City of London Livery Companies Commission. Report; Volume 1. Originally published by Eyre and Spottiswoode, London, 1884.
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APPENDIX TO REPORT.
Notes on Legal Points connected with the Inquiry, viz.,—(1) the general law as to the charters of the Companies; (2) the effect, if any, on the legal position of the Companies should they prove to be guilds by prescription; (3) the effects which would follow from the cancellation (hypothetical) of the Companies' charters; (4) the law as laid down and acted on in Brown v. Dale (fn. 1) with reference to the power of such bodies to dissolve and divide; (5) the application, according to the law of trusts, of the increment of the Companies' rents derived from their City house-property; (6) the operation of the doctrine of cy-près; (7) the right of the State to interfere.
A case was laid before Mr. Horace Davey, Q.C., M.P., and Mr. F. Vaughan Hawkins, barrister-at-law, consisting of the two above-mentioned documents prepared in the office of the Commission, viz., (1) the Preliminary Report, ( (fn. 2)) which was drawn up before the returns were received; (2) the "Abstracts and Tables, with a Preface," which were drawn up after the returns had been received. (fn. 3)
These reports contained (1) a sketch of the history of the Companies of London, similar to that which forms a part of the foregoing report; (2) suggestions as to the above points; (3) abstracts of the reports of the Inspectors of Charities, with an account of the informations filed in Chancery by the Attorney-General against the Companies.
(1.) Having regard to the facts above stated, and with special reference to the suggestion that the parts of the Companies' charters and byelaws which purport to create monopolies or to grant powers of search are respectively illegal and void, would it be possible to cancel the charters of the Companies by legal process ? Are not the void franchises separable at law ?
(2.) It has been suggested to us that the Companies, notwithstanding their incorporation by charters, are guilds by prescription, and therefore impossible to dissolve by legal process ? Is this a tenable hypothesis ?
(4.) Is there anything to prevent the Companies of London from dissolving and dividing as in Brown v. Dale ? ( (fn. 4))
(5.) What is the present state of the law of trusts as regards the real property of the Companies which is held subject to charitable rentcharges ? Did not the decision in Attorney-General v. Waxchandlers' Company ( (fn. 5)) practically alter the law ?
(7.) Having regard to the facts stated in the accompanying reports, will Her Majesty's Commissioners, in your opinion, be justified in recommending that the State should assume control of the property and expenditure of the Companies to any, and what, extent ?
Answer of Mr. Davey.
i. No doubt all franchises are granted upon conditions that should be duly executed according to the charter which settles the constitution, and if the Corporation fail to perform the terms of the patent, in the way either of misuser or abuser or non-user, it may be revoked by sci. fa.
(fn. 6) Vanacre's case (11 Will. III.), 1 Ld. Raym, 496, and see Year Books, 4 Ed. IV. 5.
(fn. 7) Rex v. City of London (3 W. & M.), Skin. 310, 4 Mod. 55.
But I think that under the circumstances, and having regard to the dates at which the most modern charters are granted, it would be held that the trade franchises, &c., were separable, and although these might be void or capable of being seized by the Crown in an action of Quo warranto, the non-user of them would not avoid the charters altogether.
It will be observed that there is no case in fact of the grant being on a false suggestion, and it might well be held that the grant of these franchises, which were known to be obsolete and incapable of being enforced or exercised, did not enter into the consideration.
The legal authorities are not very clear, but it seems that a charter may be repealed in part where no false suggestion is mingled with the consideration for granting the charter, and the clauses to be repealed are substantive and independent clauses, and do not influence and affect the whole of the charter.
(fn. 8) Lord Mulgrave v. Mounson, Freem. 17.
(fn. 9) Sackville Coll. case, T. Raym. 177.
ii. If it were sought to avoid the charter, &c., on the ground of the illegality of the provisions, and their prejudice to the subject, I apprehend that although sci. fa. is a writ of right where a charter operates to a subject's prejudice, an action by a private prosecutor would not under existing circumstances be entertained.
To Question 2. Prescription is only another name for a lost grant. If there be an existing charter creating the corporation the fiction of the lost grant would be excluded, or the surrender of a previously existing charter would be presumed.
If the earliest charter known be an inspeximus charter, or charter of confirmation, a previous lost charter would be presumed, but it would, I should think, be held that it was in the terms of the charter of inspeximus or confirmation.
(fn. 10) Corp. Colchester v. Ashurst, 7 Q.B. 385, though I should have thought the better opinion was that it would escheat to the Crown, as Lord Hale seems to have thought. 2 Bacon, Abr. 287.
The legal estate in lands held by the Company on charitable trusts would either vest in the heirs of the original donor or escheat to the Crown, but the charitable uses would, even in the latter case, probably be held to be saved by Stat. of Charitable Uses, 43 Eliz. c. 1. s. 7.
If the property of the Company is vested in trustees in trust for the Company, it would on a dissolution vest beneficially in the trustees; and as regards property vested in trustees upon any charitable trust, the dissolution of the corporation would not affect the title legal or equitable.
To Question 4. I agree with the decision in Brown v. Dale. The Court of Chancery has no jurisdiction to restrain alienation of corporate property by the members of a corporation created by charter, unless the property is subject to a trust.
(fn. 11) Corporation of Colchester v. Lowton, 1 V. and B. 226, overruling dictum in Rex v. Watson, 2 T. R., 199, 200.
"The relief now to be asked must therefore be upon quite a different principle, and though all the authorities upon what is not often the subject of consideration here have been most usefully brought forward, I have no doubt that independent of positive law as to the legal powers of a corporation, corporations, civil, ecclesiastical, or of whatever nature could in point of law alienate lands of which they were seised in fee, and the history of what corporations both aggregate and sole did before the restraining statutes is very useful. Civil corporations are at this day in the constant habit of making those alienations their title to make which is asserted by Lord Coke. In the course of my experience in this Court, of my present researches, and of my examination of authorities, which having had occasion to consider them formerly this cause has brought back to my recollection, nothing has occurred showing that there ever was a case in which this Court attached the doctrine of trust as applied under the words "corporate purposes" to the alienation of a civil or indeed of an ecclesiastical corporation. With regard to what was stated by Sir William Ashurst, a very respectable judge, and who I take this opportunity of saying was a very useful judge as a Commissioner in this Court, I do not lay down either that this is the subject of jurisdiction here as trust or of information in the Court of King's Bench. The opinion that this Court has jurisdiction is to be considered as the opinion not only of Sir William Ashurst, but of the whole Court of King's Bench, stopping upon that ground the argument upon the point as to the breach of trust. Sir Samuel Romilly has put it fairly that the Court is not to act upon the supposition that corporations are constantly abusing their duty by applying the property not to corporate purposes; but on the other hand, when a case is brought forward the Court is not to shut its eyes against the practice that has prevailed in all times, and the judgment upon it for speaking of corporate purposes though the most worthy that can be represented has not that character, the use of the seal is equally improper and as much an abuse in a court of justice though not in moral consideration. As to what obtains for instance in the ecclesiastical bodies that have been mentioned, the bishop, the dean and chapter, &c., the statutes that leases for more than 21 years, or three lives, and not at the old rent or more shall be bad do not say that any lease shall be good which can be taken to be an abuse of those corporate purposes for which the property was held, and I apprehend that it would not be difficult now to find bishops' estates the old rent reserved being 50l., and the actual estate worth 1,000l. or 2,000l. per annum. All the excess of that rent taken by the bishop himself, should, if he is a trustee, in a fair sense be taken from him by this Court, yet no such attempt was ever made where the corporation was not holding for charitable purposes. Even those corporations can alienate at law, but the alienee will be a trustee, and the jurisdiction in those cases must be regarded as a contrast to the other cases of corporations holding not for charitable but for corporate purposes, demonstrating that this Court shall not be called upon in the latter case as it is in the former."
There is no distinction at Common Law between one kind of corporation and another. Every corporation created by charter is a legal persona, and can do whatever it is not expressly restrained from doing. In this respect it differs from a corporation created for certain purposes by statute, the powers of which are confined to such as are expressly or by necessary inference or implication given by the statute. In short, there is no trust which the Court of Chancery can execute of merely corporate property as such. But there is a serious question whether a large part of the property claimed to belong to the Companies is not in fact held upon a charitable trust. See ex. gr. the charter discussed in the case of Attorney-General v. Fishmongers' Co. (2 Beav. 588; 3 My. & Cr. 16.)
But I apprehend that the word trust in not used in these cases in its strict technical meaning, but in a popular sense, and the only remedy for non-user, abuser, or misuser of the franchises of a corporation is to repeal the charter, or to seize the franchises. And there seems to be no remedy for the application of property to non-corporate purposes, provided the act be the act of the corporation.
(1.) Where the testator or donor apportions the whole income out to various charities, and by that means exhausts the whole income, the different objects will take the increased income in the same proportions.
(2.) Where specified sums are given to certain charitable purposes, and the residue is given as such to another charity, or to certain persons, or where lands are given to feoffees upon trust to pay certain specific sums and the residue is undisposed of, or lands are given subject to payment of specific sums, the charitable objects can only have the specific sums and the feoffees or devisees or residuary cestuisque trust take the whole increase.
(3.) Where certain specified sums are given to charitable objects, and the residue is devoted to a purpose which is not for the benefit of the trustees or devisees but of the persons entitled to the property generally, the charities take the increase.
To Question 6. The Betton Charity Case (reported as Attorney-General v. Ironmongers' Co., 2 My. & R. 576, 586, Cor. Lord Brougham, Cr. and Ph. 208, Cor. Lord Cottenham) is the strongest instance of the application of the doctrine of cyprès. The latest case is that of (fn. 12) Campden's Charities, L. R., 18 Ch. D. 310. The principle of the doctrine is well stated by Lord Westbury (fn. 13) in Clephane v. Lord Provost of Edinburgh, L. R., 1 H. L. Sc. 417.
A distinction may be made between cases where the Court simply finds a new means of attaining the old end, ex. gr., substituting technical education for apprenticeship premiums, the old means having become obsolete, and where the end has failed or the fund has become too large for such application, and the Court apparently discovers a new end, as in the case of the Betton Charity. But in either case the Court is professedly carrying out the founder's instructions, and executing the trusts declared by him as nearly as changes of circumstances will permit.
I should in the first place say that in my opinion about one half of the charities of this country are useless or positively mischievous, and the other half, owing to the want of organization and combination in their administration, do not produce half the good results which might be looked for.
I think that the Court of Chancery, as a court of administration, has in framing schemes dealt with charity property in a wise and liberal spirit, and gone as far in the application of the cy-près doctrine as could fairly be expected. The Court has always recognized the effect of changes in the circumstances of the times, and in public opinion, but still the Court is bound by the founder's will, and even in the most extreme cases of the application of the cy-près doctrine is, as I have already said, professedly carrying out the founder's intention. Legislation is necessary for any radical change in the administration of charities. The legislative changes which I should recommend are in outline the following:—
(1.) I think that the legal doctrine against perpetuities should be applied in a modified form to charities. No founder should be allowed to prescribe for all time the purposes to which his property shall be applied, and thus to create a perpetuity in the case of charitable trusts which the law does not permit in the case of any other trusts. I do not mean that the property should cease to be devoted to charity, but I think that after (say) 50 years, or at most 100 years, it should be applicable to any charitable purposes, without regard to those specially prescribed by the founder.
(3.) With regard to educational charities in particular, I think that an attempt should be made to introduce a more systematic management and some unity of purpose into their administration. In a word, educational charities generally should be treated as a whole. I ought to say that I do not see the force of the objection which is frequently urged against the application of educational endowments in the aid of elementary education on the ground that to do so is to relieve the ratepayers and not the poor. These charities are not eleemosynary, and should, I think, be considered public property devoted to education, and I see no reason why the ratepayers (that is, the public generally), are not entitled to have the funds so applied, although the effect may be to relieve them to a certain extent from payment of the school rate or from the annual grant made by Parliament. I think that a considerable portion of the educational endowments should be applied towards the maintenance of elementary schools. But the most useful way in which the State can employ those large funds is as a means of selecting those children amongst the poorer classes who are likely to profit most by a higher education, and of giving them that higher education which would otherwise be beyond their means. This might be accomplished by establishing a system of exhibitions or scholarships, to be given as the reward of merit in successive public schools, and by establishing public schools of ascending grades ending in the Universities, through which those children who most distinguish themselves by industry and ability should pass. I am glad to say that in the schemes which were framed by the Endowed Schools Commissioners and which are now framed by the Charity Commissioners under the powers of the Endowed Schools Act, this idea has been carried out so far as their limited powers enabled them to do so.
(4.) With regard to non-educational charities, I should like to see them applied as far as possible for public purposes which tend to the physical, moral, and intellectual improvement of the people, but which, from their cost, cannot be provided by the people for themselves, and for the most part are beyond the reach of individual charity. I give the following as an illustration only of what I mean:
To Question 7. In my opinion the Commission will not be justified in recommending that the corporate property of the Companies should be taken from them by the State. I think that such an act of the Legislature would be an act of confiscation, and would not unreasonably shake the confidence of the owners of property in the security of rights of property. It must be remembered that the estates of these Companies have been recognised and held by the courts of law to be as much their property, with a full right of disposition, as the property of individuals. But having regard to the history of the origin of these Companies, and to the fact that they were established for the promotion of trade (see Lord Coke in the City of London's case), and for public as well as private purposes, I see no reason why legislation of a less drastic character should not be applied to them.
I think that the companies must be considered to have been constituent and integral parts of the Municipal Corporation of the City of London. This is shown by the facts (which have been stated); (1) That no person could be a freeman of the City who was not a member of one of the companies; (2) That the constituency called the Common Hall which elected, and (I believe) still formally elects, the Lord Mayor, was composed of the liverymen of the Companies; (3) That liverymen, as such, enjoy the Parliamentary franchise for the City, subject to certain conditions of residence imposed by statute; (4) That the old mode of raising money in the City was by the Corporation apportioning the sum required between the Companies, and issuing a precept to the Companies to raise their quota from their members (see in the Skinners' v. Irish Society, 12 Cl. & F.)
The nearest analogy to the position of the Companies relatively to the Corporation appears to me that of the relation between the colleges and the Universities of Oxford and Cambridge. It may have been an encroachment to confine the freedom of the City to the members of the Companies (as the like process in the case of the universities undoubtedly was), but it seems to have been acquiesced in and accepted in historical times.
It is not for me to suggest the details of any recommendations which the Commission may think fit to offer to Her Majesty, nor have I sufficient information, nor have I been able to give sufficient thought to the subject, to enable me to do so; but speaking generally, I think that these Companies may fairly and properly be called on to make large annual contributions towards the public, or what, if there were a municipal corporation, I should call the corporate purposes of the whole metropolis. I also think that a sufficient primâ facie case is made out to justify the Commissioners in recommending that a considerable portion of the property of the Companies should be declared to be charitable property in addition to such property as is admitted to bear that character. The lapse of time and loss of title deeds in the Great Fire and otherwise have rendered a strict investigation of the titles of the Companies to their property impossible, but I think that a definite proportion might be declared to be charitable. In the meantime, I think the Companies should be restrained from alienating their property without the consent of the Home Office.
Answer of Mr. Hawkins.
To Question 1. Such parts of the charters as purport to give powers of exclusive trading (beyond what is justified by City customs), or of search, forfeiture of goods, &c. are no doubt illegal and void. (fn. 14) Waltham and Austin's case, cited in 8 Coke, 125a; 11 Coke, 86a (fn. 15); (fn. 16) Clothworkers' Company of Ipswich's case, Godbolt, 254; Norris v. Staps, Hobart, 211 (fn. 17) But a charter may be good in part and bad in part (per C. B. Hale, T. R. 177), and I (fn. 18) think it would be held that the incorporations of the Companies were separable from the illegal clauses and were valid. So held as to the East India Company, see E. I. (fn. 19) Company v. Evans, 1 Vern. 305, and the Dyers' Company, see Callis, 223.
The Companies are, I believe, incorporated by known charters, and are not, therefore, corporations by prescription. They may have some prescriptive rights or privileges which belonged to them as guilds before incorporation, but their power of holding property must be derived from the charters. As mere guilds or fraternities they could not, at any rate, hold land at the present day.
To Question 3. If a corporation be dissolved, (fn. 20) the corporation property not subject to any trust, so far as it is real estate and vested in the corporation itself (not in trustees), reverts to the heirs of the grantor, or, failing such, escheats to the Crown, and, so far as it is personal estate, falls to the Crown as bona vacantia.
(fn. 21) The corporate property subject to any trust of a charitable or public nature is not affected by the dissolution of the corporation, save that new trustees would be required.
The Crown claiming by escheat (as well as the heir of the grantor) would be bound by the charitable use, under the 43rd Elizabeth c. 4. (Sir F. Moore's Exposition in Duke's Charitable Uses, pp. 160–162.)
(fn. 22) But trusts of a very general nature would be enforced by the Court. See (ex. gr.) Corporation of Limerick v. Attorney-General, Beattie, 563, s.c. 6 Dow. 136.
Looking to the terms of the early charters of the larger Companies as regards the powers conferred of holding land in mortmain (so far as I can judge from the extracts I have seen), it appears to me that they are sufficient to create a charitable trust as regards the real estate acquired or held under the powers of those charters. (See the words of the Fishmongers' Charter, Preston's case, 2 Beav. 588, 5 My. and Cr. 16, "in auxilium sustentationis pauperum hominum et mulierum mysteriæ et communitatis prædictarum in perpetuum.")
The Mercers' Charter of 17 Rich. II. (1st Rep. 85, 86) is very distinct, and reads like an incorporation for charitable purposes. The lands which have been at any time held under the powers of these charters seem to me, as at present advised, to be charity property.
It would be material to examine in connexion with the charters the deeds and wills by which the trustees for the Companies (such as Preston in the Fishmongers' case) dealt with the property vested in them; the Companies probably appropriated to the purposes mentioned in the charters more land than the amounts specified therein, and wills devising lands to the Companies under the custom of London ought also to be considered in the same connexion, e.g., if a testator devised land to a Company whose charter was such as that of the Mercers' of Richard II. it appears to me to be a question whether that would not be a devise to them for the purposes mentioned in the charter, i.e., for charitable purposes.
The later licenses are said to be general, but of course a license in mortmain must be distinguished from mere words of incorporation "able and capable in law to hold lands, &c." which are not a license in mortmain. See the Charter of James I. to Leathersellers' Company (Black's History of Leathersellers' Company), after which they are said to have got a liense with difficulty.
In the Fishmongers' Company's cases (fn. 23) (2 Beav. 151, 588, 5 My. and Cr. 16), the effect of the Charter was not properly brought out. The suit in Preston's case was based on the mistaken notion that Preston was a benefactor and not a mere trustee for the Company, and failed accordingly. But Lord Langdale (2 Beav. 603) admits that the words of the charter and will are sufficient to create a trust. It was considered that there was a superstitious use paramount to the Company's original interest, which enabled the Crown afterwards to grant the property free from any trust. Sed qu.
These (Fishmongers') cases (like others of the period 1833–53) show, I think, a leaning of the Courts in favour of the Companies, probably because suits were brought by relators to make costs. The Charity Commission altered this.
As to the large Crown grants by Edward VI. and James I. to the Companies (see the private Act of 4 James I., p. 157, of 2 Beavan in Kneseworth's case) it may be true that taken alone they do not impose trusts which the Court could enforce; (fn. 24) but looking to the recitals of the Act of 4 James I. and the return to Edward VI.'s Commissioners it seems not too much to say that these grants were made upon the representation that the income of the lands granted had been in the past wholly applied to charitable uses, and in the expectation that it would in the future be so applied.
It would require a consecutive examination of the various charters, wills, and deeds of the Companies and their minutes of court (as it seems to me) in order to judge what proportion of the corporate property of the Companies is (either by appropriation or gift) really trust property held for charitable purposes of the kind specified in the early charters; and probably the Great Fire and other circumstances make the task practically an impossible one. That some part of it is such, is, I should think, capable of proof. Looking to the nature of the wills of the pre-Reformation and other donors, and to the partly charitable object (as I conceive) of these Companies, I should think the proportion would be a large one, but this is a matter of opinion.
If the donor gives out of the rents of an estate specific sums (not exhausting the annual value of the lands at the time of the gift) to charitable uses, and gives the residue or surplus of the rents to the Company to whom he has devised the legal estate in the property, or makes no disposition of them, primâ facie the Company would be entitled to the surplus rents (be they more or less) after payment of the specific sums, and there would be no proportionate augmentation (or diminution), (fn. 25) A. G. v. Skinners' Company. 2 Russ. 438; (fn. 26) A. G. v. Mayor of Bristol, 2 Jac. & W. 313; Mayor, &c. of South Molton v. Attorney-General, 5 H. of L. cases, 1 (fn. 27).
(fn. 28) But it may be inferred from the expressions used (on the principle expounded by Sir W. Grant in Page v. Leapingwell, 18 Ves. 463) that the donor was contemplating a certain surplus only, and that the Company and the other objects were intended to take in certain proportions, and in such a case there would be a proportionate augmentation (or diminution) (fn. 29) A.-G. v. Drapers' Company,* 4 Beav. 67; (fn. 30) Mercers' Company v. Atty.-Gen., 2 Bligh N.S. 165.
(fn. 31) The Wax Chandlers' Company case did not really alter the law, though it may have weakened or destroyed the authority of some doubtful cases belonging to the 1833–53 period, e.g., A.-G. v. Cordwainers' Company, 3 My. & K. 534; A. G. v. Coopers' Company, 3 Beav. 29; A.-G. v. Grocers' Company, 6 Beav. 526.
The strict rules for applying this doctrine, as Lord Cottenham's rule in Ironmongers' Company case, Cr. & Ph. 208, that you are to look to other charitable gifts in the will only for the mode of application, and not for the objects, or Lord Eldon's elaborate scale in A.-G. v. Wansey, 15 Ves. 231 (a gift to two poor Presbyterian boys living in A. parish, where he held you were to reject (1st), the number; (2), the parish; (3), the sex; (4), the denomination), are not always observed in practice; still, I think in most cy-près schemes some beneficial provision is not inserted for fear of not being quite sufficiently cy-près.
I think the better course would be, to leave the court or body which has to make the scheme free to make such a scheme as circumstances may require, leaving it to a court of appeal or to Parliament to reject or correct the scheme, if it considers there has been an amount of change which is unreasonable.
To Question 7. I should not recommend that the property of any persons should be taken from them by the State; but the State may perhaps he justified in interfering where the law is defective, to secure that property shall be applied to the purposes for which it was really intended.
The objects of the Companies (so far as my information enables me to judge) seem to me to be partly obsolete, partly of a mixed social and charitable nature, but with the charitable element predominating, and distinctly impressed on their real estate by the early charters. The constitution of these bodies descends from a time when public and private purposes were not perhaps in law quite accurately discriminated. The titles of and the trusts and obligations affecting their property seem to be so intermixed and complicated that probably no one could say how much of it ought to be considered as legally trust property; but the great bulk of their acquisitions, both by will and Crown grant, have, I think, been given to them in their character of trustees on a large scale for charitable purposes, and, in fact, as a mode of giving to charity.
Then it is suggested that the existing members of these bodies might wind up and divide the assets between themselves, and they claim the legal right, even if they disclaim the intention, to do so. Such a claim, I confess, hardly accords with my sense of justice; and it does not seem to me unreasonable, if, as appears to be the case, it can be done without injury to the reasonable pecuniary claims of any individual, that the State should interfere so far as to declare that some proportion (say that which is now actually applied in charity) of the income and property of these anomalous semi-charitable incorporations should be considered in law to be property held for charitable or public uses, and should be applied accordingly, either in promoting technical or other education, or for the general benefit of the inhabitants of the metropolis, or in some other manner.