BELL HOUSES Ltd. Vs.

CITY
WALL PROPERTIES Ltd.
BACKGROUND
• The plaintiff company main business was the development of the
estate houses, it introduced a financer to the defendant company for
a payment of a short term credit for some property development.
• The defendant company accepted the financer but on the ask for the
damages by the plaintiff company they denied the existence of any
such contract between the two.
• Before the trial the course the changed and it was alleged that the
contract was ultra-virus the plaintiff company
ISSUES
• Whether the defendant when sued for contract by a company can
they claim the contract is ultra vires of the company.
• Whether the contract was ultra vires to the plaintiff company.
HOLDING OF THE COURT
• The trial court held the contract to be ultra vires and hence following
the case of Ashbury Railway Carriage Co. Riche, held the contract to
be null an void.
• However, on appeal the decision was reversed and the court enable
the directors to undertake any new business which in their honest
opinion could be advantageously taken up. The contract was held
intra vires and the company enforce it.
REASONING
• Lord Justice called the conclusion reached by trial court judge as
“strange result”
• The court said that the any sub-clause similar to the sub-clause (c) in
this particular case is enough for the Board of Director to act on their
bona fide opinion for the benefit of the company.
• The court also took note of Cohen Report which says that the
illusionary protection for the shareholders but it is pitfall for the third
party dealing with the party.