Contractual Rights under Articles of Association―An Overlooked Principle Illustrated
| DOI | http://doi.org/10.1111/j.1468-2230.1965.tb01076.x |
| Date | 01 May 1965 |
| Published date | 01 May 1965 |
| Author | K. W. Wedderburn |
NOTES
OF
CASES
CONTRACTUAL
RIGHTS
UNDER
ARTICLES
OF
ASSOCIATION-
AN
OVERLOOKED
PRINCIPLE
ILLUSTRATED
THE decision in
Re Richmond Gate Property
Co.
Ltd.l
is, at fkst
sight, a simple one. But the reasons which led Plowman
J.
to his
conclusion reflect,
it
is submitted, the growing importance of a line
of argument which, though well supported by authority, has been
far too long neglected in company law.
The applicant, a
Mr.
Walker, subscribed the memorandum and
was, therefore, a member of a company which
"
had a very short
life."
He
was also one of its two managing directors. To the latter
position he was appointed under
an
article that named him and
Mr.
Clancy as managing directors for life. The articles went
on
to
provide that the board might appoint a managing director, and that
a
managing director should
''
receive such remuneration
. .
.
as
the directors may determine."
*
Nine months after incorporation
a
resolution for voluntary winding-up was passed. During those
months,
Mr.
Walker
bad
performed work for the company as
managing director.
No
resolution of the board had ever determined
that he should receive remuneration. The liquidator rejected his
claim for
€400
made
on
the basis of either an implied contract
or
a
quantum meruit.
Plowman
J.
agreed with the liquidator.
His Lordship held that
Mr.
Walker was contractually bound by
the terms of the articles. Properly understood, these meant that
no
claim could be made in the absence of a determination by the board.
Two different ways of reasoning were available for reaching that
conclusion. The first, and perhaps the orthodox, method might be
to say that, although the managing director had no express service
contract with the company, a contract for work done should be
inferred between
it
and him as managing director. Into that
contract the terms of the articles should be incorporated.s There-
fore,
Mr.
Walker would fail.
That was not the reasoning adopted by Plowman
J.
He did
not
find as a fact any inferred contract of service into which the articles
should be implied. The reason, in his view, why there was no room
for any claim on an
"
implied contract
yy
or
quantum meruit
was
that
Mr.
Walker was bound by his
"
express contract
"
in the
articles themselves. That was what distinguished this case from
1
[1965]
1
W.L.R.
335;
"641
3
All
E.R.
936.
2
Adopting Table
"
A,"
arts.
107
and
108,
without any amendment. Plowman
J.
construed the provision on remuneration
as
covering any and every managing
director
of
the company.
3
A
long line
of
cases supports this manoeuvre:
e.g.,
Re
New
British
Iron
Co.
[1898]
1
Ch.
324:
Read
v.
Astoria
Garage
(Streatham)
Ltd.
[1952]
Ch.
637.
847
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