Re‐Examining Sinclair v. Brougham
| Published date | 01 January 1959 |
| Author | Samuel Stoljar |
| DOI | http://doi.org/10.1111/j.1468-2230.1959.tb00506.x |
| Date | 01 January 1959 |
ILK-EXAMINING SINCLAIR
v.
BROUGHAM
SINCLAIR
v.
BROUGHAM' has always, and rightly, been thought as
of fundamental importance.2 This importance, to be sure, is
theoretical rather than practical. Practically speaking, the case
merely puts a narrow, if tricky, point concerning the priority of
creditors, and this on facts which are unlikely to recur in f~ture.~
Theoretically,
on
the other hand, the case offers a number of inter-
secting problems: contractual capacity and the doctrine of
ultra
vires;
the nature of money-claims in law and equity; the notion of
(6
tracing
"
property and quasi-contractual restitution; even the
distinction between rights
in rem
and
in personam.
Clearly these
problems are as fresh as they remain challenging.
THE SITUATION
Though empowered only to borrow money for the purpose
of
building houses, the Birkbeck Building Society started a banking
business soon after
1851
when first fourjded. This business
flourished, and the society became one of the important smaller
banks of London, known popularly as the Birkbeck Bank." By
1910
liability to the bank-depositors amounted to (roughly)
El1
millions, more than ten times the amount the society owed
to
its
shareholders. In
1911,
however, there was a run on the bank which
drove it into liquidation.
As
the assets had shrunk, a conflict arose
between (briefly) two classes of claimants, the shareholders and the
depositors, the situation being complicated by the fact that the
banking business was held to be
ultra
vires.
Had this business been
intra vires,
no serious conflict would
or
could have arisen; for the
depositors would then have been legitimate creditors clearly
entitled to repayment before the members. One may well ask, in
passing, how this illegitimate bank could succeed in borrowing
so
much money. The answer
is
that some borrowing was quite within
the society's purpose.
As
a building society, its main task was to
bring together those willing to lend and those wishing to borrow
money for the building of houses, an activity which necessarily
involved the services of
a
banker-intermediar~.~
It
had also been
1
[1914]
A.C.
398.
For earlier proceedings,
Re
Birkbeck Permanent Benefit
Building Society
[1912] 2
Ch.
183.
2
For discussion
of
this
case, see Lord Wright,
Legal Essays and Addresses
(1939) 1;
Holdsworth,
Essays in Law and
History
(1946) 238;
Hsnbury,
Essays in Equity
(1934) 1, 12;
Dawson,
Unjust Enrichment
(Boston,
1951)
18.
And
fiee
Lord
Greene
M.R.
in
Re
Diplock
[1948]
1
C,h.
465,
518.
3
See n.
7,
infra.
4
Cf.
[1912.] 2
Ch.
183
at
210, 227.
5
The
nature
of
building societies was brilliantly discussed by Jesse1
M.R.
in
Re
Guardian Pemzanent Building Society
(1882) 23
Ch.D.
440, 457
et
seq.
The impetus leading to the formation
of
these societies
was
not
80
much the
21
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