Matthews v Newport Block and Tile Co Pty Ltd (In Liquidation) [1950] HCA 4

Matthews v Newport Block and Tile Co Pty Ltd (In Liquidation) [1950] HCA 4

The Board’s resolution of 30th September 1948 to pay the managing director £1,500 in consideration of 'past services rendered' was invalid because it purported to remunerate the director for services, at least in part, prior to incorporation, which was not authorized under the articles of association. Likewise, the subsequent resolution of 24th January 1949, permitting retention of £500, did not give legal entitlement as it failed to constitute a clear and valid exercise of the directors’ powers to fix remuneration for the office of managing director under the articles. Thus, the appellant was not entitled to the £1,500 or £500, and the company was not indebted to him on this account.

Parties
Appellant: Roy Matthews; Respondents: Newport Block and Tile Company Proprietary Limited (in liquidation) and another
Jurisdiction
Australia
Procedural Posture
Appeal / High Court of Australia Appeal From the Supreme Court of Victoria
Outcome
appeal dismissed
Legal Topics
Director Remuneration, Articles of Association, Company Formation, Powers of Directors
Company Law Director Remuneration Articles of Association Company Formation Powers of Directors

Case Brief

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Parties

Roy Matthews

Appellant

Newport Block and Tile Company Proprietary Limited (in liquidation) and another

Respondents

Procedural Posture

Appeal / High Court of Australia Appeal From the Supreme Court of Victoria

Legal Issues

  1. 1 Whether the directors had power to authorize payment of £1,500 to the managing director for past services rendered, including those before incorporation.
  2. 2 Whether the managing director could retain £500 already paid pursuant to the resolution.
  3. 3 Whether the resolutions were valid under the articles of association.

Ratio Decidendi

The Board’s resolution of 30th September 1948 to pay the managing director £1,500 in consideration of 'past services rendered' was invalid because it purported to remunerate the director for services, at least in part, prior to incorporation, which was not authorized under the articles of association. Likewise, the subsequent resolution of 24th January 1949, permitting retention of £500, did not give legal entitlement as it failed to constitute a clear and valid exercise of the directors’ powers to fix remuneration for the office of managing director under the articles. Thus, the appellant was not entitled to the £1,500 or £500, and the company was not indebted to him on this account.

Court Disposition

appeal dismissed

Orders

  • Declaration that the 30th September 1948 resolution to pay £1,500 was unauthorized and invalid.
  • Declaration that the company was not indebted to the appellant in the amount of £1,000 or any other sum by reason of the resolution.