Irish Civil Service Building Society v Registrar of Friendly Societies

• Jurisdiction: Ireland
• Judgment Date: 24 July 1985
• Date: 24 July 1985
• Docket Number: [1984 No. 742 Sp.]
• Court: Supreme Court

High Court

Supreme Court

[1984 No. 742 Sp.]

Irish Civil Service Building Society v. Registrar of Friendly Societies

In the matter of the Building Societies Act, 1976, Irish Civil Service Building Society

Plaintiff

and

The Registrar of Friendly Societies

Defendant

Cases mentioned in this report:—

Murray v. Scott (1884) 9 App. Cas. 519.

Irish Permanent Building Society v. Cauldwell [1981] I.L.R.M. 242.

Ireland Benefit Building Society v. Registrar of Building Societies [1981] I.L.R.M. 73.

Building society - Alteration of rules - Registration of alterations by Registrar of Building Societies - Function of Registrar - Alterations 'in accordance with' the Act - Statutory definition of building society - Rule making powers of building society - Separate classes of shares with different voting rights - Separate categories of directors - Alternate directors - Proposed Merger or Takeover Conditional Order, 1984 (S.I. No. 217) - Building Societies Act, 1836 - Building Societies Act, 1976 (No. 38), s. 12 - Mergers, Takeovers and Monopolies (Control) Act, 1978 (No. 17) s. 5.

Special Summons.

The plaintiff building society was deemed, by virtue of s. 97, sub-s. 2, of the Building Societies Act, 1976, to be incorporated under that Act. The capital of the plaintiff was made up of approximately £20 million in 'investment shares' and approximately £87 million in 'savings shares'. Voting rights attached only to the investment shares, which were quoted on the Dublin Stock Exchange.

In February, 1984, an offer was made by the Bank of Ireland to purchase all the investment shares and the offer was referred to the Minister for Industry, Trade, Commerce and Tourism under the provisions of the Mergers, Takeovers and Monopolies (Control) Act, 1978. The Minister, by the Proposed Merger or Takeover Conditional Order, 1984 (S.I. No. 217 of 1984), prohibited the proposed takeover unless the rules of the plaintiff were amended in the manner prescribed in the schedule to that Order. The schedule provided for a complex scheme for the future management of the plaintiff, which had three broad aspects. Firstly, the new rules provided that savings shares should have limited voting rights. Secondly, it was provided that there should be two classes of directors; investment directors, subject to appointment and removal by the investment shareholders, and ordinary directors, subject to appointment and removal by the savings shareholders. Thirdly, the rules allowed the directors to appoint alternate directors.

On the 30th October, 1984, a special resolution was passed altering the plaintiff's rules to provide for that scheme and on the 31st October, 1984, the alterations were forwarded to the defendant, who by s. 85, sub-s. 1 of the 1976 Act, is also the Registrar of Building Societies, for registration, pursuant to s. 12 of the Act. By letter dated 21st November, 1984, the defendant notified the plaintiff that he refused to register the alterations on the grounds that they were not in accordance with the Act.

The plaintiff, pursuant to s. 12, sub-s. 6, of the 1976 Act issued a special summons by way of appeal from the decision of the Registrar, claiming a declaration that the defendant was not entitled to refuse to register the alterations and an order directing the defendant to register the alterations.

Section 2, sub-s. 1, of the Building Societies Act, 1976, provides inter aliathat:—

""Society" means a building society established under this Act for the purpose of raising, in accordance with this Act, funds (by the subscriptions of the members, the acceptance of deposits and loans) for making loans to members on security by the mortgage of freehold or leasehold estate or interest."

Section 10, sub-s. 1, of the 1976 Act provides:—

"(1). The rules of every society shall specify -

• (a) the name of the society;

• (b) the manner in which the funds of the society are to be raised;

• (c) the terms on which shares are to be issued and repaid;

• (d) whether preferential shares are to be issued and, if so, within what limits;

• (e) in the case of a society incorporated on or after the commencement of this section, provision for the issue of shares in compliance with section 18;

• (f) whether the society intends to borrow money and, if so, within what limits;

• (g) whether deposits are to be accepted and, if so, on what terms;

• (h) the purposes to which the funds of the society are to be applied and the manner in which they are to be invested;

• (i) the manner in which loans are to be made and repaid, any deductions for premiums, and the conditions on which a borrower can redeem the amount due from him before the expiration of the period for which the loan was made;

• (j) provision for the custody of the mortgage deeds and other securities belonging to the society;

• (k) the manner in which losses are to be ascertained and provided for;

• (l) the powers and duties of the board of directors and other officers;

• (m) the manner of appointing, remunerating, and removing the board of directors and other officers (including the filling of casual vacancies), and the manner of remunerating auditors;

• (n) provision for the use of the seal of the society;

• (o) the right of members to requisition meetings, the form of notice for the convening of meetings and the manner of service of the notice;

• (p) the manner in which notice of any resolution (including a special resolution) to be moved at meetings is to be given to members;

• (q) the procedure to be observed at meetings;

• (r) the voting rights of members, the rights of a member to appoint a proxy and demand a poll and the manner in which a poll is to be taken;

whether disputes between the society and any of its members, or any person claiming by or through any member or under the rules,

• (t) shall be settled by reference to a court, the Registrar or arbitration; any fines and forfeitures to be imposed on members of the society;

• (u) the manner in which membership of the society is to cease;

• (v) the manner in which the society may be wound up."

Section 12, sub-ss. 1-3, of the 1976 Act provide:—

"(1). A society may by special resolution alter its rules.

(2). A society altering its rules shall forward to the Registrar two copies of the alteration (or, in the case of a rescission, two copies of the resolution) signed by three members and the secretary, together with a letter signed by the secretary confirming that a special resolution has been passed in relation to the alteration.

(3). Where copies are forwarded to the Registrar in accordance with subsection (2) and he finds that the alteration is in accordance with this Act, he shall return one of the copies to the secretary together with a certificate of registration in a prescribed form, and shall retain and register the other copy."

Section 22, sub-ss. 1 and 7, of the 1976 Act provide:—

"(1). A society may from time to time raise funds for the purpose of the society by the issue of shares of one or more than one denomination, either with or without accumulating interest, and may repay such funds when they are no longer required for such purpose.

(7).

• (a) Subject to paragraph (b), a society shall not issue shares under subsection (1) to which voting rights do not attach.

• (b) Paragraph (a) shall not apply to a society which on or before the 5th day of December, 1975, had issued such shares to which voting rights did not attach."

Section 53, of the 1976 Act provides:—

"(1). Subject to subsection (2), the persons entitled to vote at a meeting of a society shall be all members who, at the end of the last financial year before the date of the meeting, held shares to which voting rights attached which were issued by the society under section 22 (1) to a value of not less than £10 and at the date of the meeting continued to hold such shares.

(2). A person under the age of eighteen years shall not be entitled to vote at a meeting."

Section 79 of the 1976 Act provides:—

"(1). It shall be the duty of every director of a society to satisfy himself that the arrangements for assessing the adequacy of the security to be taken in respect of loans to be made by the society are such as may reasonably be expected to ensure that -

• (a) the adequacy of the security to be taken will be assessed either by the directors or by a director or other officer who is not disentitled by this section to make the assessment, and

• (b) there will be available to every person who has to assess the adequacy of the security to be so taken a written report prepared and signed by a competent person (who shall not be an officer of the society) experienced in matters relevant to the determination of the value of the security, and

• (c) the report relates to the value of any freehold or leasehold estate in the security and to any other matter likely to affect the value of the security.

  • (2). A report by a person who has a financial interest in the disposal of an estate in relation to which a loan is to be made by a society shall not be accepted by the person or persons assessing the adequacy of the security as a report for the purposes of subsection (1) (b).

  • (3). A person assessing the adequacy of the security for a loan by a society shall not be a person who has a financial interest in the disposal of the estate in relation to which the loan is to be made or a person who is entitled to receive any commission for introducing the parties to the transaction involving that disposition."

The capital of the plaintiff building society was made up of approximately £20m. in investment shares, to which voting rights attached, and £87m. in savings shares, to which no voting rights attached. In February, 1984, an offer was made by Bank of Ireland to purchase all the investment shares, which was referred to the Minister for Industry, Trade, Commerce and Tourism pursuant to the Mergers, Takeovers and Monopolies...