LETCHCHIMIPILLAI v. SIVAKOLUNTU

055-NLR-NLR-V-25-LETCHCHIMIPILLAI-v.-SIVAKOLUNTU.pdf


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Present: Porter J. and Jayewardene A.J.LETCHCHIMrPTTJiAT v. SIVAKOLUNTU.
114—D. C. Batticaloa, 35-
Mutual provident or benefit association-Member naming a relative asnominee—Nominee entitled to money, and does not receive moneyas trustee for heirs.
Where a relative was named as a ^nominee by a member of theCeylon Mutual Provident Association,—
Held, that under rule 22 the nominee became entitled to themoney payable by the society on the death of the member, andthat he did not hold it as trustee or agent for the heirs of themember.
The Ceylon Mutual Provident Association v. Mendis1 notfollowed.
'JpHE facts are set out in the judgment.
Balasingham, for the administratrix, appellant.—The adminis-tratrix was named as the nominee by the deceased, Kandiah, whowas a member of the Mutual Provident Association. He is in theposition of a person for whose benefit a policy of insurance has beeneffected. The rules of the association indicate that such was theintention.
The District Judge has relied on ratio decidendi in The CeylonMutual Provident Association v. Mendis (supra). In a later case,76—D. C. (Inly.) Jaffna, 5,050 (8. C. Min., July 24, 1923),Jayewardene A. J. doubted the correctness of that decision. Counselcited Ashby v. Costing Bennett v. Slater.3
No appearance for respondent.
Cur. adv. wit.
October 2,1923. Jayewabdene A.J.—
This appeal raises a question with regard to the rights of a nomineeof a member of a mutual provident or benefit association. OneKandiah was a member of the Ceylon Mutual Provident Association.He was unmarried. Under the rules of the association he namedas his nominee a relative—his aunt and stepmother—who is thepresent appellant. Kandiah died intestate, and letters ofadministration have been issued to the appellant.. At a judicialsettlement of the accounts of the estate she claimed to retain a sumof Rs. 2,153*77, payable by the association to the nominee ofKandiah. Her claim was contested by the other heirs of Kandiah,who assert that the sum formed part of the estate of the deceased,
1 (1922) 24 N. L. R. 205.8 (1888) 21 Q. B. D. 401.
8 (1899) 1 Q. B. D. 45.
19-xxv.
12(60)29
( 226 )
1923.
Jaybwabv
db»s AJ.
Letckchimi•piUai v,
Sivakoluntv
“ 17. That the nominee or nominees of a member shall be amember or members of his family, including a bona fideadopted child where a member has no child or childrenof his own; or, failing such, any other relation. Suchname or names shall be registered in the books of theassociation as well as in the member’s pass book; pro-vided that on the marriage of a member the nominationpreviously made by him shall cease to be valid, and thata fresh nomination shall be made by such member, whichshall be duly registered.”
“ 22. On the death of a member, the amount available to hiscredit in the books of the association shall be paid to hisnominee upon application …. In the absenceof a nominee, the credit balance and contributory call shallbe p^jd to. the widow; if there be no widow, to thechildren; and if there be no children, to the next of kinor legal heirs. Provided, that if the nominee be a minor,the amount due to such minor shall be deposited in theCeylon Savings Bank for the benefit of the minor, and besubject to the rules of the said bank in respect of depositsmade for the benefit of minors.”
The question for decision is whether the nominee receives themoney beneficially, or as the trustee or agents of the heirs. la'The
and that it ought to be distributed among all the heirs. The
learned District Judge, relying on a recent judgment of this Court inThe Ceylon Mutual Provident Association v. Mendis (supra), upheldthe contention of the heirs, who are the respondents to this appeal.Recently, in a case which came before this Court, whore this questionwas discussed, 1 had occasion to remark that that decision wouldhave to be considered in the light of certain English decisions, towhich I drew the attention of counsel. Relying on these decisions,to which 1 shall refer presently, Mr. Balasingham contends thatthe decision in the above case is erroneous. The Ceylon MutualProvident Association is, I presume, not a society registered underthe Societies Ordinance, No. 16 of 1891, therefore the rightsof the members inter se depend entirely on contract, and when amember joins, he enters into a contract with the other membersof the society, who are represented by their agent—the secretaryor committee—authorized to admit him. In this way the membersmutually contract with each other to make provision for theirwidows, children, and others on certain prescribed terms. Theseterms are embodied in rules, and eaoh member as he joins agrees tobe subject to and to abide by the rules of the society. Now, therules of the Ceylon Mutual Provident Association dealing withnominations and nominees are the seventeenth and twenty-second,which are as follows
( 22* ). »
Oeylon Mutual Provident Association v. Mendis {supra) this Court tookthe view, that aa the rules did not say that the money should becometiie property of the nominee, the nominee did not become the ownerof the money, and that the rules merely designated the destinationof the property, and appointed a person who could give a validdischarge to the association. In that case the facts upon whichthe dispute arose were not quite simple, and it did not involve aclaim by a nominee. The contest there arose in this way. OneSolomon Pieris was a member of the same provident associationas the deceased here, namely, the Ceylon Mutual ProvidentAssociation, and under the rules had nominated his cousin,Daniel Pieris, as his nominee. Daniel Pieris, however; predeceasedSalomon Pieris, who died later leaving a will by which he bequeathedthis specific sum to the added defendant in the case. He left nowidow and no children. The first and second defendants were hisexecutors, while the other defendants were his next of kin or legalheirs. The Ceylon Mutual Provident Association filed an inter-pleader action, citing the various claimants before the Court.According to the rules, where there is no nominee, this money hasto be paid to'the widow, if there be no widow then to the children,and if there be no children to the next of kin, or legal heir, but theDistrict Judge held that the devisee under the will was entitled tothe money. This Court upheld his decision.
It will be seen that the case did not deal with the claim of anominee; but the reasons given in the judgment apply equally tothe case of a nominee if placed in the same position as the legalheirs in that case. This appears from the judgment of Ennis J.,who said:—
“.there is no legal principle upon which a nominee
mentioned in the rules (or, in the absence of the nominee,the person specified in the rules) becomes the owner ofthe amount paid to him or her. The effect of the rules,as at present formulated, is to provide that the associationshall be in a position to obtain a good receipt for anypayments they make. The rules merely say that themoney shall be paid to a nominee, a certain specifiedperson, and do not say that the money should become theproperty of that person, and I know of nothing by whichthe payment under the rules would affect the devolutionof ownership according to the principles of law. It ispossible that if the rules had added that the propertyshould pass to the nominee or the person specified, itmight have been suggested that the devolution was basedupon the contract between each individual member andthe other members of the association. However, therules contain no such words, and the word^ o{ the rulemerely designate the destination of the property.”
1088*
Jatowab*om A.J*
Letchchimi-pillai tf.Sivakoluntu
1928.
Jaybwar-
DBNU A.J.
pittai v.Swofeoluntu
( 228 )
According to this view the nominee is a mere agent or trustee,who receives the money without having any beneficial interest in it,But this view it seems to me is in conflict with the view held inEngland with regard to the rights of a nominee. There it has beenheld that a nominee takes the money beneficially and becomes theownerof it. It was so decided in Ashby v. Costin (supra). There thedeceased had become a member of an unregistered frindly societywhich contained a rule which empowered the committee, on thedeath of a member, to pay an allowance called the death allowance—
“ To such person or persons as in their discretion they may thinkfit; it being always understood that the extent to whichthe committee shall be bound to the payment of deathallowances shall be, in the case of a married man, to hiswidow or children, or to his parents, or to any of themin such proportions as the committee shall determine;and in the case of a single man, to his parents, brothers, orsisters, or any of them, in such proportions as aforesaid,unless the deceased members, married or single, haveotherwise bequeathed the money, in which case it shall bepaid to the person to whom it has been so bequeathed;but should there be no such surviving relatives, nor anysuch special bequest, then the funeral expenses only, to areasonable amount, shall be defrayed by the society.”
The committee paid the death allowance to the deceased’s sister,and the plaintiff, as administrator, sued her to recover the money.It was held that the above rule constituted the contract betweenthe deceased and the society as to the payment of the money ; thatthe death allowance was not the property of the deceased ; and in theabsence of a bequest by will was not assets for the payment of hisdebts, and that therefore the plaintiff could not recover. In thecourse of their judgment the judges (Cave and Grantham JJ.)said :—
“ As we read this rule, it forms the contract between the memberand the society as to the payment of the death allowance,and by it the society binds itself to pay the death allowanceto the person to whom the member may have bequeathedthe same, and in the absence of any bequest, in the caseof a married man, to his widow or children, or to hisparents, or to any of them, in such proportions as thecommittee shall determine, or, in the case of a single man,to his parents, brothers, or sisters, or any of them in suchproportions as aforesaid. In the absence of any suchsurviving relatives, the society are to pay only the member’sfuneral expenses- In' Ashby’s case the. death allowanceamounted to £80. He had not 'bequeathed it, and was
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a single man, and under these circumstances thd societypaid the amount to the defendants’ sister. It cannot becontended that the society have not fulfilled their obliga-tion to the deceased, but it is said that the sum was assetsfor the payment of the debts of the deceased, and that thedefendant in receiving it acted as executrix de son tort andis liable to the administrator. We cannot agree withthat contention. The money was not the money of thedeceased, although it was payable out of a fund to whichhe and others contributed. It was to be paid accordingto the bargain made by the deceased with the othermembers …. and by the contract between thesociety and himself the money was to be paid to certainprescribed relatives in such proportion as the committeeof the society should determine. It was contended thatthe language of rule 27 was only intended to provide someone who should be able to give the society a good dischargefor the money, but we cannot so read it …. It
must be remembered that the death allowance is not theproperty of the member in the sense of its belonging tohim absolutely in his lifetime; he has no right to it butsuch as the rules give him.”
1928.
Jayzwab*DBNK A.J.
Letchchimi*p%Ua& v.SivakoUmtu
This decision was cited with approval in the case of Bennett v.iSlater (supra), which was decided by the Uourt of Appeal. Therethe deceased was a member of a friendly society registered underthe Friendly Society Act, 1875 (38 and 39 Viet., c. 60), andsection 15, sub-sections (3) and (4) of that Act, with which section9 (4) and (5) of the local Societies Ordinance, 1891, is almostidentical, gives a member the right to nominate a person to whomhis interest in the society is payable, and also designates the personsto whom such interest is to pass on failure of a nominee. Thedeceased, left a will appointing the defendants as executors, andbequeathing his residuary estate to his grandchildren. Theplaintiff, as nominee, claimed the money payable by the society,and her claim was upheld, as the nomination was not revoked bythe subsequent will. A. L. Smith L.J. said :—
“ The second contention for the defendant was that the nomi-nation was revoked by the will. With regard to thatcontention, I may, in the first place, remark that, wherethere has been a nomination as in the present case, untilthat nomination has been revoked I think that the nominee,and not the nominator, is the person beneficially interestedin the money; and therefore I find a difficulty in seeinghow under a residuary bequest this money can be con-sidered as included.”
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1928.
JayHwah-DECKS A.J.
Letchehtoni-
ptttaiv*
Sivakoluntu
And Rigby L. J. said:—
“ The next question is whether there has been a revocation of thenomination. I think that the intention of the Legislaturewas to enable members of friendly societies to make bymeans of a nomination under the Act a gift of moneysinsured by them with the society, although, no doubt, sucha gift was not to be irrevocable, but might be revoked inthe manner prescribed by the sub-section. It appears tome, that being so, that money, the subject of such anomination which has not been revoked, forms no part ofthe residuary estate of the testator. The case of Ashby v.Costin (supra) t which was cited to us, is as nearly as possiblean authority for that proposition, for there it was held thatunder the rules of the society the money insured was notan asset of the member, but was made, by virtue of thebargain between the society and its members contained inthe rules, the property of the person prescribed by the rules,as it is here, in my opinion, made the property of thenominee by the operation of the sub-section. In this case,if the nominator had revoked the nomination in the mannerprescribed by the Act, the money would have formed partof the estate, but he did not do so, and therefore, in myopinion, it was no part of his estate.”
These two judgments, in my opinion, clearly lay down that anominee appointed under the rules of a mutual benefit association,whether registered or unregistered, is interested in, and entitled to,money payable by the society beneficially, and not as a mere trusteeor agent for the heirs. Also see In re W. Philips’ Insurance.1According to the judgment in the local case, the nominee (or, in theabsence of a nominee, the person specified in the rules) is designatedmerely to enable the association to obtain a good receipt for anypayments they may make. The same ground appears to have been‘put forward in Ashby v. Costin (supra), but it was not accepted by theCourt. Another reason, given in the local case is that the rules donot say that the money should become the property of the nomineeor other specified person, but neither section 15 (3) and (4) of theEnglish Act of 1875 nor section 9 (4) and (5) of the local Ordinanceof 1891 says that the money should become the property of thenominee. They merely say that the society shall pay to the nomineethe amount due to the deceased member. Still, it was held inBennett v. Slater (supra) that the nominee was beneficially interestedin the money, and it formed no part of the deceased’s estate. Themoney becomes the property of the nominee, or the person specifiedin the case of unregistered societies “ by virtue of the bargainbetween the society and its members contained in the rules,” andin the case of registered societies by operation of law. There is1 (1882) 23 Ch. D. 235.
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nothing in the rules of the Ceylon Mutnal Provident Associationto prevent the application of the principle laid down in the twoEnglish cases I have referred to. Buies 17 and 22 of the CeylonMutual Provident Association practically embody the rule ascontained in the English Act and the looal Ordinance. Thesedecisions of the English Court of Appeal are, in my opinion, bindingon this Qourt according to the principle laid down in Trimble v.Hill1 and followed in Meedin v. Banda.2
1 may, however, here refer to another case, In re Bead, Bead v.Turner,3 in which it was held by Sterling J. that an executor whohad been made a nominee under the Savings Bank Act, 1887(50 and 51 Viet., c. 40), received the money in deposit, not as a‘gift, but as executor. Under this Act the Postmaster-General wasauthorized to make rules for the nomination by a depositor of anyperson to whom any sum, not exceeding £100, payable to suchdepositor at his decease was to be paid at such decease, and in thiscase the depositor nominated her executor as her nominee, and itappeared from the evidence that the testator had in conversation,in the presence of the nominee, referred to the Savings Bank moneyas available for the payment of her debts, and had expressed a wishthat the executor should receive something for his trouble, and hadgiven him her watch. Upon these facts the learned Judge said :—
“ I come to the conclusion that the intention of the testatrix was
«
by executing the nomination form to transfer the moneystanding to her credit at the Post Office at her decease tothe nominee as executor . . . . ”
There the facts were so entirely different from the facts here andin the two English cases already referred to. The Post OfficeSavings Bank is not a benefit society, and any persons withoutrestriction may be nominated, and the nomination is treated as amode of transferring the money. The fact of the transferee beingexecutor, and the expression of the depositor's desire that themoney should be used for paying her debts, were held to make thenominee a trustee. Ashby v. Gostin (supra) and Bennett v. Slater(supra) were not referred to, and this case cannot be regarded inany way as affecting the judgments in those two cases.
The rules of the Ceylon Mutual Provident Association themselves,when closely examined, show that they were intended to confer onthe nominee, or, failing him, the persons specified, something morethan a mere temporary interest. Why is it declared that on themarriage of a member the nomination previously made by him shallcease to be valid and that a fresh nomination shall be made ? Thenif there be no nominee, why is it required that the money should bepaid to (1) his widow, or (2) his children, or (3) his next of kin orlegal heirs ? Why should the right to be a nominee be restrictedto the members of the family, or, failing these, to relations ? Our1 (1879) L. B. 6 A, Q. 842.*{1895) 1 N. L. R. 51.* {1896) 75 L. T. 295.
1028.
«Ta YE WAR-DEN® A. J.
Letehthimirpiftai v.SivdkoluvtHt
( 232 )
1928». of the objects is stated to be to make some provision for widows andJayhwab- orphans. How is this to be done, if the money is to be handed overpbkh.A.J, to an executor or administrator to be dissipated in paying of!LetchcMftti: creditors ? What is the meaning of the rule which required that insSlumt 08190 a nom*nee who is a minor the money shall be depositedin the Savings Bank for his benefit, if the minor nominee is notregarded as the owner of the money ?
All these provisions, in my opinion strongly indicate that it is^ intended to confer on the nominee, failing him, the persons specified,a proprietary right in the money, which, or a part of which, mightbe used by his relatives for the purposes of the deceased, suoh ashis funeral, &c. Membership of a friendly society or mutual pro-vident association is a form of life insurance or assurance, and a lifeinsurance policy may be kept up for the benefit of a nominee, andthe nominee in such cases is called the donee. Sec section 8 (1) ofthe Estate Duty Ordinance, Ho. 8 of 1919, where in enumeratingproperty passing on the death of the deceased it includes—
(/) “ Money received under a policy of assurance effected by thedeceased on his life where the policy is wholly kept up byhim for the benefit of a donee, whether nominee or assignee,or a part of such money in proportion to the premiumspaid by him, where the policy is partially kept up by thedeceased for such benefit."
The judgments in the English cases ought, in my opinion, to beconsidered as laying down the more correct principle, if I may say sowith all deference to the Judges who decided The Ceylon MutualProvident Association v. Mendis (supra), and it is more inkeeping with the aims and objects of those forming these benefitsocieties. It may be that the judgment in that case is justified byits particular facts, for the nominee had died and the amountdue from the association had been specifically bequeathed bywill to the successful party, but a serious question arises as towhether, in the absence of a nominee, a member has the right toalter the order of devolution or succession laid down in the rules.The effect of the English decisions seems to deny him any right todepart from the terms of the contract he has entered into with theassociation, one of the terms being that the money standing in hisname should, in the absence of a nominee, devolve in a particularorder .of succession. In the present case the nominee is still alive,'and these difficult questions do not arise. The nominee is, in myopinion, entitled to the money as owner thereof, and the heirs of thedeceased can claim no interest in it.
I would, therefore, set aside the order in appeal No. 114, and theappellant will be entitled to her costs in both courts. The cross
appeal No. 114a has already been dismissed.
Pobteb J.—I agree.
Set aside.