Charterbridge Corp v Lloyds Bank Ltd

Charterbridge Corp v Lloyds Bank Ltd

Chancery Division 05 November 1968

Case Analysis

Where Reported

[1970] Ch. 62; [1969] 3 W.L.R. 122; [1969] 2 All E.R. 1185; [1969] 2 Lloyd's Rep. 24; (1968) 113 S.J. 465

Case Digest

Subject: Company Law Other related subjects: Real property Keywords: Interpretation; objects clause; sale of land Summary: Memorandum; objects; construction

Abstract: Where a company enters into a transaction which is expressly within its objects (as set out in the memorandum), the other party to the transaction is not affected by the question whether or not the transaction is for the benefit of the company. X's express objects were (inter alia) to acquire land for investment and \secure or guarantee by mortgages, charges or otherwise the performance and discharge of any contract, obligation or liability of [X] or of any person or corporation with whom or which [X] has dealings or having a business or undertaking in which [X] is concerned or interested whether directly or indirectly.\X was one of a closely knit group of companies under a common ownership and sharing a directorate and offices in common. One of the other companies was Y, which was substantially in debt to the defendant bank. X executed a legal charge of certain land in favour of the bank to secure Y's debt. It was admitted later that the directors of X had regard to the benefit of the group as a whole rather than to X in isolation. There was, however, no evidence of bad faith. Z contracted to purchase the land and, when the bank threatened to enforce the charge, sought a declaration that the charge was ultra vires X and therefore void.

Held, (1) that Y was acting within the scope of the express object quoted

above; (2) that since the charge was within the express object it was irrelevant (so far as the bank was concerned) whether or not the charge was intended to benefit X; and (3) that the charge was, therefore, intra vires X and valid. (Lee Behrens & Co Ltd, Re [1932] 2 Ch. 46 distinguished; David Payne & Co Ltd, Re [1904] 2 Ch. 608 and Introductions Ltd, Re (No.1) [1968] 2 All E.R. 1221 considered). Judge: Pennycuick, J.

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