Introductions Ltd v National Provincial Bank Ltd

JurisdictionEngland & Wales
JudgeLORD JUSTICE HARMAN,LORD JUSTICE RUSSELL,LORD JUSTICE KARMINSKI
Judgment Date28 January 1969
Judgment citation (vLex)[1969] EWCA Civ J0128-4
Date28 January 1969
CourtCourt of Appeal (Civil Division)
Introductions Limited
and
National Provincial Bank Limited

[1969] EWCA Civ J0128-4

Before:

Lord Justice Harman

Lord Justice Russell and

Lord Justice Karminski

In The Supreme Court of Judicature

Court of Appeal.

(Civil Division)

(From: Mr. Justice Buckley)

Mr. RAYMOND WALTON, Q.C. and Mr, L.J. MORRIS SMITH (instructed by Messrs. Wilde Sapte & Co.) appeared on behalf of the Appellants (Defendants).

Mr. ALLAN HEYMAN (instructed by Messrs. Simmons & Simmons) appeared for the Respondent Liquidator.

LORD JUSTICE HARMAN
1

This is an appeal from Mr. Justice Buckley's decision on a summons in the liquidation of this company raising the question whether the debentures held by the defendant bank are valid against the liquidator or are void as being tainted by the doctrine of ultra vires. The judge decided two questions. First, whether the activity in question was within the powers of the company. That he answered in the negative, and there is no appeal from that. The second question, which the subject of the appeal, was that in borrowing the money in question the company was acting within its powers and could give the bank a valid security.

2

This company started its career in 1951 in connection with the Festival of Britain and facilities to be afforded to visitors from abroad in connection with that event. It has an issued capital of £400. Subsequently for some years after 1953 it carried on a business connected with deck chairs at a seaside resort from 1958 to 1960 it carried on no business but in the latter year there was a transfer of shares and a new board was elected which decided to make use of the company for a venture connected with pigs. It has always been the ambition apparently of the commercial community to stretch the objects clause, thus getting the advantage of limited liability with as little fetter on the activities of the company as possible. And, as Lord Davey said, the little man starting a grocery business usually combined groceries with power to bridge the mighty Zambesi. But still you cannot have an object to do every mortal thing you want, because that is to have no object at all. There was one thing that this company could not do and that was to breed pigs. The venture of pig-breeding is the type of adventure which has always drawn money from the pockets of the British public, who apparently much prefer to regard themselves as owners of an apple or an apple tree or a pig rather than a mere share in a company. Anyhow this venture, like other similar ventures, has been a disastrous failure, and the company was ordered to be wound up in 1965.

3

In 1960 the then new directors approached the appellant bank with a view to opening an account. This became in due course of time heavily overdrawn, and the bank, requiring security, were offered two debentures secured on the company's assets. It is common ground that before the security was given the bank was furnished with a copy of the memorandum and articles of association and also became aware, and expressly aware, that the company was carrying on as its sole business the business of pig-breeding, which it has now acknowledgedwas ultra vires its memorandum. The bank has however relied on the fact that there is in the memorandum a sub-clause (N) empowering the company in general terms to borrow, in particular by the issue of debentures, and to secure the loan by change. There is also in this memorandum a form of words which is common enough and has been for many years; and the words are these: "It is hereby expressly declared that each of the preceding sub-clauses shall be construed independently C of and shall be in no way limited by reference to any other sub-clause and that the objects set out in each sub-clause are independent objects of the company", of course the original idea of that form of words was to avoid the old difficulty, which was that there was a main objects clause and all the others were ancillary to the main objects; and many questions of ultra vires arose out of that.

4

It was argued therefore that the only obligation was the bank was to satisfy itself that there was an express power to borrow...

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27 cases
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    ...subject matter of this sub-paragraph is by its nature incapable of constituting a substantive object (as was the power to borrow in In Re Introductions Ltd. (1970) Ch. 199), or (ii) the wording of the memorandum shows expressly or by implication that the sub-clause was intended merely to c......
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  • Hazell v Hammersmith and Fulham London Borough Council and Others
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2 books & journal articles
  • The rise, fall, and reform of the ultra vires doctrine
    • South Africa
    • South Africa Mercantile Law Journal No. , May 2019
    • 25 May 2019
    ...third parties from suffering loss as a result of the 29 Bruce Welling Corporate Law in Canada: The Governing Principles (1984) 187. 30 [1969] 1 All ER 887 (CA). 31 According to this case, a power cannot be converted into an object. Harmon LJ thus stated that 'borrowing is not an end in itse......
  • ULTRA VIRES AND CORPORATE CAPACITY IN SINGAPORE
    • Singapore
    • Singapore Academy of Law Journal No. 1989, December 1989
    • 1 December 1989
    ...14. See eg Rosemary Simmons Memorial Housing Association Ltd v. United Dominions Trust Ltd[1986] 1 WLR 1440 (High Court, England). 15. [1970] Ch 199 (Court of Appeal, England). 16. [1984] BCLC 466 (Court of Appeal, England). 17. Re Introductions Ltd[1970] Ch 199 (Court of Appeal, England) (......

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