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Issues Involved
1. Whether the contract was ultra vires the plaintiff company. 2. Whether the defendants could raise the ultra vires defense. 3. Whether the chairman acted on behalf of the plaintiff company. Detailed Analysis Issue 1: Whether the contract was ultra vires the plaintiff company The plaintiff company, a private company limited by shares, engaged in a contract to introduce a financier to the defendants for a commission of lb20,000. The defendants argued that the contract was ultra vires the plaintiff company, as it was not authorized by the objects clause in the company's memorandum of association. The court examined clause 3 of the memorandum, which included sub-clauses (a), (b), (c), (q), and (u). Sub-clause (c) allowed the company to "carry on any other trade or business whatsoever which can, in the opinion of the board of directors, be advantageously carried on by the company in connection with or as ancillary to any of the above businesses or the general business of the company." The court concluded that the contract was intra vires under sub-clauses (c), (q), and (u), as it was ancillary to the company's general business and advantageous in the opinion of the chairman, who had delegated authority. Issue 2: Whether the defendants could raise the ultra vires defense The defendants raised the ultra vires defense at the last moment, arguing that the contract was void as it was beyond the company's powers. The court found that since the contract was intra vires, the question of whether the defense could be raised did not arise. The court noted that the authorities cited by the defendants, such as Ashbury Railway Carriage & Iron Co. Ltd. v. Riche, were not applicable as the contract was within the company's powers. The court emphasized that the opinion of the directors, if bona fide, was sufficient to decide the matter. Issue 3: Whether the chairman acted on behalf of the plaintiff company The defendants argued that the chairman acted on his own behalf and not on behalf of the plaintiff company. The court found this argument untenable, as the chairman was authorized by a resolution of the board of directors to conduct the administration of the company's business. The chairman's actions and letters were consistent with acting on behalf of the company. The court concluded that the contract was made with the plaintiff company through the chairman, who had the necessary authority. Conclusion The court allowed the appeal, deciding in favor of the plaintiff company. The contract was intra vires and within the company's powers under its memorandum of association. The ultra vires defense raised by the defendants was not applicable, and the chairman acted on behalf of the plaintiff company in entering the contract. The court did not find it necessary to address the question of whether the ultra vires defense could be raised if the contract had been ultra vires, as the contract was found to be intra vires.
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