RUSHBROOKE UK LTD v 4 DESIGNS CONCEPT LTD

The court considered an urgent application for an injunction restraining presentation of a winding-up petition founded on a statutory demand. The decisive legal principle was that a company acts only by its organs in accordance with its constitution; under the articles in Table A the business of the company is to be managed by the board and, absent an express delegation or board resolution, an individual director has no authority to instruct solicitors to commence or defend proceedings on the company’s behalf. The court applied Mitchell & Hobbs (UK) Ltd v Mill and considered later authorities (notably Fusion and Smith v Butler), concluding that none of the exceptions to the general rule operated on the facts. The Solicitors Regulation Authority obligation to act only on instructions from the client or someone authorised by the client was also relevant. Because there was no board resolution or delegation and no estoppel or implied authority, the application was struck out for want of authority to litigate on behalf of the company.

Background and parties: Rushbrooke UK Ltd (the applicant company) is a two-director, two‑shareholder company (Mr Steventon‑Smith and Mr Lee Bryan, each 50%). 4 Designs Concept Ltd (the respondent) served a statutory demand for unpaid invoices. The applicant issued an application seeking an injunction to restrain presentation of a winding-up petition.

Nature of the application: An injunction to restrain presentation of a winding-up petition following service of a statutory demand. The court was invited to consider whether the application had been validly brought by the company.

Procedural posture: The application was issued on 20 April 2022 and heard on 9 May 2022. The judge announced at hearing that the application would be struck out and later handed down written reasons.

Evidence and preliminary issues: The parties relied on witness statements from both directors and other witnesses; there was no cross-examination. The court heard argument on three preliminary points: (1) authority of Mr Steventon‑Smith to litigate on behalf of the company, (2) admissibility of late evidence, and (3) whether the statutory demand had been properly served (the latter was not pursued).

Issues framed by the court:

• Whether the solicitors were properly instructed on behalf of the company, i.e. whether a single director could authorise commencement of proceedings in the absence of a board resolution or delegated authority, having regard to the company’s articles (Table A, paragraphs 70–72) and the Solicitors Regulation Authority code;
• Whether late evidence should be admitted;
• Whether any estoppel, implied authority, or other exception justified permitting the proceedings despite the absence of a board resolution.

Court’s reasoning: The judge admitted the late evidence under the relevant principles and having regard to fairness. On authority, the judge analysed the articles of association (Table A paragraphs 70–72) and applied Mitchell & Hobbs (UK) Ltd v Mill, holding that, absent delegation or a board decision, a single director cannot institute proceedings on behalf of the company. The court considered Fusion and Smith v Butler: Fusion turned on its facts and any estoppel‑like or exceptionary reasoning there did not apply on these facts; Smith v Butler qualified Mitchell & Hobbs but did not establish an implied power for a lone director in circumstances where the board of two has irreconcilable differences. The court rejected arguments that (i) the other director’s alleged abandonment of day-to-day duties amounted to abandonment of the directorship, (ii) that the other director’s conduct created an estoppel, and (iii) that a creditor‑facing duty to creditors (s172(3) and the Sequana guidance) required different treatment. The judge concluded there was no authority for the application and that it should be struck out.

Other findings and context: The judge observed that directors’ duties to consider creditors’ interests may be triggered when insolvency is likely and that, on the evidence, Mr Bryan believed the company insolvent and was accordingly entitled to consider creditors’ interests when dealing with the statutory demand. The judgment notes other disputes between the directors and ancillary employment and derivative allegations but did not decide those substantive issues.

This first instance application was struck out. The court held that the application had been instituted without authority because there was no board resolution or delegated power authorising Mr Steventon‑Smith to instruct solicitors on behalf of the company, no managing‑director power or implied authority was established on the facts, and no estoppel or other exception applied. The judge therefore struck out the application for want of authority to litigate on behalf of the company.