TIONS. In one case a member of a corporate body is liable to CORPORA. be directly sued at law for the debts of the corporation. This case arises under the Companies Act, 1862, member s. 48: Individual liable to action under "If any company under this act carries on business when the number of its members is less than seven for Companies Act, 1862, a period of six months after the number has been so reduced, every person who is a member of such company during the time that it so carries on business after such period of six months, and is cognizant of the fact that it is so carrying on business with fewer than seven members, shall be severally liable for the payment of the whole debts of the company contracted during such time, and may be sued for the same, without the joinder in the action or suit of any other member." In order to make a person individually liable under this section, it is necessary that, first, the company should carry on business with less than seven members for a period of six months; secondly, the person made liable should be a member during the time that the business is so carried on; and, thirdly, he should be cognizant of the business being so carried on. RULE 60.-A corporation or incorporated body RULE 60. cannot be sued on a contract not under seal (c). Corporation cannot be sued on contract not under seal. Exception 1.-Where a corporation contracts concerning matters Exceptions. necessarily incidental to the purposes or business of the corpora tion (d). Contract on matters incidental to business. Exception 2.-Where the contract relates to matters of trivial Contract importance, or of constant recurrence (e). relating to trivial matters. (c) See Rule 26. (d) Ibid., Exception 1. (e) Ibid., Exception 2. It should be noticed, that as regards actions against corporations, there is no exception corresponding to Rule 26, Exception 3. CORPORA TIONS. Contract law. Exception 3.-In some cases of an implied contract (ƒ). A corporation may in some instances sue on a contract implied by implied by law, though no agreement under seal exists as a basis of the action. Thus a corporation may apparently be sued for use and occupation (g), for money had and received, by a person from whom fees have been wrongfully exacted by the corporation (h), and for money paid to its use, by a person who has been compelled to pay money which ought to have been paid by the corporation (i). Contract under authority of statute. Exception 4.-Where a corporation is authorized by statute to contract otherwise than under seal (j). RULE 61. Corporation cannot be sued on contract RULE 61.-A corporation or incorporated body cannot be sued on contracts ultra vires. Corporations derive all their powers from the charter, statute, &c., by which they are constituted; and can, ultra vires. therefore, have no greater capacity either to contract or to do any other act than is given them by their constitution. Any contract, therefore, entered into by or on behalf of a body corporate which is ultra vires, i. e., beyond the powers of the body, or, in other words, is an agreement which the corporation is not authorized by its constitution to make, must of necessity be invalid. This doctrine has no connection with the law of agency or the rights of individual partners. It, indeed, exactly illustrates the difference between a partnership or unincorporated company, and a corporate body. If all the part(f) Rule 26, Exception 4. (g) Finlay v. Bristol and Exeter Rail. Co., 7 Ex. 409; 21 L. J. 117, Ex. ; Low v. London and North-Western Rail. Co., 18 Q. B. 632; 21 L. J. 361, Q. B. (h) Hall v. Mayor of Swansea, 5 Q. B. 526; 12 L. J. 107, Q. B. Rule 26, Exception 5. (i) Jefferys v. Gurr, 2 B. & Ad. 833. (j) Rule 26, Exception 5. ners in an ordinary firm, or all the shareholders in an unincorporated company, were to agree to enter into a contract which had nothing to do with their original agreement of partnership with one another, they could if they pleased enter into such a contract, and it would, provided they were acting unanimously, be binding upon them. But the shareholders of a company incorporated by charter or statute cannot, even though acting unanimously, do anything contrary to the charter or statute to which they owe their incorporation (k). Nor, again, has the objection to the validity of a contract, that it is ultra vires, anything to do with the form in which the agreement is made. A contract under seal and made with every formality is nevertheless invalid, if it be a contract beyond the powers of the corporation by or on behalf of which it is made. "Corporations, which are creations of law, are, when the seal is properly affixed, bound just as individuals are by their own contracts, and as much as all the members of a partnership would be by a contract in which all concurred. But where a corporation is created by an Act of Parliament for particular purposes with special powers, then, indeed, another question arises. Their deed, though under their corporate seal and that regularly affixed, does not bind them, if it appear by the express provisions of the statute creating the corporation, or by necessary or reasonable inference from its enactments, that the deed was ultra vires, that is, that the legislature meant that such a deed should not be made" (l). The ultra vires doctrine has been mainly applied to contracts entered into by railway companies. An absolute covenant, for example, by such a company to pay a (k) 1 Lindley, Partnership, 2nd ed., 256, 257; Society of Practical Knowledge v. Abbott, 2 Beav. 559; Bagshaw v. Eastern Union Rail. Co., 19 L. J. 410, Ch. ; 7 Ha. 114. (1) South Yorkshire Rail. Co. v. Great Northern Rail. Co., 9 Exch. 55, 84; 22 L. J. 305, 313, Ex., per Parke, B. See Taylor v. Chichester and Midhurst Rail. Co., L. R. 2 Ex. 356; 36 L. J. 201, Ex. (Ex. Ch.), esp. judgment of Blackburn, J.; L. R. 2 Ex. 375-389. CORPORA TIONS. CORPORA TIONS. certain sum of money to a landowner in the event of an act passing, either before taking his land (n), or within three months after the act should pass (o), has been held ultra vires, and therefore not binding on the company; so has been held a contract by a company incorporated for the purpose of making and maintaining a railway, to lease the plaintiff's railway, and to pay the costs of soliciting bills (p). A distinction must be drawn between contracts which are, strictly speaking, ultra vires, i. e., beyond the powers of a company, and contracts which are within its powers, but irregular, i. e., made in an irregular way. Contracts of the former class manifestly do not bind the company, however regularly made. Contracts of the latter class, when made by the directors of a company, though without the prescribed formalities in making them having been observed, bind the company as regards all persons dealing with their directors bonâ fide, and without notice of the irregularity committed in making the contracts (r). RULE 62. Actions will be stayed against company winding up. RULE 62.-When a company is in course of winding up, actions against the company can either be stayed, or cannot be brought without leave of the Court (s). Companies cannot be made bankrupt. They are wound up under the provisions of the Companies Act, 1862. (n) Gage v. Newmarket Rail. Co., 18 Q. B. 457; 21 L. J. 398, Q. B. (0) Taylor v. Chichester and Midhurst Rail. Co., L. R. 2 Ex. 356; 36 L. J. 201, Ex. (p) East Anglian Rail. Co. v. Eastern Counties Rail. Co., 11 C. B. 775; 21 L. J. 23 C. P. (r) 1 Lindley, Partnership, 2nd ed., 255, 256.' (s) This rule applies, it should be remarked, to incorporated bodies. It does not, however, apply to ordinary corporations, e.g., the corporation of a borough, &c. CORPORA TIONS. After After a petition has been presented to wind up a company, any action against the company may be stayed on the application of the company or any creditor or contripetition butory of the company (t). Application to stay the and before proceedings may, it seems, be made either to the court in which the action is brought (u), or to the court in which the company is being wound up, i. e., in most cases the Court of Chancery. When a company is not formed and registered under the Companies Act, 1862, it is possible that the creditors of the company may be able to proceed against the individual members. Accordingly, the Act of 1862 contains provisions enabling the Court to stay proceedings against individual members, on the application of a creditor of the company. Only a creditor, however, is entitled to stay such proceedings (x). order. After the order to wind up a company is made, no After winding-up action can be brought against the company without the order. leave of the Court (y). A company may be wound up either by the Court, or subject to the supervision of the Court, or purely voluntarily. When the winding up is purely voluntary, it does not per se prevent a creditor of the company from bringing an action against it. It is not, therefore, in any case necessary for him to apply for leave to bring an action; but the Court (2) has jurisdiction to restrain him. (t) Companies Act, 1862, ss. 85, 197; 2 Lindley, Partnership, 2nd ed., 1255. (u) 2 Lindley, Partnership, 2nd ed., 1255; Lanyon v. Smith, 3 B. & S. 938; 32 L. J. 212, Q. B. Compare Thomas v. Wells, 16 C. B., N. S., 508; 33 L. J. 211, C. P.; Gray v. Raper, L. R. 1 C. P. 694. (x) 2 Lindley, Partnership, 2nd ed., 1258; Companies Act, 1862, ss. 197, 198, 201, 202. (y) Companies Act, 1862, s. 87; 2 Lindley, Partnership, 2nd ed., 1255. (z) I.e., The Court of Chancery, or the court in which the action is brought. 2 Lindley, Partnership, 2nd ed., 1255. |