BOOK I. CONSTITUTION OF SOCIETY. CHAPTER I. FOR WHAT PURPOSES SOCIETY MAY BE CONSTITUTED, AND EVERY undertaking in which an individual may lawfully embark, may competently be followed out by an association of individuals; and such associations may assume the forms of private firms, companies, joint-stock companies, or corporate bodies, except in so far as the statutory law has otherwise determined. contrary to morality, etc. All associations, of whatever nature they may be, which have Associations for their object an undertaking or line of business forbidden by the current notions of morality, religion, or public policy, are illegal; and the law, apart from punishing the promoters or members, will hold their acts to be nullities. As examples of this may be instanced associations formed for the purposes of overturning the established religion (a), subverting the constitution, or trafficking in the sale of public offices; or established with the view of making gain by what is morally a crime, e.g. robbery, theft, prostitution, etc.; or of what is incompatible with social well-being, e.g. procuring marriages (b). And the same rules apply to associations having for their object Associations (a) Pare v. Clegg, 29 Beav. 589; Thornton v. Howe, 8 E. Jur. N. S. 663. (b) Thomson v. M'Kailie, 14 Feb. 1770, F. C.; Sterry v. Clifton, 9 C. B. 110, 1 Bell's Com. 298, Levi's Com. B Law i. 48, Lindley 137; Stewart v. in breach of statute. Associations contrary to the violations of the revenue laws, or indeed of any special enactments forbidding what otherwise would not be illegal (a). In an old case, a society of wool-combers was found to be illegal, public interest. in respect that its regulations tended to cramp trade, and make the members independent of their employers. As combinations among workmen are no longer illegal, this decision has ceased to be a precedent to that effect; but the principles it recognises would still be given effect to, in the case of any association directly leading to a breach of the peace, or plainly inconsistent with order and existing law (b). On the same grounds, a contract of copartnery between a town and country agent, by which it appeared the interests of the public might be sacrificed, has been found illegal, and action upon it refused (c). Illegality must inhere in the purposes of association. Mala in se and mala prohibita. Difference It must be observed, however, that the commission of particular acts of illegality, though it may quoad these acts infer nullity, besides subjecting the individual shareholders or partners in penalties, does not render the association illegal so as to put it beyond the protection of the law. To produce this effect, the illegality must inhere in the purpose of the company's formation, so that its very existence infers an infringement of law (d). At one time a distinction was attempted to be made in England between mala in se and mala prohibita, as though the former only inferred nullity, and the latter not, at least as between partners (e). This doctrine has, however, been long abandoned; and it is now clearly fixed, that in either case absolute nullity is the consequence of a contract of copartnery to infringe the law of the land (ƒ). But in determining whether a copartnery is illegal by reason of between prohibitory and a particular statute, a distinction is made (at least in England) bedirectory protween provisions which are strictly prohibitory, and such as are visions. merely directory. It has been held, for instance, in that country, (a) See examples of this as to the (b) Procurator-fiscal v. Wool- (d) See previous cases. See Collyer on Partner. pp. 32 et seq.; and Lindley on Partner. p. 136. (e) Watts v. Brooks, 3 Ves. 611; Petrie v. Hannay, 3 T. R. 418. (f) See Park Insur. 497; Aubert v. Maze, 2 Bos. and P. 571. See Coll. 32; Knowles v. Haughton, 11 Ves. 168. that omission to comply with an Act of Parliament whose direct object is not the protection of the public, does not render the copartnery illegal, so as to deprive the partners of their right to recover on a contract with third parties. Thus it was held that a firm of distillers was not illegal, though one of them carried on business as a retail dealer in spirits within two miles of the distillery (contrary to 4 Geo. IV. c. 94, ss. 132-3), and was not registered as one of the firm in the Excise books (in terms of 6 Geo. IV. c. 81, s. 7). Here the firm had sued a third party as a guarantee; and the defence was, that as the whole trading of the plaintiffs was illegal, they could not recover. Judgment was for the plaintiffs; and the opinion of Lord Tenterden is so instructive, that part of it may here be quoted (a). Referring to the cases of Hodgson v. Temple and Johnson v. Hudson (b), his Lordship said: "These cases are very different from those where the provisions of Acts of Parliament have had for their object the protection of the public, such as the Act against stockjobbing, and the Acts against usury. It is different also from the cases where a sale of bricks, required by Act of Parliament to be of a certain size, was held to be void because they were under that size. There the Act of Parliament operated as a protection to the public as well as to the revenue, securing to them bricks of the particular dimensions. Here the clauses of the Act of Parliament had not for their object to protect the public, but the revenue only.' mant partners. It must also be observed, that as regards such statutes as require Case of dorcertain businesses or trades to be carried on by duly qualified persons, and no others, their provisions do not strike against partnerships with dormant partners unqualified, so long as the active partners are within the requirements (c). By the existing Registration Act (1862), the following associa- Associations tions are declared illegal : 1. All unregistered banking companies composed of more than ten persons, formed on or after the 2d November 1862, unless under Act of Parliament or Letters Patent (d). 2. All partner (a) Brown v. Duncan, 10 B. and C. 93. See also Smith v. Mawhood, 14 M. and W. 452. (b) 5 Taunt. 181; 11 East 180. (c) Candler v. Candler, Jac. 225; declared illegal, etc., by Act 1862. Associations usurping privileges of corporations. ship, associations, or companies unregistered and composed of more than twenty persons, formed on or after the 2d November 1862, for the purposes of gain, unless they are under Act of Parliament or Letters Patent (a). The consequences of non-registration in these two cases appear to be not merely illegality, but simple nullity. It is further provided, that all companies or associations which ought to have registered under the previous Acts, 1856, 1857, and 1858, and failed so to do, shall register under the present Act (b). Yet such as do not comply with this requisition are not, it would appear, illegal, but incur the following consequences, which are, in most cases, tantamount to illegality 1. They are rendered incapable of suing, but still remain capable of being sued. 2. No dividend is payable to any of their members. 3. Every manager or director of the company is liable to a penalty of £5 per day (c). It appears at one time to have been held in England, that at common law, and independently of the Bubble Act, all associations were illegal which, without being incorporated by proper authority, presumed to usurp the functions of a corporate body, such as raising or pretending to raise transferable stock, making bye-laws, having a committee of management, holding general meetings, etc. (d). This view, however, has since been abandoned, especially since the repeal of the Bubble Act (e). In Scotland it does not appear that any such notion was ever entertained; and even while the Bubble Act' remained in force, the courts exhibited great unwillingness to give effect to its prohibitory enactments (ƒ). If an incorporated joint-stock company were to attempt to exercise any of the more characteristic and important naturalia of a corporation,-e.g. using a common seal, suing or defending in a descriptive or seemingly corporate name, claiming limited liability, and the like, the association would not thereby become illegal to (a) Sec. 4. (c) Sec. 210. (d) Josephs v. Pebrer, 3 B. and C. 639; Duvergier v. Fellows, 5 Bing. 248; Kinder v. Taylor, Coll. 73; Blundell v. Winsor, 8 Sim. 601. (e) See 6 Man. and Gr. 107, per L. C. J. Walburn v. Ingilby, 1 M. and K. 61; Garrard v. Hardy, 5 Man. and Gr. 81. (f) Stevenson and Co., M. 14560 (1757); Macandrew, 6 S. 950 (1828). the effect of terminating its existence, or subjecting its members to pains and penalties; but all its acts done in usurpation of the privileges of a corporate body would be mere nullities. Such questions are now, however, more matter of curiosity than of practical importance, as the Registration Act of 1862 has brought the benefits of incorporation within the reach of any copartnery which bears the semblance of a joint-stock company. |