Case Laws for Commercial Laws

LGEAL PERSONALITY Foss v Harbottle (1843) 67 ER 189 is a leading English precedent in corporate police. In both answerion in which a wrong is alleged to feel been done to a phoner, the proper claimant is the ships community itself. This is kn stimulate as the rule in Foss v Harbottle, and the s constantlyal important exceptions that devote been developed ar often describe as exceptions to the rule in Foss v Harbottle. Amongst these is the derivative correspondion, which allows a minority share takeer to contain a claim on behalf of the fraternity. This applies in situations of wrongdoer control and is, in reality, the exactly true exception to the rule.The rule in Foss v Harbottle is best seen as the starting point for minority shareholder remedies Judgement The chat up laid-off the claim and held that when a society is wronged by its directors it is only the companionship that has standing to sue. In effect the court established two rules. jumply, the proper com plainant rule is that a wrong done to the community whitethorn be vindicated by the come with alone. Secondly, the majority rule ruler states that if the alleged wrong lavatory be confirmed or ratified by a of members in a general en foreknow, accordinglyce the court pull up stakes non interfere,Edwards v Halliwell 1950 2 All ER 1064 is a UK labour fairness and UK phoner police force case ab come to the fore the natural organisation of a trade northern, or a friendship, and litigation by members to withdraw an executive follow the organisations internal rules Some members of the National Union of fomite Builders sued the executive committee for increasing fees. Rule 19 of the union constitution required a vote and a two tierce approval level by members. Instead a delegate meeting had purported to allow the increase with let on a ballot. Jenkins LJ granted the members application.He held that under the rule in Foss v Harbottle the union itself is prima facie the pro per complainant and if a simple majority washbasin make an action binding, then no case can be brought. still there are exceptions to the rule. First, if the action is ultra vires a member may sue. Second, if the wrongdoers are in control of the unions practiced to sue there is a phoney on the minority, and an individual member may take up a case. Third, as pointed out by Romer J in Cotter v National Union of Seamen1 a company should non be able to bypass a special procedure or majority in its own articles.This was relevant here. And fourth, as here, if there is an invasion of a mortalal right. Here it was a personal right that the members paid a set amount in fees and retain Salomon v A Salomon Co Ltd 1897 AC 22 is a landmark UK company law case. The effect of the shapers unanimous ruling was to uphold securely the doctrine of corporate personality, as set out in the Companies Act 1862, so that creditors of an insolvent company could not sue the companys shareholders to pay up outstanding debts. membership as they stood before the purported alterations.Facts Mr Aron Salomon do whip boots and garments in a large Whitechapel gamey Street establishment. He ran his subscriber line for 30 long time and he might fairly get counted upon retiring with at least ? 10,000 in his pocket. His sons wanted to run line of credit partners, so he turned the business into a limited company. His wife and five eldest children became subscribers and two eldest sons also directors. Mr Salomon took 20,001 of the companys 20,007 shares. The price fixed by the produce for the sale of the business to the company was ? 9,000. According to the court, this was extrav featureor and not anything that can be called a business like or reasonable venture of value. Transfer of the business took place on June 1, 1892. The purchase bills the company paid to Mr Salomon for the business was ? 20,000. The company also gave Mr Salomon ? 10,000 in debentures (i. e. , Salomon gave the company a ? 10,000 loan, secured by a charge over the assets of the company). The balance paid went to extinguish the businesss debts (? ,000 of which was cash to Salomon). Soon after Mr Salomon incorporated his business a series of strikes in the shoe industry led the government, Salomons main customer, to split its contracts among more firms (the government wanted to diversify its supply modest to avoid the risk of its few suppliers creation crippled by strikes). His warehouse was full of unsold stock. He and his wife lent the company money. He cancelled his debentures. But the company needed more money, and they seek ? 5,000 from a Mr Edmund Broderip.He as sign Broderip his debenture, the loan with 10% interest and secured by a floating charge. But Salomons business still failed, and he could not keep up with the interest payments. In October 1893, Mr Broderip sued to enforce his security. The company was put into liquidation. Broderip was repaid his ? 5,000, and th en the debenture was reassigned to Salomon, who retained the floating charge over the company. The companys liquidator met Broderips claim with a counter claim, joining Salomon as a defendant, that the debentures were invalid for existence issued as fraud.The liquidator claimed all the money back that was transferred when the company was started rescission of the agreement for the business transfer itself, cancellation of the debentures and quittance of the balance of the purchase money. lee side v Lees Air Farming Ltd 1961 AC 12 is a UK company law case, concerning the obliterate of incorporation and separate judicial personality. The Privy Council reasserted that a company is a separate statutory entity, so that a director could still be under a contract of employment with the company he solely owned.Facts Mrs Lees husband formed the company by dint of Christchurch accountants, which worked in Canterbury, mod Zealand. It spread fertilisers on farmland from the air, realis en as top dressing. Mr Lee held 2999 of 3000 shares, was the sole director and busy as the chief pilot. He was killed in a plane crash. Mrs Lee wished to claim under the Workers fee Act 1922, and he needed to be a worker, or any person who has layed into or works under a contract of service with an employer whether remunerated by wages, salary or otherwise. The company was insured (as required) for worker compensation. The Court of compendium of New Zealand said Lee could not be a worker when he was in effect also the employer. North J said1 the two offices are clear incompatible. There would exist no power of control and therefore the relationship of master-servant was not created. ADVICE The Privy Council aware that Mrs Lee was entitle to compensation, since it was perfectly accomplishable for Mr Lee to have a contract with the company he owned. The company was a separate legal person. captain Morris of Borth-y-Gest saidIt was never suggested (nor in their Lordships view c ould it more or less have been suggested) that the company was a sham or a unmixed simulacrum. It is well established that the mere occurrence that someone is a director of a company is no impediment to his entering into a contract to serve the company. If, then, it be accepted that the respondent company was a legal entity their Lordships see no reason to challenge the validity of any contr true obligations which were created between the company and the dead soul It is said that the departed could not both be under the profession of giving orders and also be under the duty of obeying them.But this approach does not give effect to the circumstance that it would be the company and not the deceased that would be giving the orders. Control would remain with the company whoever might be the promoter of the company to example There appears to be no great difficulty in holding that a man playing in one capacity can make a contract with himself in another capacity. The company and the deceased were separate legal entities. Perpetual authorized Estate Services, Inc. v. Michaelson Properties Facts Aaron Michaelson formed Michaelson Properties, Inc in 1981.Aaron was the sole shareholder and the corporations president. It was a business for real estate joint ventures. It entered a joint venture with Perpetual Real Estates (forming a partnership called Arlington Apartment Associates) to build condominiums. As they were building, further finance was needed. Michaelson Properties Inc could not put up its share, so Perpetual loaned it $1. 05m, and got a personal guarantee from Aaron. The apartments did not turn out to be make that well. Purchasers sued the partnership successfully for $950,000.Perpetual Real Estates paid it off on the partnerships behalf. Then they sought Michaelson Properties Inc to raise its share. It did not have the money, and went bust. So they sued Aaron to pay. He argued that Michaelson Properties, Inc was a separate legal person to him, a nd it was inappropriate to squeeze the corporate veil. At first instance the jury held Aaron should pay. Aaron appealed. appraisal Wilkinson J noted that Virginia law had assiduously upheld the vital economic policy of respecting a corporation as a separate legal entity, since it underpinned the deed of vast enterp coats.He emphasised that the veil would only be lifted where a defendant exercises baseless domination and control and uses the corporation as a device or sham to disguise wrongs, discombobulate fraud, or conceal crime. 1 He said the description of the law which the jury had heard was in a rather soggy state and emphasised that it was not enough that an in retributiveice or fundamental evil would be perpetrated. The fact, he continued, that limited indebtedness might yield results that seem unfair to jurors unfamiliar with the mathematical function of the corporate form cannot provide a basis for piercing the veil. Because there was no evidence that Aaron was attem pting to goldbrick anybody, the veil could not be lifted. There was no unfair siphoning of funds when Aaron paid himself a dividend, because diffusion was entirely foreseeable when the money was given, and the distri exception happened well before any suit was filed. The fact that Aaron had given personal guarantees strengthened the corporate veil presumption, because the achievements recognized it existed. Veil lifting by the courts (1) Where company is a Sham or FacadeAdams v Cape Industries English law has suggested a court can only lift the corporate veil when (1) construing a statute, contract or other document (2) if a company is a mere facade concealing the true facts, or (3) when a subsidiary company was acting as an authorised mover of its parent, and apparently not so just because justice requires or to treat a group of companies as a single economic unit, in the case of civil wrong victims, the House of Lords suggested a remedy would in fact be available.In Lubbe v Cape plc1 Lord Bingham held that the forefront of proving a duty of care being owed between a parent company and the tort victims of a subsidiary would be answered merely according to standard principles of negligence law generally whether prostitute was reasonably foreseeable. the decision in Yukong Line Ltd of Korea v Rendsburg Investment Corpn of Liberia (No 2) 1998 2 BCLC 485 was timely in pointing out that creditors have no standing, individually or collectively to bring an action in respect of any much(prenominal) duty.Toulson J, held that a director of an insolvent company who, in b background of duty to the company, transferred assets beyond the reach of its creditors owed no corresponding fiduciary duty to an individual creditor of the company. The appropriate means of redress was for the liquidator to bring an action for misfeasance (the Insolvency Act 1986, section 212). ?Notwithstanding the logistical issue of locus standi raised by Toulson J. the question of director s duties to creditors again emerged in two recent decisions of the Companies Court 2) Where the company is used for a unsound tendency Sri Jaya Berhad v RHB Berhad The courts in Singapore thence far have been reluctant to pierce the corporate veil when called upon to do so and indicated that they would only exercise their power when called upon to do so sparingly . Re Darby, ex parte Brougham 1911 1 KB 95 is a UK company law case concerning piercing the corporate veil. It is a clear example of the courts ignoring the veil of incorporation where a company is used to conceal a fraudulent operation.Facts Darby and Gyde were undischarged bankrupts with convictions for fraud. They registered a company called City of London Investment Corporation Ltd (LIC) in Guernsey. It had seven shareholders and issued ? 11 of its nominal capital of ? 100,000. Darby and Gyde were the only directors and empower to all services. The company purported to register and float a company in England called Welsh Slate Quarries Ltd, for ? 30,000. It bought a quarrying licence and plant for ? 3ergocalciferol and sold this to WSQ for ? 18,000.The prospectus invited the open to take debentures in WSQ. It stated the name of LIC, scarce not Darby and Gyde, or the fact that they would receive the profit on sale. WSQ failed and went into liquidation. The liquidator claimed Darbys secret profit, which he made as a promoter. Darby objected that the LIC and not him was the promoter. Judgment Phillimore J rejected the argument. LIC was merely an alias for themselves just as much as if they had announced in the Gazette that they were in future going to call themselves Rothschild Co.They were minded to perpetrate a truly great fraud __________________________ Creation of Agency (1) Actual Authority The doctrine of estoppel comes into play here to keep open a tether from asserting to a tercet party that the agent has indorsement when in fact he does not, and then subsequently the headland seeks to renege on an agreement on the basis that the agent never had actual potence. In law, apparent ascendance refers to the permit of an agent as it appears to others,3 and it can hunt down both to enlarge actual permit and to create self-confidence here no actual sanction exists. 4 The law relating to companies and to apparent(a) dictum are in reality only a sub-set of the rules relating to apparent authorization and the law of agency generally, but because of the prevalence of the issue in relation to corporate law (companies, being artificial persons, are only ever able to act at all through their military man agents), it has developed its own specific body of case law. However, some jurisdictions use the terms interchangeably.In freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd 1964 2 QB 480 the director in question managed the companys property and acted on its behalf and in that consumption employed the plaintiff architects to draw up plans for the d evelopment of land held by the company. The development ultimately collapsed and the plaintiffs sued the company for their fees. The company denied that the director had any authority to employ the architects.The court found that, while he had never been appointed as managing director (and therefore had no actual authority, express or implied) his actions were inwardly his ostensible authority and the board had been aware of his dispense and had acquiesced in it. Diplock LJ identified four factors which must be map before a company can be abjure by the acts of an agent who has no authority to do so it must be shown that 1. a bureau that the agent had authority to enter on behalf of the company into a contract of the kind sought to be implemented was made to the asseverator 2. uch a mission was made by a person or persons who has actual authority to manage the business of the company, each generally or in respect of those matters to which the contract relates 3. the contrac tor was induced by such representation to enter into the contract, i. e. that he in fact relied upon it and 4. under its memorandum or articles of association the company was not deprived of the capacity each to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to an agent.The agent must have been held out by someone with actual authority to carry out the dealings and an agent cannot hold himself out as having authority for this purpose. 5 The acts of the company as trader must constitute a representation (express or by conduct) that the agent had a particular authority and must be reasonably still so by the third party. In determining whether the question had represented his agent as having such authority, the court has to consider the totality of the companys conduct. 6 The most common form of holding out is permitting the agent to act in the conduct of the companys business, and in many cases this is infer red simply from allowing the agent to use a particular title, such as finance director. The apparent authority must not be undermined by any limitations on the companys capacity or powers found in the memorandum or articles of association, although in many countries, the effect of this is trim by company law reforms abolishing or restricting the application of the ultra vires doctrine to companies. 7 However, statutory reforms do not affect the general principle that a third party cannot rely upon ostensible authority where it is aware of some limitation which prevents the authority arising, or is put on enquiry as to the intent of an individuals authority. 8 In some component part, the very nature of a transaction would be held to put a person on enquiry. Facts Lord Suirdale (Richard Michael John Hely-Hutchinson) sued Brayhead Ltd for losses incurred after a failed takeover deal.The CEO, chairman and de facto managing director of Brayhead Ltd, Mr Richards, had guaranteed repayme nt of money, and had indemnified losses of Lord Suirdale in return for injection of money into Lord Suirdales company Perdio Electronics Ltd. Perdio Ltd was then taken over by Brayhead Ltd and Lord Suirdale gained a place on Brayhead Ltds board, but Perdio Ltds business did not recover. It went into liquidation, Lord Suirdale resigned from Brayhead Ltds board and sued for the losses he had incurred.Brayhead Ltd refused to pay on the basis that Mr Richards had no authority to make the guarantee and indemnity contract in the first place. Roskill J held Mr Richards had apparent authority to bind Brayhead Ltd, and the company appealed. That has been done in the judgments of this court in Freeman Lockyer v Buckhurst Park Properties (Mangal) Ltd. 1 It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a resolution which authorises two of their number to sign cheques.It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors appoint one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall in spite of appearance the usual scope of that office. Actual authority, express or implied, is binding as between the company and the agent, and also as between the company and others, whether they are in spite of appearance the company or outside it. Ostensible or apparent authority is the authority of an agent as it appears to others. It often coincides with actual authority.Thus, when the board appoint one of their number to be managing director, they invest him not only with implied authority, but also with ostensible authority to do all such things as fall within the usual scope of that office. Other people who see him acting as managing director are entitled to assume that he has the usual authority of a managing director. But sometimes osten sible authority exceeds actual authority. For instance, when the board appoint the managing director, they may expressly limit his authority by saying he is not to order goods worth more than ? 00 without the sanction of the board. In that case his actual authority is subject to the ? 500 limitation, but his ostensible authority includes all the usual authority of a managing director. The company is bound by his ostensible authority in his transaction with those who do not know of the limitation. He may himself do the holding-out. Thus, if he orders goods worth ? 1,000 and signs himself Managing Director for and on behalf of the company, the company is bound to the other party who does not know of the ? 00 limitation (2) Apparent Authority An apparent or ostensible authority, on the other hand, is a legal relationship between the principal and the contractor created by a representation, made by the principal to the contractor, think to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the apparent authority, so as to render the principal liable to perform any obligations imposed upon him by such contract.To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is irrelevant whether the agent had actual authority to enter into the contract.In ordinary business dealings the contractor at the time of entering into the contract can in the nature of things hardly ever rely on the actual authority of the agent. His information as to the authority must be derived either from the principal or from the agent or from both, for they alone know what the agents actual authority is. All that the contractor can know is what they tell him, which may or may not be true. In the ultimate analysis he relies either upon the representation of the principal, that is, apparent authority, or upon the representation of the agent, that is, warrant of authority.The representation which creates apparent authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of the principals business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principals business has usually actual authority to enter into. First International v Hungarian International Bank An agent who had no apparent authority to c onclude a transaction might nevertheless have apparent authority to make representations of fact concerning it, such as the fact that his principal had given the necessary approval for it. The Court of collection dismissed an appeal by the defendant, Hungarian International Bank Ltd, and upheld a decision of Judge Michael Kershaw QC, sitting as a deputy High Court judge in the Commercial Court on 23 October 1991, giving judgment for the plaintiff, First Energy (UK) Ltd.The case concerned an alleged contract under which the defendant was to provide the plaintiff with business finance. One of the issues was whether the defendants agent had ostensible authority to communicate the offer upon which the contract was based. The judge held that he did, and that the plaintiff accepted that offer, so creating the contract. Mary Arden QC and Michael Todd (Chaffe Street, Manchester) for the defendant Giles Wingate-Saul QC and Andrew Sander (Davies Arnold Cooper) for the plaintiff. LORD JUSTICE STEYN said a source that ran through the law of contract was hat the reasonable expectations of honest men must be protected. It was not a rule or principle of law. But if the prima facie solution to a problem ran counter to reasonable expectations of honest men, this criterion sometimes required a rigorous re-examination of the problem to ascertain whether the law did compel demonstrable unfairness. In the present case, if their Lordships were to accept the implications which the defendant had placed on observations of the House of Lords in Armagas Ltd v Mundogas SA (1986) 1 AC 717, it would frustrate the reasonable expectations of the parties.The plaintiffs case was that the defendants agent, while not authorised to enter into the transaction, did have ostensible authority to communicate his head offices approval of the financing facility. He had sent the plaintiff a letter to this effect, which the judge held amounted to an offer capable of acceptance by the plaintiff. The law recognised that in modern commerce an agent who had no apparent authority to conclude a particular transaction might sometimes be clothed with apparent authority to make representations of fact. A decision that the agent did not have such authority would defeat the reasonable expectation of the parties.It would also fly in the face of the way in which in practice negotiations were conducted between trading banks and trading customers who sought technical loans. RATIFICATION The agent whose act is sought to be ratified must have purported to act for the principal Keighley, Maxstead Co v Durant 1901, UK, endorsed by Crowder v McAlister 1909, Qld per Cooper CJ There can be no substantiation of a contract by a person sought to be made liable as a principal, unless the person who made the contract professed to be acting on behalf of the other at the time. Keighley, Maxstead Co v Durant 1901, UK An agent had authority to purchase grain up to a particular price. Ended up contracting t o pay too much, KMCo first decide to ratify, then change their minds. Problem was that the contract was in the name of the agent and of D. D sues, but loses. a. At the time the act was done the agent must have had a competent principal Corporations Law s 131(1). b. At the time of substantiation the principal must be legally capable of doing the act himself. c.The principal must have full association of all material facts relating to the act to be ratified. Ratification must take place within a reasonable time of the agents act unless the contract stipulates another more specific timeframe. The principal has no right to see if market conditions improve, or similar, before ratifying Prince v Clark (1823). Ratification entering into an unlicensed contract The principles of ratification Where an agent enters into an unauthorised contract, the principle may be happy to adopt it. This can be done by the process of ratification.For ratification to be available, however, the agent must purport to act on behalf of a principle, the principle must be in existence at the time of the contract, and the principle must have capacity. The agent must purport to act on behalf of a principle Because the agent must purport to be acting on behalf of another, ratification is not available where the principle is undisclosed. The third party must know that there is, or is supposed to be, a principle in the background. If the third party thinks that the agent is acting on his or her own account, no later ratification will be possible.The principle must be in existence at the time of the contract The piece requirement for ratification, that is, that the principle is in existence at the time of ratification, arises mainly in relation to contracts made on behalf of new companies which are being formed. In Kelner v Baxter, it was held that if the company was not existence (in that it had not been incorporated) at the time of the contract, it could not later ratify the agreement. The p urported agents, the promoters of the company, were therefore personally liable. Such personal obligation is now imposed by statute, by virtue of s 36C of the Companies Act 1985.The principle must have capacity The final requirement is that the principle must have capacity. There are in possibility two aspects to this rule. The first rule is that the principle must have capacity to make the transaction at the time of the contract. This has most obvious relevance to minors, who want to ratify after reaching majority. It could also pass to contracts made outside the powers of a company. The second aspect is that the principle must have capacity at the time of ratification. This was applied in Grover and Grover Ltd v Matthews.A contract of fire insurance was purported to be ratified after a fire had destroyed the property which was the subject of the insurance. It was held that this was ineffective because at the time of the purported ratification the principle could not have made th e contract himself (because the property no longer existed). Capacity is thus being given a rather broader meaning than usual, to cover the issue as to whether the principle would have in practice been able to make the contract in question. Ratification is retrospective in its effect, and the archetype contract must be treated as if it had been authorised from the start.This was confirmed by the Court of Appeal in Presentaciones Musicales SA v Secunda. The implications of this rule are clear from the decision in Bolton Partners v Lambert. Bolton Partners owned a factory, which Lambert offered to buy. This offer was accepted by the managing director, though in fact he had no authority to do this. On 13 January, there was a disagreement, and Lambert withdrew his offer. On 17 January, Bolton Partners started proceedings for come apart of contract. On 28 January, the Board of Directors of Bolton Partners ratified the actions of the managing director.Lambert argued that this ratificati on came too late, but the Court of Appeal held that it had retrospectively validated the original contract, and that Lamberts attempt to withdraw was therefore ineffective. INDOOR anxiety RULE and LIABLITY OF CRIMINAL and TORTOUS ACTS Royal British Bank v Turquand (1856) 6 EB 327 is a UK company law case that held people transacting with companies are entitled to assume that internal company rules are complied with, even if they are not. This indoor management rule or the Rule in Turquands Case is relevant in most of the common law world.It originally mitigated the harshness of the constructive notice doctrine, and in the UK it is now supplemented by the Companies Act 2006 sections 39-41. The rule in Turquands case was not accepted as being firmly entrenched in law until it was endorsed by the House of Lords. In Mahony v East Holyford tap Co1 Lord Hatherly phrased the law thus When there are persons conducting the affairs of the company in a room which appears to be perfectly co nsonant with the articles of association, those so dealing with them externally are not to be affect by irregularities which may take place in the internal management of the company.So, in Mahoney, where the companys articles provided that cheques should be signed by any two of the three named directors and by the secretary, the fact that the directors who had signed the cheques had never been properly appointed was held to be a matter of internal management, and the third parties who received those cheques were entitled to presume that the directors had been properly appointed, and cash the cheques. The position in English law is now superseded by section 40 of the Companies Act 2006,2 but the Rule in Turquands Case is still applied throughout many common law jurisdictions in the Commonwealth.According to the Turquand rule, each outsider contracting with a company in good faith is entitled to assume that the internal requirements and procedures have been complied with. The company will consequently be bound by the contract even if the internal requirements and procedures have not been complied with. The exceptions here are if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (acted in bad faith) or if the circumstances under which the contract was concluded on behalf of the company were suspicious.However, it is sometimes possible for an outsider to ascertain whether an internal requirement or procedure has been complied with. If it is possible to ascertain this fact from the companys public documents, the doctrine of disclosure and the doctrine of constructive notice will support and not the Turquand rule. The Turquand rule was formulated to keep an outsiders duty to inquire into the affairs of a company within reasonable bounds, but if the compliance or noncompliance with an internal requirement can be ascertained from the companys public documents, the doctrine of disclosure and the doctrine of c onstructive notice will apply.If it is an internal requirement that a certain act should be approved by special resolution, the Turquand rule will therefore not apply in relation to that specific act, since a special resolution is registered with Companies House (in the United Kingdom), and is deemed to be public information. Liability In English law, a corporation can only act through its employees and agents so it is necessary to decide in which circumstances the law of agency or vicarious liability will apply to hold the corporation liable in tort for the frauds of its directors or senior policemans.If liability for the particular tort requires a state of mind, then to be liable, the director or senior officer must have that state of mind and it must be attributed to the company. In Meridian Global specie Management Asia Limited v. Securities Commission 1995 2 AC 500, two employees of the company, acting within the scope of their authority but unknown to the directors, used com pany funds to acquire some shares. The question was whether the company knew, or ought to have known that it had acquired those shares.The Privy Council held that it did. Whether by virtue of their actual or ostensible authority as agents acting within their authority (see Lloyd v Grace, Smith Co. 1912 AC 716) or as employees acting in the course of their employment (see Armagas Limited v Mundogas S. A. 1986 1 AC 717), their acts and omissions and their knowledge could be attributed to the company, and this could give rise to liability as joint tortfeasors where the directors have assumed responsibility on their own behalf and not just on behalf of the company.So if a director or officer is expressly authorised to make representations of a particular class on behalf of the company, and fraudulently makes a representation of that class to a Third ships company causing loss, the company will be liable even though the particular representation was an improper way of doing what he wa s authorised to do. The extent of authority is a question of fact and is significantly more than the fact of an employment which gave the employee the opportunity to carry out the fraud.