Scottish Court of Session Decisions

The Trade Union Act 1871 (34 and 35 Vict. cap. 31) enacts (section 4)—“Nothing in this Act shall enable any Court to entertain any legal proceeding instituted with the object of directly enforcing or recovering damages for the breach of any of the following agreements, namely—(1) Any agreement between the members of a trade union as such concerning the conditions on which any members for the time being of such trade union shall or shall not sell their goods, transact business, employ or be employed. (2) Any agreement for the payment by any person of any subscription or penalty to a trade union… .

Section 5 enacts—“The following Acts—that is to say, … (3) The Companies Acts 1862 and 1867 shall not apply to any trade union, and the registration of any trade

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union under any of the said Acts shall be void.” …

The Trade Union Act Amendment Act 1876 (39 and 40 Vict. cap. 22) enacts (section 16—“The term ‘trade union’ means any combination, whether temporary or permanent, for regulating the relations between workmen and masters, or between workmen and workmen, or between masters and masters, or for imposing restrictive conditions on the conduct of any trade or business, whether such combination would or would not, if the principal Act [1871] had not been passed, have been deemed to have been an unlawful combination by reason of some one or more of its purposes being in restraint of trade.”

On 23rd April 1898 several firms of aerated-water manufacturers formed themselves into the Edinburgh and District Aerated-Water Manufacturers' Defence Association, Limited, and the association was incorporated under the Companies Acts 1862 to 1890, having its registered office at No. 57 York Place, Edinburgh.

The memorandum of association stated—“3. The objects for which the company is formed are—( a) To raise a fund or funds by annual subscriptions, entrance-fees, donations, fines, levies, loans on security, or otherwise. ( b) To protect the bottles and boxes of members bearing their name or names, or trade-mark, or the name or trade-mark of the association, from being used or dealt with by any person or persons not having lawful authority for using or dealing with the same. (c) To punish, by fines or otherwise, and to prosecute by law, all persons found using, dealing in, selling, retaining, or destroying any bottles or boxes which are the property of members of the association or of the association itself. ( d) To provide for and be a central medium of useful information available for every member of the association, and generally for the furtherance and promotion of their interests. (e) To suggest, adopt, support, and carry into effect any measures for the protection of the interests of the trade, and to initiate, alter, or improve the law in relation to such business. (f) To co-operate or communicate with any kindred association or society in any part of the United Kingdom or the colonies. ( g) To do anything conducive or incidental to the attainment of all or any of the above objects.”

The articles of association provided, inter alia—“(15) A bottle exchange or clearing-house shall be established for the collection, reception, and distribution of bottles and boxes at such place or places as the council shall determine. (17) The council shall have power to make and enforce bye-laws for the effectual carrying out of any or all of the objects of the association, and of the articles of association, and to make all business arrangements for the effectual performance and carrying out of such objects and articles. (22) The council shall have power to prosecute, bring, carry on or discontinue, or refer to arbitration or compromise, any criminal or other proceedings, actions, suits, claims, and demands or or against the association, or its own members… . (24) The council shall have power to impose fines or penalties on the members of the association for any infraction of the rules or bye-laws, and to enforce the payment of such fines or penalties by law or otherwise. (32) No person shall be permitted to become an ordinary member who is not a master mineral water manufacturer or beer bottler on his own individual account. (33) Every member on joining the association shall sign a declaration agreeing to conform to the rules and bye-laws for the time being. (39) No member shall buy or sell second-hand bottles bearing names or trade-marks from brokers, hawkers, or marine store dealers, or from any person whatsoever, nor shall any member purchase from such person any plain or trade-mark soda-water bottles (wine, spirit, or beer bottles excepted); and if any such bottles are offered for sale to a member he shall at once report the fact to the secretary, with particulars of the bottles offered and the name and address of the vendor; but a member may sell to or buy from an aerated-water manufacturer or bottler, bottles which are such member's or manufacturer's property; provided he does not sell or buy bottles bearing the name or trade-mark of or belonging to any other aerated-water manufacturer or bottler without his written authority. (42) No member shall employ any traveller or other person having the sale or the superintendence of the sale of goods to customers who shall have been in the service of another member in the same capacity until after the expiration of one year from his having left such service, unless the consent in writing of such other member to earlier employment be first obtained.”

The bye-laws of the association enacted under authority of article 17 provided, inter alia—“(20) Members are prohibited from exchanging bottles, etc., with non-members, under a penalty not to exceed £5 (five pounds) for each offence. (24) Any member using, filling, or sending out bottles, syphons, boxes, or cases, belonging to another member may be brought before the council, and on the offence being proved to the satisfaction of the council, may be fined such sum as the council may determine, and such fine shall not be less than 6d., and not more than 10s., for each bottle, syphon, or box so used, filled, or sent out, but the council reserve the right of prosecuting at law such offender without calling him before them.”

In 1903 the Association, in its corporate name, raised an action in the Sheriff Court at Edinburgh against James Jenkinson & Company, aerated-water manufacturers, Leith, one of its members, for payment of £43, 2s. 6d.

The pursuers averred that the defenders had infringed the twenty-fourth bye-law, and that the sum sued for was the amount of a fine imposed on them for doing so by the council under article 24, which the defenders refused to pay.

The defenders pleaded, inter alia—“(1) No title to sue. (2) The company and its

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articles of association and bye-laws being in restraint of trade, and the company being a trade union within the meaning of the Trade Union Acts, the action falls to be dismissed.

On 30th March 1903 the Sheriff-Substitute ( Henderson) repelled the defenders' pleas and allowed the parties a proof, and to the pursuers a conjunct probation.

The defenders appealed to the Sheriff ( Rutherfurd), but he on 27th May 1903 adhered.

The defenders appealed, and argued—This Association was in the sense of section 16 of the Trade Union Act of 1876 a trade union. It was a combination for regulating the relations between masters and masters. It was, further, a combination for imposing restrictive conditions on the conduct of a trade. It was such, because, by article 42, it restricted the right of the members to employ travellers— Mineral Water Bottle Exchange Society v. Broatch, 1887, 36 Ch D 465. It was also such, because by article 39 and bye-law 20 it prevented its members buying and selling bottles except under certain conditions and restrictions— Glasgow and District Potted Meat Manufacturers' Society v. Geddes, December 17, 1902, 10 S.L.T. No. 309; Chamberlain Wharf Co. Limited v. Smith [1900], 2 Ch. 605. Being a trade union its registration was void under section 5 of the Trade Union Act 1871, and it could not sue as a corporation. The association was illegal. Its power to fine was entirely contrary to the provisions of the statute. An agreement between members of a trade to combine for specified purposes tending to restrain trade was against public policy and illegal— Hilton v. Eckersley, 1853, 6 E. & B. 47, cited and recognised as establishing a rule of law in “ Mogul” Steamship Co., infra; M'Kernan v. United Operative Masons' Association, February 26, 1874, 1 R. 453, 11 S.L.R. 219. Where an association was illegal no agreement made by it could be enforced, whether its provisions were innocuous or not. One had not merely to look at the primary purposes of the association, but to the modes by which these purposes were to be given effect to. The association was tainted with illegality, and the Court would refuse to enforce its rules. When all the restrictions in its articles or bye-laws were taken into account, there could be no doubt that this association was in restraint of trade. No term of the agreement could therefore be enforced— Cullen v. Elwyn [1903], 19 T.L.R. 426. Even if the associatien was not illegal in toto, these rules which it sought to enforce were unduly in restraint of trade, and therefore illegal— Chamberlain Wharf Co., Limited, supra; Amalgamated Society of Railway Servants for Scotland v. The Motherwell Branch of the Society, June 4, 1880, 7 R. 867, opinion of Lord Young 873, 17 S.L.R. 607–611; Rigby v. Connel, 1880, 14 Ch D 482; Aitken v. Associated Carpenters and Joiners of Scotland, July 4, 1885, 12 R. 1206, 22 S.L.R. 796.

Argued for the pursuers and respondents—The association was not a trade union. The object of the Association was perfectly legal, viz., to enforce the provisions of the Merchandise Marks Act 1887 (50 and 51 Vict. c. 28). The Association was therefore carrying out a laudable purpose. A combination to prevent undue competition had been held legal— “Mogul” Steamship Co. v. M'Grigor, Gow, & Co., 1889, 23 Q.B.D. 598, aff. [1891], A.C. 25. An association with a legal object, viz., to assist in suppressing trading under false pretences, should not be branded as illegal. To make a society an illegal association its main object must be fundamentally illegal. Although with a view to the attainment of their legal object some restrictions were placed upon members in the conduct of their business inter se, these did not affect the public, and could not be held as contrary to public policy as being in restraint of trade. Such slight restraints for a legal object were not illegal, and did not make associations that worked under them trade unions. Even if some of the rules or bye-laws of the association were held to be illegal as in restraint of trade, that would not prevent the Court upholding the rules which were legal, or prevent the association receiving a sum of money payable under a rule to which no exception could be taken— Collins v. Locke, 1879, 4 App Cas 674; Swaine v. Wilson, 1889, 24 Q.B.D. 252.

At advising—