Braithwaite v Attorney-General

[1909] 1 Ch. 510
[1908 B. 645.]

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(Judgment by: Swinfen Eady J (including background))

Between: Braithwaite
And: Attorney-General

Court:

Judge:
Swinfen Eady J

Subject References:
FRIENDLY SOCIETY
Objects exhausted
Surplus or unexhausted Funds
Charity
Cyprss
Resulting Trust
Bona vacantia

Hearing date: 5-6 February 1909
Judgment date: 13 February 1909

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Judgment by:
Swinfen Eady J (including background)

"The Benefit Society for Girls educated at the School of Industry, Kendal," was established in 1808, and was registered as a friendly society under the Friendly Societies Act of 1793 (33 Geo. 3, c. 54), s. 2. It consisted of honorary members and benefited members. The honorary members were ladies who gave in their names when the society was formed or were afterwards elected according to the rules and paid a subscription. They could not in any case derive benefit from the funds of the society. The benefited members were girls educated at the School of Industry; they paid weekly contributions to the society from the age of seven to sixty-five, and were entitled to certain weekly payments in sickness varying with age up to sixty-five, and to an annuity of 2s. a week from fifty-six to sixty-five, 2s. 6d. from sixty-five to seventy, and 4s. from seventy for the rest of their lives. All payments by the members and all sick allowances ceased at sixty-five. The annuities became payable automatically on a member attaining fifty-six without any inquiry as to poverty. The rules of the society provided that the contributions of honorary members should be appropriated, one half "to raise a capital the interest of which would be sufficient to pay the allowance to children under fifteen"; the other half "to be under the special direction of honorary members for relief in extraordinary cases not provided by the general fund."

The School of Industry was closed in 1845, and after that date no new members were admitted, but subscriptions continued to be received from both classes of members, sick allowances and annuities were paid, and the balance of the funds accumulated. This action was brought by the trustees to decide what was to be done with the accumulations, which amounted to 1901l. apportioned to the honorary members' fund and 304l. apportioned to the benefited members' fund. The 1901l. appeared from the accounts to have arisen wholly from the first half of the honorary members' fund appropriated to provide for the allowances to children under fifteen. The only surviving benefited members were two women over sixty-five in receipt of annuities. Five persons who claimed to be honorary members were made defendants:-

Held, that the society was not a charity, for the benefited members had a legal title to the benefits on making the payments without regard to their need; that the contributions of honorary members were absolute gifts to the society, and that there could be no resulting trust in favour of the honorary members; that the annuitants had no interest in the funds of the society other than the annuities which they had purchased; and that therefore the surplus of the benefited members' fund, after providing for the annuities, and the whole of the honorary members' fund belonged to the Crown as bona vacantia.

This action was brought by the trustees of a society called "The Benefit Society for Girls educated at the School of Industry, Kendal," to ascertain what should be done with the funds of the society, which had practically ceased to exist. The society was founded in 1808 and was registered as a friendly society under the Friendly Societies Act, 1793 (33 Geo. 3, c. 54). It consisted of honorary members and benefited members. The honorary members were ladies who when the society was formed gave in their names and subscribed 7s., and ladies afterwards proposed and admitted according to the rules. The honorary members were liable to fines and forfeits for not attending meetings or refusing certain offices. No honorary member could ever receive relief from any of the funds of the society. As to the benefited members, all girls who at the time of the formation of the society were being, had been, or might thereafter be educated in the School of Industry at Kendal were eligible, and no others.

The School of Industry was an institution founded some time before with the object of providing for the girls of Kendal an education in such branches of female industry as would fit them to earn their living and to care for their own households. One hour a day was given to learning reading, writing, and arithmetic, and the rest of the time was spent in sewing and knitting; the work not required for the girls' own use was sold for their benefit. School fees were charged as a rule. The school was not considered a charity. Some of the girls could earn more than their school fees.

The rules of the society on which the arguments turned are set out below. ^[F1]

There was nothing in any of the rules expressly limiting the benefits of the society to poor persons. The age of every girl joining the society was entered in the books, and the secretary was required to enter her name as entitled to an annuity when she appeared from the books to have attained fifty-six without any inquiry as to her means.

The society was carried on in the manner provided by the rules down to the year 1845, when the School of Industry ceased to exist. After that date no new benefited members were, or indeed could be, admitted, and the society had been carried on for the benefit of the members enrolled before the abolition of the school. Subscriptions continued to be received from both classes of members, and the honorary members or the survivors of them continued to act as members of the committee, irrespective of the rules which required that some members of the committee should retire each year and that there should be an election, and new honorary members appeared to have joined the society without being properly elected.

The funds of the society, after payment of annuities and sick pay to the benefited members, and of grants for relief in extraordinary cases out of the honorary members' fund, had been accumulated, and at the date of this action consisted of investments valued at 2205l. 8s. 6d., apportioned as to 1901l. 1s. 2d. to the honorary members' fund and as to 304l. 7s. 4d. to the benefited members' fund. It appeared from the accounts that the whole of the 1901l. 1s. 2d. was to be attributed to and represented the first moiety of the honorary members' fund under rule 39, namely, the half which was to be appropriated "to raise a capital, the interest of which will be sufficient to pay the allowance to children under fifteen years." In the year 1878, the fund for children under fifteen years of age being no longer required, the balance, 903l. 10s., was transferred to the same account as the second moiety under rule 39, which was entitled in the books of the society "The private fund at the disposal of honorary members."

At the date of the transfer the private fund consisted only of about 188l., which had been exhausted long before the commencement of the action. The rules did not authorize this transfer of the balance to "the private fund." So much of the interest of the 903l. 10s. as had not been applied in grants to members had been accumulated and now amounted to the said sum of 1901l. 1s. 2d. This fund arose entirely from donations, subscriptions, fines, and forfeits of honorary members. The 304l. 7s. 4d. balance of the benefited members' fund arose from the subscriptions or contributions of the benefited members. At the date of the action there were only two benefited members of the society surviving, namely, the defendants Elizabeth Armer, aged eighty-five, and Eleanor Jane Lowe, aged sixty-eight. Neither was liable to pay any further subscriptions. Elizabeth Armer was entitled to an annuity of 4s. a week for her life, and Eleanor Jane Lowe to an annuity of 2s. 6d. a week until she attained the age of seventy and thenceforward of 4s. a week.

Elizabeth Armer died between the date of the hearing and that of the delivery of judgment.

Sargant, for the Attorney-General. I do not make any claim to the fund contributed by benefited members; but the fund representing the contributions of honorary members was clearly contributed for charitable purposes. The case is different from cases where the purposes of the institution have wholly failed, and it is necessary to decide, as to the whole of its funds, whether there is a charity or a resulting trust, or the funds are bona vacantia. Here the two funds are kept wholly distinct; that contributed by voluntary members, who can take no benefit, is to be devoted, one part to securing the payment of the children's allowances, the other part for relief in extraordinary cases under the special direction of the honorary members. Both these are charitable objects. Thus the case is distinguished from Cunnack v. Edwards ^[F2] and comes within Kekewich J.'s reasoning in In re Buck. ^[F3]

The fact that the society was registered as a friendly society does not prevent its being a charity: Pease v. Pattinson; ^[F4] Spiller v. Maude. ^[F5] Those cases are not overruled by Cunnack v. Edwards, ^[F2] and in that case the question of funds contributed by honorary members was not important, for there was only one. ^[F6] It is plain from the whole scheme that the honorary members' fund was to be applied for the benefit of poor persons. Its distribution was at discretion and would be naturally left to a committee, who would not be doing their duty if they applied it for the benefit of persons who were not poor. A charity is not invalid because the beneficiaries are a fluctuating class not necessarily poor. Gifts to widows and orphans (Attorney-General v. Comber ^[F7] ), widows and orphans of seamen (Powell v. Attorney-General ^[F8] ), cottagers (In re Christchurch Inclosure Act ^[F9] ), domestic servants (Reeve v. Attorney-General ^[F10] ), have all been held good charitable gifts.

Hon. F. Russell, K.C., and P. F. Wheeler, for the surviving honorary members. There is no charity, for every member of the society was entitled to its benefits without any regard to her means. Sickness in itself is not an object of charity. In In re Buck ^[F11] Kekewich J. came to the conclusion that poverty was a necessary ingredient in the qualification of the persons to benefit.

If there is not a charity there is a resulting trust for the honorary members, i.e., for the survivors and the representatives of those who are dead. The accumulations represent only the children's fund. That is set apart with a trust to apply the income in payments to the children. There is no trust as to the capital. It is a fund set apart for a particular object which has failed, and there is a resulting trust for the donor: see In re Trusts of the Abbott Fund. ^[F12]

P. C. Vaughan, for the two annuitants. This is an ordinary benefit society, and the last surviving beneficiaries are entitled to the whole fund. There is no charity; the only ground for contending that there is one is the fact that part of the funds was raised by voluntary donations. That point was dealt with by Kekewich J. in In re Buck, ^[F13] and he decided that that fact alone could not make a society a charity. On the winding up of a benefit society the whole of the funds belong to the existing members: In re Printers and Transferrers' Amalgamated Trades Protection Society; ^[F14] In re Lead Company's Workmen's Fund Society. ^[F15] It may be said that the accumulations belong to the children's fund, in which the annuitants have no interest, but on the true construction of rule 39 only the income is appropriated to the children. In In re Trusts of the Abbott Fund ^[F16] the subscriptions were made for a particular purpose during the lives of two ladies who were both dead. It was distinguished in In re Andrew's Trust, ^[F17] where some beneficiaries were living.

Sir S. T. Evans, S.-G., and C. B. L. Tennyson, for the Crown. This society was registered as a friendly society, and therefore it is not a charity: In re Clark's Trust. ^[F18] There is nothing in the rules from which the Court can infer that poverty was in any way required as a qualification for membership.

Mr. Russell's clients cannot be entitled by way of resulting trust, for the accumulated fund represents the children's fund, and this fund was closed long before any of them joined the society. Moreover, they do not seem to have been elected as required by the rules, and they never paid 7s. subscription. The rule requiring this was altered by resolution on January 10, 1879, but that alteration was never registered, and so is invalid: see Friendly Societies Act, 1875 (38 & 39 Vict. c. 60), ss. 5 and 6, and the Friendly Societies Act, 1793 (33 Geo. 3, c. 54), s. 3. These defendants are, therefore, not honorary members at all; and if they were, s. 14 of the last-named Act makes their contributions the absolute property of the society and precludes any resulting trust. ^[F19]

As to the annuitants, it is very doubtful whether they have not ceased to be members of the society. They have ceased to make contributions and to be entitled to any benefits except their annuities. In the cases quoted the societies were being wound up by resolution and the members were held to be entitled in proportion to their contributions. These annuitants have contributed nothing to the children's fund represented by these accumulations and cannot have any claim on it.

Feb. 13. Judgment of Swinfen Eady J. -

This action is brought to determine the question what ought to be done with certain funds vested in the plaintiffs, Isaac Braithwaite and John Jowitt Wilson, as trustees acting for a society which has now ceased to exist and was known as "The Benefit Society for Girls educated at the School of Industry, Kendal."

This society was established in the year 1808 and was duly registered as a friendly society at quarter sessions pursuant to the statute 33 Geo. 3, c. 54, s. 2. [His Lordship then stated the facts of the case and the effect of the rules as above, and continued:-] The rules did not authorize the children's fund being carried over to the credit of "the private fund," and, although no question is now raised with regard to any sums already paid away, the balance remaining must be treated as if still appropriated in the manner provided by the rules. This fund arises entirely from donations, subscriptions, fines, and forfeits of honorary members' and not any portion of it has been contributed by benefited members. The 304l. 7s. 4d. balance of the benefited members fund has been subscribed or contributed by the benefited members. [His Lordship then stated the ages of the defendants Elizabeth Armer and E. J. Lowe and the annuities to which they were entitled at the date of the hearing, and continued:-] It is not disputed that the benefited members' fund is liable in the first instance to be applied in satisfying these annuities. The question is, What is to become of the residue of the benefited members' fund and the whole of the 1901l. 1s. 2d.?

The Attorney-General did not put forward any claim on behalf of charity to the surplus of the benefited members' fund, but with regard to the 1901l., which for the sake of brevity I will call "the children's fund," he contended that it was the subject of a charitable trust and ought now to be applied cyprss. I am of opinion that this friendly society was not a charitable institution. The society was one whose members were to provide by subscriptions and fines a fund to be distributed for their mutual benefit in cases of sickness and old age. Poverty of the member at the time of sickness or old age was not required to entitle her to the benefits of the institution. She acquired a legal right to these benefits by reason of her membership and paying her dues under the rules. It cannot be contended that a wealthy member would not be entitled to her annuity equally with a poor one. The funds of the society were augmented by the contributions of honorary members, which formed "the children's fund," but the funds of the society were not clothed with any charitable trust, and their character was not wholly, or to the extent of the addition, varied by such addition: see In re Clark's Trust; ^[F20] Cunnack v. Edwards. ^[F21] The case of In re Buck ^[F22] referred to a society where only members in distressed circumstances arising from poverty were eligible for relief, and it was held that poverty in itself was an object of charity. I therefore determine that the Attorney-General is not entitled to have the funds applied in charity cyprss.

It was next contended on behalf of the honorary members that they were entitled to "the children's fund" on the ground that, as the society had now come to an end, there was a resulting trust in their favour as subscribers to the fund. I am not satisfied that the defendants, who are sued as honorary members, really fill that position. They do not appear to have been duly elected or admitted pursuant to the rules. They did not become subscribers until long after the closing of the children's fund, and have only paid 1s. a year. On January 10, 1879, a resolution purported to be passed at a quarterly and committee meeting as follows:

"It is decided that a subscription of 1s. per annum shall be sufficient from the honorary members."

This alteration of the rules has not been registered in manner required by the Friendly Societies Act, 1875, and by s. 13, sub-s. 2, of that Act no amendment of a rule is valid until registered, and s. 6 of the same Act applies the provisions of that Act to existing registered societies.

But there is a further answer to the claim of the honorary members. Under s. 14 of the Act 33 Geo. 3, c. 54, societies may receive donations from any person or persons. Sums so given become the absolute property of the society. The donors have parted, once for all, with all interest in the sums so given, and there is no resulting trust in their favour.

It was next contended that the two remaining benefited members of the society were entitled to the whole funds now remaining; but their only right is under their contract of membership, pursuant to which they are entitled to certain annuities out of the benefited members' funds, but not to the surplus of those funds, after satisfying their annuities, nor to "the children's fund." In In re Lead Company's Workmen's Fund Society ^[F23] there were at the date of the winding-up 439 members, of whom eighty-eight had attained sixty-five years of age, and accordingly ceased to contribute, and had become entitled to a pension of 6s. a week for life; the invested funds of the society consisted only of some 32,000l. Consols, and it was admitted that, with no new members coming in, the society was insolvent, and that if it continued to pay the 6s. a week pension to the members who had attained sixty-five out of its capital, and also to make the usual sick pay allowances, the younger members of the society would probably receive nothing. Again, in In re Printers and Transferrers' Amalgamated Trades Protection Society, ^[F24] when the trade union was dissolved there were 201 members who had contributed to the funds, which then amounted to only about 1000l., and the Attorney-General made no claim to the funds as bona vacantia.

In neither of these cases was there any question as to the persons entitled to any surplus after providing for the claims of members under the rules. In neither case was there in fact any surplus whatever. Two cases have, however, been decided where the sole surviving member of a friendly society, or the legal personal representative of the last deceased member, claimed the remaining funds of the society. In Spiller v. Maude ^[F25] the plaintiff was the sole surviving member of the York Theatrical Fund Society, which was a society duly enrolled under the Friendly Societies Act 10 Geo. 4, c. 56. She was entitled under the rules to the whole income of the trust fund, which then amounted to about 1300l. New Three per cent. Annuities. She, however, claimed to be absolutely entitled to the principal of the fund as the sole surviving member of the society. Sir John Romilly M.R. did not accede to this view, but directed the funds to be paid into Court and the income only paid to the plaintiff for life. The same claim was advanced again on the plaintiff's death, when her legal personal representative claimed to be entitled to so much of the fund as had been subscribed by members of the society, and the claim was again rejected by Sir George Jessel M.R.

Again, in Cunnack v. Edwards the legal personal representative of the last surviving member claimed to be entitled to the unexpended funds of the society, amounting to 1250l., and by amendment one Clarke was added to represent the representatives of deceased ordinary members as a body. Chitty J. pointed out that the society was not a tontine society and held that there was no ground for saying that the funds belonged in equity to the last survivor; and the Court of Appeal decided that there was not any resulting trust in favour of deceased ordinary members as a body.

In the present case the two surviving benefited members are entitled to the annuities for which their contract of membership provides, but not to any other interest in the funds.

The entire beneficial interest has been exhausted in respect of each deceased benefited member, and when the annuities to the two surviving members cease to be payable upon their respective deaths, they too will have exhausted all their beneficial interest in the funds.

All possible claimants to the fund having now been disposed of, I decide that the surplus of the benefited members' fund and the children's fund belong to the Crown as bona vacantia.

Solicitors: Kinch & Richardson, for C. G. Thomson & Wilson, Kendal; Treasury Solicitor.