COMPANY CONTRACTS AND DIRECTOR’S AUTHORITY
Lovett v. Carson Country Homes
Corporate contractual liability is a topic that seems to give rise to a number of difficult issues. One of these is the question whether a company is bound to a contract with a third party where forgery or fraud by the company’s agent is involved. A century-old House of Lords decision, Ruben v. Great Fingall Consolidated , 1 suggests not, but this has been doubted. The issue has been considered again in Lovett v. Carson Country Homes Ltd.
2 This case also provided the first opportunity for a judge to consider the application of the Companies Act 2006, s 44, which details the circumstances in which a document is validly executed by a company. Section 44 is of central importance for contracts entered into by companies and yet there are a number of difficult issues regarding its application that remain to be settled.
In Lovett , the issue was whether a debenture purportedly made by Carson Country Homes Ltd (CCH) in favour of Barclays Bank Plc (the Bank) was a nullity, and whether, in consequence, the appointment of administrators pursuant to powers conferred in that debenture was valid. CCH had two directors: Mr Jewson and Mr Carter. The ordinary shares of the company were held by Jewson (32 shares), Carter (64 shares) and SGJ Ltd (SGJ), a company owned by the Jewson family (100 shares). Both CCH and SGJ were engaged in property development.
CCH borrowed money from the Bank, but also borrowed very significant sums on an unsecured basis on an inter-company loan account from SGJ. The Bank also lent
1.  1 AC 439.
2.  EWHC 1143 (Ch);  2 BCLC 196.
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