The Gazette 1985

J ANUARY / F E BRUARY 1985

GAZ E T TE

borrowing (where it is within the directors' powers) or approving the form of the mortgage or authorising the affixing of the seal. These were merely matters of internal management in respect of which an outsider was entitled to the protection of the rule in Royal British Bank -v- Turquand. 1 In this case, however, the bank had adopted an ultra- cautious approach and the liquidator contended that they should be penalised for their pedantry. It was submitted that because Ulster Investment Bank Limited required as a condition precedent to the first loan the right to receive and approve copies of the various board resolutions authorising the borrowing, they had disqualified themselves from relying on the rule. Carroll J. would have none of this. She was satisfied that the bank had acted bonafide throughout. They were entitled to assume where there were two directors present that one was an " A " director and one was a " B " director. 8 The liquidator also sought to rely on the terms of the shareholders' agreement between the shareholders of which the bank had actual notice. It was argued that the bank must be taken to know from this that the two directors present were " B " directors. According to the terms of the agreement the two persons in question together with another were to be issued with all the " B " ordinary shares whereas the " A " ordinary shares were reserved to other named individuals. Again the Judge was unimpressed. 9 She pointed out that it was possible for the shareholding to have changed between the date of the shareholders' agreement and the general meeting. Also there was no particular shareholding qualification required for directors in the articles. Carroll J. indicated that she was influenced in her view generally by a consideration of other cases that deal with various aspects of the rule in Turquand's case. Among these cases was Duck -v- Tower Galvanising Co. 10 The case relates to defacto directors. A man formed a company to carry on his business, and himself and his spouse acted as directors without being appointed by the subscribers to the memorandum, as the articles required, and without those subscribers in any way acquiescing in them so acting, or in any way conveying the impression that they had been properly appointed. These de facto directors issued a debenture in the company name to secure a loan made to the company. The court held that the company was bound by the debenture. The debenture-holder could validly assume that there had been no irregularity in the appointment of the directors from the fact that they controlled the company's business. Cox v. Dublin City Distillery (No. 2) In light of the authorities Ulster Investment Bank Limited-v- Euro Estates Ltd. can be viewed as an orthodox application of the "indoor management" rule. One Irish, case which had some relevance to the issues involved, appears, however, to have escaped the attention of Carroll J. In Cox -v- Dublin City Distillery (No. 2) certain debentures were issued in trust for persons pursuant to various resolutions. At the board meetings at which these resolutions were passed there was no quorum competent to vote and consequently the resolutions were invalid. It was decided in Yiull -v- Grey mouth Point Elizabeth Railway and Coal Co. Ltd. 12 that the word "quorum" in the articles of association of a company signified a quorum competent to transact and vote on the business

more

Irish Mutual pays investors the highest interest rates — 1% more than any of the big building societies. Also, you can withdraw any amount, at any time without notice or loss of interest — that's the security you have with an Irish Mutual Ordinary Account. And you're guaranteed absolute confidence. Wherever your money is now, check the return you're getting: you'll almost certainly get more at Irish Mutual. IRISH MUTUAL BUILDING SOCIETY The "1% more" Building Society 111 Lower C r a f t on SI reel (opposite Trinity College). Telephone 719866 Business hours: Monday to Friday, 9 a.m. to 5.30 p.m. Open during lunch-hour. Saturdays, 10 a.m. to 12.45 p.m.

18