Question 1

Tardis Ltd carries on business as a travel agent. There is no restriction on the company’s objects in the articles of association. The articles provide that the board may delegate authority to a managing director or to individual directors who may contract on behalf of the company up to a limit of £50,000, beyond which the board’s prior authority must be obtained.

The following agreements have been entered into on behalf of the company:

(a) The board agreed to sponsor a local student to attend a three-year course at a nearby university at a cost of £10,000. The course is unrelated to the business of the company.

(b) Andreas, who acts as the managing director without having been formally appointed as such, contracted with Itma Ltd for the installation of a computer network for £55,000. He had not obtained the prior authority of the board for this.

Advise on the validity of these transactions and the liability of the company and/or the board and the individual directors.

Answer guidance

This question relates to contracts potentially beyond the company’s capacity and outside the authority of the directors.

Briefly explain the notion of a company’s capacity and the doctrine of ultra vires (eg Ashbury Railway Carriage & Iron Co v Riche (1875) LR 7 HL 653) to show you understand that contract (a) might previously have fallen foul of this. However as the company does not have restricted objects, you should consider and apply CA 2006, s. 31. You could acknowledge that CA 2006, s. 39 would protect the validity of acts beyond a company’s capacity (including ex gratia payments) even if there were a restriction, but the directors would be in breach of duty under CA 2006, s. 171(a) and liable to account to the company, unless the agreement was ratified.

For contract (b), consider the effect of A acting on behalf of the company, and exceeding the limitation in the company’s articles. Distinguish between actual authority, and apparent (or ostensible authority), and recognise that the company can be bound even where there is no actual authority. Consider the holding out of A as managing director, and cases such as Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. You also need to consider theeffect of the limitation in the company’s articles. Work through CA 2006, s. 40 (identifying any remaining areas of uncertainty of interpretation) and apply. For completeness you could also identify the common law indoor management rule (Royal British Bank v Turquand (1856) 6 El &Bl 327), but recognise s. 40 is usually broader in application. Remember to consider A’s liability under CA 2006, s. 171(a) which is not affected by s. 40 (s. 40(5)).

Question 2

Critically evaluate the importance of and impact on corporate responsibility of the Corporate Manslaughter and Corporate Homicide Act 2007.

Answer guidance

To answer this question fully you need to locate corporate manslaughter within the wider field of corporate criminal liability and corporate responsibility. You should acknowledge the company as a separate entity, but dependent on the actions of the individuals who control it, and consider whether/why corporate liability for criminal acts (and manslaughter in particular) is necessary.  The difficulties of identifying ‘corporate’ behaviour and punishing a corporation – and whether these are necessary - should also be considered.

Assess the Act by considering its context and the problem of attributing criminal liability to a company. Show an understanding of the identification doctrine and developments, with particular consideration of the pre-Act problems establishing corporate manslaughter (considering the P&O and Southall disasters for example). Explore the approach of the courts and evaluate the merits and problems of the pre-Act approach. You should discuss the Law Commission proposals and the resulting Act, with reference to the wider academic discussion. Explain how the Act operates, how far it differs from the preceding law, and evaluate issues of interpretation and application. Consider the impact of the Act by considering more recent cases, and assess its importance. Discuss whether a similar approach should be adopted in other areas of corporate liability/responsibility, or the merits of other statutory approaches such as the Bribery Act 2010. You could contrast the approach of the Act with that taken in other jurisdictions.