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Rolled Steel Products (Holdings), Ltd. v. British Steel Corp.

[1986] 1 Ch. 246, [1985] 3 All ER 52, [1985] 2 WLR 908, [1984] BCLC 466, [1982–85] BCC 99, 158, (48 MLR 109), (44 CLJ 39) (1984)

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Rolled Steel Products (Holdings), Ltd. v. British Steel Corp.

England and Wales Court of Appeal, Civil Division
[1986] 1 Ch. 246, [1985] 3 All ER 52, [1985] 2 WLR 908, [1984] BCLC 466, [1982–85] BCC 99, 158, (48 MLR 109), (44 CLJ 39) (1984)

Facts

Alexander Shenkman and his family controlled Scottish Steel Sheet Ltd. (SSS), a private limited-liability company that owed a substantial debt to Colvilles Ltd. SSS did not have any assets, but Shenkman and his family also controlled Rolled Steel Products (Holdings), Ltd. (RSP) (plaintiff). When British Steel Corporation (BSC) (defendant) acquired Colvilles, BSC pressed Shenkman to satisfy SSS’s debt, leading RSP’s directors to approve a guarantee and debenture to BSC. Clause 3(k) of RSP’s memorandum of association provided that RSP was authorized to give guarantees or become security on terms that “may seem expedient.” RSP subsequently sued BSC and Vivian Cooper (defendant), seeking to invalidate the guarantee and debenture as ultra vires and seeking the return of money paid to BSC and Cooper thereunder. RSP argued that Clause 3(k) permitted guarantees and security only for proper corporate purposes and that BSC and Cooper knew that the guarantee and debenture in BSC’s favor did not qualify because they related to debt incurred by another company. The trial court ruled in favor of RSP. BSC and Cooper appealed.

Rule of Law

Issue

Holding and Reasoning (Slade, J.)

Concurrence (Lawton, J.)

Concurrence (Browne-Williamson, J.)

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