In a February 2025 judgment, the high court declared two master rental agreements void, finding that the appellant company’s supposed representative who signed the agreements did not have the authority to bind the appellant. The directors resolution provided by the appellant was limited in scope to tax affairs. The purported delegation of authority by the authorised employee to the representative could not extend to include general commercial activities.
The dispute involved office equipment leased to the appellant under agreements signed by its employee and supposed representative in 2011. The lessor of the equipment then ceded its rights, including the right to receive rental payments, to the respondent, and the continued lease of the equipment was governed by a master rental agreement concluded between the appellant and the respondent in 2013. The agreements required the directors or an authorised representative of the appellant to sign the agreements. The appellant produced a directors resolution authorising a different employee to act on the appellant company’s behalf, and a power of attorney from that employee to the representative who signed the agreement.
The court analysed the authorising resolution which appointed the first employee “as the representative taxpayers/vendor for the Company” and granted the “full power and authority to act on behalf of the Company in respect of all tax affairs” including to “act in the name of the Company in making any enquiries or to complete or sign the necessary returns or other documents regarding the affairs of the company.” The power of attorney in favour of the representative who signed, purportedly extended the authority to include the “full power and authority to act on behalf of the Company in Respect of All Financial and Human Resource affairs” including matters regarding “auditing, accounting, banking and general financial administration.”
The directors resolution clearly restricted the first employee’s authority to tax-related matters. Any actions unrelated to tax exceeded the employee’s authority including authority to bind the appellant to commercial agreements. The court then dealt with the purported delegation to the representative highlighting that “the power to delegate authority within a corporate structure must flow from proper board authorisation. The distinction between operational delegation, a management tool, and formal delegation of board-authorised powers, requiring resolution, is fundamental to company law.” The first employee could not, through delegation, transform his own authority which was limited to tax matters to include general commercial authority.
Despite the respondent’s arguments that the representative had implied authority, because of the appellant’s “directors’ knowledge of and acquiescence” of the conduct”, the court found that the resolution did not empower the employee to delegate their authority and, even if specifically empowered, the first employee could not delegate more authority than was set out in the resolution.
Directors resolutions are not formalities. They are empowering documents and need careful attention as to their scope and terms.