The court was asked whether the knowledge of the directors of the latter company should be attributed to it, with the effect that the latter company could and should be treated as estopped from denying that it had consented to a particular arrangement with a third party company. However, the arrangement was one that was against the company’s interests and for the benefit of the third party company which the directors also controlled and which was in financial difficulties.
Held: The law does not make the unreal assumption that agents will reveal to their principals the fraud which they are comitting on them.
Viscount Dunedin summarily rejected the suggestion that the company could be treated as knowing about a director’s breach of duty by virtue only of the knowledge of the defaulting director himself: ‘My Lords, there can obviously be no acquiescence without knowledge of the fact as to which acquiescence is said to have taken place. The person who is sought to be estopped is here a company, an abstract conception, not a being who has eyes and ears. The knowledge of the company can only be the knowledge of persons who are entitled to represent the company. It may be assumed that the knowledge of directors is in ordinary circumstances the knowledge of the company. The knowledge of a mere official like the secretary would only be the knowledge of the company if the thing of which knowledge is predicated was a thing within the ordinary domain of the secretary’s duties. But what if the knowledge of the director is the knowledge of a director who is himself particeps criminis, that is, if the knowledge of an infringement of the right of the company is only brought home to the man who himself was the artificer of such infringement? Common sense suggests the answer, but authority is not wanting.’
Viscount Dunedin, Lord Sumner
[1928] AC 1, [1927] All ER 97
England and Wales
Citing:
Cited – Re Hampshire Land Company 9-Jul-1896
A company had borrowed from a building society. The borrowing was not properly authorised by resolution of the shareholders in general meeting The court was asked whether whether the knowledge of the company secretary common to both the company and . .
Cited by:
Cited – Fassihim, Liddiardrams, International Ltd, Isograph Ltd v Item Software (UK) Ltd CA 30-Sep-2004
The first defendant (F) had been employed by a company involved in a distribution agreement. He had sought to set up a competing arrangement whilst a director of the claimant, and diverted a contract to his new company.
Held: A company . .
Cited – Jetivia Sa and Another v Bilta (UK) Ltd and Others SC 22-Apr-2015
The liquidators of Bilta had brought proceedings against former directors and the appellant alleging that they were party to an unlawful means conspiracy which had damaged the company by engaging in a carousel fraud with carbon credits. On the . .
Lists of cited by and citing cases may be incomplete.
Agency, Company
Updated: 29 November 2021; Ref: scu.215866