Under Rule 64 of a Society registered under the Act, rules could be amended ‘by resolution of a three-fourths majority at a special general meeting’. Various amendments were carried by a three-fourths majority of the shareholders. The effect of one of the amendments, if valid, was to impose on many members an obligation to subscribe for additional shares. The appellant was a dissentient member who sought to challenge the power of the society to impose such an obligation.
Held: The House considered the Society’s powers of amendment to its rules. A power of amendment reserved in a trust must be exercised for the purpose for which it was granted. The amendment here not only to lead to absurd and fundamentally unacceptable conclusions, but was also at variance with the essential nature of the transaction and the relationship between the parties.
Lord Tomlin said: ‘Does a power enabling a majority to amend the rules justify as against a dissenting member any alteration whatever, where, as here, neither by the statute nor by the rules themselves is any one rule expressed to be more fundamental and unalterable than any other?
The answer in my judgment must be in the negative. In construing such a power as this, it must, I think, be confined to such amendments as can reasonably be considered to have been within the contemplation of the parties when the contract was made, having regard to the nature and circumstances of the contract. I do not base this conclusion upon any narrow construction of the word ‘amend’ in Rule 64, but upon a broad general principle applicable to all such powers.’
Judges:
Lord Tomlin
Citations:
[1930] AC 472
Statutes:
Industrial and Provident Societies Act 1893
Jurisdiction:
England and Wales
Cited by:
Cited – Rainy Sky Sa and Others v Kookmin Bank SC 2-Nov-2011
Commercial Sense Used to Interpret Contract
The Court was asked as to the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
Held: The appeal succeeded. In such a case the court should adopt the more, rather than the . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 08 May 2022; Ref: scu.450167