Eastford Ltd v Gillespie & Anor

[4] The minutes of the board meeting recorded that the resolution in relation to this action was carried by two votes to one but that Mr Graham Gillespie and Mr Alan Gillespie disagreed with that result. The minutes also stated:

"Thomas Graham Gillespie wanted it noted that Eastford had no funds to pursue these actions. Alan Gillespie requested that Minutes of Meeting be approved by Semple Fraser and forwarded to Anderson Fyfe. Thomas Graham Gillespie requested that it be noted that in his view the meeting was illegal."

[6] In the debate, which I have heard, the defenders challenged the relevancy of the action and sought its dismissal on the basis that the purported ratification at the board meeting was ineffective because of conflict of interest. The defenders did not contend that the company could not ratify the directors' actions. They advanced a narrower argument, namely that the ratification was ineffective because Mr Gary Gillespie and Mr Steven Gillespie should not have voted as they had placed themselves in a position where their personal interests were in conflict with their duty to Eastford.

Legal background [7] It is well established at common law that, unless a company's constitution otherwise provides, a board of directors can, within a reasonable time, ratify the acts of a director or directors who, when they acted, had no authority to bind the company: Re Portuguese Consolidated Copper Mines Ltd [1890] LR 45 Ch D 16, Breckland Group Holdings Ltd v London & Suffolk Properties Ltd [1989] BCLC 100 and Municipal Mutual Insurance Ltd v Harrop [1998] 2 BCLC 540. See also Danish Mercantile Co Ltd v Beaumont [1951] Ch 680.

[9] One must look to the purpose of the statutory statement which is revealed in the 2006 Act. Subsections (3) and (4) of section 170 set out the relationship between the general duties which are stated in the Act and the pre-existing common law rules and equitable principles on which they are based. Subsection (3) provides: