Brownett v Newton [1941] HCA 14

Brownett v Newton [1941] HCA 14

There was sufficient evidence for a jury to infer the directors, by entering into and authorising the supply contracts on behalf of the company, warranted their authority to make immediately binding contracts for the company. Because the requisite statutory preconditions under s.77 of the Companies Act 1936 (NSW) were not met, the contracts were not binding on the company. The directors may be held personally liable under a warranty of authority if the party dealing with them did not know of the lack of authority and relied on the representation, as supported by the actual dealings and the evidence before the Court.

Parties
Appellant: Henry Michael Mullins; Appellant: George Myer Hains; Appellant: Edwin Percy Sheppard; Appellant: John Stuart Dunbar; Respondent: Newton
Jurisdiction
Australia
Procedural Posture
Appeal / Appeal From the Supreme Court of New South Wales, Full Court, to the High Court of Australia
Outcome
appeal dismissed
Legal Topics
Directors' Authority, Warranty of Authority, Contracts With Companies Before Commencement of Business, Breach of Warranty of Authority
Company Law Agency Law Directors' Authority Warranty of Authority Contracts With Companies Before Commencement of Business Breach of Warranty of Authority

Case Brief

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Parties

Henry Michael Mullins

Appellant

George Myer Hains

Appellant

Edwin Percy Sheppard

Appellant

John Stuart Dunbar

Appellant

Newton

Respondent

Procedural Posture

Appeal / Appeal From the Supreme Court of New South Wales, Full Court, to the High Court of Australia

Legal Issues

  1. 1 Whether directors of a company can be held personally liable for breach of warranty of authority for contracts entered into before the company was entitled to commence business under s.77 of the Companies Act 1936 (NSW)
  2. 2 Whether there was sufficient evidence for a jury to infer the directors warranted their authority to enter binding contracts on behalf of the company

Ratio Decidendi

There was sufficient evidence for a jury to infer the directors, by entering into and authorising the supply contracts on behalf of the company, warranted their authority to make immediately binding contracts for the company. Because the requisite statutory preconditions under s.77 of the Companies Act 1936 (NSW) were not met, the contracts were not binding on the company. The directors may be held personally liable under a warranty of authority if the party dealing with them did not know of the lack of authority and relied on the representation, as supported by the actual dealings and the evidence before the Court.

Court Disposition

appeal dismissed

Orders

  • Appeal dismissed with costs