EMCO Plastica International Ltd. v. Sydney Lawrence Freeberne, Civ. App. 5 of 1971, E. A. C. A.; 19/8/71; Lutta, Law and Mustafa JJ. A.

EMCO Plastica International Ltd. v. Sydney Lawrence Freeberne, Civ. App. 5 of 1971, E. A. C. A.; 19/8/71; Lutta, Law and Mustafa JJ. A.

The respondent was appointed secretary of the appellant company at the first meeting of the company. At that meeting Mr. Dhanani was appointed Chairman of the Board of Directors. The latter performed the functions of Managing Director. He entered into a service contract with the respondent under which he was given a salary of ₤ 3,000 per annum, annual passages for himself and family and other generous terms and allowances. The contract was to last for a minimum period of 5 years with a proviso that either party may terminate it by giving 12 month’s notice in writing. The respondent’s contract was terminated prematurely without notice of termination as is required in the agreement. He sued for damages for breach of contract. It was argued on behalf of the appellant company that Mr. Dhanani did not have the authority to make an offer on behalf of the appellant company in terms of the contract and that the contract was so unusually generous as to require the approval of the Board of Directors. The learned judge held that Mr. Dhanani was the Managing director and therefore had power to enter into the contract on behalf of the company. He awarded the respondent damages.

            Held: Lutta j. A.: (1) “It seems to me that the question to be determined here is whether Mr. Dhanani had actual or ostensible authority to enter into the contract with the respondent and on behalf of the appellant company.” “In my view the learned judge’s decision, on the facts of this case, was correct. Several acts of Mr. Dhanani suggest that the appellant company knew of Mr. Dhanani holding himself out as acting on the appellant company’s behalf thus impliedly representing that he had authority to do so. He was appointed Chairman of the appellant company on 1^st October, 1965; someone had to represent the appellant company in the conduct of its business, particularly at the initial period, and such person must surely have authority to bind the appellant company. Thus a third party dealing with the appellant company was entitled to assume that there was authority on the part of that person to bind the company. The question as to whether or not the Articles of association or a resolution of the board empowered the Chairman or any other director to enter into a contract bind in the appellant company was not a matter into which the third party should have inquired as long as he acted on a representation that the Chairman or director has authority to bind the appellant company.” (2) “The appellant company cannot repudiate the actions of the Chairman/director done within the scope of his ostensible authority.” (3) Appeal dismissed. Law and Mustafa JJ. A. concurring.