Articles provided that any dispute between member and company should be solved by arbitration.C was a member of company, and company refused to register C’s sheep. C complained and sued company for declaration that his sheep were entitled to be registered; company applied for action to be stayed on basis that dispute should go to arbitration. C argued that arbitration clause did not apply, as the dispute was unrelated to C’s membership of the company – rather it was related to . Held:
Enforceability of Articles
1) Where an outsider purports to be given rights by articles in their capacity as an outsider, are not enforceable.
· This case even if outsider is or subsequently becomes a member.
· Hence fact that an outsider purportedly given rights in a company’s articles is subsequently granted shares in company does not make a previous claim enforceable.
2) In addition member of a company can only enforce his rights under constitution in his capacity as a member.
· And not e.g. as director, solicitor etc.
3) Where articles purport to grant rights to an outsider, if outsider subsequently becomes member this does not mean that he can enforce those earlier rights
· i.e. as these rights are still not in his capacity as a member
· regardless of fact that outsider has since become a member
· C’s claim is to enforce his rights as a member of D.
· Arbitration article deliberately addresses disputes amongst members themselves.
· Therefore case stayed in favour of arbitration.