. Ostensible authority and estoppel.
4. Application of the rule in Royal British Bank v. Turquand.
5. Relevance of the articles of association.

Detailed Analysis:

1. Liability for Payment of Fees:
The plaintiffs, architects and surveyors, sought to recover fees for work done in 1959 for the Buckhurst Park Estate, owned by the defendant company. The central question was whether the liability for these fees rested with the defendant company or the second defendant, Kapoor. The trial court found in favor of the plaintiffs, and the defendant company appealed, arguing that Kapoor was personally liable.

2. Authority of Kapoor to Engage the Plaintiffs:
Kapoor, a director of the defendant company, instructed the plaintiffs to undertake work related to the Buckhurst Park Estate. The plaintiffs executed the work, and the fees were undisputed. The defendant company argued that Kapoor lacked the authority to engage the plaintiffs on its behalf. The trial judge found that Kapoor had been acting as managing director with the board's knowledge, thus implying he had the authority to engage the plaintiffs.

3. Ostensible Authority and Estoppel:
The plaintiffs contended that Kapoor had either actual or ostensible authority to engage them. The trial judge concluded that Kapoor acted within the scope of his ostensible authority, which the defendant company could not deny. The judge relied on principles from Biggerstaff v. Rowatt's Wharf Ltd., which established that a company is bound by the acts of persons who act with the knowledge of the directors, provided such acts fall within their apparent authority.

4. Application of the Rule in Royal British Bank v. Turquand:
The rule in Turquand's case was invoked, which allows third parties to assume that internal company procedures have been followed, provided the act appears to be within the agent's authority. The judge found that Kapoor, acting as managing director, had ostensible authority to engage the plaintiffs, and the defendant company was estopped from denying this.

5. Relevance of the Articles of Association:
The articles of association of the defendant company were examined to determine if they conferred the necessary authority. Although Kapoor was never formally appointed as managing director, the board's conduct implied his authority. The articles allowed for delegation of powers to a managing director, which supported the finding of ostensible authority.

Separate Judgments:

Willmer LJ:
Willmer LJ emphasized the evidence showing Kapoor acted as managing director with the board's knowledge. He noted that the plaintiffs' belief that Kapoor had authority was reasonable given the circumstances. The judge's finding that Kapoor had ostensible authority was upheld, and the appeal was dismissed.

Pearson LJ:
Pearson LJ agreed with the trial judge's findings, highlighting that Kapoor's actions were within the ordinary scope of the company's business. He reiterated that the plaintiffs were entitled to rely on Kapoor's ostensible authority, as the company had held him out as having such authority.

Diplock LJ:
Diplock LJ provided a detailed analysis of the legal principles governing actual and apparent authority. He confirmed that the plaintiffs relied on Kapoor's apparent authority, which was supported by the board's conduct. The judge's decision was affirmed, and the appeal was dismissed.

Conclusion:
The judgment affirmed that Kapoor had ostensible authority to engage the plaintiffs, binding the defendant company to pay the fees. The principles of ostensible authority and estoppel, along with the rule in Turquand's case, were crucial in reaching this conclusion. The appeal was dismissed, upholding the trial court's decision.

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