Viscount of Royal Court v B. Shelton, A. Shelton, Moss and Dimsey

JurisdictionJersey
CourtRoyal Court
Judge(Crill, Deputy Bailiff):
Judgment Date23 September 1983
Date23 September 1983
ROYAL COURT
(Crill, Deputy Bailiff):

R.J. Michel for the plaintiff;

R.A. Falle for the first, second and third-named defendants;

A.J. Olsen for the fourth-named defendant.

Companiesdirectorspersonal liabilityclause in articles of association exempting director from liability for "any loss, damage, or misfortune whatever which shall happen in the execution of the duties of his office unless the same shall happen through his own dishonesty"in absence of fraud, negligence may indicate dishonestyto be determined by court on evidence

Companiesobjectsobjects and powerspowers in memorandum of association only to further not expand objects of companyif main objects to be carried on in Channel Islands, power to buy land for company's trading cannot extend to buying land in UK

Companiesultra viresacts ultra vires companyultra vires contract void and cannot be ratified by shareholders

CRILL, DEPUTY BAILIFF: Jomen Limited is a company incorporated in Jersey on the 25th July, 1972. Its original name was Jomen (1972) Limited but on the 8th April, 1975, it changed its name to its present title. I shall refer to it hereafter as "the Company". On the 27th July, 1981, the Company contracted with Kwik Save Discount Group Limited to buy the freehold property 101/103 The Strand, Longton, Stoke-on-Trent. Completion date was the 26th October, 1981, but the Company failed to complete. Subsequently, the terms of the contract were varied so as to extend the completion date until the 30th June, 1982, and provide for monthly payments of 5,000. In the event only two payments were made, together with 5,871.16 of interest from October 26th, 1981, until the 7th June, 1982. On the 14th May, the Company was declared 'en dsastre'. On the 21st June, 1982, Kwik Save Discount Group Limited notified the Viscount, the Plaintiff in this case, that it was electing to treat the contract as having been repudiated by the Company and claimed damages. At the time the purported contract was made between the Company and Kwik Save Discount Group Limited, and when the contract was varied subsequently, the Plaintiff says that Messrs. Barry Shelton, Anthony Shelton, Kenneth Moss and Dermot Dimsey were directors of the Company. In their Answers Messrs. Barry and Anthony Shelton and Mr. Moss admit they were directors but Mr. Dimsey, in his Answer, denies that he was a director at the relevant times.

From August 1981, to the 6th May, 1982, the Company traded from its Stoke-on-Trent address and made a loss of 91,229.59 which the Viscount now claims from the four directors, because, he says, the Company's action in purchasing the Stoke-on-Trent property was ultra vires its objects and, accordingly, the directors are liable for any loss sustained by reason of that ultra vires transaction. Counsel agreed that as a preliminary matter I should decide two questions. First, was the purchase of the English property ultra vires the Company's powers; and secondly, if it was, can the Viscount recover the loss I have mentioned from those who were the Company's directors at the time.

I start by looking at the Company's objects as set out in its Memorandum. Sub-Clauses 3(1) to (12) are what I may call the mercantile objects, that is to say a description of the kinds of business that the Company was founded to carry out. Those objects embrace all the business connected with what is called, in common parlance, "the rag trade". All the Sub-Clauses are in Clause 3 and I shall not repeat that figure in referring to them. Sub-Clauses (13) and (14) are the usual general objects clauses. Sub-Clauses (15) to (44) inclusive may also be described as general objects clauses but directed more to the powers which the Company requires to carry out the objects previously specified. For example, the Company may buy lands and businesses suitable for its purpose as indeed it did when it bought the Stoke-on-Trent property and traded therefrom (see for example Sub-Clauses (22) and (23)).

Sub-Clause (20) is as follows:-

"To invest and deal with the moneys of the company not required for the purpose of its business in such securities and investments and in such manner as may be thought expedient provided always that the company shall not purchase, acquire or hold any investments which according to the Laws of the United Kingdom of Great Britain and Northern Ireland, would, if held by a British subject whose domicile is outside the United Kingdom of Great Britain and Northern Ireland, be liable on the death of such an individual to Estate Duty in the United Kingdom of Great Britain and Northern Ireland. Nothing in this provision shall in any way preclude the company from holding on a register outside the United Kingdom of Great Britain and Northern Ireland, investments in a Company situated and registered outside the United Kingdom of Great Britain and Northern Ireland where, for the convenience of its shareholders, in addition to the Register of its Members kept in the country in which it is registered, it possesses a Register of Members in the United Kingdom of Great Britain and Northern Ireland."

The proviso in the power contained therein is what is called "the Bailiff's Clause." It was designed to give effect to an agreement made between H.M.G. and the States some years before 1939 under which the Insular Authorities agreed to assist in the prevention of the avoidance of U.K. taxes by Jersey registered companies. It was never given statutory authority nor was its legality ever tested or challenged in the Royal Court. It is obvious that if...

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1 cases
  • Re Osias Settlement
    • Jersey
    • Royal Court
    • 19 January 1988
    ...107 Sol. Jo. 981; sub nom. Towler's Settlement Trusts, Re, [1963] 3 All E.R. 759, considered. (11) Viscount of Royal Ct. v. Shelton, 1983 J.J. 53. (12) Weston's Settlements, In re, [1969] 1 Ch. 223; [1968] 3 All E.R. 338; [1968] T.R. 295; (1968), 47 A.T.C. 324; 112 Sol. Jo. 641, dicta of Lo......

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