Harman Patil

Catley v Herbert

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Full case name  Catley v Herbert
Citation(s)  [1988] 1 NZLR 606
Decided  14 August 1988
End date  August 14, 1988
Catley v Herbert
Judge(s) sitting  Richardson, Somers and Hardie Boys JJ
Ruling court  Court of Appeal of New Zealand

Catley v Herbert [1988] 1 NZLR 606 is a cited case in New Zealand regarding whether a contract illegal under law, can be subsequently validated under the Illegal Contracts Act 1970.

Contents

Background

Catley and Herbert were joint shareholders in a company, and had agreed that Herbert would buyout Catley's shares. This sale entailed the selling of some of the company property in order to purchase his shares. Unfortunately, the law saw this as financing the purchase of a company's own shares, which was illegal under section 62 of the Companies Act 1950.

As a result, Herbert refused to pay Catley, on the basis that to do so would be illegal. Catley sought validation of the contract in the court.

Held

Validation of the contract was ordered.

Footnote: This case is often discussed with NZI Bank Ltd v Euro-National Corp Ltd [1992] 3 NZLR 528, where a similar transaction that also contravened section 62(1) was not validated

References

Catley v Herbert Wikipedia


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