Implied actual authority and director non-disclosure: company bound by contracts, and enforcement was not barred once rescission was unavailable.

Actual authority may be implied from a company's course of dealing where an officer functions as de facto chief executive, is entrusted with financial decisions, and the board acquiesces; on those facts, the indemnity and guarantee were binding on the company. A director's failure to disclose his interest in the contracts did not render them a nullity: section 199 of the Companies Act 1948 imposed a disclosure duty and penalty, but the consequence of non-disclosure was that the contract was voidable at the company's option, not permanently unenforceable by the director. Once rescission was no longer available, the company could not resist enforcement on that ground.

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Issues: (i) whether the chairman and chief executive had authority to bind the company to the indemnity and guarantee; (ii) whether a director's failure to disclose his interest in those contracts rendered them unenforceable by him.

Issue (i): whether the chairman and chief executive had authority to bind the company to the indemnity and guarantee.

Analysis: Actual authority may be implied from the relationship between the board and the agent, the course of dealing, and the responsibilities in fact entrusted to him. The evidence showed that the officer concerned functioned as de facto managing director and chief executive, was allowed to make financial decisions and commit the company in substantial transactions, and the board acquiesced in that mode of business. On those findings, his authority was not confined to his formal office as chairman and extended to the transactions in question.

Conclusion: The contracts were made with actual authority and were binding on the company.

Issue (ii): whether a director's failure to disclose his interest in those contracts rendered them unenforceable by him.

Analysis: Section 199 of the Companies Act, 1948 imposed a duty of disclosure and a penalty for non-compliance, but it did not itself void the contract. The proper consequence of non-disclosure was that the contract was voidable at the option of the company, not that it was a nullity or permanently unenforceable by the director. Once avoidance became impossible because the position could no longer be restored, the company could not resist enforcement on that ground.

Conclusion: The non-disclosure did not bar enforcement by the director and the contracts remained enforceable.

Final Conclusion: The appeal failed because the company was bound by the contracts and the director's non-disclosure did not defeat his claim on them.

Ratio Decidendi: Where a company knowingly allows an officer to act as its chief executive and to conduct its financial business, authority to enter related contracts may be implied from that course of dealing; and a director's non-disclosure of his interest makes the contract voidable at the company's option, not unenforceable by the director once rescission is no longer available.

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