In the world of business and corporate law, the concept of what is “ultra vires” is important. It refers to acts that are beyond the legal power of a corporation or organisation. It is the opposite of under proper authority—intra vires.
When a company engages in an ultra vires act, it can have serious consequences for both the organisation and its stakeholders. Likewise, the principle has the same definition in the fields of judicial review and administrative law.
Meaning of the Ultra Vires Principle
An ultra vires act is an act that a person or entity performs, that is beyond their legal authority. There are three fields where the doctrine can be applicable:
- judicial review
- administrative law
- corporation law
In the context of judicial review, it refers to the principle that delegated legislation (also known as subordinate legislation) is invalid if it exceeds the powers that have been delegated to the body that made it.
Delegated legislation is legislation that is made by a public body. This incudes a government minister or a local authority, under the authority of an Act of Parliament. It is often used to fill in the details of a statute or to make changes to it in response to changing circumstances.
The ultra vires doctrine is one of the main grounds on which parties can challenge delegated legislation in judicial review proceedings. If a court finds that delegated legislation is ultra vires, it will quash it (declare it invalid).
There are two main types of ultra vires challenges:
- Procedural ultra vires. This happens when a public body fails to follow the correct procedures when making delegated legislation. For example, a minister may fail to consult with the relevant stakeholders before making a regulation.
- Substantive ultra vires. This occurs when a public body makes delegated legislation that is outside the scope of the powers that have been delegated to it. For instance, a local authority may make a by-law that restricts freedom of speech, even though this is not a power that the Parliament has delegated to it.
The ultra vires doctrine is an important safeguard against the abuse of power by public bodies. It ensures that they make delegated legislation in accordance with the law. It also ensures that it does not exceed the powers that have been delegated to the public body that made it.
The ultra vires doctrine is a principle of administrative law that allows the courts to review the actions of public bodies to ensure that they are acting within the powers granted to them by law. The doctrine is based on the idea that public bodies are creatures of statute and that their powers don’t go beyond those that the Parliament specifically grants to them.
Moreover, if a public body acts beyond its powers, its actions are ultra vires. Therefore, they become invalid. This means that the courts can set aside the actions of the public body and order it to take steps to remedy the situation.
The ultra vires doctrine is one of the most important principles of administrative law. It helps to ensure that public bodies do not abuse their powers and that they act in accordance with the law. The doctrine also provides a mechanism for individuals and businesses to challenge the actions of public bodies that they believe are unlawful.
In the context of corporations, an ultra vires act is an act that a corporation performs. This act is beyond the scope of its powers as per its articles of incorporation or bylaws. There are two main types of ultra vires acts:
- Acts that are beyond the express powers of the corporation. These are acts that the corporation’s articles of incorporation or bylaws do not specifically authorise.
- Acts that are within the express powers of the corporation, but that are prohibited by law. These are acts that the corporation’s articles of incorporation or bylaws authorise. But are prohibited by statute or case law.
Effect of an Ultra Vires Act
If a corporation engages in an ultra vires act, the act may be void or voidable.
- A void act is an act that has no legal effect whatsoever.
- A voidable act is an act that is valid until a court of law challenges it, and declares it void.
If a corporation engages in an ultra vires act, the parties to the act may be able to recover damages from the corporation. However, the corporation may also be able to defend itself against liability by arguing that the act was ultra vires and therefore not binding on the corporation.
This principle protects the interests of creditors and shareholders of corporations. By preventing corporations from engaging in acts that are beyond their legal authority, the doctrine helps to ensure that corporations are only able to enter into contracts and incur liabilities that they are legally capable of fulfilling.
The Legal Services Commission of South Australia states that the existence of an ultra vires act in the decision making process of the Parliament results in the interference of the court with an administrative decision or question. This is if it can be shown that the decision maker went beyond its powers given to one’s position.
Reasons Why a Administrative or Judicial Decision May Be Ultra Vires
An administrative or judicial decision may be ultra vires (beyond its powers) for a number of reasons:
- Error of law: – In the usual manner of decision-making, tribunals have the freedom to create legal principles in particular fields of law. However, there are times when the law has been decided in other decisions and the tribunal is obliged to follow such established rules.
- Beyond or lack of jurisdiction: – If a decision is beyond the jurisdiction of a particular tribunal, a decision that affects the rights and interests of individuals and entities may be challenged on that ground.
- Bad Faith: – In this ground, it must be shown that corruption, bribery, malicious intent, or other similar malpractice has affected the decision.
- No evidence: – This ground establishes that the evidence presented does not sufficiently support the decision made.
- Irrelevant considerations: – The government body, in reaching its final decision, included factors that were not relevant to the matter at hand or failed to consider the more relevant matters that should influence the outcome of the decision. Thus, the court may intervene.
Need to Challenge an Ultra Vires Transaction or Decision?
The law constantly evolves and adapts to the changing needs of society. But sometimes, the law can be rigid and inflexible, leading to decisions that are unfair or unjust. This is where the concept of ultra vires comes in.
Challenging an ultra vires decision can be a complex and time-consuming process. But it is an important way to ensure that public bodies are accountable for their actions. Ultimately, it is a way to protect the rights of individuals and groups and to ensure the fair and consisted application of law.
Lawyers can help in challenging ultra vires decisions by:
- Identifying the grounds on which parties can challenge the decision.
- Preparing the necessary legal documents.
- Presenting the case to the court.
- Negotiating a settlement with the decision-maker.
So, if you believe that a public body or a corporation has made a decision or an act that is ultra vires, you should not hesitate to seek legal advice. Our competent lawyers at JB Solicitors can help you to determine whether you have a valid case and advise you on the best way to proceed.
Contact us today.