Formation and Constitution of Company in UK Law

The words are a recognition of the fact that a limited company is more than a mere judicial entity, with a personality in law of its own: that there is room in company law for recognition of the fact that behind it, or amongst it, there are individuals, with rights, expectations and obligations inter se which are not necessarily submerged in the company structure.

The decision of the Court of Appeal was that these background facts were not admissible to construe the meaning of the articles. Because the articles are required to be registered, addressed to anyone who wishes to inspect them, the admissible background for the purposes of construction must be limited to what any reader would reasonably be supposed to know. It cannot include extrinsic facts which were known only to some of the people involved in the formation of the company.

That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before.

An "apparent" or "ostensible" authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the "apparent" authority, so as to render the principal liable to perform any obligations imposed upon him by such contract.

The rule of equity which insists on those who by use of a fiduciary position make a profit, being liable to account for that profit, in no way depends on fraud, or absence of bona fides; or upon such questions or considerations as whether the profit would or should otherwise have gone to the Plaintiff, or whether the profiteer was under a duty to obtain the source of the profit for the Plaintiff, or whether he took a risk, or acted as he did for the benefit of the Plaintiff, or whether the Plaintiff has in fact been damaged or benefited by his action.

One of the most useful orders mentioned in the section—which will enable the Court to do justice to the injured shareholders—is to order the oppressor to buy their shares at a fair price: and a fair price would be, I think, the value which the shares would have had at the date of the petition, if there had been no oppression. The section gives a large discretion to the Court and it is well exercised in making an oppressor make compensation to those who have suffered at his hands.

That, however, was a case of partnership where the scope of the partners' power to bind the partnership can be closely defined in relation to the partnership deed In the present case the knowledge and information obtained by Boardman was obtained in the course of the fiduciary position in which he had placed himself.