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have long undertaken this work in a completely satisfactory way. The alternative implied in the prospectus is that the choice lies between the incompetence, negligence, or fraud’of private individuals and the services of the Public Trustee.
The Public Trustee Act, 1906, is expanded by the statutory rules and orders made by virtue of the Act. These rules are explained in the prospectus in a way which is not always in harmony with either the Act or the rules, and might lead people who had not looked into the matter for themselves to think that they were under a legal obligation to consult the Public Trustee, when as a matter of fact no such obligation exists. The indications of the Public Trustee office up to the present time suggest excessive keenness to obtain business by methods hitherto unusual in Government Departments.
Mr. Allen carries the boycott of insurance companies so far as to say in his article that some practical remedy for the proved difficulties and dangers inherent in the private administration of trusts was imperative; and it was not forthcoming.' He gives us some particulars about commercial companies acting as trustees in other countries, but his brief reference to companies doing similar work in England is, to say the least of it, biassed. The Public Trustee and his apologists ignore the insurance companies when they can, or, when reference to them seems necessary, have one, and only one, attempt at argument. Mr. Allen hints at it by quoting opinion in America as holding that the assumption of vast risks and commercial adventures is incompatible with the absolute security which is essential to the transaction of legitimate private trust business.' Sir Howard Vincent also urges that some branches of insurance business' may be highly speculative, such as life, fire, burglary, and earthquake insurance, very upsetting to the sure and certain business of a trustee.' This contention is so Aimsy as to be hardly worth refuting. The trustee departments of insurance companies are quite separate from the other departments, trust funds are kept entirely apart from the general funds of the companies, and generations of success have proved well-established insurance companies to be the soundest financial institutions in existence. Their guarantee for the honesty of their officials affords security for honesty that is not excelled by that of the British Government, while their reputation for fair treatment of clients is altogether superior to the treatment of private individuals by Government Departments. The Treasury would pay for the defalcations of a Public Trustee only when the claim of a customer was proved up to the hilt, the final proof being probably determined by the House of Lords if the case were decided against the Government in the lower courts. In practice the State guarantee of compensating a private individual for loss amounts to very little, though the probabilities that the public officials will be honest are undoubtedly great. As effective guarantees of honesty and fair treatment the undertakings of the insurance companies are greatly superior; as a mere matter of pounds, shillings, and pence it would pay them better to treat their customers generously, rather than to give them the merely legal rights which are all they could hope to obtain from the Treasury.
In view of the apparent attitude of the Public Trustee to the insurance companies, it is regrettable that they are to some extent under his control. We have an instance of this in regard to custodian trustees. The Public Trustee Act says: “The provisions of this section shall apply in like manner as to the Public Trustee to any banking or insurance company or other body corporate entitled by rules made under this Act to act as custodian trustee.' There is not a syllable in the Act about commercial competitors being in any way under the control of the Public Trustee. The rules made under the Act go far towards setting up a monopoly for the Public Trustee : they provide that the bodies corporate entitled to act as custodian trustee shall be any such incorporated banking or insurance or guarantee or trust company ... as may be approved by the Public Trustee and the Treasury. The Public Trustee may require payment by any applicant for such approval of a fee not exceeding ten guineas. Any such approval may at any time be withdrawn without reason assigned.
It would appear that the Public Trustee must apply to himself for his own approval, pay himself ten guineas for his own application to himself, and may withdraw his approval of himself without assigning any reason to himself. Commercial companies, open to the stimulus of competition, which is for the benefit of the public, are to be under the control of an official keenly desirous of diverting business from them to himself, must contribute to the expenses of the Public Trustee, and may be dismissed from business by the competing official, who need assign no reason for his action.
In various other ways attempts have been made to put the Public Trustee in a position to acquire a monopoly of the business. Whatever there may be to be said in favour of the existence of such an official to whom people can apply if they wish to, it is a mistake to diminish in any way the legitimate competition between commercial companies and the Government Department. With a fair field and no favour insurance companies would beat the Government Department in this direction as in others; but if disabilities are to be imposed upon insurance companies and exceptional advantages conferred upon the Public Trustee, the public will be left to choose between the unsatisfactory system of private trustees and the employment of a State Department. The most effective remedy-that of utilising insurance companies for the purpose—might no longer be available for testators.
Some of the special powers conferred upon the Public Trustee are open to considerable question. For instance, the Public Trustee
may ... without judicial proceedings take the opinion of the High Court upon any question arising in the course of an administration.' This suggests the possibility that the Trustee, thinking that the claims of a particular beneficiary are clear, may obtain a decision of the Court without giving notice of proceedings to other interested parties. If such a mistake as this were made, and the right claimant appeared later on, there would be no redress against the Public Trustee or the Treasury. An insurance company in such a case would doubtless compensate the rightful claimant for the sake of maintaining its reputation.
Passing from special features connected with the Public Trustee Department which are open to adverse criticism, it is instructive to consider the results of Government activity in other directions of a similar kind. The Public Trustee is practically a new Government Insurance Department, the object of his appointment being to enable testators to insure that the capital which is available for the purposes of the trust will provide an income for beneficiaries: this is essentially a system of insurance.
Some experience is available to show how the insurance of trusts is likely to be dealt with by a Government Department. As regards matters connected with wills we have experience at Somerset House, which for futile formality and irritating delay it would be very difficult to beat. The Public Trustee has been given some of the powers of the Chancery Division of the High Court, and in regard to sundry matters he is under the control of the Treasury, which has a high reputation as a circumlocution office. There is small reason for expecting that the Public Trustee will be more businesslike in dealing with the public than the Court of Chancery or existing Government Departments already concerned with somewhat kindred subjects.
If we turn to the Government record in connexion with insurance we find no ground for hope that the Public Trustee Insurance Department will be so beneficial to the public as the work of commercial insurance offices. The Post Office, in spite of the advantage of innu. merable branches maintained for postal purposes, and the benefit of a State guarantee, which in the minds of the ignorant is something very real, has admittedly failed completely in connexion with insurance. Neither for magnitude nor merit will it compare for a moment with commercial companies.
The Committee which reported a few months ago as to the adoption of employers' liability insurance by the State gave cogent reasons against such a course being taken. After hearing much evidence the Committee reported that adequate facilities were provided by insurance companies, emphasised the inevitable lack of elasticity in the conduct of business by a Government Department, and gave other grounds for the opinion that the business had better be left to commercial companies.
Vol. LXIII–No. 378
The National Debt Office is another Government Insurance Department. Many years ago it distinguished itself by publishing terms which certain people promptly discovered to be erroneous. A few life assurance companies and a bank thereupon bought annuities on the lives of old men, which resulted in a loss to the Government of at least one million sterling, although the precise amount of the loss has never been made public.
Even at the present price of Consols the Government does not supply annuities on such good terms as those upon which they can be obtained from first-class life offices with equal security. As an indication of the business methods of this Government Department, it may be mentioned that the prospectus is an excessively voluminous and unintelligible document, showing the annuity which can be obtained for 1001. of 21 per cent. of Consolidated Stock according to the current price of Consols. Commercial people would inform the public what annuity could be bought for 1001. sterling. As a further businesslike method of promoting the work of the Department, persons are warned in formal official language as to special and exceptional penalties for felony and perjury, including a notice that false statements of age shall forfeit the purchase price of the annuity, in addition to treble the amount of any annuity received and the further sum of 5001. Truly the way in which Government Departments work when they undertake insurance business is not such as to encourage the expectation that any such Department will be beneficial to the public or businesslike in its methods.
The Public Trustee is of such recent origin that he can only be regarded as a mere piece of legislation. It is therefore instructive to look at certain features of insurance legislation. The Life Assurance Companies Act of 1870 has, for the most part, proved extremely useful because it left insurance companies free to do whatever they liked, merely ordering the deposit of accounts in accordance with certain schedules. The Insurance Department of the Board of Trade, while apparently having the power to insist upon conformity with these schedules, explained recently to the House of Lords Committee on Life Assurance that it did not now insist upon conformity with these schedules because in practice it had not insisted upon them in the past. In a Government Department precedent is an adequate excuse for non-compliance with an Act of Parliament. The Act of 1870, so far as it provided for freedom and publicity, did a great deal of good. In one matter, however, it attempted interference. It required a deposit of 20,0001. before a new life office could be started. This deposit has not prevented the formation of new proprietary companies which have failed and involved their policyholders in loss, but it has prevented the formation of new mutual life offices, which as a class are the best for policyholders.
The Workmen's Compensation Acts may to some extent be con
sidered insurance legislation, since it was definitely recognised that insurance would be essential to their working. The Workmen's Compensation Act, 1897, was especially praised by its adherents in Parliament because it was to bring about the utmost simplicity in the settlement of disputes and to avoid litigation altogether : it is notorious that it has produced more litigation than any other recent Act. The Act of 1906, again, was to provide compensation for nearly every worker. A proposal to modify the terms of compensation to the old and infirm was rejected as withholding from these people benefits to which they are fairly entitled ; the practical consequence has been to deprive such people of both compensation and employment. A novel provision of the Act of 1906 makes the employer responsible for compensating an illegitimate child for the death of a parent or grandparent, and compensating a parent or grandparent for the death of an illegitimate child : the result, probably uncontemplated and unexpected, was seen in a recent case, in which a widow and her children received less compensation than would otherwise have been paid to them because the money had to be shared with illegitimate children.
The legislation of other countries does not necessarily afford useful guidance for this country, but it may not be amiss to refer for a moment to the harm done to the public by insurance legislation in France and in the United States. By way of protecting home industries legislation has been passed in France which practically prevents foreign insurance companies from giving policyholders better terms than the French life offices give. If a resident in France buys in England a policy from an English company, he can obtain it upon much better terms than if he buys in France the same policy from the same English company.
In the United States all insurance companies have for years been subject to the supervision of an Insurance Department in each State. Very extensive information about the business has had to be filed with State Departments every year. The officials of any State can swoop down upon an insurance company at any moment and examine every detail of the business at the company's expense. Insurance legislation has been rampant, and brought into existence a class of legislators who introduced legislation adverse to the interests of insurance companies and their policyholders for the sake of being bought off by the insurance companies. For all practical purposes the public in the United States thought they were being protected by official machinery, with the result that intending policyholders entirely failed to discriminate between good companies and bad, as to some extent the English public discriminates, and the United States have been the happy hunting-ground of wild-cat schemes and unsound methods. Two or three years ago the so-called scandals in American life offices came about, through a personal squabble between the principal