Scottish Court of Session Decisions

(See Incorporation of Cordiners of Edinburgh, Petitioners, March 9, 1907, 44 S.L.R. 495.)

On 26th February 1910 the Incorporation of Cordiners of the City of Edinburgh, and Charles Wilfred Allan, deacon, and Joseph Park, treasurer thereof, as representing the Incorporation, presented a petition under the Burgh Trading Act 1846 (9 and 10 Vict. cap. 17), sec. 3, for the sanction of alterations in the bye-laws.

The facts as to the presentation of a former petition by the Incorporation appear from the former report (44 S.L.R. 495).

The facts as to the presentation of the present petition appear from the following report of Mr Robert Addison Smith, Registrar of Friendly Societies in Scotland, to whom, on 15th March, the Court remitted the petition for report:—“Since the judgment of the Court in 1907 the membership of the Incorporation has risen from six to twelve, including one member who has been admitted since the present petition was presented to your Lordships, three members being in benefit, and the number of widows entitled to annuities has risen from one to two. The petitioners maintain that the Incorporation must be dealt with on the footing that its position as one of the ancient trading incorporations of Scotland is in no way abnormal when compared with other incorporations whose rules have been amended and approved by the Court. As regards the benefits, the amount of the respective benefits payable to those in benefit is not stated in the rules, although the amount of entrance moneys payable is fixed and stated in the rules. The practice has been to alter from time to time the benefits payable to those in benefit by resolution of the Incorporation following upon the report of a professional accountant, without obtaining the sanction of the Court in accordance with the following bye-laws dealing with benefits, viz. — … In accordance with the provisions contained in these bye-laws the Incorporation obtained a report from the late Mr J. A. Robertson-Durham, C.A., Edinburgh, on the state of its affairs as at 7th June 1909, with a view to the raising or diminishing of the annuities payable to those in benefit. He reported as follows:—‘If there is no further litigation or legal expenditure, and if the sums spent on repairs during the next five years do not exceed the sums spent on repairs during the past five years, and the accountant is assured that there is no probability of their doing so, the net income of the next five years may be estimated at not less than £6450. The accountant therefore sees no reason why the Incorporation should not increase the annuities for the next five years. If the maximum annuity is increased by £30 per annum, from £180 to £210, the liabilities for the next five years calculated in the same manner as in appendix No. II. would amount to £6050. If the maximum annuity is increased by £40 per annum—from £180 to £220 per annum—the liabilities calculated in the same manner as in appendix No. II. would amount to £6400. The accountant has no hesitation in recommending an increase by £30 from £180 to £210, but if the Incorporation wishes to increase from £180 to £220 in all probability they will be safe to do so, but with such a comparatively small number of lives to deal with, there is a risk—a very slight one, however—of the expenditure exceeding the income.’ The Incorporation at a meeting held on 3rd August 1909 unanimously resolved to increase the annuity payable for the following five years to members and widows entitled to full annuity from £180 to £220, subject to deduction of income tax, the payments to those entitled to partial annuity being increased in the same proportion.…

“The proposed increases in the entrance fees are as follows—

1. By entrants at the Far Hand.

Not exceeding 25 years of age, from £110 to £440 0 0

Exceeding 25 and not exceeding 30, from 125 to 586 13 4

Exceeding 30 and not exceeding 35, from 145 to 733 6 8

Exceeding 35 and not exceeding 40, from 160 to 916 13 4

Exceeding 40 and not exceeding 45, from 165 to 990 0 0

2. By Freemen's Sons and Sons-in-law.

Not exceeding 21 years of age, — from £3110/-to £115 10/- Exceeding 21, additional for

each year of excess, from 2 2/- to 7 7/-

These increases are a considerable advance upon the entrance fees imposed in 1850, but they are very much less than the entrance fees proposed in the petition of

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1904, which were disapproved of by the Court and its sanction withheld.

It is urged by the petitioners that the increases are justified in respect (1) of the usages of this and other similar incorporations; (2) of the largely increased benefits; and (3) that the Court has sanctioned increases as large in the case of other incorporations.

In regard to these propositions, the reporter begs to say that while it is a fact that a number of other incorporations have carried through alterations of their rules for securingan increase in the entry-moneys payable by entrants both at the near hand and the far hand, in none of the alterations of rules which were sanctioned by the Court was any compearance made to oppose the prayers of the respective petitions.

A petition at the instance of the Baker Incorporation of Perth was presented to your Lordships of the First Division on 26th January 1906 (subsequent to the decision in Allan's case), for sanction of increase of rates of entry-money. The rate in the case of entrants at the far hand was relatively much higher in proportion to benefits than the rates proposed in the present petition. The increases proposed by the Incorporation were sanctioned by your Lordships.

The Aberdeen Shoemakers' Incorporation petition was presented to their Lordships of the Second Division on 15th October 1909 (subsequent to the decision in Allan's case), for an increase of the dues payable by entrants. The increase of dues proposed by the society was sanctioned. They were relatively higher in proportion to benefits than the rates proposed in the present petition in proportion to benefits.

In the case of some incorporations there is in the rules an absolute power of admission or rejection of entrants at the far hand. The Incorporation of Maltmen in Glasgow is an instance of this, its rules, including such power, having been sanctioned by the Court on 25th May 1852, again on 27th June 1885, and again on 11th July 1905.

With the approval of the petitioners the reporter has consulted Mr Thomas Wallace, actuary, Edinburgh, who was also consulted by Sir Chares Logan in 1906, and Mr Wallace reports as follows—

“‘The benefits which were payable in 1850, and those which are payable now, are as follows—

	Benefits payable in 1850.			Benefits now payable
1. To members of 15 years' standing and 50 years of age an annuity of	£10	0	0	£110	0	0
Rising by annual increments of	2	0	0	22	0	0
To a maximum of at the age of 55.	20	0	0	220	0	0
2. To widows of members an annuity of	20	0	0	220	0	0
Suspended during the subsistence of a second marriage — the widow of a second marriage receiving only two-thirds of this benefit
3. To each fatherless child under 13 years of age, a yearly allowance of	2	13	4	29	6	8
4. To each orphan child under 14 years of age, a yearly allowance of	£6	13	4	£73	6	8
Restricted to a total per family of Benefits 2, 3 and 4 commence not sooner than 7 years after date of member's admission.	20	0	0	220	0	0
5. Funeral money payable on death of member	15	0	0	15	0	0
6. Funeral money payable on death of member's wife or widow	15	0	0	15	0	0

It is important to note in regard to the annuities payable by the Incorporation that — (1) They are not of fixed amount which each beneficiary may rely upon receiving without variation. On the contrary, the amount is subject to increase or decrease from time to time as circumstances require. (2) They are payable entirely out of income, sec. 27 of the bye-laws and regulations expressly providing that “the capital stock belonging to the Incorporation shall not be encroached upon, and that with this view the annuities and allowances shall be calculated at the periodical investigation so as to be met by the annual revenue.” (3) The entrance fees received by the Incorporation from new entrants are allocated to capital, and are not themselves available to meet the future benefits which may become payable—not even the future benefits which may become payable to the new entrants themselves. The income from the existing funds, augmented as it will be by the income from the entrance fees, is only available for that purpose.

Under these conditions there is a possibility that by a decrease in the number of annuitants or an increase in the annual income produced by the accumulated funds of the Incorporation, there may be hereafter an increase in the amount of the benefits, but there is also a possibility that by an increase of the number of annuitants, or a decrease in the annual income, there may be hereafter a decrease in the amount of the benefits.

The actuary, having perused the documents submitted to him, and having made the necessary calculations and given due consideration to the points hereinbefore mentioned, is of opinion that, making ample allowance for a possible reduction in the amount of the benefits hereafter payable, the proposed increased dues of entry, being substantially less than the value of these benefits, are moderate in view of the pecuniary advantages likely to be obtained by an entrant member and his family.’

At several meetings which the reporter had with the agents for the petitioners it was urged upon him that although in the course of the proceedings in the petition of 1904 and in the case of Allan v. The Incorporation ( 1907 S.C. 654 and 665) the question whether the power of the Incorporation to raise the rates of entry-money was subject to the general condition that the rates should not be increased to such a figure as to make entrance of new members into the Incorporation prohibitive was discussed,

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no indication was given by the Court as to what amount would be considered prohibitive other than what was to be inferred from the general statement by Lord M'Laren in the case of Allan, supra, viz. — ‘That there should be a proper table of fees which on the one hand would not be so low in amount as to tempt so large a number of members to enter as to make it unworkable, and again would not be so high as to keep people out altogether.’

The reporter ventures respectfully to say that those incorporations which in old times were described as ‘close corporations’ still remain close corporations excepting in so far as the rights of exclusive trading are concerned; and the conditions of skilled craftsmanship remain to a considerable extent an obstacle to an increase in numbers as well as the money conditions imposed on joining.

The difference in the position of the petitioners to-day when compared with their position when they last petitioned your Lordships in 1904 may be stated thus—

1. The number of members has increased from six to twelve.

2. The percentages of increase on the proposed entrance fees are—

		Proposed under this petition.	Proposed under 1904 Petition.
1.	By entrants at the far hand (average)	420 p.c.	751 p.c.
2.	By freemen's sons and sons-in-law	266 p c.	500 p.c.
3.	By sons and sons-in-law of members on the roll at 11th November 1849	No increase	750 p.c.

3. The benefits have increased thus — “Annuities to widows and old members £220, as compared with £20 in 1850 and £180 in 1904.”

At advising—