Corporate authority and mandatory statutory assent: emergency borrowing may be ratified, but a mortgage without prior sanction is void.

A managing agent's lack of general borrowing power did not prevent the temporary loan from being authorised where an emergency required immediate accommodation for the company's business, and later board treatment of the debt amounted to ratification. A mortgage executed for the company was not defeated by defects in sealing or by internal irregularities in authorisation, because a good-faith outsider could rely on apparent corporate authority and regularity of internal management. However, a mortgage over undertaking land made without the prior Government assent required by the tramway order was in breach of a mandatory statutory condition and was therefore absolutely void, incapable of ratification or estoppel.

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Issues: (i) Whether the managing agent had authority to obtain the temporary loan and whether the company ratified the transaction; (ii) whether the mortgage was validly executed and binding on the company under company law; (iii) whether the mortgage was void for want of prior Government sanction under the tramway order.

Issue (i): Whether the managing agent had authority to obtain the temporary loan and whether the company ratified the transaction.

Analysis: The managing agent had no general power to borrow, but the loan was urgently required for the company's business and the situation amounted to an emergency. In such circumstances, the ordinary law of agency permitted temporary accommodation to protect the principal's interests. In any event, the Board's later reports and accounts treated the borrowing as an accepted liability and showed clear ratification.

Conclusion: The loan was authorized in the emergency and, alternatively, ratified by the Board, so the company remained liable.

Issue (ii): Whether the mortgage was validly executed and binding on the company under company law.

Analysis: The seal on the mortgage deed was not essential to validity if company law did not require execution under seal. The defect, if any, in the manner of affixing the seal did not invalidate the document. Although the resolution authorizing execution was not proved to have been passed at a properly convened meeting, a person dealing in good faith with the company was entitled to assume regularity in matters of internal management. The mortgagee was therefore protected by the rule that internal irregularities do not defeat an external transaction entered into in good faith and within apparent corporate power.

Conclusion: The mortgage was not invalid on company-law grounds and was binding on the company as between the parties.

Issue (iii): Whether the mortgage was void for want of prior Government sanction under the tramway order.

Analysis: The land mortgaged formed part of the undertaking, and the order required prior assent of Government before transfer. The transaction was entered into without such prior sanction. A breach of a mandatory statutory condition of this kind renders the transfer absolutely void, not merely voidable, and such a void transaction cannot be ratified or saved by estoppel.

Conclusion: The mortgage was void for want of prior Government sanction.

Final Conclusion: The decree for sale could not stand, but the respondents were entitled only to rank as unsecured creditors and to obtain a simple money decree payable in liquidation.

Ratio Decidendi: A transaction made in contravention of a mandatory statutory prohibition requiring prior Government assent is absolutely void, while a good-faith outsider dealing with a company may rely on the regularity of internal corporate acts within apparent authority.

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