"General capacity:" this now the prevailing doctrine. Powers of statutory corporations time. It is adopted by some of the best English writers (a), and in America Kent stated it (long before the subject had attained its present development in England) as the modern and even as the obvious doctrine (b). It also seems to have been taken for granted by those who framed the modern statutes defining the powers of incorporated companies (c); 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 the 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 the important qualification that "a statutory corpora limited to tion created by Act of Parliament for a particular purpose is purposes of incorpora- limited as to all its powers by the purposes of its incorporation as defined by that Act" (d). 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 quali tion. (a) Leake on Contracts, 258; Lindley, 1. 263. (b) Kent, Comm. 2. 298-9 (in the later editions, however, this is much qualified by the note at p. 278.) The Supreme Court of the U. S. certainly seems to have so held, at all events as to corporations created by statute: Bank of Augusta v. Earle, 13 Peters 519, 587. (c) See L. R. 9 Ex. 266. (d) Lord Selborne in Ashbury Ry. Carriage Co. v. Riche, L. R. 7 H. L. 653, at p. 693. This is now the leading case on the subject, and, together with other authorities, will be more particularly mentioned hereafter. fication rests are in 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 partner- Reasons ship: (2) from principles of public policy. for the limitation derived 1. In trading corporations the relation of the members or 1. From shareholders to one another is in fact a modified (a) contract of partnership law. 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. partners. Now it is a well settled principle of partnership law that no Rights of majority of the partners can bind a dissenting minority, or even dissenting 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, any 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 kept in sight. But further, according to the law of partnership a partner can bind the firm only as its Doctrine agent his authority is prima facie an extensive one (c), but if as to it is specially restricted by agreement between the partners, and agency. such restriction is known to the person dealing with him, he (a) Namely by provisions for transfer of shares, limited liability of shareholders, and other things which cannot (at least with convenience or completeness) be made incident to a partnership at common law, (b) Lindley, 1. 621 sqq. (c) Lindley, 1. 248; per James L. 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. limited presumed to be known. cannot bind the firm to anything beyond those special limits (a). Limits of this kind may be imposed on the directors or other In public officers of a company by its constitution; and if that constitucompanies tion is embodied in a special Act of Parliament, or in a deed limits of directors' of settlement or articles of association registered in a public office authority 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 (b). 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. Assent of all the will re 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 (c). These applications of partnership law materially cut down the results of the common law theory of general capacity so far as regards its application to almost all incorporated companies of modern origin. But it is to be observed that in the ordinary law of partnermembers ship there is nothing to prevent the members of a firm, if they are all so minded, from extending or changing its business withmove obout limit by their unanimous agreement. As a matter of pure jections on this head. corporation law, the unanimity of the members is of little importance: it may supply the want of a formal act of the governing body in some cases (d), but it can in no case do more. (a) Lindley, 1. 344-9. (c) Lindley, 1. 267 sqq. As a (d) Even this is in strictness hardly consistent with the leading principle that if A, B, C... &c. matter of mixed corporation and partnership law this unanimity may be all-important as being a ratification by all the partners of that which if any one of them dissented would not be the act of the firm for although the corporate body of which they are members is in many respects different from an ordinary partnership, it is treated, and justly treated, as a partnership for this purpose. It would seem, then, that the unanimous assent of the members will remove all objections founded on the principles of partnership, and will so far leave the corporation in full possession of its common law powers. There are nevertheless many transactions which even the unanimous will of all the members cannot make binding as corporate acts. For the reasons which determine this we must seek farther. Powers poses of tion. 2. Most corporations established in modern times by special 2. Public policy: acts of Parliament have been established expressly for special corporapurposes the fulfilment of which is considered to be for the tions formed for benefit of the public as well as of the proprietors of the underspecial taking, and for this reason they are armed with extraordinary purposes. powers and privileges. Whatever a corporation may be capable must not of doing at common law, there is no doubt that unusual powers be used to defeat purgiven by the Legislature for a special purpose must be employed only for that purpose: if Parliament empowers either natural incorporapersons or a corporation to take J. S.'s lands for a railway, J. S. is not bound to let them take it for a factory or to let them take an excessive quantity of land on purpose to resell it at a profit (a). If Parliament confers immunity for the obstruction. of a navigable river by building a bridge at a specified place that will be no excuse for obstructing it in the like manner elsewhere. Moreover we cannot stop here. It is impossible to say that an incorporation for special objects and with special are incorporated to them and their . &c. are (a) See Galloway v. Mayor of London, L. R. 1 H. L. at p. 43, Lord Carington v. Wycombe Ry. Co. 3 Ch. 377, 381. Nor may a company hold regattas or let out pleasure-boats to the inconvenience of the former owner on a piece of water acquired by them under their Act for a reservoir: Bostock v. N. may powers gives a restricted right of using those powers, but leaves the use of ordinary corporate powers without any restriction. The possession of extraordinary powers puts the corporation for almost all purposes and in almost all transactions in a wholly different position from that which it would have held without them; and apart from the actual exercise of them it may do many things which it was otherwise legally competent to do, but which without their existence it could practically never have done. Any substantial departure from the purposes contemplated by the Legislature, whether involving on the face of it a misapplication of special powers or not, would defeat the expectations and objects with which those powers were given. It be too much to say that by the mere act of incorporation for a particular purpose the Legislature forbids the corporate body to do anything remote from that purpose. But when, in the public interest and in consideration of a presumed benefit to the public, it adds extraordinary powers, it must be taken in the same interest to forbid the corporation to do that which will tend to defeat the policy of the whole scheme; and to forbid in the sense not only of attaching penal consequences to such acts when done, but of making them wholly void if it is attempted to do them. Accordingly contracts of railway companies and corporations of a like public nature which can be seen to import a substantial contravention of the policy of the incorporating acts are held by the courts to be void, and are often spoken of as mala prohibita, and illegal in the same sense that a contract of a natural person to do anything contrary to the provisions of an Act of Parliament is illegal (a). Others prefer to say that the Legislature, acting indeed on motives of public policy, has simply disabled the corporation from doing acts of this class; "to regard the case as one of incapacity to contract rather than of illegality, and the corporation as if it were non-existent for the purpose of such contracts" (b). The difference, however, is but a verbal one, and both modes of expression have their convenience. The former seems required (a) Blackburn, J. in Taylor v. Chichester & Co. L. R. 2 Ex. 379; and (Brett and Grove, JJ. concurring) in Riche v. Ashbury Ry. Carriage Co. L. R. 9 Ex. 262, 266; Lord Hatherley, s. c. nom. Ashbury Ry. Carriage. Co. v. Riche, L. R. 7 H. L. at p. 689. (b) Archibald, J. (Keating and Quain, JJ. concurring) L. R. 9 Ex. 293; Lord Cairns, L. R. 7 H. L. at p. 672; Lord Selborne, ib. 694. |