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Seanad Éireann díospóireacht -
Wednesday, 5 Sep 1934

Vol. 19 No. 6

Agricultural Co-operative Societies (Debentures) Bill, 1934—Report Stage.

The following amendment appeared on the Order Paper in the name of Senator Jameson:—
Section 4. To add at the end of the section a new sub-section as follows:—
(6) No issue of debentures shall be made by an agricultural co-operative society under this section unless and until a resolution approving the issue of such debentures shall have been passed by a special meeting of the shareholders of such society convened for the purpose of passing such resolution.

I had a note this morning to say that the Minister has another amendment prepared to Section 4 and I think perhaps it would be well if the Minister said what he intends to say about his amendment before I say anything about mine.

I am proposing to change the wording of the Senator's amendment slightly. Perhaps he will accept it in the new form. The first amendment which I suggest reads as follows:—

Section 4, sub-section 1. After the word "time" in line 25 to insert the words "subject to the provisions of this section and".

That, of course, only prepares the way for the alternative amendment which I suggest the Senator should propose instead of his amendment. The second amendment reads:—

Section 4, sub-section (2). To insert before the sub-section a new sub-section as follows:—

(2) An issue of debentures shall not be made by an agricultural co-operative society under this section unless either the committee of such society has power under the rules of such society to borrow money and the amount to be borrowed on the security of such debentures is within such borrowing power or a resolution approving of the making of such issue has been passed by a special meeting of the shareholders of such society convened expressly for the purpose of considering and, if thought fit, passing such resolution.

I do not know if it differs very materially from Senator Jameson's amendment except for the fact that the wording is altered.

The Minister thinks it is a better wording?

I think it is, or at least the draftsman thinks so.


This amendment provides for a case where the rules of a society allow the borrowing of the money without calling a meeting. That is not provided for in the original amendment of Senator Jameson.

That is why I think it is better than mine. I formally move the two amendments which have been read out by the Minister instead of my amendment on the Order Paper.

I do not think that the amendment by the Minister is the same as the amendment which is on the Order Paper in the name of Senator Jameson. The object of Senator Jameson's amendment was, I think, to secure that, whatever borrowing powers the societies may have hitherto possessed, if they wish to raise debentures in the future under this Bill, they should go to the shareholders. What the Minister provides is that, where borrowing powers are at present entrusted to the Committee, these borrowing powers shall be sufficient.


That is the idea.

That was not the idea some of us had when this matter was debated in Committee. We were pressing, in Committee, that, in every case where debentures were issued, a meeting of the shareholders should be called, irrespective of what the borrowing powers of the Committee previously were. The argument was that the creation of debentures in the new form raised a totally new issue, and that it was right and proper that the shareholders should endorse the proposal. We may accept this amendment, but I do not think we should accept it under a misapprehension.


Is Senator Jameson satisfied with the Minister's amendment?

I do not quite see Senator Sir John Keane's point. If a committee of a society has now the right to issue debentures without calling their shareholders together, I do not think that this Bill is intended to interfere with that. That is the view I took. I only came into the matter where the Bill introduced something new. I cannot see where the two amendments disagree. I did not understand that my amendment was interfering with the existing state of affairs.

I understood that the objection raised by some Senators was to the words "whether the society is or is not authorised or is or is not forbidden" to borrow in that way. I thought that the amendment I had drafted, as an alternative to Senator Jameson's amendment, met the wishes of the Seanad.

Substituted amendments put and declared carried.

With regard to Amendment 2, in my name, I think that the matter could be better discussed on Amendment 3, to be moved on behalf of the Minister.

Amendment 2 not moved.


Government Amendment No. 3:

Section 7, sub-section (1). To delete in lines 13-14 the words "registered under the Industrial and Provident Societies Act, 1893," and to substitute therefor the words "mentioned in the Schedule to this Act."

I move the amendment.

I second the amendment.

In this case, there is no difference in effect whatsoever between Amendments 2 and 3, though there is a difference in the wording. The draftsman appears to prefer this way of putting the provision. The schedule will, of course, come in with this amendment.

Amendment put and agreed to.


Government Amendment No. 4:

Section 7, sub-section (1). To delete in lines 17-18 the words "arrangement or understanding" and to substitute therefor the words "agreement in writing."

I move the amendment.

I second the amendment.

The words "arrangement or understanding" were objected to in the Seanad on one Stage of the Bill. It was believed that the meaning of the words was rather loose. We propose to substitute for those words the words "agreement in writing." The amendment is hardly necessary now that we have a schedule of societies.

The difficulty I see with regard to this provision is that the Oireachtas is establishing itself as a court. The Minister and his law officers may have seen these agreements. Nobody in the Seanad has seen them or heard of them until now, and I understand that the position in the case of members of the Dáil is the same. I do not remember any reference to agreements in writing. Between whom were these agreements made? Were they made between these societies and the lending Corporation, or were there understandings between the Minister and the Corporation? What we are doing is giving the Corporation power to proceed legally on written agreements which we have never seen. The Minister will probably tell us whether or not he has seen these agreements and by whom they are made. If they are legal agreements which can be acted upon, what is the need for this Bill at all? I know that, in the case of the bank with which I am associated, we have, in some cases, got debentures in the case of loans made to these societies. This has been done by agreement with the societies concerned. We have legally got debentures issued.

If this lending Corporation have got a legal document that is an agreement entered into by the society and by the lending Corporation, and it gives them the right to charge the uncalled capital, why have they not done it? Why are we needed to step in, in order to say that because of this written agreement, which we have never seen, we are going to give this Corporation the power to proceed against all the shareholders in the four companies to collect from them all the uncalled capital? I honestly confess I do not understand it. If the Corporation have the legal power under this written agreement to proceed to collect their money, why have they not done so in the past? I cannot see why the Oireachtas should be asked to interfere in the matter. I know in all cases where banks have loans out, when they were lending the money what they got was all the security they were going to get. If they did not like it they would not lend the money, and if they did like it they had to stick to that, because that was all they were going to get.

So far as this matter is concerned, there is an agreement between the late Minister and the lending Corporation, and I do not know what document they have got from the shareholders or anybody connected with these four companies binding them to pay this charge when called upon. Perhaps the Minister will now tell us what this agreement is, and why it is necessary for the Oireachtas to give this Corporation power over the uncalled capital which they have not got at the present time and never had, so far as I am able to judge. There is a very great difference between this Corporation and any other lending Corporation, it would seem. The justification is an agreement between the late Minister for Agriculture and the lending Corporation—that is what the Minister now tells us. The Minister should make a very clear statement as to the nature of this agreement, or agreements, whether he has seen them and whether, in the opinion of the law agents of the Government, they are documents on which we ought to act, giving the Corporation power to collect the uncalled capital.


It is in the section. Does not the section mention that it must be an agreement between the Corporation and such society? The section states it explicitly.

An agreement in writing between the said Corporation and such society—but that does not say the shareholders.


Perhaps the Minister had better explain the matter.

I am merely setting out my difficulties.

What the Cathaoirleach has mentioned is quite true. It says in the beginning of the section: "Whenever the Minister is satisfied ... (a) that money is owing to the said Corporation by a society registered ... and (b) that when such loan was so made there was an arrangement or understanding"—or an agreement in writing—"between the said Corporation and such society that the amount of such loan and the interest thereon would be secured... by a charge on the uncalled capital of such society...." That must be actually stated in writing. There is a third proviso—"that when such loan was made the rules of such society authorised the charging...of the uncalled capital of such society." That is a very unusual rule for a society to have. As a matter of fact, I believe in all these cases the rules were specially changed for the purpose. This agreement must be in writing between the Corporation and the society, and the rules must provide for that being done.

Senator Jameson asks a very pertinent question, why, if these things are right, was a Bill brought in? The Bill was brought in because neither the Corporation nor the society had any legal power to charge the uncalled capital. That is why the Bill was brought in. I explained on a previous Stage that the very same thing was done by the Dairy Disposals Company in the case of creameries, and the 1928 Act had to be brought in to legalise that transaction. At the time, the creameries mentioned in the schedule were being built. They did look for capital in the ordinary way. If they had gone to a bank they would have been asked to sign a joint and several guarantee. They were not disposed to do that at the time. At all times members of a committee are very reluctant to do that; they only do it as a last resort. It would have been impossible to get a new creamery established on those conditions. It is a different thing if the creamery has been in existence for some years. In that case the members would see that it might be advisable to go to a bank and sign a joint and several guarantee. In this instance it was not possible to get a body of farmers to sign a joint and several guarantee in order to start a new creamery. I am not sure that banking institutions would have given 17/6 to every 2/6 raised by way of share capital.

The point Senator Jameson makes is that we are giving special consideration to this institution as compared to other institutions. That statement is true in fact, but the circumstances are peculiar. I do not know of any case— perhaps Senator Jameson does—where the banks have advanced money to creameries without a joint and several guarantee of the members. There was no such thing in this case, and the real reason why I think the Oireachtas should pass this section is because the Credit Corporation at the time agreed to make these advances only on condition that the Minister would legalise the action at a future date. The Credit Corporation knew quite well that they had not the legal power to enforce the terms of the loan when they were making the loan, but they were assured by the Minister then that at the first available opportunity their action would be legalised. We are taking this opportunity of having that action legalised.

I think the safeguards in this case on the societies' part are very clearly laid down. They must, in the first place, owe the money and, in the second place, have made an agreement in writing that it could be charged on the uncalled capital, and, thirdly, their rules must have actually authorised them to do that at the time. That would be sufficient proof that the members were quite well aware of what was being done. Apart from that, it would have been quite obvious that the members knew what was being done, because new creameries were being organised, and they were only asked for 2/6 a share, the remainder being paid by the Corporation.

I am not complaining about this Corporation getting different conditions from other banks, once the Schedule is there, and refers only to four societies. Apparently we are to have no statement that the Corporation collected these two-and-sixpences. I referred previously to the fact that five out of the seven years for collecting the money had passed, and that there should not be very much money in dispute now. I know that they have not paid these two-and-sixpences. What the Seanad is now doing is putting a charge of 17/6 on ordinary shareholders of these four societies which is to be collected when the Corporation chooses. I do not like that. The Corporation has not collected the money. It trusted these societies but is now getting power to collect 17/6 from the shareholders. We are acting on the word of the Minister that there is an agreement such as he describes which complies with all the conditions in the Bill. None of us has seen the agreement, and none of us knows how much money is going to be collected. It may be due to the fact that we have had no daily papers, but what astonishes me is that nobody, with the exception perhaps of the shareholders, knows what we are debating now. I have not had any representations on behalf of the shareholders made to me. I am objecting to this power being given because I know what will happen. In the bank with which I am connected we have plenty of these societies but we have not collected the two-and-sixpences. We have provided for that money. We would not come to the Oireachtas to ask for power to collect the 17/6 due on the shares. In some cases we may have some good guarantors. That is a matter for negotiation. I do not know if I could get the Seanad to agree with me if I put in another amendment. I really do not like this proposal, and I should like the Minister to say how much the corporation say is due on the uncalled capital, and what he believes the shareholders are going to be called upon to pay.

It was I raised this matter on the Second Reading, because it seemed to me the words "agreement or understanding" were altogether too indefinite for an Act of Parliament. The Minister has now substituted the words "agreement in writing." That is precise and definite and, so far as I am concerned, the section fulfils its purpose. I cannot understand Senator Jameson's argument. Up to the present his complaint has been that we were putting this corporation into a more favourable position than the ordinary banks.

That is not right.

That was the first thing the Senator said. Then he turned round and said: "Oh, it is very hard on the shareholders." On which leg is he standing? Is he speaking on behalf of the banks or on behalf of the shareholders? If he is speaking on behalf of the banks this section greatly facilitates them. It is a great advantage to the banks, because it gives the corporation a new fund to resort to. That is the liability of the shareholders, and when the corporation has the new fund to resort to, it is a well-known principle that it must resort to it and leave the other fund for the banks who may have advanced money to the societies. Therefore, as the section stands it is very much in favour of the banks. It is also in favour of the corporation, because it legalises what was a definite understanding. The present Minister is making good a promise made by his predecessor. Nobody can say that the banks are being injured. Justice is being done to the Agricultural Credit Corporation. When people got up societies it is only right that they should pay for them as far as they can.

I should like the Minister to answer a question which has a bearing on this matter. How is the uncalled capital called up? Have the committees of management power whereby uncalled capital is collected in the form of deductions from the milk cheques? I know that frequently that is the way it is done. Whether that is legal or not I have not been able to discover. Some of these things are done more or less in a friendly way. Can the Minister say if it is legal to make deductions from milk cheques without the consent of the owners?

I take it that we are on the Report Stage, but that we are not going to be too strict in view of this development. I am surprised at Senator Jameson's argument to-day, because amendment No. 4 makes reference to particular societies which were named by the Senator in his amendment. If he had no communication with or responsibility for the societies concerned, I wonder whether he had any authorisation to put down the names. All the Senator asked for is conceded, but he now opposes the concession.

As far as Senator Comyn's remarks are concerned, we are dealing only with Section 7, which has nothing to do with any bank except the Agricultural Credit Corporation. I distinctly stated that I was not talking on behalf of the banks. If I was, I would not do so under Section 7. I do not know what Senator Johnson has complained about. I accepted the Minister's proposal about the Schedule. I am not complaining about that. Not a word I said applies to what Senator Johnson referred to.

Is the Senator supporting the amendment before the House?

I am discussing what the amendment is going to do.

It is going to do what you asked.


The Senator does not think so, and tried to argue to that effect.

I did not think so. The amendment has now come before the Seanad in its final form, and it is going to give the corporation power to collect whatever money still remains due on the uncalled capital of the shares of the four societies in the Schedule. I am not at all satisfied that it will not mean a call upon the shareholders of about 17/6 in the £ on the shares they have taken. If the Seanad passes that it may be doing something on the shareholders of the four societies which may wreck many of them. I am asking the Minister if he has any idea of the liability on the ordinary shares of the four societies.

I do not think it makes the slightest difference whether the amendment is passed or not. Whether the agreement was in writing, or was an arrangement, or an understanding, the section will remain the same, I take it, as far as the power of the Credit Corporation is concerned. We are giving the corporation power to collect the outstanding amounts. The society in turn has power to collect these amounts from the suppliers by deducting them from the cheque due to them for their milk supply. That power was specifically given to the society by the suppliers when they joined the society which, I think, is sufficient proof that every member of the society knew what he was doing. He actually signed an agreement when joining the society that if he did not pay his 2/6 the society could deduct it from the cheque due for his milk. Everyone of them signed that agreement.

With regard to the amount that is due by the societies to the Credit Corporation, they have not paid in full in all cases. I am quite sure of that. I have not gone into the matter in detail, because I do not think it should arise. I think that we should look at this from the point of view of the Credit Corporation. The corporation advanced this money, the society knowing very well the bargain they were making, and every supplier knowing very well the bargain the society was making with the corporation. The society even bound itself to change its rules in order to enable the corporation to collect on that basis. But the Credit Corporation knew they had no legal power to do that at the time until they got the necessary power by a Bill being passed, and the Minister gave an undertaking that that would be passed. As that was the position of the Credit Corporation, I think the Oireachtas should certainly make the matter right for the corporation, whether they did collect that money or not. If the Credit Corporation ask the Minister to make good the promise made to them, I do not think anything else arises, if we want to be fair to the corporation. They got the undertaking, and we should fulfil the undertaking. I think I should ask the Seanad, at any rate, to fulfil it. Whether or not the Seanad thinks it is right for a Minister to give an undertaking like that and come along afterwards and ask for sanction is a different matter.

Possibly there might be hardships if the corporation were owed 12/6 on every share by a certain society and, this Bill having been passed, they were to say to the society: "You must pay up that 12/6 per share immediately." I think the Credit Corporation do business much the same as the banks do. The money may be due to them; they may have all the legal power required to collect the money, but they know very well that in practice it is not the best way to do it. I am sure that having got the power they will then make the best possible arrangement for getting the money in over a period of time. I am quite sure that they are not going to bankrupt the suppliers immediately. They want to have power, perhaps, to make the demand and then, if the demand is not met, enter into a new agreement. However, of course, that is the business of the corporation itself and I have nothing to say to what they may do in that way. I think, however, that we should not inquire as to what is due to the corporation, or what powers the members have or the societies have. The only thing that really matters, as far as I am concerned at any rate, and I am asking the Seanad to adopt that attitude, is that this undertaking was given to the corporation and it is the first opportunity that either my predecessor or I have had of fulfilling that undertaking without bringing in a special Bill. We have brought it in as part of this Bill.

The Minister mentioned a matter now which has not cropped up before—that he believes the corporation are going to deal with the collection of this money as other banks would do. He thinks it is going to be spread over a period. That is one of the main things I am concerned about. If the Minister says that he will tell the corporation that he has given an undertaking that these debts are not to be collected promptly and at once but that a reasonable time is to be given and that an arrangement, such as paying out of the milk supply, is to be carried out, I shall leave it in the Minister's hands and say no more about it. If the Minister had stated earlier that he would see that these people were not going to be dragged into Court and that reasonable methods of collecting the money would be adopted and plenty of time given to the shareholders, I certainly would not have been talking so long. I am quite prepared to leave it in the hands of the Minister on that understanding.

I should like to make what might be held to be a personal explanation. I made a statement in reference to Senator Jameson's amendments on the last occasion and he appeared to think that I was misrepresenting his point of view. Senator Jameson is reported in the Official Report, Col. 332, as having said:—

"I ask the Committee to confine the Bill to certain societies specified. It would be a very bad Bill if it worked so that it could be applied to any or to an unlimited number of societies. But if it is made certain that it is to be applied only to a specified lot of societies I think the Minister has a right to get it after he has met these points on the Report Stage."

The question of calling on the unpaid capital of co-operative societies has been raised in a very serious way by Senator Jameson. I am interested in a co-operative society, not a dairy society, which has about 10/- per share of unpaid capital—in the case of some shareholders it would be even more; that is, that the second or third call has been left unpaid. We decided long ago that it was quite impossible, owing to present conditions, to collect these amounts. I, therefore, for one at all events, could not agree that we should give power to the Credit Corporation to call on the unpaid capital of societies.


Is the Senator concerned with one of the four scheduled societies?

I thought this matter was raised on the amendment.


We are only dealing with four societies and that is rather outside the scope of the amendment.

I want to make it clear to Senator Jameson that I gave it as my own opinion that the Credit Corporation would be reasonable. Of course I have no control over the corporation. The Senator knows that if I say to them: "You may do such a thing," they may say: "You must mind your own business."


I think the Senator may take it that the Minister's recommendation will go.

Amendment put and agreed to.

I am not moving amendment No. 5 in deference to the Minister's amendment.


Government amendment No. 6:—

Section 8. To add at the end of the section a new sub-section as follows:—

(3) Where a member of the committee of a society is charged with an offence under this section, it shall be a good defence to such charge for such member to prove that he did not vote for and was not a party to or responsible, directly or indirectly, for the wrongful application of called-up capital which is alleged to constitute such offence.

I move amendment No. 6.

This is the alternative to Senator Johnson's amendment which he has withdrawn. It is to deal leniently with such members of the committee as are not responsible for any misappropriation of funds.

Amendment put and agreed to.
The following Government amendment was also agreed to:—
Section 14. After Section 14 to insert a Schedule as follows:—
Kildare and Leix Co-operative Creameries, Ltd.
Boro Co-operative Creamery, Ltd.
Edenderry Co-operative Creamery, Ltd.
Imokilly Co-operative Creamery, Ltd.
Question—"That the Bill be received for final consideration"—put and agreed to.
Question—"That the Bill do now pass"—put and agreed to.