Application of Peter Wood and anor Hoy v Wood

[1999] NSWSC 802

CITATION:	Application of Peter Wood and anor Hoy v Wood [1999] NSWSC 802
CURRENT JURISDICTION:	Equity Division
FILE NUMBER(S):	4340/98; 1577/99
HEARING DATE(S):	05/07/99
JUDGMENT DATE:	6 August 1999
PARTIES :	Application of Peter John Wood & Michael John Bloomfield Francis Anthony Hoy v Peter John Wood and Michael John Bloomfield
JUDGMENT OF:	Master Macready at 1

COUNSEL :	Mr J.M. Atkin for Wood Miss D. Stewart for Hoy
SOLICITORS:	Whiteley Ironside & Shillington, Orange for Wood Longman Hill, Orange for Hoy
CATCHWORDS:	Trustees. Application for Judicial Advice. Voluntary unincorporated association for the purpose of conducting a sickness fund for its members. Fund ceases to operate and no express provision for dissolution. Held that assets should be distributed equally among all members at time fund ceases to operate.
CASES CITED:	Abbatt v The Treasury Solicitor (1969) 1WLR 1571 Re Sick & Funeral Society of St Johns Sunday School v Golpah (1973) Ch 51.
DECISION:	Paragraphs 17, 18 and 19

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IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

MASTER MACREADY

Friday, 6 August 1999

4340/98 THE APPLICATION OF: PETER JOHN WOOD AND MICHAEL JOHN BLOOMFIELD

1577/99 FRANCIS ANTHONY HOY v PETER JOHN WOOD AND

MICHAEL JOHN BLOOMFIELD

JUDGMENT

1    MASTER: There are two matters before me for hearing. Matter No. 4340 of 1998 is a matter in which the plaintiffs seek the advice of the court pursuant to s 63 of the Trustee Act. The other matter No 1577 of 1999 is an application by way of summons in which Mr Hoy claims against the two applicants for judicial advice in matter No 4340 of 1998 and seeks a declaration to the effect that monies held by the Email Hospital Fund on its dissolution must be donated to a charity with medical objectives. A judge of the court has ordered that the whole of the proceedings be heard by a Master. The second matter was apparently commenced after there had been appropriate advertising as a result of directions given in the summons for judicial advice in matter No. 4340 of 1998. All the evidence including that of the plaintiff in matter No 1577 of 1999 was filed in the proceedings for judicial advice, namely, No 4340 of 1998. Accordingly I made an order that both matters be heard together and that the evidence in one be evidence in the other.

2    The matters concern the affairs of what is known as the Email Hospital Fund (“the fund”). It was established apparently some time between 1952 and 1957 and has some rules to which I will refer. The object appears to have been to collect fees from members and apply its funds to meeting needs of members who were in hospital due to accident or illness. To be eligible to join a member had to be an employee of Email. On 24 August 1998 at a meeting the members present resolved “to wind up the Email Hospital Fund through the Supreme Court and abide by its decision”. The two applicants for judicial advice are the signatories to the bank accounts maintained by the fund. The total amount of funds held is $75,888.46. The applicants for judicial advice suggest that the fund should be divided between the existing members as at 24 August 1998 equally. There are some 43 members of the fund.

3    The alternative position advanced by Mr Hoy is that the agreement to set up the fund contained a provision that, in the event of dissolution, the funds would be made available to and distributed to a charity to be nominated by the fund’s members and he suggests that this be the Orange District Hospital which is in the area where the fund’s members work. The Email factory is apparently at Orange.

4    There is therefore an initial question which it is appropriate to resolve in matter No 1577 of 1999 as to what are the terms of the fund in question.

5    Evidence was given by a number of people connected with the fund. Mr Richard James Hennessy was the secretary/treasurer of the fund between 1966 and August 1998. He recalls that originally there were two companies Emmco and Elcon which companies later amalgamated and became known as Email Limited. He himself joined the fund in 1959 and he says that the fund became known as the Email Hospital Fund about three years later. He recalls that the founding president of the fund was a Mr Tom Lee and that in 1963 a Mr Bill Denman was president who remained in that position until 1977 when Mr Pat Ryan became the president. He says that the last annual meeting of the fund was on 14 May 1970 and the last executive meeting was on 24 June 1977. Thereafter as secretary he gave notice of the annual meeting to the members but virtually no-one turned up. The quorum required was 25 and accordingly he just continued to administer the fund. The only document of which he is aware is the set of rules a copy of which he annexes to his affidavit and which was also annexed to his statement of facts. Those rules refer in Rule 11 to funds being deposited in Westpac Bank and they also have the members’ contributions shown in dollars and cents. Given that the Bank of New South Wales changed its name to Westpac Banking Corporation on 5 October 1982 it is clear that this set of rules were prepared after that date.

6    One other set of rules has come to light and they are referred to by Mr Knight in his affidavit of 24 March. He produced a set of rules which would appear to have come from Mrs Lee, the widow of the late Tom Lee, who founded the fund. Such rules are headed “Elcon Hospital Comforts Fund” and are substantially in the same terms as the other rules to which I have referred except that the contributions are in shillings and pence and the bank account is shown as being with the Commonwealth Bank. The rules are not lengthy and they provide for things such as annual meetings, special meetings and duties of officers including a committee. They make absolutely no provision for termination of the fund or what should happen to the assets of the fund on its termination.

7    The evidence in support of the suggestion that there may be a provision in the arrangements for setting up the fund to the effect that on dissolution the fund should go to a charity was sought to be led from a number of witnesses. Unfortunately, most of the evidence was in an inadmissible form. Mr Hoy reported conversations he had with Mr Tom Lee, the founder, where the founder is alleged to have said, “The Orange Base Hospital should be the ultimate beneficiary of any proceeds of this fund if it ever ceases to operate”. There was a suggestion that Mr Siemer who was a member of the fund may have had a copy of the original agreement but this did not turn out to be the situation. In the end he was unable to give any evidence of the type of provision that had been recounted by Mr Lee to Mr Hoy. Mr Noonan was also a member up until 1980. He had previously been with the Small Arms Factory at Lithgow which had a similar fund. He spoke of that fund having provisions on its winding up for the funds to be donated to the Orange Base Hospital. The only relevant evidence he gives about the Elcon Fund was that members expressed to him an opinion that the monies should be donated to a medical charity and not divided up amongst the then members at the time the fund ceased to operate.

8    An important matter to note is that Mr Siemer does remember the original agreement being signed in the canteen and that the signatories were Tom Lee, Bill Denman and Pat Ryan. Mr Ryan gave evidence in this case. Although he gave some inadmissible evidence of views of members he did not speak of any specific provision that might have been agreed upon at the time of setting up the fund. This, I think, is significant. Also, importantly, a number of people who were associated with the fund indicated in their evidence that they did not hear of any such provision for the fund on dissolution to go to a charity.

9    On the evidence before me there is nothing from which I could conclude that it was a term of the fund that the proceeds on dissolution would go to a charity. Accordingly, the summons in 1577 of 1999 should be dismissed.

10    I turn to the question of the judicial advice. I am satisfied that the rules of the Elcon Hospital Comforts Fund at the time it was formed are those which are in Annexure A to the affidavit of Peter John Knight of 24 March 1999 without the alterations that appear on the face of the document. They may have been amended during the period of the operation of the fund to change the name to the Email Hospital Fund and to make other minor amendments which are not relevant to the matters presently before the court.

11    I have earlier referred to the decision taken at the meeting in August 1998. The resolution clearly evinced an intention to wind up the operations of the fund according to the members who were then present. There were 27 members attending and five proxies out of a total membership of 43. After that meeting the secretary, Mr Bloomfield, gave notice to the employer of the decision and the employer has ceased deducting membership fees from the members’ salaries. There has thus been no further payment of membership fees. The former secretary, Mr Hennessy, indicated that there had been very few claims in the last six or seven years prior to his retirement in 1998 and in his view the fund had become redundant.

12    In submissions it was suggested that the meeting held in August 1998 was invalid. It is perfectly clear that the meeting was called by Mr Bloomfield. He had no authority from the committee to call that meeting and, indeed, it seems, as I have recounted earlier, there was no effective committee for over 30 years.

13    It would seem given these facts that the meeting could not be described as one having been called in accordance with the provisions of the rules of the fund. However, it is an expression of opinion of some of the then present members who met together to decide whether the fund should continue. I am satisfied that the purposes for which the fund was established can no longer be accomplished and that it has ceased all its activities. There has been no suggestion from any member that the fund should continue in existence. Accordingly, it is appropriate to make some provision for distribution of its funds.

14    The opinion and advice and direction of the court which is sought is in the following terms:-

“(a) Are the plaintiffs justified in regarding themselves as trustees of the funds held with the Westpac Bank in Orange?

(b) Pursuant to the resolution of the meeting of Email Hospital Fund held 24 August 1998, would the plaintiffs be justified in distributing, on behalf of the fund, the assets of the fund to those persons who were as at 24 August 1998 employees of Email Limited and who were members of the fund?

(c) Would the plaintiffs be justified in disregarding any claims made upon the fund, or upon them, by or on behalf of any person who was at one time a member of the fund but as at 24 August 1998 had ceased to be a member of the fund?”

15    The fund was established as a voluntary unincorporated association. It is clear that it is not a charitable trust. It is not a trust for a purpose but is for the benefit of individual persons who have chosen to become members. Such a trust may be terminated by the exercise of powers or termination or revocation reserved to it, by the court, or by the decision of all the beneficiaries being of full age and capacity. In the circumstances of this case it would appear that the fund can only be terminated by the court determining the proper distribution of the funds. I mention that those opposing the advice sought by the trustees did not suggest that in the present case there is any resulting trust. There is also no suggestion that the property could pass as bona vacantia to the Crown as the members of the fund at the present time are the possible claimants to the ownership of the property of the fund.

16 The question is, what is the most appropriate method of distribution? The possibilities are the equal division among the members or a proportionate division among the members. An equal distribution is the usual method of division of the assets of an unincorporated association. The members entitled to share in that distribution are those persons who are members at the time the fund ceased its activities. See for example Abbatt v The Treasury Solicitor (1969) 1 WLR 1571 Re Sick and Funeral Society of St Johns Sunday School v Golpah (1973) Ch 51. In the absence of any specific rule or in the absence of an appropriate inference available to be drawn from the rules as a whole, a member is not entitled to receive a distribution proportionate to that member’s contribution. See Re Sick and Funeral Society of St Johns Sunday School v Golpah at 60. In the present case there is no specific rule and there is nothing in the constitution to which I have referred which would lead one to draw an inference that it was intended upon dissolution that those members entitled to receive a distribution would receive a distribution proportionate to the contributions made by each individual member.

17    In the circumstances I am satisfied that the appropriate division is equally between the members of the fund as at 24 August 1998. Accordingly I would answer the questions sought in the advice:

9 (a) Yes.

9 (b) The plaintiffs are justified in distributing the assets of the fund equally between those persons who were, as at 24 August 1998, employees of Email Limited and who were then members of the fund.

9 (c) Yes.

18    So far as costs are concerned, I order that the applicant for Judicial Advice costs in both matters on an indemnity basis to be paid out of the fund.

19    The defendant in 1577/99 seeks no costs against the plaintiff in that matter and, accordingly, I make no order for costs against the plaintiff in matter 1577/99.

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