Eley v. Positive Government Security-Life Assurance Co. Ltd
The company’s constitution provides that Antonio is appointed a master tattooist for life. However, directors have decided to terminate his employment. After Antonio bought shares from the company, he became a member. According to Section 140(1) of the Corporation Act, any replaceable rules applicable to the company and the company’s constitution have effects as “a contract between the company and each member.”
In Eley v. Positive Government Security-Life Assurance Co. Ltd., the company’s constitution stated that Eley would be the company’s solicitor. Still, later after becoming a member, the directors chose to use another solicitor. Eley sued the company for breach of the statutory contract. The Court held that he could not enforce the agreement in a manner that he was attempting to enforce his rights as a solicitor, not as a member, mainly because it is not in the capacity as a member. Eley v Positive Government Security Life Assurance Co Ltd (1875) 1 Ex D 88. Therefore, a member can’t enforce rights other than his/her membership rights in the company.
Similarly, in Hickman v. Kent or Romney Marsh Sheep-Breeders’ Assoc., the Court held that an outsider to whom rights are purportedly granted by the company’s constitution in his/her capacity as an outsider may not enforce the statutory contract in that capacity, whether he/she is a member of the company or not. Hickman v Kent or Romney Marsh Sheep-Breeders’ Association [1915] 1 Ch 881. Since Antonio is a member of the company, he cannot enforce the contract because the statutory rights are only enforceable for rights that are personal to members in their capacity, but not for reasons that he has in other capacities as provided by S140(1) of the 2001 Corporations Act.