The rules of an unincorporated building society may authorize CHAP. XXVI. the directors to borrow money for the purposes of the society Where rules without imposing any limit as to the amount to be so borrowed; give unlimited and loans contracted under such rules are valid (ƒ). power to borrow. power to If the rules give to the directors of an unincorporated society Where rules a power to borrow, limited as to amount, the society will not be give limited liable for any loan in excess of the prescribed limit (g). So, borrow. also, if the rules authorize the directors to raise money for certain specified purposes only, a loan for other purposes will create no liability against the society (). A person lending money to the society is affected with notice of the limitation of borrowing powers imposed by the rules (). An unincorporated society has no power to borrow money Where rules unless authorized by its rules, either expressly or by necessary to borrow. give no power implication, by reason of such borrowing being properly incident to the course and conduct of the business for its proper purposes, as indicated by the rules (k). It must be borne in mind that from the 2nd November, 1874, to the 22nd April, 1875, unincorporated societies certified under the repealed Act, 6 & 7 Will. IV. c. 32, were deemed to be societies under the Act of 1874 (1), and accordingly had power to borrow within the limits prescribed by the later Act, though no express borrowing powers were given by the rules. powers ac Where a society has no power to borrow at the time of the Borrowing loan, any security given for the money borrowed after borrowing quired after powers have been obtained will be void (m). date of loan. Where officers of a society borrow without authority, they Subrogation. may be entitled to the benefit of the equitable doctrine of subrogation, that is to say, that if they make payments for purposes of the society out of the borrowed moneys, they may stand in the place of the persons to whom the payments were made, and to claim against the society for the amounts so paid (n). (f) Murray v. Scott, 9 App. Cas. 519. (g) Chapleo v. Brunswick Building Soc., 6 Q. B. D. 696, C. A. (h) Davis' Case, L. R. 12 Eq. 516; Moye v. Sparrow, 22 L. T. 154. (1) Per Baggallay, L. J., in Chapleo v. Brunswick Buiding Soc., 6 Q. B. D. at p. 712. See also Portsea Island Building Soc. v. Barclay, (1894) 2 Ch. 298, C. A. (k) Cunliffe, Brooks & Co. v. Blackburn Benefit Building Soc., 9 App. Cas. 857, 865. See Richardson v. Williamson, L. R. 6 Q. B. 276; Re National Permanent Benefit Building Soc., Exp. Williamson, L. R. 5 Ch. A. 309; (7) See 37 & 38 Vict. c. 42, s. 8, (m) Exp. Watson, 21 Q. B. D. 301. See Re Bottom Gate Industrial Soc., 40 W. R. 139. (n) Owen v. Roberts, 57 L. T. 81. See also Baroness Wenlock v. River Dee Co., 19 Q. B. D. 155, C. A. CHAP. XXVI. Liability of directors for unauthorized borrowing. Repeal of Directors borrowing money without authority have in several cases been held personally liable for the amount borrowed even in the absence of any fraud on their part (o). ii. As to Incorporated Building Societies. By the Building former Acts, Societies Act, 1874 (p), the statute 6 & 7 Will. IV. c. 32, is how far. Incorporation of societies. Power to borrow. 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 (q), 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. Every society subsisting at the date of the commencement of the Act of 1874 (), 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 (s). The Court has no power to declare the incorporation of a society void (f). 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 (u), 1877 (x), 1884 (y), and 1894 (≈), and by the regluations 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 (a); (0) Collen v. Wright, 8 E. & B. 301; (s) 37 & 38 Vict. c. 9, 8. 9. The form 59. (t) Glover v. Giles, W. N. (1881) (u) 38 & 39 Vict. c. 9. (a) Re Kent Benefit Building Soc., 1 Dr. & S. 417; Re National Permanent, &c. Society, L. R. 5 Ch. A. 309; Laing v. Reed, L. R. 5 Ch. A. 4; Moye v. Sparrow, 18 W. R. 400; Re Victoria Permanent, &c. Society, Hill's Case, L. R. 9 Eq. 605; Durham Co., &c. Building Soc., L. R. 12 Eq. 516. but deeds, deposited as securities by such a society, will not be ordered to be delivered up (b). CHAP. XXVI. The power of incorporated societies to borrow money is regu- Statutory lated by the 15th section of the Act of 1874, which contains the borrowing 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 "(3.) In a terminating society, the total amount so received "(4.) Any deposits with or loans to a society under this Act, made before the commencement of this Act in accordance with its certified rules, are thereby declared to be valid and binding on the society; but no further deposits or loans are to be received by such society except within the limits provided by this section: "(5.) Every deposit book or acknowledgment, or security of any kind given for a deposit or loan by a society, shall have printed or written therein or thereon the whole of the 14th and 15th sections of the present Act" (c). powers of incorporated societies. powers. By sect. 1 (h) of the Building Societies Act, 1894 (d), Limit of (repealing but virtually re-enacting sect. 16 (2) of the Act of borrowing 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. Sect. 43 provides that "if any society under this Act receives Personal loans or deposits in excess of the limits prescribed by this Act, directors for liability of the directors or committee of management of such society exceeding powers. (b) Wilson's Case, L. R. 12 Eq. 516. (e) Sect. 14 relates to the liability of members. (d) Regulations of 1884, r. 5. CHAP. XXVI. receiving such loans or deposits on its behalf shall be personally liable for the amount so received in excess (e). Alternative limits in case of terminating society. Amount for secured by mortgages from members. 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 (ƒ). 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 (g); and that whether or not the advances so secured were made in respect of shares (h). 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 (i). An overdrawn account with a banker secured by deposit of title deeds is a loan within sect. 15 of the Act (k). By sect. 14 of the Building Societies Act of 1894 (7), 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 time when it was received, and, so far as regards any amount secured either on properties, the payments in respect of which are 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." CHAP. XXVI. It is to be observed that neither the Act of 1836 nor the Act Securities by building of 1874 expressly empowered building societies to mortgage societies. their 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 (m). of security. Securities given by a building society may be enforced against Enforcement the society, although sects. 14 and 15 are not indorsed thereon, the enactment in sect. 15 directing this to be done being only directory (n). 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 (0). land and iii.-As to Friendly Societies.-By the Friendly Societies Act, Power to hold 1875 (p), a friendly society, or any branch of such society, may, mortgage. 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, in every county where it has an office, 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. (m) See also sect. 19 of the Act of 1874. (n) Re Guardian Permanent Benefit Building Soc., Hawkins' Case, 23 Ch. D. 440, C. A. (0) Ibid. at p. 452. |