policy of assurance effected by any man on his own life, and expressed to be for the benefit of his wife or of his children, or of his wife and children, or any of them, or by any woman on her own life, and expressed to be for the benefit of her husband, or of her children, or of her husband and children, or any of them, shall create a trust in favour of the objects therein named, and the moneys payable under any such policy shall not, so long as any object of the trust remains unperformed, form part of the estate of the insured, or be subject to his or her debts; provided, that if it shall be proved that the policy was effected and the premiums paid with intent to defraud the creditors of the insured, they shall be entitled to receive, out of the moneys payable under the policy, a sum equal to the premiums so paid. The insured may by the policy, or by memorandum under his or her hand, appoint a trustee or trustees of the moneys payable under the policy, or from time to time appoint a new trustee or trustees thereof, and may make provision for the appointment of a new trustee or new trustees thereof, and for the investment of the moneys payable under any such policy. In default of any such appointment of a trustee, such policy, immediately on its being effected, shall vest in the assured and his or her legal personal representatives, in trust for the purposes aforesaid. If at the time of the death of the assured, or at any time afterwards, there shall be no trustee, or it shall be expedient to appoint a new trustee or new trustees, a trustee or trustees or a new trustee or new trustees may be appointed by any court having jurisdiction under the provisions of the Trustee Act, 1850, or the Acts amending and extending the same. The receipt of a trustee or trustees duly appointed, or in default of any such appointment, or in default of notice to the insurance office, the receipt of the legal personal representative of the insured shall be a discharge to the office for the sum secured by the policy, or for the value thereof, in whole or in part. By Clause 26, the Act is not to extend to Scotland.

It is to be feared that no small amount of litigation will be required before the meaning of several of the above-referred to enactments is determined. It will be observed that Clause 6 and those governed by it speak only of deposits "in any post-office or other savings bank, or in any other bank," not taking account of the fact that all registered friendly societies having loan funds are authorised to receive deposits, and that a small group of such societies are characteristically "deposit friendly societies." Will the words "other interests," subsequently used, cover such deposits when made by married women? Again, the only annuities spoken of are those "granted by the Commissioners for the Reduction of the National Debt, or by any other person;" will "other person apply to friendly societies granting annuities to married women? Again, the framers of the measure do not seem to have been aware that " friendly societies" form only one of five classes of "societies under the Friendly Societies Acts," and it becomes, therefore, a question whether married women's interests in cattle insurance societies, in such benevolent societies as grant annuities or other permanent benefits, and in specially authorised societies other than such as are also loan societies under the authority of 16th May 1876, come within the terms of the clauses in question. Nor does it seem to have been known to the framers that an important class of friendly societies, those within Section 30 of the Act of 1855, are bound by law to grant policies, and it will therefore have to be decided sooner or later by the courts whether Clause 11, which speaks only of an "insurance office," applies to such friendly societies. The important innovation made by the clause in question, which apparently enables the insurer in certain cases to impose on the body granting the policy, notice of a trust, and to insert it in the policy itself, will be noticed.

Other observations will have to be made on the Bill in reference to other classes of societies.

IX.-UNAUTHORISED INVESTMENTS OF FRIENDLY SOCIETIES.

An important case under the Friendly Societies Acts was decided on appeal, 5th November 1881, In re Coltman, Coltman v. Coltman, Law Reports, 19 Ch. D. 64. The trustees of a registered friendly society (the Victoria Friendly Society at Burbage) advanced 300 l. to one Joseph Marshall, on a promissory

note signed by himself and two sureties, John Marshall and E. C. Coltman, all three strangers to the society. Coltman having died intestate, and his estate being administered by the Court, the trustees of the society claimed to prove for the 300 l. with an arrear of interest. Vice Chancellor Fry disallowed the claim, on the ground that a loan to a person not a member was forbidden by the Friendly Societies Acts (see Sect. 16, Sub-sect. 1 of the 38 & 39 Vict. c. 60), and that the transaction was therefore illegal, and one on which no action could be maintained. His decision was, however, reversed on appeal.

The Master of the Rolis said. . . . "The Act savs that the trustees, with the consent of the committee of management, or a majority of the members of the society, may lend the money of the society on certain securities, not including personal securities, but there is nothing in the Act which directly or indirectly prohibits the lending on personal security beyond the fact that it gives the trustees no authority to do so, and that their doing so would therefore be a breach of trust. I cannot find anything in the Act which would prevent all the members from effectually authorising a loan on such security, although a mere majority could not do so. There is, therefore, nothing that I can find in the Act of Parliament which makes the loan illegal. . ... I am not satisfied that an express provision in the Act of Parliament that the trustees should not lend money on personal security would have made any difference. The loan would have been wrong; it would have been an appropriation of the society's money to their own use, but there would not have been any such illegality in the transaction as would preclude the trustees from recovering the money lent. It seems to me that to hold it to be incompetent to maintain an action under those circumstances would be to say that it was incompetent for a trustee who had improperly appropriated the money of the society and lent it in his own name to take steps to enable him to restore it. How the persons who borrowed it, there being no illegality in the borrowing on their part, and no illegality in their agreeing to repay the money so borrowed, and no illegality in the purpose to which they were intending to apply it, can set up the doctrine that they are relieved from their liability by reason of the money having originally belonged to a friendly society, is a thing which I am quite unable to understand."

...

Lord Justice Brett. . . . "The appellants are trustees of a friendly society. They have not, by virtue of their office, any authority at Common Law to lend the money of the society at all, and they required a statutory authority to enable them properly to do so. That authority is given to them in this 16th section, but only under certain circumstances, and subject to certain rules. It seems to me that the section does not give them authority to lend to strangers on personal security, and such a loan could not be sanctioned except by the authority of all the members, the consent of a committee or of a majority of members not being sufficient. This section, therefore, shows that the money which was the consideration for the promissory note, was lent by the trustees without authority. But does it follow that because the money is lent by a person who has no authority to lend it, therefore that contract is an illegal contract? It seems to me that it does not follow. . . . The contract is, if you will lend me so much money I will pay you that money back on demand. The consideration is the handing over the money. That is not illegal. The promise to pay back money which you have borrowed is not illegal. The money was not borrowed for any illegal purpose in order to do an illegal or immoral thing, and I cannot see that there is anything illegal in the contract. The only objection is, that those who made the contract with the debtor had no authority to make it, and that is an objection which he cannot take.”

Lord Justice Lindley "There is nothing illegal in the promise, and nothing illegal in anything except that the money was got from a place from which the payees had no right to take it. . . . It appears to me, upon principle, that the mere fact that they got the money from a place from which they had no right to take it does not in any way invalidate the promise to repay it on demand."

This decision, it may be observed, in the first instance, fully confirms by implication the construction put by the Central Office on the words "personal security," in Sects. 16, 1 (e), and 18 (2) of the Friendly Societies Act, 1875 (see the Chief Registrar's Report for 1878, p. 12), since it was assumed throughout by all three of the learned judges that what is meant is the security of individuals.

The

The point which the decision directly establishes, it must next be pointed out, is that where the money of a society has been improperly lent (if not for a purpose illegal in itself on the part of the borrower), it is nevertheless recoverable, as it does not lie with the debtor to object want of authority on the part of the lender.

But there is nothing in the decision, it must be carefully noted, to affect the responsibility of trustees for such unauthorised loans. On the contrary, it is clearly pointed out by Lord Justice Brett that they have no authority to lend money at all, except so far as the Statute gives them such authority, and that as between themselves and the members, when they go beyond that authority, nothing but the unanimous authority of all the members for the loan can discharge them of responsibility.

may be

Nor does the decision affect any statutory responsibility which incurred, as towards the public, by violation of the provision of the Act, and which may be enforceable at the suit of the Registry Office.

Accordingly, in a case at the Wigan County Police Court, the trustees of the Ever Firm Lodge, No. 1, Miners Sick and Accident Society, Goose Green, Pemberton, were convicted at the suit of the Chief Registrar in the sum of 5 l. and costs, for having, in violation of the Act of Parliament (and also of the rules of the Society) invested money of the society (80 l. out of 1281. 4 s. 6 d.) on personal security, viz., the promissory note of a member. The loan had been advanced with the consent of a majority at a meeting of the Society, although warned by a trustee that the investment was illegal (12 August 1881).

X.-THE ANNUAL RETURNS.

A return having been proposed to be moved for by Mr. Roundell, M.P., of all societies and branches which had or had not made valuations under the Friendly Societies Acts, in order to avoid a double publication containing much of the same matter, it was determined to embody the desired details in the second part of the Report for 1880 (for Societies) and of 1881 (for Branches). Great additional labour is thus entailed in making up the abstracts, and it is to be feared that this part will only appear at a late date.

The endeavour to secure greater accuracy in the statistics published by the office has indeed so much increased its work that the addition of another lower division clerk to the staff has been authorized by the Treasury.

Two thousand two hundred and eighty-seven returns from Friendly Societies or Branches had to be sent back for amendment or explanation. Among the returns from Friendly Societies,

984 were sent back on account of imperfections in filling up form.

784 were sent back for inquiries as to investment of funds.

535 were sent back for neglect in respect of audit.

152 were sent back for inquiries as to management fund.

33 were sent back for inquiries as to misappropriation of funds.

28 were sent back for being made up to a date other than the Act directs.

The returns of branches generally came in in a more correct shape than those of isolated Friendly Societies, owing to previous examination by the Secretaries of Orders, who are responsible for such returns, as forming, in fact, parts of the return of the Order itself; 262 returns of branches had, however, to be sent back.

Summonses were taken out in 1881 for default in sending the annual returns in 24 cases, of which 14 were in Surrey, six in Berkshire, two in Sussex, and two in Essex.

Convictions were obtained in the 15 following cases:

King of the South Lodge, I.I.O.O.F., L.U., Victoria Tavern, Lavender Hill, Surrey. Battersea Provident Society, St. Peter's Club Room, Battersea, Surrey.

Abraham's Pride Lodge, L.O.A.S., A.U., British Lion, Acre Street, Wandsworth, Surrey.

Loyal Albion Benefit Society, Lodge No. 3, Old Friends, Catherine Wheel, Borough, Surrey.

Spring of Hope Lodge, L.O.A.S., A.U., Three Sugar Loaves Inn, Borough, Surrey.

Independent Ladies' Friendly Society, George and Dragon, Bennett Street, Lambeth, Surrey.

Loyal Friendship Lodge, I.O.O.F., M.U., Holland Arms, Holland Street, Brixton, Surrey.

Loyal True Brothers Lodge, I.I.O.O.F., S.L.U., Duke of Cornwall, Thornton Heath, Surrey.

Croydon Juvenile Branch of Odd Fellows, Rising Sun, North End, Croydon, Surrey.
United Mechanics Friendly Society, Merry Wives Tavern, Windsor, Berkshire.
Court Foresters Arms, A.O.F., Savings Bank, Faringdon, Berkshire.

Vale of White Horse Juvenile Foresters Society, Faringdon, Berkshire.
Sanctuary Pride of the Nile, A.O.L., Faringdon, Berkshire.

Adelaide Lodge, I.O.O F., M.U., Warriors Gate Inn, St. Leonards, Sussex.
Court Forest Hall, A.O.F., Cock Inn, Chipping Ongar, Essex.

In five cases the summonses were withdrawn on payment of the fine and costs, viz:

Mutual Provident Alliance, 2 Albion Place, Blackfriars, Surrey, (maximum fine required).

Britons in Unity Society, Leather Bottle Inn, Warlingham, Surrey.

Tent of Righteousness Friendly Society, Equestrian Tavern, Blackfriars Road, Surrey. Royal Antediluvian Order of Buffaloes, Prince of Wales, St. George's Road, Surrey. Provident Friendly Institution, Town Hall, Saffron Walden, Essex.

In the four remaining cases, where incorrect or doubtful information had been given, the summonses were withdrawn without payment.

It is found as an invariable rule that a prosecution is followed by an increase of returns from the neighbourhood. But, except occasionally in the case of prosecutions in the metropolis, when reported by the London papers, from which the report gets copied into some provincial ones, the effect seldom extends beyond the range of the circulation of the local paper in which the prosecution is reported. Hence a conviction in Berkshire has no effect in Norfolk, or Cornwall, or Lancashire, and vice versa. It becomes therefore necessary from year to year to vary more or less the localities in which proceedings are taken.

The number of valuation returns received during the year was 4,856, thus showing a very large increase upon the number of the previous year 3,542. This result is satisfactory as far as it goes, showing that societies are recognising the necessity of complying with the provision of the Act in this respect. No doubt the large increase is in some measure due to the notion generally entertained that the date of valuation was required to be the same as that for making the quinquennial return. Partly, too, it arose from a desire to postpone the making of the return to as late a period as possible. In addition, the sending out of the notices, referred to on page 12 of the Report for 1880, has had a most salutary effect by impressing upon societies the fact that the valuation requirement of the Act was intended to be rigorously carried out by this office.

In consequence of the large numbers of societies requiring the services of a valuer simultaneously, it is to be feared that, speaking generally, the valuations have been made in a perfunctory manner, tabular results being applied to societies with little if any previous inquiry as to how far such results would prove applicable to the particular society. From time to time valuations have been sent back for correction containing egregious errors of principle, and now and again glaring clerical errors. In many cases the valuations show conclusively that the person signing as valuer has had little, if anything, to do with the valuation, and in some cases it would almost appear that the valuer has done nothing more than put his name to to the documents. It need, therefore, hardly be stated that the work of the Actuary to the Central Office, in examining these valuations, and sending them back for correction, with, in many cases, long explanatory letters on technical points, has been very heavy; indeed at times it has been found impossible to give immediate attention to valuations received.

One prominent result of the carrying out of this provision of the Act has been the wide diffusion, among those connected with friendly societies, of the principles of actuarial science, in their bearing upon the financial position of friendly societies. The Memorandum on Valuations issued by this office

(Appendix

(Appendix B., Report for 1880), has done good work in this respect, and from time to time the Actuary has had in particular cases to call attention to actuarial points of importance which have been loosely dealt with, or not at all, by the valuer. Generally speaking, in these cases the valuer is really nothing more than a mere computer, performing certain simple arithmetical processes in rule-of-thumb fashion, and it is a serious question for societies to consider how far they are acting with good judgment, in placing a matter of such vital importance as the valuation of their assets and liabilities in the hands of such persons, on the ground that by doing so the society is enabled to comply with the Act at a cheaper rate than would be the case were a really competent valuer employed.

A point as to which there is much misunderstanding is, that of the financial effect of secessions, and how they may be dealt with in a valuation, and the following extracts from a letter addressed by the Actuary to this office to James C. Stevenson, Esq., M.P., and published by the latter in a local paper, may here be reprinted :

Registry of Friendly Societies,

Central Office, 28, Abingdon-street, S. W., London, 12 July 1882.

Dear Sir, "Mr. Ludlow tells me that you desire a few words of explanation as to how this office deals with the question of secessions in valuation returns.

"I may, in the first place, state that this office does not reject, nor ever has rejected, valuation returns, because in the said returns it has been attempted to make allowance by a reduction of the liabilities for the supposed profit that may accrue to a society from members seceding. What has given rise to this idea is probably No. 10 of the instructions to public valuers, appointed by the Treasury, which runs as follows:

"No allowance is to be made for possible future profits arising from secessions unless 'the number of contributing members in the society, and the nature of the society's 'business be such as fully to justify an allowance being made, and the valuer shall in all 'such cases state in his report what allowance has been made, and the grounds on which it is made.' This instruction was very carefully considered, and would do well for the guidance of valuers who are not public valuers under the Act, but when a valuation was tendered, made by a valuer who was not a public valuer, the responsibility of making any allowance for secessions would rest entirely with him, and this office would not reject the valuation on the ground that allowance for secession had been made, provided the matter had been reasonably dealt with, and a clear explanation given of how it had been dealt with.

"While writing to you it appears desirable to add a few observations on the question, which will probably put it in a new light.

"(1.) When a society charges the same contribution for all ages at entry, then it is clear that the younger members must pay more than the proper amount, and the elder members less than the proper amount, if the actual amount of contribution paid by all is sufficient to assure the benefits to all.

"In a valuation, therefore, in the case of young members, there would be what are known as negative values, i.e., where the value of the benefits is less than the value of the contributions, so that the value of the benefits, less the value of the contributions, constituting the reserve for such member, is a negative quantity. Consequently, if a young member with a negative value seceded, the society would be a loser, and would only gain in cases where the value of the benefits, less the value of the contribution, is a positive quantity.

"(2.) Again, in the unfortunately only too common case, where none of the members pay the proper amount of contribution, every member's benefits will have a greater value than his contributions, and so far as the valuation goes there would be a profit accrue possibly to the society in the event of his seceding. Against this, however, are to be put two matters on the other side.

(a.) If the member who secedes be a healthy, prosperous member, his secession would probably be a loss to the society.

"(b.) One of the arguments commonly brought forward by those who have not given the subject much attention is that secessions should be allowed for, because the society should be treated as a 'going concern.' But, in the cases now under consideration, the assumption of a so-called 'going concern' considerably modifies the assumption as to secession, because, as a going concern, new members would come in and replace those who go out, and just as it is concluded that the latter are a gain to the society, so to be logical and correct, it must also be concluded that those who take their place will be a loss to the society.

"In the case of ordinary societies, any profit made on secessions will undoubtedly reveal itself from time to time when the periodic valuation is made, but as you will see from what I have just said, the question is by no means the simple one that ordinary 373.