ARTICLES OF ASSOCIATION

2;

other shareholder, and Lord Herschell, in Welton v. Saffery
1897, A.C. at p. 315), after stating the words of the section,
went on to say: ‘The articles thus become in effect a contract
under seal by each member of the company and regulate
his rights. They cannot, of course, diminish or affect any
liability created by the express terms of the statute; but,
as I have said, the statute does not purport to settle the
rights of the members inter se; it leaves these to be .deter-
mined by the articles (or the articles. and memorandum
together), which are the social contract regulating those
rights. I think it was intended to permit perfect freedom
in this respect. It is quite true that the articles constitute a
contract between each member and the company, and that
there is no contract in terms between the individual members
of the company; but the articles do not any the less, in my
opinion, regulate their rights ¢nter se. Such rights can only
be enforced by or against a member through the company,
or through the liquidator representing the company; but I
think that no member has, as between himself and another
member, any right beyond that which the contract with the
company gives.” The point, then, is that, there being no
contract constituted by the articles between one member
and another, although their mutual rights are regulated by
the articles, one member cannot in general sue another in
respect of a violation of those rights, but the company must
do 1t for him.

(3) As between the company and outsiders the articles do Company
not constitute any contract whatever. And this seems to be and
true, even in the case of a member in relationships with the Dutzidess,
company arising otherwise than purely through membership.
[t was long ago held that where the articles of a company
provided that the preliminary expenses should be paid by
the company, this gave the promoter no right whatever to
recover them from the company [Melhado v. Porto Alegre
Railway Company (1874), L.R. 9 C.P. 503]. The effect of
the article was merely an agreement by the company with
each individual shareholder, that the company would pay
the preliminary expenses; and if the company failed to do
50 there was no breach of contract with the promoter, but
only with the shareholders, who were not damnified. Similarly,
in Eley v. Positive Life Assurance Company (1876, 1 Ex. D.
38), there was an article providing that the plaintiff should
be employed for life as solicitor to the company and should
only be removable for misconduct. He acted for some
time, and then the company discontinued the employment.
[t was held that he could not sue the company. Lord