McEllistrim v Ballymacelligott Co-operative Agricultural and Dairy Society

• Jurisdiction: Ireland
• Judgment Date: 20 February 1918
• Date: 20 February 1918
• Docket Number: (1916. No. 111.)
• Court: Court of Appeal (Ireland)

M'Ellistrim

and

The Ballymacelligott Co-Operative Agricultural and Dairy Society, Limited (1).

Appeal.

CASES

DETERMINED BY

THE CHANCERY DIVISION

OF

THE HIGH COURT OF JUSTICE IN IRELAND

AND BY

THE IRISH LAND COMMISSION,

AND ON APPEAL THEREFROM IN

THE COURT OF APPEAL.

1917.

Industrial and Provident Society — Disputes between Society and Members — Rules — Arbitration — Rules alleged to be ultra vires — Stay of Proceedings — Industrial and Provident Societies Act, 1893 (56 & 57 Vict. c. 39), s. 49.

The rules of an industrial and provident society provided for the reference of all disputes between the society and its members to the Irish Agricultural Organization Society.

A member of the society commenced an action against the society for a declaration that certain new rules adopted by the society were ultra vires the society, and not binding upon him, and for consequential relief.

Held, that the plaintiff's claim was not a dispute within the arbitration rule and s. 49 of the Industrial and Provident Societies Act, 1893, and that the defendant society's motion to stay proceedings in the action ought accordingly to be refused.

This was an appeal from an order, dated the 29th February, 1916, of Pim J. (sitting for Barton J.), refusing the defendants' motion for an order staying all further proceedings in the action.

The action was brought by the plaintiff claiming a declaration that certain rules adopted by the defendant society in the year 1915, and registered by the Registrar of Friendly Societies on the 1st February, 1916, were not binding on the plaintiff and the other members of the society, as being improperly adopted to the prejudice of the plaintiff and other members, illegal as in unreasonable restraint of trade, and ultra vires the society. The plaintiff also claimed an injunction to restrain the society from acting upon or putting in force the said rules.

The society was registered under the Industrial and Provident Society's Act, 1893, on the 6th March, 1903, and the plaintiff, who was the owner of a large farm, and of a number of milch cattle at Ballydwyer, Ballymacelligott, became a member of the

society under the rules adopted and registered in 1903. Rule 20 of these rules provided: “Any member who shall supply milk to any creamery, other than that owned by the society, for the space of three years from the date of his admission to membership, without the consent in writing of the committee, shall forfeit his share, together with all money credited therein.”

On the 29th November, 1915, notices were sent out on behalf of the society to each member of a special general meeting to amend the rules of 1903, and to adopt certain new rules; and at the meeting held on the 17th December, 1915, a resolution to adopt these new rules was carried by a show of hands, a poll being, as the plaintiff alleged, refused. These rules were not registered by the Registrar of Friendly Societies. A further meeting of the society was summoned, and held on the 18th January, 1916, when a resolution adopting the new rules was again carried, and these rules were subsequently registered. The plaintiff, as he alleged, attended both meetings of the society, and protested against the change of rules.

Rule 5 of the new rules, so far as material, provided that—

“The society shall consist of the special members, and of all such persons resident in or occupying or grazing lands in the townlands of Ballydwyer, Ballymacelligott (and other townlands), and of the members of such other societies registered under the Act, wherever situated, as the committee of management may admit to membership.”

Rule 6 (2) of the new rules provided that—

“After the society shall have started a creamery for its members, no individual member of the society, so long as he continues a member thereof, who shall have milk to sell, the produce of a cow or cows kept or grazed on lands within the area defined in rule 5, shall, without the written consent of the committee first obtained, sell any such milk to any creamery other than a creamery of the society, or to any company, society, person or persons who sell milk or manufacture butter for sale. Any member of the society committing a breach of this rule shall pay to the society, as and for liquidated damages, and not by way of penalty, the sum of one shilling per cow per day for every cow's milk sold contrary hereto.”

Rule 16 of the new rules provided that—

“Any member, all of whose shares shall have been transferred or cancelled, shall thereupon cease to be a member of the society. A member shall not otherwise be entitled to withdraw from the society.”

By further rules it was provided that no member should withdraw from the society, or assign his shares, except by leave of the committee, and also that all disputes between members and the society were to be referred to the Irish Agricultural Organization Society.

An affidavit was filed by the secretary of the defendant society in support of the motion to restrain the action, in which he averred that the society was always ready and willing to join and concur in all necessary and proper acts for causing the matters in dispute to be decided by arbitration in accordance with the rules. In an answering affidavit filed on behalf of the plaintiff, it was alleged that the defendant society contributed to the funds of the Irish Agricultural Organization Society by payment of affiliation fees and fees to butter instructors; that the said Organization Society levied contributions on the annual turn-over of the defendant society at the rate of 10s. per £1000, and had a pecuniary interest in the funds and business of the defendant society, and in particular in preventing members from withdrawing from the defendant society.

At the date of the hearing of the motion to stay proceedings before Pim J., no statement of claim had been delivered. The writ of summons in the action having sought a declaration that the rules of the society as a whole were not binding on the plaintiff, the learned judge refused the motion on the ground that the action could not be sent to arbitration under a rule the validity of which was itself challenged in the action. Hence this appeal. In the statement of claim which was subsequently delivered, the plaintiff impeached only the three rules above set out.

Conner K.C. and Carrigan K.C. (with them D. B. Sullivan), for the appellants:—

The action should be stayed, and the matter in dispute referred to arbitration. The acknowledgment of registry is conclusive evidence that the rules were duly registered. Section 10, sub-s. 3, of the Industrial and Provident Societies Act, 1893: Butler v. Springmount Co-Operative Dairy Society (1); Rosenburg v. Northumberland Building Society (2); Dewhurst and Others v. Clarkson (3).

All the members are bound by the new rules. Section 22 of the Industrial and Provident Society Act, 1893; Smith v. Galloway (4). The validity of the rules themselves, and not any act done under the rules, is challenged. It is a dispute between the society and its members, and comes within the arbitration rule: Trott v. Hughes (5); Stone v. Liverpool Marine Society (6); Cox v. Hutchinson (7). Section 49, sub-s. 1, of the Industrial and Provident Society Act, 1893, is mandatory: M'Caffrey v. M'Mahon (8). Counsel also cited Reeves v. White (9); Acklacca Co-Operative Creameries, Ltd. v. Lynch (10); Crisp v. Bunbury (11); Mulkern v. Lord (12); Municipal Permanent Investment Building Society v. Kent (13) (judgment of Lord Blackburn, 274); North-Western Salt Co., Ltd. v. Electrolytic Alkali Co., Ltd. (14).

Conner K.C., in reply, referred to Wilkinson and Others v. Jagger and Others (15); Rex (M'Aneny) v. County Court Judge of Tyrone (16).

S. L. Brown K.C. and Clery (with them Serjeant Sullivan):—

The arbitration rule does not apply to this case. It is not a dispute under the rules. Here the rules themselves are attacked: Kitts v. Moore (17); Andrews v. Mitchell (18); Palliser v. Dale (19); M'Gowain v. City of Glasgow Friendly Society (20). A clause in an agreement to refer disputes thereunder to arbitration cannot be set up in answer to an action in which the validity of the agreement is questioned, inasmuch as the action strikes at the root of the agreement: Mylne v. Dickinson (21), a decision of

Lord Eldon. Cox v. Hutchinson (1) was a case in which the act done, i.e., the passing of the resolution, was alleged to be ultra vires, not the rule itself under which it was proposed to arbitrate. The Irish Agricultural Organization Society were the moving party in forcing upon the plaintiff these rules, by which they are made the arbitrator in a dispute in which they have a direct pecuniary interest. A decrease in the membership of a society affects their funds adversely.

Conner K.C. and CarriganK.C. (with them D. B. Sullivan), for the appellants:—

S. L. Brown K.C. and Clery (with them Serjeant Sullivan):—

Sir I. J. O'Brien L.C.:—

This is an appeal from an order of Mr. Justice Pim, refusing a motion of the appellants asking that all further proceedings in the action be stayed, on the ground that the dispute between the plaintiff and the defendants is one which under the rules of the defendant society must be referred to arbitration. In the result, I am of opinion that the order of Mr. Justice Pim was correct, but I give my own reasons, because I do not adopt those which influenced him as I understand them, in the decision at which he arrived. The judgment was given on a contention that the whole body of rules was impeached, but before us the question has been limited to a few specified rules.

The plaintiff had been a member of the society under rules which had been duly approved and registered on the 6th March, 1903. Speaking generally, the object of the society was, that the members, who were to be for the most part farmers, should supply the milk produced on their farms to the Creamery Society, in which they became members by holding...