Freeman and Lockyer (a firm) v Buckhurst Park Propertie PDF

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This is the landmark case for the topic of directors to whether it is an actual authority or apparent authority. from this case we will learn what are the differences between these two types of authorities...

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Date and Time: Monday, 6 December 2021 1:45:00 PM +08 Job Number: 159234507

Document (1) 1. Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 Client/Matter: -NoneSearch Terms: Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd Search Type: Natural Language Narrowed by: Content Type UK Cases

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Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd

Overview | [1964] 2 QB 480 ,

| [1964] 1 All ER 630,

|

[1964] 2 WLR 618 ,

| 8 LDAB 228 , 108 Sol Jo 96,

| 189 Estates Gazette 963

Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630

All England Law Reports > 1964 > Volume 1

COURT OF APPEALEnglandandWales WILLMER, PEARSON AND DIPLOCK LJJ 9, 10, 11 DECEMBER 1963, 24 JANUARY 1964 24 January 1964. The following judgments were delivered. Company — Director — Authority — Ostensible authority — Director acting as managing director — Board's knowledge of conduct — Finding purchaser for company's estate — Employing architects and surveyors in relation to company's property without actual authority of board — Contract within ambit of managing director's authority — Liability of company. K who carried on business as a property developer, entered into a contract to purchase an estate. He had not enough money to pay for it and obtained financial assistance from H. They formed a limited company with a share capital of £70,000, subscribed equally by K and H, to buy the estate with a view to selling it for development. K and H, with a nominee of each, comprised the board. The quorum of directors was, by the articles of association, four. H was at all material times abroad. There was power under the articles to appoint a managing director, but the board did not in fact do so. K to the knowledge of the board acted as if he were managing director of the company in relation to finding a purchaser for the estate and, again without express authority of the board, employed on behalf of the company a firm of architects and surveyors for the submission of an application for planning permission, preparing an appeal against a refusal of permission, preparing plans and defining estate boundaries. The firm claimed from the company their fees for work done.

Held – The company was liable for the fees claimed because— (i) K throughout acted as managing director to the knowledge of the company and thus was held out by the company as being managing director, and the ostensible authority thus conferred could bind the company since

Page 2 of 20 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 its articles of association in fact provided for there being a managing director of the company, and (ii) K's act in employing the plaintiffs was within the ordinary ambit of the authority of such a managing director, and (iii) the fact that the plaintiffs had not examined the company's articles of association and had not enquired whether K was properly appointed managing director did not prevent their establishing their claim against the company based on their reliance on K's ostensible authority (see p 640, letter f, p 638, letter b, p 641, letters e to

h , p 642, letters f and h , and p 648, letters c to g, post). Biggerstaff v Rowatt's Wharf ([1896] 2 Ch 93 ), and British Thomson-Houston Co Ltd v Federated European Bank Ltd ([1932] All ER Rep 448 ) applied. J C Houghton & Co v Nothard, Lowe and Wills Ltd ([1927] 1 KB 246 ), Kreditbank Cassel, GmbH v Schenkers Ltd ([1927] All ER Rep 421 ) and Rama Corpn v Proved Tin and General Investments Ltd ([1952] 1 All ER 554 ) explained and distinguished. Per Diplock LJ: to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no authority to do so four conditions must be fulfilled, viz,—(a) a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced must have been made to the contractor; (b) the representation must have been made by a person or persons who had “actual” authority to manage the business of the company either generally or in respect of those matters to which the contract related; (c) the contractor must have been induced by the representation to enter into the contract; and (d) the company must not have been deprived, under its memorandum or articles of association, of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to the agent to enter into a contract of that kind (see p 646, letter b, post). Appeal dismissed. Notes As to persons dealing with a company being bound to know its constitution, see 6 Halsbury's Laws (3rd Edn) 299, para 603, pp 430, 431, paras 833, 834; and as to the rule in Royal British Bank v Turquand , see ibid, p 430, para 833, text and note (f); and for cases on the subjects, see 9 Digest (Repl) 559, 560, 3701–3707, 675, 4458– 4460, and 96, 97, 428–430. Cases referred to in judgments

Biggerstaff v Rowatt's Wharf Ltd, Howard v Rowatt's Wharf Ltd[1896] 2 Ch 93 , 65 LJCh 536, 74 LT 473, 9 Digest (Repl) 675, 4458 .

British Thomson-Houston Co v Federated European Bank Ltd[1932] All ER Rep 448 , [1932] 2 KB 176 , 101 LJKB 690, 147 LT 345, 9 Digest (Repl) 675, 4460 .

Clay Hill Brick and Tile Co v Rawlings[1938] 4 All ER 100 , 159 LT 482, 9 Digest (Repl) 500, 3295 .

Page 3 of 20 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630

County Life Assurance Co, Re (1870), 5 Ch App 288 , 39 LJCh 471, 22 LT 537, 9 Digest (Repl) 674, 4455. Dey v Pullinger Engineering Co[1920] All ER Rep 591 , [1921] 1 KB 77 , 89 LJKB 1229, 124 LT 534, 9 Digest (Repl) 687, 4527 .

Ernest v Nicholls (1857), 6 HL Cas 401, 30 LTOS 45, 10 ER 1351, 9 Digest (Repl) 667, 4418 . Firbank's Executors v Humphreys (1886), 18 QBD 54 , 56 LJQB 57, 56 LT 36, 9 Digest (Repl) 531, 3497. Houghton (JC) & Co v Nothard, Lowe and Wills Ltd[1927] 1 KB 246 , 96 LJKB 25, 136 LT 140, affd HL, [1927] All ER Rep 97 , [1928] AC 1 , 97 LJKB 76, 138 LT 210, 9 Digest (Repl) 505, 3330. Kreditbank Cassel, GmbH v Schenkers Ltd[1927] All ER Rep 421 , [1927] 1 KB 826, 96 LJKB 501, 136 LT 716, 9 Digest (Repl) 578, 3822. Mahony v East Holyford Mining Co (1875), LR 7 HL 869, 33 LT 383, 9 Digest (Repl) 687, 4529. Premier Industrial Bank v Carlton Manufacturing Co and Crabree, Ltd[1909] 1 KB 106 , 78 LJKB 103, 99 LT 810, 9 Digest (Repl) 687, 4526.

Rama Corpn v Proved Tin and General Investments Ltd[1952] 1 All ER 554 , [1952] 2 QB 147, 9 Digest (Repl) 97, 430.

Royal British Bank v Turquand (1856), 6 E & B 327, 25 LJQB 317, 119 ER 886, 9 Digest (Repl) 660, 4374. Totterdell v Fareham Blue Brick and Tile Co Ltd (1866), LR 1 CP 674 , 35 LJCP 278, 9 Digest (Repl) 559, 3701 . Young v Bristol Aeroplane Co Ltd[1944] 2 All ER 293 , [1944] KB 718 , 113 LJKB 513, 171 LT 113, affd HL, [1946] 1 All ER 98 , [1946] AC 163, 115 LJKB 63, 174 LT 39 , 30 Digest (Repl) 225, 691 . Appeal The defendant company appealed against an order of His Honour Judge Herbert QC made on 2 May 1963, ordering that the plaintiffs recover from the defendant company the sum of £291 6s for debt. The grounds of appeal were that: (i) there was no evidence that either at the time of the making of the contract sued on or at all the second defendant had any apparent authority to act on behalf of the defendant company in employing the plaintiffs or any other surveyors, (iii) the judge was wrong in law and misdirected himself in that the plaintiffs were not entitled to rely on any ostensible or apparent authority in the second defendant in that there was no evidence that the plaintiffs relied on such authority and the plaintiffs did not rely on such authority in making the contracts sued on; (iii) there was no evidence on which the judge could find that the second defendant asked the plaintiffs to do the work sued on for the defendant company; (iv) there was no evidence on which the judge could find that the plaintiffs thought that they were being instructed on behalf of the defendant company; (v) there was no evidence on which the judge could find that the second defendant had been acting as managing director or so acting to the knowledge of the defendant company's board.

Page 4 of 20 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630

The cases noted belowa were cited in argument in addition to those referred to in the judgments.

aSmith

v Hull Glass Co (1852), 11 CB 897, County of Gloucester Bank v Rudry Merthyr Steam and House Coal Colliery

Co[1895–99] All ER Rep 847 , [1895] 1 Ch 629

A E Holdsworth for the defendant company.F J White for the plaintiffs. Cur adv vult WILLMER LJ. The plaintiffs, who carry on business as architects and surveyors, bring this action to recover fees alleged to be due to them in respect of work done during the autumn of 1959 in relation to Buckhurst Park Estate at Sunninghill, the property of the defendant company. The plaintiffs received their instructions in August, 1959, from the second defendant, one Mr Kapoor, who was at all material times a director of the defendant company. The plaintiffs admittedly executed the work which they were employed to do, and there is no dispute as to the quantum of the fees earned by them, viz, £291 6s. The question is whether the liability in respect of those fees is that of the defendant company or that of the second defendant, Mr Kapoor. By an amendment Mr Kapoor was added as second defendant, but at all material times up to the date of trial his whereabouts were unknown, and he was never served with the proceedings. The action accordingly proceeded against the defendant company alone. The trial took place before His Honour Judge Herbert at Westminster County Court on three days during March and April, 1963, and by a reserved judgment which he delivered on 2 May 1963, he found in favour of the plaintiffs. The defendant company now appeals to this court, contending that the liability is not theirs but that of the second defendant. It appears that the second defendant was a gentleman who carried on business as a property developer, ie, his business was to purchase properties for the purpose of developing them. His practice was, as and when he purchased a property, to form a company for the purpose of dealing with it. He had a number of such companies, all of which were controlled from a house called “Poyle Manor”, which was in fact the registered office of one of his companies, viz, Reevaham Ltd. Much of the business dealt with from Poyle Manor was handled by a gentleman called Mr Mackay, who was a director of Reevaham, Ltd and appears to have acted as general factotum for the second defendant. In September, 1958, the second defendant entered into a contract to purchase Buckhurst Park Estate for a sum of £75,000. Unfortunately for him he had not sufficient cash resources to enable him to complete the purchase. In these circumstances he sought and obtained assistance from a Mr Hoon, who was willing to advance a sum of approximately £40,000. On 11 October 1958, the two men entered into a written agreement (a copy of which is before us) whereby they agreed to form a private limited company with a nominal capital of £70,000 which they were to subscribe in equal shares. The directors of the company were to be the second defendant and Mr Hoon and a nominee of each. The object of the company was as soon as practicable to complete the purchase of the Buckhurst Park Estate. In due course the defendant company was formed, and it was provided by art 12 of the articles of association that the directors were to be the second defendant and Mr Hoon, together with Mr Cohen (described in the memorandum of association as a company director but in fact a managing clerk employed by the second defendant's solicitors), who was the second defendant's nominee,

Page 5 of 20 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 and Mr Hubbard (a managing clerk employed by Mr Hoon's solicitors) who was Mr Hoon's nominee. Article 14 of the articles of association made provision for alternate directors to act in the place of any director who might be unable to be present at a meeting. By art 19 it was provided that the quorum necessary for the transaction of the business of the directors should be four. After entering into the agreement with the second defendant, and even before the formation of the company, Mr Hoon went abroad, and thereafter was at all material times out of the country except for a short period from June to August, 1959. In his absence he left his interests to be protected by his nominee, Mr Hibbard. It was clearly never contemplated that Mr Hoon should take any material part in the management of the company. Whatever the legal formalities, the substance of the transaction was a loan by Mr Hoon to the second defendant to enable him to acquire and resell the Buckhurst Park Estate. The second defendant in fact thought that he had a purchaser in view, and expected to make a quick profit, which it was agreed should be shared equally between him and Mr Hoon. Unfortunately for both of them, the prospective purchaser never materialised. The property was duly conveyed to the company, and the minutes of the first meeting of the board held on 11 December 1958, record that it was resolved that the company's seal should be affixed to the conveyance. It had been agreed between the second defendant and Mr Hoon that, pending resale of the property, the running expenses of maintaining it were to be defrayed by the second defendant personally, and that he was to be reimbursed out of the profit of the resale. This agreement appears to have been accepted by the board, although I cannot find that it was ever the subject of any resolution at a board meeting. A board meeting was held on 3 April 1959, by which time it is clear from the minutes that any prospect of a quick resale of the property had already disappeared. It is to be observed that none of the resolutions purported to be carried at this board meeting could be of any legal effect, since only three members of the board were present thereat.

In the summer of 1959 the second defendant instructed an architect, one Mr Hayler, to make application for planning permission for certain development in respect of Buckhurst Park Estate. This Mr Hayler proceeded to do, and an application for planning permission was submitted by him dated 8 July 1959. It is noteworthy that this application was expressed to be made on behalf of the second defendant personally as owner. The application was in fact refused by a notice of refusal dated 10 August 1959. In the meantime, however, on 4 August or 5, the second defendant instructed the plaintiffs to act for him because, as he said, he wanted a local firm to act on his behalf. The plaintiffs duly submitted a fresh application for planning permission dated 1 September 1959, which was again expressed to be made on behalf of the second defendant as owner. A little later they also entered an appeal on behalf of the second defendant against the refusal of the original application for planning permission. During the ensuing months the plaintiffs did other work for the second defendant, not only in respect of Buckhurst Park Estate, but also on behalf of several of his other companies. The fees due to them in respect of work done for the other companies have all been paid, but those relating to work in respect of the Buckhurst Park Estate

Page 6 of 20 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 remain outstanding, and form the subject of the present action. The work done by the plaintiffs in respect of the Buckhurst Park Estate falls under three heads, viz, (a) submitting application for planning permission and preparing appeal against the refusal of the application made by Mr Hayler; (b) preparing plans of each floor of the main house and ancillary buildings; and (c) defining the boundaries of the estate and preparing plans. So far as concerned the work done in respect of the Buckhurst Park Estate, Mr Freeman gave evidence, which was corroborated by Mr Mackay, that he was instructed by the second defendant on behalf of the defendant company. This evidence was specifically accepted by the judge. About the time that the plaintiffs were first instructed, Mr Hoon was in this country; but he was not apparently consulted about the matter, and there is no minute of any resolution of the board authorising the employment of the plaintiffs. It appears, however, that at this time relations between Mr Hoon and the second defendant were already somewhat less than friendly. Mr Hoon was complaining that some of the expenses incurred by the second defendant were not properly speaking maintenance expenses. There was also some negotiation between them with regard to a plan whereby one or other of them was to buy the other out. Nothing, however, came of this, and it is not necessary to refer to it further since it is in no way relevant to the present appeal. Throughout the autumn of 1959 the plaintiffs were in constant communication in relation to the work which they were doing both with the second defendant personally and with Mr Mackay at the office of Reevaham Ltd. Throughout the whole of this correspondence no mention whatsoever of the defendant company's name is to be found. On the face of it the plaintiffs were purporting to act entirely for the second defendant personally. The appeal from the refusal of planning permission was submitted in his name, and a certificate under s 37 of the Town and Country Planning Act, 1959, was submitted by the plaintiffs certifying that the second defendant was the estate owner in respect of every part of the land to which the appeal related. These circumstances were strongly relied on at the trial as going to show that the plaintiffs throughout were regarding the second defendant as their employer, and that they were looking exclusively to him for payment of their fees. The explanation which Mr Freeman gave in evidence was that he simply identified the second defendant in his own mind with the defendant company. As I have said, however, the judge specifically accepted Mr Freeman's evidence that he was instructed by the second defendant on behalf of the defendant company, and counsel for the defendant company has not sought to challenge this finding. Having regard to this, the fact that in the correspondence the plaintiffs throughout appeared to regard the second defendant personally as their employer loses its significance. The only question which remains is whether, in view of the fact that the second defendant contracted with the plaintiffs in the defendant company's name, the latter are bound by his act. The plaintiffs contended: (i) that on the true inference from all the facts the second defendant had actual authority to engage the plaintiffs on behalf of the defendant company; alternatively (ii) that the second defendant was held out by the defendant company as having ostensible authority, so that the latter is estopped from denying responsibility for his acts. The submissions on behalf of the defendant company are conveniently summarised in paras 2 and 3 of the defence as follows: “(2) The said [second defendant] was at all material times a director of the [defendant company], but the [defendant company] denies that he was authorised expressly or impliedly to enter into the alleged or any agreement with the plaintiffs for and on behalf of the [defendant company]. (3) Further, or in the alternative, the [second defendant] at all material times

Page 7 of 20 Freeman and Lockyer (a firm) v Buckhurst Park Properties (Mangal) and Another [1964] 1 All ER 630 acted without the...