Magical Marking Ltd & Anor v Holly & Ors

A director’s general management powers belong to the board collectively unless the company’s constitution or course of dealing establishes individual authority. A director cannot rely on actual authority where powers are used for an improper personal purpose. Ostensible authority requires a clear representation attributable to the company, reasonable reliance, and compliance with the company’s constitution. A person who encounters objectively abnormal circumstances and merely seeks reassurance from the representor cannot establish genuine reliance. Supplying equipment which is later used for infringement does not itself make the supplier an infringer without participation in the infringing acts.

Magical Marking Ltd and Andrew Phillis claimed against former director Sean Holly, Wayne Canavan, NextGen Technical Services Ltd and others. The claims arose from a visit to Magical’s premises during which a complete copy of its electronic business records was made and removed, backup media was taken, and its computer systems were disabled.

The principal issue concerning Mr Canavan and NextGen was whether Mr Holly had actual or ostensible authority to instruct them to secure Magical’s systems and copy its records. The court also considered subsequent copying and uploading, copyright and database-right infringement, misuse of confidential information, passing off, trespass and harassment.

1. Authority of a director. Regulation 70 of Table A vested management powers in the directors, meaning the board collectively. Regulation 71 reinforced that conclusion by permitting the directors to delegate powers. Mr Holly therefore had no unilateral authority under the articles to control Magical’s business or commission the relevant IT work.
2. Any actual authority arising from a director’s duties to inform himself about company affairs did not extend to copying the company’s essential business information for his personal purposes. Mr Holly was acting for an improper purpose and therefore lacked actual authority. His earlier operational authority had also ended when the company accepted his withdrawal from operational management.
3. Mr Holly’s office as company secretary did not give him authority to enter the relevant contracts. The evidence showed that the office was formal and carried no established executive authority in Magical’s affairs.
4. Mr Canavan could not rely on ostensible authority. There was no clear representation by Magical that Mr Holly could commission an IT consultant to undertake the work. Further, the circumstances were so abnormal that a reasonable consultant should have investigated whether he was assisting the company or Mr Holly personally. Seeking reassurance from Mr Holly and his solicitor, and relying on police inaction, did not amount to genuine reasonable reliance.
5. NextGen and Mr Canavan were liable for copyright infringement, database-right infringement and misuse of confidential information. The court granted injunctions, delivery-up orders and inquiries as to damages or equitable compensation. It granted no additional or exemplary damages against NextGen.
6. Supplying computers and lending a server did not, without more, make Mr Canavan or NextGen infringers. However, the court inferred that Mr Canavan later uploaded the stolen material onto the Quest/ESP system, creating further liability.
7. ESP was liable for primary and secondary copyright infringement and database-right infringement. The material supplied to ESP was held on constructive trust for Magical. Mr Holly was liable to Canavan and NextGen under his warranty of authority and was required to indemnify them where Magical elected for damages or equitable compensation.
8. The court also found passing off, trespass and harassment by Mr Holly. Harassment required a course of conduct, which was established by the proved sequence of threatening and intimidating telephone calls.