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Building Societies Act 1965

Constitution of building societies - Functions and general powers of building societies

9C: Ultra vires transactions

You could also call this:

“Building societies' actions can't be called wrong just because they weren't allowed to do them”

You should know that anything a building society does, or any property it transfers or receives, can’t be considered invalid just because the society didn’t have the right or power to do it. This rule helps protect the actions of building societies.

However, there are some exceptions to this rule. Members of the society, people who hold certain types of loans from the society, or trustees for those loan holders can still challenge the society’s actions in court if they think the society didn’t have the power to do something. The society or its members can also take legal action against the society’s officers for doing something the society wasn’t allowed to do. The FMA (Financial Markets Authority) can also apply to shut down the society.

If someone tries to stop the society from doing something because they think it doesn’t have the power to do it, the court can decide what’s fair for anyone who might lose out because of this. But the court can’t give money for profits that people thought they might make in the future.

Any legal challenges about the society’s powers must be heard in court, not through arbitration, even if the society’s rules say otherwise.

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Topics:
Money and consumer rights > Banking and loans Housing and property > Buying and selling homes
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9B: Powers of building societies, or

"Building societies can do many things to help them work, unless their rules say they can't"

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"Registering or filing society documents doesn't mean everyone knows about them"

Part 2 Constitution of building societies
Functions and general powers of building societies

9CUltra vires transactions

  1. Nothing done by a society and no conveyance or transfer of any property to or by a society shall be invalid, void, or unenforceable by reason only of the fact that the society was without capacity or power to do it, or to execute, or give, or take such conveyance or transfer.

  2. Nothing in subsection (1) shall apply:

  3. in any proceedings against the society by any member of the society, or where the society has issued a debenture or debentures secured by any charge over all or any of the undertaking or property of the society, by the holder of any of those debentures or the trustee for the holder of those debentures—
    1. to prevent the doing of any act, or the conveyance or transfer of any property to or by the society on the ground that the society is without capacity or power to do the thing or to execute or take such conveyance or transfer; or
      1. to obtain any other relief on the ground that the society was without capacity or power to do such thing, or to execute or take such conveyance; or
      2. in any proceedings by the society or any member of the society against any officer or former officer of the society as a result of any thing done by the society or the conveyance or transfer of any property to or by the society on the ground that the society was without capacity or power to do such thing or to execute, give, or take such conveyance or transfer; or
        1. in any application by the FMA to have the society put into liquidation.

          1. In any proceedings to which subsection (2)(a)(i) applies to prevent the doing of any act, or the conveyance or transfer of any property by or to the society pursuant to any contract to which the society is a party, the court may, on the application of any party to the contract (including the society), in addition to making any order restraining or preventing the society from performing the contract, make an order granting such relief as the court thinks just in respect of any loss or damage which may be sustained as a result of the society being prevented from performing the contract.

          2. Nothing in subsection (3) shall authorise the granting of relief in respect of the loss of anticipated or future profits.

          3. Every proceeding to which subsection (2)(a) or subsection (2)(b) applies shall, notwithstanding anything to the contrary in the rules of the society or in sections 108 to 113, be heard and determined by the court and not by arbitration.

          Notes
          • Section 9C: inserted (with effect on 1 January 1966 and applying to any thing done by a society and any conveyance or transfer of any property to or by a society whether before or after this date, but not applying to or affecting any proceedings instituted or commenced before 1 September 1987), on , by section 4(1) of the Building Societies Amendment Act 1987 (1987 No 175).
          • Section 9C(2)(c): replaced, on , by section 2 of the Company Law Reform (Transitional Provisions) Act 1994 (1994 No 16).
          • Section 9C(2)(c): amended, on , by section 82 of the Financial Markets Authority Act 2011 (2011 No 5).
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