Bell Houses Ltd v City Wall Properties Ltd

JurisdictionEngland & Wales
Judgment Date01 April 1966
Judgment citation (vLex)[1966] EWCA Civ J0401-3
Date01 April 1966
CourtCourt of Appeal

[1966] EWCA Civ J0401-3

In The Supreme Court of Judicature

Court of Appeal

(From: Mr. Justice Mocatta - London)


Lord Justice Sellers

Lord Justice Dakckwerts and

Lord Justice Salmon

Bell Houses Limited
City Wall Properties Limited

Mr. J.G. STRANGMAN, Q.C. and Mr. PAUL SIEGHART (instructed by Messrs. Theodore Goddard & Co.) appeared on behalf of the Appellants (Plaintiffs).

Mr. S.W. TEMPLEMAN, Q.C. and Mr. J.K. HOLDEN (instructed by Messrs. Edwards, Son & Noice) appeared on behalf of the Respondents (Defendants).


LORD JUSTICE DANCKWERTS: Lord Justice Sellers has asked me to read the first judgment in this appeal.


This is an appeal from a decision of Mr. Justice Mocatta on the 5th July, 1965, in an action brought by the appellants, Bell Houses Limited, against the respondents, City Wall Properties Limited, to recover a commission or procuration fee of £20,000 under an agreement alleged to have been made between the parties between the 5th February and the 9th March, 1962.


Bell Houses Limited is a private company limited by shares and its principal business in fact is the development of housing estates. The chairman of the directors, Mr. Randal Mulcaster Bell, controls the company and its administration. The other directors were his wife and a brother of Mr. Bell, but the brother has left the company now. All effective dealings of the company were really done by Mr. Bell, and this was officially authorised by a resolution passed on the 10th June, 1955, at a Meeting of the Board of Directors whereby it was resolved that the administration of the company generally and with regard to sales be left for the chairman to deal with together with his principal sales agent. The directors had power to delegate in this way by virtue of Article 102 of Table in Schedule I of the Companies Act, 1946, which was incorporated in the company's articles.


The method by which the business of the company was transacted was described by Mr. Bell in evidence as being the acquisition of vacant sites for which no planning consent had been obtained, because the land is thus obtained at a cheaper price. The contract of purchase was made subject to planning consent, and the company then obtained outline planning consent and proceeded with the development of the site as a housing estate.


The practice of the company was to have the sites conveyed to subsidiary companies controlled by Mr. Bell, apparently purely as a matter of convenience. Finance had, of course, to be obtained, and so advances on mortgages were obtained for these companiesfrom some "financier". A noteworthy feature is that the advances to these companies might exceed the purchase price of the sites, but this was due to the value provided by Bell Houses' possession of planning consent and the enhanced values which would be produced by the development on the sites of housing estates. For this purpose building leases of the sites were granted to Bell Houses, and this was a condition of the advances made to the companies. The sums advanced were repaid when the purchasers of the houses paid for them by means of loans from building societies obtained in the ordinary way.


It is obvious that in order to finance these transactions Mr. Bell and his company, Bell Houses, had to know of persons who were willing to provide the finance, and knowledge of such sources was a matter of value. Four of such transactions took place with a financing company called Nestle's Pension Trust Limited (hereinafter called "the Trust"), two of the transactions being with a company called Maes-y-Tannau Estates Limited, and the others being with companies called Pont Faen Investments Limited and Golden Court (Richmond) Investments Limited.


An argument was put forward on behalf of the respondents (City Wall Properties Limited) that these were transactions between the Trust and these three companies and not Bell Houses. This argument seems to me to ignore the reality that these properties were conveyed to and the advances by the Trust made to those companies merely as the nominees of Bell Houses and for the convenience of the business of Bell Houses. It is true that Bell Houses held no shares in these companies, but they were controlled by Mr. Bell, the chairman of Bell Houses, and were therefore not independent in fact. The reality is that this was all machinery to effect Bell Houses' operations. In my opinion there is no substance in this point.


The way in which City Wall came into the matter was as follows. Bell Houses had been approached by financiers, including apparently some Swiss financiers, with a view to Bell Houses being financed in their business transactions from such sources.Bell Houses had at the moment no development scheme for which the company could use the money, but in the course of a lunch-time meeting between Mr. Skeggs, who is a solicitor but was acting as the agent of City Wall in financial matters, end Mr. Bell it emerged that City Wall required finance to the extent of £1,000,000 for the purpose of their current schemes – what was called "bridging finance". Mr. Skeggs said that this variety of bridging finance was extremely difficult to obtain. Mr. Bell intimated that he knew of sources from which such finance could be obtained. After a few abortive attempts to obtain it from other sources, eventually the money required was to be provided by the Trust.


It is claimed by Bell Houses that for this service City Wall agreed to pay a commission of £20,000 to Bell Houses. The introduction was effected, but City Wall refuse to pay to Bell Houses the amount in question… In this action Bell Houses claim payment of this sum as due from City Wall under the alleged agreement. Alternatively, Bell Houses claim £20,000 damages on an implied term that City Wall would not prevent Bell Houses earning the commission.


The contract is denied in the Defence, though (1) a letter of the 2nd March, 1962, from Mr. Skeggs to Mr. Bell, (2) a letter of the 5th March, 1962, from Air. Bell to the surveyor of the Trust, (3) his reply to Mr. Bell of the 6th March, 1962, (4) a letter of the 9th March, 1962, from Mr. Bell to Mr. Oppenheim, the chairman of City Wall, and (5) a letter of the 13th March, 1962, from Mr. Oppenheim to Mr. Bell, suggest the existence of a contract of the kind alleged. But this issue is not before us because a new point was taken by City Wall at the last moment.


The action came on for trial before Mr. Justice Mocatta on Monday the 28th June, 1965. On the previous Friday counsel for City Wall informed counsel for Bell Houses that he had been instructed to take the point that the alleged contract was void as ultra vires the plaintiff company since it was not authorised by the objects clause in the company's Memorandum of Association.The learned judge allowed the Defence to be amended by adding the following paragraph: "The Defendants will say that the agreement or agreements herein alleged by the Plaintiffs were at all material times ultra vires the Plaintiffs and void in that the Plaintiffs under their Memorandum of Association had no power to enter into such agreement or agreements".


The result of this was that the action took a different turn: the matter raised by the amendment was heard and decided as a preliminary point.


The learned judge states in his judgment three separate points as arising for decision. (1) Can a defendant when sued upon a contract by a company take the point that that contract is ultra vires the company? (2) If he can do so when the contract is executory, can he do so or is the point relevant when the contract has been executed so far as the company's obligations are concerned? (3) Assuming that the answers to the first two questions are in the affirmative, was the contract ultra vires the plaintiff company?


The learned judge did not deal with the three points in that order; and, indeed, it is clear that if the answer on the third of the points is that the contract is not ultra vires the company, the other two points do not arise. The learned judge decided the third point in the defendants' favour and dismissed the action. We, also, have heard the third point argued first; and in the result we have not found it necessary to hear argument on the other two points.


One point was raised and discussed in argument which is rut really involved in the question of ultra vires, but which I suppose went to the basis of the contract alleged by the plaintiff company. It was argued on behalf of City Wall that the dealings with City Wall were conducted by Mr. Bell on his own behalf and not on behalf of Bell Houses, so that the plaintiff company had no interest in the matter. This argument seems to me to be completely untenable. There is no evidence that Mr. Bell ever claimed the benefit of the £20,000 for himself. Ashas already been mentioned, Mr. Bell controlled Bell Houses Limited and administered it completely, and it is evident that ha used the company for the purposes of the business. He was authorised by the resolution of the Board of Directors to con-duct the administration of the company's business on behalf of the Board, and it is impossible to suppose that he was distinguishing business negotiations carried out by him from the business of the company. Letters written by him in the course of this transaction were always written on the company's notepaper, and though most of his letters were signed by his Christian name, that was in accordance with the terms on which these business men were, and some of the letters, and in particular the letter of the 9th March, 1962, to Mr. Oppenheim (the chairman of City Wall) were signed by Mr. Bell as "Chairman".


Finally the action has been brought in the name of Bell Reuses Limited. There is no doubt that if there was a contract to pay commission, the contract was made with the plaintiff company, through...

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