HL Deb 13 March 1928 vol 70 cc410-3

Order of the Day for the Second Reading read.


My Lords, I beg to move that the Bill be now read a second time. It is a very small and non-contentious Bill, designed to correct a defect that is found to exist in Section 22 of the Industrial and Provident Societies Act, 1893. The question arises from the liquidation of the Agricultural Wholesale Society, which took place recently, and the subsequent judgment of the House of Lords in the case of Biddulph against that society, as a result of which a number of kindred societies who were members of the main body unexpectedly found themselves confronted with a considerable liability to pay for shares for which they were not aware they were at all liable. A good many of the associations do not appear to have been aware of the situation in which they were placed, and the object of this Bill is to prevent the recurrence of what has happened in the case to which I have referred.

Under Section 22 of the Act of 1893 a registered society, by an alteration of its rules, can bind all its members and all persons claiming through them to the same extent as if each member had subscribed his name and affixed his seal thereto, even if he is totally unaware of any alteration in his liability. The situation revealed by the Biddulph decision has naturally aroused a great deal of unwillingness among farmers to proceed with the formation of new agricultural co-operative societies, and the National Farmers Union have intimated that they will not assist in, in fact they would rather discourage, the formation of new co-operative societies until the law has been amended. It is very desirable that no obstacle shall be placed in the way of carrying out the Government policy of encouraging the extension of co-operative enterprise in agriculture. The Bill therefore proposes that unless his consent in writing is first obtained a member of a registered society shall not be bound by any amendment of rules which requires him to take up more shares or to increase the value of his shares beyond those that he held at the date of the registration of the amendment.

In addition to the main purpose of the Bill, it has a subsidiary purpose, which will be beneficial. At present a society registered under the Industrial and Provident Societies Acts has an unrestricted power of amending its rules in whatever manner the rules themselves may provide and the Registrar is bound to register an amendment if it is not contrary to the provisions of the Acts. Occasionally societies have utilised this power to increase directly the liability of members under their shares, as, for example, by increasing the value of the shares from, say, 5s. fully paid to 10s. with 5s. paid, thus adding 5s. to the original liability of the shareholders. Under the Companies (Consolidation) Act, 1908, a company has no power to increase the liability of a member under his shares without his consent. The Registrar of Friendly Societies has, therefore, on the analogy of company law, sought to resist the registration of such an amendment and he has sometimes been successful; but it is extremely doubtful whether he has any authority to do so, as his power of objection is limited to matters which are contrary to the Act of 1893 itself, and such an amendment is not contrary to that Act. The present Bill, while not prohibiting an amendment which would have the effect of increasing the liability of a member under his shares, prevents such an amendment being enforced against a member without his consent in writing, and so substantially puts an end to the difficulty which at present exists. I hope that your Lordships will be pleased to give this Bill a Second Reading, and I beg to move.

Moved, That the Bill be now read 2a.—(The Earl of Stradbroke.)


My Lords, I think this measure will meet with ready assent. It seeks to put right something which admittedly needs remedying. The position has been fully outlined by the noble Earl who moved the Second Reading. He has made it clear that owing to the judgment which was given, no doubt quite rightly given, in your Lordships' House, an unusual position has been created in reference to the Act of 1893, whereby members of these societies may have, and have had, put upon them liabilities beyond what they understood they could possibly be called upon to fulfil, and this has been done without their deliberate consent.

Obviously in any association or investment or business transaction nothing can be worse than that there should be unknown liabilities which may be put upon a man without his knowledge and consent. This has happened; and I think it is true to say that certain members of these societies have been placed in positions of very serious financial embarrassment. In order to prevent that kind of thing happening in the future, it is necessary to pass this one-clause Bill, the indirect effect of which will be, as I understand it—in fact I think this was implied in the remarks of the noble Earl—that encouragement will be given to the formation of these co-operative organisations. At the present time there is a lack of confidence, there is mistrust owing to what has happened, and it is very desirable that these co-operative organisations should be encouraged and that their formation should be encouraged. I think it is true to say that so far as this country is concerned our record in this regard is not a good one. We are very much behind the statistics of many countries. As a matter of fact, I believe that only about 2½ per cent. of agricultural produce is marketed through co-operative organisations. If that is right, it is a very small proportion.

That is all I wish to say. I do not think there will be any controversy about this Bill. In view of the depressed condition of agriculture many things are proposed to help the industry. About several of the proposals, about most of them in fact, there is wide difference of opinion, and it is rather refreshing to come across something which will indirectly help agriculture and about which, I think, there is no difference of opinion. In those circumstances I have no doubt the Bill will receive the ready assent of your Lordships.

On Question, Bill read 2a, and committed to a Committee of the Whole House.