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Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> The Second Edinburgh and Leith 493rd Starr-Bowkett Building Society and Another v. Aitken [1892] ScotLR 29_456_1 (11 March 1892)
URL: http://www.bailii.org/scot/cases/ScotCS/1892/29SLR0456_1.html
Cite as: [1892] SLR 29_456_1, [1892] ScotLR 29_456_1

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SCOTTISH_SLR_Court_of_Session

Page: 456↓

Court of Session Inner House First Division.

Friday, March 11. 1892.

[ Lord Kyllachy, Ordinary.

29 SLR 456_1

The Second Edinburgh and Leith 493rd Starr-Bowkett Building Society and Another

v.

Aitken.

Subject_1Building Society
Subject_2Instrument of Dissolution
Subject_3Consent of Members
Subject_4The Building Societies Act 1874 (37 and 38 Vict. cap.42), sec.32.
Facts:

The 32d section of the Building Societies Act 1874 provides that a society may be dissolved by dissolution with the consent of three-fourths of the members, holding not less than two-thirds of the shares, “testified by their signatures to the instrument of dissolution.”

Held that members of a society under the Act who had employed mandatories to sign an instrument of dissolution on their behalf, had failed to testify their consent to a dissolution in terms of the Act, and that signatures adhibited by mandatories could not be reckoned in calculating, whether an instrument of dissolution was signed by three-fourths of the members of the society.

Headnote:

The Second Edinburgh and Leith 493rd Starr-Bowkett Building Society, incorporated under The Building Societies Act 1874 was duly registered on 7th February 1882. The object of the society was to make advances to members (chosen by ballot) on the security of heritable property, the funds for these advances being subscribed by the members, who were bound to pay sixpence a-week per share until they had subscribed £27, 6s. on each share of £100 held by them. The members who received advances were bound to repay them by instalments.

On 26th August 1890 an instrument of dissolution of the society was registered, which bore to be “signed by not less than three-fourths of the members holding not less than two-thirds of the number of shares in the said society.” At the same date the number of shareholders on the register was 203, and 158 signatures were appended to the instrument. The deed appointed Peter Ronaldson, C.A., trustee for the special purpose of the dissolution.

Page: 457↓

In March 1891 the society, and Peter Ronaldson as its trustee, brought an action against Thomas Aitken, a member of the society, for payment of £33, 10s. 6d., as the balance due by him in respect of advances which he had received from the society.

The defender denied indebtedness, and further stated various objections to the validity of the instrument of dissolution, and, inter alia, that the names of eleven shareholders were adhibited by mandatories, which was not authorised by the Act of Parliament

He pleaded—“(1) No title to sue.”

By the 32d section of the Building Societies Act 1874 it is provided, inter alia—“A society under this Act may terminate or be dissolved: (2) By dissolution with the consent of three-fourths of the members, holding not less than two-thirds of the number of shares in the society, testified by their signatures to the instrument of dissolution.” …

After a proof the Lord Ordinary ( ) on 1st December 1891 sustained the first plea-in-law stated for the defender, and dismissed the action.

“ Opinion—I am very unwilling to sustain this defence, for I see that if I do so there may be great practical difficulty in working out the society's remedy against this member, who is undoubtedly due, and must ultimately in some form pay a considerable sum of money to the society. But the question is, whether I have any option in the matter…. There are, it appears, eleven signatures to the deed which were not adhibited by the members themselves, but by certain persons alleged to be their mandatories. I shall assume that these persons had good mandates at the time they signed, although I am afraid I cannot hold that proved. But assuming that that is so, I am afraid that the terms of the 32d section of the Act make it really too clear for argument that a member cannot under this statute testify his consent to a dissolution otherwise than by his own signature. The words of the statute are, ‘as testified by their signatures to the instrument of dissolution.’ I think that contemplates that the member's own signature, and not his signature through a mandatory, must be adhibited. If that be so, I am afraid it is fatal, because, taking the shareholders on the register at May as 164, and adding the 39 shareholders who became members in August, the total number of members on the register when the deed of dissolution took effect was 203. I think these must all be taken as members, and that being so, how many sign this deed of dissolution? There are 158 signatures in all, taking everything most favourably for the pursuers. But if eleven mandates are to be deducted, as the signatures of mandatories, that leaves only 147 good and genuine signatures. Now, I am afraid that 147 is not three-fourths of 203, and therefore this deed was not well executed, and the procedure was irregular. I say nothing as to its effect with respect to those members who have acceded to the liquidation. It may very well be that they are bound by their actings, but with respect to this defender I do not think that he has become bound to recognise the title of the liquidator, and therefore I have no option but to sustain the plea of no title to sue.”

The pursuers reclaimed, and argued—The signatures adhibited by the mandatories must be held to be the signatures of the members, who had given the mandates, and such members had accordingly testified their consent to the instrument of dissolution in terms of the Act.

The defender was not called upon.

At advising—

 Judgment:

Lord President—The question is whether the Lord Ordinary is right in holding that as regards eleven of the shareholders said to consent to dissolution the instrument of dissolution is defective in the statutory requisite of signature. Now, it appears to me that the objection is well founded and fatal. The company purports to be dissolved by the instrument of dissolution, and in order to make the dissolution valid it is necessary that a certain proportion of the shareholders should have consented to the dissolution and expressed their consent on the face of the deed, the statute providing that the consent of the necessary number of the shareholders shall be obtained “as testified by their signatures to the instrument of dissolution.” In order to bring the number of consenting shareholders up to the required proportion, it is necessary for the reclaimer to rely on signatures, not of shareholders, but of mandatories of shareholders, or at least of persons who may for the present purpose be assumed to be mandatories. I do not think such an attestation meets the requirements of the statute. It was pressed on us that the members of a society of this kind being generally working people, it would be reasonable to expect special provision to be made by the Legislature for relaxing the formalities of execution where their signatures are required; but it appears to me that the Legislature has allowed a relaxation of the usual formalities, because the statute does not demand that there should be instrumentary witnesses to the signatures of the shareholders. It is enough if the necessary consents are testified by the signatures of the shareholders themselves. It is all the more necessary, therefore, to see that the formalities required by the Legislature have been complied with, and, in a word, I think that to maintain that the signatures of mandatories are the signatures of the shareholders themselves in the sense of the statute is a hopeless contention.

Lord M'Laren—I concur with your Lordship, and at the same time I sympathise with the observations made by the Lord Ordinary as to the difficulties that may be caused to the society by our deciding that it is not possible to carry out the winding-up under the present administration. But I cannot help adding that the

Page: 458↓

liquidator might have perfected his title if he really has, as he professes to have, mandates from a sufficient number of shareholders, because if these mandates were granted by the shareholders in full knowledge of the purpose for which they were to be used, I can hardly doubt that the shareholders would, on a proper representation, be willing to sign the instrument of dissolution. Therefore it rather appears that there may be substance in this objection, and that it is impossible at present to obtain the requisite consents to a dissolution under the present management.

Lord Kinnear—I also sympathise with the observations made by the Lord Ordinary at the beginning of his opinion, but it appears to me to be clear that we cannot avoid sustaining this objection. I entirely agree with the reason given by your Lordship for adhering to the Lord Ordinary's interlocutor, and have nothing to add.

Lord Adam was absent.

The Court adhered.

 Counsel:

Counsel for the Pursuer— C. S. Dickson— Crole. Agents— Morton, Smart, & Macdonald, W.S.

Counsel for the Defender— Gunn. Agent— John Mackay, Solicitor.

 1892

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