What is the Point of Ultra Vires?
| Published date | 01 March 1966 |
| DOI | http://doi.org/10.1111/j.1468-2230.1966.tb01117.x |
| Date | 01 March 1966 |
NOTES
OF
CASES
WHAT
It3
TIIE POINT
OF
ULTRA VlREt3?
How
strictly will the courts apply the
ultra
vires
principle? To
whom is its protection available? These questions are revisited by
Mocatta
J.
in
Bell
Houses
Ltd.
v.
City
Wall
Properties
Ltd.*
The
plaintiff,
a
private company formed for property development,l
entered into
a
contract with the defendants to introduce
a
financier
who would provide
El
million short-term credit. The chairman
often acquired knowledge of such sources of The company
now claimed its fee
on
the contract, either
as
commission
or
as
damages
in
lieu.
The
defendants replied by arguing that the
contract
to
act, in effect,
as
a
money broker was outside the plaintiff
company's powers.
Two
points arose
on
this preliminary iasue-
was it
ultra
vires;
and,
if
it
was, could the defendants take the
point
?
Mocatta
J.
decided them both in favour of the defendants.
The company's objects were lorgely those
of
a
property develop-
ment company. There was no clause stating that the sub-clauses
of
the objects clause were each
to
stand independently and not to
be limited by other sub-clauses; the judge was much affected by
the absence of that familiar form of words in adopting
a
restrictive
construction of the general words of the memorandum; for
"
general
words construed literally may mean anything under the
sun."'
But the objects also included power:
''
(c) to carry
on
any other trade or business whatever which
can,
in
the opinion of the board of directors, be advan-
tageously carried
on
by the company in connection with or
as
ancillary to any of the above businesses or the gencral
business.
.
.
.
(u) to do
all
such other things
as
are incidental
or
conducive
to the above objects or any of them."
Sub-clause
(u)
added nothing to the general law. His lordship
agreed that the phrase
"
in connection with
"
was the widest in
meaning; but he could not accept that the contract fell within the
objects even
so.
For
('
the mere fact that
a
contract
is
entered into
to make money out
of
knowledge acquired in the course of carrying
1
1966
8
W.L.R.
1066;
[lo86
8
A11
E.R.
427.
0
Hie Lordship decided,
though
not without doubt, that
Mr.
Bell
acquired hie
knowledge in hie capacity
of
director. Some nice points romain for decieion
in thia area,
Bee,
e.g.,
Be
European
Bank
(1870) 6 Ch.App.
BG8;
Re
David
Payns
Ltd.
[1904]
2
Ch.
G08;
and the bizarre decision in
The
Birnam
Wood
19071
P.
1, ospecially in
the
light
of modern dovelopment
of
tho
alter
ego
6
octrine
(eee
high
(l96G)
28
M.L.R.
684).
4
Cited by Mocatta
J.
from Lindley
L.J.,
Re
German
Date
Coffee
Co.
(1882)
20
Ch.l). 160
at
p.
188.
191
2B
y
M'
r.
Bell
whom the judge
d
eecribed
BE
"
at all material timee ite
alter
ego."
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