Richard Brady Franks Ltd v Price

58 CLR 112

RICHARD BRADY FRANKS LIMITED

PRICE AND OTHERS

RESPONDENTS. DEFENDANTS,

ON APPEAL FROM THE SUPREME COURT OF

NEW SOUTH WALES. Company-Debentures-Issue-Resolutions on two different dates-Competent quorum

of directors present on second date only-Validity of debentures-Bona fides of SYDNEY, July 30;

Appeal-Questions of fact-Functions of court of appeal. Aug. 3, 4, 17.

At a meeting of a board of directors of a company on 3rd November 1931 a resolution was passed for the issue of a series of debentures to certain named persons. At a further board meeting on 17th November 1931 a resolution was passed that "the series of debentures

prepared in pursuance of resolution of 3rd November, 1931, be sealed and issued to the respective persons named therein." At the meeting on 17th November a quorum of directors competent to vote was present and voted, but at the earlier meeting there was no such quorum present.

Held that the resolution of 17th November was a substantive and inde- pendent exercise of the directors' power to bind the company and not a mere formal carrying out of a decision finally resolved upon at the earlier meeting, and that it contained clear authority for the issue of the debentures therefore the validity of the debentures could not be attacked on the ground that they purported to be issued pursuant to a resolution passed at a meeting when the requisite quorum of directors was not present.

Cox v. Dublin City Distillery [No. 2], (1915) 1 I.R. 345, distinguished. The company had for some time been in financial difficulties and the prospect of an improvement was not good. From time to time certain of the directors

58 CLR 113

and other persons had lent money to the company on "short call " and had guaranteed the company's overdraft. The debentures were issued to these directors and persons. The plaintiff claimed that the debentures were not issued bona fide and, therefore, were invalid. The trial judge found on the evidence that in issuing the debentures the directors acted in the interests FRANKS LTD. of the company and of the general body of shareholders and not in the interests of the proposed debenture holders.

Held that the plaintiff had not discharged the onus of establishing want of bona fides on the part of the directors, and, upon the evidence, the finding of the trial judge should not be disturbed.

Upon questions of fact an appeal court will not interfere with the decision of the trial judge unless there is some good and special reason to throw doubt upon the soundness of his conclusions.

Decision of the Supreme Court of New South Wales (Long Innes C.J. in Eq.): Richard Brady Franks Ltd. v. Price, (1936) 37 S.R. (N.S.W.) 37 53 W.N. (N.S.W.) 238, affirmed.

APPEAL from the Supreme Court of New South Wales.

In a suit brought in the Supreme Court of New South Wales in its equitable jurisdiction by Richard Brady Franks Ltd. against Herbert Price, Rose Eaton Thwaites, Annie Adeline Price, Otto…