The Law of Building Societies

owners of any money," &c., who "shall steal or embezzle any such money, &c., of or belonging to any such co-partnership or to such joint beneficial owners." But it is questionable whether the persons who had parted with their money for a purpose declared to be illegal, would be entitled to be considered as "joint beneficial owners," within the meaning of the Act. In pari delicto, potior est conditio possidentis.

5. It is true that it does not always follow, because an agreement to form a given partnership or association is illegal, that those who subscribe to its formation cannot get back their subscriptions. If, for instance, A. pays money to B., to be applied by him to some illegal purpose, A. may require B. to restore the money, if B. has not already parted with it (a). But, in such a case, it is not sought to enforce an illegal contract, but rather to prevent the continuance of what is illegal. It has been held, moreover, that the survivor of two directors, who were also the trustees, of a mining association (which, it was contended, was illegally constituted, although that point was not decided) was liable as trustee to account for the moneys received and paid by them, and a receiver and manager was appointed by the court (b). But, as a general rule, a court of equity will not assist a person to recover property which he has transferred to another for person some illegal purpose (c).

A further consequence of illegality in a contract of partnership, is that the members have no remedy against each other, for contribution or apportionment in respect of the partnership dealings and transactions; and if one member of an illegal partnership institutes proceedings against another, arising out of

(a) See Varney v. Hickman, 5 C. B. 271.

(b) Sheppard v. Oxenford, 1855, 1 K. & J. 491.

such transactions, the defendant can resist the proceedings on the ground of illegality (d).

6. That these considerations are not without practical weight appears from the facts stated in the recent report of the Hon. E. Lyulph Stanley to the Friendly Societies' Commissioners:

"There are in Sheffield a large number of societies which have reached a greater development there than anywhere else, and which have grown out of the old fashioned money clubs. They are called Funding Societies, and in many respects resemble Terminating Building Societies, but they lend on all kinds of security, and not only on land. They are brought out by the managers in series."

Of one series, he says, "the 33rd was founded in 1871."

"The number of shares issued is limited, and the amount of each share is £30. A shareholder pays 5s. a share every four weeks, and goes on paying till his instalments with share of the profits made by lending out the money amount to £30. The shareholders are then paid off, and the society is wound up. The borrowers, who must be members, take a share for each sum of £30 which they wish to borrow. They pay a premium not exceeding £4 10s. for each £30, and they pay £5 per cent. annual interest, which has to be paid monthly at the same time as the instalments on their shares. The borrowers give promissory notes payable to the trustee of the society, and such other security as the committee require. The effect of the rates of interest, premiums, &c., is to give the depositing members about 7 per cent. for their money, and the managers are paid by a system of fees and perquisites."

(d) See Thomson v. Thomson, 7 Ves. 470; Cousins v. Smith, 13 Ves. 542. See further, on this subject, Lindley on the Law of Partnership.

The amount of money in the hands of the managers of this series, in connection with their successive societies, he states, "is to be reckoned by hundreds of thousands": and that there are in Sheffield many other similar societies started in imitation of these.

7. Mr. Stanley reports that these societies "are conducted under the common law, not registered as companies, and rest for their success on the ability and honesty of the manager and on the confidence which people generally have in him. Not only individuals, but friendly societies and trades unions, deposit their funds as shareholders in these funding societies." It would appear, moreover, that hitherto that confidence has not been misplaced, and that these societies have been conducted with probity and even with success. If, however, the law relating to unregistered bodies, having for object the acquisition of gain, be as we have stated our view of it, it would seem clearly to be applicable to all such societies, and to place their funds in a certain degree of peril. It will be not unworthy of the attention of the Legislature to so frame any enactments on the subject as to embrace within the beneficial system of registration as friendly societies all associations having a lawful object, and thus to enable these and many other kindred institutions to extricate themselves from their present anomalous position.

PART V.

ALPHABETICAL DIGEST

OF THE

STATUTE LAW AND CASES RELATING TO BUILDING SOCIETIES.

The Numbers in brackets refer to articles not pages.

ACCOUNTS.

1. To be rendered periodically by the society.-The secretary, or other officer, of every society under the Building Societies Act, 1874, is, once in every year at least to prepare an account of all the receipts and expenditure of the society since the preceding statement, and a general statement of its funds and effects, liabilities and assets. Every such account and statement is to be attested by the auditors, to whom the mortgage deeds and other securities belonging to the society are to be produced;

Such account and statement are to be countersigned by the secretary or other officer;

Every member, depositor, and creditor for loans is entitled to receive from the society a copy of such account and statement;

A copy thereof is to be sent to the registrar within fourteen days after the annual or other general meeting, at which such account and statement is presented;

Another copy thereof is to be suspended in a conspicuous place in every office of the society. 37 & 38 Vict. c. 42, s. 40.

To be rendered by officers. See OFFICERS (99).

ACKNOWLEDGMENTS for loans must contain ss. 15 & 16 of 37 & 38 Vict. c. 42. See POWER TO BORROW (108).

ACT.

2. The Act to consolidate and amend the laws relating to Building Societies, 37 & 38 Vict. c. 42 (1874), is a public Act, and extends to England, Scotland, and Ireland.

It repeals the Act 6 & 7 Will. 4, c. 32, but such repeal is not to affect any subsisting society certified under that Act, until such society shall have obtained a certificate of incorporation under the Building Societies Act, 1874 (s. 7).

It commences and takes effect on the 2nd November, 1874 (s. 2).

Livros

The Law of Building Societies: Comprising Socities Under the Act of 1874 ...