The Directors, etc. of the Shrewsbury and Birmingham Railway Company v The Directors, etc. of the North-Western Railway Company and of the Shropshire Union Railways and Canal Company
| Jurisdiction | England & Wales |
| Judgment Date | 13 May 1857 |
| Date | 13 May 1857 |
| Court | House of Lords |
English Reports Citation: 10 E.R. 1237
House of Lords
Mews' Dig. iii. 165, 1011, 1022; iv. 653; x. 279, 280; xi. 1484, 1485, 1486, 1488, 1491; xiii. 1765, 1849, 1855. S.C. 26 L.J. Ch. 482; 3 Jur. N.S. 775; and, below, 4 De G. M. and G. 115; 22 L.J. Ch. 682; 17 Jur. 845; 1 W.R. 172. On point as to position of corporate bodies, followed in Taylor v. Chichester, etc. Ry. Co., 1867, L.R. 2 Ex. 384; Riche v. Ashbury Ry. Carriage Co., 1874, L.R: 9 Ex. 292; A.-G. v. G. E. Ry. Co., 1879, 11 Ch. D. 487; Hire Purchase Furnishing Co. v. Riche, 1887, 20 Q.B.D. 390; and see note to Eastern Counties Ry. Co. v. Hawkes, 1855, 5 H.L.C. 331. On point as to interest of judges, see note to Dimes v. Grand Junction Canal Co., 1852, 3 H.L.C. 759.
Company's Acts - Directors' Powers - Contracts - Specific Performance.
SHREWS. AND BIRM. RY. CO. V. N.-WESTERN RY. CO. [1857] VI H.L.C., 114 THE DIRECTORS, etc. of the SHREWSBURY AND BIRMINGHAM RAILWAY COMPANY,-Appellants; THE DIRECTORS, etc. of the NORTH-WESTERN RAILWAY COMPANY and of the SHROPSHIRE UNION RAILWAYS AND CANAL COMPANY,-Bespondents [March 12, 13, 16, 17, 19, May 13, 1857]. [Mews' Dig. iii. 165, 1011, 1022; iv. 653; x. 279, 280; xi. 1484, 1485, 1486, 1488, 1491; xiii. 1765, 1849, 1855. S.C. 26 L.J. Ch. 482 ; 3 Jur. N.S. 775 ; and, below, 4 De G. M. and G. 115; 22 L.J. Ch. 682; 17 Jur. 845; 1 W.R. 172. On point as to position of corporate bodies, followed in Taylor v. Chichester, etc. By. Co., 1867, L.R. 2 Ex. 384; Biche v. Ashbury By. Carriage Co., 1874, L.R: 9 Ex. 292 ; A.-G. v. G. E. By. Co., 1879, 11 Ch. D. 487; Hire Purchase Furnishing Co. v. Bichens, 1887, 20 Q.B.D. 390 ; and see note to Eastern Counties By. Co. v. Hawkes, 1855, 5 H.L.C. 331. On point as to interest of judges, see note to Dimes v. Grand Junction Canal Co., 1852, 3 H.L.C. 759.] l f sj Zc^-.jo Company's Acts-Directors' Powers-Contracts-Specific Performance. Prima facie all corporate bodies are bound by contracts under their common seal; but this prima facie power to contract cannot be insisted on as to matters where from the nature of the corporate body or the object of its incorporation, it is expressly or impliedly " by reasonable inference," prohibited from contracting. A contract as to such matters is ultra vires. Where a contract between two companies proves to be one by which one of the contracting parties will gain considerable advantages, at the expense of the other, while the other will receive no corresponding benefit, whether such contract is or not legally valid, equity will not aid in enforcing it by a decree for specific performance. A private Act of Parliament authorised one railway company to accept a lease of another railway: the directors of the first company then entered into an agreement with the directors of a third company, the stipulations of which were to be performed " during the continuance " of such lease. No lease within the provisions of the Act was ever granted. The agreement appeared to be, if legally valid, at least unfair to the shareholders of one of the companies. Held, that equity would not enforce it by a decree for specific performance. Lord St. Leonards and Lord Wensleydale, being shareholders in one of the companies, declined to take part in the hearing of the case. In this case there had been a suit to enforce an agreement entered into between the Appellants and the Respondents. The circumstances out of which that suit arose were these: [114] The Shrewsbury and Birmingham Railway is the property of the Appellants, and runs in a southerly direction from Shrewsbury through Wellington and Shiffnal to Wolverhampton. The Shropshire Union line runs in a similar direction from Shrewsbury through Wellington (this part of the line being common to both companies), and thence by Gnosall to Stafford.* * The accompanying sketch is necessary for the clear understanding of the case. N -^^~ 1 ^ BIRMINGHAM RUCBY" 1237 CMOSALL VI H.L.C., 115 SHREWS. AND BIRM. RY. CO. V. N.-WESTERN RY. CO. [1857] The North-Western Hallway runs from London through Rugby to Birmingham, and then through Walsall to Portobello, skirts the town of Wolverhainpton, outside which there is a station, and thence on to Stafford. Here it joins the Shropshire Union line, and curves round through Gnosall to Wellington, and then proceeds by the same line as that of the Appellants to Shrewsbury. The Respondents also hold on lease a railway, called the Trent Valley Line, which runs from Rugby through Tarn-worth to Stafford, and thence on as before to Shrewsbury. They have also another railway called the Stour Valley Line, which runs direct from Birmingham to Wolver-hampton, where it joins the Appellants' railway. [115] In 1847, the main line of the North-Western was completed; the Trent Valley Line was in the course of formation, and the North-Western Company received the power (which it has since exercised) of taking that line on lease. The Shropshire Union Line was then in the course of being formed; and by the Acts obtained by that Company, as well as by those obtained by the Appellants, provisions were made for the management of that part of the line which was common to the two Companies, by a joint committee of directors formed from the members of both. In 1847, the North-Western Company applied to Parliament for leave to take on lease the Shropshire Union Line. It was believed that if that application should be granted, the North-Western Company would be in a position to command the traffic between Birmingham, Wolverhampton, and Shrewsbury, as well as between Rugby, Birmingham, Stafford, and Shrewsbury. The Appellants therefore opposed the application, and that opposition led to the agreement which was the subject of this suit. On the 13th May 1847, certain articles were executed between the Appellants of the one part, and the Respondents of the other part, by which it was arranged, ' 1. That all traffic between Wellington or Shrewsbury or intermediate stations, and Rugby, or any point to the south of Rugby, shall be kept separate, and divided between the two Companies in proportion to the mileage travelled over each of the lines of the Shrewsbury and Birmingham and the Shropshire Union Companies, such joint account and division, however, to be optional with the; Shrewsbury anjd Birmingham Company. This arrangement to include all the London traffic by whatever route it may pass. 2. Neither the Shropshire Union nor the North-Western shall, during the continuance of such joint account and traffic, convey from Wellington, or any part of their line westward of Wellington, goods or passengers to1 any part of the Shrewsbury [116] and Birmingham line east of the same place, or be entitled to participate in such traffic." An agreement was to be forthwith prepared to carry these articles into1 execution. In consequence of these articles, the opposition to the Bill was withdrawn, and the Act 10 and 11 Viet. c. cxxi., passed. It was entitled, " An Act to authorise a lease of the undertaking of the Shropshire Union Railways and Canal Company to the London and North-Western Railway Company." * * The Act recited the three Acts by which the Shropshire Union Company had been authorised to make the railways therein mentioned, and enacted (s. 1), that " on the completion of the works of the railways by the, recited acts authorised to be made, so as to be opened for public traffic, or at such earlier period as may be agreed on between the said Companies, the Shropshire Union Railways and Canal Company shall, and they are hereby empowered and required to grant, and the London and North-Western Railway Company shall and they are hereby empowered and required to accept, a lease in perpetuity of the undertaking of the said Shropshire Union Railways and Canal Company at a rent," and on terms therein mentioned. By sect. 2, a, joint committee of directors was tot be appointed, consisting of eight directors of each company. By the 8th sect., the joint committee was to' exercise all the powers on behalf of the Shropshire Union Railways and Canal Company, as to contracts and the management of the works and property, " and also the management of the said railways, when and as the same shall be completed, which if this Act had not been passed might have been exercised by the directors of the Shropshire Union." By sect. 11, it was enacted, that, " when and as each of the railways shall be completed and opened, the same shall be worked and used by the London and North- 1238 SHREWS. AND BIRM. RY. CO. V. N.-WESTBRN RY. CO. [1857] VI H.L.C., 117 [117] After the passing of this Leasing Act, an agreement dated 12th October 1847, for more effectually carrying it into operation was made. This agreement was entered into between the Shrewsbury and Birmingham Company, of the one part, and the London and North Western and the Shropshire Union Companies, of the other part, and was sealed with the seal of each Company respectively. It recited the matters already stated, and then proceeded to stipulate, 1st. " That the Shropshire Union or the North Western Company shall at all times during the continuance of any such lease authorised to be granted by such Act, keep a separate account of all passengers, etc., which such companies, or either of them, shall carry from Shrewsbury or Wellington, or from any point between those two places to Rugby, or to any place on the London side of Rugby on the line of the North Western Company, and also of passengers which such companies, or either of them, shall carry from Rugby, or any place to the south of Rugby on the line of the North Western Company, to Wellington or Shrewsbury, or to any point between the two last named places. And the Shrewsbury and Birmingham shall keep a separate account of all passengers...
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