Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653 is a UK company

law case, which concerned the objects clause of a company.

Its importance has been diminished as a result of the Companies Act 2006 s 31, which allows for
unlimited objects for which a company may be run. Furthermore, any limits a company does have in
its objects clause has no effect whatsoever for people outside a company (s 39 CA 2006), except as
a general issue of authority of the company's agents.

Facts[edit]
Incorporated under the Companies Act 1862, the Ashbury Railway Carriage and Iron Company Ltds
memorandum, clause 3, said its objects were "to make and sell, or lend on hire, railway-carriages"
and clause 4 said activities beyond needed a special resolution. But the company agreed to give
Riche and his brother a loan to build a railway in Belgium. Later, the company refused the
agreement. Riche sued, and the company pleaded the action was ultra vires.

Judgment[edit]
Exchequer Court[edit]
The judges of the exchequer chamber being equally divided, the decision of the court below was
affirmed.

Blackburn J said,

thought it was at common law an incident to a corporation that its capacity should be
limited by the instrument creating it, I should agree that the capacity of a company
incorporated under the act of 1862 was limited to the object in the memorandum of
association. But if I am right in the opinion which I have already expressed, that the
general power of contracting is an incident to a corporation which it requires an
indication of intention in the legislature to take away, I see no such indication here. If
the question was whether the legislature had conferred on a corporation, created
under this act, capacity to enter into contracts beyond the provisions of the deed,
there could be only one answer. The legislature did not confer such capacity. But if
the question be, as I apprehend it is, whether the legislature have indicated an
intention to take away the power of contracting which at common law would be
incident to a body corporate, and not merely to limit the authority of the managing
body and the majority of the shareholders to bind the minority, but also to prohibit
and make illegal contracts made by the body corporate, in such a manner that they
would be binding on the body if incorporated at common law, I think the answer
should be the other way.
House of Lords[edit]
The House of Lords, agreeing with the three dissentient judges in the Exchequer Chamber,
pronounced the effect of the Companies Act to be the opposite of that indicated by Mr Justice
Blackburn. It 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 LCsaid,

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.