Wright v Atlas Wright (Europe) Ltd
| Jurisdiction | England & Wales |
| Judgment Date | 28 January 1999 |
| Date | 28 January 1999 |
| Court | Court of Appeal (Civil Division) |
Court of Appeal
Before Lord Justice Kennedy, Lord Justice Aldous and Lord Justice Potter
Company - life payments to directors - formalities not observed - agreements valid
Agreements between a company and its directors providing for payments for life terminable only by the recipients and not by the company were valid and enforceable even though the procedural steps set out in section 319 of the Companies Act 1985 had not been complied with, since real consent to the agreements was given by the sole shareholder of the company for an act which was intra vires the company's powers.
Applying the principle in In re DuomaticELR ((1969) 2 Ch 365), the formalities in section 319 were amenable to waiver by the class for whose benefit and protection it was designed, namely shareholders.
The Duomatic principle did not necessarily apply in respect of every resolution passed as an authorisation process under the 1985 Act. The underlying purpose of each provision had to be examined to determine whether the Duomatic principle applied in relation to it.
The Court of Appeal so held, dismissing the appeal of the defendant, Atlas Wright (Europe) Ltd, against the decision of Judge Gibbs, QC, sitting as a High Court judge in Birmingham Mercantile Court on February 10, 1998, on questions of law under Order 14A of the Rules of the Supreme Court in relation to agreements made between the defendant company and the plaintiffs, George Peter Wright and Ann Wright on May 9, 1988.
Mr Andrew Stafford for the company; Mr Alan Gourgey for Mr and Mrs Wright.
LORD JUSTICE POTTER said that the company was founded by Mr Wright in 1973 and carried on the business of design, manufacture and contracting of air conditioning systems.
He was the chairman and managing director of the company and his wife, the second plaintiff, was a director. Between them they owned the entire share capital of the company.
In May 1987 the company's entire share capital was sold to Wheway plc and service agreements were entered into between the company and each of the plaintiffs, terminable on 12 months notice. A year later the first plaintiff wanted to retire, and on May 9, 1988 the agreements in question were made in substitution for the service agreements.
Mr Wright's agreement appointed him as president of the company for life, terminable by Mr Wright by six months notice. Mr and Mrs Wright were each to receive an annual...
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...have done formally by way of written resolution or at a meeting: Re New Cedos Engineering Co Ltd [1994] 1 BCLC 797, 814g-h; Atlas Wright (Europe) Ltd v Wright [1999] BCC 163, 174G-H. Accordingly the principle can not apply to relieve the directors of liability in respect of transactions w......
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...protect third party interests it would be inappropriate to allow shareholders to waive these third party rights. Wright v Atlas Wright [1999] B.C.C. 163 In Wright v Atlas Wright the court considered the Duomatic principle in the context of shareholder approval for directors' long-term servi......