As limited by positive No doubt a corporation might have a statutory power or be under a statutory duty to remove obstructions, and the true question in the case was whether any such power or duty had been conferred on highway boards. The majority of the court held that it had not. But if such had been the case, the right so conferred would still have been wholly distinct from the right of a natural person at common law to remove things which obstruct his lawful use of a highway (a). We now come to consider the far more difficult and law. Con- complicated question of special restrictions. The imflicting portance of this subject is quite modern; it arose from the corporate general establishment of railway companies and others of powers. a like nature incorporated by special Acts of Parliament, theories of and has been continued and increased by the multiplication of joint stock companies, building societies, and other bodies which are incorporated or made "quasicorporations" under general Acts. On this there have been many decisions, much discussion, and some real conflict of judicial opinions. There are two opposite views by which the consideration of the matter may be governed, and they may be expressed thus: 1. A corporation is an artificial creature of the law, and has no existence except for the purposes for which it was created. No act exceeding the limits of those purposes can be the act of the corporation, and no one can be authorized to bind the corporation to such an act. In each particular case, therefore, the question is: Was the corporation empowered to bind itself to this transaction? 2. A corporation once duly constituted has all such powers and capacities of a natural person as in the nature of things can be exercised by an artificial person. Transactions entered into with apparent authority in the name (a) On the nature of corporate action in general cp. Hobbes, Behemoth, part 4. ad init. (6. 359, ed. Molesworth), and Leviathan, pt. 1. c. 16; and on its artificial character, Maine, Early History of Institutions, 352. of the corporation are presumably valid and binding, and are invalid only if it can be shown that the Legislature has expressly or by necessary implication deprived the corporation of the power it naturally would have had of entering into them. The question is therefore: Was the corporation forbidden to bind itself to this transaction? As Mr. Justice Lindley puts it (a), the difference is "as to whether the act of incorporation is to be regarded as conferring unlimited powers except where the contrary can be shown; or whether alleged corporate powers are not rather to be denied unless they can be shown to have been conferred either expressly or by necessary implication.". As we shall often have to refer to these views, we may call (1) the doctrine of special capacities and (2) the doctrine of general capacity. ties." There is much to be said on principle for the theory of "Special special capacities. Most if not all corporations are established capaci for tolerably well defined purposes, which persons dealing with them can ascertain without difficulty. They are certainly not intended to do anything substantially beyond those purposes, and a reasonable and liberal construction. of their powers may be trusted to prevent the application of the doctrine from causing any real hardship (b). This theory was the prevalent one in the earlier period of the discussion. For a while the common law courts took it without question from the courts of equity, where for particular reasons to be mentioned afterwards it appeared in a somewhat more positive form and was maintained for a longer time (c). It also seems to have been taken for (a) 1. 251. (b) See judgment of Coleridge. J. Mayor of Norwich v. Norfolk Ry. Co., 4 E. & B. 397, 24 L. J. Q. B. 105, 119. (c) Accordingly it was till quite lately adopted by the best textwriters. Kent, Comm. 2. 298-9, even treated it as an obvious doc trine (in the later editions, how- "General capacity." Powers of statutory corporations limited to tion. granted by those who framed the modern statutes defining the powers of incorporated companies (a); which, if the opposite view be correct, are redundant in permission and defective in prohibition. The theory of general capacity, on the other hand, may well be supported on principle as tending to call the attention of the Legislature more distinctly to the limits it may be proposed to assign to corporate powers, and ultimately to promote general convenience by making those limits more certain. It is also favoured by the general analogies of the law. There is a fallacy latent in the phrase of the other theory. When we speak of an artificial person as a creature of the law, we mean its legal existence, not its particular rights and capacities. If legal existence as a subject of rights and duties is once admitted by a fiction, why not admit its ordinary incidents so far as they are physically possible? All rights are in one sense creatures of the law, and it is in a special sense by creation of the law that artificial persons exist at all: but when you have got your artificial person, why call in a second special creation to account for its rights? This last view seems on the whole to have in its favour a preponderance of modern authority. It is subject however to an important qualification, finally established by the purposes of leading case, to be more particularly spoken of afterwards, incorpora of Ashbury Railway Carriage Co. v. Riche (b); namely, "that where there is an Act of Parliament creating a corporation for a particular purpose, and giving it powers for that particular purpose, what it does not expressly or impliedly authorize is to be taken as prohibited" (b). This makes the conflict between the two theories much less sensible in practice than might at first sight be expected. The considerations on which the qualification rests are in (a) See L. R. 9 Ex. 266. (b) L. R. 7 H. L. 653; Lord Blackburn in A. G. v. G. E. Ry. Co., 5 App. Ca., at p. 481; cp. Reg. v. Reed, 5 Q. B. D., at p. 488. themselves foreign to the law of corporations as such, but they are constantly present in the modern cases and are often decisive. These considerations are derived (1) from the law of Reasons partnership: (2) from principles of public policy. for the limitation derived1. From 1. In trading corporations the relation of the members partneror shareholders to one another is in fact a modified (a) ship law. contract of partnership, which in the view of courts of equity is governed by the ordinary rules of partnership law so far as they are not excluded by the constitution of the company. any partners. Now it is a well settled principle of partnership law that Rights of dissenting no majority of the partners can bind a dissenting minority, or even one dissenting partner, to engage the firm in transactions beyond its original scope (b). In the case, therefore, of a corporation whose members are as between themselves partners in the business carried on by the corporation, dissenting member is entitled to restrain the governing body or the majority of the company from attempting to involve the company in an undertaking which does not come within its purposes as defined by its original constitution. Courts of equity have been naturally called upon to look at the subject chiefly from this point of view, that is, as giving rise to questions between shareholders and directors, or between minorities and majorities. Such questions do not require the court to decide whether an act which dissentients may prevent the agents of the company from doing in its name might not nevertheless, if so done by them with apparent authority, be binding on the corporate body, or a contract so made be enforceable by the other party who had contracted in good faith. This distinction, clear and important as it is, has not always been (a) Namely by provisions for transfer of shares, limited liability of shareholders, and other things which cannot (at least with con venience or completeness) be made (b) Lindley, 1. 600 sqq. as to limited agency. limits of presumed to be known. kept in sight. But further, according to the law of partDoctrine nership a partner can bind the firm only as its agent: his authority is prima facie an extensive one (a), but if it is specially restricted by agreement between the partners, and the restriction is known to the person dealing with him, he cannot bind the firm to anything beyond those specialIn public limits (b). Limits of this kind may be imposed on the companies directors or other officers of a company by its constitution; directors' and if that constitution is embodied in a special Act of authority Parliament, or in a deed of settlement or articles of association registered in a public office under the provisions of a general Act, it is considered that all persons dealing with the agents of the corporation must be deemed to have notice of the limits thus publicly set to their authority. The corporation is accordingly not bound by anything done by them in its name when the transaction is on the face of it in excess of the powers thus defined (c). And it is important to remember that in this view the resolutions of meetings however numerous, and passed by however great a majority, have of themselves no more power than the proceedings of individual agents to bind the partnership against the will of any single member to transactions of a kind to which he did not by the contract of partnership agree that it might be bound. Irregularities in the conduct of the internal affairs of the body corporate, even the omission of things which as between shareholders and directors are conditions precedent to the exercise of the directors' authority, will not however invalidate acts which on the face of them are regular and authorized: third parties dealing in good faith are entitled to assume that internal regulations (the observance of which it may be difficult or impossible for them to verify) have in fact been complied with (d). These applications of partnership law materially cut (a) Lindley, 1. 236; per James I. J. Baird's ca. 5 Ch. 733; Story on Agency, § 124, 125, adopted by the Judicial Committee in Bank of Australasia v. Breillat, 6 Moo. P. C. 152, 195. (b) Lindley, 1. 327 sqq. |