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You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> Smith v Henniker-Major & Co [2002] EWCA Civ 762 (22 July 2002)
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Cite as: [2002] 3 WLR 1848, [2003] Ch 182, [2002] 2 BCLC 655, [2002] BCC 768, [2002] EWCA Civ 762

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    Neutral Citation Number: [2002] EWCA Civ 762
    Case No: A3/2001/2373

    IN THE SUPREME COURT OF JUDICATURE
    COURT OF APPEAL (CIVIL DIVISION)
    ON APPEAL FROM THE HIGH COURT OF JUSTICE
    CHANCERY DIVISION (RIMER J)

    Royal Courts of Justice
    Strand,
    London, WC2A 2LL
    22 July 2002

    B e f o r e :

    LORD JUSTICE SCHIEMANN
    LORD JUSTICE ROBERT WALKER
    and
    LORD JUSTICE CARNWATH

    ____________________

    Between:
    SMITH
    Appellant
    - and -

    HENNIKER-MAJOR & CO
    Respondent

    ____________________

    (Transcript of the Handed Down Judgment of
    Smith Bernal Reporting Limited, 190 Fleet Street
    London EC4A 2AG
    Tel No: 020 7421 4040, Fax No: 020 7831 8838
    Official Shorthand Writers to the Court)

    ____________________

    Mr David Mabb QC and Mr Julian Gun Cuninghame (instructed by Fosters) for the appellant
    Mr Christopher Symons QC and Mr Daniel Gerrans (instructed by Mills & Reeve) for the respondent

    ____________________

    HTML VERSION OF JUDGMENT
    AS APPROVED BY THE COURT
    ____________________

    Crown Copyright ©

      Lord Justice Robert Walker:

      Introduction

    1. The appeal and the renewed application before the court raise issues of some general importance in the fields of company law, agency and the amendment of pleadings. The appellant is Mr Geoffrey Smith, a businessman with an interest in property development. The respondent Henniker-Major & Co (“the solicitors”) were a firm of solicitors based in Ipswich. The firm has since been dissolved and for practical purposes the respondent is the former senior partner, Mr Mark Henniker-Major.
    2. The appeal is from an order of Rimer J made in the Chancery Division on 17 October 2001. The order refused Mr Smith permission to amend his particulars of claim and dismissed his action under CPR Part 24 as having no real prospect of success.
    3. The judge refused permission to appeal but Arden LJ gave permission to appeal on two grounds (which can conveniently be called the section 35A issue and the ratification issue) and Mr Smith has renewed his application for permission on the third ground for which Arden LJ did not give permission (the amendment issue). There is a respondent’s notice which raises three grounds, not relied on by the judge, for affirming his order. One of these is relevant to the appeal on the ratification issue; one is relevant to the renewed application on the amendment issue; and one will (if it is still material) have to be the subject of further argument on another occasion (that is in accordance with directions given by Chadwick LJ on 27 March 2002; the reserved issues include the issue of Mr Smith’s good faith).
    4. The facts

    5. At the beginning of his judgment the judge rightly commented that the case had a considerable background, but that for his purposes it was not necessary to go into much of it. That is so in this court also. For present purposes the essential issues are whether, how and when Mr Smith personally acquired rights of action against the solicitors from a company called Saxon Petroleum Developments Ltd (“SPDL”), and whether he should be permitted to amend his pleaded case if he needs to do so.
    6. The case set out in the particulars of claim is that in 1992 a partnership called Peter McCall Associates was trading from premises in Ipswich. The partners were Mr Trevor Bickers and Mr Peter McCall. Their business was identifying sites on or near trunk roads which had potential for development as filling stations, cafes or motels, and arranging deals for the sites of that sort. The solicitors acted for Mr Bickers and Mr McCall.
    7. In about October 1992 Mr Christopher Meynell, a financial consultant, was introduced to Mr Bickers and Mr McCall, and he in turn introduced them to Mr Smith. The outcome was the formation (on 23 April 1993) of SPDL as a joint venture company whose shares were (under a shareholders’ agreement dated 7 May 1993) to be held as to 30 per cent by Mr Smith, 33 per cent each by Mr Bickers and Mr McCall, and 4 per cent by Mr Meynell. All four were appointed as directors.
    8. By the shareholders’ agreement Mr Bickers and Mr McCall were at once to transfer to SPDL all their “options agreements plans and other relevant information or documentation relating to petrol station sites and their acquisition and development” and there were provisions prohibiting competition and the disclosure of confidential information.
    9. Mr Smith’s case was that the first deal to be carried out by SPDL related to a site at the junction of the A19 and the A689 at Wolviston, Cleveland, but that SPDL was deprived of the benefit of that deal by sharp practice on the part of Mr Bickers and Mr McCall, who made use of another company called Saxon Petroleum Ltd (“SPL”) of which Mr Smith was neither a director nor a shareholder. Mr Smith’s case was that the solicitors wrongfully accepted a retainer on behalf of SPL when already instructed by SPDL, and that they were in breach of contractual, tortious and fiduciary duties to SPDL. The individuals said to be implicated were Mr Henniker-Major and an unqualified employee of his firm, Mr Terry Bright.
    10. In December 1993 Mr Smith brought proceedings under section 459 of the Companies Act 1985 in the Ipswich County Court. The respondents were SPDL, Mr McCall, Mr Bickers and Mr Meynell. On 7 April 1995 His Honour Judge Bromley QC gave a first judgment in favour of Mr Smith and said that Mr McCall and Mr Bickers had been in gross breach of their fiduciary duties to SPDL. The proceedings continued for some time but it is unnecessary to go further into the details.
    11. That is the background to the issues on this appeal. The facts of immediate relevance are concerned with Mr Smith’s efforts to see SPDL’s rights of action against the solicitors pursued and brought to judgment. By August 1998 Mr Smith and Mr McCall were the only directors of SPDL. The judge’s account of what happened is not challenged:
    12. “Mr Smith convened a board meeting of SPDL for 12 August 1998. He gave notice of it to Mr McCall by a letter of 9 August 1998. Mr McCall replied on 10 August, saying that he was unable to attend the meeting, and nor did he. The meeting was attended by Mr Smith alone. Its minutes record that he was authorised to sign two assignments which were before the meeting. One of them was that with which this action is concerned, namely an assignment of certain of SPDL’s alleged claims to Mr Smith himself.”
    13. The assignment is a typewritten document with the date (12 August 1999) in typescript but it is common ground that ‘1999’ must be a mistake and that it was signed by Mr Smith on 14 August 1998. The parties are SPDL, described as the Assignor, and Mr Smith, described as the Assignee. The text starts with the heading ‘WHEREAS’ and this is followed by eight numbered clauses which do not clearly distinguish between recitals and operative provisions:
    14. “1 The Assignor considers themselves to be rightful in taking proceedings for damages for negligence and/or breach of contract against Henniker-Major & Co, the Assignors appointed Company Solicitors.
      2 The Assignor Company is based in England.
      3 The Assignee is desirous of acquiring all of the rights subsisting in the above referred to rights, and the Assignor has agreed to assign all the said rights to the Assignee accordingly.
      4 The Assignee indemnifies the Assignor against any costs of such pursuit of the Rights afforded by the said Court Order.
      5 The Assignee is the only remaining Creditor of the Assignor Company.
      6 The consideration for the aforementioned assignment, shall be an undertaking that whilst the pursuit of any entitlements against Messrs Henniker-Major & Co, the Assignee shall hold off any action to recover the acknowledged indebtedness sum due to him, in the order of £45,000 (plus any interest due) until all efforts to recover this sum elsewhere are exhausted.
      7 This Assignment was approved and agreed at a properly convened meeting of the Board of Directors of the Assignor Company held on the 12th of August 1998 and held at the Registered Office.
      8 The signatory below is Chairman of the Board of Directors of the Assignor Company and the Company will be bound by the terms of this agreement save by prior mutual consent between the Assignor and the Assignee.”

      The assignment was signed (once) by Mr Smith as director and chairman, and dated in manuscript ‘14-8-98’.

    15. Clause 5 recited that Mr Smith was the only remaining creditor of SPDL. Before the judge Mr Smith accepted that that was incorrect and that SPDL had liabilities of about £80,000 in all, including about £17,000 owed to Mr Meynell. Mr Smith said that the other liabilities were to him and his wife, Mrs Sharon Smith. The solicitors did not accept that there were no other creditors. Mr and Mrs Smith had in 1997 sold their house at Stowmarket in order to pay off their liabilities to Barclays Bank plc, including liabilities as guarantors of SPDL. The sum described as “of the order of £45,000” represented a sum of £40,438.88 paid by Mr and Mrs Smith as guarantors together with an estimated sum of interest.
    16. It is common ground that Mr Smith could not validly hold a board meeting on his own because (under regulation 89 of Table A, which applied to SPDL) the quorum for a board meeting was two directors. (Mr Smith’s written evidence, on which he was not cross-examined, was that he misunderstood the articles and believed that he had power to act on his own.) That has given rise to the first issue on the appeal, as to the meaning and effect of section 35A of the Companies Act 1985. Believing himself to have acquired SPDL’s rights of action, Mr Smith issued his claim form in these proceedings on 28 September 1999. The proceedings were commenced in the Queen’s Bench Division but were transferred to the Chancery Division.
    17. In their defence the solicitors denied any breach of duty. They also raised some further matters by way of defence, including (in paragraph 24) the contention that the board meeting on 12 August 1998 was inquorate and that the assignment of 14 August 1998 (“the 1998 assignment”) was ineffective. A further point taken was that in any event it did not assign any cause of action for breach of fiduciary duty.
    18. Soon after putting in their defence the solicitors made an application for summary judgment under CPR Part 24. The application took a long time to come on partly because of the order for transfer to the Chancery Division. With the application still pending SPDL and Mr Smith entered into a further deed (“the 2001 deed”) to which Mrs Smith was also a party. This deed was executed on 31 August 2001. By that time Mr Smith was the sole director and the 2001 deed was executed at, or immediately after, what minutes signed by Mr Smith described as ‘a meeting of the sole director’ of SPDL. The minutes refer to Mr Richard Gunstone being in attendance as the proposed company secretary, and to his appointment as company secretary at the meeting.
    19. The 2001 deed recited the 1998 assignment and the solicitors’ challenge to its validity and extent. Its operative part consisted of five clauses, as follows:
    20. “(1) SPDL hereby ratifies the 14/8/98 Assignment to the fullest extent possible and, for the avoidance of doubt, retrospectively.
      (2) Without prejudice to clause (1) above, SPDL hereby confirms and repeats the assignment by it to Mr Smith of all claims against Henniker-Major & Co, including for the avoidance of doubt all claims now pleaded in the proceedings begun by Mr Smith against Henniker-Major & Co in the Queen’s Bench Division, Ipswich District Registry on 28th September 1999, Claim No. IP 990075, and since transferred to the Chancery Division, London. As between SPDL and Mr Smith, this clause (2) shall take effect so far as possible from 14th August 1998.
      (3) Mrs Smith hereby assigns to Mr Smith in equity all her claims against, including for the avoidance of doubt all her interest in claims against, SPDL.
      (4) It is hereby agreed between SPDL, Mr Smith and Mrs Smith that the consideration for the assignment by SPDL to Mr Smith of all claims against Henniker-Major & Co effected by the 14/8/98 Assignment and/or by this deed shall extend beyond clause 6 of the 14/8/98 Assignment to the satisfaction of all claims of Mr Smith and/or Mrs Smith against SPDL, whether or not Mr Smith makes any recovery against Henniker-Major & Co and irrespective of the amount thereof; but so that: -
      (a) for the avoidance of doubt, if such assignment by SPDL to Mr Smith is invalid, the claims of Mr Smith and/or Mrs Smith against SPDL shall not be satisfied thereby; and
      (b) if Mr Smith makes recovery against Henniker-Major & Co but is required for any reason to, and does: -
      1. account for it or part of it to SPDL, or
      2. pay it or part of it or an amount equal to it or part of it to SPDL,
      then to the extent of the amount so accounted for or paid by Mr Smith to SPDL, but to a maximum of the amount by which the amount of the above claims of Mr Smith and/or Mrs Smith against SPDL (including any claims or potential claims to interest under Section 35A of the Supreme Court Act 1981 or otherwise) exceeds the amount so recovered by Mr Smith and retained by him net of the beneficial interest described at sub-clause 5(a) below, the claims of Mr Smith and/or Mrs Smith against SPDL shall not be satisfied by the assignment by SPDL to Mr Smith; and so that where the claims of Mr Smith and/or Mrs Smith against SPDL are satisfied in part but not in full, each such claim shall be satisfied rateably.
      (5) Mr Smith declares that he holds all claims against Henniker-Major & Co assigned to him by the 14/8/98 Assignment and/or by this deed, and their fruits, upon trust: -
      (a) to apply 24% of such fruits, or such lesser percentage thereof as may suffice, in indemnifying SPDL against any valid and enforceable claim by Mr C M Meynell under paragraph 17 of the Order dated 19th May 1995 made by His Honour Judge Bromley QC in proceedings in the Cambridge County Court in relation to SPDL, the short reference to which was List 2/94; and subject thereto
      (b) for himself.”
    21. The 2001 deed was executed as a deed by Mr Smith and Mr Gunstone on behalf of SPDL and also by Mr and Mrs Smith personally. The 2001 deed has given rise to the second issue in the appeal, the ratification issue, which the judge described as follows:
    22. “The issue which arises under that document is as to whether it was in fact a true ratification of the 1998 transaction. If it was, then at least for certain purposes its effect would have been retrospective and the 1998 transaction would be regarded as having always been a valid one. Mr Steinfeld submitted, however, that it was not a true ratification at all. If it was not, then the 1998 transaction would remain the unauthorised transaction which it has always been, and the 2001 transaction would have operated for the first time - and only as from 31 August 2001 - to assign to Mr Smith SPDL’s causes of action against HM.
      Mr Steinfeld’s submission was that it makes no difference to Mr Smith’s plight whether or not the 2001 deed was a true ratification. He said that either way Mr Smith’s procedural problems are insoluble. His primary argument, however, was that the deed did not effect the true ratification.”
    23. In that passage the judge was also foreshadowing the third issue, the amendment issue, on which Arden LJ did not give permission to appeal. In paragraph 29 of his particulars of claim Mr Smith relied on the 1998 assignment as giving him title to sue. Having decided both the section 35A issue and the ratification issue against Mr Smith, the judge observed that Mr Smith’s only remaining hope was to obtain permission to amend his particulars of claim so as to plead the 2001 deed (not as a ratification but as a self-contained assignment taking effect on 31 August 2001). Mr Smith had not made a formal application but the judge dealt with the matter as if an application for permission to amend were before him. However he dismissed that notional application, and so cleared away the last possible means, as he saw it, of Mr Smith’s claim being preserved as an arguable claim. In dismissing the application for an amendment the judge took into account the fact that (as is common ground) the limitation period for any claim by SPDL against the solicitors must have expired in February 2000 at the latest.
    24. The section 35A point

    25. Section 35A of the Companies Act 1985 represents (together with sections 35 and 35B as inserted by the Companies Act 1989) Parliament’s second attempt at giving effect to article 9 of the First Council Directive on Company Law, 68/151/EEC. The previous version was in section 9 of the European Communities Act 1972 (“the 1972 Act”), and was therefore the first occasion on which Parliament undertook the transposition of Community legislation into domestic law. Moreover the United Kingdom government had no part in the negotiation of the directive, section II of which (validity of obligations entered into by a company) represents a compromise between German company law, on the one hand, and the company laws of the other original member states, on the other hand (see the valuable exposition in Vanessa Edwards, EC Company Law (1999) pp.33-7).
    26. Article 9 of the directive is in the following terms:
    27. “1. Acts done by the organs of the company shall be binding upon it even if those acts are not within the objects of the company, unless such acts exceed the powers that the law confers or allows to be conferred on those organs.
      However, Member States may provide that the company shall not be bound where such acts are outside the objects of the company, if it proves that the third party knew that the act was outside those objects or could not in view of the circumstances have been unaware of it; disclosure of the statutes shall not of itself be sufficient proof thereof.
      2. The limits on the powers of the organs of the company, arising under the statutes or from a decision of the competent organs, may never be relied on as against third parties, even if they have been disclosed.”
    28. Section 35A (power of directors to bind the company) is as follows:
    29. “(1) In favour of a person dealing with a company in good faith, the power of the board of directors to bind the company, or authorise others to do so, shall be deemed to be free of any limitation under the company’s constitution.
      (2) For this purpose –
      (a) a person ‘deals with’ a company if he is a party to any transaction or other act to which the company is a party;
      (b) a person shall not be regarded as acting in bad faith by reason only of his knowing that an act is beyond the powers of the directors under the company’s constitution; and
      (c) a person shall be presumed to have acted in good faith unless the contrary is proved.
      (3) The references above to limitations on the directors’ powers under the company’s constitution include limitations deriving –
      (a) from a resolution of the company in general meeting or a meeting of any class of shareholders, or
      (b) from any agreement between the members of the company or of any class of shareholders.
      (4) Subsection (1) does not affect any right of a member of the company to bring proceedings to restrain the doing of an act which is beyond the powers of the directors; but no such proceedings shall lie in respect of an act to be done in fulfilment of a legal obligation arising from a previous act of the company.
      (5) Nor does that subsection affect any liability incurred by the directors, or any other person, by reason of the directors’ exceeding their powers.
      (6) The operation of this section is restricted by section 65(1) of the Charities Act 1993 and section 112(3) of the Companies Act 1989 in relation to companies which are charities; and section 322A below (invalidity of certain transactions to which directors or their associates are parties) has effect notwithstanding this section.”
    30. This may be compared with section 9(1) of the 1972 Act, which covered in a single subsection the material now contained in sections 35, 35A and 35B:
    31. “In favour of a person dealing with a company in good faith, any transaction decided on by the directors shall be deemed to be one which it is within the capacity of the company to enter into, and the power of the directors to bind the company shall be deemed to be free of any limitation under the memorandum or articles of association; and a party to a transaction so decided on shall not be bound to enquire as to the capacity of the company to enter into it or as to any such limitation on the powers of the directors, and shall be presumed to have acted in good faith unless the contrary is proved.”
    32. It is unnecessary, at this stage, to identify precisely all the points of difference between the two texts. Possibly the most significant alteration is the use in section 35A(1) of the expression ‘the board of directors’ (rather than simply ‘the directors’). The new wording is a better reflection of the expression ‘organ’ which appears in article 9(2) (for the importance of that concept in German company law, see Edwards at p.35).
    33. Section 9(1) of the 1972 Act was considered by Sir Nicolas Browne-Wilkinson V-C in TCB Ltd v Gray [1986] Ch 621. In that case Mr Gray, the principal shareholder in two private companies of which he was a director, was seeking to avoid liability as a guarantor of a loan of £5m made to the two companies jointly. He relied on two main grounds, only one of which is relevant for present purposes, that is that a debenture purportedly executed by one of the companies (referred to as Link) had had the affixing of the company seal attested, not by the signature of a director, but by the signature of a solicitor who held a power of attorney from a director (that is, Mr Gray).
    34. That was the context in which the Vice-Chancellor had to consider the effect of s.9(1) of the 1972 Act. He said (at p.635),
    35. “In approaching the construction of the section, it is in my judgment relevant to note that the manifest purpose of both the directive and the section is to enable people to deal with a company in good faith without being adversely affected by any limits on the company’s capacity or its rules for internal management. Given good faith, a third party is able to deal with a company through its “organs” (as the directive describes them) or directors. Section 9(1) achieves this in two ways: first it “deems” all transactions to be authorised; second, it deems that the directors can bind the company without limitations. The second part of the subsection reinforces this by expressly abolishing the old doctrine of constructive notice of the contents of a company’s memorandum and articles. It being the obvious purpose of the subsection to obviate the commercial inconvenience and frequent injustice caused by the old law, I approach the construction of the subsection with a great reluctance to construe it in such a way as to reintroduce, through the back door, any requirement that a third party acting in good faith must still investigate the regulating documents of a company.”

      What the Vice-Chancellor referred to as the first way, the second way and the reinforcement are now to be found in s.35, s35A and s.35B respectively.

    36. The Vice-Chancellor went on to consider three objections raised by Mr Gray’s counsel as to the application of s.9(1). He dismissed them all in terms from which each side has derived some comfort. The first and third points depended on the expression “transaction decided on by the directors” which was used in s.9(1) but is not used in s.35A. The second point was that the word “limitation” (which is used in both versions) does not apply to a procedural requirement of a mandatory nature. In rejecting this submission the Vice-Chancellor said (at p.636)
    37. “Any provision in the articles as to the manner in which the directors can act as agents for the company is a limitation on their power to bind the company and as such falls within the first part of section 9(1).”
    38. There has been some common ground between counsel (Mr David Mabb QC leading Mr Julian Gun Cuninghame for Mr Smith, and Mr Christopher Symons QC leading Mr Daniel Gerrans for the solicitors) as to the right approach to this question. Both sides agreed that the legislative purpose of article 9 of the directive, and hence of section 35A, is the protection of third parties. Both agreed that the reference to the board of directors in section 35A(1) emphasises its character as a constitutional organ of the company. Both agreed that there is a meaningful distinction between substantive restrictions on a board’s powers (for instance, not to borrow more than a specified sum without the consent of the company in general meeting) and procedural restrictions or requirements (for instance the quorum for a board meeting, or the procedure for giving notice of a board meeting, or a prohibition on a board meeting being held in a particular jurisdiction).
    39. Where counsel parted company was as to the irreducible minimum that must be established in order to obtain protection under section 35A. It has to be said that the facts of this case, still unexplored by cross-examination, are a particularly inappropriate setting for a dispassionate examination of this difficult and important question of law. Mr Smith had a huge and obvious conflict of interest in the matter, and the minutes of the meeting called for 12 August 1998 show that he had been concerned about his power, as the only director at the board meeting, to take action on behalf of the company. Mr Mabb himself described the facts as ‘stark’.
    40. The starkness of the facts, and the effort of imagination required to consider them in a detached way, is increased by the fact that the ‘meeting’ on 12 August 1998 was attended by one single director, Mr Smith himself. Mr Mabb readily acknowledged that two people sitting at the table can look like a board meeting, even if the quorum is three, whereas there is a strong intuitive feeling that a single individual cannot constitute a board. But Mr Symons rightly accepted that under some companies’ articles a single director can constitute its board, and can act as such.
    41. Under the direction given by Chadwick LJ the issue of Mr Smith’s good faith is (together with a number of other issues including alleged champerty) to be heard on another occasion, if necessary. I would accept that in construing section 35A the court should start out on the same detached way as if Mr Smith had (in his capacity as an assignee) been truly a third party, such as an oil company entering into a contract to buy a site owned by SPDL. But even if Mr Smith’s good faith is unquestioningly assumed for present purposes, there is still a question (especially in view of the agreed legislative purpose of article 9 and section 35A) whether Mr Smith could possibly be described as a third party, or “a person dealing with a company”, within the meaning of those respective provisions.
    42. If Mr Smith had truly been a third party, Mr Mabb’s argument could not be lightly dismissed. If (as is common ground) section 35A protects against substantive limitations which could readily be discovered by a search at Companies House, it would be curious if a procedural defect (which may be much more difficult for a third party to detect) were not to attract protection. In this case the fact that the board was inquorate on 12 August 1998 could have been established by a search (and by taking legal advice, if necessary, as to the meaning of the article which Mr Smith deposed that he misunderstood). But it is easy to imagine cases in which the lack of a quorum would be virtually undetectable by an outsider (for example, if one of the directors present had for some reason recently ceased to hold office).
    43. The judge rejected Mr Mabb’s arguments as based on a misinterpretation of section 35A. He thought that its meaning was clear:
    44. “All that section 35A does is to deem the board of directors to be free of any limitation on its powers which the company’s constitution imposes. In this context, the reference in section 35A to the power of the “board of directors to bind the company” can sensibly only be to powers exercisable by the directors when they gather together and act as a board. It is only possible to ascertain how they can so act – and whether in any particular case they have done so – by examining the articles relating to their proceedings. If the articles provide that a quorum for their meetings is three, then a meeting of only two of them will not be a meeting of “the board” at all, or at any rate it will not be a meeting at which the board can transact business. If, despite this, such a meeting purports to resolve to bind the company to a transaction, it will not be an exercise of the board’s power at all, it will be a nullity. In that example, the point of inquiry as to whether section 35A has any application has simply not been reached. It is irrelevant to inquire whether a particular power is free of a particular limitation in a case in which the power has not been exercised at all.”
    45. The judge considered that this conclusion was reinforced by two particular difficulties which he perceived in the contrary view. One was the word “limitation” in section 35A(1), which was inappropriate to a procedural requirement such as a quorum. The other was the doubt which he felt as to the practical consequences of the contrary view.
    46. The judge also considered that the Vice-Chancellor’s decision in TCB Ltd v Gray supported his conclusion. He noted the changes in language as between section 9(1) and section 35A, but regarded them as insignificant. He said,
    47. “Just as the Vice-Chancellor held that it was necessary to be able to show that the relevant transaction had been decided on by the board before section 9(1) could come into play, I also consider it clear that it is necessary to be able to show a transaction decided on by the board before section 35A can operate.”
    48. So the judge must have seen the irreducible minimum as being a duly convened and quorate meeting of the board of directors. Without that, in the judge’s view, the court simply did not get to the point at which section 35A could operate so as to confer protection on third parties acting in good faith. There was (as the judge put it at another place in his judgment) no exercise of the board’s powers at all.
    49. The court was shown some passages in which commentators have expressed views contrary to the judge’s decision on the section 35A issue, notably a Law Commission consultation paper on the execution of deeds and documents by bodies corporate published in 1996 (no.143, para 5.13) and Gore-Browne on Companies, 44th edition para 5.1.1. These views are entitled to respect but are of limited assistance since (apart from a general appeal to a purposive approach) they are not supported by reasons.
    50. Taking the judge’s reasons in reverse order, I cannot agree that TCB Ltd v Gray supports his conclusion. The Vice-Chancellor (at p.636) stated the argument based on the need for ‘a transaction by the company’ (a question-begging formulation) and roundly rejected it:
    51. “Since Link never sealed the debenture in the only way authorised by the articles, there was no transaction by Link at all; the debenture was not the act of Link. If this argument is right, it drives a coach and horses through the section. In every dealing with the company the third party would have to look at its articles to ensure that the company was binding itself in an authorised manner. In my judgment the section does not have that effect.”

      Then after considering its effect in relation to a company’s capacity the Vice-Chancellor continued,

      “Similarly a document under seal by the company executed otherwise than in accordance with its articles was not, under the old law, the act of the company: but section 9(1) deems it so to be since the powers of the directors are deemed to be free from limitations, ie as to the manner of affixing the company’s seal.”
    52. Here (and in a later passage which I have already cited) the Vice-Chancellor was treating a procedural requirement as a limitation on the directors’ powers. He was also rejecting (as contrary to the evident statutory purpose) the argument that an improperly-executed deed could not be the company’s act at all.
    53. That leads on to the judge’s two particular difficulties. One was with the word ‘limitation’. Mr Mabb accepted that it was not the perfect word to describe a procedural requirement, but submitted that the linguistic argument is not strong. The Vice-Chancellor seems to have taken that view. So do I.
    54. The judge did not spell out his other difficulty, as to the practical consequences. It may have been connected with some references made in the course of argument (but not fully developed) as to the absurdities of corporate anarchy which might occur if a company found that it had two rival boards claiming to be running its affairs, or if an ambitious office boy tried to set himself up as an organ of his corporate employer’s governance. These are extreme and rather fanciful examples, but they do draw attention to a real problem, which may lie at the heart of the section 35A issue: if the judge put the test for the irreducible minimum too high, at what level should it be put, and what workable test can be formulated? Mr Symons submitted that there could be no satisfactory answer to that question. As it is put in the respondents' skeleton argument prepared by Mr Gerrans:
    55. “It is one thing, in the interest of harmonizing laws to facilitate inter-state trade, to provide that third parties dealing with the board of directors of a company can safely assume that the board’s capacity to bind the company is unlimited; it is another to emancipate third parties from the need to verify that the individuals they are dealing with are in fact the company’s board, or have authority from the board, just as they need to do when dealing with an agent professedly acting for a non-corporate principal.”
    56. In my judgment the irreducible minimum, if section 35A is to be engaged, is a genuine decision taken by a person or persons who can on substantial grounds claim to be the board of directors acting as such (even if the proceedings of the board are marred by procedural irregularities of a more or less serious character). This is not a precise test and it would have to be worked out on a case by case basis. But the essential distinction is between nullity (or non-event) and procedural irregularity.
    57. That was ultimately, as I see it, the ground on which the Vice-Chancellor based his decision on the second issue in TCB Ltd v Gray. He said at p.637,
    58. “The evidence clearly established that no such meeting of the directors of Link ever took place. But in fact all the directors of Link individually had decided to grant the debenture, although not at a meeting at which they were all present.”

      So the absence of a properly-convened meeting, or a signed written resolution, was treated as an irregularity. It is true that the Vice-Chancellor then went on to refer to Link having put forward the (false) board minutes as one of the completion documents, and so being unable to deny their validity. In that case solicitors had undoubtedly been instructed on behalf of the company and so it was plainly possible to rely on their ostensible authority. But in other circumstances resort to the doctrine of estoppel would simply shift the problem of whether a representation purportedly made by a company had been authorised by the board of directors or (in the absurd extreme example) by the office boy.

    59. If an outsider had been negotiating in good faith with the company, believing that the draft contract was to be approved at a board meeting, Mr Smith’s one-man meeting on 12 August 1998 would in my view have passed the test and attracted protection under section 35A. Mr Smith was a duly appointed director of SPDL. He sent a notice of the proposed board meeting to the only other director. He attended the meeting and took decisions, recorded in the minutes which he prepared. His written evidence is that he believed that he was entitled to take that decision on his own, and he signed the assignment of 14 August 1998 in that belief. Had he produced the minutes to a third party acting in good faith, both parties would have been bound by any resulting agreement.
    60. At this point in an earlier draft of this judgment I expressed the view that Mr Smith must nevertheless fail on the section 35A argument because he was not a third party within the legislative purpose of article 9, and (in the light of that legislative purpose) could not reasonably be described (even if his good faith were assumed) as “a person dealing with the company”. That has led to the matter being restored for further argument and I must briefly digress in order to record the course of events.
    61. On 26 April 2002 the court reserved judgment after argument spread over three days. Judgment was to have been given on 28 May, and draft judgments were sent out in the usual way. On 27 May counsel for Mr Smith put in a skeleton argument suggesting (I hasten to add, in the most moderate and courteous terms) that my judgment and that of Schiemann LJ decided adversely to Mr Smith (and treated as determinative) a point on the section 35A issue which had not been relied on by the respondent’s counsel, or properly addressed in argument by either side. The outcome was that judgment was not delivered on 28 May, and the appeal was listed for further argument, which was heard on 5 July. Mr Mabb and Mr Gun Cuninghame relied on their skeleton argument of 27 May and Mr Symons and Mr Gerrans put in a further skeleton dated 2 July.
    62. Mr Mabb relied mainly on the following points in arguing that “person” in section 35A(1), although necessarily excluding the company (which could not deal with itself) did not exclude a director of the company.
    63. i) The contrary reading would be inconsistent with section 322A of the Companies Act 1985, a provision introduced as part of the same set of amendments made by the Companies Act 1989, which must have been intended to have a coherent scheme.

      ii) The natural meaning of “person” is wide and the court should be slow to find an unexpressed limitation in what are quite detailed statutory provisions.

      iii) That point was reinforced by doubt as to what limitation ought to be read in, if there were to be any interference with the statutory text.

      iv) All or most leading textbooks take the view that s.35A(1) is not restricted in this way.

    64. The second, third and fourth points are self-explanatory but the first needs some explanation. The material parts of section 322A are in the following terms:
    65. “(1) This section applies where a company enters into a transaction to which the parties include –
      (a) a director of the company [ ... ]
      and the board of directors, in connection with the transaction, exceed any limitation on their powers under the company’s constitution.
      (2) The transaction is voidable at the instance of the company.
      (4) Nothing in the above provisions shall be construed as excluding the operation of any other enactment or rule of law by virtue of which the transaction may be called in question or any liability to the company may arise.
      (7) This section does not affect the operation of section 35A in relation to any party to the transaction not within subsection (1)(a) or (b) ... ”
    66. Mr Mabb submitted that these provisions, and those of s.35A(6) (set out in paragraph 21 above) made plain that the two sections were intended to co-exist and interact in such a way that a director who acted in good faith but in a transaction to which he himself (or an associate) was a party, and which was beyond the board’s powers, got through the first filter of section 35A but was caught by the second filter of section 322A (with the result that the transaction was voidable, not void).
    67. Mr Symons asked the court not to go any further in construing these statutory provisions than was necessary in order to reach a decision on the very unusual facts of this case. He submitted that the protection of a delinquent director was no part of the legislative purpose of article 9 or section 35A, and would indeed be inimical to that purpose by prejudicing the solicitors, who really were third parties. He drew attention to the terms of section 35A(2), which he described as generous, and not such as should be extended to a delinquent director. (Mr Mabb in a very brief reply said that the application of subsection (2) would always depend on the facts). Mr Symons suggested that there was a tension between the two sections which might result in a director who was honestly mistaken being treated more harshly than a dishonest director. He recognised that the language of section 35A(6) gave Mr Mabb some assistance, but submitted that there were more pointers in favour of his construction. He also submitted that the textbooks were not unanimous, and that most did not give reasons for their views.
    68. I have found Mr Mabb’s submissions more persuasive, and especially his reliance on section 35A(6). The two sections do cross-refer, and the terms of the cross-reference in section 35A(6) are to my mind striking. These terms appear to be carefully chosen and they bring out the contrast between section 65 of the Charities Act 1993 (a provision first introduced into the Charities Act 1960 by section 111 of the Companies Act 1989) and section 112(3) of the Companies Act 1989 (the Scottish equivalent of section 65) on the one hand, and section 322A on the other hand. The two provisions about charitable companies do plainly restrict section 35A; it is not to apply to a charity unless certain stringent requirements are met. Section 322A, by contrast, is said to have effect “notwithstanding” section 35A, so (as it were) allowing section 35A to play its card, but then trumping it to the extent that a director or associate is involved (a three-cornered transaction between a company, a director and an outsider illustrates this).
    69. I am also impressed by the unanimity of the views expressed by the editors of Gore-Browne 44th ed para 5.1.2, Palmer 25th ed para 3.305 and Gower 6th ed pp.215 and 218. These views may not be fully reasoned, but they are evidently based on what the distinguished editors regard as the natural meaning and effect of the statutory material. I was not persuaded by Mr Symons’ submissions as to legislative purpose and as to tension between section 35A and section 322A.
    70. I would therefore, so far as the sub-issues before us are concerned, depart from my previous draft judgment and decide the section 35A issue in favour of Mr Smith. I wish to express my regret that my tortuous progress to this conclusion has occasioned some delay and additional expense.
    71. I would add that Carnwath LJ (from whom I differ only with misgivings) has referred to the speech of Lord Simonds in Morris v Kanssen [1946] AC 459, 475-6. That was a case in which a director and his accomplice conspired together to concoct false minutes of a board meeting which had never taken place (and at which, as it was fraudulently claimed, the accomplice had been appointed as a director). The most surprising thing about the case is that it reached the House of Lords. In the passage which Carnwath LJ has referred to Lord Simonds was dealing with general principles of agency and with the general presumption of regularity of transactions. I do not find it of much help in construing section 35A. Indeed another passage in the speech of Lord Simonds (at p.471) –
    72. “There is, as it appears to me, a vital distinction between (a) an appointment in which there is a defect or, in other words, a defective appointment, and (b) no appointment at all.”

      appears to me to give some slight support to the view which I have expressed in paragraph 41 above. I readily acknowledge that it is not a wholly satisfactory test but I can see no alternative short of what I would regard as an unduly restrictive reading of section 35A.

      The ratification issue

    73. Mr Smith’s case is that the 2001 deed (the validity of which is not challenged) had the effect of ratifying the 1998 deed and so making it valid with retrospective effect. The solicitors challenge that on two grounds. Their case is that the effect of the 2001 deed was not to ratify, but to vary and supersede, the 1998 assignment; and further that even if an instrument in the form of the 2001 deed could have ratified the 1998 assignment, it was too late. The judge decided the first point in favour of the solicitors. He did not express a view on the second point, which is raised in the respondent’s notice.
    74. On this issue also there was a good deal of common ground between counsel as to the relevant principles (which are set out in Bowstead and Reynolds on Agency, 16th ed, Articles 13 to 20). The main dispute was as to the application of the principles to the unusual facts of this case. Whereas the 1998 assignment was a document prepared by a layman and containing numerous mistakes and obscurities, the 2001 deed was a carefully-crafted document prepared with the evident purpose of curing the worst deficiencies of the earlier deed, while at the same time preserving it and validating it. That was an ambitious objective which the judge found not to have been achieved (or, I think, to have been achievable).
    75. Both sides agreed that ratification is an election by a person to adopt a transaction purportedly entered into in his name or on his behalf, but not in fact authorised by him at the time. Effective ratification is “equivalent to an antecedent authority” (Lord Sterndale MR in Koenigsblatt v Sweet [1923] 2 Ch 314, 325) and so it has retrospective effect. The process of ratification need not be consensual, and a later consensual transaction may amount to a new, non-retrospective contract (which on the solicitors’ case is what happened here). A party wishing to ratify a transaction must adopt it in its entirety. But adoption of part of a transaction may be held to amount to ratification of the whole. That is illustrated by Re Mawcon Ltd [1969] 1 WLR 78, where a provisional liquidator had not authorised the directors’ hiring of lorries for the company’s earth-moving business, but had brought into his accounts the money earned by the use of the lorries. Pennycuick J said (at p.83)
    76. “It is well established that a ratification may be implied from conduct. It is further well established that the adoption of part of a transaction operates as a ratification of the whole transaction. A principal cannot pick out of a transaction those acts which are to his advantage. If he ratifies at all he must ratify cum onere:”
    77. Both leading counsel subjected the terms of the 1998 assignment and the 2001 deed to close scrutiny. Mr Symons submitted, and Mr Mabb did not dispute, that whatever the correct construction of clause 6 of the 1998 assignment, the effect of the complicated provisions in clauses 4 and 5 of the 2001 deed was to furnish a new and (from SPDL’s point of view) better consideration for the assignment effected by the 1998 assignment. The judge put it robustly when he said that it was obvious that the main function of the 2001 deed
    78. “ ... was, apart from its attempts to ratify the 1998 assignment, to make the terms of that assignment appear a little more respectable and a little less one-sided.”
    79. Mr Mabb, while accepting that there was to be additional consideration, submitted that that was not repugnant to the 2001 deed’s primary and clearly-stated purpose of ratifying the earlier deed. He emphasised that SPDL (as assignor) was not in any way failing to accept the burden of parting with the subject-matter of the assignment. All that the 2001 deed did, apart from ratification (and apart from the arrangement between Mr Smith and his wife, which did not affect the company) was to provide additional, or supplementary, consideration.
    80. The point is in the end a short one, although not an easy one. It may be said in favour of the appeal that the 1998 deed, although inexpertly drafted, was expressed to operate as an immediate assignment (not merely as a contract to assign) and that that transfer of a chose in action is the essential element which SPDL had to ratify. But the transfer was a transfer on sale. Whether or not the effect of the 1998 assignment was to create an unpaid vendor’s lien (a point which was not addressed in argument) the transfer cannot in my view be separated from the consideration which supported it. The 2001 deed was skilfully drafted, but the draftsman had been set an impossible task. In my judgment the judge was correct when he concluded,
    81. “Any true ratification in this case would therefore have required SPDL to manifest an intention to adopt the 1998 transaction in its entirety, including the modest consideration to be found in clause 6 of the 1998 assignment. But it is obvious from a reading of the 2001 deed that SPDL was not doing that.”
    82. It is not necessary to decide whether the 1998 assignment caught any cause of action for breach of fiduciary duty. It probably did, since a layman’s draft must be construed purposively and there was no sensible reason not to assign all available causes of action together. But the room for argument on the point confirms the conclusion that the 2001 deed was not a simple ratification.
    83. Mr Mabb submitted that the clauses about consideration were put into the 2001 deed in a well-intentioned attempt to cure the deficiencies of the earlier deed, and that it would be ‘a poor reward for virtue’ if their inclusion defeated the primary purpose of the deed. That is a beguiling submission, but the fact is that if the clauses had not been included, the 2001 deed would be facing all the outstanding difficulties which are still unresolved in relation to the 1998 deed. The doctrine of ratification is to some extent anomalous (see Bowstead and Reynolds, 2-047 and 2-049) and the court should not be ready to stretch its limits.
    84. On the view which I take, there was no ratification and it is unnecessary to decide whether an instrument in the form of the 2001 deed, if ever capable of achieving ratification of the 1998 assignment, was too late. But again I should express my view on this point, which was raised in the respondent’s notice and has been fully argued.
    85. Article 19 in Bowstead and Reynolds states the principle as follows under the heading ‘Limits on ratification’:
    86. “Ratification is not effective where to permit it would unfairly prejudice a third party, and in particular –
      (1) where it is essential to the validity of an act that it should be done within a certain time, the act cannot be ratified after the expiration of that time, to the prejudice of any third party,
      (2) the ratification of a contract can only be relied on by the principal if effected within a time after the act ratified was done which is reasonable in all the circumstances.”

      The most important English authority cited in support of this statement of principle is the decision of this court in Re Portuguese Consolidated Copper Mines Ltd (1890) 45 Ch D 16. It is also necessary to examine closely the decision of this court in Presentaciones Musicales SA v Secunda [1994] Ch 271, which is discussed (without whole-hearted approbation) in Bowstead and Reynolds at 2-089.

    87. The Portuguese Consolidated case was concerned with an allotment of shares purportedly (but invalidly) made at a board meeting on 24 October 1888. One allottee failed to pay what was due on the shares; the other paid under protest; neither took action to withdraw his application or to repudiate the allotted shares. On 24 December 1888 the company sued the first allottee for the money, and at valid board meetings on 16 January and 7 March 1889 the allotments were confirmed, first informally (by signature of minutes of the previous meeting) and then formally.
    88. It was held that the allotments had been ratified within a reasonable time, the test stated (at p.27) by Cotton LJ at the beginning of his discussion of this point. Later (at p.30) he referred to the shareholders’ assertion of an intervening ‘considerable alteration in the position and prospects of this company’ as potentially material, but said that it had not been established. Lindley LJ agreed, referring (at p.31) to a reasonable time. Bowen LJ also agreed, saying (at p.34) that
    89. “ ... as it is an election, it must take place within a reasonable time, and the standard of reasonableness must depend upon the circumstances of the case.”
    90. Presentaciones was concerned with a writ (claiming relief for breaches of an agency contract and copyright infringement) which had been issued in April 1988 in the name of a Panamanian company (Presentaciones) by solicitors who mistakenly believed that they had authority to do so. The alleged breaches went back to November 1981. In fact the company had been put into dissolution and liquidators had been appointed in June 1987. In March 1991 the defendants applied to have the proceedings stayed or struck out. In May 1991 the liquidators purported to ratify the commencement of the action, outside a three-year limit prescribed by Panamanian company law (the report omits that part of the judgment of Dillon LJ but the three-year limit was held not to be an obstacle to ratification).
    91. The defendants relied on the old case of Bird v Brown (1850) 4 Exch 786, 799 for the proposition
    92. “ ... that the act of ratification must be taken at a time, and under circumstances, when the ratifying party might himself have lawfully done the act which he ratifies.”

      (The clearest illustration of that principle is in the field of landlord and tenant; a party cannot, by means of an unauthorised notice to quit, postpone the moment at which he has to make a decision until after the time for giving notice has expired.) In Presentaciones the defendants sought to apply the same principle to ratification of an action after the cause of action was wholly or partly statute-barred.

    93. Dillon LJ reviewed the authorities on the loss of the right to ratify, starting with Audley (Lord) v Pollard (1597) 2 Cro.Eliz.561. He extracted from them the principle (at p.279) that
    94. “ ... if a time is fixed for doing an act, whether by statute or by agreement, the doctrine of ratification cannot be allowed to apply if it would have the effect of extending that time.”

      He then considered the effect of the Limitation Act 1980 (which was complicated, on the facts of the case before the court, by transitional provisions effecting the transition from the Copyright Act 1956 to the Copyright Designs and Patents Act 1988).

    95. Even in a simple case not involving transitional provisions, the argument is complicated at this point by the need to look forward to the third issue on this appeal, that is amendment. A new claim may not be statute-barred if it can be introduced by amendment into existing proceedings, and a writ which is defective (but not a nullity) may be cured by delivery of a proper statement of claim even after the expiry of the limitation period: Pontin v Wood [1962] 1 QB 594. Dillon LJ (at p.280) took the same approach to the question of ratification after some of the claims had passed outside the limitation period:
    96. “Where a writ is issued without authority, the cases show that the writ is not a nullity. For the nominal plaintiff to adopt the writ, or ratify its issue, does not require any application to the court. Accordingly, on the same general principle that justifies Pontin v Wood [1962] 1 QB 594, the plaintiff, in the simple example of an action raising a single cause of action which has been begun by solicitors without authority, must be entitled to adopt the action notwithstanding the expiration of the limitation period applicable to that cause of action.”
    97. Nolan LJ agreed with Dillon LJ. The commentary in Bowstead and Reynolds (2-089) treats Roch LJ as having taken a narrower view of the scope of the exception (and Dillon LJ, at p.280, seems to have thought the same). However that is not entirely clear. Roch LJ quoted from the judgment of Cotton LJ in Bolton Partners v Lambert (1889) 41 Ch D 295, 307,
    98. “The rule as to ratification is of course subject to some exceptions. An estate once vested cannot be divested, nor can an act lawful at the time of its performance be rendered unlawful, by the application of the doctrine of ratification.”

      Roch LJ then noted (to my mind correctly) that Cotton LJ was there giving examples of exceptions, rather than setting out an exhaustive list of exceptions (p.285). Then at pp.285-6 Roch LJ said (apparently treating non-divestment as the exception which might be relevant),

      “I would suggest that that exception ought to be stated in these terms: that the putative principal will not be allowed to ratify the acts of his assumed agent, if such ratification will affect adversely rights of property in either real or personal property including intellectual property, which have arisen in favour of the third party or others claiming through him since the unauthorised act of the assumed agent. The expiry of the limitation period in the present case does not create any such right in the defendants; if applicable it would merely bar the plaintiff company’s remedies. I would not extend this exception to cases such as the present where a defendant would receive a windfall defence in a case where the vice against which the Limitation Acts are designed to protect defendants, namely the bringing of claims at a time so far after the occurrence of the cause of action that a defendant is put at a disadvantage in defending the claim, does not exist.”
    99. I am inclined to think that this debate (as to whether the exception is limited to ratification affecting property rights) may not be particularly profitable. Even though the operation of the Limitation Act 1980 is normally to bar the remedy rather than to extinguish the right, an accrued defence under the Act has often been spoken of in terms approximating to a property right of which a party ought not to be deprived. In my view the right approach would be to regard the deprivation of an accrued right as an important example of the general rationale identified in Bowstead and Reynolds’ Article 19 – that is, unfair prejudice.
    100. The solicitors’ skeleton argument indicated an intention to contend, if necessary, that Presentaciones was decided per incuriam. That bold submission was advanced, without great conviction, by Mr Symons. With more enthusiasm he submitted that it was essential to the decision that the writ issued in the name of the Panamanian company was not a nullity, whereas the claim form issued by Mr Smith was, he said, a nullity (or as he preferred to put it, of no effect). In my view Presentaciones binds this court as to the proposition that ratification of proceedings is not automatically barred after the expiry of the limitation period. For reasons to be set out on the amendment issue I consider that the fact that the ratification is at one remove (that is, not of the proceedings themselves, but of an assignment of a cause of action) should not be a decisive distinction. But Presentaciones did not touch on other aspects of unfair prejudice arising from delay.
    101. I would not accept the submission (put forward in the solicitors’ skeleton argument, but not much developed by Mr Symons in his oral submissions) that prejudice is not necessary. But I would accept that the significance of a modest degree of prejudice may be magnified by delay. Counsel on both sides referred to the sequence of events leading up to the execution of the 2001 deed, and it is necessary to go back to the events summarised in paragraph 15 above and describe them in rather more detail.
    102. During 1995 and 1996 Mr Smith (then represented by other solicitors) seems to have been preoccupied with the proceedings which he had taken under section 459 of the Companies Act 1985. His success in those proceedings against Mr McCall and Mr Bickers seems to have been a pyrrhic victory in terms of financial recovery, especially as he incurred a liability for costs payable to Mr Meynell. That was one of the liabilities which led to the sale of his house in 1997. Both he and SPDL were short of funds. These matters help to explain his delay in trying to arrange for SPDL to take proceedings against the solicitors, but they do not of course provide grounds for any extension of the statutory limitation period. In December 1997 Mr Bright (the solicitors’ employee impugned in the proceedings) died.
    103. In August 1998 Mr Smith instructed new solicitors (Lloyd Barnes of Ipswich). On 30 March 1999 they sent a long and detailed letter before action to the Solicitors Indemnity Fund indicating Mr Smith’s claims against the solicitors. The letter referred to the section 459 proceedings and stated,
    104. “The right of action on behalf of [SPDL] is being assigned to Mr Smith. You will note from the judgment that he has been given leave by the Learned Judge to take action for and on behalf of [SPDL].”

      This contained two inaccuracies. The 1998 assignment had already taken place and there is no evidence that a fresh assignment was in mind at that stage. Moreover Judge Bromley had not given leave for proceedings against the solicitors.

    105. On 28 September 1999 Mr Smith’s claim form was issued. It did not refer to the 1998 assignment (although a reference to it was subsequently added by amendment). Mr Smith and his solicitors were encountering great difficulty in obtaining adequate legal aid, which was essential to his strategy (see Norglen Ltd v Reed Rains Prudential Ltd [1999] 2 AC 1). Several extensions of time were granted and eventually the particulars of claim were served on 9 August 2000. They pleaded the 1998 assignment. In the meantime the limitation period had expired (as is common ground) in February 2000 at latest.
    106. The solicitors acting for the Solicitors Indemnity Fund asked for more information about the 1998 assignment. On 9 October 2000 they put in a defence (which had been signed by Mr Henniker-Major himself on 13 September) challenging the 1998 assignment on various grounds (including the further grounds which are not before the court at this hearing). On 9 November 2000 the Part 24 application was issued seeking summary judgment for the solicitors.
    107. On 12 December 2000 Mr McCall, the only other director of SPDL, resigned from office. That put Mr Smith in a position to act validly as a one-man board of SPDL. But he did not take any immediate action to ratify or otherwise confirm the 1998 assignment.
    108. Both sides were preparing for the Part 24 application, which was expected to be heard in the Colchester County Court in May 2001. But before then Mr Smith changed solicitors and his new solicitors (Fosters of Norwich) obtained public funding for leading counsel to be instructed. Mr Mabb was instructed in April and on 26 April 2001 there was an order, by consent, transferring the proceedings to the Chancery Division. The Part 24 application was heard by Rimer J in October 2001, after the execution of the 2001 deed on 31 August 2001.
    109. Mr Mabb has submitted that although there have been delays, they were all excusable in the circumstances of a complicated matter in which newly-instructed solicitors and counsel had to try to untangle the true state of SPDL’s affairs. He submitted that the solicitors had not suffered any significant prejudice from the lateness of the ratification, which they must have been expecting. The costs which they incurred between 12th December 2000 and 3rd September 2001 were relatively insignificant (about £4,000), and most would have been incurred in any event. There was no evidence, Mr Mabb said, that the solicitors had ever had good grounds for regarding Mr Smith’s claim as irrevocably doomed to failure.
    110. Against that, Mr Symons submitted that if (contrary to his first submission) prejudice was required, it was established by the sequence of events summarised above. The delay had caused significant costs to be incurred, and as Mr Smith was publicly funded any first-instance costs awarded against him would probably be irrecoverable.
    111. If it were necessary to decide this point I would prefer Mr Symons’ submissions to those of Mr Mabb. Mr Smith has suffered grievously through the deplorable conduct of two associates whom he trusted, and he has shown determination in his attempts, in the face of many difficulties, to obtain recompense. But the serious imputations against Mr Henniker-Major are now not much short of ten years old, and his former employee, Mr Bright, is no longer alive to give oral evidence. In these circumstances even a relatively small amount of prejudice, coupled with the long delay, must in my judgment make it unfair for Mr Smith to rely on the 2001 deed as a retrospective ratification of the assignment executed three years earlier. I would reach that conclusion as a judgmental application of principle, (that is, the principle stated in Article 19 of Bowstead and Reynolds) not as an exercise of judicial discretion, although for practical purposes the two are closely akin.
    112. The amendment issue

    113. This issue (which is the subject of a renewed application for permission to appeal) arose because the judge was against Mr Smith on both the preceding issues. His only possible means of saving his case was to amend the particulars of claim so as to plead the 2001 deed. The judge treated an application for an amendment on those lines as being before him but refused permission, primarily on the ground that it would introduce a new claim which did not arise “out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings” (CPR 17.4(2)). The judge indicated that even if that condition had been satisfied, he would still (in what he described as “the very unusual circumstances of this case”) have exercised his discretion so as to refuse permission.
    114. I will say at once that I regard the last-mentioned view of the judge, not as an off-the-cuff remark, but as a considered view from which this court should differ only on the limited grounds on which it is permissible for an appellate court to interfere with a judge’s exercise of his discretion. I see no ground for interfering in this case. On the contrary, for the reasons set out in the last paragraph of the section of this judgment dealing with the ratification issue, I would have reached the same conclusion myself.
    115. In those circumstances, and because this judgment is already too long, I propose to deal fairly briefly with the submissions made on the renewed application for permission to appeal. The submissions made to the court were elaborate and included the citation of fifteen authorities (apart from others which were mentioned in passing). It is a little disheartening that the introduction of the Civil Procedure Rules does not seem to have produced much clarification or simplification in this area of practice and procedure.
    116. An appropriate starting-point is the state of the law, in relation to pleadings and limitation of actions, before the coming into force of the Limitation Act 1980. This was considered in a scholarly judgment of Brandon LJ in Liff v Peasley [1980] 1 WLR 781. Brandon LJ referred (at p.799) to the established rule of practice under which the court would not add a person as a defendant to an existing action if the claim was already statute-barred and he wished to rely on that defence.
    117. Brandon LJ explained (at p.799) that there were two competing explanations for this rule of practice:
    118. “The first basis is that, if the addition were allowed, it would relate back, so that the action would be deemed to have been begun as against the person added, not on the date of amendment, but on the date of the original writ; that the effect of such relation back would be to deprive the person added of an accrued defence to the claim on the ground that it was statute-barred; and that this would be unjust to that person. I shall refer to this first basis of the rule of practice as the “relation back” theory.
      The second and alternative basis for the rule is that, where a person is added as defendant in an existing action, the action is only deemed to have been begun as against him on the date of amendment of the writ; that the defence that the claim is statute-barred therefore remains available to him; and that, since such defence affords a complete answer to the claim, it would serve no useful purpose to allow the addition to be made. I shall refer to this second and alternative basis of the rule of practice as the “no useful purpose” theory.”
    119. Brandon LJ considered a number of authorities and reached the provisional conclusion that the ‘no useful purpose’ basis was correct. In the course of discussing the matter he observed (at p.803),
    120. “There is, in my view, a high degree of artificiality and unreality about the “relation back” theory. There is no reason to quarrel with the general proposition that an amendment of a writ or a pleading relates back to the original date of the document amended, as stated by Lord Collins MR in Sneade v Wotherton Barytes & Lead Mining Co [1904] 1 KB 295, 297. This seems to me to be an entirely sensible proposition so long as the amendment concerned does not involve the addition of a new party, either as plaintiff or defendant, or the raising of a new cause of action, but involves only the modification, by addition, deletion or substitution, of pleas or averments made between existing parties in respect of a cause or causes of action already raised. Where, however, the amendment concerned involves the addition of a new party or the raising of a new cause of action, it appears to me to be unrealistic and contrary to the common sense of the matter to treat it as relating back in the same way.”

      Brandon LJ’s provisional conclusion was approved by the House of Lords in Ketteman v Hansel Properties Ltd [1987] AC 189 (although Lord Brandon dissented as to the outcome of that appeal).

    121. I need not set out the whole of section 35 of the Limitation Act 1980. It provides for rules of court (now CPR 17.4) to allow a restricted range of new claims to be pleaded after the expiry of the limited period, as an exception to the general prohibition in section 35(3). Section 35(2) defines a new claim, so far as new material, as
    122. “ ... any claim involving either –
      (a) the addition or substitution of a new cause of action; or
      (b) the addition or substitution of a new party.”
    123. The legislative history and purpose of section 35 were considered by Millett LJ in Yorkshire Regional Health Authority v Fairclough Building Ltd [1996] 1 WLR 210, 219. He pointed out that although the Limitation Act 1980 was enacted to give effect to the recommendations of the 21st Report of the Law Reform Committee published in 1977 (Cmnd 6923) there was no recommendation for major change in this area. Limited changes only were recommended:
    124. “The purpose of these recommendations was to allow a limited number of amendments to existing proceedings to be made after the expiry of the limitation period which could not have been made before. They were not intended to deprive the court of any existing power to allow amendments after the expiry of the limitation period, nor were they intended to cover amendments which, though made after the expiry of the limitation period, were not statute-barred. It would have been completely outside the committee’s terms of reference to make any recommendations of the latter kind.”
    125. The report of the Law Reform Committee seems not to have been drawn to the attention of this court in Liff v Peasley. But section 35(3) of the Limitation Act 1980 appears to reflect and give statutory force to Brandon LJ’s account of the rationale of the established rule of practice. Mr Symons was therefore right to abandon the argument by which he sought to impale the amendment on the horns of a dilemma.
    126. There were two main arguments on which leading counsel previously instructed for the solicitors had relied before the judge, and on which Mr Symons relied in this court. The first argument was that at the time of issue of the claim form Mr Smith had no cause of action at all (or if different, no title to sue at all) and that the claim form was therefore a nullity (or of no effect) and could not be cured by amendment. The judge rejected that argument.
    127. In my view the judge was right to do so. Mr Symons relied on the decision of this court in Ingall v Moran [1944] KB 160. But that decision was on a different point (change of capacity); was described (while still extant) as a blot on English jurisprudence; and has since been overturned by section 35(7) of the Limitation Act 1980 and CPR 17.4(4). So far as it embodied any larger principle it has been overtaken by the modern approach as described by Evans LJ in Hendry v Chartsearch Ltd [1998] CLC 1,382, para 23. In that case this court disapproved the more rigid approach adopted in Eshelby v Federated European Bank Ltd [1932] 1 KB 254. It is correct, as Mr Symons pointed out, that there was no limitation point in Hendry v Chartsearch Ltd, but that goes to his other main argument.
    128. On the other main point Mr Symons defended the judge’s conclusion that the proposed amendment would amount to the addition of a new cause of action, and that it did not arise out of the same (or substantially the same) facts as were already in issue. In reaching that conclusion the judge referred to the classic and much-quoted definitions of ‘cause of action’ by Brett J in Cooke v Gill (1873) LR 3 CP 107, 116 (“every fact which is material to be proved to entitle the plaintiff to succeed”) and by Diplock LJ in Letang v Cooper [1965] 1 QB 232, 242 (“simply a factual situation the existence of which entitles one person to obtain from the court a remedy against another person”).
    129. I have to say that in the context of section 35 of the Limitation Act 1980 I am uneasy about the process of lifting either of these classic definitions out of the legal lexicon, as it were, and reading them into the language of section 35(5)(a). The notion of “a factual situation” which “arises out of the same facts or substantially the same facts” as another set of facts is not an easy one to grasp. Probably the answer lies in Millett LJ’s observation (in Paragon Finance plc v D B Thakerar & Co (a firm) 1999 1 AER 400, 405),
    130. “The selection of the material facts to define the cause of action must be made at the highest level of abstraction.”
    131. So in identifying a new cause of action the bare minimum of essential facts abstracted from the original pleading is to be compared with the minimum as it would be constituted under the amended pleading. But in applying section 35(5)(a) the court is concerned on a much less abstract level with all the evidence likely to be adduced at trial: see Goode v Martin [2002] 1 WLR 1828, 1838, approving Hobhouse LJ’s observation in Lloyds Bank plc v Rogers [1996] CAT 1904:
    132. “The policy of the section is that, if factual issues are in any event going to be litigated between the parties, the parties should be able to rely upon any cause of action which substantially arises from those facts.”
    133. That does not however automatically shut out a case in which the proposed amendment seeks to cure a defect in a pleading which may disclose no cause of action: see Sion v Hampstead Health Authority [1994] 5 Med LR 170, 171, where Staughton LJ said,
    134. “If a statement of claim fails to disclose a cause of action, but by some amendment can be made to do so on the same facts or substantially the same facts as those already pleaded, I cannot believe that the Rule Committee intended that, if the limitation period had expired, there should be no discretion to allow the amendment. It may be that in some cases it should not be allowed; perhaps a plaintiff whose original claim was manifest nonsense should not be allowed to cure it after the limitation period had expired, even if he can do so on substantially the same facts. For example, a plaintiff who pleads that the defendant ran him down in his car, and claims damages for libel, might not be allowed to amend “libel” to “personal injury” after the expiry of the limitation period. But that would be an exercise of discretion, and is not remotely like this case.”
    135. The judge thought that the (non-retrospective) assignment effected by the 2001 deed was part of the essential core facts which had to be pleaded for Mr Smith to succeed in his claim, and that amendment to plead it was therefore the introduction of a new claim in the statutory sense. Mr Mabb has attacked that, relying particularly on what Evans LJ said in Hendry v Chartsearch Ltd (a case where there had been an assignment after the commencement of the action, but during the limitation period) at p.1,389,
    136. “The purpose of the re-amendment is to specify the reason why the plaintiff alleges that he is entitled to bring the claim. The cause of action remains the same: the additional facts cause no prejudice or embarrassment to the defendants.”
    137. The judge did not regard that observation as binding him because it was not made in relation to the special problems raised by section 35 of the Limitation Act 1980. I think he was right in that, and that he was also right to regard Robinson v Unicos Property Corporation Ltd [1962] 1 WLR 520 as a case on special facts (involving the changing membership of a partnership). Although a claimant’s title to sue cannot normally be regarded as the same as his cause of action, it is an essential part of his cause of action. I think the judge was right in his view that Mr Smith had to bring his case within section 35(5)(a).
    138. I do however feel real doubt about the judge’s conclusion that the case did not come within that provision. On this point he said,
    139. “As matters stand at present, [Mr Smith] is in effect suing as an impostor. What he wants to do is to plead a post-claim form event which will actually give him a title to sue. In my view, those features of his proposed amendments are so fundamental that they cannot fairly justify the new claim as one which can be regarded as arising out of “substantially the same facts” as the current claim, let alone out of the same facts.”
    140. I doubt whether that was the right approach. I am inclined to think that it was concentrating too much on the abstracted facts relevant to whether there was a new claim, and was not having sufficient regard to the legislative purpose of section 35(5)(a) as identified by Hobhouse LJ in Lloyds Bank plc v Rogers. The proof of the 2001 deed was unlikely to add much to the court’s task in investigating the facts. But the issue of the same (or substantially the same) facts is very much a matter of impression and (on a point which cannot, on the view which I take, be determinative) I am not prepared to express a definitive view that the judge was wrong.
    141. Conclusion

    142. For these reasons I would have allowed the appeal on the section 35A issue (but subject to further argument on the outstanding points raised in the respondent’s notice). I would have dismissed it on the ratification issue and the amendment issue.
    143. Lord Justice Carnwath:

    144. I agree with the judgment of Robert Walker LJ on every point, except one, in relation to the application of section 35A. Unfortunately, in the somewhat unusual circumstances explained in his judgment, this issue has now become potentially determinative of the appeal. I will therefore explain my reasons rather more fully than in the draft judgment which was supplied to the parties.
    145. The problem is to identify the “irreducible minimum” needed to bring section 35A into play. Literal interpretation does not help. On its face, the section is about the “power of the board of directors” to bind the company, in favour of a person who is party to “any transaction… to which the company is a party”. This begs two questions to which the section provides no direct answer: how does the “board of directors” exercise its power; and in what circumstances is a transaction to be treated as one to which the company is a “party”? Both questions can only be answered, under the ordinary law, by looking at the company’s constitution. Yet that is the very inquiry which the section seeks to avoid.
    146. I do not, with respect to my Lord, think that this problem can be solved by the suggested distinction between “nullity” and “procedural irregularity”. Such distinctions have not proved workable in administrative law (see e.g. de Smith, Woolf and Jowell, Judicial Review of Administrative Action 5th Ed para 5-044ff), and I do not think they are workable here. The problem is illustrated by this case. By what criterion is it to be said that Mr Smith’s decision to constitute himself as a board of the company is to be treated as a mere procedural irregularity, rather than a nullity? He had no more authority to take a decision in the name of the company than the office-boy. To an outsider, of course, such a document, emanating from the Chairman, could reasonably have been assumed to have more validity than a similar document signed by the office-boy. Yet, viewed under the company’s constitution, the decision had no validity of any kind; it was a “nullity”.
    147. The same problem, in different words, arises under Article 9 of the Directive (“acts done by organs of the company”); or section 9(1) of the 1972 Act (“transaction decided on by the directors”). In TCB v Gray [1986] Ch 621, the Vice-Chancellor accepted (at p 636G) the submission that it had to be shown that the debenture was a transaction “decided upon by the directors” (applying the wording of section 9(1) as it then was). Although there was a purported minute of a board meeting recording a decision on that issue, the evidence showed that no such meeting had ever taken place. The position was that all the directors had decided to grant the debenture, but not at a meeting at which they were all present. The Vice-Chancellor commented:
    148. “It has to be borne in mind on this aspect of the case that I have to determine whether a valid debenture was granted by Link. In my judgment Link, having put forward the minutes of the meeting of 25th January as one of the completion documents on the basis of which TCB made the loan, could not be heard to challenge the validity of that minute by denying that such a meeting ever took place. Therefore the minute stands as irrefutable evidence against Link that the grant of the debenture was a ‘transaction decided upon by the directors’. Accordingly the necessary basis for section 9(1) of the Act of 1972 to apply as between Link and TCB, exists.” (p637 C-E).
    149. I do not understand him to have treated the lack of a properly convened meeting as a mere “irregularity”, which could be disregarded for that reason. The key point seems to have been that the purported minute had been put forward by persons with apparent authority on behalf of the company and relied on by the TCB in completing the transaction. In effect, therefore, the Vice-Chancellor treated the irreducible minimum as, either an actual decision of the directors approving the transaction, or something represented as such a decision, by someone having apparent authority so to represent it, and in circumstances in which the other party was entitled to rely on the representation.
    150. I would be reluctant, however, to treat that reasoning, which was related to the facts of the case, as laying down a general test. Nor is this the case in which to attempt that task. A purposive approach to the section suggests a low threshold. The general policy seems to be that, if a document is put forward as a decision of the Board by someone appearing to act on behalf of the company, in circumstances where there is no reason to doubt its authenticity, a person dealing with the company in good faith should be able to take it at face value: see e.g. Mayras A-G, in Friederich Haaga Gmbh [1974] ECR 1201, 1210, cited by Vanessa Edwards op cit at p 43. (There may be some question, as she points out, whether section 35A has fully achieved that policy.) In principle, where the person in question is a third party in the ordinary sense, a wide interpretation is wholly appropriate.
    151. I accept that the section does not distinguish between insiders and outsiders. It applies to any “person dealing with the company”. These words are wide enough to include a director of the company. There is nothing in law to prevent a director from being “a person dealing” with his own company. If there were any doubt in section 35A itself, it seems implicit in section 322A that a director may be such a person. On the other hand, it is impossible to read that section as giving any comfort to directors seeking to rely on section 35A. Rather it adds a further level of defence for the company against its own directors and connected persons, by making transactions voidable in the circumstances defined; but this is expressly stated not to exclude any other rule by which the transaction may be avoided, and not to affect the operation of section 35A in relation to any other party (s 322A(4)(7)).
    152. I would prefer, however, to express no view about the position of directors in other circumstances. The facts here were quite exceptional. Mr Smith was not simply a director dealing with the company, and having some incidental involvement in the decision. As Chairman of the company, it was his duty to ensure that the constitution was properly applied; yet, he was personally responsible for the error, by which he purported to turn himself into a one-man Board. We have to assume good faith, but that means no more than that we have to assume that he made an honest mistake. It does not make it any less a mistake, or one for which he is any less responsible. I do not see how he can rely on his own error to turn his own decision, which had no validity of any kind under the company’s constitution, into a decision of “the Board”. I see nothing in section 35A, however purposefully interpreted, to give it that magical effect.
    153. I am also comforted to find that a robust approach was taken by the House of Lords to a similar contention in Morris v Kanssen [1946] AC 459. That concerned the application of the rule in Turquand’s case (Royal British Bank –v- Turquand (1856) 6 E&B 327), which allows outsiders dealing with the company to assume that acts of internal management have been properly carried out. The facts in Morris were, if anything, even more extreme than in the present case. There was a series of concocted meetings, at the end of which Mr Morris claimed to have been validly appointed a director, and as such to have joined in successfully allotting shares to himself. The question was whether he could rely on the rule for his own benefit. Lord Simonds thought the answer was clearly no, even approaching the matter on the basis that he was acting in good faith (p 475):
    154. “For here Morris was himself purporting to act on behalf of the company in a transaction in which he had no authority. Can he then say that he was entitled to assume that all was in order? My Lords, the old question comes into my mind, ‘Quis custodiet ipsos custodes?’ It is the duty of directors, and equally of those who purport to act as directors, to look after the affairs of the company, to see that it acts within its powers and that its transactions are regular and orderly. To admit in their favour a presumption that that is rightly done which they have themselves wrongly done is to encourage ignorance and condone dereliction from duty…. (p 476).
    155. Of course, he was concerned with a common law principle, rather than statute. But where, as here, the language of a statute (even one based on a Dircctive) has to be stretched in a purposive way to achieve its object, I see no reason why, in setting the limits, we should not be guided by what the common law would deem appropriate in a similar context.
    156. Accordingly, differing with great respect from the judgment just given, I would dismiss the appeal.
    157. Lord Justice Schiemann:

    158. I also would dismiss this appeal.
    159. So far as the issue under section 35A of the Companies Act 1985 is concerned, I have approached the matter by first considering the First Directive on Company Law. Article 9(2) of the Directive provides
    160. The limits on the powers of the organs of the company, arising under the statutes or from a decision of the competent organs, may never be relied on as against third parties, even if they have been disclosed.

    161. This provision was clearly intended to prevent the company from relying as against a third party on limits on the powers of the organs of the company. I do not consider that it was intended to prevent the company from relying on those limits as against the very director (‘the delinquent director’) who breached those limits. The fact that the directive makes no mention of good faith seems to lend support to this view. It is to me inconceivable that it was intended that a company should not be able to sue a director who knowingly acted beyond his powers so as to dispose of the company’s assets. This leads me to the conclusion that such a director falls outwith the concept of a third party as used in the Directive.
    162. By contrast, the solicitor firm in the present case is a third party. This provision was intended to prevent the company, and perhaps others such as the delinquent director, from relying on those limits as against a third party. It was not in my judgement intended to prevent a third party from relying on those limits.
    163. I do not understand either of my lords to take issue with any of the foregoing. The differences between them arise as to the proper interpretation of section 35A. Does that section enable a director, who has made an honest mistake as to the meaning of a provision in the articles of the company of which he is a director, himself to rely on his own mistake in order to give validity to something which would lack validity were it not for that mistake? In the phraseology of judges who lived in a different sartorial era, to pull himself up by his own bootstraps. To that question Robert Walker LJ gives an affirmative and Carnwath LJ and Rimer J. a negative answer.
    164. S. 35A uses different drafting from the directive and I accept poses more difficult problems. Manifestly, at least in part, it was enacted to give effect to Article 9(2). However, I accept of course that it was open to Parliament to go beyond what the Directive required and to enact that a director of a company should be able to rely as against third parties on his own mistake made in good faith as to his powers.
    165. There is frequently tension in the law – one sees it in administrative law as well as agency and company law - between two desiderata. The first is the desire to ensure that A acting on behalf of B only does that which B has properly authorised : this desire is caused by the wish to protect B from the consequences of that which he has not authorised. The second is the desire to ensure that C who in good faith relies on the acts of A as binding B is then not frustrated in his expectations because it turns out that B has never given A the authority to do those acts. One can easily find policy arguments for giving weight to either desideratum.
    166. Manifestly both the directive and section 35A are concerned with giving greater emphasis to the second desideratum than the first. They seek to resolve the tension between B and C in favour of C.
    167. Section 322A is not primarily concerned with this tension or the tension between B and C. It is concerned with the tension between B and A and gives B the opportunity of resolving any tension in its favour.
    168. What the present case is in substance concerned with is the tension between A and C. I have not heard of any possible policy reason for enabling a director in A’s position to rely on his own mistake vis a vis C. I can see none for myself. I thus approach the case with a predisposition to find in favour of the solicitors rather than in favour of the director.
    169. Mr Mabb has put forward a careful argument to the effect that in the circumstances it is really the director who is to be regarded as C, rather than the solicitors who relied upon him having the authority of the company. I find that result counter-intuitive.
    170. I accept that the word ’person’ is on its face wide enough to include such a director and that there is nothing in the section itself which points against the word being given such a wide meaning. That however is not to say that it must be given such a wide meaning.
    171. The fact that we are here dealing with a one man board meeting I agree is irrelevant. My reasoning and conclusions would be the same if the articles required a quorum of three and there had been merely two who attended the board meeting which resolved to part with the company’s assets to them.
    172. Moreover I accept that, whatever one’s intuitive feelings as to the right end result, one must consider whether the statute compels a contrary conclusion.
    173. Like Carnwath LJ and the Judge, I do not think that it does. I do not accept that s322A is inconsistent with a construction of s.35A which inhibits a director who is the author of his own misfortune from profiting vis a vis third parties from his own mistake. S.322A seems to me to be concerned with a different problem, namely, with what a company can do vis a vis its own director who has overstepped the mark.
    174. I note the point made by Mr Mabb about the desirability for certainty and the possible difficulties of drawing the line once one says that the phrase ‘person dealing with the company’ is not to be construed as comprising all persons. As it seems to me there is no difficulty in excluding from such persons the very directors who overstepped the limitations in the company’s constitution.
    175. So far as the other issues are concerned I gratefully adopt what Robert Walker LJ has said.
    176. Since Carnwath LJ agrees that this appeal should be dismissed it will be.
    177. Order: Appeal dismissed; Appellant do pay the Respondent’s costs, such costs to be subject to detailed assessment if not agreed; application for permission to appeal to the House of Lords refused.
      (Order does not form part of the approved judgment)


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