Rayfield v Hands [1960]
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Rayfield v Hands [1960] Ch 1 is a notable UK company law case addressing the enforceability of obligations within a company. The case centres around Mr Rayfield's legal action against the directors of Field Davis Ltd, seeking to compel them to purchase his shares in accordance with Article 11 of the company's constitution.
Article 11 of the company's constitution stated that every member intending to transfer shares must inform the directors, who are then obligated to acquire the shares equally between them at a fair value. The directors, however, refused to comply with this provision, leading Mr Rayfield to seek an injunction to enforce the contractual obligation.
The crucial question addressed was whether the terms of Article 11 established a relationship between the members inter se (among themselves) or between a member and directors as distinct entities. Vaisey J swiftly disposed of this point by asserting that, in his judgment, the relationship in this case was between Mr Rayfield as a member and the directors not merely as directors but also as members.
Vaisey J granted the injunction and based the decision on the interpretation of Article 11, holding that the article imposed an obligation on the directors, not merely in their capacity as officers but also as members of the company. Vaisey J emphasised that directors, despite their managerial role, retain their status as members and are, in essence, working members of the company.
This case established that the obligation specified in Article 11 was a contract or quasi-contract between members, specifically between Mr Rayfield and the directors in their capacity as members. This decision underscores the interconnected roles of directors as both managerial figures and members within a company, emphasising the enforceability of obligations within the internal structure of the company.
Article 11 of the company's constitution stated that every member intending to transfer shares must inform the directors, who are then obligated to acquire the shares equally between them at a fair value. The directors, however, refused to comply with this provision, leading Mr Rayfield to seek an injunction to enforce the contractual obligation.
The crucial question addressed was whether the terms of Article 11 established a relationship between the members inter se (among themselves) or between a member and directors as distinct entities. Vaisey J swiftly disposed of this point by asserting that, in his judgment, the relationship in this case was between Mr Rayfield as a member and the directors not merely as directors but also as members.
Vaisey J granted the injunction and based the decision on the interpretation of Article 11, holding that the article imposed an obligation on the directors, not merely in their capacity as officers but also as members of the company. Vaisey J emphasised that directors, despite their managerial role, retain their status as members and are, in essence, working members of the company.
This case established that the obligation specified in Article 11 was a contract or quasi-contract between members, specifically between Mr Rayfield and the directors in their capacity as members. This decision underscores the interconnected roles of directors as both managerial figures and members within a company, emphasising the enforceability of obligations within the internal structure of the company.
