LIABILITY OF PARTICIPATING POLICY-HOLDERS.

Kumara Times, Issue 938, 2 October 1879, Page 4

LIABILITY OF PARTICIPATING POLICY-HOLDERS.

[FROM THE LONDON REVIEW.] A case which has recently been decided by Mr Justice Fry, in the winding up of the Albion Life Assurance Company, is of very great importance in reierence to the position of participating policy-holders in mutual societies. The articles of association of the Company provided that it waa to consist of two classes of members, to wit, shareholders and assurance members. They were to be all persons who held policies of assurance en the terms of participating in the profits (that is, what are usually called " participating policy-holders,") and who were duly registered as members. A peculiarity of the present case which will no doubt be enlarged upon with considerable emphasis should the case be taken to a court of appeal, was that the lady, whose case was taken as representative of those of other persons similarly situated, had never had her name registered in the list of members. Another noticeable feature in the case, as far as its facts can be collected from the somewhat scanty report which has as yet appeared, is that the articles of association appear to have contemplated a gradual change in the character of the society from that of a mixed to that of a purely mutual society. The capital is stated to have been fixed at L 50,000, made up of 5000 £lO shares, but provision appears to have been made for re-pay-ment of the amount or the shares with the view of making the society in course of time strictly mutual in ics principles o working. The lady in question had applied for a policy of £IOOO, and had been accepted ; and the declaration which she signed at that time bound her when required to execute the articles of association, or any deed of covenant in conformity therewith. This was probably regarded as im portant in rendering her liable according to the scheme by which the constitution of the society was gradually to be changed. No notice, however of this point is taken in the judgement of this case as we have seen it reported. The question, then, which the court had to consider was, whether this lady and other persons similarly situated were liable as contributors to the creditors of this unfortunate society, which is now in liquidation. The point was raised on a summons taken out by the liquidator for the purpose of settling the list of contributories.

The point was determined by Mr Justice Fry in favor of the contention of the liquidator, viz., that the participating policy-holders were liable to the creditors for their money. The 35th section of the Companies' Act enables the Court to rectify the register cf members in a summary manner, by inserting any name as being improperly omitted, or removing any one which is without sufficient cause enrolled among the members. Mr Justice Fry contended that the case before him fell inside the provisions of this section, which has already given rise to so many important and difficult questions. The fact of the lady's name not appearing on the register of members was therefore, in his opinion, immaterial. She had, he considered, agreed to become a member. The court was therefore unable to " rectify the register " by placing her name upon it, with all the usual unpleasant consequences of that position. The judge, however, added that as no doubt questions would arise between the two classes of members, viz, the ordinary members snd those who were such by reason of their holding participating policies, it was desirable that an indication should be placed upon the list of contributors that her name appeared there in respect of a policy. He indeed suggested that it might be desirable to have a triple list of members, viz., (1) shareholders, (2) participating policy-holders, and (3) those persons whose names were placed there in the double charactes of ■hareholders and participating policyholders. This will probably be a ncvelty in making out the list of contributories, and probably, if the principle of this decision be acquiesced in or confirmed in the Court of Appeal, some nice questions may arise as to the measure of liability of the three different classes of persons who ■were unfortunate enough to find their names figuring in any of these capacities in the list uf those who are liable to contribute towards the liquidator's demand. The obvious hardship of the case, as it presents itself to our minds on the materials before us, is that persons who have had no control over the management of the concerns of the society would be equally liable with those who were entitle! to make their voices heard in controlling in operations. It is by no means improbable that this case, involving as it does a question of very considerable nicety and interests of no little magnitude, may be made the subject of appeal. Mean while it certainly deserves to be regarded with much attention, as throwing light on a point of law which has not aa yet been studied with anything like the care which it deserves.