Chap. Directors borrowing money without authority have in several XXVI. (i.) cases been held personally liable for the amount borrowed even in the absence of any fraud on their part (p). how far. Liability of directors for unauthorized borrowing. ii. As to Incorporated Building Societies.-By the Building Repeal of former Acts, Societies Act, 1874 (q), the statute 6 & 7 Will. IV. c. 32, is repealed, but this repeal is not to affect any subsisting society certified under the repealed Act, until such society shall have obtained a certificate of incorporation under the Act of 1874 (r), and is not to affect its past operation, or the force or operation, validity, or invalidity of anything done or suffered, or any bond or security given, or any right, title, obligation or liability accrued, or any proceedings taken, thereunder, or under the rules of any society which has been certified thereunder. Incorporation of societies. Power to borrow. Every society subsisting at the date of the commencement of the Act of 1874 (s), or thereafter established, upon receiving a certificate of incorporation under the Act, is to become a body corporate by its registered name, having perpetual succession, until terminated or dissolved as provided in the Act, with a common seal (t). The Court has no power to declare the incorporation of a society void (u). Incorporated building societies, whether originally formed under the Act of 1836 or since the Act of 1874 came into operation, are governed by the Act of 1874, as amended by the Acts of 1875 (x), 1877 (y), 1884 (≈), and 1894 (a), and by the regulations issued by the Secretary of State under sect. 44 of the Act of 1874. An incorporated benefit building society has no power to borrow money, except so far as authorized by statute and by its rules (b); and if the limits of the power are exceeded, the loan will create See also Baroness Wenlock v. River Dee (p) Collen v. Wright, 8 E. & B. 301; (t) 37 & 38 Vict. c. 9, s. 9. The form of a certificate of incorporation is given in the Schedule to the Building Societies Act, 1877 (40 & 41 Vict. c. 63). (u) Glover v. Giles, 18 C. D. 173. (x) 38 & 39 Vict. c. 9. (y) 40 & 41 Vict. c. 63. (z) 47 & 48 Vict. c. 41. (a) 57 & 58 Vict. c. 47. (b) Re Kent Benefit Building Soc., 1 Dr. & S. 417; Re National Permanent, &c. Society, L. R. 5 Ch. 309; Laing v. Reed, L. R. 5 Ch. 4. Chap. no liability against the society (c), though the directors may be personally liable (d), and deeds, deposited as securities by a XXVI. (ii.) society in such a case, will not be ordered to be delivered up (e). The power of incorporated societies to borrow money is Statutory regulated by the 15th section of the Act of 1874, which borrowing contains the following provisions: "With respect to the borrowing of money by societies under this Act, the following provisions shall have effect: (1.) Any society under this Act may receive deposits or loans at interest within the limits in this section provided from the members or other persons, or from corporate bodies, joint stock companies, or from any terminating building society, to be applied to the purposes of the society: (2.) In a permanent society the total amount so received on (3.) In a terminating society, the total amount so received (5.) Every deposit book or acknowledgment, or security of any By sect. 1 (h) of the Building Societies Act, 1894 (g), (repealing but virtually re-enacting sect. 16 (2) of the Act of 1874), the rules of every society shall set forth whether the society intends to avail itself of the borrowing powers contained in the Act, and, if so, within what limits not exceeding the limits prescribed by the Act; and where the original rules of a society are altered, the altered rules must similarly set forth whether the society intend to borrow. powers of incorporated societies. Limit of borrowing powers. Sect. 43 provides that "if any society under this Act receives Personal (c) Moye v. Sparrow, 18 W. R. 400; Re Durham County Bldg. Soc., L. R. 12 Eq. 516. (d) Wurtzburg (4th ed.), p. 108. But see Wurtzburg, p. 108. (f) Sect. 14 relates to the liability of members. (g) Regulations of 1884, r. 5. liability of Chap. loans or deposits in excess of the limits prescribed by this Act, XXVI. (ii) the directors or committee of management of such society receiving such loans or deposits on its behalf shall be personally liable for the amount so received in excess (h). directors for exceeding powers. Alternative limits in case of terminating society. Amount for secured by mortgages from members. 99 A terminating society may adopt by its rules either of the two alternative limits provided by sect. 15, but the alternative so adopted will be the limit prescribed by the Act within the meaning of sect. 43; if such limit is exceeded, the directors will be liable for the excess, even though the other alternative limit is not exceeded (i). In ascertaining the "amount for the time being secured to the time being the society by mortgages from its members" within the meaning of sect. 15, sub-sect. 2, such amount is not to be restricted to the amount of principal secured, but includes the whole amount due on the securities of members at the time of the loan to the society for principal, interest, fines, or otherwise, and all instalments not then due, secured by the mortgages (k); and that whether or not the advances so secured were made in respect of shares (1). Amount borrowed. Overdrawn banking account. Limits of borrowing power. In ascertaining the limits of the statutory power of borrowing, the total amount borrowed from all sources must be included (m). An overdrawn account with a banker secured by deposit of title deeds is a loan within sect. 15 of the Act (n). By sect. 14 of the Building Societies Act of 1894 (o), it is enacted as follows: "In calculating the amount for the time being secured to a society under the Building Societies Acts by mortgages from its members, for the purpose of ascertaining the limits of its power to receive deposits or loans at interest, the amount secured on properties, the payments in respect of which were upwards of twelve months in arrear at the date of the society's last preceding annual account and statement, and the amount secured on properties of which the society had been twelve months in possession at the date of such account and statement, shall be disregarded. "Provided that this section shall not affect the validity of any deposit or loan which was within the limit provided by law at the Chap. time when it was received, and, so far as regards any amount secured either on properties, the payments in respect of which are XXVI. (ii.) upwards of twelve months in arrear at the passing of this Act, or on properties in the possession of the society at the passing of this Act, shall not come into operation until the expiration of three years from the passing of this Act." It is to be observed that neither the Act of 1836 nor the Act Securities societies. of 1874 expressly empowered building societies to mortgage their by building property as a security for deposits or loans, but the reference to "securities" in sect. 15 appears impliedly to give this power, and the existence of the power is, in practice, assumed without question (p). Securities given by a building society may be enforced against Enforcement the society, although sects. 14 and 15 are not indorsed thereon. of security. Sub-sect. (5) of sect. 15 of the Act of 1874 is directory only, and an omission to comply with its requirements will not vitiate a security given by a building society for a loan (q). land and iii. As to Friendly Societies.-By the Friendly Societies Power to hold Act, 1896 (r), a friendly society, or any branch of such society, mortgage. may, if the rules thereof so provide (and with a limitation as to benevolent societies), hold, purchase, or take on lease, any land in the names of its trustees for the time being, and may mortgage the same, and no mortgagee shall be bound to inquire as to the authority for any mortgage by the trustees, and the receipt of the trustees shall be a discharge for all moneys arising from or in connection with such mortgage. (p) See also sect. 19 of the Act of 1874. (q) Re Guardian Permanent Benefit Building Soc., Hawkins' Case, 23 Ch. D. (r) 59 & 60 Vict. c. 25, s. 47. VOL. I.-C. I I CHAPTER XXVII. OF MORTGAGES BY COMPANIES. Distinction between companies incorporated by charter and by statute. Charter companies. Statutory companies. SECTION I. OF THE BORROWING POWERS OF COMPANIES. i. Of the Power of Companies to Borrow generally.-With regard to the powers of companies to borrow money on mortgage, a distinction must be drawn between companies which are incorporated by charter, and companies which are created by statute (a). Companies incorporated by charter, being corporations at common law, may, by instruments under their common seal, except so far as prohibited or controlled by their charter of incorporation, dispose of their property, by way of mortgage or otherwise, as freely and fully as individuals (b). But statutory companies, whether created by private Acts or under the general Companies Acts, are not common law corporations, and, accordingly, derive their powers of mortgaging or otherwise dealing with their property from their instruments of incorporation. Companies of the former class, therefore, have no powers beyond such as are expressly or by necessary implication conferred by the special Acts to which they owe their existence (c). But if no express borrowing powers are given by the particular Act such powers may be implied, if the raising of money by loan is necessary for the furtherance of the objects of the company as defined by that Act (d). (a) See Buckley on Companies (6th ed.), p. 15. (b) Sutton's Hospital Case, 10 Rep. 1; Riche v. Ashbury Railway Carriage Co., L. R. 9 Ex. 224, 263. (c) Lady Wenlock v. River Dee Co., 38 Ch. D. 534, C. A. (d) Per Lord Cranworth in Hawkes v. Eastern Counties Rail. Co., 5 H. L. C. 331; per Lord Selborne in Blackburn Building Society v. Cunliffe, Brooks & Co., 22 Ch. D. 61, at p. 70, C. A. And see per Lord Blackburn in Lady Wenlock v. River Dee Co., 10 App. Ca. 354, at p. 360. |