making; such a contract is said to be ultra vires (a). And the question here, as in similar cases, is whether there is anything on the face of the act of incorporation which expressly or impliedly forbids the making of the contract sought to be enforced" (p. 135).

The actual ground of decision was that in this case, whether the contract was valid or not, the time had not arrived at which it was to take effect.

Moreover Lord Wensleydale was enabled to repeat his opinion even more distinctly in the House of Lords: Scottish N. E. Railway Co. v. Stewart, 3 Macq. 382, 415 (and see per Willes, J., L. R. 2 Ex. 390-1). "There can be no doubt that a corporation is fully capable of binding itself by any contract under its common seal in England and without it in Scotland, except when the statutes by which it is created or regulated expressly or by necessary implication prohibit such contract between the parties. Prima facie all its contracts are valid, and it lies on those who impeach any contract to make out that it is avoided."

Lord St. Leonards took the same view in E. C. Ry. Co. v. Hawkes in the Court of Chancery (see 1 D. M. G. 737, 752, 759-60), and still more clearly in the House of Lords (5 H. L. C. 331).

"The appellants as a corporation have all the powers incident to a corporation except so far as they are restrained by their act of incorporation. Directors cannot act in opposition to the purpose for which their company was incorporated [7], but short of that they may bind the body just as [the proper officers, &c., of] corporations in general may do" (p. 373). Again, "the safety of men in their daily contracts requires that this doctrine of ultra vires should be confined within narrow bounds" (p. 371). He further stated the effect of this and other shortly preceding decisions of the House of Lords (which however do not much illustrate our particular subject), as being to "place the powers and liabilities of directors and their companies in making contracts and in dealing with third parties upon a safe and rational footing. They do not authorize directors to bind their companies by contracts foreign to the purposes for which they were established, but they do hold companies bound by contracts duly entered into by their directors for purposes which they have treated as within the objects of their Acts, and which cannot clearly be shown not to fall within them" (p. 381, and see L. R. 9 Ex. 389). This case is the more important inasmuch as it was one of specific performance of a contract to purchase land and pay a sum of money as compensation and damages, and the contract was enforced

(a) This term, if restricted to the definition here given of it, is harmless and possibly convenient; but it

has become so ambiguous by less accurate usage that we prefer to avoid it,

notwithstanding that in the result the land was not wanted by the

company.

The doctrine was also discussed by Erle, J., in Mayor of Norwich v. Opinion of Norfolk Ry. Co., 4 E. & B. 397, 24 L. J. Q. B. 105 (a case where there Erle, J. was an extraordinary division of opinion in the Court on the questions actually before them, and especially whether the particular contract was or was not unlawful in itself). He thought the true view to be that corporations were prohibited by implication only from using their parliamentary powers in order to defeat the purposes of incorporation, and criticized the judgment in the East Anglian case as too wide (4 E. & B. 44-5, 24 L. J, Q. B. 112): and he carefully pointed out the danger of overlooking the differences between a dissenting shareholder's suit in equity and an action by a stranger against the corporate body (4 E & B. 419, 24 L. J. Q. B. 113). The same learned judge further said in Bostock v. N. Staffordshire Ry. Co., 4 E. & B. 798, 819, 24 L. J. Q. B. 225, 231, (this however was not a case of con tract), citing the Sutton's Hospital case, "By common law the creation of a corporation conferred on it all the rights and liabilities in respect of property, contracts, and litigation, which existence confers on a natural subject, modified only by the formalities required for expressing the will of a numerous body. . . . Those of its rights and liabilities which are unaffected by statute exist as at common law."

Turning to recent cases in courts of equity, we find marked signs Recent of an abandonment of their earlier view, and adhesion to the doctrine cases in equity. of general capacity. In considering the power of building societies (which were statutory quasi-corporations; see now the Act of 1874, 37 & 38 Vict., c. 42), to borrow money, the question has been treated on all hands as being not whether the borrowing of money was expressly or necessarily permitted by the statute, but whether it was forbidden or clearly repugnant to the constitution and objects of the society: Laing v. Reed, 5 Ch. 4; Ex parte Williamson, ib.309 (notwith-standing the wording of the head-note in the latter case, see p. 312).

And in Ex parte Birmingham Banking Co., 6 Ch. 83, the Court of Appeal held without hesitation that an incorporated company can prima facie mortgage any part of its property, and this as well for an existing debt as for a new loan. The articles of association authorized borrowing on mortgage, but the Lords Justices did not stop to discuss whether this would or would not include a mortgage to secure preexisting debts (a), resting this part of their decision on the general power of a body corporate to "hold property and dispose of it as freely as an individual, unless it is specially prohibited from so doing" (James, L. J., at p. 87). One may also refer to the view taken

(a) As to which see Inns of Court Hotel Co., 6 Eq. 82.

Riche r.

&c., Co. in Ex. Ch.

by Turner, L. J., that the affirmative provisions of the Companies Clauses Act do not exclude other modes of contracting: Wilson v. West Hartlepool Ry. Co., 2 D. J. S. 475, 496.

Lastly, we have the doctrine of general capacity deliberately Ashbury adopted by the whole Court of Exchequer Chamber in Riche v. Ashbury Ry. Carriage Co., L. R. 9 Ex. 254, sqq. The division of the Court was confined to the questions (i) whether a company formed under the Companies Act, 1862, is forbidden to undertake business substantially beyond its objects as defined in the memorandum of association and (ii) whether, apart from this, an assent of all the shareholders could in this case be inferred in fact.

Applica

tion of partner

Simpson v.
Denison.

Application of doctrines of partnership and agency.

A case in which this view appears most clearly, and indeed exclusively, ship law is Simpson v. Denison, 10 Ha. 51. The suit was instituted by dissentient shareholders to restrain the carrying out of an agreement between their company (the Great Northern) and another railway company, by which the Great Northern was to take over the whole of that company's traffic, and also to restrain the application of the funds of the Great Northern Company for obtaining an Act of Parliament to ratify such agreement. The V.-C. Turner treated it as a pure question of partnership: "How would this case have stood" he says in the first paragraph of the judgment "if it had been the case of an ordinary limited partnership?" The Railways Clauses Consolidation Act became in this view a statutory form of partnership articles, to which every shareholder must be taken to have assented: and the general ground of the decision was that "no majority can authorize an application of partnership funds to a purpose not warranted by the partnership contract." For the purpose of the case before the court this analogy was perfectly legitimate; and the dissent expressed by Parke, B. (in South Yorkshire &c. Co. v. G. N. R. Co. 9 Ex. 88, 22 L. J. Ex. 315) must be considered only as a warning against an unqualified extension of it to questions between Statement the corporate body and strangers. The rule comes out, if possible, of the prin- even more clearly in Pickering v. Stephenson, 14 Eq. 322, 340, where ciple in it is thus set forth by Wickens, V.-C. "The principle of jurispruv. Stephen- dence which I am asked here to apply is that the governing body of a corporation that is in fact a trading partnership cannot in general use the funds of the community for any purpose other than those for which they were contributed. By the governing body I do not of course mean exclusively either directors or a general council (a), but the ultimate authority within the society itself, which would ordinarily be a majority at a general meeting. According to the (a) Referring to the peculiar constitution of the company then in question.

Pickering

son.

principle in question the special powers given either to the directors or to a majority by the statutes or other coustituent documents of the association, however absolute in terms, are always to be construed as subject to a paramount and inherent restriction that they are to be exercised in subjection to the special purposes of the original bond of association."

It is to be observed that this passage contains no indication of opinion on the extent to which a corporation may be bound by the the unanimous assent of its members.

Any dissenting shareholder may call for the assistance of the Rights of Court to restrain unconstitutional acts of the governing body, but he dissenting sharemust do so in his proper capacity and interest as a shareholder and holders. partner. If the Court can see that in fact he represents some other interest, and has no real interest of his own in the suit, it will not listen to him; as when the suit is instituted by the direction of a rival company in whose hands the nominal plaintiff is a mere puppet, and which indemnifies him against costs: Forrest v. Manchester, &c., Ry. Co., 4 D. F. J. 126: so where the suit was in fact instituted by the plaintiff's solicitor on grounds of personal hostility, Robson v. Dodds, 8 Eq. 301. But if he has any real interest and is proceeding at his own risk he is not disqualified from suing by the fact that he has collateral motives, or is acting on the suggestion of strangers or enemies to the company, or even has acquired his interest for the purpose of instituting the suit: Colman v. E. C. Ry. Co. suprà ; Seaton v. Grant, 2 Ch. 459; Blozam v. Metrop. Ry. Co., 3 Ch. 337. As Parties to a rule the plaintiff in suits of this kind sues on behalf of himself suit. and all other shareholders whose interests are identical with his own; but there seems to be no reason why he should not sue alone in those cases where the act complained of cannot be ratified at all, or can be ratified only by the unanimous assent of the shareholders; Hoole v. G. IV. Ry. Co., 3 Ch. 262. There is another class of cases in which abuse of corporate powers or authorities is complained of, but the particular act is within the competence of, and may be affirmed or disaffirmed by "the ultimate authority within the society itself” (in the words of Wickens, V.-C., just now cited), and therefore the corporation itself is prima facie the proper plaintiff. See Lindley 2. 935 sqq. Gray v. Lewis, 8 Ch. 1035, 1051. The exception is when a majority have got the government of the corporation into their own hands, and are using the corporate name and powers to make a profit for themselves at the expense of the minority; then a suit is rightly brought by a shareholder on behalf of himself and others, making the company a defendant: Menier v. Hooper's Telegraph Works, 9 Ch. 350. We mention these cases only to distinguish them from those with which we are now concerned.

Limited

&c.

The cases in which companies and their directors have been restrained by injunction at the suit of shareholders from unwarranted or (as we have already taken leave to call them) unconstitutional proceedings, are collected and digested by Mr. Justice Lindley in a passage (2. 1059) to which the reader is referred for detailed information. With regard to the doctrine of limited agency, and to its agency of peculiar importance in the case of companies constituted by public directors, documents, all persons dealing with them being considered to know the contents of those documents and the limits set to the agent's authority by them, this subject again is so completely dealt with by Mr. Justice Lindley (a) that we need not dwell on it at any length. It may be useful to give Lord Hatherley's concise statement of the law (when V.-C.) in Fountaine v. Carmarthen Ry. Co., 5 Eq. 316, 322. "In the case of a registered joint-stock company all the world of course have notice of the general Act of Parliament and of the special deed which has been registered pursuant to the provisions of the Act, and if there be anything to be done which can only be done by the directors under certain limited powers, the person who deals with the directors must see that those limited powers are not being exceeded. If, on the other hand, as in the case of Royal British Bank v. Turquand (b) the directors have power and authority to bind the company, but certain preliminaries are required to be gone through on the part of the company before that power can be duly exercised, then the person contracting with the directors is not bound to see that all these preliminaries have been observed. He is entitled to presume that the directors are acting lawfully in what they do. That is the result of Lord Campbell's judgment in Royal British Bank v. Turquand."

Royal British Bank

e. Tur

The contrast of the two classes of cases is well shown in Royal British Bank v. Turquand (supra) and Balfour v. Ernest, 5 C. B. quand, &c. N. S. 601, 28 L. J. C. P. 170. In the former case there was power for the directors to borrow money if authorized by resolution: and it was held that a creditor taking a bond from the directors under the company's seal was not bound to inquire whether there had been a resolution. Jervis, C. J., said in the Exchequer Chamber (the rest/ of the Court concurring) ::

"We may now take for granted that the dealings with these companies are not like dealings with other partnerships, and that the parties dealing with them are bound to read the statute and the deed, of settlement. But they are not bound to do more. And the party, here on reading the deed of settlement would find not a prohibition from borrowing, but a permission to do so on certain conditions."

(a) 1. 266-272, 351.

(b) 5 E. & B. 248, 6 ibid. 327; 21 L. J. Q. B. 327, 25 ibid, 327,