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 the corporate body and strangers. The rule comes out, if possible, Statement even more clearly in Pickering v. Stephenson, 14 Eq. 322, 340, where of the principle in it is thus set forth by Wickens, V.-C. "The principle of jurispru- Pickering dence which I am asked here to apply is that the governing body of v. Stephena 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 principle in question the special powers given either to the directors or to a majority by the statutes or other constituent 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 unanimous assent of its members. son. share Any dissenting shareholder may call for the assistance of the Rights of Court to restrain unconstitutional acts of the governing body, but he dissenting must 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 action, it will not listen to him; as when the proceedings are taken 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 (a) Referring to the peculiar constitution of the company then in question. 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. supra ; Seaton v. Grant, 2 Ch. 459; Bloxam v. Metrop. Ry. Co., 3 Ch. 337. Parties to As a rule the plaintiff in actions of this kind sues on behalf of himaction. self 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. W. 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; MacDougall v. Gardiner, 10 Ch. 606, 1 Ch. D. 13, 21; Russell v. Wakefield Waterworks Co., 20 Eq. 474. "The majority are the only persons who can complain that a thing which they are entitled to do has been done irregularly" (a). 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 an action 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 agency of directors, &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 peculiar importance in the case of companies constituted by public 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 (b) 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 (a) Mellish, L. J., 1 Ch. D. at p. 25. As to a shareholder's right to use the company's name as plaintiff, see Pender v. Lushington, 6 Ch. D. 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 (a) 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.” v. Tur The contrast of the two classes of cases is well shown in Royal Royal BriBritish Bank v. Turquand (supra) and Balfour v. Ernest, 5 C. B. tish Bank N. S. 601, 28 L. J. C. P. 170. In the former case there was power quand, &c. 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." The same principle has been followed in many later cases (Ex parte Eagle Insurance Co., 4 K. & J. 549, 27 L. J. Ch. 829; Campbell's ca. dc. 9 Ch. 1, 24; Totterdell v. Fareham Brick Co., L. R. 1 C. P. 674 ; Re County Life Assce. Co., 5 Ch. 288, a very strong case, for the persons who issued the policy were assuming to carry on business as directors of the company without any authority at all) and it has been decisively affirmed by the House of Lords in Mahony v. East Holyford Mining Co., L. R. 7 H. L. 869. In that case a bank had honoured cheques drawn by persons acting as directors of the company, but who had never been properly appointed; and these payments were held to be good as against the liquidator, the dealings having been on the face of them regular, and with de facto officers of the company. Shareholders who allow persons to assume office and conduct the company's business are, as against innocent third persons, (a) 5 E. & B. 248, 6 ibid. 327; 24 L. J. Q. B. 327, 25 ibid. 327. no less bound by the acts of these de facto officers than if they had been duly appointed. It is for the shareholders to see that unauthorized persons do not usurp office and that the business is properly done (a). In Balfour v. Ernest the action was on a bill given by directors of an insurance company for a claim under a policy of another company, the two companies having arranged an amalgamation; this attempted amalgamation however had been judicially determined to be void: Ernest v. Nicholls, 6 H. L. C. 401, revg. S. C. nom. Port of London Co's case, 5 D. M. G. 465. The directors had power by the deed of settlement to borrow money for the objects and business of the company and to pay claims on policies granted by the company, and they had a power to make and accept bills &c. which was not restricted in terms as to the objects for which it might be exercised. It was held that, taking this with the other provisions of the deed, they could bind the company by bills of exchange only for its ordinary purposes, and not in pursuance of a void scheme of amalgamation, that the plaintiffs must be taken to have known of their want of authority, which might have been ascertained from the deed, and that they therefore could not recover. "This bill is drawn by procuration" said Willes, J., "and unless there was authority to draw it the company are not liable (b) this is the bare case of one taking a bill from Company A. in respect of a debt due from Company B., there being nothing in the deed (which must be taken to have been known to the plaintiffs) to confer upon the directors authority to make it." . . . The connexion with ordinary partnership law is brought out in the introductory part of Lord Wensleydale's remarks in Ernest v. Nicholls (6 H. L. C. 401, 417) :— "The law in ordinary partnerships, so far as relates to the powers of one partner to bind the others, is a branch of the law of principal and agent. Each member of a complete partnership is liable for himself, and as agent for the rest binds them, upon all contracts made in the course of the ordinary scope of the partnership business. . . Any restriction upon the authority of each partner, imposed by mutual agreement among themselves, could not affect third persons, unless such persons had notice of them; then they could take nothing by contract [sc. as against the firm] which those restrictions forbade. [The law in this form, i.e., the presumption of every partner being the agent of the firm, being obviously inapplicable to joint-stock companies], the legislature then devised the (a) Opinion of judges, at p. 880; per Lord Hatherley, at pp. 897-8. (b) In form it was a bill drawn by two directors on the company's cashier, and sealed with the company's seal. plan of incorporating these companies in a manner unknown to the common law, with special powers of management and liabilities, providing at the same time that all the world should have notice who were the persons authorized to bind all the shareholders by requiring the co-partnership deed to be registered. . and made accessible to all." The continuation of the passage is given by Mr. Justice Lindley (1.266); its language is however extra-judicial and of an almost dangerous latitude, and the Courts have distinctly declined to adopt it (Agar v. Athenæum Life Assce. Soc., 3 C. B. N. S. 725, 27 L. J. C. P. 95, Prince of Wales Assce. Co. v. Harding, E. B. & E. 183, 27 L. J. Q. B. 297). In fact they could not have done so without disregarding Royal British Bank v. Turquand. We now pass on to the cases which show how far transactions in Ratifica tion of the conduct of a company's affairs which in their inception were irregular all the invalid as against any dissenting shareholder may nevertheless be transac made binding on the partnership and decisive of its collective rights tions by (at all events as between the company and its own past or present assent of members) by the subsequent assent of all the shareholders, though sharesuch assent be informal and shown only by acquiescence. The holders. leading examples on this head are given by the well-known cases in Spackman v. Evans, the House of Lords which arose in the winding-up of the Agricul- &c., conturists' Cattle Insurance Company. They have been relied on as authorities for the proposition that the unanimous assent of shareholders may bind a company in its corporate capacity to anything: but since the decision of the House of Lords in Ashbury Ry. Carriage & Iron Co. v. Riche, L. R. 7 H. L. 653, this view is untenable. "In no one of those cases," observed Lord Cairns, "was there any question as to whether the power of the whole company had been exceeded" (L. R. 7 H. L. 674). The whole matter was one of the internal constitution and affairs of the company, and there was no occasion to consider to what extent or in what transactions the assent of shareholders was capable of binding the company as against strangers. Moreover, the irregular act which was ratified was unauthorized as to the manner and form of it, but belonged to an authorized class, as pointed out by Lord Romilly (L. R. 3 H. L. 244-5) (a). The general nature of the facts was thus: At a meeting of the company an arrangement was agreed to, afterwards called the Chippenham arrangement, by which shareholders who elected to do so within a certain time might retire from the company on specified terms by a nominal forfeiture of their shares. The deed of settlement contained provisions for forfeiture of shares, but not such as to warrant this arrangement. It was held (a) See also the judgment of Ry. Carriage Co., L. R. 9 Ex. 289. Archibald, J., in Riche v. Ashbury sidered. |