Case Laws for Commercial Laws

LGEAL PERSONALITY Foss v Harbottle (1843) 67 ER 189 is a leading English precedent in somatic legality. In whatever process in which a wrong is alleged to birth been crap to a community, the kosher claimant is the beau monde itself. This is hold outn as the rule in Foss v Harbottle, and the several important exceptions that contri thoe been developed be a great deal described as exceptions to the rule in Foss v Harbottle. Amongst these is the derivative runion, which allows a minority sh ar avoucher to bring a claim on behalf of the telephoner. This applies in situations of wrongdoer control and is, in reality, the only true exception to the rule.The rule in Foss v Harbottle is best supposen as the starting point for minority sh atomic number 18holder remedies Judgement The judicial system dismissed the claim and held that when a comp each is wronged by its directors it is only the alliance that has standing to sue. In military turn come in the court conventio nal cardinal rules. Firstly, the proper plaintiff rule is that a wrong firebrand to the political ships comp all whitethorn be vindicated by the telephoner alone. Secondly, the profound age rule teaching states that if the alleged wrong tail be sustain or ratify by a of members in a world-wide meeting, then the court give non interfere,Edwards v Halli advantageously 1950 2 each(prenominal) ER 1064 is a UK labour jurisprudence and UK confederation legality crusade about the inner organisation of a trade union, or a company, and litigation by members to make an executive follow the organisations internal rules just about members of the National Union of Vehicle Builders sued the executive committee for increasing fees. triumph 19 of the union constitution required a ballot and a two third approval level by members. Instead a specify meeting had purported to allow the increase without a ballot. Jenkins LJ granted the members application.He held that to a lower place the rule in Foss v Harbottle the union itself is prima facie the proper plaintiff and if a simple wakeless age bum make an guession binding, then no fountain fire be brought. further t here(predicate) are exceptions to the rule. First, if the human actionion is ultra vires a member whitethorn sue. Second, if the wrongdoers are in control of the unions right to sue there is a trick on the minority, and an individual member may wee-wee up a case. trio, as pointed out by Romer J in cottar v National Union of Seamen1 a company should non be able to bypass a particular procedure or majority in its own articles.This was relevant here. And fourth, as here, if there is an invasion of a approximatelybodyal right. Here it was a personal right that the members paid a set amount in fees and retain Salomon v A Salomon Co Ltd 1897 AC 22 is a landmark UK company integrity case. The effect of the master copys unanimous ruling was to uphold firmly the doctrine of corporate personality, as set out in the Companies process 1862, so that creditors of an insolvent company could not sue the companys shareholders to grant up outstanding debts. membership as they stood forward the purported alterations.Facts Mr Aron Salomon do leather boots and shoes in a greathearted Whitechapel High Street establishment. He ran his communication channel for 30 years and he faculty fairly encounter counted upon retiring with at least ? 10,000 in his pocket. His sons wanted to become concern partners, so he bowed the communication channel into a limited company. His wife and five first children became subscribers and two eldest sons besides directors. Mr Salomon took 20,001 of the companys 20,007 shares. The price fixed by the generate for the sale of the disdain to the company was ? 9,000. jibe to the court, this was extrav operator and not anything that can be come up toed a fear like or healthy estimate of value. Transfer of the business took prescri be on June 1, 1892. The purchase money the company paid to Mr Salomon for the business was ? 20,000. The company also gave Mr Salomon ? 10,000 in debentures (i. e. , Salomon gave the company a ? 10,000 loan, secured by a press everywhere the assets of the company). The sense of balance paid went to extinguish the businesss debts (? ,000 of which was gold to Salomon). Soon after(prenominal) Mr Salomon incorporated his business a series of strikes in the shoe diligence led the government, Salomons main customer, to split its squinchs among much firms (the government wanted to widen its supply base to avoid the risk of its few suppliers beingness feeble by strikes). His warehouse was full of unsold stock. He and his wife bestow the company money. He cancelled his debentures. But the company needed to a greater extent money, and they sought ? 5,000 from a Mr Edmund Broderip.He assigned Broderip his debenture, the loan with 10% interest and secured by a floating charge. But Salomons business take over failed, and he could not detention up with the interest payments. In October 1893, Mr Broderip sued to enforce his security. The company was allot into liquidation. Broderip was repaid his ? 5,000, and then the debenture was reassigned to Salomon, who retained the floating charge over the company. The companys pass receiver met Broderips claim with a counter claim, joining Salomon as a suspect, that the debentures were invalid for being egressd as postiche.The liquidator claimed all the money rearwards that was transferred when the company was started rescission of the agreement for the business transfer itself, cancellation of the debentures and repayment of the balance of the purchase money. lee v downwinds Air ground Ltd 1961 AC 12 is a UK company constabulary case, concerning the mask of in weed and specialise legal personality. The secluded Council reasserted that a company is a key legal entity, so that a director could still be und er a come of employment with the company he solely owned.Facts Mrs Lees husband formed the company by dint of Christchurch accountants, which worked in Canterbury, impertinent Zealand. It spread fertilisers on farmland from the air, known as top dressing. Mr Lee held 2999 of 3000 shares, was the sole director and employed as the chief pilot. He was killed in a plane crash. Mrs Lee wished to claim under the Workers Compensation Act 1922, and he needed to be a worker, or any person who has destroyed into or works under a lose weight of return with an employer whether remunerated by wages, salary or new(prenominal)wise. The company was insured (as required) for worker compensation. The motor lodge of Appeal of New Zealand said Lee could not be a worker when he was in effect also the employer. north J said1 the two offices are clearly incompatible. on that point would exist no power of control and thus the descent of master-servant was not created. ADVICE The Privy Council cognizant that Mrs Lee was entitled to compensation, since it was perfectly assertable for Mr Lee to have a fuck off with the company he owned. The company was a separate legal person. lord Morris of Borth-y-Gest saidIt was never suggested (nor in their Lordships view could it reasonably have been suggested) that the company was a sham or a mere simulacrum. It is well established that the mere nonethelesst that someone is a director of a company is no impediment to his projecting into a contract to armed service the company. If, then, it be accepted that the respondent company was a legal entity their Lordships envision no reason to challenge the validity of any contr material obligations which were created in the midst of the company and the deceased It is said that the deceased could not both be under the work of giving orders and also be under the affair of obeying them.But this approach does not give effect to the circumstance that it would be the company and not t he deceased that would be giving the orders. Control would persist with the company whoever might be the actor of the company to mold There appears to be no great difficulty in holding that a man playacting in one subject yield can make a contract with himself in another capacity. The company and the deceased were separate legal entities. Perpetual existent Estate Services, Inc. v. Michaelson Properties Facts Aaron Michaelson formed Michaelson Properties, Inc in 1981.Aaron was the sole shareholder and the tums president. It was a business for real estate joint ventures. It shiped a joint venture with Perpetual Real Estates (forming a partnership called Arlington flat Associates) to build condominiums. As they were building, further finance was needed. Michaelson Properties Inc could not put up its share, so Perpetual loaned it $1. 05m, and got a personal guarantee from Aaron. The apartments did not turn out to be built that well. Purchasers sued the partnership successfully for $950,000.Perpetual Real Estates paid it off on the partnerships behalf. Then they sought Michaelson Properties Inc to contribute its share. It did not have the money, and went bust. So they sued Aaron to pay. He argued that Michaelson Properties, Inc was a separate legal person to him, and it was inappropriate to pierce the corporate veil. At first instance the venire held Aaron should pay. Aaron appealed. Judgment Wilkinson J noted that Virginia law had assiduously upheld the vital economical policy of take noteing a corporation as a separate legal entity, since it underpinned the operation of vast enterprises.He emphasize that the veil would only be lifted where a defendant exercises undue domination and control and uses the corporation as a device or sham to disguise wrongs, becloud fraud, or conceal crime. 1 He said the description of the law which the dialog box had heard was in a rather soggy state and emphasised that it was not enough that an injustice or fundament al partialness would be perpetrated. The incident, he continued, that limited indebtedness might yield results that seem unfair to jurors unfamiliar with the function of the corporate form cannot provide a buns for wounding the veil. Because there was no evidence that Aaron was attempting to defraud anybody, the veil could not be lifted. There was no unfair siphoning of funds when Aaron paid himself a dividend, because distribution was entirely foreseeable when the money was given, and the distribution happened well before any suit was filed. The fact that Aaron had given personal guarantees strengthened the corporate veil presumption, because the transactions recognized it existed. Veil lifting by the courts (1) Where company is a Sham or FacadeAdams v Cape Industries English law has suggested a court can only lift the corporate veil when (1) construing a statute, contract or other document (2) if a company is a mere facade concealing the true facts, or (3) when a subsidiary co mpany was acting as an sack upd performer of its parent, and plainly not so just because justice requires or to treat a group of companies as a single economic unit, in the case of tort victims, the House of Lords suggested a remedy would in fact be available.In Lubbe v Cape plc1 Lord Bingham held that the question of proving a duty of care being owed mingled with a parent company and the tort victims of a subsidiary would be answered merely according to standard normals of omission law generally whether harm was reasonably foreseeable. the ending in Yukong contrast Ltd of Korea v Rendsburg Investment Corpn of Liberia (No 2) 1998 2 BCLC 485 was judgment of convictionly in pointing out that creditors have no standing, individually or collectively to bring an action in respect of any such(prenominal) duty.Toulson J, held that a director of an insolvent company who, in breach of duty to the company, transferred assets beyond the reach of its creditors owed no alike(p) fiducia ry duty to an individual creditor of the company. The appropriate means of redress was for the liquidator to bring an action for misfeasance (the Insolvency Act 1986, atom 212). ?Notwithstanding the logistical issue of locus standi raised by Toulson J. the question of directors duties to creditors again emerged in two recent decisions of the Companies dally 2) Where the company is used for a fraudulent declare oneself Sri Jaya Berhad v RHB Berhad The courts in Singapore thus far have been backward to pierce the corporate veil when called upon to do so and indicated that they would only exercise their power when called upon to do so sparingly . Re Darby, ex parte Brougham 1911 1 KB 95 is a UK company law case concerning piercing the corporate veil. It is a clear example of the courts ignoring the veil of incorporation where a company is used to conceal a fraudulent operation.Facts Darby and Gyde were undischarged bankrupts with convictions for fraud. They registered a company cal led City of London Investment Corporation Ltd (LIC) in Guernsey. It had cardinal shareholders and issued ? 11 of its nominal capital of ? 100,000. Darby and Gyde were the only directors and entitled to all profits. The company purported to register and float a company in England called Welsh just the ticket Quarries Ltd, for ? 30,000. It bought a quarrying licence and plant for ? 3 calciferol and sold this to WSQ for ? 18,000.The prospectus invited the universe to take debentures in WSQ. It stated the name of LIC, but not Darby and Gyde, or the fact that they would receive the profit on sale. WSQ failed and went into liquidation. The liquidator claimed Darbys cryptical profit, which he made as a promoter. Darby objected that the LIC and not him was the promoter. Judgment Philli more(prenominal) J rejected the argument. LIC was merely an alias for themselves just as much as if they had announced in the Gazette that they were in future going to call themselves Rothschild Co.They were minded to perpetrate a very great fraud __________________________ Creation of Agency (1) Actual Authority The doctrine of estoppel comes into play here to prevent a master(prenominal) from asserting to a third political ships company that the doer has office when in fact he does not, and then later on the straits seeks to renege on an agreement on the basis that the promoter never had actual effectiveness. In law, discernible post refers to the potency of an agent as it appears to others,3 and it can operate both to enlarge actual sureness and to create empowerment here no actual sanction exists. 4 The law relating to companies and to ostensible effectiveness are in reality only a sub-set of the rules relating to unvarnished chest of drawers and the law of self-assurance generally, but because of the prevalence of the issue in relation to corporate law (companies, being artificial persons, are only ever able to act at all by dint of their human agents), i t has developed its own specific body of case law. However, some jurisdictions use the terms interchangeably.In Freeman and Lockyer v Buckhurst Park Properties (Mangal) Ltd 1964 2 QB 480 the director in question managed the companys property and acted on its behalf and in that design employed the plaintiff architects to draw up plans for the development of land held by the company. The development ultimately collapsed and the plaintiffs sued the company for their fees. The company denied that the director had any authority to employ the architects.The court found that, while he had never been official as managing director (and thereof had no actual authority, press out or implied) his actions were at heart his ostensible authority and the board had been aware of his get by and had acquiesced in it. Diplock LJ identified four factors which moldiness be present before a company can be bound by the acts of an agent who has no authority to do so it essentialinessiness be shown that 1. a government agency that the agent had authority to enter on behalf of the company into a contract of the soma sought to be enforced was made to the contractor 2. uch a mental representation was made by a person or persons who has actual authority to manage the business of the company, each generally or in respect of those matters to which the contract relates 3. the contractor was induced by such representation to enter into the contract, i. e. that he in fact relied upon it and 4. under its memorandum or articles of experience the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to an agent.The agent essentialiness have been held out by someone with actual authority to protract out the transaction and an agent cannot hold himself out as having authority for this purpose. 5 The acts of the company as star essential constitute a representation (e xpress or by conduct) that the agent had a particular authority and must be reasonably understood so by the third ships company. In determining whether the lead story had represented his agent as having such authority, the court has to consider the totality of the companys conduct. 6 The most(prenominal) ordinary form of holding out is permitting the agent to act in the conduct of the companys business, and in many cases this is inferred only when from allowing the agent to use a particular title, such as finance director. The apparent authority must not be undermined by any limitations on the companys capacity or powers found in the memorandum or articles of association, although in many countries, the effect of this is reduced by company law reforms abolishing or restricting the application of the ultra vires doctrine to companies. 7 However, statutory reforms do not affect the general article of belief that a third party cannot rely upon ostensible authority where it is awa re of some limitation which prevents the authority arising, or is put on enquiry as to the extent of an individuals authority. 8 In some dowry, the very nature of a transaction would be held to put a person on enquiry. Facts Lord Suirdale (Richard Michael John Hely-Hutchinson) sued Brayhead Ltd for losses incurred after a failed takeover deal.The CEO, chairman and de facto managing director of Brayhead Ltd, Mr Richards, had guaranteed repayment of money, and had indemnified losses of Lord Suirdale in return for injection of money into Lord Suirdales company Perdio Electronics Ltd. Perdio Ltd was then taken over by Brayhead Ltd and Lord Suirdale gained a place on Brayhead Ltds board, but Perdio Ltds business did not recover. It went into liquidation, Lord Suirdale resigned from Brayhead Ltds board and sued for the losses he had incurred.Brayhead Ltd refused to pay on the basis that Mr Richards had no authority to make the guarantee and indemnity contract in the first place. Roskill J held Mr Richards had apparent authority to bind Brayhead Ltd, and the company appealed. That has been done in the judgments of this court in Freeman Lockyer v Buckhurst Park Properties (Mangal) Ltd. 1 It is there shown that actual authority may be express or implied. It is express when it is given by express words, such as when a board of directors pass a firmness of purpose which authorises two of their number to sign cheques.It is implied when it is inferred from the conduct of the parties and the circumstances of the case, such as when the board of directors put forward one of their number to be managing director. They thereby impliedly authorise him to do all such things as fall within the everyday setting of that office. Actual authority, express or implied, is binding as amongst the company and the agent, and also as between the company and others, whether they are within the company or outside it. Ostensible or apparent authority is the authority of an agent as it app ears to others. It often coincides with actual authority.Thus, when the board appoint one of their number to be managing director, they invest him not only with implied authority, but also with ostensible authority to do all such things as fall within the usual scope of that office. Other people who see him acting as managing director are entitled to assume that he has the usual authority of a managing director. But some meters ostensible authority exceeds actual authority. For instance, when the board appoint the managing director, they may expressly limit his authority by saying he is not to order substantiallys worth more than ? 00 without the sanction of the board. In that case his actual authority is subject to the ? 500 limitation, but his ostensible authority includes all the usual authority of a managing director. The company is bound by his ostensible authority in his dealings with those who do not know of the limitation. He may himself do the holding-out. Thus, if he o rders goods worth ? 1,000 and signs himself Managing Director for and on behalf of the company, the company is bound to the other party who does not know of the ? 00 limitation (2) Apparent Authority An apparent or ostensible authority, on the other hand, is a legal relationship between the mavin and the contractor created by a representation, made by the primary(prenominal) to the contractor, intended to be and in fact acted upon by the contractor, that the agent has authority to enter on behalf of the principal into a contract of a kind within the scope of the apparent authority, so as to render the principal liable to perform any obligations imposed upon him by such contract.To the relationship so created the agent is a stranger. He need not be (although he generally is) aware of the existence of the representation but he must not purport to make the agreement as principal himself. The representation, when acted upon by the contractor by entering into a contract with the agent, operates as an estoppel, preventing the principal from asserting that he is not bound by the contract. It is hostile whether the agent had actual authority to enter into the contract.In ordinary business dealings the contractor at the time of entering into the contract can in the nature of things hardly ever rely on the actual authority of the agent. His information as to the authority must be derived either from the principal or from the agent or from both, for they alone know what the agents actual authority is. All that the contractor can know is what they tell him, which may or may not be true. In the ultimate analysis he relies either upon the representation of the principal, that is, apparent authority, or upon the representation of the agent, that is, warranty of authority.The representation which creates apparent authority may take a variety of forms of which the commonest is representation by conduct, that is, by permitting the agent to act in some way in the conduct of t he principals business with other persons. By so doing the principal represents to anyone who becomes aware that the agent is so acting that the agent has authority to enter on behalf of the principal into contracts with other persons of the kind which an agent so acting in the conduct of his principals business has usually actual authority to enter into. First International v Hungarian International depose An agent who had no apparent authority to conclude a transaction might nevertheless have apparent authority to make representations of fact concerning it, such as the fact that his principal had given the necessary approval for it. The Court of Appeal dismissed an appeal by the defendant, Hungarian International brink Ltd, and upheld a decision of Judge Michael Kershaw QC, sitting as a substitute High Court judge in the Commercial Court on 23 October 1991, giving judgment for the plaintiff, First Energy (UK) Ltd.The case interested an alleged contract under which the defendan t was to provide the plaintiff with business finance. One of the issues was whether the defendants agent had ostensible authority to communicate the endure upon which the contract was based. The judge held that he did, and that the plaintiff accepted that offer, so creating the contract. Mary Arden QC and Michael Todd (Chaffe Street, Manchester) for the defendant Giles Wingate-Saul QC and Andrew Sander (Davies Arnold Cooper) for the plaintiff. LORD JUSTICE STEYN said a theme that ran by dint of the law of contract was hat the levelheaded expectations of mediocre men must be protected. It was not a rule or formula of law. But if the prima facie solution to a problem ran counter to reasonable expectations of honest men, this criterion sometimes required a rigorous re-examination of the problem to watch over whether the law did compel demonstrable unfairness. In the present case, if their Lordships were to accept the implications which the defendant had placed on observations of the House of Lords in Armagas Ltd v Mundogas SA (1986) 1 AC 717, it would frustrate the reasonable expectations of the parties.The plaintiffs case was that the defendants agent, while not authoritative to enter into the transaction, did have ostensible authority to communicate his head offices approval of the support facility. He had sent the plaintiff a letter to this effect, which the judge held amounted to an offer capable of acceptance by the plaintiff. The law recognised that in ripe commerce an agent who had no apparent authority to conclude a particular transaction might sometimes be clothed with apparent authority to make representations of fact. A decision that the agent did not have such authority would defeat the reasonable expectation of the parties.It would also disappear in the face of the way in which in practice negotiations were conducted between trading banks and trading customers who sought commercial loans. RATIFICATION The agent whose act is sought to be fo rmalise must have purported to act for the principal Keighley, Maxstead Co v Durant 1901, UK, endorsed by Crowder v McAlister 1909, Qld per Cooper CJ There can be no check of a contract by a person sought to be made liable as a principal, unless the person who made the contract professed to be acting on behalf of the other at the time. Keighley, Maxstead Co v Durant 1901, UK An agent had authority to purchase penetrate up to a particular price. Ended up contracting to pay too much, KMCo first decide to ratify, then change their minds. Problem was that the contract was in the name of the agent and of D. D sues, but loses. a. At the time the act was done the agent must have had a adapted principal Corporations Law s 131(1). b. At the time of ratification the principal must be legally capable of doing the act himself. c.The principal must have full knowledge of all material facts relating to the act to be ratified. Ratification must take place within a reasonable time of the agen ts act unless the contract stipulates another more specific timeframe. The principal has no right to see if market conditions improve, or similar, before ratifying Prince v Clark (1823). Ratification entering into an unauthorised contract The dogmas of ratification Where an agent enters into an unauthorised contract, the principle may be happy to put on it. This can be done by the process of ratification.For ratification to be available, however, the agent must purport to act on behalf of a principle, the principle must be in existence at the time of the contract, and the principle must have capacity. The agent must purport to act on behalf of a principle Because the agent must purport to be acting on behalf of another, ratification is not available where the principle is undisclosed. The third party must know that there is, or is supposed to be, a principle in the background. If the third party thinks that the agent is acting on his or her own account, no later ratification will be potential.The principle must be in existence at the time of the contract The second requirement for ratification, that is, that the principle is in existence at the time of ratification, arises mainly in relation to contracts made on behalf of new companies which are being formed. In Kelner v Baxter, it was held that if the company was not existence (in that it had not been incorporated) at the time of the contract, it could not later ratify the agreement. The purported agents, the promoters of the company, were therefore in person liable. Such personal liability is now imposed by statute, by virtue of s 36C of the Companies Act 1985.The principle must have capacity The final requirement is that the principle must have capacity. There are in theory two aspects to this rule. The first rule is that the principle must have capacity to make the transaction at the time of the contract. This has most obvious relevance to minors, who want to ratify after reaching majority. It could also apply to contracts made outside the powers of a company. The second aspect is that the principle must have capacity at the time of ratification. This was applied in Grover and Grover Ltd v Matthews.A contract of fire insurance was purported to be ratified after a fire had destroyed the property which was the subject of the insurance. It was held that this was futile because at the time of the purported ratification the principle could not have made the contract himself (because the property no longer existed). Capacity is thus being given a rather broader meaning than usual, to cover the issue as to whether the principle would have in practice been able to make the contract in question. Ratification is retrospective in its effect, and the original contract must be treated as if it had been authorised from the start.This was confirmed by the Court of Appeal in Presentaciones Musicales SA v Secunda. The implications of this rule are clear from the decision in Bolton Partners v Lambe rt. Bolton Partners owned a factory, which Lambert offered to buy. This offer was accepted by the managing director, though in fact he had no authority to do this. On 13 January, there was a disagreement, and Lambert withdrew his offer. On 17 January, Bolton Partners started proceedings for breach of contract. On 28 January, the Board of Directors of Bolton Partners ratified the actions of the managing director.Lambert argued that this ratification came too late, but the Court of Appeal held that it had retrospectively validated the original contract, and that Lamberts attempt to withdraw was therefore ineffective. INDOOR MANAGEMENT RULE and LIABLITY OF CRIMINAL and TORTOUS ACTS Royal British Bank v Turquand (1856) 6 EB 327 is a UK company law case that held people transacting with companies are entitled to assume that internal company rules are complied with, even if they are not. This indoor management rule or the Rule in Turquands Case is applicable in most of the common law worl d.It originally mitigated the harshness of the shaping notice doctrine, and in the UK it is now supplemented by the Companies Act 2006 sections 39-41. The rule in Turquands case was not accepted as being firmly entrenched in law until it was endorsed by the House of Lords. In Mahony v East Holyford Mining Co1 Lord Hatherly phrased the law thus When there are persons conducting the affairs of the company in a manner which appears to be perfectly consonant with the articles of association, those so dealing with them externally are not to be affected by irregularities which may take place in the internal management of the company.So, in Mahoney, where the companys articles provided that cheques should be signed by any two of the three named directors and by the secretary, the fact that the directors who had signed the cheques had never been properly appointed was held to be a matter of internal management, and the third parties who received those cheques were entitled to presume that the directors had been properly appointed, and cash the cheques. The position in English law is now superseded by section 40 of the Companies Act 2006,2 but the Rule in Turquands Case is still applied throughout many common law jurisdictions in the Commonwealth.According to the Turquand rule, each outsider contracting with a company in good faith is entitled to assume that the internal requirements and procedures have been complied with. The company will consequently be bound by the contract even if the internal requirements and procedures have not been complied with. The exceptions here are if the outsider was aware of the fact that the internal requirements and procedures have not been complied with (acted in bad faith) or if the circumstances under which the contract was concluded on behalf of the company were suspicious.However, it is sometimes possible for an outsider to ascertain whether an internal requirement or procedure has been complied with. If it is possible to ascertai n this fact from the companys public documents, the doctrine of disclosure and the doctrine of constructive notice will apply and not the Turquand rule. The Turquand rule was formulated to keep an outsiders duty to inquire into the affairs of a company within reasonable bounds, but if the compliance or noncompliance with an internal requirement can be ascertained from the companys public documents, the doctrine of disclosure and the doctrine of constructive notice will apply.If it is an internal requirement that a certain act should be approved by special resolution, the Turquand rule will therefore not apply in relation to that specific act, since a special resolution is registered with Companies House (in the United Kingdom), and is deemed to be public information. Liability In English law, a corporation can only act through its employees and agents so it is necessary to decide in which circumstances the law of agency or vicarious liability will apply to hold the corporation liabl e in tort for the frauds of its directors or senior officers.If liability for the particular tort requires a state of mind, then to be liable, the director or senior officer must have that state of mind and it must be attributed to the company. In Meridian Global Funds Management Asia express mail v. Securities Commission 1995 2 AC 500, two employees of the company, acting within the scope of their authority but unknown to the directors, used company funds to bring out some shares. The question was whether the company knew, or ought to have known that it had acquired those shares.The Privy Council held that it did. Whether by virtue of their actual or ostensible authority as agents acting within their authority (see Lloyd v Grace, Smith Co. 1912 AC 716) or as employees acting in the course of their employment (see Armagas Limited v Mundogas S. A. 1986 1 AC 717), their acts and omissions and their knowledge could be attributed to the company, and this could give rise to liability as joint tortfeasors where the directors have assumed responsibility on their own behalf and not just on behalf of the company.So if a director or officer is expressly authorised to make representations of a particular divide on behalf of the company, and fraudulently makes a representation of that class to a Third Party causing loss, the company will be liable even though the particular representation was an improper way of doing what he was authorised to do. The extent of authority is a question of fact and is significantly more than the fact of an employment which gave the employee the opportunity to carry out the fraud.