Appendix CASE ONE - Collection Point® | The Total Digital Asset ...

The Influence of Butch Cassidy on English Company Law 175
a mere unincorporated association but a registered company. It was therefore
constituted by its Memorandum and Articles of Association and governed by
the Companies Acts. The Articles of Association of the Kent or Romney
Marsh Sheep Breeders' Association contained a provision, in Article 49, that
all disputes between the Association and any member would be referred to
arbitration. Now the Arbitration Act 1889 provided in effect that, if the
parties to a dispute had entered into a 'written agreement' to submit such
disputes to arbitration, then they could not bring an action in court about
that dispute without going first to arbitration. The Association argued that
Article 49 of their Articles of Association was such an agreement between
them and Hickman and that therefore these Chancery proceedings must be
stayed and Hickman must go to arbitration. Hickman argued that the Articles
of Association were not an agreement between him and the Association and
therefore he had not entered into an agreement to go to arbitration and
the court could not stay these proceedings. The issue therefore became the
apparently straightforward one: do the articles of association of a company
constitute an agreement between the members and the company?
The problem that Hickman had to settle concerned the relationship between
a company and its shareholders and, in particular, what is known as the
statutory contract, which used to appear in s. 20 of the Companies Act 1948
and now appears in s. 14 of the Companies Act 1985. The wording of this
section has not changed much since it first appeared in the Companies Act
1856. At the time of Hickman the relevant words were in the Companies
(Consolidation) Act 1908, s. 14(1) and read as follows:
The memorandum and articles shall, when registered, bind the company and
the members thereof to the same extent and as if they had respectively been
signed and sealed by each member, and contained covenants on the part of each
member, his heirs, executors and administrators, to observe all the provisions of
the memorandum and of the articles, subject to the provisions of this Act.
The problem which this provision creates is whether or not it has the effect
of creating a contract between the members inter se and a contract between
each member and the company. In 1937 Lord Greene admitted, in Beattie
v. E. and F. Beattie Ltd., 4 that this provision had proved controversial
in the past and was likely to continue to be controversial in the future.
The origins of the controversy are not difficult to trace. Because of the
restrictions imposed by the Bubble Act, many business organizations were set
up under deeds of settlement. Almost invariably an indenture, incorporating
the association's constitution, was executed by every member and the trustees
of the association. Therefore there was no problem in identifying the parties
to the contract: the indentures established the contract between the members
and the association. When incorporation by mere registration became possible
under the Companies Act 1844, the problem still did not arise for that Act
4 [1938] Ch. 708