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Capacity & Authority - Coggle Diagram
Capacity & Authority
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Must then find out if the agent had authority to act on behalf of the company (if not- voidable at instance of company)
actual authority
express
Articles typically give directors authority to manage business on company’s behalf: MA 3: directors are responsible for the management of the company’s business for which purpose they may exercise all the powers of the company, 5 and 6 give directors power to delegate this
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Freeman and Lockyer v Buckhurst Properties- actual auth is a legal relationship between principal and agent created by consensual agreement to which they alone are parties. Can apply ordinary principles of construction of contracts
deemed authority
means no actual authority given yet, but the agent is still able to bind the principal
Statutory deemed
under S40 CA 2006- protects third parties so they can rely on directors that they entered into agreements with in good faith. Company cannot claim not to be dound by acts of their directors by asserting the acts to be unconstitutional- this is even where articles require specific shareholder approval or board approval. Third party is presumed good faith unless contrary proven and is not regarded as bad faith just for knowing an act is beyond power of directors under their constitution (S40(b) CA 2006). This does nit protect directors, only the third parties, company can sue director, disqualify them, etc
deemed at common law
ostensible (apparent) authority- looks at relationship between principal and third party- has the principal said or done anything by conduct which suggested to the third party that the agent could make such agreements/actions, and the third party reasonably relies on this- Freeman and Lockyer v Buckhurst Park Properties Ltd- director made out like he was managing director infront of the architects and did not stop him. Director then entered into contract with the architect on behalf of the developers (who did not give him authority). He had deemed ostensible authority.
deemed at common law
indoor management rule- lesser significance now due to S40 t point 1. Can be used when third party not dealt directly with the board or a question of if agent authorised arises. Royal British Bank v Turquand- Outsiders are entitled to assume the company’s internal procedures have been complied with (Turquand’s rule). Rolled Steel ltd v British Steel- the rule will not apply if the third party has notice of the irregularity or is not acting in good faith. Morris v Kanssen- rule does
not apply where third party is an insider, such as a director entering a contract with the man co. Indoor management rule will be used where the issue is more procedural or relates to formalities, if however, the person acting as managing director was in fact never intended to be appointed as such, then ostensible authority will be relevant
A company is able to ratify acts beyond actual authority of the agent provided the act is within the authority of the appropriate organ of the company who are looking to ratify it
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Liability in Tort
Primary liability – company itself is said to have committed the tort through acts of an individual attributed to the company
Vicarious liability- an individual within the company who is personally liable for the tort but the company is additionally vicariously liable for that person’s act or omission. Both the induvial and company are jointly liable. Company itself is not at fault but Is legally responsible for acts of another
attribution theory (Requires a particular individual within a corporate structure to be identified as the controlling or guiding mind)
Lennards carrying co ltd v Asiatic petroleum co- liability under the merchant shipping act 1894 required fault. It was necessary to find an individual within the company who was the directing mind and will of the corporation. Once that individual was identified, if that person has the required fault, then the fault can be attributed to the company
Tesco Supermarkets Ltd v Nattrass- Trade Descriptions Act 1968 could find a company liable. Tesco said it was not them but the manager of the store. It was concluded the manager was not the ‘guiding mind’ of Tesco and therefore Tesco could not be liable for his actions, it would be the manager directly (old)
MODERN CASE: Meridian Global Funds Management Asia Ltd v Securities Commission- the real issue is determining who the ‘controllers’ of the company for the purposes of attribution, not the guiding minds. It held two senior managers to be the controllers and allowed attribution of liability to the company for individuals lower down in the company
SFO v Barclays PLC- where criminal dishonesty of senior officers within organisation whi misled the board and relevant committees in Barclays would render Barclays itself criminally liable: individuals who were acting dishonestly did not have full discretion to act independently in relation to the particular function and were responsible to another person (board) they could not be the directing mind and criminal culpability could not be attributed to Barclays. Judgment noted the difficulty of holding a corporation to account and looked to parliament to draft something with position of corporations in mind
Economic Crime and Corporate Transparency Act 2023 passed in response to the high bar set in previous cases. S196(1) - if a senior manager of a body corporate or partnership acting within the actual or apparent scope of their authority commits a relevant offence the organisation is also guilty of the offence. Shift focuses from directing mind to the role and responsibilities of the individual
The provision only applies to certain offences- mainly economic crimes and offences relating to fraud and funding of terrorism, gov did state a desire to extend this to all criminal offences in due course
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