HC Deb 19 December 1906 vol 167 cc1570-603

Considered in Committee.

(In the Committee).

[Mr. EMMOTT (Oldham) in the Chair.]

Clause 10:—

Amendment proposed—

"In page 8, line 35, after the word 'omission,' to insert the words 'or decision."—(Mr. Marnham.)

Amendment agreed to.

Clause 10, as amended, agreed to.

Clause 11:—

Amendments proposed—

"In page 9, line 5, after the word 'Act' to insert the words 'under this Act."

"In page 9, line 8, after the word 'brokers,' to insert the words, 'or other persons."—(Sir John Walton.)

"In page 9, line 10, after the word 'to,' to insert the words 'the interests of the trust, but subject to this shall, whenever practicable, take into consideration."—(Mr. Harmood-Banner.)

Amendments agreed to.

Amendment proposed—

"In page 9, line 19, after the word 'do' to insert the words, 'Provided that nothing in this Act, or in any rule made under this Act, shall confer upon any person not otherwise entitled thereto any right to appear, or act, or be heard in or before any Court or tribunal on behalf or instead of the public trustee, or to do any other act whatsoever on behalf or on the instructions of the public trustee which could otherwise only be lawfully done by a barrister or a duly certificated solicitor."—(Mr. Marnham.)

SIR JOHN WALTON

said this clause was in the Bill as originally drafted, and he did not know why it was omitted. He had given the best consideration he could to it, and he accepted the Amendment.

Amendment agreed to.

*MR. BERTRAM (Hertfordshire, Hitchin)

said he desired in line 20 to omit all the words from "where" down to the word "but" in line 24 and to substitute other words. He thought the clause as it stood was meaningless. His object was to prevent the Court when granting administration from insisting on a trustee entering into a bond or providing sureties. He moved to insert "no bond, surety or other security shall be required from the public trustee by the Probate Division of the High Court of Justice or any district registry as a condition of any grant of administration to him, but he shall be subject to the same liabilities as a person who had entered into such bond, etc." He did not desire to press the Amendment, but he thought it was necessary to make clear the meaning of the clause.

SIR JOHN WALTON

said that if his hon. friend would withdraw the Amendment he would consider the matter between this and Report. At present he thought the suggested words would be an improvement to the clause.

Amendment, by leave, withdrawn.

*MR. BERTRAM

said his next Amendment was to leave out in sub-section (5) from the word "and" to the end of the sub-section. It appeared to him very desirable in the case of a public trustee to guard against fraud in his own office. He would be compelled to delegate his powers to a very great extent, and the chief protection upon which he could rely was that given by the provision of the Forged Transfers Act, which provided that before any deed of transfer could be registered notice in writing must be given to the holder of the stock at his registered address. In the case of a public trustee he ought to receive such notice at his private address, and he would know of any fraud that was being perpetrated in his own office. Otherwise if he had a fraudulent clerk and the notice was sent to his official address, the person who forged the transfer would have an opportunity of opening the letter, and the fraud might not come to the knowledge of the public trustee until too late. He moved.

Amendment proposed—

"In page 9, line 27, to leave out from the word 'and,' to the end of the sub-section."—(Mr. Bertram.)

Question proposed, "That the words proposed to be left out stand part of the clause."

SIR JOHN WALTON

said he would consider the matter before the Report stage.

Amendment, by leave, withdrawn.

Amendment proposed—

"In page 9, line 30, at end to add the words, 'and no person dealing with the public trustee either alone or jointly with any other trustee or person on any transfer of mortgage or reconveyance or other dealing with mortgaged property shall be affected with notice of a trust."—(Mr. Micklem.)

Question proposed, "That those words be there inserted."

SIR JOHN WALTON

thought there was a point in the Amendment which ought to be provided for, but suggested that the hon. Gentleman should accept the words he proposed to meet the point.

Amendment, by leave, withdrawn.

Amendment proposed—

"In page 9, line 30, at end, to add the words, 'and in dealing with property the fact that the persons or one of the persons dealt with is a public trustee shall not of itself constitute notice of a trust."—(Sir John Walton.)

Clause 11, as amended, agreed to.

Clause 12 agreed to.

Clause 13:—

MR. HARMOOD-BANNEE (Liverpool, Everton)

moved an Amendment to provide a more rapid and serviceable way of dealing with the judicial trustee. He said he was glad that the Government were amending the Judicial Trustee Act, 1896, which had not been used to the extent it ought to be. If it had he did not think they would have needed this Bill. However, the Government were proposing to improve it by this clause, and he was now suggesting a further improvement. He wished to add the words "or such person as may be nominated by such person or persons to act as judicial trustee on their behalf, unless the Court otherwise order." Under the present Judicial Trustee Act there was power to apply to the Court for the appointment of a judicial trustee but his Amendment would enable the proper persons at once to make the appointment without the delay consequent on application to the Court, and it provided against any improper action by the words "unless the Court otherwise order." Besides being a more rapid and serviceable method of dealing with the judicial trustee it would make the Act more appreciated.

Amendment proposed—

"In page 10, line 10, after the word 'granted,' to insert the words, 'or such person as may be nominated by such person or persons to act as judicial trustee on their behalf unless the Court otherwise order."—(Mr. Harmood-Banner.)

Question proposed, "That those words be there inserted."

*SIR JOHN WALTON

said the Amendment had substantial ground to recommend it. In certain cases no doubt it would be desirable that the executors or administrators who might have been appointed and were unwilling to act should have a voice in the selection of the person into whose hands they were prepared to entrust the management of the estate, and who might be constituted a judicial trustee under the Act of 1896. The difficulty was that the Amendment threw the burden of objection upon the beneficiary, whereas as the matter stood now in the ordinary case the person nominated would apply to the Court to constitute him a judicial trustee. Although there was something to be said for the hon. Member's suggestion he thought on the whole it would be unwise to accept the Amendment, as it would interfere with the machinery of the Judicial Trustee Act.

MR. WILLIAM RUTHERFORD

said he had an Amendment later on to leave out the whole of this section, because it was a very good illustration of the difficulty in an Act like this of dealing with the complicated position set up in the Judicial Trustee Act of 1896. The proper way to amend the Act was by a Bill exclusively devoted to the purpose. The Amendment under discussion was not on the Paper, and it was exceedingly difficult to understand it. From what he could see he thought it would be likely to get out of some of the difficulties which at present hampered the public in availing themselves of the facilities of the Judicial Trustee Act, 1896, but without the words before him it was difficult to form a conclusive opinion.

MR. HARMOOD-BANNER

asked leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendment proposed—

"In page 10, line 18, to leave out sub-section (3)."—(Mr. William Rutherford.)

Amendment agreed to.

Motion made, and Question proposed) "That the clause stand part of the Bill."

MR. WILLIAM RUTHERFORD

moved the rejection of Clause 13 for the reason he had already given, namely, that the Judicial Trustee Act of 1896 required amending and ought to be dealt with separately. Any lawyer who had had experience of that Act and its application or who had studied the cases which had gone to the Court of Appeal upon its construction would at once see the great complication and difficulty which was likely to arise. If the Judicial Trustee Act of 1896 was to be amended at all it was one of those technical and difficult matters which ought to be dealt with in a separate Bill. Section 13 of this Bill was a wholly inadequate attempt to deal with the position which had arisen under that Act. He appealed to the Attorney-General to leave out the clause. The Bill was to establish a public trustee, but this particular clause had nothing to do with the public trustee, and was merely an attempt to patch up and improve the Judicial Trustee Act of 1896. That Act had been before the Court, and it had been held that it was an injudicious thing to appoint a judicial trustee with an ordinary trustee. There was a general opinion that the Act was not what it ought to be, and in a number of cases the appointment of judicial trustees had been refused. Any attempt to patchwork the Judicial Trustee Act in this way wag bound to create further complication and confusion. Those who, having gone into the question closely, were in a position to make suggestions to amend the Act, could not do so upon a proposition of this kind, and he hoped therefore that the Government would see their way to leave the clause out altogether.

MR. MICKLEM,

in supporting the omission of the clause, said it was manifest that whoever framed this particular clause was not very well acquainted with the practice of the Chancery and the Probate divisions of the High Court. The two Courts seemed to have been hopelessly mixed up in the drafting, and an attempt was being made to extend the Judicial Trustee Act of 1896 to the Probate Court. The Judges had almost unanimously refused to enforce the Judicial Trustee Act, and if the Government wished to amend that Act it should be done by a separate Bill.

*SIR JOHN WALTON

said he found considerable difficulty in dealing with this clause. Sub-section (3) had already been struck out, and he had come to the conclusion that this was a foreign element in the Bill. He did not think the Bill in its original scope intended to deal with the Judicial Trustee Act, nor was he of opinion that this clause effected such a reform in that Act as was necessary to make it an effective working measure. He did not think this clause had been inappropriately described as a piece of patchwork. Any attempt to deal with the Judicial Trustee Act should form a separate measure. It was obvious that the clause as it stood would be of very little use and would need a considerable amount of amending to make it operative. He thought therefore that the section had better be left out. For these reasons he accepted the Amendment,

MR. WILLIAM RUTHERFORD

said if this clause had remained it would have been necessary to put down four or five very difficult and complicated Amendments on Report.

Question put, and negatived.

Clause 14:—

Amendment agreed to.

MR. HARMOOD-BANNER

moved an Amendment providing for the regulation of the fees to be charged under the Act. He thought it was very important that the public should know that there was a regulation of fees by a public authority. He was a member of a profession which would probably benefit by the Act, and he did not wish it to go forth to the public that the fees to be charged were not liable to taxation as any other fees of solicitors and accountants were.

Amendment proposed—

"In page 10, line 26, after the word 'Act,' to insert the words, 'and the regulations as to fees to be taken under this Act."—(Mr. Harmood-Banner.)

Question proposed, "That those words be there inserted."

SIR JOHN WALTON

said the suggestion of the hon. Member was a valuable one, and he would accept it. But he thought the proper place to insert the provision was in sub-section (5), and when they came to it he would ask the Committee to insert words providing that the remuneration of the auditor and the other expenses of the investigation and audit "shall be such as are prescribed by rules under this Act."

MR. HARMOOD-BANNER

asked leave to withdraw his Amendment.

Amendment, by leave, withdrawn.

*MR. J. M. HENDERSON (Aberdeenshire, W.)

moved an Amendment to the effect that the condition and account of every trust should be investigated and audited once a year. The object of the Amendment was to carry out more effectively the intention with which the Bill was framed, that intention, to quote the words of the hon. and gallant Member for the Central Division of Sheffield, being to prevent the breaches of trust which had been constantly occurring. Some attempts had been made somewhat to minimise 'the evil which this Bill was intended to remedy. The Report of the Committee which had inquired into the subject could not be accepted as conclusive. That Committee had before, them only such breaches of trust as came before the public, but, as a matter of fact, for every breach of trust which came before the public, there were ten suffered in silence. So far as trusts to be created in future were dealt with by the public trustee, he agreed that there would be absolute security for the trust funds. But there were at the present moment thousands of trusts which would continue to be administered by private trustees just as before. Further, there would be trusts created in future with private trustees, and this Bill provided no proper protection for the trust funds of estates where the public trustee was not, and could not, be appointed. Beneficiaries had had the right for about a hundred years to get an account, and according to the judgment of the Court in 1819 in the case of Pearce v. Green it was the first duty "of every trustee, receiver, or executor, to be constantly ready with his account." The trouble which had arisen in these matters was because the beneficiaries would not avail themselves of the rights they had. This clause would perpetuate the evil. If beneficiaries had exercised their right to ask the trustees for an account, there would not have been one-tenth of the defalcations which had occurred. There were in many cases social circumstances which made beneficiaries hesitate to avail themselves of the rights which they possessed. If they had not availed themselves of the right in the past, what reason was there to believe that they would demand an investigation in future? Hon. Members knew that they would not, and Parliament ought to protect them. Beneficiaries were generally widows and children; a widow was not accustomed to business, and if the trustee was her own brother, brother-in-law, uncle, or father-in-law, she would not take the risk of offending him by asking for an account. It this Amendment were adopted, there would be no trouble at all, because there would be no occasion for any feeling between the parties. A widow in the circumstances which he had described would be able to see the accounts and be satisfied without going to the trustee. Commercial companies of every kind, friendly societies, trades unions, and clubs, had periodical audits of their accounts, and why should not a pivate trustee render an account in the way proposed? One alleged ground of objection was the expense in the case of small estates. In the case of an estate with an income of £50 the number of securities to be examined and entries to be inspected would not take more than half an hour of the time of a man accustomed to business. The expense of a compulsory audit might amount to half a guinea, and need not be more than one per cent. of the income of the trust. No estate was so poor that the beneficiaries could not get some friend to do this necessary work, or afford an audit paid for on the scale of one per cent. The next objection to his Amendment was that private trustees would never stand it. His answer to that was that they would be glad to do it and very many did it now. In Scotland it it was almost a universal practice, and he was glad to see that it was becoming more and more the practice in England. Every man who became a trustee would obtain great comfort and protection from his proposal. Many trustees were plagued and pestered by life-renters to commit some little breach of trust so that they might obtain a little more income out of the trust funds, and the trustee, who might be a very good natured man, out of the goodness of his heart would not refuse, but grant it. But if the trustee had an auditor behind him he would say to the life-renter who made the application that he could not do it, and that answer would be accepted without further remark. The only man that he could understand who would object to his Amendment was really the honest trustee who had hopelessly mixed up the trust funds with his own affairs and got the whole into a muddle. But he must have to give an account of the trust funds some day, and why should he put it off? If he were compelled by an annual audit to submit the accounts of the trust funds to an auditor he would be all the happier and more comfortable. They were bound to come to an official audit some time. It appeared extraordinary to him that this kind of legislation, which corresponded to the commonsense view of the public, was so long delayed in Parliament, For instance, the great Companies Act of 1862 made no provision for an auditor. Then came the failure of the City of Glasgow Bank in in 1879, when a provision was made in an Act of Parliament for a bank audit. Then after thirty-eight years there was the Act of 1900 which directed that every limited liability company must have an auditor. But to this day there was not a single obligation on any company to put a balance sheet before the general meeting of the company, although it was the usual thing to do so. That showed that the common sense of the public had outrun legislation. He was assured that if his Amendment were adopted, men who accepted the position of trustees would find themselves easier in mind and more willing to act. He knew that there were some good-natured friends who said that because he was connected with the profession which might incidentally be affected, in moving this Amendment he had an axe to grind—[Cries of "No, no."]—but he could assert that he would not move a step across the House for all the fees that were likely to come to him as the result of his Amendment if carried. It was only from his intimate experience of thirty years that he had seen the necessity for this legislation. He appealed to the House and the Government to take courage in both hands and to adopt the Amendment which would bring legislation to a level with common sense and public opinion, and ensure that trust funds would be secured in a way they had never been before.

Amendment proposed—

"In page 10, line 30, after the word 'audited' to insert the words 'once a year."(Mr. J. M. Henderson.)

MR. HILLS (Durham)

thought the Amendment would do a great deal of harm because it went much too far. These trusts were of all kinds. They might be trusts of land or of stocks, and he did not think a rigid system of this kind ought to be applied to all trusts. Certain trusts accounts should be audited every year or oftener, but in other cases a yearly audit would be much too frequent. He thought the majority of large trusts had an annual audit already, and this section gave a large power to the beneficiary who thought things were not going as they ought to do, by enabling him through very easy and simple machinery to get an audit. He thought that in an experimental Bill this section went far enough. In the future they might come to some kind of compulsory audit, but if they persisted in inserting this Amendment now he thought they would wreck the Bill.

MR. WILLIAM RUTHERFORD

said he differed with very great reluctance from his hon. friend. After a quarter of a century's experience of trusts, large and small, he had come to, the conclusion that a compulsory annual audit was required. Unfortunately a large number of cases of frauds in connection with trusts had come before the public of late, but there was a still larger number which had never seen the light of day. Those frauds had generally arisen where the trustees had the trust monies in their hands for years, where no accounts were kept, and where the trustees were tempted to use the trust funds for the purposes of speculation or for their own business. In such cases, matters went from bad to worse, of course. He believed that it would be the greatest boon to trustees in this country, of whom there were so many, to have the safeguard of an annual audit of their trust accounts. That would mean that accounts would have to be kept properly, both of the principal and of the income; secondly, that the accounts would be kept up to date; and thirdly, that the beneficiaries would be able to get a statement once a year at any rate, showing what the trust estate consisted of. If this Amendment were adopted, it seemed to him that it would enable an ordinary man to accept a trusteeship when asked by a friend to do so. The clause simply put into language the rights that beneficiaries already had. Every beneficiary to-day had aright to apply and insist upon the accounts being audited by the registrar of the Court. The next thing that struck him about this clause was that instead of making it compulsory to audit the accounts, the applicant had to apply to the Court to order that the accounts should be audited. He felt bound to say that there was hardly a trust in England in regard to which, if the beneficiary had to apply to the Court for an audit, it would not lead to a rupture of the pleasant relations which had hitherto existed between the trustee and the beneficiary. He hoped therefore that the Government would see their way to adopt the Amendment, and by so doing effect the greatest reform in the management of trusts that had ever been made. It would reduce to a minimum the chances of thieving. It would enable beneficiaries without offending their trustees to see exactly how they stood in regard to the trustee funds; in fact there was hardly a point of view in regard to the management of trusts, whether it was that of the beneficiary, the trustee, or the professional man interested, from which this Amendment would not be an improvement. The only objection he had heard to the Amendment was the expense. The trouble was nothing, because there ought to be no trouble at all. The accounts ought to be properly kept so that they could be audited. As to the expense, if the Committee looked at the words of the section itself they would find that there was power to get this audit done in the event of its not being done by the public trustee or some official appointed by him, and he supposed that the Government were going to indicate some maximum amount. He had not the slightest doubt whatever, speaking from a very extensive experience in this matter, that the Amendment would do immense good, and there was not a single practical ground of objection against its acceptance.

SIR E. CARSON (Dublin University)

hoped the Attorney-General would not accept the Amendment, because if he did it would imperil the Bill. How many trusts to which this Bill applied were there in this country? Nobody knew. If they were going to set up machinery for a compulsory audit they must also set up machinery for in some way or other registering all existing trusts and every trust which came into existence in the future. After that would come the compulsory audit, and how many auditors did they think they would want? They would have to set up hundreds of thousands of auditors all over the country. The truth was they were raising an entirely new question—a question quite alien to this Bill. He was not sorry that the question had been raised, however, because an hon. Gentleman had remarked that if a beneficiary asked for an audit the trustee was likely to be offended. [An Hon. Member: Some of them are now.] Well, there was one thing they knew. The trustee appointed under this Bill would not be offended, and he thought the very best advertisement that could be given to the Bill was that in the case of trusts under it they would have that compulsory audit which was admitted to be of the greatest possible advantage.

*SIR JOHN WALTON

said he viewed the proposal of his hon. friend the Member for Aberdeen with some sympathy. His hon. friend's experience in these matters had been extensive, and he had shown an immense amount of practical knowledge of the subject, and possibly the object which he had in view might be attained when this clause had been in operation sufficiently long to enable them to obtain experience of its working. He would point out, however, that the proposal of his hon. friend was a very large one. He suggested the adoption of a scheme of audit which would be applied to every estate whether large or small, whether it needed an annual audit or not, and whether or not the parties desired it. As he understood the proposal, his hon. friend desired an automatic audit of every trust of every size, whether the trust was constituted by an instrument made with that object alone, or was created under an instrument which had some other object. Such a proposal was exceedingly drastic and wide. The House had never discussed it. It had never been discussed by the profession, or by those who in the last twenty years had been interested in framing this legislation. He concurred in the observation of the right hon. Gentleman the Member for Dublin University that to try to bring it into existence at this period of the Bill would be to imperil the passing of the measure. He was sure his hon. friend did not wish that the Bill should be imperilled. He would point out that the present clause went a long way to meet the hon. Member. He thought they were making a substantial step towards the goal which they might ultimately reach after they had had experience of the working of this clause. The Bill as it stood would give the beneficiary, or any one trustee, the right to have the accounts of the estate audited. That in itself was a very important provision. He could not conceive a trustee refusing to accept a trust because he would have to submit to an audit of the accounts. The proposed trustee would rather say he would accept the trust, provided the accounts were audited. It would tend to relieve him from liability to have a compulsory audit taken annually. Under the clause they had a very far-reaching scheme for the audit of trust accounts, but the universal application of a yearly audit would, if provided for, be outside the practical scope of this measure. He did not think the Committee would be wise to go outside that range and accept a proposal which might be adopted two or three years hence but which, if inserted at this stage, would imperil the measure.

MR. EUGENE WASON (Clackmannan and Kinross)

said he had very much sympathy with his hon. friend in his endeavour to get a compulsory yearly audit, but he was afraid that if he persisted in his Amendment and carried it, it would wreck the Bill, which was a better measure than anything they had had up to the present and which might be made better still in time. He agreed that it would be an enormous relief to trustees if they could get a compulsory audit, but having regard to the impracticability of getting such a clause in this promising Bill, he appealed to his hon. friend to withdraw the Amendment.

* MR. RADFORD (Islington, E.)

said he had listened to the arguments of the hon. and learned Attorney-General and had not been moved by them. They were arguments that could be used against any new proposals, and were the kind of arguments always used by Ministers who did not agree with the proposals that were suggested. He was in favour of the Amendment. In this Bill nothing had yet been done to promote the object of the promoters, which was to give security to trust funds. The Bill was purely optional, and no one would suggest that the people of this country would appoint no trustee but the public trustee. The proposal of the hon. Member for West Aberdeenshire did not introduce a new principle in the method of administering their affairs. He had followed the lines of custom and habit of enlightened people who considered their duties, as trustees, to the beneficiaries and considered the responsibility of their own position, and who did, as a matter of fact, have a periodical audit by competent accountants for the satisfaction both of their beneficiaries and of themselves. If the Government pursued that course he thought they would be taking a wise course, and that it would result in making a law that would be operative. So far nothing had been done except to ensure that a number of gentlemen should receive appointments and salaries. Though trusts were now administered fairly well, the beneficiaries did not know anything of the way in which they were administered, or whether even the primary duties of the trustee were being carried out. He quite agreed that any attempt on the part of a beneficiary to obtain an account from the trustee was likely to lead to quarrels; but if the suggestion embodied in this Amendment was accepted it would make the audit compulsory, and the trustee would not have to refuse the beneficiaries information, and hence there could be no quarrel that kind. It was the air of secrecy with which trusts were conducted that led to negligence, irregularity, and fraud, and it was in order to put a stop to those things that hon. Members were anxious to find a device of some sort. They were indifferent as to whether it was done by a public trustee or in some other way. If a compulsory periodical audit were enforced the result would be to improve the conduct of trustees all round, because while some were dishonest the great majority were merely negligent or stupid. It would be to the benefit of the beneficiaries and the community alike, and it would pull up short those trustees who were negligent or speculative. If a man knew his trust funds were to be audited at a short date by a competent accountant he would think twice before he committed an irregularity or fraud. That would do more to prevent fraud than the appointment of public trustees and a large staff of officials. They were not without some precedent for this legislation. The Bankruptcy Act of 1883, although not in his opinion a good Act, certainly contained one good clause, which enabled the Board of Trade to call upon all trustees of liquidations under the previous Act of 1869 to bring in their accounts. The result of that was in some respects deplorable, because a number of persons who had up to that time held a high position in their profession were found to have misappropriated trust funds, and there were sad smashes in various directions. If this Amendment were carried it might be that some people interested in trust estates would have a rude awakening in a similar way, but that was not an argument against the Amendment. It was desirable, if a trust fund was being mismanaged or misappropriated, that they should know the worst and the sooner the better. For these reasons he supported the Amendment of his hon. friend.

MR. BERTRAM

said hon. Members of this Committee seemed to think there was some magic in the word "shall" and that the insertion of the word in this Bill would, ipso facto, produce an audit of all trusts. That was not so. In this Bill there was no machinery to penalise trustees who did not obey the mandate. Supposing a trustee ignored the section what penalty was there. How could this section be put into motion except upon the application of some person who desired the audit? The mere insertion of the word "shall," would not have the effect the hon. Gentleman seemed to suggest of causing a compulsory audit of trust accounts throughout the country. They must remember that there were a large number of trusts in this country in which there were, in practice, no accounts to be audited; such trusts for example as marriage settlements under which the trustees had given directions that the income from the securities should be paid over direct to the tenant for life. There was no machinery in this Bill to enforce penalties, and if the Amendment was incorporated in the Bill it would not be operative.

*MR. R. PEARCE (Staffordshire, Leek)

said the words proposed to be left out were "on an application being made." He desired to know whether that application was to be made to the Court or to the public trustee. It seemed to be desirable that there should be some summary method of getting this audit.

*SIR JOHN WALTON

said it was not intended to make an application to the Court. It was to be made to the public trustee.

*MR. R. PEARCE

said that explanation removed the doubt he had in his mind and made the clause satisfactory. He thought the hon. Member for West Aberdeenshire would, after what had been just said, do wisely if, having made his protest, he did not proceed further.

MR. DUNN (Cornwall, Camborne)

said he was in sympathy with the object the hon. Member for West Aberdeenshire had in view, but he certainly saw very great difficulties in carrying it out. The only difficulty with regard to the form of the clause was that unfortunately it required of persons who were probably most unwilling to audit the duty of auditing. If the clause contained words relating to the desire of a testator or settlor in regard to the audit it would certainly be more valuable than in its present form.

MR. J. M. HENDERSON,

in asking leave to withdraw the Amendment, said he still felt it would have to come; why not at this opportunity he could not see. He admitted there was protection wherever the public trustee was appointed, but there were thousands of trusts existing now for which this Bill provided absolutely no protection.

Amendment, by leave, withdrawn:

Amendment proposed—

In page 10, line 31, to leave out the word 'applicant,' and to insert the word beneficiaries."—(Mr. J. M. Henderson.)

Question proposed, "That the word "applicant' stand part of the clause."

*SIR JOHN WALTON

thought the word "applicant" ought to remain in the clause.

MR. WILLIAM RUTHERFORD

said there was difficulty in accepting any word in lieu of "applicant" in this clause, though the word itself was open to objection. The whole clause as drawn was an astonishingly difficult clause.

Amendment negatived.

Amendments proposed—

"In page 10, line 37, to leave out the word 'entitled,' and insert the words 'appointed under this section."

"In page 11, line 3, after the word 'any,' to insert the words 'securities and."—(Mr. Micklem.)

Amendments agreed to.

MR. MICKLEM

moved an Amendment to save expense by requiring that copies of the accounts need only be sent to trustees who desired them.

Amendment proposed—

"In page 11, line 3, after the word 'trustee,' to insert the words 'who may desire it."—(Mr. Micklem.)

Question proposed, "That those words be there inserted."

SIR JOHN WALTON

hoped the hon. Gentleman would not press the Amendment. Every trustee, whether he desired it or not, should have a copy of the accounts.

MR. MICKLEM

said he would withdraw the Amendment.

Amendment, by leave, withdrawn.

Amendments proposed—

"In page 11, line 11, after the word 'trust,' to insert the words, 'and that he has had the securities of the trust fund investments produced to and verified by him."—(Mr. J. M. Henderson.)

"In page 11, line 11, at end, to insert the words, 'or (as the case may be) that such accounts are deficient in such respects as may be specified in such certificate."—(Mr. Micklem.)

"In page 11, line 23, after the word 'shall,' to insert the words 'such as may be prescribed by rules under this Act and shall"—(Sir John Walton.)

Amendments agreed to.

*MR. RADFORD

moved an Amendment to provide that the expenses of the audit should be borne, not as the clause proposed by the applicant, but by the estate. If some such words as these were not inserted there would be scarcely any applications at all to the public trustee and the whole clause would be inoperative.

Amendment proposed—

"In page 11, line 23, to leave out from the word 'shall,' to end of clause, and to insert the words 'be paid by the trustees out of the income or capital of the trust property, or partly out of one and partly out of the other as may be prescribed."—(Mr. Radford.)

Question proposed "That the words proposed to be left out stand part of the clause."

*SIR JOHN WALTON

said he was willing so to amend the clause that in the normal case the expenses would fall on the estate, but at the same time giving the public trustee discretion to apportion the expenses between the applicant and the estate.

*MR. J. M. HENDERSON

said there was no necessity whatever for bringing in a public trustee unless there was a dispute as to appointment and as to payment.

SIR JOHN WALTON

said that as the clause stood it contained the words "if the public trustee otherwise directs." There was nothing which enabled him to deal with the question of expense. The applicant would pay unless the public trustee said he should not pay. He would suggest the words "In the event of the public trustee so directing he may order that such expenses be borne by the estate, or by the trustees personally, or partly by them and partly by the estate."

MR. MICKLEM

said that under Section 14 the cost would have to be borne whether the public trustee came in or not. Assuming that the case was properly brought under the section, he thought the expenses ought not to fall upon the applicant. This section would not be brought into operation at all if the applicant had to pay. He thought it was manifest that the cost of the audit ought to be borne by the estate and ought not to be thrown upon the applicant.

*MR. J. M. HENDERSON

said he had an Amendment down in the same sense, but the difficulty was that the Attorney-General wanted to throw the whole cost upon the applicant unless the public trustee otherwise directed. He wished to do exactly the opposite.

MR. WILLIAM RUTHERFORD

said he was anxious that this Bill should meet every case in the best possible manner. There was a real difficulty with regard to the cost of the investigations of the auditors, and it should not be passed over in a moment. It depended upon who had to bear the cost whether the Act would be availed of or not. As trusts were conducted to-day the trustees kept the accounts, and if any beneficiary wanted a copy he had to pay for it. Without this section the applicant would have to pay the costs. It was now proposed that the costs should be thrown upon the estate, and he thought that would lead to some confusion. Did that mean capital or income? It should not be forgotten that a large number of trusts were fully invested and there was no spare money. These were practical difficulties in the administration of estates.

*MR. RADFORD

said the words proposed by the Attorney-General would not give effect to what he desired so well as the words which he himself had moved. He was of opinion that rules made deliberately and at leisure would probably carry out the purpose in view better than words in the Act suggested on the spur of the moment even by so high an authority as the Attorney-General. He hoped the hon. and learned Gentleman would reconsider the matter.

SIR JOHN WALTON

said he thought it would be very much better to have words in the Act.

*MR. RADFORD

asked leave to withdraw his Amendment.

Amendment, by leave, withdrawn.

Amendment proposed—

"In page 11, line 24, to leave out the words 'paid by the applicant,' and insert the words 'and in the event of the public trustee so directing, he may order that such expense may be borne by the applicant, or by the trustees personally, or partly by them and partly by the applicant."—(J. M. Henderson.)

Question proposed, "That the words proposed to be left out stand part of the clause."

MR. WILLIAM RUTHERFORD

suggested that some words should be inserted to show whether the expense was to be paid out of capital or interest.

Question put, and negatived.

Words proposed there inserted.

Clause 14, as amended, agreed to.

Clause 15:—

Amendment proposed—

"In page 12, line 15, at end to add, '(f) the classes of corporate bodies entitled to act as custodian trustees; (g) the form and manner in which notices under this Act shall be given."—(Mr. Micklem.)

Amendment agreed to.

Clause 15, as amended, agreed to.

Clause 16:—

MR. MICKLEM

moved to add words defining the expression "administration of an estate" as meaning "administration of the estate of a deceased person." He thought the words "administration of an estate" were ambiguous and that they might apply to the administration of any trust estate in the lifetime of the person creating the trust. This was merely a drafting Amendment.

Amendment proposed—

"In page 12, line 34, at end, to add, the expression 'administration of an estate' means 'administration of the estate of a deceased person."—(Mr. Micklem.)

Question proposed, "That those words be there inserted."

SIR JOHN WALTON

said if this were merely a drafting Amendment he would not take exception to it, but it was capable of being construed in a sense which would make it dangerous. He thought the Amendment was unnecessary.

MR. MICKLEM

said he did not think the definition which he proposed to introduce would cut down what was provided for in Clause 3, but it would make clear that the clause was only intended to apply to the trust estates of deceased persons.

SIR JOHN WALTON

said he did not accept the view that Clause 3 should be limited to estates of that class.

MR. MICKLEM

said it seemed to him to be quite a new provision in the Bill if it was to be made to apply to settlements by persons still surviving. He thought the intention was not to interfere with what a man did during his lifetime.

MR. WILLIAM RUTHERFORD

said the words "administration of an estate" occurred in two or three other clauses as well as Clause 3. If the proposed definition were accepted confusion would be created in regard to the other clauses.

Question put, and negatived.

SIR JOHN WALTON

said that the object of the next Amendment was only to give the same construction to this Act as to the Act of 1896.

Amendment proposed—

"In page 13, line 3, at the end, to insert the words 'that other expressions have the same meaning as the meaning of the words in the Judicial Trustee Act of 1896."—(Sir John Walton.)

Clause 16, as amended, agreed to.

Clause 17 agreed to.

*SIR JOHN WALTON

moved a new clause to bring the Act into operation from 1st January, 1908.

New clause, "This Act shall come into operation on the first day of January, 1908."—(Sir John Walton.)

Brought up, read the first time, and added to the Bill.

SIR JOHN WALTON

said he wished to move a financial clause left over from the previous night.

New clause—

"(1) The Consolidated Fund of the United Kingdom shall be liable to make good all sums required to discharge any liability which the Public Trustee, if he were a private trustee would be personally liable to discharge, except where the liability is one to which neither the Public Trustee nor any of his officers has in any way contributed, and which neither he nor any of his officers could by the exercise of reasonable diligence have averted, and in that case the Public Trustee shall not, nor shall the Consolidated Fund, be subject to any liability;(2) All sums payable in pursuance of this section out of the Consolidated Fund shall be charged on and issued out of that fund or the growing produce thereof."—(Sir John Walton.)—

Brought up and read the first time and the second time.

MR. MICKLEM

said he wished to move to omit the words 'from discharge to the end of the sub-section. It was quite clear, he maintained, that one of the main objects of the Bill was to put the public trustee in a similar position to a private trustee, and make him liable in the same way as a private trustee, and therefore no exception should be made to the one which did not apply to the other.

Amendment proposed—

"In line 4, of the proposed new clause, to leave out the words 'from discharge' to the end of sub-section,"—(Mr. Micklem.)

*SIR JOHN WALTON

said he regretted that he could not accept the Amendment. The intention of the Bill was to offer to the public a guarantee in regard to all funds which were placed in the hands of the public officer constituted under its provisions. It was for the public to say whether that guarantee was sufficient to make it worth their while to hand over their funds to him. If they did so they would have the undertaking of the Imperial Government. But the Treasury and the Executive authority did not see their way to give an unqualified guarantee in every case. The reasons were given when the Bill was last before the House by the Chancellor of the Exchequer in the last Parliament, now Lord St. Aldwyn, who made a statement that it would be imprudent to provide for a larger indemnity than was embodied in the clause as it now stood. If the public believed that the security was sufficient, then the Bill would be a success; but if they considered that it was not sufficient, then trusts would be left in the hands of private trustees.

MR. WILLIAM RUTHERFORD

said he thought that the hon. and learned Attorney-General was quite right in regard to the maintenance of those words in the clause. Under the Trustees Act of 1896 where the trustee was not personally guilty where any fraud was committed he was freed from all responsibility.

MR. HERBERT (Buckinghamshire, Wycombe)

said that it appeared to him that the liability of a public official was very different from that of an ordinary trustee. He thought that the case would be met by the third section of the Judicial Trustee Act, and it appeared to him a mistake to grant relief from liability in a form of words different from that in the Act mentioned.

*MR. RADFORD

said that in regard to this Bill they were in the position of a firm pushing a new article, namely, the Public Trustee, who had to compete with various other articles on the market—the private trustee and the various corporations who did this class of business. By this measure it was provided that the Public Trustee should be liable to make good any loss which up to the present the private trustee had been liable to discharge. So far, so good, but he could imagine the family solicitor closeted with the testator and considering the question of whether the Public Trustee should be appointed or not. The family solicitor would say to the testator, "I must draw your attention to the words of sub-section 1, of Clause 17 of the Public Trustee Act." He would read to the testator the words which showed that the Public Trustee was liable under the same conditions as the private trustee except when the liability was one to which the Public Trustee had not nor had any of his officers in any way contributed, and could not have averted by reasonable diligence, and that in that case the Public Trustee was not, nor was the Consolidated Fund to be liable. He thought that the testator in considering those words would regard them as something alarming, and I would be inclined not to take the Public Trustee to administer his affairs, but to stick to the old plan of having a private trustee. He did not very clearly understand what the meaning of those words might be, and although he had listened carefully to what the hon. and learned Attorney-General had said, he did not glean from his remarks what was their precise bearing. No doubt it was his own fault and due to some defect in his intelligence, but the words were long and complicated, and they were the more alarming from the fact that they were insisted upon by the Chancellor of the Exchequer, because if the Chancellor of the Exchequer insisted upon these words being inserted the right hon. Gentleman must think that there were certain liabilities which might sound in damages from which it was desirable to escape. He appealed to the hon. and learned Attorney-General who desired to promote the success of the Bill to consider this matter.

MR. MICKLEM

asked leave to withdraw his Amendment.

Amendment, by leave, withdrawn.

MR. MICKLEM

moved after the word "discharge" in line 4 of the proposed new clause, to insert "or to discharge any liability incurred by the Public Trustee in that capacity." He said it must be perfectly manifest to the Committee that the Consolidated Fund should be liable not only for any acts of the Public Trustee for which he would be liable if he were a private trustee, but also for the action of the Public Trustee for anything he did in his public capacity. The Public Trustee had under some sections of the Act judicial authority. He might go completely wrong and make the various beneficiaries incur costs which there was no way of meeting, unless words were inserted which enacted that the Consolidated Fund should be liable for the acts of the Public Trustee as such. Then in addition to his judicial functions, the Public Trustee had administrative functions us distinguished from the private trustee. There were certain sections inserted directing him to undertake certain duties, and if in consequence of his discharge of those duties, loss resulted to the beneficiary, he thought the Consolidated Fund ought to be liable.

Amendment proposed—

"In line 4 of the proposed new clause, after the word 'discharge' to insert the words 'or to discharge any liability incurred by the Public Trustee in that capacity."—(Mr. Micklem.)

Question proposed, "That those words be there inserted."

SIR JOHN WALTON

said the Amendment did not seem to him to be necessary, but he would consider the matter. The, substance of the Amendment, he thought, was effectively provided for.

MR. MICKLEM

said he would withdraw the Amendment.

Amendment, by leave, withdrawn.

*MR. R. PEARCE,

who had given notice of the following Amendment— In line 12, at end, to insert the words 'Provided that the Consolidated Fund shall not be liable under this section while the national expenditure under the control of Parliament and provided for by taxes exceeds one hundred million pounds in the year, said that this matter was dismissed the night before, and he did not apprehend that the Government would since have changed their mind. It would therefore be no use persevering with his Motion.

Clause agreed to.

New clause:—

"The salary or remuneration of the Public Trustee and his officers and such other expenses of executing his office or otherwise carrying this Act into effect as may be sanctioned by the Treasury shall be paid out of moneys provided by Parliament."—(Sir John Walton.)

Brought up and read the first and the second time and added to the Bill.

New clause:—

"(1) There shall be charged in respect of the duties of the Public Trustee such fees, whether by way of percentage or otherwise, as the Treasury with the sanction of the Lord Chancellor may fix, and such fees shall be collected and accounted for by such persons and in such manner, and shall be paid to such account as the Treasury direct. (2) Any expenses which might be retained or paid out of the trust property if the Public Trustee; were a private trustee shall be so retained or paid, and the fees shall be retained or paid in the like manner as and in addition to such expenses. (3) Such fees shall, under the regulations of the Treasury, be applied as an appropriation in aid of moneys provided by Parliament for expenses under this Act, and, so far as not no applied, shall be paid into the Exchequer. (4) The fees under this section shall be arranged from time to time so as to produce an annual amount sufficient to discharge the salaries and other expenses incidental to the working of this Act (including such sum as the Treasury may from time to time determine to be required to ensure the Consolidated Fund against loss under this Act), and no more."—(Sir John Walton.)

Brought up and read the first and the second time.

MR. MICKLEM

moved at the end of the proposed new clause to insert— (5) The incidence of the fees and expenses under this section as between capital and income shall be determined by the Public Trustee subject to appeal to the Court.

SIR JOHN WALTON

said he would accept the Amendment if the last words "subject to appeal to the Court" were omitted. He did not think those words were wanted, and if they were left out he thought the Amendment would be a useful one.

MR. MICKLEM

consented to the omission of the words.

Amendment proposed—

"In line 20 of proposed new clause, at the end, to insert, the words '(5) The incidence of the fees and expenses under this section as between capital and income shall be determined by the Public Trustee."—(Mr. Micklem.)

Question proposed, "That those words be there inserted."

MR. WILLIAM RUTHERFORD,

having alluded to the difficulties of auditing if the apportionment of the charges between capital and income was not dealt, with, made one more appeal to the hon. and learned Attorney-General to make the matter clear.

*SIR JOHN WALTON

said he would consider the matter.

*MR. R. PEARCE

said he noticed that the clause proposed that this matter should be left in the hands of the public trustee. In New Zealand, where this subject had been a matter of considerable discussion, it was not left to the public trustee, but there was a graduated scale with a diminishing charge as the estates increased in value. He thought that such a provision should be prescribed by some higher authority than the public trustee and should be dealt with by rules.

*SIR JOHN WALTON

said there was a provision to the effect that the Lord Chancellor should frame rules, and these would have reference to the question whether the incidence of these fees should fall upon capital or income.

Motion made, and Question proposed.

"That the clause, as amended, be added to the Bill."

MR. J. D. WHITE (Dumbartonshire)

said that before this question was put to the House be would like to call attention to the financial arrangements in all these clauses and particularly with regard to this clause. It was provided that all fees should go into the Consolidated Fund and all payments both as to management and liability and insurance against liability, etc., were to come from the Consolidated Fund. He ventured, however, to think Section 5 was by no means sufficient to make the ends meet. There was considerable danger that there might be in various directions a balance of liability on the Consolidated Fund. He pointed out also that while the benefits of the Bill extended to England alone, the Consolidated Fund was contributed to by Scotland and Ireland. He had no claim to speak for Ireland, but so far as Scotland was concerned, he could say that she also needed a public trustee. It not infrequently happened in Scotland that small estates were either mismanaged and wasted or the profits were eaten up by legal expenses. All he could do was to express the hope that as Scotland contributed to the liability under this Bill she should not be refused the benefit of it, and that the Government in the near future would either constitute a public trustee for Scotland or in some other way consider her claims when the question of equivalent grants came up for discussion.

MR. MICKLEM

said the object of the Amendment he now proposed was that persons who were dealing with beneficiaries should be able to obtain information as to the state of the property of such beneficiaries. The whole matter was somewhat technical but, as all those who understood the question knew, a trustee under the present law was not bound to answer any questions put to him even if they were put with the authority of the beneficiary as to any assignments made by him. He ventured to think that if we were to have a public trustee he should be bound to keep a register and to answer any questions put on behalf of the beneficiary. The object of this was to enable a man interested in an estate to borrow money upon his interest if he required to do so for any purposes of his own on marketable terms. If no register was kept and the trustee refused to answer any questions, the person borrowing money would have to go to a moneylender and pay unfair rates of interest, although he was dealing with his own property. There could be no possible objection to the Public Trustee being bound to keep a register to which beneficiaries and others interested might go and see what was being done. Without imposing any hardship on the trustee it would be of great benefit to all beneficiaries who wanted to deal with their estates. He begged to move.

New clauses—

'(1) The public trustee shall keep a register of all notices received by him, including notices passed on to him by former or other trustees, of assignments, settlements, in cumbrances, and other dealings affecting, and Orders of Court changing or appointing, receivers of the present or future interest of any beneficiary in the property subject to the trust. (2) It shall be the duty of the public trustee to acknowledge the receipt of all notices received by him in respect of any of the before-mentioned matters. (3) The register relating to each trust shall be open to inspection by the beneficiaries or persons authorised by them at all reasonable times. (4) Any person suffering loss by reason of the failure of the public trustee to enter on the register such notices as aforesaid shall be entitled to be indemnified by the public trustee, and such loss shall be deemed to be a liability within Section 7 of this Act. Subject to rules under this Act any person claiming as beneficiary, purchaser, or mortgagee to interested in any trust property held by the public trustee either alone or jointly shall be entitled to give a notice to the public trustee to operate as regards the trust property in the same manner as a distring as notice or stop order operates upon stock standing in the books of a company or upon funds in Court. In any case where the public trustee is acting as custodian trustee jointly with other trustees notices required to be served on the trustees shall be deemed to be duly served if served on the public trustee alone."—(Mr. Micklem.)—

Brought up, and read the first time.

Motion made, and Question proposed, "That the clause be read a second time."

*SIR JOHN WALTON

expressed the hope that the Amendment would not be pressed. He pointed out that as the law now stood, m the absence of any express provision, the public trustee would be in exactly the same position as a private trustee, subject to the same obligations, and with a right to exercise a similar discretion. His conduct would be regulated by the rules of law applicable to the administration of estates. This Bill contemplated that in making rules the Lord Chancellor should deal with the exceptional situation arising from the fact that the public trustee had been called in to discharge duties which had hitherto devolved upon private persons. It was certain that some provision would have to be made in those rules in order to enable the object of the hon. Member to be carried out. The whole matter was one of detail, and one which would have to be considered, and he did not think it would tend to the practical value of the scheme if the Government accepted the Amendment.

MR. MICKLEM

said that, in the face of the assurance of the Attorney-General that this matter would be considered and dealt with by the rules proposed to be made by the Lord Chancellor, he would not press the Amendment.

New Clause, by leave, withdrawn.

Title:

Amendment proposed—

"To leave out the words 'the Judicial Trustee Act, 1890, and otherwise."—(Sir John Walton.)

Amendment agreed to.

SIR HOWARD VINCENT

expressed the Committee's sense of the tact and great courtesy with which the Attorney-General had conducted the Bill through Committee.

Bill reported, with an amended title; as amended, to be considered To-morrow, and to be printed. [Bill 378.]