Scottish Court of Session Decisions

The Friendly Societies Act 1896 (59 and 60 Vict, cap. 25), section 78 (1), enacts—“Subject to the provision of this Act as to the dissolution of societies with branches, a registered society or branch may terminate or be dissolved in any of the following ways—…( c) as respects friendly societies or branches, by the consent of five-sixths in value of the members (including honorary members, if any) testified by their signature to the instrument of dissolution, and also by the written consent of every person receiving or entitled to receive any relief, annuity, or other benefit from the funds of the society or branch unless the claim of that person is first duly satisfied or adequate provision made for satisfying that claim, and in the case of a branch, with the consent of the central body of the society, or in accordance with the general rules of the society.’

The General Law 29 of the Ancient Order of Foresters Friendly Society provides, section 4—“The account of each Court fund shall be kept separate and distinct; and any Court appropriating any portion of the sick and funeral fund for any other purpose than paying the sick and funeral allowances claimable under the Rules … shall forfeit the money so appropriated to the High Court Relief Fund, to be recovered by legal process as a penalty.…” Section 6—“No Court shall divide any of its funds or any part thereof, which shall be devoted solely to carry out the objects of the Order.

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Any Court violating this section shall forfeit the money so divided to the High Court Relief Fund, to be recovered by legal process as a penalty …, and the Court shall also be fined £5, and 10s. per day until the money is paid into the said fund.”

The Special Rule 48 of the Court North Bute (No, 6216) of the Ancient Order of Foresters Friendly Society, provided—“That the Court may at any time be dissolved by the consent of the central body of the Order, and also the consent of five-sixths in value of the members, including honorary members if any, testified by their signature to some instrument of dissolution in the form provided by the Treasury Regulations in that behalf, and also by the written consent of every person for the time being receiving or entitled to receive any relief or benefit from the funds of the Court, unless the claim of such person be first duly satisfied, or adequate provision made for satisfying such claim; the value of members to be ascertained by giving one vote to every member, and an additional vote for every five years that he has been a member, but to no one member more than five votes in the whole.”

In August 1916 George Frederick Kelly and others, trustees of the Ancient Order of Foresters Friendly Society, registered under the Friendly Societies Act 1896, pursuers, brought an action in the Sheriff Court at Rothesay against Alexander Robertson Peacock and two others, trustees of the Court North Bute of the Order, William Dallas, secretary of that Court, James Wilson, its treasurer, and John Hogarth and another, two members of the Committee of Management, defenders.

The crave was—“To decern the defenders jointly and severally or severally to pay to the pursuers, as trustees foresaid, the sum of £715, 8s. 3d. sterling, with interest thereon, being the amount of funds belonging to the said Court North Bute, a branch of the Ancient Order of Foresters Friendly Society, and misapplied or misappropriated by the said Court and the defenders from the objects for which said funds were to be used, contrary to the General Laws of the said Ancient Order of Foresters Friendly Society and the Friendly Societies Act 1896, for which misapplication or misappropriation the said Court and the defenders are liable to pay the amount foresaid to the pursuers, and to find the defenders liable in expenses.”

The pursuers pleaded, inter alia—“1. The alleged dissolution of the said Court North Bute being invalid and inept, the said Court still remains a registered branch of the pursuers' society, and the actings of the said Court and the defenders, following on said illegal and invalid dissolution, were illegal and contrary to the Friendly Societies Act and the general laws of the pursuers' friendly society. 2. The said Court North Bute being still a subsisting branch of the pursuers' friendly society, the said Court and the defenders or any one of them, were not entitled to appropriate and divide the funds of the said branch or to dispose of or deal with the same except under the general laws of the pursuers' friendly society, and being liable to restore the said funds decree should be granted as craved with expenses. 3. The said Court and the whole defenders having acted with the said funds, being the amount sued for, contrary to the general laws of the pursuers' friendly society and in breach of trust are liable personally in reparation therefor, and decree should be granted as craved, with expenses.”

The defenders pleaded, inter alia—“3. The pursuers' averments being irrelevant to support the conclusions of the initial writ, the action should be dismissed. 4. Mora, acquiescence, and taciturnity.”

The facts are given in the note ( infra) of the Sheriff-Substitute ( Martin), who, on 8th December 1916, found that the pursuers by their actings were personally barred from instituting the proceedings, sustained the defenders' fourth plea-in-law, and dismissed the action.

Note.—“This is an action at the instance of George Frederick Kelly and three others, trustees of the Ancient Order of Foresters Friendly Society, which has its head office in London, against (1) Alexander Robertson Peacock, plumber, Rothesay, and two others, who are designated as trustees of Court North Bute, No. 6216 (a branch of the said Ancient Order of Foresters), (2) against the treasurer and the secretary of the said branch, and (3) against two members of the committee of management of the said Court, and the crave of the initial writ is that the defenders should be decerned, jointly and severally, to pay to the pursuers, as trustees aforesaid, the sum of £715, 8s. 3d.

The circumstances under which the present claim is made are as follows:—Court North Bute, No. 6216, was constituted in or about April 1876, and it seemed to have carried on its work successfully until 1912, when the National Insurance Act came into operation.

On 31st December of that year the Court, through their law agent, intimated to the secretary of the Foresters' Association that in consequence of the Insurance Act they were unable to carry on their work satisfactorily and that they proposed to dissolve. They further asked if the consent of the High Court was necessary, and if so, what steps should be taken to obtain it.

A reply was sent to this letter on 8th January 1913, stating that the Court could not be allowed to dissolve, and referring to certain of the General Rules as to the disposal of the funds of the Court.

To this letter the Court replied on 9th January 1913 that under the rules a Court might, with the necessary consents, be dissolved at any time, and asking why in this case the Executive Council refused their consent. As no reply was sent to this letter, the Court on 6th February again wrote to the secretary of the Society stating that if no satisfactory reply was given to their letter of 9th January 1913 the Court at its next meeting would proceed to dissolve.

On February 13th, 1913, the secretary of

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the Association wrote saying that Court North Bute could not divide the funds among its members, and if they did so, the funds so divided would be forfeited to the High Court, but still evaded answering the questions asked in the Court's letter of 9th January. (Now it may be noted in passing that up to this time there had been no suggestion of a division of the funds; all that the Court had asked was how they could competently dissolve, and upon what grounds the Executive Council refused their consent to this being done.)

On 22nd February 1913 the Court wrote that it did not intend to secede but to dissolve, and that the instrument of dissolution required by the Friendly Societies and Treasury Regulations had been signed by the requisite number of members. To this a reply was sent by wire, ‘No branch has power to dissolve, funds illegally divided will be forfeited.’ Various other letters passed between the parties on the same lines as those already referred to, but on 17th March 1913 the Court wrote that they had been informed by the Registrar of Friendly Societies that there had been several cases in which courts of the ‘Foresters’ had been dissolved by instrument of dissolution, and they again asked for the consent of the central body.

On 25th March 1913 the Court, in answer to a request for information for the directory, replied that as the Court had been dissolved, there was no information to send.

On 28th March the Court again wrote asking whether, irrespective of any division of the funds, the High Court would sanction the dissolution of Court North Bute. If information was supplied on this point, the question of the division of the funds would then be taken up. The reply to this was as formerly, that no dissolution could be sanctioned, but the Council still refused to assign any reasons. On 21st April the Court again wrote re-asserting that as Courts had been dissolved in the past, the Executive Council had the power to allow the Courts to dissolve if they chose to do so, and they again reminded the Council that the Court had been dissolved, and that no business was being carried on by it. They further asked the Council if they had any proposals to make, or if they intended to take any action in the matter. In reply to this the Council on 23rd April 1913 repeated their contention of inability to sanction the dissolution of a Court, and they stated that if the funds of the Court were divided, steps would be taken to recover the divided money.

As the Court was getting tired of the evasive replies of the Council, they formally intimated, by letter of 29th May 1913, that the moneys would be divided on 8th July, and that if the Council wished to take proceedings to stop the division of the money they must commence these before that date.

On the 3rd June 1913 the Court again wrote repeating the notice in their letter of 29th May, and adding, ‘We wish to give you every opportunity of proving your position,’ and they further stated that they would found on this intimation in any future proceedings, and also on the fact that the Council declined to take any steps to prevent the distribution of the funds. It would appear from answer 4 of the closed record that Court North Bute, No. 6216, resolved to dissolve on 2nd July 1912, that the consent of all the members was obtained to this dissolution, and it further appears that upon that date the Court ceased working.

In order to allow the Executive Council full time to consider what they would do in the matter, and to give them an opportunity of staying the distribution of the funds by interdict or otherwise, the Court allowed eleven months to elapse before they proceeded to make any division of the money, and even then they only made a nominal division of 2s. 6d. to each member, which payment was duly intimated to the Executive Council, and this intimation was duly acknowledged. Again a considerable time was allowed to elapse before any additional payment was made to members, in order to allow the Executive Council a further opportunity of taking action if so advised.

After the lapse of sixteen months, and as no proceedings had been instituted, the Court came to the conclusion that the Executive Council acquiesced in what was being done, to the extent at least of not offering any active opposition to it, and so in September 1915 a further distribution of the funds among the members was made. Still the Executive Council remained inactive, and in March 1916 the balance of the fund was paid over to the members. The Court alleges that the total fund thus distributed was £687, 13s. 8d., and not £713, 8s. 3d. as claimed by the Executive Council.

The claim of the pursuers in the present action is that the defenders should be decerned, jointly and severally, to pay to them the sum sued for, being the amount of the funds belonging to Court North Bute, which they allege the defenders misappropriated or misapplied.

While neither party has formally renounced probation, it was stated at the Bar that both sides were desirous that I should dispose of the case on the closed record, the correspondence, and the documents in process. I am prepared to do so.

The pursuers practically base their case on the ‘General Laws’ of the Foresters Society, as contained in a somewhat bulky volume, but before we reach the consideration of these laws and the interpretation put upon them by the pursuers it is necessary to consider and to dispose of the defenders' fourth plea-in-law, because if I see my way to sustain it, there is an end of the present action.

That plea is ‘ Mora, acquiescence, and taciturnity,’ and these three may be conveniently grouped under the general plea of ‘personal bar.’ The defenders' fourth plea might thus be stated in these terms—The pursuers are personally barred by their actings from pursuing the present action.

In the House of Lords, Lord Chancellor Campbell, in the case of Cairncross,

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1860, 3 Macq. 827, thus defined ‘personal bar’—‘If a man either by words or conduct has intimated that he consents to an act that has been done, and that he will offer no opposition to it although it could not have been done lawfully without his consent, and he thereby induces others to do that from which they might otherwise have abstained, he cannot question the legality of the act he has so sanctioned, to the prejudice of those who have so given faith to his words, or to the fair inference which is to be drawn from his conduct.’ Many other dicta to the same effect might be cited from the reported cases on ‘personal bar,’ but the passage above quoted is exceptionally clear and authoritative.

Let us now consider how the rules above expressed apply to the facts of the present case.

Have the pursuers by their conduct ‘induced’ the defenders ‘to do that from which they might otherwise have abstained’? My view of the correspondence and the averments on record is that they have. It cannot be disputed that from beginning to end the defenders have acted in a perfectly open and straightforward manner. They duly intimated to the pursuers what they were proposing to do, and their reasons for doing it, and they even consulted them as to how their purpose could be carried out to the satisfaction of all concerned. And here I may refer to what I may term the fallacy which, in my view, has run through the whole of these negotiations, and which I was rather surprised to hear revived again in the debate, and that is the persistent mixing up by the pursuers of dissolution and the division of funds. It may suit the pursuers' case to confuse the two, but in my view it is unwarranted by their General Laws. The correspondence further establishes, I think, that when the defenders discussed among themselves the question of dissolution, and when they finally decided that it was necessary for them to adopt this course, they had given no consideration to the question of how the funds of the Court should be dealt with. That point only arose after the dissolution proceedings had been carried through.

The pursuers were duly informed that ‘Court North Bute’ had de facto dissolved. They were also informed that on 8th July 1913 a division of the funds would take place, and they were called upon, by letter of 29th May 1913, if they objected to what was being done, to take proceedings before the money was actually divided.

Surely this was the proper time for the pursuers, if they seriously challenged the defenders' actings to take proceedings by interdict or otherwise, to prevent them from committing what they persistently term throughout the whole correspondence ‘an illegal act,’ but they did nothing.

Eleven months were allowed to elapse to give the Executive Council an opportunity of taking proceedings before any distribution of the funds was made, and then, after due intimation to the pursuers, a small sum was paid to each member.

On 2nd June 1913 the pursuers' secretary had written to the defenders—‘We cannot move in the matter until such illegal division takes place.…’ In May 1914 what the pursuers term an ‘illegal division’ actually took place; and one would certainly have expected if their letter of 2nd June 1913 had any meaning that proceedings would at once have been instituted. Again, however, nothing was done. Still, to keep themselves on the safe side, the defenders allowed sixteen months to elapse before making any further distribution of funds, to give the Executive Council full time to take the promised or threatened proceedings against them. Again as on the previous occasion nothing followed, and as the defenders state in answer 4 they assumed that no objection was to be taken to the distribution and division of their funds by the Executive Council. They still had money in hand, but they prudently allowed another six months to elapse to give the pursuers a final chance of taking action before they distributed the remaining balance in March of the present year.

The defenders' actings have been characterised by the utmost deliberation from beginning to end. They have kept the pursuers fully informed of what they proposed to do, and of what from time to time they were doing, but the pursuers took no action. They allowed what they term an ‘illegal act’ of which they were fully aware to proceed step by step; they tacitly acquiesced in the funds of this Court being distributed among its members by abstaining from taking any proceedings to interdict the defenders; and it is only six months after the whole funds have been distributed, and three and a-half years after they were made aware of what the defenders proposed to do (for the correspondence begins in December 1912), that the present action is raised.

In these circumstances it seems to me that the principle laid down in Lord Chancellor Campbell's opinion in the case of Cairncross above cited is directly applicable.

In my view the pursuers might have tested the validity of their contention in the present action at any time after December 1912, when they were made aware of what the defenders proposed to do, and on their own admission (see letter of 2nd June 1913) they could have done so any time after the first division of the funds took place (May 1914). By their failure to take action they practically ‘consented’ to ‘an act which had been done,’ and when sixteen months were allowed to elapse and no proceedings were taken, and when the pursuers were aware that further distributions were to be made, I think the defenders were justified in believing that the pursuers would ‘offer no opposition’ to these. If this be so, then the ‘conduct’ of the pursuers as distinguished from their letters has ‘induced’ the defenders ‘to do that from which they might otherwise have abstained,’ and the pursuers ‘cannot question the legality of the acts’ they have ‘so sanctioned to the prejudice of those who have so given faith … to the fair inference which is to be drawn from' their

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‘conduct.’ In my view therefore the pursuers are personally barred by their actings from maintaining the present action, which accordingly fails.

I refer also to the case of Pembery, H.C. of J., Chancery Division, 18th December 1914. That case in many respects closely resembles the present, and a copy of the judgment is in process.”

The pursuers appealed to the Second Division of the Court of Session.

At advising—