Facts and legal principles established in 'Aishbury Railway Carriage and Iron Comp. Ltd. Vs. Riche (1875)
Facts of the Case
Incorporated under the Companies Act 1862, the Ashbury Railway Carriage and Iron Company Ltd’s memorandum, clause 3, stated that its objects were "to make and sell, or lend on hire, railway-carriages…" and clause 4 stated that activities beyond this needed a special resolution. But the company agreed to give Riche and his brother a loan to build a railway from Antwerp to Tournai in Belgium.[1] Later, the company repudiated the agreement. Riche sued, and the company pleaded that the action was ultra vires.
Legal Principles established
The House of Lords held that if a company pursues objects beyond the scope of the memorandum of association, the company's actions are ultra vires and void.
Lord Cairns LC said, It was the intention of the legislature, not implied, but actually expressed, that the corporations, should not enter, having regard to this memorandum of association, into a contract of this description. The contract in my judgment could not have been ratified by the unanimous assent of the whole corporation.
Implication in Current Context
Its importance as case law has been diminished as a result of the Companies Act 2013, s 31, which allows for unlimited objects for which a company may be carried on. Furthermore, any limits a company does have in its objects clause have no effect whatsoever for people outside a company (s 39 CA 2013), except as a general issue of authority of the company's agents.
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