''Rolled Steel Products (Holdings) Ltd v British Steel Corp''

986 Year 986 ( CMLXXXVI) was a common year starting on Friday (link will display the full calendar) of the Julian calendar. Events By place Byzantine Empire * August 17 – Battle of the Gates of Trajan: Emperor Basil II leads a Byz ...

Ch 246 is a

UK company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary lega ...

case, concerning the enforceability of obligations against a company. The case was one of the last significant cases on ''

ultra vires ('beyond the powers') is a Latin phrase used in law to describe an act which requires legal authority but is done without it. Its opposite, an act done under proper authority, is ('within the powers'). Acts that are may equivalently be termed ...

'' under

English company law The United Kingdom company law regulates corporations formed under the Companies Act 2006. Also governed by the Insolvency Act 1986, the UK Corporate Governance Code, European Union Directives and court cases, the company is the primary legal ...

before the provisions abrogating that doctrine in the

Companies Act 1985 The Companies Act 1985 (c. 6) is an Act of the Parliament of the United Kingdom of Great Britain and Northern Ireland, enacted in 1985, which enabled companies to be formed by registration, and set out the responsibilities of companies, their ...

became effective.

Facts

Rolled Steel Products Ltd gave security to guarantee the debts of a company called SSS Ltd to

British Steel Corporation British may refer to: Peoples, culture, and language * British people, nationals or natives of the United Kingdom, British Overseas Territories, and Crown Dependencies. ** Britishness, the British identity and common culture * British English, ...

. This was a purpose that did not benefit Rolled Steel Products Ltd. Moreover, Rolled Steel's director, Mr Shenkman was interested in SSS Ltd (he had personally guaranteed a debt to British Steel’s subsidiary Colvilles, which SSS Ltd owed money to). The company was empowered to grant guarantees under its articles but approval of the deal was irregular because Mr Shenkman's personal interest meant his vote should not have counted for the quorum at the meeting approving the guarantee. The shareholders knew of the irregularity, and so did British Steel. Rolled Steel Products wanted to get out of the guarantee, and was arguing it was unenforceable either because it was ultra vires, or because the guarantee had been created without proper authority. At first instance

Vinelott J Sir John Evelyn Vincent Vinelott (15 October 1923 – 22 May 2006) was a leading barrister at the Chancery bar and an English High Court judge in the Chancery Division from 1978 to 1994. He was born in Gillingham, Kent, and studied at Queen E ...

held British Steel’s knowledge of the irregularity rendered the guarantee ultra vires, void and incapable of validation with the members’ consent. British Steel appealed.

Judgment

The Court of Appeal held that the transaction was not ultra vires and void. Simply because a transaction is entered for an improper purpose does not make it ultra vires. He emphasised the distinction between an act which is entered into for an improper purpose (which is not beyond the capacity of a company, or void) and an act which is wholly outside a company's objects (and hence ultra vires and void). However, it was unenforceable because British Steel, with knowledge of the irregularity, could not rely on a

presumption of regularity The presumption of regularity is a presumption that forms part of the law of evidence of England and Wales. It is expressed by the maxim of law ''omnia praesumuntur rite et solemniter esse acta donec probetur in contrarium'', which may be shortene ...

in the company’s internal management. Since British Steel ‘constructively knew’ about the lack of authority, they could acquire no rights under the guarantee. On ''ultra vires'' Browne-Wilkinson LJ said the following. On the question of authority Slade LJ held that the '' Rule in Turquand's case'', which would ordinarily entitle a person dealing with a company who to assume the company's own internal rules were complied with, did not apply when it came to someone breaching a rule to further their own personal interests.

Ch 246, 283-284

Notes

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References

* L Sealy and S Worthington, ''Cases and Materials on Company Law'' (9th edn OUP 2010) 95, 119 United Kingdom company case law Court of Appeal (England and Wales) cases 1986 in case law 1986 in British law Steel industry of the United Kingdom

Facts

Judgment

See also

Notes

References