Hely-Hutchinson v Brayhead Ltd
A director who acts as managing director with the acquiescence of the board may have implied actual authority to make contracts on behalf of the company.
Facts
Lord Suirdale was the chairman of Brayhead, and acted as its de facto managing director, with the knowledge and acquiescence of the board, although he had not been formally appointed. He signed letters on behalf of Brayhead, guaranteeing loans made by Mr Hely-Hutchinson to another company. When the other company failed, Mr Hely-Hutchinson sued Brayhead on the guarantees. Brayhead argued that Lord Suirdale had no authority to give them.
Legal principle
The Court of Appeal held that Brayhead was bound by the guarantees. Lord Denning MR said that Lord Suirdale had implied actual authority to give the guarantees, because the board had, by its conduct over many months, acquiesced in his acting as its chief executive and committing the company to contracts without the necessity of sanction from the board. Actual authority may be express or implied, and implied authority can be inferred from the conduct of the parties and the circumstances of the case.
Related cases on corporate contracts, agency and attribution
- Bilta (UK) Ltd v Nazir (No 2) [2015] UKSC 23, [2016] AC 1
- Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
- Kelner v Baxter (1866) LR 2 CP 174
- Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705
- Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500
- Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45
- Phonogram Ltd v Lane [1982] QB 938
- Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147
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