Company Law

|BUSINESS ENTITY |
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|Sole Proprietorship |Partnership |Un-incorporated Associations |Companies |
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| |Limited Partnership |Private Companies |Public Companies |
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| | |One Man Company |Listed |Unlisted |
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| | |De facto | |De jure | |

Types of Business Enterprises include: - • The Sole Proprietorship • The Partnership • The Un-incorporated Association • The Company

The Sole Proprietorship

This is the oldest and simplest form of business. There is a single owner who has the prerogative and responsibility of making all the ultimate decisions concerning the business. Servants or agents may assist the Sole Proprietor, if he functions without the aid of others, his obligations are in Contract and his liabilities for wrongdoing are primarily by Tort.

Advantages of the Sole Proprietorship

1. Businesses commenced and dissolved with ease. 2. There are modest expenses involved in starting up the business. 3. Businesses subject to minimum regulation by law.

Disadvantages of the Sole Proprietorship

1. Un-incorporated owner is fully liable for all the debts and other obligations incurred by his business, for in law his business has no separate legal personality. 2. The courts adopt a hostile attitude when the sole proprietor attempts to segregate his property alienating his interest in the property by passing personal assets into the name of a spouse or other family members. 3. Absence of continuity; therefore death or prolonged illness may interrupt the business and ultimately destroy it.

Partnership

The partnership of the 21st century is virtually the same as it was at the start of the 19th century when it was defined by the 1891 UK partnership act as: “The relation which subsists between persons carrying on a business in common with a view to profit.”
The “persons” may be companies or individuals or any combination of the two. All partners have the right to participate in the management of the business and all partners are jointly and severally liable for the debts and obligations of the partnership. To satisfy commercial interests, separate legal personalities have been bestowed in the United States and some Commonwealth Caribbean jurisdictions with the advent of the Limited Liability Partnership Act, for example, St. Lucia. But, by and large the United Kingdom Partnership Act of the 19th century continues to represent the foundation of partnership law in the Commonwealth Caribbean. The attractiveness lies in the informality of formation. They are not required to register and there are no filing requirements. It operates as a sole proprietorship as there is a collection of sole traders who co-operate for the sake of the business. The advantage lies in the flexibility and ease of operation. See the Jamaican decision in the case of Joseph v. MCKenzie (1993) 30 JLR 305 which is instructive of the essential characteristics of a partnership. The facts involved a breakdown in the relationship between the defendant (MCKenzie) and the plaintiff (Joseph) in relation to a restaurant. This business relationship started with an oral agreement relating to profit sharing. Justice Smith found the oral agreement was binding. He noted that it is a settled principle that a partnership can be formed as a result of an agreement between the parties to carry out a business in common with a view to sharing profit or loss. “There must be a community of profit or loss and to ascertain whether or not a partnership exists the agreement must be construed as a whole. The mere fact that the parties to it claim that they are partners is not conclusive.”

Co-operatives

1. A co-operative differs from other forms of businesses in that its structure reflects its aims, which are generally stated as to service its members and to benefit the society at large. This is reflected in the course of its business as well as the use of profits. 2. An essential feature of the co-operative is democratic control i.e. one member one vote. Persons elected, or appointed, in a manner agreed upon by the members conduct their affairs. The elected or appointed persons are also accountable to the members. The policy of a co-operative is laid down in the general meeting and is reflected in the bylaws of the co-operative. In contrast in a corporation control is vested in shareholders, primarily those with the largest financial interest. 3. Open membership: Membership in a co-operative society should be voluntary and available without artificial restriction and without any social, political, racial or religious discrimination to all persons who can make use of its services and are willing to accept the responsibilities of membership. 4. Surplus distribution: A co-operative society belongs to the members. The economical result therefore is that any surplus must be distributed evenly so as to avoid one member gaining at the expense of other members. When a surplus is distributed it is allocated between members on the basis of the transactions with the co-operative. 5. All co-operatives should make provision for the education of the employees, members, officers and the general public.

Liability

A co-operative is an un-incorporated association so that historically a person seeking an action against a common fund would in effect have to prove the liability of all the members personally, since the fund is thought to be owned by all the members for the time being. This created problems because of fluctuations in membership and the procedural burden of getting judgement against all the members personally. Legislation now permits that an association can be sued in its own name. Taff Vale Ry v. A.S.R.S. [1901] AC 426 is authority for the proposition that an un-incorporated association can be liable in Tort through a class action. Boyce v. Committee of Management Enterprise Co-operative Credit Union Ltd. (1975) 10 Barb. L.R 6 The court found for the credit union as the dispute related only to the committee as the body responsible for the management of the society.

Companies

|Companies |
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|Private Companies | |Public Companies |
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| |Statutory Companies | |
|One Man |Closed Controlled | |Listed |Not Listed |
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|De facto |De jure | | | |

As far as corporate legislation is concerned, it has many functions: 1. It is enabling; i.e. it empowers people to attain what they could not otherwise achieve, creating a body with a distinct corporate personality. 2. It is regulatory; legislation prescribes conditions, which have to be complied with to obtain incorporation. The rules of the Companies Act must be observed to protect the shareholders, creditors and the general public. The Companies Act classifies companies in terms of their size and their method of raising capital.

Public Companies

• The Barbados Companies Act S.2 defines a public company as a company whose shares or debentures[1] are issued to the public. • This type of company dominates important segments of our economy and it represents perhaps the biggest centre of non-governmental power. • Typically the share-holding body is massive and wide spread. • The company is managed by a board of directors who delegate their powers to executive directors. • S.59 of the Barbados Companies Act states that a public company must have no fewer than three directors at least two of who are not officers or employees of the company or any of it’s associates. • If public companies are going to be listed on the stock exchange they must have a minimum capital requirement. No such requirement for private companies of minimum capital.

Listed Companies

Some companies are listed on the stock exchange. Stock exchanges were incorporated in the region in the mid 1980’s. These were created to fill a void in the financial system. It comprises designated and non-designated members who make up the board. Designated members include the Minister of Trade, Governor of the Central Bank and Minister of Finance. Companies listed on the exchange fall under the purview of Securities Legislation. Such as: Barbados Securities Act of 2002 Jamaica Securities Act of 1993 Trinidad and Tobago Securities Act of 1995[2].
The listed company must enter into a listing agreement, which imposes a number of obligations on issuing companies. They enter into obligations relating to the conduct of trading prohibiting manipulative and fraudulent practices. In order to secure a listing a company must have a trading record or history and a certain number of shares must be held by members of the public who are not associated with the directors or major shareholders.

Private Companies

Generally these are small family type companies[3]. According to statute in “new law[4]” jurisdictions, there must be at least one director. It is a closely-knit unit with family members often comprising the share holding body. Because of the nature of this type of company, many of the formal requirements stipulated in the Companies Act are abandoned i.e. requirements for taking minutes, the holding of meetings. This is because often Directors do not bother to hold general meetings concentrating rather on running the business. Another characteristic of Private Companies is they normally have in their constitution a pre-emptive rights clause. It is used to ensure shareholders remain “friendly”. It is a clause, which states that no shareholder can sell shares without the approval of the board.

Holding and Subsidiary Companies

This is where one company is in a position of control over another by owning more than 50% of the shares in that company. This is covered by the Companies Acts: Barbados S442 Jamaica S149 Trinidad and Tobago S5.
Control is an essential ingredient. The parent or holding company has the ability to control or influence the policies of the other company and they can appoint executives.

Limited and Unlimited Companies

Not all companies are limited by shares, if they are limited, the letters Ltd. or the word “limited” must be affixed after the corporate name. If it is a public limited company the letters PLC or the words “Public Limited Company” must also be affixed after the corporate name.

Method of Incorporation

In Jamaica, Belize[5] and the Bahamas[6], incorporation is achieved by filing the memorandum of association and the articles of association. The memorandum of association is the company’s principal constitutional document and it governs the relationship between the company and the outside world. The memo sets out the details of the company’s existence. For example the company name, domicile, capital structure, whether it is a private or public company and the company’s objects.

The articles of association regulate the company’s internal day to day affairs. For example when meetings have to be held, the number and rights of shareholders as well as directors powers. The first subscribers for shares sign both the memorandum and the articles of association, see for example Jamaica Companies Act Arts. 3 & 6. The signatures must be witnessed and each subscriber must take at least one share. The number of shares taken will be entered alongside the name in the memorandum. In new law jurisdictions there are pre-printed forms which are filled out. There are actually five standard forms, these are: Notice of Directors form Request for Name Search form Registered Head Office form Certificate of Incorporation and an Affidavit
The affidavit stems from articles such as S.4 of the Barbados Companies Act, which provides that you must be over 18, you must not be bankrupt, and you must be of sound mind. These things are sworn by an attorney in an affidavit.

Lecturer: Ms. Lesley Walcott Date: September 23rd, 2003.

Advantages of Incorporation

1. A company has perpetual succession. Unlike partnerships and sole traders, the “business” continues despite the death (or serious illness[7]) or shareholders and directors. 2. Its assets are owned and its debts owed by the company and not its members, this is so even with one-man companies, which are permissible in some territories[8]. 3. Generally a shareholder can freely transfer his share holdings unlike a partnership where the consent of the other partners must be obtained. 4. The liability of a shareholder is limited by his shares. In Barbados all shares must be fully paid whereas in Jamaica shares might be partially paid[9]. 5. Shareholders are not bound by a fiduciary duty either to themselves or the company. 6. There are fiscal advantages of incorporation as opposed to being a sole trader, there is scope for tax avoidance (which is legal as opposed to tax evasion which is illegal.) Where there are high profits, it is advantageous to incorporate[10]. 7. It is arguably easier for a company to raise additional finance from banks and other financial institutions through shares and debentures. 8. As a separate legal person, the company can sue or be sued in its own name.

Disadvantages of Incorporation

1. National Insurance contributions are payable by both employer and employee. 2. There has been an increase in the corporate tax rate, which makes incorporation to reduce tax liability less attractive.[11] 3. There is reduced flexibility, one has to maintain minutes, records of meeting and comply with the various statutory requirements. These are quite significant with regard to public listed companies. There are additional accounting and audit requirements imposed on companies and considerable financial information should be given to the shareholders by the board of directors.

Corporate Persona

A company is defined by S.2 of the Companies Act of Barbados as “A body corporate that is incorporated or continued under this act.” Section 2 of the Jamaica Companies Act defined a company as “A company formed or incorporated under this act or an existing company.”

In the eyes of the law, the company is regarded as a separate distinct person apart from its shareholders. For example, see the case of A.G. v. Antigua Times Ltd.[12] where the court stated that “the term person includes the body corporate.” See also the Interpretation Acts. Section 17 in the Barbados Companies Act provides that: - “A company has the capacity and subject to this act, the rights, powers and privileges of an individual.”
The decision cited as establishing the legal personality of the company is the House of Lords decision in the case of Salomon v. Salomon & Co. Ltd.[13] In this case Salomon carried on business as a manufacturer of leather goods, he was a sole trader. Due to an increase in profitability he was advised to incorporate, he then created a limited liability company, which purchased the business. The company thereafter started to experience financial difficulties. Salomon gave the company a loan, which was secured with company assets. The company was forced into liquidation and Salomon claimed the assets of the company, which had been used to secure his loan, the liquidator and the other creditors objected to this. The House of lords unanimously reversed the decision of Vaughan Williams LJ and held that Salomon was under no liability to the company and its creditors that his debentures were validly issued, and his security over the company’s assets were effective against the company and its other creditors. Lord MCNaghten stated in summing up a company’s personality: - “The company is at law a different person all together from the subscribers to the memorandum, and though it may be that after incorporation, the business is precisely the same as it was before and the same persons are the managers and the same hands receive profits, the company is not in law the agent of the subscribers or a trustee for them. Nor are the subscribers as members liable in anyway shape or form except to the extent and in the manner provided by the act.”

The House of Lords held that no matter how large a proportion of the share capital is held by a shareholder, the company’s assets, liabilities and rights were not those of it’s controlling shareholders.

Application of the Doctrine

The principle of the company’s separate legal personality has been consistently applied since Salomon v. Salomon & Co. Ltd.[14] See for example the case of Macaura v. Northern Assoc. Co. Ltd.[15] where the House of Lords held that the assets of the corporation were not those of the shareholders. See particularly the judgments of Wrenbury and Lord Buckmaster. This case is also authority for the proposition that the shareholders do not have an insurable interest in the in the property of the corporation because they do not have a legal or equitable interest in the property.

Determine the validity of the arguments used in the case of Constitution Ins. Co. of Canada v. Kosmopolous [1987] 34 DLR (4th) 208.
Since a company is a legal person, separate from its shareholders, the following applies: - 1. A contract of employment can be entered into by a company and its sole director and controlling shareholder. See the case of Lee v. Lee Air Farming [1961] AC 12.[16] 2. Regardless of whether the person holds all the shares in the company, the company’s business is not necessarily that persons business in the eye of the law. However, where an individual controls a number of companies whereby their existence represents a sham, the court will treat these companies as his creatures whereby the individual will be personally liable.

Piercing the Corporate Veil

There are instances where the courts will pierce the corporate veil and disregard its separate existence. Within traditional legal scholarship, there is no principled distinction between the two limbs i.e. instances where the principle is applied and instances where it is ignored. The courts seem unwilling to define clear guidelines, preferring rather to describe instances where the corporate veil is used as a sham or a cloak. It is difficult to rationalise the cases except under broad and rather questionable headings. These headings are: - 1. Agency 2. Fraud 3. Trusts 4. Enemy & 5. Statute[17]
See also the United States Patriot Acts and the Helms Burton legislation. Lecturer: Ms. Lesley Walcott Date: September 25th, 2003.

Fraud
Equity will not allow an individual to use a company as a shield for improper conduct or fraud. In a group relationship, the claimant must attack the artificiality of the Parent subsidiary relationship. The onus lies on the claimant and a high burden of proof must be discharged. He/she must establish that the company is a sham, cloak and buffer. See Gilford Motor Co. v. Horne[18]where the court of appeal held that the plaintiff was entitled to an injunction against both the defendant and the company which, the defendant, in contravention of a contract, formed a company and solicited his former employers clients. See also the case of Jones v. Lipman[19] where a vendor of land sought to avoid specific performance by transferring the land in breach of he contract to a company he had formed for that specific purpose. The court treated the company as a sham and granted an order for specific performance. See also the case of BG Preeco Pacific Coast Ltd. [1989] DLR 30. Please note however that an unsuccessful claim of fraud renders the claimant liable for costs.

Agency

An examination of the cases indicates that agency is often used in conjunction with other heads, for example fraud. One should consider whether agency precedes the lifting of the veil by virtue of the courts imputing an agency relationship-using agency as a means of lifting the veil resulting in implied or constructive agency. See the decision of Smith Stone & Knight Ltd. v. Birmingham Corp.[20] and note that there are two types of agency, agency as a result of capitalist control, and agency as a result of functional control. Functional control is a question of fact.
The factors to be considered are: 1. Does the shareholder treat as their own the profits of the company? 2. Who appoints the persons conducting the business? 3. Who is the head and brain of the trading venture? 4. Who decides what and how much capital should be injected into the various ventures? 5. By whose skill and direction are profits made? 6. In a group subsidiary relationship who closely and directly controls the subsidiary?

Group Enterprises
Regional company statutes contain definitions of the holding, subsidiary and affiliated companies. These are: - Jamaica S. 149 Bahamas S. 2 Barbados Ss.440 – 443 Trinidad & Tobago S. 5
On the financial implications of the holding and subsidiary relationship see the case of Acatos & Hutchinson Plc Watson [1995] 1BCLC 218, which involved an arrangement whereby the company acquired another company which held shares in it. See also the decision in Ord v. Bellhave Pubs Ltd.[21]

Advantages of the Holding Company 1. It is suitable as a medium for controlling modern large-scale business enterprises. 2. There is simplicity in formation, by simply acquiring a majority of the shares that carry voting powers. This does not disturb creditors or preference shareholders or any minority of ordinary shareholders and it does not interfere with the good will and reputation of an existing business. 3. The holding company may be used for the purpose of financing the operations of its subsidiaries. 4. Tax advantages may be obtained for example where a company with accumulated losses acquires a subsidiary with substantive gains, the losses may be carried forward for income tax purposes and deducted from future profits. 5. Subsidiary companies insulate each individual company from the creditors of other subsidiary companies. In this way the risk of loss to the holding company is limited to the amount of capital subscribed in the subsidiary. The mere fact of ownership of shares or capitalist control does not impose a responsibility on the holding company.

Disadvantage and Abuse of the Holding Company
Some of the advantages mentioned may prove to be disadvantages: - 1. Holding companies tend to create monopolies and concentrate the control of big business in the hands of a few [22]. 2. Share Pyramiding; control can be acquired by investing a relatively small amount of capital in a number of subsidiary companies. Control is achieved over the whole chain by holding a majority of shares in the first company. 3. Manipulation of accounts; inter-corporate transfer and transactions may be hidden.[23] Financial statements may be obscure and cover up essential information
Generally the doctrine of Salomon v. Salomon & Co. Ltd.[24] can be easily abused and the corporate personality used as a veil behind which to shield conduct prejudicial to the corporations creditors. An insolvent subsidiary is generally treated, as a separate legal entity so that it’s parent company will rarely if ever be liable for it’s debts. The application of this principle to group companies has caused hardship to the unsecured creditors of the insolvent subsidiary. See the case of Multinational Gas v. Multinational Gas & Petrochemical Services Ltd.[25] where the court held that there was no agency relationship between the plaintiff and defendant company. The court further found that when the parent company sent instructions to the subsidiary company and it was carried out, the subsidiary company ratified the instructions.
In the case of DHN Ltd. v. Towel Hamlet,[26] the parent company requested that the courts pierce the veil because the subsidiary company had been compulsorily acquired. It was in this case that Lord Denning devised the “Single Economic Unit” theory. He felt the courts should pierce the veil in the “interest of justice.”
In Adams v. Cape Industry Plc [1990] 2 WLR 657. The subsidiary company was mining asbestos; the court however found that there was no agency relationship between the parent and subsidiary companies. The court in this case also expounded the view that there was no such thing as “in the interest of justice.” In the case of Polly Peck International plc.[27] the court of appeal affirmed the principles arising from Adams v. Cape Industry Plc[28].
In the United Kingdom, there continues to be a marked unwillingness on the part of the courts to acknowledge the economic reality of groups and pierce the corporate veil. In Europe, the “single economic unit” theory receives a far more favourable response.

See the Barbadian case of Debdor Co. Ltd. v. Wilkinson[29]. In this case the owner of Bresmay transferred all of Bresmay’s assets to Debdor Co. Ltd. and only maintained the employees’ contracts with Bresmay. Miss. Wilkinson was terminated and sued for wrongful dismissal. She was successful but there were no company assets to settle the debt. The owner of Debdor then provided a Debdor cheque to settle the debt. He then argued in court that he had no authority to use Debdor assets to settle a Bresmay debt. The court of appeal held that although Bresmay had employed the former employee, it was no more than a shell. William’s J expressed the view of the court when he said: - “The court strongly disapproves of the use of the corporate concept as a device for treating employees unjustly…It is nothing more than a shell, an entity used as a tool to hold contractual arrangements made with those who are employed in the business. When successful claims are made by employees, there is no substance to satisfy them and the employees are left with feelings of injustice and frustration.”

Lecturer: Ms. Lesley Walcott
Date: October 9th, 2003.

Promoter
There is a lack of judicial definition of the word promoter in the Jamaica Companies Act see S43 & 44 in Barbados the Companies Act refers to an incorporator. In jurisdictions such as Jamaica and Belize there is a promoter, but in the new law jurisdictions reference is made to an Incorporator. The term incorporator and Promoter are not synonymous. Promoters are persons who conceive the idea of forming a company, they undertake its incorporation, and they provide shares and loan capital. See for example the case of Emma Silver Mining Co. v. Lewis & Son[30] where Lindley LJ stated that: - “as used in connection with companies the term promoter involves the idea of exertion for the purpose of getting and starting a company, or what is known as floating it.”
The nearest attempt at a definition can be found in Twycross v. Grant[31] in the 19th Century where Cobourne CJ states that a promoter is: - “one who undertakes to form a company with reference to a given project and to see it going and who takes the necessary steps to accomplish that purpose.”

The Need for a Definition
A definition is often of the utmost practical importance so as to impose liability upon a defendant/promoter. See for example Vice Chancellor Bacon’s comments in Bagnall v. Carlton.[32] The grant of a particular relief or remedy may depend solely on this issue. In Jamaica see S. 40 of the Companies Act and the third schedule to the legislation. How therefore can a company and the persons who have authorised the issue of the prospectus fulfil this duty without knowing who is the promoter?

Reasons For The Lack of Definition.

1. Where a promoters conduct falls to be considered by the courts the judges simply resort to equitable remedies. Relying on the principle that secret profits are inequitable, and anyone who has made them is a promoter. 2. One school of thought insists that the term promoter is best left as a business term rather than a legal one. See for example the case of Twycross v. Grant.[33] 3. The courts have intentionally failed to set down a definition in a formal sense, because if a definition were laid down it might be possible for persons concerned in the promotion of companies to avoid its application, taking advantage of their fiduciary position without incurring the liability of promoters. 4. A comprehensive definition is impossible due to the wide range of companies promoted, from small one-man companies to the large public corporations, and given the varied activities of the person engaged in promoting the company.

Suggested Test
The animus factum test see the case of Bagnall v. Carlton[34] when the defendants were held to be promoters “because it was their intention and conviction to sell the prospect of the company”. There we witness the element of intention and the fulfilment of this intention as the criteria. See the case of Re Leeds & Hanley Theaters of Varieties Ltd.[35] where the element of intention was also stressed by Vaughan William's LJ he stated: - “If you trace all the proceedings of the finance company as detailed in their own minutes, it seems clear that they were acting and intended to act as promoters of the company.”
Similarly see the decision of Twycross v. Grant[36] where it was stated that: - “The defendants acts were done with a view to the promotion of the company.”
The inference from these is that a promoter is not under a liability merely because he agreed to promote the company. To be liable the person had to act. See the case of Whaley Bridge Calico Printing v. Green & Smith[37] as to what constitutes an active step. There is an active step of promotion only where the vendor has negotiated the promotion with other institutions. Please note that this has not been followed by later House of Lords decisions such as Gluckstein v. Barnes[38] and Erlanger v. New Sombrero Phosphates & Co.[39].

Termination of Promotion
In the decision of Twycross v. Grant[40] Cobourne LJ stated that: - “So long as the work of formation continues, those who carry on that work must retain the title of promoter.”
There is no statutory limitation of promoters, the courts have developed a test of intention and the promotion period covers all activities designed to start the company. As a reality; 1. The term promoter is not a term of art. 2. The obligations of the promoter have been built up piecemeal by the courts. See the use of agency and trust principles, buttressed at times by legislation. 3. Where attempts have been made at judicial definitions, the definitions have not been exhaustive. 4. The matter of whether or not someone is a promoter is a question of fact. 5. The promoter is not an agent of the company as there is no principal (This is because the principal or company is not yet formed).

Duties and Obligations

The promoters stand in a fiduciary relationship to the company. See the case of Erlanger v. New Sombrero Phosphates & Co.[41]which was the first decision to recognise the existence of a fiduciary relationship Lord Blackburn commented on the extensive, almost unlimited powers which promoters have. Lord Blackburn indicated that such powers must be checked by an objective test of reasonable use. 1. A promoter must not make any secret profit out of the promotion of the company without the company’s consent. 2. A promoter is under a duty to disclose any interest in which he may have in a venture in which he has entered into. 3. A contract entered into between the promoter of the company is voidable at the instance of the company unless all material facts have been disclosed to a full and independent board.
“Independent”, is a question of fact. If a company is a private company then the general meeting is the proper forum for disclosure. At this meeting, the promoter due to his vested interest must abstain from the vote. If the company is a public company then full disclosure in the prospectus is sufficient. See the House of Lords decision in the case of Erlanger v. New Sombrero Phosphates & Co.[42] as well as Gluckstein v. Barnes[43] where a syndicate purchased property and resold it to the company. The syndicate only disclosed a portion of the profits. The House of Lords decided they were accountable for the remainder. See the case of Whaley Bridge Calico Printing v. Green & Smith[44] where a promoter was held accountable where he negotiated a sale of a business from a third party to the company and obtained a share of the profits.

Remedies 1. The company may bring proceedings in its own name for restitution of a benefit, which the promoter has received either in equity on the basis of constructive trust, or through an action for money had and received. See the case of Gluckstein v. Barnes[45]. 2. The company may have a remedy in damages against the promoters for breach of their fiduciary duty. See Re Leeds & Hanley Theatres of Varieties Ltd.[46] 3. The promoter and his accomplices may be sued in an action of deceit. A promoter may be personally liable to compensate persons who subscribed for shares or securities on the faith of his prospectus. Where a promoter has been promised but has not received a profit, bribe or other benefit, the company may itself enforce his claim against the promisor on the basis that he held the claim as trustee for it. a. restitution b. damages c. recission d. compensation

Lecturer: Ms. Lesley Walcott
Date: October 2nd, 2003.

Remuneration
A promoter is not entitled to recover any remuneration for his services form the company unless there is a valid contract between him and the company. See the cases of Re: English & Colonial Produce Co.[47] and also Re: National Motor Mail Co.[48]. In the absence of a valid contract therefore, a promoter will be unable to recover his preliminary expenses and any registration fees or duties paid. The promoter is at the mercy of the directors of the company. In practice this does not present a significant problem because a provision is usually inserted in the articles or bylaws of he company authorising the directors to pay the promoter. Furthermore, more often than not, the promoter himself becomes a director.

Pre-Incorporation Contracts
The fact that Anglo-West Indian law does not recognise the existence of a corporation until a certificate of incorporation has been issued and other prescribed conditions met creates significant legal and practical difficulties. Where a promoter purports to conclude a contract on behalf of a prospective corporation. Pre-incorporation contracts are an essential part of commercial life. The promoter may feel that it is important to nail down the other party to the contract before he has had an opportunity to change his mind. The other party may insist on the contract being concluded by a given date, or the existence of the contract may be a pre-condition of the promoter being able to attract other investors to the corporation. Frequently the promoter is also under the mistaken impression that the corporation has already been incorporated or that compliance with the statutory incorporation requirement is only a minor inconsequential formality.

Common Law Position
Determining the enforceability of pre-incorporation contracts has led to a volume of case law. The common law can be regarded as unsatisfactory, arbitrary, unrealistic and fraught with fine distinctions. The structure and application of the common law is evident in the case of Kelner v. Baxter[49] and Newbourne v. Sensolid (Great Britain Ltd.)[50]. In the case of Kelner v. Baxter[51] the court stated that a promoter who purports to make a contract on behalf of an unformed company will be personally liable despite signing as agent of the unformed company. This is provided that on the face of the instrument it is evident that he was a party to the contract. The rationale for this is: - 1. Prior to the incorporation a company lacks the capacity to enter into contracts and is not bound by contracts made by the agents purporting to act on its behalf prior to incorporation. 2. A company is prevented from ratifying pre-incorporation contracts because when the company comes into existence, it is a totally new creature. Rights and liabilities begin on the date of incorporation and not before. Thus when the company in Kelner v. Baxter purported to ratify the promoters contract, it was held that in the absence of a principal who could be originally bound, they themselves were liable. 3. An agent for a non-existing principal must be considered as personally incurring liability. In the case of Kelner v. Baxter Earle CJ applied the parol evidence rule. Where an instrument is clear and unambiguous on its face, oral evidence is inadmissible to contradict the written instrument. In the case of Kelner v. Baxter, all the parties were aware that the company was not in existence.
In the case of Newbourne v. Sensolid (Great Britain Ltd.)[52] a written contract was made for the supply of goods by the appellant to the respondent, as in Kelner v. Baxter[53]the appellant was acting for an un-incorporated company, the respondent refused to accept delivery, and the appellant sought specific performance relying on the principle in Kelner’s case. The appellant claimed the contract was binding and enforceable by him as the company’s agent. The Court of Appeal rejected his arguments and held that the company and not the promoter was the contracting party and since the vendor was non-existent; there was no contract at all. As a result of the decision, the courts became pre-occupied with the form of the pre-incorporation contract as opposed to its substance. The court of appeal placed specific emphasis on the, manner in which the contract was signed. The position is that if as in Kelner v. Baxter[54] a promoter signs for and on behalf of a non-existent company, he will be considered as personally incurring liability. If the promoter signs as per director of an unformed company, there is no company and no one is liable. The issue came up for consideration in the case of Black v. Smallwood[55] , here the attestation clause in the contract for the sale of land contained the name of the company as purchaser followed by the signatures of two persons as directors. The signatories believed the company had been incorporated and they were the directors of the company. The vendor sued for the specific performance of the contract citing the case of Kelner v. Baxter[56] and it was also claimed that the signatories were personally liable. The court held that the ‘directors’ were not liable. Kelner v. Baxter[57] was distinguished on two grounds: - 1. In Kelner, both sides were aware of un-incorporation 2. That the court in Kelner had concluded that the documents disclosed an intention that the directors should be personally bound.
The court in Black v. Smallwood[58]introduced intention as a guideline as to whether an agent will be personally liable. See Phonogram v. Lane[59] which is a case concerned with S.9 ss. 2 of the United Kingdom European Community Act of 1972. Lord Denning criticised the fine common law distinction between a contract signed for another and a contract signed as agent for another.

The real question in every case was the true intention of the parties. The liability of the signer did not turn on the distinction drawn in the Newbourne v. Sensolid (Great Britain Ltd.)[60] case. The common law applies in Jamaica and Belize, the common law does not apply in the Bahamas, Barbados, Guyana, Trinidad & Tobago, Dominica, Grenada and St. Lucia, this problem with the common law has been corrected by statute. In old law jurisdictions, reliance must also be placed on the common law and the cases of Newbourne v. Sensolid (Great Britain Ltd.)[61]and Kelner v. Baxter[62]apply. Reliance must also be placed on the common law doctrine of novation i.e. the person making the contract will be released from liability if the company after incorporation enters into a second contract with the contractor incorporating some of the same terms as the pre-incorporation contract. Cogent evidence is required to prove the existence of a second, fresh contract. See the case of Bagnot Pneumatic Tyre Co. v. Clipper Pneumatic Tyre Co.[63] where it is demonstrated that a mere mistaken belief is not sufficient., see also Re Northumberland Avenue Hotel Co.[64] If a company takes possession of property transferred to it under a pre-incorporation contract the court may be able to infer a new contract see the case of Re Patent Ivory Manufacturing Co.[65] Consider the Jamaican decision of Hadlinston Construction co. Ltd[66] a Court of Appeal decision which illustrates the traditional common law approach. This case involved a series of building contracts with allegations of negligence: - 1. The issue of pre-incorporation contracts arose as a preliminary issue reaffirmed the salient principle in the common law that a company cannot enter into contracts before incorporation because it does not yet exist as a legal person. Nor for the same reason is it found by contracts made by agents purporting to act on its behalf before incorporation. 2. In response to arguments that there was no enforceable contract, the court of appeal held that a company cannot ratify or adopt a pre-incorporation contract. However, a new contract may be inferred and in this case, there was cogent evidence to support such an agreement between the appellant and the respondent. 3. The Court of Appeal found there was an entirely new contract following the case of National Land v. Colonisation [1904] AC 120. and therefore that novation operated to save the agreement. This doctrine operates wholly apart from the common law position against ratification.
See the case of Canwest International v. Atlantic (1994) 48 WIR 40.

Lecturer: Ms. Lesley Walcott
Date: October 7th, 2003.

Dealings With The Company and Liability for Torts and Crimes

The rule in Foss v. Harbottle[67]: - If a wrong is done to the company, only the company can rectify the wrong. There are exceptions to this rule. The exceptions include: _ 1. ultra vires 2. Personal Action; the personal rights as an ordinary shareholder are infringed. 3. Special Majority; the special majority requirements for decisions breached. 4. Fraud; this is referred to as fraud on the minority (it has been argued by some, that this is the only true exception). The four exceptions have either been replaced or supplemented by Statutory Derivative Act.

In the Barbadian decision of Canwest International v. Atlantic (1994) 48 WIR 40. In this case William's CJ enabled or empowered a third party who acquired rights under a pre-incorporation contract to bring an action against the company. A complainant may bring an action and is defined as a shareholder or former shareholder, director or former director, and the Director of Companies and any other person who is a fit and proper person to bring the action. Williams CJ interpreted the phrase “any other person who is fit and proper…” to include third parties who acquire rights under a pre-incorporation contract. In the Jamaican case of Chinatown Restaurant Ltd. et al v. Wong[68], the case was thrown out because the shareholder did not live in Jamaica, Jamaica therefore follows the rule in Foss v. Harbottle.

The Doctrine of Ultra Vires The Memorandum of Association This is the company’s principal constitutional document, it governs the relationship between the company and the outside world. The memorandum sets out the essential details of he company’s existence. For instance the company name, domicile, capital structure and whether it is a private or public company.

The Objects Clause This is the most important clause in the memorandum of association. This clause defines the capacity of the company. It sets out the main business activity of the company. Its purpose is to protect investors, shareholders and others dealing with the company. A company has natural limitations in accordance with Suttons Hospital[69], a company cannot commit treason, it cannot marry and it cannot be excommunicated. The law has introduced an artificial limitation in the form of the doctrine of ultra vires. This doctrine is based on the fact that companies were formed historically to fulfil a specific limited purpose as stated in the companies constitution.

See the case of Ashbury Railway Carriage & Iron Co. Ltd. v. Riche[70], which settled the uncertainty as to whether, the doctrine applied to companies. In this case the company’s memorandum gave he company power to make and sell railway carriages. The directors entered into a contract to purchase a concession. The issue was whether the contract was valid, and if it was not, could the shareholders ratify the contract. The House of Lords held the contract was of a nature not provided for in the memorandum and was therefore null and void and incapable of ratification. Lord Cairns expressed the view that: - “The memorandum is the area beyond which the action of the company cannot go.”

In the subsequent House of lords decision in the case of A.G. v. Great Western Rly. Co.[71] the court sought to relax the harsh application of the ultra vires doctrine by introducing the “reasonably incidental” test stating that the court will accept those acts which are reasonably incidental to the expressed objects unless they are expressly prohibited. Lord Selbourne stated that: - “The doctrine of ultra vires ought to be reasonable and not unreasonably understood and applied.” Certain powers are implied in the case of trading companies unless expressly prohibited for example the power to appoint and act through agents, the power to borrow money, to give security on property, to employ labour, to have a bank account. It is evident that the doctrine of ultra vires operates as a fetter on commercial enterprise, because the doctrine of ultra vires by confining the activities of a company to its stated objects has the effect of restricting the companies actions and may prejudice bona fide creditors. Draftsmen have devised numerous schemes in an attempt to ensure the company’s capacity remains unfettered: - 1. The Subjective Clause; provides that the “company can 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 ancillary to the general business of the company.” This type of clause vests the company and its directors with the power to define its commercial activities enabling the company to extend its area of operations. See the case of Bellhouse Ltd. v. City Wall Properties Ltd[72] where the court of appeal reluctantly upheld such a clause. This decision attempts to throw doubt on Re Crown Bank[73] an earlier decision, which stated that “an objects clause must be capable of ascertainment, it must contain a definite purpose.” 2. Lengthy and Comprehensive Memorandum; Corporate draftsmen developed the technique of specifying in the objects clause, not only the main objects which the company was to pursue, but also a seemingly endless list of other activities covering every conceivable business venture. Lord Wrenbury in the case of Cotman v. Brougham[74] in response to this the courts attempt to restrict this development by developing the main objects rule of construction. See the case of Re Haven Goldmining Company (1882) 20 Ch. 151 and the application of the ejusdem generis rule. Where the main objects specified in the first few paragraphs of the memorandum of association are followed by wide powers expressed in general words, the latter should be construed subject to the main objects. 3. Separate and Independent Objects Clause; in order to circumvent the ejusdem generis rule draftsmen inserted a separate and independent objects clause at the end of the objects clauses. These clauses provided that each paragraph is to constitute a separate and independent clause not limited by or to other paragraphs. See the case of Cotman v. Brougham[75]where the House of Lords reluctantly upheld such a clause, contrast this with the case of Re Introductions Ltd. v. National Provincial Bank Ltd.[76] where a company was incorporated with the object of hosting foreign students, later it became involved in pig breeding. Two debentures over the company’s assets were created to secure a large overdraft. The objects clause stated that the company could borrow by debentures, and there was also a clause which provided that each of the preceding sub-clauses should be construed independently and should in no way be limited in any way to any other sub, sub-clause. The Court of Appeal held that the ability to borrow money was a power and not an object, and the power to borrow money could not be elevated into an object by an independent objects clause. We witness the distinction between objects and facilitative powers with powers being considered as facilitating an object.

Lecturer: Ms. Lesley Walcott Date: October 9th, 2003.

The Doctrine of Ultra Vires
Rolled Steel Products Ltd[77] (H of L) & Russell v. Northern Bank Dev. Corporation Ltd.[78]

In the case of Rolled Steel Products (Holdings) Ltd v. British Steel Corporation[79], which is based on complex facts, and has to do with the maintenance of capital in accordance with S. 151 of the UK Companies Act 1985. The memorandum gave the plaintiff company power to lend and advance money, to give guaranties and give securities. The controller of the plaintiff company established a service company which ran up a debt with a third company which was subsequently acquired by the defendant company. The controller of the plaintiff company gave a guarantee on the companies indebtedness and subsequently guaranteed the balance of the debts and issued a debenture to secure the debt. On the subsequent liquidation of the plaintiff company, the plaintiff instituted proceedings against the defendant for money paid under the debenture. They also sought a declaration as to the validity of the guarantee and the debenture granted. Justice Vinn Lott in the lower court stated that the power to lend and advance money in the plaintiffs memorandum was not a separate independent object, but merely an ancillary power which had to be exercised in pursuance to the main objects and purpose of the company. Since the defendant knew that the granting of the debentures and guarantee was under the ancillary power, and was not to further the companies main purpose and objects, the guarantee and debenture were ultra vires, and being ultra vires, the shareholders even if acting unanimously could not ratify them. The Court of Appeal reversed this decision finding instead that “an act which comes within the scope of a power conferred expressly or impliedly by the company’s memorandum is not made ultra vires by reason of the fact that the director entered into it for some improper purpose.” The court of appeal decision can be regarded as blurring the distinction, or eradicating the distinction between an object and a power.

Lord Justice Slade in the Court of Appeal put forward six propositions: - 1. It is a question of construction of the memorandum of association whether a particular transaction is within or outside a company’s capacity. 2. The state of mind or knowledge of persons dealing with it is irrelevant when considering corporate capacity. 3. While due regard must be paid to any express conditions attached to the company’s memorandum, for example a power to borrow only up to a specified amount. The court will not ordinarily construe a statement in the memorandum as a condition limiting the company’s corporate capacity, but rather as a limitation on the authority of the directors. 4. In the absence of unanimous consent of all shareholders, the directors of a company will not have actual authority from the company to exercise any expressed or implied powers other than for the purpose of the company as set out in its memorandum of association. 5. A company holds its directors as having ostensible authority to bind the company to any transaction which falls within the powers expressly or impliedly conferred on it by the memorandum of association. Unless he is put on notice to the contrary, a person dealing in good faith with a company that is carrying on an intra vires business is entitled to assume that its director are properly exercising such powers for the purpose of the company as set out in the memorandum of association. 6. If a person dealing with the company is put on notice he cannot rely on the ostensible authority of the directors.

Note the following: - 1. It is questionable whether the decision of Rolled Steel Products (Holdings) Ltd v. British Steel Corporation[80] is applicable when there has been a total abandonment of the companies original business as in the case of Re Introductions Ltd. v. National Provincial Bank Ltd.[81]. 2. Brady v. Brady[82] seems to indicate that the distinction between an object and a power has not been wholly eradicated.

Gratuitous Dispositions
Gratuitous dispositions include employee benefit schemes and dispositions for non-business purposes. The classical approach is that an activity not bona fide designed to enhance the profitability of the company is ultra vires. See the case of Hutton v. West Cork Railway[83] where it was stated that: - “Charity cannot sit at the board room table, and there are no cakes and ale except for the benefit of the company.”
See the case of Re Lee Behrens[84]; in this case a director of a company awarded a widow of one of the company’s former directors an annuity, the court upheld the liquidators claim which was that the payment was mere gratuity and therefore ultra vires the company. Eve J laid own the test for determining the validity of such gratuitous grants: - 1. Is the transaction incidental to the carrying on of the companies business? 2. Is it a bona fide transaction? 3. Is it done for the benefit of and to promote the prosperity of the company?
See the case of Re W&M Roith Ltd.[85] where a service agreement with a director provided for a pension to his widow was held to be ultra vires the company on the grounds that tests one and three of Eve J’s tests were not satisfied.

Where there is an express provision in the memorandum, which identifies a substantive object of the company as charitable works, it should be immaterial whether the transaction benefits and promotes the prosperity of the company. See the case of Re Horsley & Weight Ltd.[86] where the court of appeal held that the grant of a pension was not ultra vires bearing in mind the separate and expressed provision in the memorandum.
See the case of Charterbridge Corporation v. Lloyds Bank Ltd.[87] where it was held that the act was ultra vires regardless of whether or not it was intended for the benefit of the company because it was in pursuance of an express purpose.

Failure of Substratum
If the objects for which the company has been formed cannot be achieved, the company is liable to be wound up on the just and equitable ground of failure of substratum. See the case of Re German Date Coffee Co.[88] where the memorandum of association of a company stated that it was formed for working a German patent which had been or would be granted. This German patent was never granted, and it was held that the shareholders were entitled to apply for the winding up of the company.

Remedies 1. A member can sue under a derivative action on behalf of a company to set aside the effect of an ultra vires transaction. 2. Shareholders are entitled to apply for an order of winding up. See the Jamaica Companies Act S. 203. 3. Members have the power to apply for an injunction to restrain the company from entering into an ultra vires transaction. 4. The company has the right to recover from its officers compensation for loss suffered as a result of an ultra vires transaction which they have caused it to enter.

Articles of Association
Every company is required to have articles of association (Jamaica, Bahamas, Belize and St. Kitts). This defines the companies corporate authority indicating contractual limitations placed upon the company by the shareholders. The articles of association determine how the objects of the company are to be achieved and how the powers are to be exercised. Articles of Association generally contain the following provisions: - 1. Appointment of the board of directors. 2. Specifications as to the powers which a director may exercise in a company’s name. 3. The calling and holding of shareholders meetings. 4. The determination of voting rights. 5. Determination of rights of different classes of shareholders. 6. provisions dealing with the financial management of the company, for example: - a. Share capital and variation of rights clause. b. Calls on shares ( this applies to partially paid up shares in Jamaica and Belize. c. Transfer of shares. d. Alteration of capital e. Annual accounts, profits and dividends. f. Winding up of the company.

Lecturer: Ms. Lesley Walcott
Date: October 14th, 2003.

Articles of Association…

Interpretation
Articles of association are subordinate to the memorandum of association, hence if there is any inconsistency between the memorandum and the articles of association, the memorandum will prevail and articles are void to the extent of their inconsistency. The authority for this comes from the case of Guinness v. Land Corp. of Ireland (1885) 30 Ch. 376.

The articles of association may be examined to clarify Ambiguities in the memorandum. Please note that in determining the question of corporate authority the purposes of the corporation are material. The purposes are to be gathered from the ordinary natural meaning of the words.

The Contractual Effect of the Articles of Association
This has been the centre of debate for over a century. The controversy stems from a drafting oversight in S. 20 of the 1948 UK Companies Act which is reflected in S. 14 of the 1985 UK Companies Act. This oversight has been carried through and adopted in the English speaking Caribbean. see for example S.22 of the Jamaica Companies Act as well as S. 14 of the 1981 Companies Act of Belize.
Section 20 of the UK Companies Act provided that: - “Subject to the provisions of this act the memorandum and articles, when registered bind the company and its members to the same extent as if they respectively had been signed and sealed by each member, and contained covenants on the part of each member to observe all the provisions of the memorandum and of the articles.”
St. Kitts in 1996 remedied this lacuna with S. 10 of the Companies Act and now expressly mentions covenants on the part of each member and the company[89].

The deed of settlement failed to take into account the fact that the corporation is a separate legal entity. The courts as a result of this loophole became preoccupied with the following questions: a. Who are the parties to the statutory contract, the members of the company and the company, or just the members? b. Are the members deemed to have covenanted with each other, or the company or both? c. Could members sue another directly on the contract or must he enforce his statutory right only through the company?
Some of the questions have been resolved: - 1. See the case of Wood v. Odessa Waterworks Co.[90] where the articles empowered a director with the sanction of a general meeting to declare dividends to be paid to shareholders. The company passed an ordinary resolution proposing to pay no dividends, but to give shareholders debenture bonds redeemable over thirty years. An injunction was granted to the shareholder to prevent the company from acting on the resolution. A shareholder therefore has the right to enforce the terms of the articles by virtue of the statutory contract of S. 20. 2. The articles bind the shareholders only in their capacity as members of the company. They as shareholders cannot make the company abide by the articles by virtue of any special or personal right for example qua director, as solicitor or as managing director. These rights are not shared by all. This principle was illustrated in the case of Hickman v. Kent or Romney Marshall Sheep Breeders Association[91] and Beattie v. E & F Beattie Ltd.[92]
In the case of Hickman v. Kent, the plaintiff was a member of the defendant company. The articles of the company contained an arbitration clause for the settling of disputes. The plaintiff brought an action complaining of irregularities in the affairs of the association. Astbury J examined the earlier decision in the case of Pritchard, Melhado v.Porto Allegre Rly. Co[93] as well as the decision in Browne v. La Trinidad (1887) 37 Ch. D 1. He stated that these decisions relied on by the plaintiff purported to give specific contractual rights to persons in some capacity other than that of shareholders, and in none of these cases did the members possess rights in common with other members.

He laid down the following principles upon which most of the law as to the legal effect of a companies articles of association now rest: - 1. No article can constitute a contract between the company and a third party. 2. No right merely purporting to be given by an article to a person in a capacity other than that of a member, for example, solicitor, promoter or director can be enforced against the company. 3. That the articles generally create rights and obligations between the members inter se and the company respectively.
See the case of Rayfield v. Hands[94] where Vaisey J upheld an action against a member by another member without joining the company in the action. The articles required every member who intended to transfer his shares to notify the directors who are entitled to take the shares at fair value. The court held that the obligation to acquire the shares was imposed on the directors as members and they were obligated to honour the clause.

See the case of Eley v. The Positive Government Security Life Assurance Co. Ltd. [1876] 11 Ex.D. 88.the articles of association provided that the plaintiff acts as solicitor and transacts all legal business on behalf of the company, he was to be paid all usual fees and charges. The articles provided that he not be removed and used for breach of contract. The court in upholding Astbury J’s second proposition held that the plaintiff was not a party to the contact and that was a matter between the directors and shareholders. The court did not address the fact that Eley subsequently acquired shares in the company.

New law jurisdictions have bylaws, they are regulatory only and are not contractual. Section 20 only applies in Jamaica Belize and St. Kitts and does not give rise to contractual obligations. See the case of Rands Hiram v. Walker where the court purported to give contractual effect to bylaws, it was subsequently discredited by the Supreme Court of Canada. ****

Rights conferred by the articles of association are: - 1. The right to vote ( Pender v. Lushington[95] 2. The right to protect preferential rights and class interest ( Greenhalgh v. Arderne Cinemas [1951] Ch. 286[96] 3. The right to be registered and the right to enforce delivery of share certificates in accordance with the articles. 4. The right to enforce a declared dividend as a legal debt, and if no dividends are declared then a right to prevent dividend from being distributed otherwise than in accordance with the articles of association ( Wood v. Odessa Waterworks Co.[97] 5. A member has a personal right to prevent alterations in the articles which would constitute a fraud on the minority.

Alteration of Articles
The Jamaica Companies Act S.7, 9 and 12: - Directors have the power to alter the contract and S. 22 of the legislation provides the procedure to be followed. This constitutes a substantial corporate change a three-quarters majority is required, for that special resolution, and that resolution must be forwarded to the Registrar of Corporate Affair. Section 9 of the Jamaica Companies act provides that subject to the conditions contained in it memorandum a company may by special resolution alter its article. It follows that shareholders rights although dependent upon the articles of incorporation are not enduring and indefeasible, but are liable to modification or destruction. A shareholder is not entitled to assume that the articles would always remain in a particular form.

Lecturer: Ms. Lesley Walcott Date: October 16th, 2003.

The Rules of Agency

|Authority |
| | | | | |
| | | | | |
| |Actual Authority | | |Apparent/Ostensible Authority |
| | | | | |
| | | | | |
| | | | | |
| |Express Authority | |Implied or Usual Authority | | |
| | | | |Course of Conduct |
| | | | | |
| | | | | |
|Written |Oral | | | |

Actual Authority
Actual authority may be express or implied. Express actual authority is derived from the memorandum of association, articles of association or bylaws depending on the jurisdiction whereby specific authority may be conferred on an agent orally or in writing in the form of a resolution.

Implied Actual Authority
This is where actual authority is not defined and therefore needs to be implied or inferred from the surrounding circumstances. It will be implied from the fact of appointment that the person has the usual authority which holders of such position usually have. Actual authority whether express or implied is binding between company and agent as well as the company and others. See the case of Hely Hutchinson v. Brayhead.[98] The common law doctrine of implied actual authority is supported in the statutory assumption in S 21.(d.) in the Barbados Companies Act which provides that : - A person held out by a company as a director, an officer or an agent of the company who has not been duly appointed has authority to exercise the powers and perform the duties that are customary in the business of the company or usual for such a director, officer or agent. –

Ostensible/Apparent Authority
This is the authority of an agent as it appears to others. It is often wider than actual authority, and is the legal relationship between the principal, (the company), and the contractor, (the third party), created by a representation made by the principal and acted upon by the contractor that the agent had the authority to enter into a contract of the kind entered into. The principal (the company) is liable to perform any obligations imposed by such contracts.

Note the following: - 1. The agent is a stranger and need not be aware of the existence of the representation. 2. The representation when acted upon by the contractor operates as estoppel, preventing the principal from asserting that he is not bound by the contract. 3. It is irrelevant whether the agent had actual authority to enter into the contract. 4. The representation may take a number of forms, the most common being conduct, usually by allowing the agent to act in some way ( Acquiescence. 5. The key to apparent or ostensible authority is that the company has created the situation. See the case of Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd.[99] where Diplock LJ identified four criteria which must be satisfied before apparent authority will be created: - a. A representation made to the outsider that the agent had the authority to enter into a contract of he kind in dispute on behalf of the company b. This representation was made by a person who had actual authority to mange the business of the company either, generally, or with respect to the matters which the contract relates. c. The outsider was induced by such representation to enter into the contract d. The company had the capacity either to enter into a contract of the kind sought to be enforced or to delegate such authority to an agent to enter into a contract of that kind.

Constructive Notice
Constructive notice is another obstacle confronting outsiders, whereby outsiders are deemed to have knowledge of the corporations constitution and related documents which are filed in the registry. Consequently if those documents impose restrictions on an agent’s authority, the outsider will be bound by virtue of the operation of the doctrine. An outsider will not be allowed to plead ignorance. See the House of Lords decision in the case of Ernest v. Nichols[100] where the court stated that the corporate constitution is strict and obligatory on those who deal with the company.

The Rule in Turquands Case a.ka. The Indoor Management Rule
This is an important qualification introduced to redress the imbalance. This rule states that: - “where persons conduct the affairs of the company in a manner which appears to be in accordance with the company’s constitution then persons dealing with these agents are not affected by any irregularities in the internal management of the company.”
For an application of this rule, see the case of Mahoney v. East Holyford Mining co.[101] In this case a bank was held to be entitled to accept cheques drawn and signed by directors in a manner authorised by the articles and were not obliged to query whether the individual signing the cheque were validly appointed by the company.

Note the following: - 1. The rule does not protect a third party who in fact had notice or knowledge of the defective authorisation. The onus lies on he who alleges that the third party had the required notice or knowledge as shown by the case of B. Liggett (Liverpool) Ltd. v. British Steel Corp.[102] where a bank contrary to instructions paid out cheques signed by one director only. The court held the bank should have made enquiries to satisfy itself and could not rely on the indoor management rule. 2. The doctrine does not apply if the document the outsider sought to rely on is forged. See for example the case of Ruben v. Great Fingal Consolidated[103]. The forged document is considered a pure nullity and the indoor management rule only applies to irregularities which would otherwise constitute a genuine transaction. This forgeries ruke has been abolished by the Barbados Companies Act. S.21 (3) 3. An outsider is precluded from relying on the rule. See the cases of Morris v. Kansen[104] and Howard v. Patent Ivory Manufacturing Co.[105]

Reform
The Barbados Companies Act S.20 abolished the doctrine of constructive notice. See also S. 81, which provides that: - “An act of a director or officer is valid not withstanding any irregularity in his election or appointment.”
Section 21 is a reflection of the indoor management rule. It is broader in ambit, expressly overruling the rule with respect to forgeries.

Criminal and Civil Liability
A Company has no soul to be damned and no body to be kicked. In recent times we have had several highly publicised disasters caused by human error. There are however, several conceptual difficulties in applying criminal law to corporations: - a. The criminal law process is a personal one, evident in the rules relating to diminished responsibility and the requirement of mens rea, whereas corporate law is impersonal. b. Ones notion of punishment is never satisfied with respect to corporations c. The inappropriateness of certain punishment for example life imprisonment, hanging, cat-o-nine tails. d. There are some crimes which can only be committed by someone performing some physical act.

Corporations, like human beings may be made to pay punitive damages. They may be subjected to administrative sanctions and may even be criminally convicted.

Weaknesses 1. The punitive system is weak, paltry fines are evident in many regional statutes, which do not correlate to the wrong committed. See for example S.125 (5) in the Jamaica Companies Act, which imposes a fine of $100.00 on directors.

Lecturer: Ms. Lesley Walcott Date: October 21st, 2003.

2. Another weakness is a personalised sanction satisfying some of a more visceral notion which demand personal damnation, shame, hurt and humbling contriteness. There is a difficulty in attaining these goals when the corporation rather than the owner is punished.
In an attempt to circumvent these difficulties, corporate law has devised several themes or principles of corporate blameworthiness: - a. the identification doctrine or alter ego b. agency principles c. the imposition of strict liability requiring no mental element or mens rea.
However if the offence is one that requires a mental element such as intention or recklessness then the identification principle applies. See the Bahamian case of Rabin v. Sunshine Development: - in this case the villain of the piece was stated to be the alter ego of the company. The legal distinction between a company incorporated under the companies articles and the individual human person(s) as the alter ego was highlighted. The court employed the doctrine of the rule in Turquands case, and the issue was whether Mr. Reid had the power to bind the company. As stated by Moore J: - “he was a character who had a pattern of getting into ladies pants and then into their pocketbook.”
The court stated that a person who deals in good faith with a representative body of a company, which is in fact exercising powers of management, is not prejudiced by defects in procedure which should have been fulfilled before the transaction is effected. Therefore the plaintiff as an outsider is entitled to rely on the assurances of the defendant. Moore J commented on the fact that the doctrine of separate legal personality has been historically exploited in the Bahamas so much that an industry of sorts is created and a large measure of legal factors has to do with companies whose practical as distinct from legal existence hardly extends beyond the covers of a document folder.

Common Law Test
a. Identifying mind and will theory. A company as a separate artificial person cannot commit certain acts which require a human thought or action. See the case of Lennards Carrying Co. Ltd. v. Asiatic Petroleum Co. Ltd. [1915] AC 705 where Viscount Collins stated that: - “a company is an abstraction, it has no mind of it’s own, more than it has a body of its own. Its active and directive will must consequently, be sought in the person of somebody who for some purposes may be called an agent but who is really the directing mind and will of the corporation, the very ego and centre of the corporation.”
In this case the company unsuccessfully claimed protection under S. 502 of the Merchant Shipping Act of 1894 which provided that a ship owner is liable for damage by fire in the absence of “actual fault or guilt.” The evidence shows that Mr. Leonard a director of the ship owning company was aware that the ship was un-seaworthy; his fault was imputed to the company and as the company failed to discharge the burden of proof that his fault was not the fault of the company. See the subsequent House of Lords Decision in the case of H.L Bolton Engineering Co. Ltd. v. T.J. Graham & Sons Ltd [1957] 1 QB 159 wher Lord Denning stated: - “a company may in many ways be likened to a human body, it has a brain and nerve centre which controls what it does. It also has hands which holds the tools and act in accordance with directions from the centre. Some people in the company are mere servants and agents who are nothing more than the hands to do the work and cannot be said to represent the mind or will. Others are directors and managers who represent the directing mind and will of the company and control what it does. The state of mind of these managers is the state of mind of the company and is treated by the law as such.”

In the subsequent House of lords case of Tesco Supermarkets v. Nattrass [1971] 2 All ER 127 Lord Reid stated that: - “a living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intention. A corporation has none of these, it must act through living persons though not always one and the same person. Then the person who acts is not speaking or acting for the company, he is acting as the company and his mind, which directs his acts, is the mind of the company. He is an embodiment of the company or one can say he hears and speaks through the persona of the company.”

Note the following: - 1. Who will be identified with the company? See the case of Meridian Global Funds Management Asia Ltd. v. Securities Commission [1995] 2 AC 500 which involved an alleged breach of securities legislation, the defence turned on whether the company had knowledge of the activities of the investment managers. Pay attention to Lord Hoffman’s judgement which addressed the problem of the attribution of knowledge or mens rea to a company. He also suggests that the directing mind and will theory will not always be appropriate. Examine his primary and secondary rules of attribution and determine whether or not he provides a solution. 2. On the issue of corporate theft, see your respective larceny or theft legislation. In Barbados, theft is: - “the appropriation of property of another with the purpose of permanently depriving another of that property.” See the cases of Perlberg & Obrien [1982] Crim. LR 829, AG’s Ref. # 2 of 1982 [1984] QB 624 and R v. Philipou (1989) 89 Cr. App. R. 290 which deal with the question of whether one can steal from oneself. See Virgo’s article “Stealing From The Small Family Business” [1991] CLJ 464. See the case of Rv. Rozeik [1996] 1 WLR 159 where Mr. Rozeik received two cheques from two companies and was convicted of obtaining them dishonestly by defrauding the company. The issue was whether his guilty mind could be imputed to the company by virtue of his office. Please note Legatt LJ stated: - “in cases where the company is the victim the person(s) who stand for its state of mind may differ from those who do so in cases where he company is charged with the commission of the criminal offence.” 3. Corporate Manslaughter: See AG’s Reference # 2 of 1999 [2003] WLR 195. Please note that the broader mention rule was rejected in this corporate manslaughter case. 4. See the case of R v. IRC Haulage [1944] KB 551 where the court of criminal appeal held that the liability of a company for a criminal act of an individual identified with the company depends on the nature of the charge.

Directors

The companies acts empower the directors to manage the business and affairs of the company[106], subject to a unanimous agreement of the shareholders[107] . The companies acts provide the statutory power which reflects the common law, and the common law position obtains in Jamaica and Belize.

Barbados and other new law jurisdictions (like Bahamas and Trinidad and Tobago) gives a two-fold duty to directors. S.95(1)(a) places directors under a duty to act honestly and in good faith with a view to the best interests of the company. S.95(1)(b) places directors under a duty of care duty and skill that a reasonable prudent person would exercise in comparable circumstances. S.95(2) provides that where the director exercises his fiduciary duty to the company he is to have regard to the “interest of the employees in general and to the shareholders.”

|DIRECTORS | | |STATUTE | |
|Barbados |S. 58 | |Barbados |S. 95 (1) |
| |S. 60 | |Trinidad & Tobago |S. 99 |
|Bahamas |S.85 | |Bahamas |S. 86 |
| | | | | |

Lecturer: Ms. Lesley Walcott Date: October 23rd, 2003.

Nature of Fiduciary Duties

The director’s power to mange is not unfettered. Limitations are imposed on the exercise of his duty in the form of statute and the common-law. In new law jurisdictions, directors are under a statutory obligation to act honestly and in good faith with view to the best interest of the company. See for example S. 95 of the Barbados, S. 99 Trinidad & Tobago, S. 86 Bahamas Companies Acts. The statutory requirement that directors act honestly and in good faith with a view to the best interests of the company summarises the notion that directors are fiduciaries enabling their conduct over the company property to be tested against equitable standards. The strengths and weaknesses of the standard (the ex statutory standards) to act in good faith lie in its generality. It is a broad statement about what is expected from directors and officers. In new law jurisdictions such as Trinidad & Tobago, Barbados and the Bahamas which refer to “directors and officers” statute began this: - Officers defined in S. 2 as CEO, Corporate Secretary, Treasurer. St. Kitts has a curious definition of an officer as a director or liquidator of the corporation. It’s weakness arises from the difficulty of what constitutes prudent behaviour, good faith and the best interest of the corporation.
Rule 1: - (Belize and Jamaica) Directors when exercising their directorial power must act bona fide in what they consider, not what the court considers is in the best interest of the company. See the case of Mills v. Mills [1958] 60 CLR 150 where as a result of tension between the managing director of the company who was also a large ordinary shareholder and his nephew who was a director and the holder of a large number of preference shares. The managing Director utilised his votes and those of family members and resolved that certain accumulated profits be capitalised and distributed to ordinary shareholders in the form of bonus shares. This was designed to ensure that the managing director continued to control the company. Latham CJ noted the difficulty of applying the test of “acting in the interest of the company” where there are different classes of shares, for the character of the act must necessarily adversely affect the interest of one class of shareholders while benefiting the other. In such circumstances he states, the question becomes what is fair between the different classes of shareholders i.e. what is the moving cause. He held that the exercise of the power was proper.
Rule 2: - directors must not act for any collateral purpose, the duty to exercise powers for a proper purpose requires that those powers must be exercised for the purpose for which those powers were granted. If Directors issue shares of the company for the purpose of conserving their own power, the resolution concerning the shares would be set aside or an injunction would be granted. Before the court will intervene it must be established that the director acted from an improper motive or arbitrarily and capriciously. See the case of Hogg v. Cramphorn Ltd. [1969] 1 All ER 977 where directors attached special voting rights to preference shares so as to thwart a hostile take-over bid. The director believed that the acquisition of control by a prospective take-over bidder would not be in the best interest of the company or its staff. Nevertheless the court held it was improper use of the directors power and while accepting that the board acted in good faith, they noted that the primary purpose of the scheme was to ensure control of the company.
Rule 3: - this relates to contracts between a director and the company. A contract made by a company with one of its directors or with a company or firm in which he has an interest is voidable at the instance of the company. See the case of Aberdeen Rly. Co. v. Blaikie Bros.[1854] 4 MAC 461, where an arrangement to manufacture iron chains was set aside on the ground that the chairman of its board of directors was the managing partner of that company. The rationale for this was that in the discharge of duties one must not place oneself in a situation where your interests and duty conflict, and in accordance with equity, a director is prohibited from dealings unless he can point to full disclosure. Trinidad & Tobago S.93 and Barbados S. 86 & 90.

A director or officer of a company who is a party to a material contract or proposed material contract with the company must disclose in writing or request to have entered into the minutes the nature and extent of his interests.

Note the following: - 1. The onus is on the director to point to full disclosure, failure to satisfy this requirement may lead to a loss of office, avoidance of the contract, or loss of profits. 2. It is possible under S. 94 of the Trinidad & Tobago and S. 90 of the Barbados Companies Act for a director to give general notice.

Bribes

See the case of Mahesan v. Malaysian Housing Society [1978] 2 WLR 444
Remedies: - 1. rescission of contract 2. an action for money had and received (The company can sue him as a constructive trustee of the bribe money.) 3. damages 4. the official is liable to instant dismissal and will forfeit any claim he may have to commission or bonus relating to the transaction concerned

Rule 4: - directors are precluded from making any secret profit and from misusing corporate information and opportunity. Corporate fiduciaries and officers normally consider a range of commercial opportunities as a function of their office. Where directors acquire for themselves property rights which they are regarded as holding in equity on behalf of the company, they will be held to be in breach of their strict fiduciary obligation. One must determine the point at which such an opportunity may be said to belong to the company. If an executive resigns from the corporation, at what point does that implicit contract with respect to obligations between the company and the executive terminate? At what point is former employee free to capitalise on information gleaned while in the services of the corporation? The implicit contract will in general extend beyond the termination of the employment. See the case of Regal (Hastings) Ltd. v. Gulliver [108][1942] 1 All ER 378 where Viscount Sankey laid down the conflict test. The general rule of equity is that: - “no one who has duties of a fiduciary nature to perform is allowed to enter into agreements in which he has or can have personal interest conflicting with the interest of those he is bound to protect.”
See the case of Peso~ Silver Mines Ltd. v. Cropper [1966] DLR (2nd ed.) 1 where the strict rule was relaxed because there was a bona fide vote of the board of directors, thus the court held that the directors did not violate the conflict rule. Therefore, a director is free to make an investment on his own account after the company has considered the proposition and bona fide decided against it. It is important to note that the principle is dependent upon informed consent. See Canadian Aero Services Ltd. v. O’Malley [1973] 40 DLR (3rd) 371 where Laskin J identified the relevant factors required in determining standards of honesty, loyalty and good faith: - 1. the position held 2. the nature of the corporate opportunity “its rightness or specificity” and the directors or officers relationship to it. 3. the amount of knowledge possessed 4. the circumstances in which the knowledge was obtained 5. was the knowledge special and private? 6. the circumstances under which the relationship was terminated, for example, retirement, resignation, sick-leave.
It is clear that a criterion for business opportunity is property rights. Economic theory suggests that if an executive appropriates an investment opportunity for private account which was anticipated by the participants in the capital market that gain belongs to the firm. In the case of Industrial Development Consultants Ltd. v. Cooley [1972] 2 All ER 162, Cooley was the managing director of the company and as a representative of the company he took part in negotiations with the gas board which said expressly that they did not want to do business with the company. They wanted to do business with Cooley in his private capacity. Cooley resigned and Roskill J held that he was accountable to the company for the whole of his benefit under the contract.

Lecturer: Ms. Lesley Walcott Date: October 28th, 2003.

Duty Of Care Diligence and Skill

In the case of Re City Equitable Fire Ins. [1925] Ch. 407 Justice Romer outlines the duty as follows: - 1. A director need not exhibit a greater degree of skill than that usually associated with persons in that position. 2. A director need not give continuous attention to the affairs of the company, his duties are of an intermittent nature to be performed at periodical board meetings. 3. A director is justified in the absence of suspicion to delegate or trust some other official.
See also the case of Re Brazilian Rubber Plantations & Estates Ltd. [1911] 1 Ch. 425 where it is noted that if the director has special knowledge he must give the company the benefit of it.

In the case of Re Cardiff Savings Bank, Marquis of Bute [1892] 2 Ch. 100 where the director attended one board meeting in 38 years, the court found that he was not in breach of his duty of care diligence and skill.

The case of Re Pavlides v. Jensen [1956] Ch. 565 demonstrates that mere negligence is insufficient to constitute a breach of care diligence and skill. The sale of an asset at under value will not without more be a breach of care diligence and skill. There must be mala fides on the part of the director. He must have benefited from the sale at under value to establish a breach.

Dovey v. Cory [1901] AC 477 examined the third prong of Justice Romer’s directors duties. The court found the director was entitled to rely on statements made by the chairman.

The directors can also protect themselves through indemnity insurance, or they can insert a clause in the bylaws or articles to protect themselves from liability. Barbados Companies Act S. 101. In the case of Re Brazilian Rubber Plantations & Estates Ltd. [1911] 1 Ch. 425 there was an indemnity clause in the articles of association that was given effect to.

Corporate Finance

Equity Financing

The term equity is applied to the shares of a corporation. Justice Farwell in the case of Borlands Trustees v. Steel Bros & Co. Ltd.[109] gave the definition of a share, he stated: - “A share is the interest of a shareholder in the company measured by a sum of money for the purpose of liability in the first place and of interests in the second, but also consisting of a series of mutual covenants entered into by all the shareholders inter se in accordance with S.14 of the Companies Act of 1862 [CA 1985, S. 14].”

The Jamaica Companies Act S. 2 defines a share as “A share in the share capital of a company.” See also S. 73 which provides that “The share or other interest of a member in a company shall be personal estate transferable in the manner provided by the articles of a company and shall not be in the nature of a real estate.”

Barbados S. 26 section has similar provisions and provides that shares in a company are personal estate and are not in the nature of a real estate.

Share Certificates

A share certificate is an instrument under seal of the company that the person therein named is entitled to a certain number of shares. It is not a negotiable instrument. In Jamaica a share warrant to bearer is permissible, this is a certificate under the seal of the company stating that the bearer of the warrant is entitled to a certain number of paid up shares. A share warrant to bearer is a negotiable instrument. See the Jamaica Companies Act S. 82.

Classes of Shares

The shares of a corporation may be sub-divided into various classes and the relative rights of the holders of these various classes of shares are usually prescribed in the articles of association.

Preference Shares

1. These rank first in priority 2. They have attached to them certain preferences or rights over the holders of other classes of shares. 3. Holders of this type of security are usually entitled to dividend paid at a fixed pre-determined rate; usually expressed as a percentage of the nominal value of the share. This nominal value[110] has been abolished in new law jurisdictions such as Barbados, Trinidad & Tobago, St. Lucia. The value of shares is determined by the market value. There is also a book value – this is what the accountant says the value is. The nominal percentage is fixed and cannot be increased no matter how large the companies profit may be unless, the shares are accompanied by an express right to participate in the surplus profits. 4. Preference shareholders rank equally with ordinary shareholders with respect to the repayment of capital on winding up unless expressly governed by the bylaws or articles of association. 5. Preferred dividends may be and usually are cumulative, in other words, if they are not paid in a particular year, they accumulate and are payable in subsequent income years. The arrears of preferred dividends are not a debt of the company, but represents a priority with respect to future dividend distribution. 6. Where the preferred dividend is non-cumulative, it is payable only out of the profit of that particular year. There is no allowance for the carrying forward of arrears.

Shareholders Rights

1. The right to vote 2. The right to dividends 3. The right to a return of their capital on winding up.
Income tax legislation in the region recognises the existence of preference shareholders. When a company pays dividends to preference shareholders, they are entitled to deduct it from their profits in the computation of its accessible income. The preference shareholder may be seen as a hybridic investor, he lies somewhere between a creditor and an ordinary shareholder. See S. 10 of the Barbados Income Tax Act.

Lecturer: Ms. Lesley Walcott Date: October 30th, 2003.

Common or Ordinary Shares

This is the residual category, payment of capital and dividends is postponed. If the company prospers, the increase in value will accrue to the ordinary shareholders since the preferred shares are normally fixed in value. Similarly if the company suffers, on liquidation the common shareholders will bear the brunt of the losses since the preferred shareholders will normally have returned to them the full issue price of the preferred shares and any arrears in dividends before the ordinary shareholders receive anything.
Note: - 1. This category normally carries the majority of voting rights at general meetings 2. If the issued capital does not differentiate then the issued shares are ordinary shares ranking equally. See S. 27 of the Barbados Companies Act. 3. Ordinary shareholders are entitled to dividends if and when declared. 4. They are entitled to share in the surplus assets of the company if and when wound up.

Other Types of Shares

1. Watered Shares: - These are where shares are issued for labour, services or property which is less than the par value of the share, or were less than the value attributed by the director to the labour services or property. (This applies in old law jurisdictions like Jamaica and Belize.) 2. Redeemable Shares: - If these are authorised by the article or bylaws, a company may issue redeemable shares. The shares may be redeemed or bought back out of the profits of the company. If there are more liabilities than assets, then the company is prohibited from purchasing or redeeming the shares. See S.40 Barbados and S. 57 of Jamaica Companies Acts. 3. Bonus Shares: - These are shares given as extra consideration for what is received by the corporation. 4. Discount Shares: - These are where shares are issued for a sum of money that is less than normally obtained by such shares as indicated by their par value. See for example S. 58 of the Jamaica Companies Act. The Barbados statute prohibits the issuing of shares at a discount. 5. The Golden Share: - this share is associated with state ownership where in the process of privatisation the government retains a percentage of the share capital.

Rules of Construction

1. There is no implied condition that all shares rank equally. 2. A presumption of equality arises in the absence of express provision to the contrary. Barbados S. 27. See the House of Lords decision of Birch v. Cropper [1889] 14 A.C. 525 where the articles of the company provided for only one class of shares i.e. ordinary shares. Preference shares were subsequently created and the articles amended to provide that preference shares are entitled to a dividend of 5% taking preference over the ordinary shares. On winding up the issue was what method should be used to distribute corporate assets between the two groups. The House of Lords held that in distributing the surplus assets, preference shareholders were entitled were to participate rateably with the ordinary shareholders, in proportion to the nominal amount of shares held. Therefore where the share issue does not differentiate between the rights of the classes of shares with regard to: - a. dividends and b. return of capital and participation in surplus capital and c. voting then shareholders are entitled to participate rateably in proportion to shares owned. 3. If shares are expressly divided into classes, it is a question of construction in each case as to what the rights of each class of shareholders are. See the case of Scottish Insurance Corp. v. Wilson & Clyde Coal Co. [1949] AC 512 4. Where a preference is bestowed in respect of dividends, the return of capital or voting, then this preference does not extend beyond that particular right. The preference is exhaustive and the presumption of equality remains in respect of the remaining residual rights. See the case of Re Bridgewater Navigation Co. [1891] 2 Ch. 317 as well as Will v. United Lankat Plantations [1914] AC 11 where Falwell LJ stated that: - “The attribute of a preference share are limited and defined on its birth, it has a preference and such a preference as is given to it by resolution.” Both the Court of Appeal and the House of Lords rejected the argument that the preference shareholders are entitled to participate in dividends equally with the ordinary shareholders after they receive their cumulative 10%. See the case of Re William Metcalf & Sons Ltd. [1933] Ch. 132 which ruled that the principle in Will v. United Lankat Plantations[111]only applied to dividend rights and had no application to capital rights. So preference shareholders may be seen as non-participating with dividends but participating with capital, this decision removed by Scottish Insurance Corp. v. Wilson & Clyde Coal Co.[112] as well as Prudential Assurance Co. Ltd. v. Chatterly Whitfield Colliers [1949] AC 512. These decisions arguably make preferred shares a less secure form of investment. 5. A company may be empowered to give preference shareholders a share in the profits of the company in addition to preference dividends, this is dependent upon the bylaws and articles of association. 6. Where shares are entitled to participate in surplus capital on a winding up, prima facie, they participate in all surplus assets. See the case of Dimbula Valley (Ceylon) Tea Co. Ltd. v. Laurie [1961] Ch. 353 where Buckley LJ rejected the contention that the companies undistributed profits were automatically the sole and exclusive property of the ordinary shareholders. He construed the preference shareholders rights provisions as extending to these funds except in so far as they formed part of the subject matter of the appropriate dividend resolution passed at the commencement of liquidation. 7. If preference dividends are provided for, it is presumed to be cumulative. See the case of Webb v. Earle [1875] LR 20 Eq. 556. This presumption is rebuttable. 8. There is a presumption that preferential dividends are payable only if declared.

The Rules on Capital Maintenance

The fundamental principle is that a company must maintain its stated or nominal capital, the share capital fund must be preserved and should not be diminished, otherwise than by expenditure specified in the companies memorandum. The law therefore has laid down certain rules to ensure the preservation of this fund. 1. Issuing share at a discount: - See the Jamaica Companies Act S. 58 a. The issue of shares at a discount must be authorised by a resolution passed in a general meeting of the company and must be sanctioned by the court b. The maximum rate of discount must be specified in the resolution. c. The company must have been in business for at least a year. d. The discounted share must be issued within one month after the date on which the issue is sanctioned by the court or within the extended time allowed by the court. See the case of Oregum Gold Mining v. Roper [1892] AC 1125, this is a House of Lords decision which concerned the issue of preference shares so that the preference shareholders were to be relieved of liability to pay up shares in full. The House of lords found that this was beyond the companies power. Lord MCNaghten stated that: - “The rationale for this rule is that the requirement is based on limited liability and the investor purchases his interest on this understanding. It operates therefore as a condition precedent which cannot be dispensed with.”
Discounted shares are not allowed in new law jurisdictions see for example Barbados Companies Act S. 26. This rule therefore applies in old law jurisdictions such as Jamaica and Belize.

Maintenance of Capital and Rights of Shareholders: ( Examinable

On the subject of what is examinable, Work Sheets 2 and 4 seem to be very examinable as well.

Lecturer: Ms. Lesley Walcott Date: November 4th, 2003.

Consideration Other Than Cash

The question is whether this represents a means of evading the rule against issuing shares at a discount. The decision of Re Wragg [1897] 1 Ch. 796 states that the value of the consideration cannot be enquired into unless impeached on the ground of fraud. See Spargo’s Case [1873] LR8 Ch.App. 407 where a lease was sold to a company incorporated to purchase the lease, and the company credited the purchase price against the vendors liability as a payment against the shares for which he had subscribed. The court held that this operated as a payment for cash.

See the case of Re White Starline [1938] Ch. 458, which states that the consideration given by way of payment must bona fide, be regarded as representing the sum which the payment is to discharge. It is evident therefore that the issuing of shares for consideration other than cash can be a means to avoid the stringent rules on the maintenance of capital.

Shares Issued at a Premium

There is no prohibition against the issuing of shares at a premium, in other words, in excess of its nominal or par value. Statute ensures the premium is treated as capital and not as income or profit by stipulating the amount to be credited must be in a separate section on the companies account headed “Share Premium Account”. See the Jamaica Companies Act S. 56 ss.(1) & ss (2).
Note the following: - 1. By virtue of the capitalisation of the company, a rigidity is placed in the corporate structure. 2. It represents a special statutory reserve as distinct from profits and revenue reserves. 3. Payments out of this account are analogous to a reduction of capital. 4. A return of the companies share capital in the form of dividends is prohibited.

See the cases of Henry Head & Co. Ltd. v. Roper Holdings Ltd. [1952] Ch. 124 and Shearer (Insp. of Taxes) v. Bercain Ltd. [1980] 3 All ER 295. The case of Shearer (Insp. of Taxes) v. Bercain Ltd.[113] involved an amalgamation whereby the share capital in one company was exchanged for the issue of shares in another company at a lower value. The issue was whether the excess had to be capitalised. The Inland Revenue claimed the excess was subject to tax because it was distributable. The court found the company was under an obligation to capitalise by setting up a share premium account and the “profit” as such was not subject to tax. This decision illustrates that share premium accounts may operate to reduce ones tax liability.

Pre-emptive Rights

This is a first option restriction and it operates so as to maintain the balance of power between respective shareholders. It is a right given to shareholders to subscribe for any new shares that the company issue in proportion to their existing share holding. See the Barbados Companies Act S. 34 which commences “If the articles so provide.” Work Sheet 6 p.2-3 lists the reasons for Restrictive Provisions or (Pre-emptive rights), these are: -“ 1. To prevent intrusion of undesirable business associates 2. To preserve the relative interests of the owners 3. To resolve deadlock (or as a control device) 4. To comply with the definition of “private company” in legislation 5. To ensure continuity of the business 6. To provide a market at an acceptable price, for shares”
See the case of Tett v. Phoenix Property & Investment Co. Ltd. [1984] BCLC 599 where article 5 of the company’s articles permitted a member to transfer his shares without prior authorisation from existing members. However, a shareholder could not transfer his shares to an outsider if any member, or the wife, husband or parent of a member was willing to purchase the shares. The shares were transferred to the plaintiff without considering the interest of the members. Justice Vinn Lott found that though the transfer was in breach of the articles, it was wholly complete as between the parties so as to confer a beneficial interest in the plaintiff.

Shareholders rights are dependent upon the articles of association in old law jurisdictions.

Equity Financing

Share Holders Rights

Shareholders rights are protected by: - 1. Common law 2. Statute 3. Contract

Contract: Variation of Rights Clause

This is a protective provision inserted in the articles of a company or bylaws prescribing the conditions, which must be, fulfilled in order to later the rights attached to a particular class of shares. It is an internal restriction. Note however, that an insertion of such a clause may in itself amount to an alteration of substantive rights, where there was no previous provision. The effectiveness of a variation of rights clause is dependent upon whether a company is bound to adhere to the conditions stipulated in the variation of rights clause. One must examine two conflicting decisions in the cases of Fischer v. Easthaven Ltd. [1964] NSWR 261 and Crumpton v. Morrine Hall Pty. Ltd. [1965] NSWR 240. In the case of Fischer v. Easthaven Ltd.[114]the company failed to comply with a variation of rights clause contained in the company’s articles. The company attempted to hold a general meeting to alter the rights including one right, which affected the plaintiff. The court held that the variation of rights clause was not binding on the company. However, in Crumpton v. Morrine Hall Pty. Ltd.[115] the variation of rights clause was upheld as binding on the company on the ground that the action of the company operated as a fraud on the minority.

In the decision of Cumbrian Newspapers Group Ltd. v. Cumberland & Westmoreland Herald Newspaper & Printing Co. Ltd. [1986] 2 All ER 816[116] Scott J commented on the variation of rights clause and he contends that it provides only a limited protection to the shareholders. See the decision of Greenhalgh v. Arderne Cinemas [1951] Ch. 286[117] where Vaisey J stated that: - “The word class is not a technical word, but the rights of persons in the same class must be capable of being ascertained by a common system of valuation.”
In Cumbrian Newspapers Group Ltd. v. Cumberland & Westmoreland Herald Newspaper & Printing Co. Ltd. [1986] 2 All ER 816[118] Scott J had to determine whether there had been a variation of rights clause attached to a class of shares. He stated that the: - “Rights or benefits which may be contained in articles may be divided into three different categories. 1. First, there are rights or benefits which are annexed to particular shares. Classic examples of rights of this character are dividend rights and rights to participate in surplus assets on a winding up. And the right to vote… 2. A second category of rights which may be contained in the articles (although it may be that neither ‘rights’ nor ‘benefits’ is an apt description), would cover rights or benefits conferred on individuals not in the capacity of members or shareholders of the company but, for ulterior reasons, connected with the administration of the company’s affairs or the conduct of its business. For example the tenure of directors. Eley v. Positive Government Security Life Assurance Co Ltd[119] was a case where the articles of the defendant company had included a provision that the plaintiff should be the company solicitor. The plaintiff sought to enforce that provision as a contract between himself and the company. He failed. The reasons why he failed are not here relevant, and I cite the case only to draw attention to an article which, on its terms conferred a benefit on an individual but not in the capacity as a member or shareholder of the company. 3. This category would cover rights or benefits that, although not attached to any particular shares, were nonetheless conferred on the beneficiary in the capacity of member or shareholder of the company. The rights of the plaintiff under the articles 5, 7,9 & 12 fall, in my judgment, into this category. (“This category” being category three.)”
It is contended that this decision represents a widening of the definition of class rights.

What Amounts To a Variation or Abrogation of Class Rights

The courts unwillingness to interfere in the internal management of the company is evident in the restrictive interpretation of variation. See the case of Adelaide Electrical Co. v. Prudential [1933] All ER 82 where the place of the payment of a fixed preferential dividend was changed from England to Australia. The value of the Australian £ was less than the value of the English £ causing a decrease in the value of dividends paid to preference shareholders. The court found no abrogation of preference shareholders rights.

In the case of Greenhalgh v. Arderne Cinemas [1951] Ch. 286[120] a subdivision of one class of shares was held not to amount to a variation of rights, despite the fact that the variations altered to company’s voting equilibrium.

In the case of White v. Bristol Aeroplane Co. Ltd. [1953] Ch. 65[121] the Court of Appeal held the proposed issue of new capital did not affect the rights and privileges of existing preference shareholders. The courts have drawn a distinction between the rights and the value or the enjoyment of those rights. See the cases of White v. Bristol Aeroplane Co. Ltd. [1953] Ch. 65[122] and Greenhalgh v. Arderne Cinemas [1951] Ch. 286[123]. Evershed MR said in the case of White v. Bristol Aeroplane Co. Ltd. that: - “There is to my mind a distinction, a sensible distinction between an affecting of the rights and an affecting of the enjoyment of the right.”
Note that there is no need to comply with a variation of rights clause where there has been a mere alteration of the enjoyment of the right.

See the House of Lords decision in the case of Re House of Fraser plc [1987] BCLC 293 where the company at an extraordinary general meeting passed a special resolution reducing the capital of the company and paid off and cancelled its cumulative preference shares. No class meeting of the preference shareholders had been held, and the preference shareholders argued (held) that this failure contravene the articles of the company. The House of lords held there had been no variation of rights.
****Mention was made that Work Sheets 5, 6, & 7 are in fact linked****

Lecturer: Ms. Lesley Walcott Date: November 5th, 2003.

Alteration of The Articles of Association…

Forms of Corporate Action

There are three forms of corporate action: - 1. Personal 2. Representative 3. Derivative

Personal Action

This is brought by an individual shareholder who has been wronged, and wishes to recover on his own behalf. Such an action may be undertaken by a shareholder so as to restrain a company from performing an ultra vires act. It is also appropriate for the vindication of contractual rights conferred on a shareholder by the Jamaica Companies Act S.20, S. 22 or S14. Authority for this is the case of Pender v. Lushington (1877) 6 Ch.D 70 where the shareholders right to vote was abrogated, the shareholder was held to be entitled to have his vote counted and to compel the observance of the articles of association.

Representative Action

This is an appropriate action where a shareholder brings an action on behalf of himself and remaining shareholders to enforce collective personal rights. The relief sought is beneficial to all the shareholder and any judgment obtained binds all the shareholders represented. This prevents duplicity of action ( (See the Rules of the Supreme Court Ord 15 Rule 12)

Derivative Action

Where a company has been injured by some wrongdoing, a shareholder has also arguably been injured throughout the diminution in the value of their shares. This is traceable to the corporate injury. The courts followed by statute have developed a derivative action whereby a shareholder is permitted to bring an action to rectify a wrong committed against a company for which management did not seek redress, perhaps because management or one of their members were the alleged wrongdoers. Under a derivative action, a shareholder on behalf of a corporation brings an action which is derived from the companies cause of action. This is an indirect action in contrast to a personal action which is direct.
Note the following: - 1. A derivative action cannot be brought by a shareholder who participated in the wrongdoing. 2. Judgment is given in favour of the company. The individual plaintiff or applicant does not directly benefit. 3. The company must be joined in the action and must indemnify the shareholder who acted on its behalf if the action is successful, or if it was reasonable and prudent in the circumstances. 4. If the company asks the court to strike out a derivative action prior to the commencement of proceedings, the action will be allowed to continue only if allegations in the statement of claim justify a derivative action and a prima facie case is proved the authority for this is Prudential Assurance Co. Ltd. v. Newman Industries Ltd.(No. 2) [1981] Ch. 257[124].

Exceptions to The Rule In Foss v. Harbottle

1. Ultra vires: - In cases where the act complained of is ultra vires the company, the Foss v. Harbottle[125] rule has no application because there is no question of the transaction being confirmed by any majority [126]. See the case on point Russell v. Wakefield Waterworks Co. (1875) LR 20 Eq. 474.
2. Individual or Personal Rights: - The rule has no application where the personal or individual rights of members have been infringed, if the wrong done is not to the company but to the member. The problem with this exception is that the line between a personal action and a derivative action is not clear or settled. And, the shareholder who brings his suit believing he has a personal right of action may be confronted with the ruling that the wrong is not a wrong to him but to the company.
3. Special Majority or Special Resolution: - Where the activity undertaken must be sanctioned by a special resolution, a shareholder is entitled to apply to the court to restrain the breach of the article. The shareholder can sue by way of representative action. Note that if the breach was actually committed, he can sue in his personal capacity on the basis of his contractual rights.
4. Fraud on the Minority: - Where the activity amounts to fraud on the minority and the wrongdoers are in control of the company, the rule in Foss v. Harbottle[127]in favour of the aggrieved minority who are entitled to bring a minority shareholders action on behalf of themselves and others. This is the most popular exception, and most commentators argue, the only true exception. Note, the procedure is derivative and in order for the plaintiff or applicant to succeed he must first furnish prima facie proof that: - 1. There was fraud on the minority, and 2. The perpetrators were in a position of control of the company.

Categories of Fraud

1. Appropriation of Corporate Property: ( Cook v. Deeks [1916] 1 AC 554[128] and contrast with the decision of Regal (Hastings) Ltd. v. Gulliver (1942)[1967] 2 AC 134[129]. The case of Cook v. Deeks [1916] 1 AC 554[130] involved an un-ratifiable misappropriation of corporate assets, while Regal (Hastings) Ltd. v. Gulliver (1942)[1967] 2 AC 134[131] involved ratifiable profit making. Note that where majority shareholders compromise litigation commenced by the company, this will amount to an appropriation of corporate property. Menier v Hooper’s Telegraph Works (1874) 9 Ch. App. 350[132].
2. Negligence: ( Mere negligence is insufficient, see for example the case of Pavlides v. Jensen [1956] Ch. 565[133] which involved a gross undervalue of a corporate asset by some £800, 000.oo, nevertheless, the action was held to be ratifiable. However, if the negligence is self-serving, the action is not ratifiable as shown by the case of Daniels v. Daniels [1978] Ch. 406[134].
3. Abuse of Power: ( Where directors act for an improper purpose, that is in mala fides that cannot be ratified, Cook v. Deeks [1916] 1 AC 554[135]. Note however, that a bona fide exercise of power for a collateral purpose is ratifiable as shown by Hogg v. Cramphorn Ltd. [1969] 1 All ER 977.

At common law there were problems of procedure as it was often unclear whether it was a personal, derivative or representative action. If the party gets past this hurdle, the claimant then has to determine whether the action is brought under: - 1. ultra vires 2. Infringement of personal rights 3. Special majority or 4. Fraud on the minority.
The matter could still be thrown out at this stage, but if the claimant succeeds what was available was an equitable action for winding up. A claimant whose rights were infringed, may not want the company wound up, he could simply want the infraction rectified. The Jamaica Companies Act S. 196 relaxed the rule which required a just and equitable winding up, however, S. 196 was read along with S.203 and as a result there was very little flexibility in applying S. 196.

|Procedural Problems Which Arose Under the Common Law |
| | | | | |
|STAGE I | |STAGE II | |STAGE III |
| | | | | |
|1. Personal | |1. Ultra Vires | |1. Just and equitable winding |
| | | | |up |
| | | | | |
| | |2. Personal Action | | |
|2. Derivative |( | |( |2. Oppression had to be shown |
| | |3. Special Majority | | |
| | | | | |
|3. Representative | |4. Fraud on the Minority | | |
| | | | | |
| | | | | |
|(If the action is improperly | |(If the action is improperly classified | | |
|brought under any of the | |under any of the actions at Stage 2 then the| | |
|actions at Stage 1 then the | |courts could throw it out at this stage.) | | |
|courts throw it out at this | | | |(Altered by statute Jam. S. |
|stage.) | | | |196) |
|( | |( | | |
|Thrown Out | |Thrown Out | | |

See the case of Scottish Co-operative Wholesale Society Ltd v. Meyer [1959] AC 324[136] where the court said to prove oppression, the conduct had to be harsh, burdensome and wrongful.

The difficulty in showing oppression is shown by the case of Windoors v. Bryan where a director bought a house, an apartment and a racehorse with corporate funds, and held no meetings with shareholders. The court found that there was no oppression.

New law jurisdiction for instance in Barbados, the Companies Act S. 225- 228 removed the restrictive requirement of “shareholders”, and replaced it with “complainant”, and created a wide range of actions see S. 228. Oppression was relaxed and anything that is 1. “unfairly prejudicial” or 2. “unfairly disregards your interest” and 3. oppression is still included.

The Companies Acts also indemnify the shareholder as to the cost of bringing the proceedings. Barbados S. 230 and Trinidad and Tobago S. 242. (Trinidad and Tobago S.240 ???)

That concludes the Company Law Lecture Notes for this semester. To all my friends and former classmates in the Bahamas all the best in the exams, (and even though I know you don’t need it good luck (((((). I guess I will be seeing you folks in December.
I have once again made some corrections I did not catch any on the first eight pages, so you may print from page 9 –the end.
-----------------------
[1] Black’s Law Dictionary: 1. A debt secured only by the debtor’s earning power, not by a lien on any specific asset. 2. An instrument acknowledging such a debt. 3. A bond that is backed only by the general credit and financial reputation of the corporate issuer, not by lien on corporate assets. 4. English Law. A company’s security for a monetary loan ( The security usually creates a charge on company stock or property.
[2] These Securities Acts are the first of their kind in the Commonwealth Caribbean.
[3] Ms. Walcott did however point out in class that this is not always the case.
[4] New Law Jurisdictions with more modern Companies Acts are: Barbados 1982, Guyana 1991, Trinidad & Tobago 1995 and Dominica, Grenada & St. Lucia who got their companies Acts between 1995-1996, they are all also based on the Barbados statute.
[5] Jamaica and Belize are considered to be old law jurisdictions.
[6] The Bahamas is considered to be a hybrid jurisdiction in terms of its Companies Act. In this regard, it remains with the old law jurisdictions.
[7] My addition from prior notes.
[8] New Law Jurisdictions such as: Barbados 1982, Guyana 1991, Trinidad & Tobago 1995 and Dominica, Grenada & St. Lucia who got their companies Acts between 1995-1996.
[9] In Jamaica and Belize, being the two old law jurisdictions, partially paid shares exist.
[10] This is because as explained by Ms. Walcott, corporations are usually charged at a fixed rate of tax, which may be lower than that which would be paid for an un-incorporated company with the same earnings.
[11] Barbados for instance recently raised their corporate tax rate to 40%.
[12] [1976] AC 16
[13] [1897] AC 22
[14] [1897] AC 22
[15] [1928] AC 619
[16] Privy Council decision.
[17] This is usually or especially for tax statutes.
[18] [1933] Ch. 935
[19] [1962] 1 WLR 832
[20] [1939] 4 All ER 116
[21] [1998] 2 BCLC 447
[22] This may create problems in term of Fair Trading. Jamaica for instance has extensive Fair Trading legislation, which is strictly enforced. (1993)**********
[23] See the article “Storm in a Teacup; The Crisis In Jamaica” *********
[24] [1897] AC 22
[25] [1938] Ch. 258
[26] [1976] 1 WLR 852
[27] [1996] 2 All ER
[28] [1990] 2 WLR 657
[29] (1995) 49 WIR 49
[30] [1879] 4 CP D
[31] [1877] 2 CP.D
[32] [1877] 6 Ch. D 371
[33] [1877] 2 CP.D
[34] [1877] 6 Ch. D 371
[35] [1902] 2 Ch. 809
[36] [1877] 2 CP.D
[37] [1880] 5 QBD 109
[38] [1900] AC 240
[39] [1878] 3 App.Cas 1218
[40] [1877] 2 CP.D
[41] [1878] 3 AC 1218
[42] [1878] 3 AC 1218
[43] [1900] AC 240
[44] [1880] 5 QBD 109
[45] [1900] AC 240
[46] [1902] 2 Ch 809
[47] [1906] 2 Ch435
[48] [1908] 2 Ch 515
[49] (1860) LR 2 CP 174
[50] [1954] 1 QB 45; [1953] 2 WLR 596
[51] (1860) LR 2 CP 174
[52] [1954] 1 QB 45; [1953] 2 WLR 596
[53] (1860) LR 2 CP 174
[54] (1860) LR 2 CP 174
[55] [1966] ALR 744
[56] (1860) LR 2 CP 174
[57] (1860) LR 2 CP 174
[58] [1966] ALR 744
[59] [1981] 3 All ER 182
[60] [1954] 1 QB 45; [1953] 2 WLR 596
[61] [1954] 1 QB 45; [1953] 2 WLR 596
[62] (1860) LR 2 CP 174
[63] [1902] 1 Ch
[64] (1886) 33 Ch D 16
[65] (1888) 38 Ch D 156
[66] Hadlinston Construction co. Ltd Casilla Development Ltd. & Harold Massop v. Casilla Development Ltd. Goldson Barrett Jo9hnson (a firm) & Earl A. Arichards (1985) 22 JLR 495
[67] (1843) 2 Hare 461
[68] Jamaica Court of Appeal Civil Appeal No. 25 of 1988 (Rowe, Pres. Wright and Forte JJ.A March, 1989.
[69] (1612) 77 ER 937, [1558-1774] All ER Rep 11
[70] (1875) LR HL 653
[71] (1880) 20 Ch.D. 169 (CA)
[72] [1966] 1 QB 207
[73] (1890) 44 Ch.D. 634, [1895-9] All ER Rep. 1280
[74] [1918] AC 514 HL
[75] [1918] AC 514 HL
[76] [1968] 2 All ER 1221
[77] Rolled Steel Products (Holdings) Ltd v. British Steel Corporation [1982] Ch. 478
[78] [1992] 1 WLR 588
[79] [1982] Ch. 478, [1982] 3 All ER 1057
[80] [1982] Ch. 478, [1982] 3 All ER 1057
[81] [1968] 2 All ER 1221
[82] [1987] 3 BCC 535, [1988] BCLL 21
[83] [1883] 23 Ch. D. 654
[84] [1932] 2 Ch 46, [1932] All ER Rep 889, 48 TLR 248
[85] [1967] 1 All ER 427
[86] [1982] Ch. 442
[87] [1970] Ch. 62
[88] (1882) 20 |Ch. D. 169 C.A.
[89] Section 18 in the St. Kitts Companies Act abolishes the doctrine of ultra vires.
[90] (1889) 42 Ch.D 636, 5TLR 596
[91] [1915] 1 Ch. 881, [1914-15] All ER Rep. 900, 113 LT 159
[92] [1938] Ch 708, [1938] 3 All ER 214, 54 TLR 964
[93] (1874) LR 9 CP 503, 31LT 57, [1874-80] All ER Rep Ext. 2032
[94] [1960] Ch 1, [1958] 2 All ER 194, [1958] 2 WLR 851
[95] (1877) 6 Ch D 70
[96] [1950] 2 All ER 1120
[97] (1889) 42 Ch.D 636, 5TLR 596
[98] [1968] 1 QB 549
[99] [1964] 2 QB 480
[100] [1857] 6 H.L. Case 401
[101] [1875] LR 7 HL 869
[102] [1986] Ch. 246
[103] [1906] AC 439
[104] [1946] 1 All ER 586
[105] [1888] 38 Ch. D. 156
[106] Barbados S 58 OECS S. 58
[107] Trinidad and Tobago S 15, Bahamas S 85-6, Barbados S. 95, Trinidad and Tobago S. 99
[108] [1967] 2 AC 134 (see work sheet 5)
[109] [1901] 1 Ch 279
[110] S. 26(2)
[111] [1914] AC 11
[112] [1949] AC 512
[113] [1980] 3 All ER 295
[114] [1964] NSWR 261
[115] [1965] NSWR 240
[116] [1987] Ch. 1, [1986] 3 WLR26, [1986] BCLC 286
[117] [1950] 2 All ER 1120
[118] [1987] Ch. 1, [1986] 3 WLR26, [1986] BCLC 286
[119] (1876) 1 EX D 88
[120] [1950] 2 All ER 1120
[121] [1953] 1 All ER 40, [1953] 2 WLR 144
[122] [1953] 1 All ER 40, [1953] 2 WLR 144
[123] [1950] 2 All ER 1120
[124] [1980] 2 All ER 841, [1980] 3 WLR 543, [1982]Ch. 204
[125] (1843) 2 Hare 461
[126] See Work Sheet 7 p. 5
[127] (1843) 2 Hare 461
[128] [1916-17] All ER Rep.285
[129] [1942] 1 All ER 378
[130] [1916-17] All ER Rep.285
[131] [1942] 1 All ER 378
[132] [1874-80] All ER Rep Ext 2032
[133] [1956] 2 All ER 518, [1956] 3 WLR 224
[134] [1978] 2 All ER 89, [1978] 2 WLR 73
[135] [1916-17] All ER Rep.285
[136] [1958] 3 All ER 66, [1958] 3 WLR 404.