Scottish Court of Session Decisions

This was a reduction at the instance of William Davie and certain other members of the Colinton Friendly Society of a minute of meeting of the said Society, held at Colinton on 14th October 1864, and of a certificate by Alexander Carnegy Ritchie, Registrar of Friendly Societies in Scotland, dated 1st March 1866, “by which minute the rules of the said society were altered, or pretended to be altered, by the adoption of a new rule or alteration in the rules, to the effect that the probationary period of entrants to the said Society should be reduced to one year instead of three years, as under the existing rules of the Society, and by which certificate it was certified, or pretended to be certified, that the said alteration was in conformity with law.”

It appeared that the Society had been founded in 1804, remodelled in 1829, and that its rules, certified as in conformity with 10 Geo. IV. c. 56, had, with certain amendments made in 1837, 1844, and 1854, in terms of the then existing Acts, remained the rules by which the Society has been regulated down to the date when the amendment sought to be reduced was made.

By one of the fundamental rules of the Society, as they existed before 14th October 1864, entrants to the Society were obliged to go through a probationary period of three years before they received any benefit from the Society. The amendment upon the rules contained in the minute and certificate hereby sought to be reduced was to the effect that the probationary period of three years should be reduced to twelve months.

Alterations and amendments of the Society's rules were thus provided for. Rule 97 enacted “that all alterations or amendments of these rules must be intimated, submitted, and agreed to, in terms of the Act of Parliament, either by a general meeting of the Society, or by a committee nominated for that purpose at a general meeting. But it is hereby declared that no alteration or amendment shall be made on any of the fundamental laws tending to alter the contributions or allowances, without the report of a professional accountant.” The terms of the Act of Parliament, 10 Geo. IV. c. 56, §9, referred to in this rule, are, “That no rule, confirmed in manner aforesaid, shall be altered, rescinded, or repealed, unless at a general meeting of the members of such society as aforesaid, convened by public notice, written or printed, by the secretary or president, or other principal officer or clerk of such society, in pursuance of a requisition for that purpose, by seven or more of the members of such society, which said requisition and notice shall be publicly read at the two usual meetings of such society to be held next before such general meeting, for the purpose of such alteration or repeal, unless a committee of such members shall have been nominated for that purpose at a general meeting of the members of such society, convened in manner foresaid, in which case such committee shall have the like power to make such alterations or repeal, and unless such alterations or repeal shall be made with the concurrence and approbation of three-fourths of the members of such society, then and there present, or by the like proportion of such committee as aforesaid, if any shall have been nominated for that purpose.” In addition to this, the existing Act, 18 and 19 Vic. cap. 63, section 27, enacts, “That after the rules of a friendly society shall have been certified by the registrar as aforesaid, it shall be lawful for such society, by resolution at a meeting specially called for that purpose, to alter, amend, or rescind the same, or any of them, or to make new rules; and it shall be law-ful for any friendly society formed and established under any of the Acts hereby repealed, to alter,

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amend, or rescind the rules by which the society is governed, regulated, or managed, or to make new rules, provided always that two copies of the proposed alterations or amendments, and of such new rules, signed by three members of such society, and the secretary or other officer, shall be submitted to the said registrar, to one of which shall be attached a declaration by the secretary or one of the officers of such society, that, in making the same, the rules of such society respecting the making, altering, amending, and rescinding rules, or the directions of the Act under which such society was established, have been duly complied with; and if the said registrar shall find that such alterations, amendments, or new rules, are in conformity with law, he shall give to the society a certificate, in the form set forth in the schedule to this Act, and return one of the copies to the society, and shall keep the other with the rules of such society in his custody, and for which certificate no fee shall be payable to the said registrar, and as against such member or person, such certificate shall be conclusive of the validity thereof, and all such rules, alterations, and amendments, so certified as aforesaid, shall be binding on the several members of the said society, and all persons claiming on account of a member, or under the said rules, but unless and until the same shall be so certified as aforesaid, such rules, alterations, and amendments shall have no force or validity whatsoever.” The rule of the society regulating the number of members required to be present at meetings to form a quorum, is as follows:—That one for every ten members, including the “committee, shall be a quorum at all quarterly and extraordinary meetings; and no meetings shall be held fully constituted for altering or amending the rules, or passing judgment on any matter out of the ordinary way, unless the stipulated number be present.” Such being the rules of the society, and the existing statutory enactments upon this subject, the pursuers alleged that the said pretended “rule or alteration in the rules was not proposed, and has not been adopted competently or in the manner prescribed by the constitution of the society, and is null and void. The alteration attempted to be made was an alteration upon the fundamental laws of the society, tending to alter the contributions and allowances of members, and it was made without the report of a professional accountant, as required by the 97th rule. The said alteration was not intimated, submitted, and agreed to, either by a general meeting of the Society, or by a committee nominated for that purpose at a general meeting, as is provided by the 97th rule. There was no intimation or notice calling the meeting at which it was brought forward, as a meeting for the purpose of altering the rules of the Society, and there was no requisition by any members of the Society to the preses requiring him to call the said meeting. The said meeting was not a meeting specially called for the purpose of altering or amending the rules of the Society, and the provisions of the Act 18 and 19 Vict. c. 63 were violated, by a motion for the alteration of the rules having been brought forward at such meeting. The number of members necessary to form a quorum was not present at the said meeting.” The pursuers farther alleged that, notwithstanding that the said meeting and resolution come to thereat were illegal and inept, certain members of the Society, including the secretary, falsely and fraudulently represented to Mr Carnegy Ritchie, Registrar of Friendly Societies in Scotland, “that the alleged alteration or amendment had been made in terms of law, and of the rules of the said Society, but there was no declaration submitted to the registrar by the said secretary, or any other officer of the Society, that in making the said pretended alteration the rules of the Society respecting the alteration of rules, or the directions of the Act under which the Society was established, had been duly complied with, as is required by the Act 18 and 19 Vict. c. 63, § 27. Acting on these false and fraudulent representations, the said Alexander Carnegy Ritchie was induced to grant a certificate in the following terms:— ‘ Edinburgh, 8 Broughton Place, 1 st March 1866.— I hereby certify that the foregoing alteration and amendment of the rules of the Colinton Friendly Society at Colinton, in the county of Edinburgh, is in conformity with law.—A. Carnegy Ritchie, Registrar of Friendly Societies in Scotland. A copy kept. A. C. R.’ The said certificate is false, the alteration and amendment therein referred to, for the reasons already stated, not being in conformity with law and the rules of the said Society. The said certificate was issued without the conditions enjoined by the Act 18 and 19 Vict. c. 63, § 27, as precedent to any such certificate being issued, having been complied with, and it is therefore destitute of legal validity. Even if it had not been procured by false and fraudulent representations, it was illegally and wrongfully issued by the registrar, and is null and void, or in any event reducible, and ought to be reduced.”

The defenders stated the following preliminary pleas—“(2) The jurisdiction of the Court of Session is excluded by the rules of the society, and by the statute 18 and 19 Vict. cap. 63, which regulates the law relating to friendly societies. (3) On the assumption that the provisions of the Act 10 Geo. IV., chapter 56, apply, the jurisdiction of the Court of Session is excluded by that, and by the other Friendly Society Acts, and by the statute 18 and 19 Vict., chapter 63, and also by the rules of the society. (4) The society's rules in regard to the settlement of disputes by arbitrators, and the statutory provisions relating thereto, constituted a valid and effectual obligation binding the pursuers, as members of the society, to submit and refer the questions raised in this action to arbitration. (6) The certificate granted by the Registrar of Friendly Societies, that the alteration or amendment of the rules complained of is in conformity with law, is, under the statute, binding on the pursuers and on the whole members of the society.”

In support of these they made the following statements:—“With reference to disputes and arbitrations, it is by the Society's rules provided (sec. 91) ‘That all disputes between this Society, or any person acting under them, and any individual member thereof, or any person claiming on account of any member, shall be submitted and referred to arbitrators. The 92d rule provides for the election of twelve arbitrators. The twelve arbitrators were duly elected, and since the first election there always have been, and are now, in conformity with this rule twelve arbitrators of the Society. It is further provided by the rules, as follows:—‘93. When any dispute shall arise, three of the arbitrators shall be chosen by ballot to decide the matter in dispute, and whatever award shall be made by the said arbitrators, or the major part of them, according to the

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true purport and meaning of the rules of the Society, shall he binding and conclusive on all parties, and shall be final to all intents and purposes, without appeal. The award made by the arbitrators shall be expressed in the terms of the form hereto annexed. 94. That all disputes must be submitted to arbitration within three months from the date of the meeting by whose decision such member or his representative may think himself aggrieved; and any member delaying for a longer period to bring his case before the committee or Society, or to intimate his intention of referring it to arbitration, shall be held to have acquiesced. 95. No member shall bring any dispute between him and the Society or committee of management before a court of law without having first offered to refer it to arbitration, under the penalty of being expelled the Society, and of forfeiting all claims upon its funds.’ By the statute 18 and 19 Vict. cap. 63 (23rd July 1855) which now regulates the law applicable to Friendly Societies, it is enacted (sec. 40) that ‘Every dispute between any member or members of any society established under this Act, or any of the Acts hereby repealed, or any person claiming through or under a member or under the rules of such society, and the trustee, treasurer, or other officer, or the committee thereof, shall be decided in manner directed by the rules of such society, and the decision so made shall be binding and conclusive on all parties, without appeal.’ And by section 41 of the said statute it is enacted that ‘in all Friendly Societies established under this Act, or any of the said repealed Acts, all applications for the removal of any trustee, or for any other relief, order, or direction, or for the settlement of disputes that may arise or may have arisen in any society, the rules of which do not prescribe any other mode of settling such disputes, or to enforce the decision of any arbitrators, or to hear or determine any dispute if no arbitrator shall have been appointed, or if no decision shall be made by the said arbitrators within forty days after application has been made by the member or person claiming through or under a member, or under the rules of the society, shall be made to the county court of the district within which the usual or principal place of business of the society shall be situate, and such court shall, upon the application of any person interested in the matter, entertain such application, and give such relief, and make such orders and directions in relation to the matter of such application as hereinafter mentioned, or as may now be given or made by the Court of Chancery, in respect either of its ordinary or its special or statutory jurisdiction; and the decision of such county court upon and in relation to such application, as aforesaid shall not be subject to any appeal: provided always, that in Scotland the Sheriff within his county, and in Ireland the assistant barrister within his district, shall have the same jurisdiction as is hereby given to the judge of a county court.’

The Lord Ordinary ( Mackenzie) pronounced the following interlocutor:—

“ Edinburgh, 14 th June 1870.—The Lord Ordinary having heard parties’ procurators, and considered the closed record and process, sustains the second, fourth, fifth, and sixth pleas in law for the defenders, dismisses the action, and decerns: Finds the pursuers liable in expenses, of which allows an account to be given in, and remits the same, when lodged, to the auditor to tax and to report.”

The pursuer reclaimed.

The Lord Advocate and Mackay, for the reclaimer, submitted that there were three objections to the proceedings by which the rules of this society had been altered:—(1) That there had been no preliminary report of an accountant; (2) That there had been no proper intimation of the meeting; and (3) That there had not been a quorum present. These being the objections to the validity of the amended rules, there were three preliminary questions which fell to be now argued:—(1) Whether the certificate of the registrar is final and cannot be reduced; (2) Whether the matter in dispute was one which must be decided under the arbitration rules of the society; (3) If not, whether it is a matter which falls under the jurisdiction of the sheriff to the exclusion of this court.

On the first question, they said that though the registrar's certificate was binding, that was not to say that it is irreducible and cannot be impugned. On the second question, they argued that no such matter as an illegal alteration of the rules was intended to be submitted to arbitration. It is sufficient to read the clauses concerning arbitration to see this, and they referred to Kelsall v. Tyler, 25th Jan. 1856, 25 Law Jour. Exch. Ca. 153. And on the third question they submitted that the cases quoted by the Lord Ordinary had no application, and referred to the clauses of the statute and to the cases of Sommerville, 6 Macph. 796; Morison v. Glover, 1849, 4 Exch. Rep. 430; and Laing, 4 Nov. 1869, 5 L. R. Ch. Ap. p. 4.

Shand and Balfour, for the respondents, argued that it was the policy of the Friendly Societies Acts to exclude expensive litigation, and that § 41 of the Amendment Act must so be construed. The sheriff's jurisdiction is therefore privative here, and it is no objection that he has not in ordinary cases power of reduction. Reductive powers, or what are tantamount to them, are sometimes given him by implication, as for instance in the Bankruptcy Act 1857; see case of Dickson, June 5 1866; 4 Macph. 797. This 41st section includes “ all disputes in any society,” and the remaining words of the clause do not limit this. The Sheriff must have all powers necessary to explicate his own jurisdiction, even to a reduction if that be necessary, which is not admitted. They quoted the cases of Johnston v. Brodie, 24 D. 973; and Woldridge, 31 Law Journ., Qu. B. 122; and endeavoured to show that the case of Laing, quoted on the other side, was quite a different one from the present, the difference being that there the society was alleged to have done regularly that which was illegal and ultra vires, whereas here the proceedings would have been perfectly legal and valid had they been regularly carried through. The case of Laing might very well be competent in the supreme court, but it did not follow that this case was so too. As to the effect of the registrar's certificate, they argued that the same policy of the statutes applied, viz., the saving expense and delay, and that it was the intention of the Legislature to make the certificate conclusive of the validity of the rules and amendments.

At advising—