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Corporate Liability in Tort and the Doctrine of Ultra Vires

Published online by Cambridge University Press:  16 January 2009

A. L. Goodhart
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Extract

The question whether a statutory corporation should be held liable for torts committed in the course of an ultra vires undertaking is one of particular interest to the student of law for two reasons. First, the principle of ultra vires emphasises most clearly what Dr. C. T. Carr-calls “the incidents of corporateness.” “Perhaps, indeed,” as Mr. Brice has written, “the Law of Corporations may be considered for most practical purposes as in reality only the application and development of the doctrine of ultra vires.” Secondly, owing to the fact that there are only a limited number of cases dealing with this question, and that even these are but of doubtful authority, a writer is free to suggest his own solution. This lack of precedent does not, however, mean that the problem is devoid of practical importance, for, with the rapid increase in the number of business companies, it is probablethat the courts will have to deal with it in the near future. THE CAMBRIDGE LAW JOURNAL was, therefore, fortunate when it was able to publish Professor Edward H.Warren's article “Torts by Corporations in Ultra Vires Undertakings,” in the 1925 number. This article is of such interest that the writer of the present paper may be excused for discussing at considerable length some of the points raised by it. Professor Warren quotes Sir John Salmond, and, as the latter's view that a statutory corporation ought to be held liable for torts committed in the course of an ultra vires undertaking is familiar to most English students, it will be convenient to consider Salmond's position first.

Type
Research Article
Information
The Cambridge Law Journal , Volume 2 , Issue 3 , November 1926 , pp. 350 - 364
Copyright
Copyright © Cambridge Law Journal and Contributors 1926

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References

1 Law of Corporations, Chap. I.

2 Doctrine of Ultra Vires. Pref. to 3rd ed. p. xvi.

3 Law of Torts, 3rd ed. pp. 58, 59, 60.

4 Vol. xxxv, p. 13.

5 6th ed. p. 65.

6 100 U.S. 699.

7 118 U.S. 256.

8 17 Mass. 479.

9 6th ed. p. 66.

10 7th ed. p. 345.

11 L.R. 7 H. L. 653.

12 Smith's Law of Master and Servant, 6th ed. p. 1.

12A Law of Contract, 16th ed. p. 404.

13 Law of Torts, 6th ed. p. 67.

14 Halsbury's Laws of England, Vol xx, p. 252.

15 In Harmon v. Stegel-Cooper Co., 167 N.Y. 244, a corporation, the proprietor of a department store, was held liable for malpractice in the business of dentistry. The Court of Appeals said: “Though it was beyond the corporate powers of the defendant to engage in the business this does not relieve it from the torts of its servants committed therein.”

But was the dentist a servant of the corporation? Could he have sued it for his salary? It is submitted that in England his contract of employment would be held to be absolutely void. Asbbury Railway Carriage Co. v. Riche, supra.

16 (1862) 1 Hurlstone & Coltman 526, 542. See also Ruben v. Great Fingall Consolidated [1906] A.C. 439,444 and Storey v. Ashtnn L.B., 4 Q.B. 476.

16A Beard v. London General Omnibus Co. [1900] 2 Q.B. 530.

17 Fistier v. Prince, 3 Burr. 1364. Lord Mansfield: “The reason and spirit of cases make law; not the letter of particular precedents.” Cage v Acton, 12 Mod. 294. Lord Holt: “The reason of a resolution (judgment) is more to be considered than the resolution itself.” and see Wambauah's Study of Cases, 2nd ed., P. 15: “The decision is a precedent for the doctrine necessarily involved in it, etc.”

18 P. 183.

19 P. 684

20 And see Archibald, J. in the Exchequer Chamber. L.R. 9 Ex. at p. 292: “I admit that at common law (as was resolved in the case of Sulton's Hospital), when a corporation is duly created all other incidents are tacite annexed, x x; but the question under consideration has reference to the creation of corporations by statute with a limited scope and objects, and to the true construction of the statute law in regard to such bodies, a question which depends necessarily to a great extent, where the legislative provisions are not unmistakeably clear and express the other way, on the general policy of such legislation.”

21 36 Ch. D. 675, n. at 685, n.

22 10 Co. 1.

23 Grant on Corporations, p. 131.

24 P. 181.

25 Ashbury Railway Carriage Co. v. Riche at p. 684.

26 P. 186.

27 P. 694.

28 And see Lord Chelmsford. p. 679. and Lord Hatherley, p. 685.

29 P. 672.

30A P. 188.

31 L. R. 9 Ex. 224, 255.

32 P. 265.

33 Lindley on Companies, 6th ed. p. 205.

34 Halsbury, , Laws of England, Vol. VIII. §377, Simpson v Dminon (1852)10 Hore, 51, 55Google Scholar ; Pickering v Stephenson (1872) L. R. 14 Eq. 333, 340; Burland v Karlt [1902] A.C. 83, P.C.

35 Houldsworth v. Evans, 3 H.L.C. 249, 276, “In joint stoek companies absent shareholders should never be bound to do anything more than to assume that the directors are doing their duty,” and see Spackman v. Evarvt 3 H.L.C.171.

36 Amalgamated Society of Railway Servanis v, Osborne [1910] A.C.87, and see Lord Watson's judgment in Baronett Wenlock v. River Dee Company, X App. Cas. 354, 362.

37 At p. 183. “A corporation acts through human beings, and the question whether a corporation has acted is always to be answered by inquiring (a) whether human beings have acted, and (b) whether it is proper to give corporate significance to their acts.”

38 Pollock's Law of Torts 12th ed. at p. 59, “But this is really part of the larger question of the liability of principals and emplovers for the conduct of persons employed by them; for a corporation can act and become liable only through its agents or servants.

39 14 Harvard L.B. 332. 334.

40 P. 184.

41 P. 13.

42 P. 19.

43 Law of Torts. p. 59 n. (c).

44 P. 28.

45 XXVII L.Q.R. 219, 222.

46 L.R. 2 C.P. 174.

47 P. 185.

48 P. 185.

49 Law of Contrast. 16th ed. P.424.

50 See Pollock, Principles of Contrast 9th ed. p. 116, and Story, Law of Agency. English ed.: “§280 In the next place, persons, contracting as agents, are, nevertheless, ordinarily held responsible, where there is no other responsible principal, to whom resort can be had. Thus for example, where a person signed a note ”as guardian of A.B..” he was held to bo Presonally liable on toe note: for he could not make his ward personally liable therefor, nor his ward's assets. …§285. Upon the same principle, where certain persons, on behalf of a Darish in England, made an agreement with the plaintiff to pave the streets of the parish, and to pay him therefor: it was held, that the persons so contracting were personally liable; for the parishioners, as such, could not be sued therefor. Meriel v. Wymandsold. Hardres, R., 205.

51 [1911] I.K.B. 869.

52 At p. 875.

53 Ashbury Railway Carriage Co. v. Riche, supra.