Case 1

Hely-Hutchinson v Brayhead Ltd 1968 1 QB 549 (UK)

Lord Suirdale (Richard Michael John Hely-Hutchinson) sued Brayhead Ltd for losses incurred after a failed takeover deal. The CEO, chairman and de facto managing director of Brayhead Ltd, Mr. Richards, had guaranteed repayment of money, and had indemnified losses of Lord Suirdale in return for injection of money into Lord Suirdale's company Perdio Electronics Ltd. Perdio Ltd was then taken over by Brayhead Ltd and Lord Suirdale gained a place on Brayhead Ltd's board, but Perdio Ltd's business did not recover. It went into liquidation. Lord Suirdale resigned from Brayhead Ltds board and sued for the losses he had incurred. Brayhead Ltd refused to pay on the basis that Mr. Richards had no authority to make the guarantee and indemnity contract in the first place.

With reference to the case, explain if the director had authority to make the guarantee and indemnity contract?