STRUCTURE FOR COMPANY CONTRACTING PROBLEM EXAM

QUESTION

What you’re trying to work out is whether the particular company IS BOUND BY THIS
CONTRACT → ie can a 3rd party that has dealt with the company or thinks it has a
contract with the company enforce that? What potential issues might there be which
might stop the contract from being enforced?

USEFUL 3-PART STRUCTURE

PART 1 → WAS THERE ACTUAL AUTHORITY? (ie = did the particular person who
purported to enter into the contract on behalf of the company have actual authority)
● Often in an exam problem question, there will NOT be ‘actual authority’ – because
otherwise there would almost certainly be a contract in place and so it would not be a
good problem question
● THUS → the task at the 1st stage if often to identify WHY there might not be
authority in this particular case:
- Maybe there is dishonesty that might be argued to remove actual authority
- Maybe the correct process for director meetings has not been followed
- Maybe you won’t have the right decision maker for that particular transaction
(ie if it is a major transaction, and so you would need the approval of a special
resolution of shareholders as well as board approval of the company)
● Even if there was NOT actual authority ⇒ then the company might still be bound by
APPARENT AUTHORITY

PART 2 → WAS THERE APPARENT AUTHORITY?

● Was there a ‘HOLDING OUT’ of the particular agent by the company, so that the 3rd
party could RELY on the agent as being able to deal on behalf of the company?
● If there WAS a ‘holding out’ (some apparent authority) ⇒ then stage 3 kicks in

PART 3 → IF (2) APPLIES, DID THE 3RD PARTY NONETHELESS KNOW OR OUGHT TO
HAVE KNOWN ABOUT ANY DEFECTS IN AUTHORITY?
● If the 3rd party does have some knowledge about the LACK of ACTUAL
AUTHORITY of the agent, then they WILL NOT be able to rely on APPARENT
AUTHORITY
(PART 4) → COULD THERE BE AN IMPACT ON THE TRANSACTION UNDER s141
(interested transactions) —OR— IN EQUITY (for breach of fiduciary duty)?
s141
● EVEN IF it is decided that there is either ACTUAL – or – APPARENT authority = and
thus the contract is arguably in force as a matter of agency law = sometimes there
could still be an impact on the transaction
● It may be VOIDABLE (that is the transaction may be void) ⇒ BECAUSE OF s141 of
the CA 1993
● S141 CA93 ⇒ an interested transaction = a transaction which the company enters
into, which a director of the company has an interest in
● Thus the transaction will be VOIDABLE if the company has NOT obtained FAIR
VALUE for a transaction under the certain circumstances
Equity
● ALTERNATIVELY, the transaction could be VOIDABLE in EQUITY
● There is clear law that a transaction which is entered into AS A RESULT OF
BREACH OF FIDUCIARY DUTY can make the transaction VOIDABLE unless the
third party is innocent
- Comes under the directors duties section of this course

DIFFERENCE BETWEEN ACTUAL –

and – APPARENT AUTHORITY
First you need to consider whether the corporate
agent had ACTUAL authority – and if not – whether
they had APPARENT authority

ACTUAL Actual authority is driven by the relationship

AUTHORITY between the principal (the company) and the agent – what authority has
the principal given to the agent?

APPARENT Apparent authority is driven by what happens between the principal

AUTHORITY (company) and the 3rd party
It operates effectively as a form of ESTOPPEL - it is based on what the
principal has said to the third party - representations or holding out
(INCLUDES CONDUCT) that leads the 3rd party to reasonably believe
that an agent has authority to bind the principal
ACTUAL AUTHORITY

● Is based on communication between the principal and the agent giving

permission to the agent to deal with the
● S128 = authority to contract is conferred on the BOARD (subject to some things
such as major transactions and constitutional limitations ect)
● S130 = the board can DELEGATE (subject to the second schedule)

How actual authority (a concept of general application in agency law) applies

SPECIFICALLY in the company context

It is based on COMMUNICATION between the PRINCIPAL (company) and AGENT

CONFERRING PERMISSION
● Usual actual authority
OR
● Specific actual authority

Actual Authority → PROCESS

● Major transactions = need special resolution

● Need to have a notice of the meeting and comply with schedule 1, paragraphs 2 (a)
and (b)
● Normal transactions = board resolutions = schedule 3 paragraphs 2 (notice), 3
(method), 4 (quorum), 5 (voting)
● OR = a unanimous written board resolution = schedule 3 paragraph 7
● OR = perhaps a INFORMAL UNANIMOUS ASSENT OF DIRECTORS = such as in
RUNCIMAN v WALTER RUNCIMAN PLC (1992) → where there was an extension of
a chairman's contract to a term of 5 years

Usual actual authority is the authority that the agent of a particular kind (eg the managing
director) would be expected to have based on INDUSTRY NORMS → ie it is created from
the fact someone is appointed to a particular position that would usually have the authority to
enter into certain transactions in the industry) – it is kind of IMPLIED DELEGATION by the
board
● Eg → if someone is appointed as the general manager of a company or the CEO –
then that appointment by itself would normally be expected to carry with it certain
normal authorities that could be said to be a form of usual actual authority
Usual actual authority can be limited by communication between the company (the board)
and the agent
● Eg → if the company appoints someone as managing director the managing director
would normally be expected to have very wide powers – HOWEVER – if the board
says that in this case, they are going to restrict the managing directors powers so
that the MD can’t do any transactions over $10,000 without coming back to the
board, then the managing director WILL NOT have any authority beyond that amount
– the MD’s usual actual authority is LIMITED by the communication between the
board and the MD
● If the board has in fact restricted the authority of the person (eg the managing
director) the person may still have usual apparent authority that they are managing
director – BECAUSE the 3rd party that they are dealing with on behalf of the
company might NOT KNOW that the board has RESTRICTED the managing
directors ACTUAL AUTHORITY IN THAT WAY ⇒ if this is the case, the managing
director may well have a form of usual apparent authority

The starting point for actual authority is that full authority to contract is conferred on the
board under section 128 of the Companies Act 1993. The board has actual authority to enter
into any transaction on behalf of the company, subject only to limitations that might be in the
Act (e.g. s129 → major transactions – AND – the constitution e.g. shareholder resolution
required for transactions of a certain value)

The board can delegate its authority to contract under s130(1), subject only to the 2nd
schedule which sets out 21 powers that CANNOT be delegated by the board – eg the issue
of shares
● A delegation of one of those particular powers in schedule 2 would NOT be effective
● THUS, if the board purported to delegate the power to issue shares to the General
Manager, and the General Manager then entered into a contract for the issue of
shares, there would NOT be ACTUAL AUTHORITY for the General Manager to do
that, because of SCHEDULE 2
● One of those powers to the General Manager, who then purported to enter into a
contract within one of those cases, there would NOT BE ACTUAL AUTHORITY

The board remains responsible for a delegates actions, UNLESS = s130(2):

 ● The board believed on REASONABLE GROUNDS that the delegate would exercise
the delegated powers properly
AND
● The board MONITORED the delegate by means of REASONABLE METHOD

Delegation of the Board:

● Section 130 allows the Board to delegate most of its powers, subject to the limits in
the 2nd schedule (list of 21 powers that cannot be delegated - eg the issue of shares)
– if, for example the board purported to delegate the power to issue shares to the GM
and the GM then entered into a contract for the issue of shares – THIS WOULD NOT
BE ACTUAL AUTHORITY OF THE GENERAL MANAGER TO DO THAT because
the 2nd schedule prohibits the delegation of that power
● The delegation of powers by the board is usually EXPRESS – but it can be IMPLIED
from conduct such as ACQUIESCENCE → the Hely-Hutchinson v Brayhead case is
an example of this

UNANIMOUS RESOLUTIONS OF DIRECTORS → WRITTEN RESOLUTIONS OF THE

BOARD - SCHEDULE 3 CLAUSE 7
It is important to be familiar with schedule 1 and 3 in terms of PROCESS

INSTEAD OF A BOARD RESOLUTION AT A MEETING OF DIRECTORS → directors can

ALSO PASS RESOLUTIONS BY UNANIMOUS WRITTEN BOARD RESOLUTION (unless
the constitution of the company provides otherwise)
● Schedule 3 paragraph 7:
→ (1) a resolution in writing signed or assented to by all directors then entitled
to receive notice of a board meeting, is VALID and EFFECTIVE as if it had
been passed at a meeting of the board, duly convened and held
→ (2) any such resolution may consist of several documents in like form each
signed or assented to by one or more directors

IF THE BOARD PASSES A UNANIMOUS WRITTEN RESOLUTION → there can be actual

authority for a transaction, even though there was no board meeting that would otherwise be
necessary to comply with the requirements in schedule 3, or the companies constitution

IS INFORMAL UNANIMOUS ASSENT OF DIRECTORS SUFFICIENT INSTEAD OF

WRITTEN RESOLUTION UNDER SUB-CLAUSE 7? → Informal unanimous assent of
directors is DIFFERENT to that of shareholders
 ● Certainly at common law, if directors all unanimously agreed in an informal way to a
particular contract or transaction, that was regarded as being sufficient to create
actual authority (Runciman v Walter Runciman plc - 1992)
- In Runciman the board UNANIMOUSLY AGREED to extend the chairman’s
contract to a term of 5 years, and that was regarded as being a VALID
CONTRACT and the INFORMAL UNANIMOUS ASSENT of ALL of the
directors was held to been EFFECTIVE AS AB BOARD RESOLUTION AT A
FORMAL MEETING would have been

The question is ⇒ whether INFORMAL UNANIMOUS ASSENT OF DIRECTORS IS STILL

SUFFICIENT, or whether the UNANIMOUS RESOLUTION WOULD NEED TO BE IN
WRITING, given schedule 3 clause 7…
● Peter Watts suggests that a unanimous resolution of directors in an informal way
would STILL BE SUFFICIENT
- “Clause 7(1) of schedule 3 … provides that directors can resolve upon
matters without in fact holding a meeting, so long as the relevant resolution is
in writing and signed or assented to by all directors entitled to receive notice
of a board meeting – such a resolution may consist of several documents…”
- “It is unclear whether this procedure has SUPPLANTED the concept of
informal unanimous assent of directors, which existed… at common law –
there even unanimous oral agreement would suffice to bind the company → it
is arguable that the CA93 is simply intending to provide a clear mechanism
for decision making, without at the same time denying that informal
unanimous assent, might, in appropriate circumstances, ALSO BE
EFFECTIVE”
● JOHN LAND thinks that this is arguable - however - of course the fact
that clause 7 on its terms only talks about resolution IN WRITING
BEING EFFECTIVE ⇒ will create a potential doubt as to whether it is
IMPLICIT that informal oral agreements are no longer effective

LIMITS TO AUTHORITY OF THE BOARD

● Meeting irregularities = ie in the notice, quorum, voting can be prohibited by the
constitution → see PACIFIC COAST COAL MINES v ARBUTHNOT

● Company lacks capacity = IE there might be something in their constitution saying

that they can’t do business in australia ect → but note s18(1)(a)
 ● Major transactions = IE the board does not have authority without the approval of
shareholder special resolution → but note s18(1)(a)

● Situations where an Act imposes specific rules = ie situations in which the CA93
applies specific rules which need to be complied with before the board can be said to
have authority such as, for example, in relation to a contract for the issue of shares or
distributions, share issues, share repurchases etc → but note s18(1)(a)

● Dishonesty = absolute rule or presumption? → this depends on whether or not you

follow Peter Watt’s view or not on whether dishonesty automatically removes the
board or director authority

DELEGATION BY THE BOARD → s130 → GIVES THE BOARD VERY WIDE POWERS
TO DELEGATE ITS AUTHORITY TO ENTER INTO CONTRACTS
● Delegation can be EXPRESS or IMPLICIT (eg = implicit if you are appointed to a
particular position ie CEO)
● There are, however, limits in the second schedule → which sets out 21 powers that
can NOT be delegated eg issue of shares
● Usual actual authority is the authority that agent of a particular kind (ie managing
director) would be expected to have based on INDUSTRY NORMS
- IF THE BOARD, HAS, IN FACT, RESTRICTED THE AUTHORITY OF THE
PERSON – the person STILL MIGHT HAVE the usual APPARENT
AUTHORITY

WHAT IS “USUAL” ACTUAL AUTHORITY?

→ it is the sort of thing John Land was talking about when he was talking about the
INHERENT authority of a chief executive officer being the authority that someone in their
position automatically has
→ based on INDUSTRY NORMS
→ (if you don’t say anything about what their actual authority is)
→ IE^ unless the the authority of the CEO is EXPRESSLY LIMITED or given clear
parameters in a FORMAL DOCUMENT relating to the appointment of that CEO

USUAL AUTHORITY OF PARTICULAR OFFICES

● The MD and CEO → have USUAL AUTHORITY for the day-to-day running of the
company – is a very BROAD AUTHORITY
● If the company only has ONE DIRECTOR → they are then considered to be the
‘board’ for the purposes of making company decisions – as per s127 of the CA93
● If the company has MORE THAN ONE DIRECTOR then a SINGLE DIRECTOR has
LIMITED AUTHORITY to make decisions on behalf of the company – as per
AUTUMN TREE (CoA) at [27]
● The CHAIR is the spokesperson for the board (but doesn’t actually have much
‘contracting authority of his or her own’)
● The company secretary should ALSO be able to confirm that a transaction has been
approved by the board

IMPLIED DELEGATION THROUGH ACQUIESCENCE

● Authority to an officer can be based on CONDUCT//ACQUIESCENCE (acquiescence
= green light to do something)
● As per HELY-HUTCHINSON v BRAYHEAD (leading authority for this position)
- Wherein, the chairperson for the board (remember chairpersons don’t usually
have much authority) but in this case the chairperson was a bit different
because he effectively was acting like a de facto managing director
- He would go off and do transactions without telling the board first and then
come back and put the transactions in front of the board and they would
basically say “yup that’s all fine”
- SO A PATTERN BUILT UP OVER A PERIOD OF YEARS OF THIS
HAPPENING → that is allowing the chairperson to enter into SIGNIFICANT
 TRANSACTIONS on behalf of the company and just report these transactions
to the board AFTERWARDS
- So he was effectively the de facto managing director
- The issue in this case involved a couple of transactions, an indemnity and a
guarantee which were entered into in favour of Mr Heley Hutchinson
- Mr Heley Hutchinson was seeking to rely on these documents (indemnity and
guarantee documents) that had been provided in his favour by Brayhead ltd
THROUGH THE CHAIRPERSON DUDE …
- Who had obviously not sought prior approval from the board of Brayhead for
these transactions
● BUT had entered into these transactions in the same sort of way he
had entered into previous transactions

THE COURT HELD:

- Held that these transactions for Mr Heley Hutchinsons were WITHIN THE SAME
SCOPE as they many earlier transactions which the chairperson dude had entered
into without prior authority from the board
- But obviously the company was under an arrangement where it was clear from the
boards previous conduct that the board was ACQUIESCENCE IN THE
CHAIRPERSON ACTING AS A DE FACTO MANAGING DIRECTOR WITH THE
NORMAL POWERS THAT A DE FACTO MANAGING DIRECTOR WOULD HAVE

IMPORTANCE:
- Demonstration of IMPLIED DELEGATION AS A RESULT OF ACQUIESCENCE
BY THE BOARD
RATIFICATION (ADOPTION)
● If an agent acts on behalf of a principal WITHOUT actual authority → the principal
can supply consent RETROSPECTIVELY TO ADOPT THE TRANSACTION and
supply actual authority retrospectively
● The principal however must have been in a position to allow them to contract at that
time the decision of an agent on behalf of the principal was made
● The principal has a REASONABLE PERIOD OF TIME to RATIFY (which is
UNAFFECTED by a third parties attempt to withdraw)
NOTE → this^ is a DIFFERENT CONCEPT to that of ‘ratification’ (release) of breaches of
directors duties

CASE EXAMPLE
BOLTON v LAMBERT

Bolton v ● Mr Lambert wrote to the managing director of the Bolton Company,

Lambert offering to purchase the sugar works from the company.
● The managing director of the Bolton company accepted the offer,
but he did not actually have actual authority to do so.
○ If matters had stood as they were, there might not have
been a contract.
● After the managing director had purported to accept the offer, Mr
Lambert withdrew the offer.
● The board of directors then later purported to ratify the managing
director’s acceptance of the original offer. He had no authority to
accept the offer and sell the sugar works, but the board of the
company decided we can see that it was a good idea, so we will
adopt that.
● The CA held the contract was binding. The ratification dated back to
the date of the original acceptance by the Managing Director.
● As a result, that meant the contract was in place from that time the
ratification operated retrospectively, and applied from the time of the
managing director’s acceptance. That meant the offer was
withdrawn too late from Lambert.

MOTIVE and AUTHORITY:

The extent to which an improper motive of a corporate agent might be argued to remove
actual authority that the corporate agent has:
● There is a difference of approach on this issue as between JOHN LAND and PETER
WATTS

There is an argument that DISHONESTY // ACTING CONTRARY to the interests of a

principal removes the actual authority of the corporate agent…
THUS → if the corporate agent is dishonest, or acts deliberately contrary to the interests of
the principal - they can be said to not have actual authority to do so = THIS IS THE VIEW
TAKEN BY PETER WATTS

However → JOHN LAND THINKS THE BETTER (and he’s probably right) IS:
The view consistent with the RECKITT v BARNETT case:
● Is that ACTUAL AUTHORITY is just a question of construing the express or implied
authority that was provided to the agent
● The agent acting DELIBERATELY CONTRARY to the interests of the principal does
NOT NECESSARILY REMOVE ACTUAL AUTHORITY
● It DOES mean that the director has committed a breach of the directors fiduciary
duties under s131 of the Act → which requires directors to act in the best interests of
the company
● that^ however, does NOT remove actual authority – but – it does make a transaction
VOIDABLE AT EQUITY (WHICH WE WILL DISCUSS LATER)
● That point such a transaction made in breach of a s131 duty makes the transaction
voidable is noted by the CoA in the AUTUMN TREE DECISION …
● Admittedly only in a footnote however
● If the transaction is voidable at equity - that right of voidance will be LOST if the 3rd
party is INNOCENT
- This approach is BETTER PROTECTIVE OF THE INTERESTS OF 3RD
PARTIES

HOPKINS v TL DALLAS GROUP (2004) (EWHC) → Sets out the WATTS view – QUOTES
PETER WATTS FROM HIS BOWSTEAD ON AGENCY LAW BOOK
● “The grant of actual authority should be implied as being subject to a condition that it
is to be exercised honestly and on behalf of the principal”
● “Acting fraudulently or in furtherance of own interests WILL BY ITS VERY NATURE
NULLIFY ACTUAL AUTHORITY – but NOT apparent authority” (ie actual authority is
removed if the corporate agent is acting dishonestly)
- We will consider the extent to which dishonesty impacts on APPARENT
authority later on in the course
RECKITT v BARNETT, PEMBROKE and SLATE (1929) AC
● Reckitt is a much older english HOL case which takes a different approach
● The decision in HOPKINS v DALLAS is only a FIRST INSTANCE (before the courts)
decision and does not quote RECKITT
● The approach taken in RECKITT was = if you have a situation where a corporate
agent has acted dishonestly, you still have to look at whether the actions WERE
WITHIN THE ACTUAL AUTHORITY OF THE AGENT, AND THAT IS SIMPLY A
QUESTION OF CONSTRUCTION

RECKITT v BARNETT

FACTS Mr Reckitt had given power of attorney to Lord Terrington for use in
connection with Mr Reckitts affairs while he was overseas
Lord T had acted FRAUDULENTLY – used Mr R’s bank account to pay his
own personal debts
- (eg to pay off moneys that he owed in relation to the purchase of his
own motor vehicle and to pay repairs on another personal motor
vehicle of his own)

ISSUE(s) The question at issue was = whether it could be said that these actions (the
use of Mr R’s monies in the bank account pursuant to the power of attorney)
could be said to be within the ACTUAL AUTHORITY under the POA
- “In order to succeed the respondents must show that Lord Terrington had in
fact authority to use the appellant’s money in payment of his, Lord
Terrington, private debts”
● Respondents = the parties who had been paid for the repair of the
motor vehicle

In addition to the POA – there was a side letter to the bank → for the
purpose of the bank, Lord Halishham regarded that the letter would be
regarded as being an EXTENSION to the POA:
- The question then is whether the power of attorney plus the letter did
give Lord Terrington authority to use the appellant’s money for the
purpose of paying his private debts → THIS IS PURELY A QUESTION
OF CONSTRUCTION
● So UNLIKE the approach in HOPKINS v DALLAS // or from
PETER WATTS // or from BOWSTEAD ON AGENCY = it is
NOT AUTOMATICALLY ASSUMED that because the agent
 (Lord T) has acted deliberately contrary to the interests of his
principal, it is not automatically assumed that that falls
outside of his authority – it is a QUESTION OF
CONSTRUCTION

HELD “It is plain that the letter has to be read in conjunction with the power of
attorney to which it expressly refers; when so read it seems to me that the
SO IT'S A whole authority is expressly limited to acting for the appellant in the
MATTER management of his affairs”
OF - So the way the POA was drafted made it clear that the POA was
CONSTRU limited to Lord Terrington acting for Mr Reckitt in the management of
CTION his affairs
● The POA said you can draw on the account ‘without
restriction’, and the Judge says “I cannot construe the
addition of the words ‘without restriction’ as entitling Lord
Terrington when he is drawing cheques on the appellant’s
account to do so for any other purpose except for the
discharge of the appellant’s debts or in the conduct of his
business.
● Thus as a matter of construction of the particular POA, it was
clearly framed in such a way as to be limited to Mr Reckitt’s
business and affairs. Spending money on Lord Terrington’s
own motor vehicle was not part of Mr Reckitt’s affairs and
business. Therefore as a matter of construction, there was
no actual authority for what Lord Terrington did.
● This is a different analytical approach to the approach taken
in Hopkins v Dallas, which seems to suggest that as a
matter of a principle of law, automatically actions deliberately
contrary to the principal’s interests will take you outside of
the actual authority given to you as an agent.
Then the Lord Chancellor goes on, and says Mr Lords, reliance was placed
before your Lordship on the case of Hambro v Burnand. In my judgement
that case is plainly distinguishable
→ this ^ was = A case in which Mr Burnard had been given authority to
write certain Lloyds of London insurance policies (the other defendants had
expressly given Mr Burnard authority to write policies in the Lloyds market)
 - Burnard did in fact do exactly what he was supposed to do in the
sense that he wrote a form of policy that fell within the kind of
policies that he was authorised to write on behalf of the other
defendants
- But he did so in this particular case for an improper purpose - he
wrote this guarantee policy and provided it to Hambro, and he did
that because he had a hidden motivation that he had personally
given a guarantee to Hambro, and he was trying to take the heat off
himself
- So there was an improper motive
- The English Court of Appeal in Burnard said that the fact that Mr
Burnard had an improper motivation does NOT remove actual
authority
- He is doing exactly what he was authorised to do in writing an
insurance policy of the form that fell within the description of the
policies that could be written under the agency arrangement
- He was doing exactly what was authorised, so that was within his
actual authority even though he had a dishonest or improper motive
for doing so

That case then was the case being discussed by Lord Hailsham at the
bottom of page 128 on LHS (pg 182 of printed report). It was
DISTINGUISHABLE
- In that case Mr Burnand has been given a power of attorney to
enable him to underwrite at Lloyd’s certain risks for his principals; it
was expressly found that the risks which he did in fact underwrite
were those which it was in the ordinary course of the business of
an underwriter at Lloyd’s to underwrite
- Burnand in fact underwrote the particular risks in question in the
action in order to assist a company in which he was financially
interested (i.e. he had own interest he was addressing rather that his
principal)
- In these circumstances, the CA held that the act done by
Burnand was within the actual authority conferred upon him,
although his motive in doing the act was to benefit himself and
not his principals; and accordingly they held that the principals were
 bound by Mr Burnand’s act
● Even though the agent was acting for improper motives to
benefit himself and not his principal, that did not remove
actual authority in that case
● Lord Hailsham does not overrule that in Reckitt, just
distinguishes it because as a matter of construction in the
Reckitt case the particular actions did not fall within the
power of attorney
● Different from the position in Hambro.

Note there are also some equivalent passages from the judgement of
Viscount Dunedin on page 129.
- “Now the power of attorney is clear. It only authorises Lord
Terrington to conduct Reckitt’s business, not to pay accounts of his
own.”
- Refers to Hambro v Burnard to distinguish it - “The distinction
between this case and such cases as Hambro v Burnard is obvious.
In that case the agent was doing the very business he was
authorised to do to issue letters of guarantee”
- “He was doing very bad business and he was doing it from an
IMPROPER MOTIVE”
● So Viscount Dunedin also notes that the improper motivation
did not remove actual authority in that case
● He doesn’t say it is wrongly decided, he simply distinguishes
the case

In the present case, the act which is challenged was the issue to the
respondents of a cheque drawn on the appellant’s account in payment of
Lord Terrington’s private debt; in my view this was not within the authority
conferred upon Lord Terrington by the power of attorney and the
appellant is not bound by it
That case is directly contrary to Hopkins v Dallas:
- It suggests that if you have a subjective motivation to act in your
interests rather than in the interests of your principal, that won’t
remove actual authority as Justice Lightman would have suggested
was the case
 - This decision in Hambro was considered by the HL in Reckitt, and
Lord Hailsham says it is distinguishable
- Not going to say it is wrongly decided. It is just that on the facts of
the Reckitt case, when one looks at the power of attorney as a
matter of construction, it can only be construed as allowing Lord
Terrington to do things that are a part of the affairs of Sir Harold
Reckitt, and so on the particular facts of the case what Lord
Terrington did in paying for his own personal purchase of a car and
car repairs, was outside the scope of the power of attorney of the
agency as properly construed
- So it doesn’t overrule Hambro, it just distinguishes it
- It takes an approach that is based on the construction of the
particular agency document, rather than on the basis of an absolute
principle of law as suggested in Hopkins v Dallas which is a much
later case
- But that sort of approach taken is NOT taken by the HL in Reckitt

NZ CASE LAW IS CONSISTENT WITH THE APPROACH THAT JOHN LAND PREFERS =
THAT IS = THAT FRAUD DOES NOT NECESSARILY REMOVE ACTUAL AUTHORITY, IT
IS A QUESTION OF
CONSTRUCTION:

IE → you have to look at the scope

of the task, and the scope of the
authority and see whether or not the
actions fall outside that scope
RECAP → COMPANY
CONTRACTING PART 1:
(ACTUAL AUTHORITY)
● For a company to be bound
to a contract, the relevant agent must have ACTUAL or APPARENT AUTHORITY TO
ACT

● Normally the board has ACTUAL AUTHORITY to contract (there are some
exceptions eg major transactions, constitutional limitations, specific rules in the Act
for certain transactions)
● There is NO ACTUAL AUTHORITY if there are cases of MEETING
IRREGULARITIES

● Corporate agents can be delegated actual authority either EXPRESSLY or

IMPLIEDLY (through appointment to a particular position or sometimes through
acquiescence by the board AS PER HELY-HUTCHINSON CASE)

● Whether or not dishonestly removes actual authority will DEPEND UPON THE
CONSTRUCTION OF THE AUTHORITY (as per RECKITT and NATHAN &
DOLLARS CASES) but mya make the transaction VOIDABLE (as per AUTUMN
TREE CASE)