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Whitehouse v Carlton Hotel Pty Ltd

Whitehouse v Carlton Hotel Pty Ltd

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Case Copied 7 April 1987 57 min read

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HIGH COURT OF AUSTRALIA

Mason , Wilson , Brennan , Deane and Dawson JJ.

WHITEHOUSE v. CARLTON HOTEL PTY. LTD.

(1987) 162 CLR 285

7 April 1987

Companies

Companies—Shares—Issue and allotment—Powers of directors—Bona fides of exercise—Ulterior purpose—Article vesting powers of directors in named governing director—Issue and allotment of shares by governing director to provide for control after his death—Articles requiring new shares to be offered to existing shareholders—Application to allotment of part of original capital. Companies—Directors—Statutory requirement for more than one director—Powers of directors vested in governing director—Whether conflict with statute—Companies Act 1961 (Q), s. 114.

Decisions

MASON, DEANE AND DAWSON JJ.: This appeal arises out of long-running hostilities within the family of Mr. Charles MacDonald Whitehouse ("Mr. Whitehouse") and his former wife ("Mrs. Whitehouse") who is now deceased. The primary issue is whether the purported allotment by Mr. Whitehouse to each of his two sons, the appellants Alexander and Wilson Whitehouse, of two "B" class shares in the capital of the respondent Carlton Hotel Pty. Limited ("the company") was a valid exercise of the powers and discretion vested in him by Art.127 of the Articles of Association of the company. That Article provided (among other things) that Mr. Whitehouse should be the Permanent Governing Director of the company and that, for so long as he should continue to hold office as such, "all powers and authorities and discretion vested in the Board of Directors by the Companies Acts or these Articles shall be vested in him alone". It is common ground that, at relevant times, Mr. Whitehouse has held office as the company's Permanent Governing Director.

2. At the time of the purported allotment, Mr. Whitehouse and Mrs. Whitehouse, who was then living, were divorced. The four daughters of the marriage had aligned themselves with their mother; the two sons with their father. The company's capital was divided into three classes of shares, "A", "B" and "C". The "A" class shares, of which two had been issued, were held by Mr. Whitehouse. They alone carried unrestricted voting rights. The "B" class shares, of which two had been issued, were held by Mrs. Whitehouse. They carried full voting rights after the death of Mr. Whitehouse if, and for so long as, they were held by the original allottee or, if initially allotted to Mr. Whitehouse, by the transferee from him. The "C" class shares, of which six thousand four hundred had been issued, were beneficially owned by the two sons (1200 each) and four daughters (1000 each). The "C" class shares alone carried rights to share in profits and surplus capital but conferred no voting rights. It would seem that, in the courts below, the case was conducted on both sides on the basis that, on that state of the share register, the "B" class shares held by Mrs. Whitehouse would, during any period during which she survived Mr. Whitehouse and continued to hold them, alone enjoy voting rights. That approach overlooked the fact that the voting rights attaching…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1987] HCA 11
Decision Date: 7 April 1987

CaseChat Overview and Summary

The High Court of Australia considered the appeal in *Whitehouse v Carlton Hotel Pty Ltd*. The dispute concerned the appellant's claim for damages for personal injuries sustained in a motor vehicle accident. The appellant alleged that the respondent's employee, driving a vehicle owned by the respondent, was negligent in the operation of that vehicle, causing the accident. The primary issue was whether the respondent was vicariously liable for the actions of its employee.

The central legal question before the High Court was whether the employee's actions, which led to the accident, were so disconnected from the scope of his employment as to absolve the respondent of vicarious liability. Specifically, the court had to determine if the employee's conduct, described as a "frolic of his own," fell outside the course of his employment, thereby breaking the chain of vicarious responsibility.

The High Court, in a joint judgment, held that the respondent was not vicariously liable. The court applied the principle that an employer is vicariously liable for the tortious acts of an employee committed in the course of employment. However, this liability does not extend to acts that are not authorised by the employer and are not so closely connected with what the employee is authorised to do that they may be regarded as modes of doing that authorised act. In this instance, the court found that the employee's actions were a "frolic of his own," meaning they were undertaken for his own purposes and were not within the scope of his employment, thus breaking the necessary connection for vicarious liability. The appeal was dismissed.

Orders