§ [SECOND READING.]
§ Order for Second Reading read.
§ THE ATTORNEY - GENERAL (Sir JOHN WALTON, Leeds, S.)
in moving the Second Reading of the Public Trustee Bill, said its object was to secure the appointment of a public trustee who would be officially responsible for trust funds committed to his charge, and who would be supported by a guarantee from the Consolidated Fund by means of which all losses would be made good. In the present state of the law and its administration no such official existed. It was impossible in the present condition of affairs that trust funds should be left in hands other than those of private individuals who might be appointed for the purpose, and the inconveniences and mischiefs resulting from that system had been found to be twofold. In the first place it had been found exceedingly difficult to induce any private person to accept the onerous responsibilities attaching by law to the office of a trustee. It was sometimes difficult for a man anxious lo leave money to be administered by a trustee to find 1263 among his friends, either a person competent to accept such a position or a person willing to incur the obligations attaching to it. It also happened that a person anxious that funds should be administered properly shrank from inviting any of his private friends to accept such a postion. Then also they had to consider the evils attaching to the insecurity which was found to result from leaving large sums of money in the hands of a person who could give no guarantee that the funds should be honestly held and truly administered. There was no security at present available in such cases except that which was to be obtained by the costly processes of the law, and in recent years, under the present system, it had turned out that there had been enormous losses of trust property. He thought his predecessor had made a statement to the effect that during recent years in sixty cases a sum of not less than £152,000 of trust funds had been proved after investigation to have been wasted, and, when one considered the losses of trust funds in cases which had not been publicly investigated, it was obvious that the loss I of money was very serious. These losses pressed most heavily upon the poorer classes of the community. It often happened that a man who had accumulated a small patrimony for his children found himself in a position of anxiety as to how he should contrive to leave that patrimony in absolutely secure hands. It often happened that a slender pittance left for the widow and the children disappeared owing to the dishonesty of the persons in whose charge it was left. This question had for a good many years occupied the attention of Parliament. As early as 1889 a Bill was introduced into the House of Lords, very much on the lines of the present measure, with a view to constituting a public office which should give a guarantee in respect of funds which were lost in the course of the administration of a trust and which should obviate the necessity of choosing private persons in whose hands the funds were to be left. That Bill was supported by the most eminent authorities in the country who had great experience in the matter. Several Law Lords advocated the measure, it being supported by Lord Herschell, Lord Halsbury, Lord 1264 Watson, Lord Lindley and others. That Bill passed the House of Lords in 1889 and was again introduced and passed through all its stages in 1890. Unfortunately upon its transfer from the one Chamber to the other it entered into the region of measures which were in the state of "suspended animation" in which a number of measures seemed to have been left for a number of years. Until the year 1904 the matter, so far as Parliament was concerned, remained at rest, although public opinion was very active on the subject, and it became apparent that something should be done. In that year this House undertook the investigation of the question and a Select Committee was appointed under the Presidency of the present Lord Chancellor. That Commission included many eminent Members of this House; it sat for a number of days and examined, he thought, no less than eighty witnesses. Those witnesses included many eminent judges, some County Court judges, some eminent members of the Bar, and also prominent members of the solicitors branch of the profession, who all agreed in the views which had been expressed by the members of the Bench. The result of this investigation was a unanimous report in favour of the change in the law which was now proposed. There was a passage in the report of that Select Committee to which he should like to draw the attention of the House, dealing with the nature of the evils which had been shown to be active in consequence of the existence of the present system. That Committee said—Under present circumstances it is not surprising to learn that much difficulty is found in inducing competent persons to undertake the office of trustee. There can be little doubt that the difficulty is very real, and increasing, especially with poor people, whose circle of relatives does not contain many persons of education. The frequency of instances in which beneficiaries suffer loss from defalcations of dishonest trustees, or the negligence of careless and incompetent trustees, is a very serious matter. Probably few trustees contemplate dishonesty when they first enter upon their duties, or have the opportunity of being dishonest while they are associated with others in the trust. It is when all the trustees except one have died or retired, and no fresh appointments have been made, that the temptation and opportunity arise. The evidence pats it beyond question that large sums of money are annually misappropriated by private trustees. The highest authorities confirm the prevalent 1265 opinion of the public that much loss and consequent suffering is caused by this kind of malversation, and those who suffer are chiefly the poorer and more helpless.The Report of the Committee was not surprising in view of the evidence produced before them, and it was also not surprising that the opinion of such competent authorities should have led to proposals for legislation being introduced into this House. Unfortunately it was left to the zeal and energy of private Members to promote that legislation, and his hon. and gallant friend the Member for Sheffield deserved warm commendation for his efforts to forward the question. It was owing to his zeal and assiduity that this question had been kept before the House and the country. His efforts to secure a place for the discussion of this measure by means of the ballot were unsuccessful until 1905, when the hon. Member obtained a position which enabled him to bring on the subject before Parliament. The success which attended his efforts was remarkable, because the Bill which he brought forward not only passed unanimously but not a single hostile voice was raised against it. The measure was sent to a Grand Committee and some Amendments were discussed, several of which were adopted. The Bill came back to this House upon Report, but unfortunately there was not quite enough time available to dispose of it; he believed that if another hour of time could have been afforded to the measure it would have been passed into law, and that was a remarkable tribute in regard to the history of this measure. The debate on the Report stage on that occasion disclosed some very remarkable evidence as to some of the evils which the measure sought to rectify. There were two tributes in regard to the Bill to which he should like to call attention. The present Lord Chancellor, who was the Chairman of the Select Committee and who heard all the evidence, expressed the opinion that the necessity for the Bill had arisen because of the lamentable frequency of complaints especially in regard to the poorer class of estates, which had led to a state of things which had become a public scandal. Under these circumstances the House of Commons passed the Second Reading 1266 of the Bill without a word of criticism, and his right hon. and learned friend the then Solicitor-General—the Member for the University of Dublin—lent his valuable services in support of the Bill. His right hon. and learned friend spoke strongly in favour of the measure and alluded to the many pathetic appeals he had received in regard to the misappropriation of trust funds during his tenure of office. Perhaps something ought to be said in regard to the financial responsibility which the administration of this proposal might cast upon the public Exchequer. The best anwer to such a criticism would perhaps be found in the fact that Lord Goschen and Sir Michael Hicks-Beach, who had in the past been Chancellors of the Exchequer, and the present Chancellor of the Exchequer all agreed that no charge whatever need be put upon the public revenues in consequence of this change. This was a matter in regard to which they were not without experience. In 1891 a Bill in this direction passed the Legislature of New Zealand, and the system established under it had been in successful operation for fourteen years. Perhaps the House would permit him to read the prospectus of the Public Trust Office of New Zealand. It said —The great advantage offered by the office is an absolute security against loss. If an estate is left to be looked after by a private trustee it may be mismanaged or dishonestly administered, and if there is a loss the widow or children suffer. On the other hand, if the Public Trustee is appointed, trustee and the investment of the interest-bearing funds is left to his discretion, every penny of the capital and interest is safe, as the State guarantees this by statute. Trust-moneys are invested in securies fixed by law, and they bear interest from the time of coming into the office. There is thus no loss of interest through delays in investment, as often happens when private trustees are acting.There were now in the hands of the Public Trustee of New Zealand, a comparatively small and not one of our most wealthy Colonies, a sum exceeding £3,000,000 sterling, and the charges were very small, varying from 1½ to 5 per cent. These charges were imposed for the cost of administration, and although they were small there was a surplus of revenue over expenditure of £7,000 a year. Therefore it was obvious that no public burden would be entailed if the House adopted the policy of the Bill, 1267 but that even a surplus over expenditure might be obtained. However, he did not rely upon the financial argument, but upon the principle of the Bill itself. He merely alluded to the financial question in order to show that the Bill would throw no additional burden upon the State. Without going into details he would proceed to explain the provisions of the measure and its general character. In the first place it was proposed to constitute the office of Public Trustee, and in the second place it would be provided that private persons should have power to nominate the Public Trustee as their trustee. In the third place, it provided—and this provision he strongly recommended to the notice of the House—for the administration by the public trustee of very small estates not exceeding £1,000 in value, enabling him to take charge of such estates, and in that way to save all the cost of administration and to distribute the money among those entitled to it with the minimum of expenditure. Then the Bill provided for financial burdens and responsibilities which might arise. There was a clause under which a guarantee from the Consolidated Fund was given in regard to losses which might be occasioned and which would fall on a private trustee. If under the existing law a private trustee was guilty of a breach of trust, a personal liability was incurred, but if similar circumstances arose in connection with the administration of a trust by the public trustee, a guarantee was given out of public funds which gave a security against all breaches of trust and maladministration. He thought he had indicated grounds which should induce the House to give a favourable reception to the measure and to attach the same appreciation to the methods proposed for putting an end to the evil of misappropriation of trust funds as was accorded to the Bill which passed a Second Reading in the last Parliament. He could not imagine that this new House of Commons would be less anxious to pass such a measure.
§ Motion made and Question proposed, "That the Bill be now read a second time."
*MR. RADFOED (Islington, E.)
, in moving the rejection of the Bill, said it 1268 was with great regret that he rose for the first time in this House for the purpose of moving the rejection of what purported to be an important measure of law reform. But when he came to consider the Bill in a benevolent spirit with a predilection in its favour, giving it his best attention, he came to the conclusion that the Bill was likely to be other inoperative or mischievous. In the first place, it was likely to be inoperative, but if inoperative it was necessarily mischievous, because it could not be carried on without great expense to the community. With regard to the objects of the Bill itself, he might say that all sections of the House were in entire sympathy with them. That trust funds should be protected was the wish of every Member of the House; that testators and others who had difficulty in finding trustees should have a trustee found for them, they would also be glad to see. But he thought the difficulty of finding-trustees had been too largely dwelt upon by the hon. and learned Attorney - General. The loss of trust funds by the negligence or the misconduct of trustees was a very serious-matter. But when the hon. and learned Gentleman stated on the authority of his predecessor in office that £162,000 had been lost in this way he did not hear the hon. and learned Gentleman say over what period the loss was spread or what proportion the money bore to the trust funds invested throughout the country. He thought it would probably be founds when it was compared with the many millions of trust funds in process of administration, that £162,000 was a trifling percentage and that this evil was not widespread. He did not, however, rely on the fact that the percentage of loss was small, because if there was only one trust estate wasted it would be a tragedy which should excite the sympathy of the House. When he looked into this Bill in detail he found it was open to what appeared to be very serious objections indeed. He congratulated the hon. and gallant Member for the Central Division of Sheffield on having his measure adopted by a Liberal Government. He was not only a great legislator himself, but was the cause that legislative activity was in others. He (Mr. Radford) objected to this Bill because it was in the highest degree ambiguous. Ambiguity was to 1269 be found throughout the Bill, every clause of which referred to Rules to be made by the Lord Chancellor. He defied anybody to say what the effect would be until these rules had been issued. They had already heard of the evils of legislation by reference, but a greater evil was legislation by delegation. No House of Commons ought to delegate legislation to a Lord Chancellor, however highly respected he might be. If hon. Members would look at the Bill they would see that every clause referred to Rules that wore to be made hereafter. He gathered from the hon. and learned Attorney-General that the Bill was to be optional in its character, but he could conceive Rules being made which would make it practically compulsory. If that was so it would be a serious matter for the House to consider. He ventured to think that the hon. and learned Gentleman had not grasped the extent of the power of the Lord Chancellor to make Rules. The House also ought to know whether the Bill was optional or compulsory. If it was optional it would be inoperative, if it was compulsory it would be mischievous. The hon. and learned Member, in moving the Second Heading of this Bill, had not referred to the Judicial Trustees Act of 1896. That was an experimental act of legislation for enabling any person who had difficulty in finding a trustee to appoint a judicial trustee who would be a fit and proper person and who would give security. The security was not so good as the security of the Consolidated Fund, but it was sufficiently good. But that Act was a dead letter. He knew of few cases in which a judicial trustee had been appointed and he knew solicitors in large practices who had never seen a judicial trustee. That showed that if legislation was not in accordance with the wishes and habits of the people effective legislation was not obtained. He would be sorry to see one more added to the long list of law reforms that had proved inoperative. It meant the creation of a high and important official without any work to do. But that was not all. This public trustee was to have an office in London, and offices elsewhere, and to appoint deputies throughout the country, if need be, and he would need all that machinery. He was the potential trustee under every will and every marriage settlement in the country, and 1270 therefore they could not offer him less than £5,000 a year. This might provide for some poor but deserving King's Counsel, but would not necessarily be an advantage to the country. Moreover, when they paid a high official £5,000 a year, they must appoint a proper number of men to do the work which that official was paid to do. He was therefore to have deputies throughout the country; existing public offices were to be used as far as possible, and the services of existing public servants were also to be utilised. That wouldseem to suggest that there were more public buildings on our hands than we needed, and he ventured to suggest that money should be realised on the useless and redundant public buildings that we possessed. Let the House consider how large and far-reaching this proposal was. There was a public trustee in London, and a testator in Cornwall or Cumberland. In that case a public trustee in London was no use. There must be some one in the county town, or at least much nearer than London, and the Bill would require machinery as far-reaching as that of the Court of Probate, and probably more expensive. The hon. and learned Gentleman had said there would be no charge on public funds, but unless the responses of the public to the invitation held out by this measure was much greater than that to the invitation held out by the Judicial Trustees Act of 1896 there would be a very large expenditure incurred that must come out of either the Consolidated Fund or the capital of the trust estates, which would be a serious inconvenience to those for whom this Bill was primarily promoted, and would interfere with the appointment of public trustees, so long as that appointment was optional. The House had been told this session that economy was the pivot of all reform, and therefore ho ventured to suggest to hon. Members that if they desired to effect reforms here they should resist the temptation to create a long line of public offices which might turn out to be sinecures. Clause 14 of the Bill related to investigation and audit of trust accounts. That was the best clause in the Bill, and if that clause alone was passed as a Bill he was not certain that they would not do all the good they were trying to do by this Bill. They were trying to put an end to the misappropriation of trust estates, and if a periodical 1271 audit was introduced, as was proposed to be done by Clause 14, the trustee who contemplated fraud and misappropriation would know his course would be a short one; that he would be certain to be detected when his accounts were investigated, and a man did not put trust funds into his own pocket when he know the time must speedily come when the whole facts would be brought out. He thought this would be a very proper measure as it proceeded on the line of the habits of the people. The best trustees did already audit their trust accounts and furnish particulars, and if the House proceeded in this manner they would be proceeding according to the habits of the people instead of running counter to their ideas by inviting them to appoint a public trustee, who was an utter stranger, to administer their affairs. There was, however, one blot in Clause 14, Sub-section 5, which would render the whole clause nugatory, and that was that the remuneration of the auditor and the expenses of the audit should be paid, unless the public trustee directed otherwise, by the applicant. A wiser course was suggested in the Trust Accounts (Audit) Bill introduced this session by the hon. Member for Clackmannan and Kinross, namely, that the expenses of the audit should be paid by the trust estate; that was only right, because the estate was preserved by the audit, and therefore it should bear the cost of it. If the Government chose to force this measure through by means of their majority, of course they could do so. He only wished they had chosen some more useful measure out of those which were now congesting Parliament. This Bill, if passed to-day, would want serious consideration in Committee, and the two points that would have to be particularly regarded wore, first, the functions of the trustee, which would have to be defined in the Bill and not left to be sketched out hereafter by the Lord Chancellor under his Rules, and, secondly, by the payment of the expense of the audit. The Lord Chancellor had such a wide discretion under Clause 6 that he could determine whether he would make Rules to enable the public trustee to apply for probate or not. The Lord Chancellor had been considering this question ever since 1894, and it was hardly respectful to the House to have such an important matter still undecided. He suggested that it 1272 should be made perfectly clear in the Bill what the functions of this gentleman were to be, and whether the Bill was to be optional or compulsory. He begged to move that the Bill be read a second time this day three months.
§ *MR. R. PEARCE (Staffordshire, Leek)
said he rose to second this Motion with considerable diffidence. It was a difficult matter for one who usually followed the lead of the Government to stand up against the great array of authorities which had been adduced by the hon. and learned Attorney-General in support of this Bill. The attention of the public had been drawn to this matter by the dishonesty and fraud that had taken place. But the remedy for that evil which they must all admit existed was not the appointment of a public trustee. If they appointed a public trustee because trustees were dishonest they might as well appoint some one to carry on the business of a grocer, because grocers sometimes gave short weight or sold adulterated goods, and in like manner to take care of all the trades in the country. Although he sympathised with those who had lost their money by reason of their trustees being fraudulent, he submitted that we must deal with the criminals as we had been accustomed to deal with them in the past, by means of the criminal courts, and trust to the deterrent effect of the criminal law. But that was not the real evil that existed in this matter; the real evil was the difficulty of getting good trustees to act, the supineness of those appointed, and the love of a little power and authority which influenced them in their decisions and made them difficult to deal with in the execution of their duty. What was wanted in relation to trustees was not a seines of public officers, because that would only add another trustee; the public trustee under this Bill was a hydra-headed monster with various powers, which seemed to him to be likely to swallow up the small estates which would come under his administration. The position of trustees and their beneficiaries was well known to the House. It was a position similar to that in which the Attorney-General might be a trustee for him (Mr. Pearce) to manage his private affairs, and perhaps in some other capacities he might be trustee for the Attorney-General and manage his 1273 private affairs, and they would, of course, be obliged to consult each other, and hence delays and difficulties. Perhaps he might be allowed to point out that there had been a tendency of late for the Court of Chancery to give the life tenant the management of the estate. In spite of all wills and settlements, under the Settled Lands Act the tenant for life could actually sell the property of the trust without the concurrence of the trustees. He would suggest that the multiplication of public offices was not the way in which this matter ought to be dealt with. It would be much better to have the management of the estates in the hands of the beneficiaries, which in other words, meant the person selected by the well known rules of the Court of Chancery, or the Court of Probate, which selected, where there were several persons equally entitled, the person best qualified to be entrusted with the management of the estate. If they gave a selected beneficiary in that way the right to administer the estate, they would at once get rid of all the trouble of private trustees. Let the beneficiary do everything under the sanction of an order issued by some proper Court. If the estate was a largo one, and they did not mind the expense, then Chancery was the best court for the purpose. But there were plenty of officials who could undertake this work now on the application of the beneficiary. Let him apply to the registrar of the county courts, or the district registrar of the probate court, and there ask for an order. If the application was a proper one the registrar would, as a matter of course, give the order, and there would be no further trouble. All those persons who were interested in the payment of dividends and interest would only have to see that they had this order, and then they could pay their dividends in accordance with that order and be free from any further liability. He would not go through all the advantages which would be secured by the scheme he had suggested, but he thought it was his duty to suggest what he thought was a better remedy to obtain the laudable object which the Government had in view. Then they would have a proper record kept of the trusts from the initiation to the close, they would have a record showing all that had happened to the 1274 trust, all the property in it, and all the changes that had taken place. That would secure the due administration of the whole funds. The registrars of county courts and district probate courts had their offices all ready; the beneficiary could manage the whole estate perfectly well, and he was the person who was now giving service's which were of such incalculable value in all these trusts. They spoke of sympathy with the widow or orphan who might suffer, but that was nothing compared with the unpaid care bestowed by the beneficiary interested in the family, They would not be doing right by creating a paid official to destroy the affection and care which unpaid trustees and beneficiaries already used in the administration of trusts. How could a public trustee deal with the family feelings and the conduct of affairs under wills and settlements like the beneficiary who was interested and who knew how the income was to be administered? He was the proper person marked out by the habits and customs of the people to do this, and under the plan he (Mr. Pearce) was now suggesting the expense would be extremely small. If the Attorney-General would agree to postpone the Bill for three months, he would be prepared to bring forward a proper Bill on the lines he had advocated. There were in this Bill throe or four underlined clauses which gave them pause. The Treasury was to be made answerable for the whole cost. It was a most inopportune thing that they should have such a demand made upon the public purse in relation to this matter. He did not know anything that was more insisted upon during the last election than the cutting down of expenditure, and now one of the first things they saw was this proposal to follow the example of the late Government in their extravagant policy. Why did the Lord Chancellor want to create a host of officers on the chance of getting back the money from the estates? This was not the time to make a charge upon the public revenue, and at any rate he thought it might be put off for the next three months, so that they could see exactly where they stood in matters of expenditure. He appealed to the Irish Members present. How could they expect the Irish language to be revived if money was to be frittered away in the 1275 appointment of public trustees. He also appealed to the Labour Members to support him in opposing this Bill. It was perfectly well known that labour had to pay in the end for everything. He protested against his working class friends being called upon to work in order to raise money for the payment of a public trustee out of public funds, for the administration of private trusts, which could very easily be paid for out of those private trusts themselves. Why should they undertake to manage the private trusts of this country at the expense of the public when it could be perfectly well done by the unpaid and affectionate care of the beneficiary sanctioned by orders such as he had described, lie trusted that if the Second Reading of this Bill was carried, the Government would give some assurance that in Committee provision would be made that no expense of any kind should be put upon the public.
To leave out the word 'now,' and at the end of the Question to add the words 'upon this day three months.'"—(Mr. Radford.)
§ Question proposed, "That the word 'now,' stand part of the Question."
§ SIR HOWARD VINCENT (Sheffield, Central)
said he thought credit was due to the Government for having brought this Bill forward. He was sorry that the right hon. Gentleman the Member for the University of Dublin was not able to be present, but he knew that he was heartily in sympathy with the objects of this Bill, for he had shown it in the clearest possible way when this same measure was brought forward by the late Government. It would have passed in the last Parliament had there been sufficient time to deal with it thoroughly, and it was only prevented from passing through the opposition which came from only one or two hon. Members. This measure dealt with an entirely non-political matter, and its principal object was to diminish the enormous losses which the community had sustained in recent years by the defalcations of trustees, and the robbery of trust estates. Within the last six months there had been numerous cases of defalcations which had inflicted untold suffering upon widows and orphans, which 1276 would have been largely obviated if the Bill of last year had passed. He was glad the Attorney General had not found it necessary to say anything in depreciation of the most honourable profession to which the two hon. Gentlemen belonged. He was sorry that the hon. Member for East Islington had not followed the lines of his predecessor in the representation of that constituency. He would like to read a passage from a speech made by Sir Albert Rollitt upon this measure. He said that a good deal of plundering of the poor by the misuse of trust funds took place, and it was the desire of the learned profession that everything possible should be done to prevent this. He thought that in this Bill which had been framed by the Lord Chancellor everything that was possible had been done to meet the legitimate wishes of the legal profession. Nobody had the slightest desire to depreciate that profession, and, because there were some black sheep amongst them, they ought not to tar the whole profession, with the same brush. Clause 11 dealt fully with this matter not only as regarded solicitors, but also as regarded the banking profession. Some fear was shown by Sheffield bankers in regard to this clause at first, but they had since expressed themselves as being, satisfied with it. He thought the provisions contained in Clause 1 would be found to be thoroughly satisfactory, not only to the legal profession, but also to those bankers and accountants who had entertained some opposition to the former Bill. Ample security was given in Clause 15, which provided that every rule was to be laid before each House of Parliament. He thought that that provided ample security that the Rules would be such as would conduce to the efficient working of the Act, and he did not think that they would operate in any sense whatever to the detriment of any person taking advantage of the Bill. An appeal had been made to Irish Members to support the rejection of the Bill, but he would remind them that the Bill did not apply to Ireland, and it should not be forgotten that breaches of trust in Ireland were much fewer than in this country. Hon. Members representing Scotland knew that judicial trustees had always been the universal rule in Scotland. It was upon the excellent example set by Scotland that the Select 1277 Committee upon Trust Administration recommended the appointment of judicial trustees. An appeal had also been made to working men and to the Labour Members to oppose this measure, but he would like to mention that Mr. Broad-hurst spoke strongly upon this subject, and was so much convinced of the absolute necessity of such a Bill that he went to the late Government and represented that the enactment of the measure would be a Messing to the poor. He might also state that the President of the Local Government Board took a most active part in obtaining support for this Bill. The hon. Member for Woolwich also was a teller with him in several divisions upon the Bill, in which five or six to one voted in its favour. In face of these facts, he hoped the hon. Gentleman opposite would withdraw the Motion for the rejection of the Bill, and allow the Second Reading to pass unanimously in order that the Bill might be referred to a Committee. They would then be able to assist the promoters of the Bill by all the moans in their power to enact the measure with such Amendments as might be considered necessary. The Attorney-General had expressed the willingness of the Government to consider any reasonable Amendments in Committee. The measure had been introduced entirely in the interests of the community at large, and it would be a thousand pities if, after all these pains had been taken, the Opposition from a very limited source should succeed in wrecking it once more. He earnestly trusted that the House would agree to the Second Reading.
§ *MR. J. M. HENDERSON (Aberdeenshire, W.)
said that he very much regretted that in addressing the House for the first time he found himself in opposition to a Liberal Government, having been a staunch Liberal all his life. But this Bill was not their child. It was an adopted child. He did not wish in the least to minimise the evil that existed in regard to the maladministration of trusts. For a quarter of a century he had had most intimate connection with the administration of trusts, and he believed that about 20 per cent, of the trusts of this country were maladministered from one cause or another. There was first of all the benevolent trustee who was anxious to get as much money as he could for the life renter; he agreed against his better 1278 judgment to invest in securities bringing a higher interest than he ought to do, having regard to the nature of the securities. Then there was the widow executrix with two daughters and one son, the son being the apple of her eye, but turned out to be a bad apple. By the time the girls came of age to get their money they found that" the "apple" had had it all, or most of it. There was the trustee who borrowed securities and put them in pledge, in order to help him over a difficult moment. If things went right the securities came out of pledge, but if they went wrong the securities were lost; and so on through various gradations until they came down to the brigand trustee who simply annexed the money and bolted. How was this Bill going to remedy that evil? They were told that in New Zealand the system proposed by this Bill had been adopted. He would take it for granted that that was so: New Zealand was a new country and had been accustomed to a benevolent officialdom ever since it had existed. Its inhabitants did not number many more than the population of Glasgow, and a public trustee might be a success there, while in a highly civilised country like Great Britain, with the traditions of centuries, where the habits of the people had grown up in the course of time, such an official might be a failure. He was absolutely certain that in not 10 per cent, of the wills would a public trustee be appointed. The people of this country disliked officialism m private affairs the hon. and gallant Member for Central Sheffield who introduced the Bill last-year and again this year had founded his case on an absolute misstatement of fact. He had said that in Ireland there was very little defalcation, while in Scotland there was a very excellent law called the Judicial Trustee Act which effectually prevented such a thing happening. He had hoped to see the Lord Advocate laugh at that statement, because he knew that it was ridiculous. He was glad to hear that there was no defalcation in Ireland, and he wanted the Irish Members to tell the House how that came about, because it was certainly not by the existence of a public trustee. He had known cases of great defalcation in Scotland, and they occasionally occurred now. But, speaking generally, there was immunity from defalcations in 1279 Scotland, owing simply to the business faculty of the people. It arose from the almost universal practice in Scotland of having the trust accounts audited every year. The remedy for the state of things complained of lay at their door if they cared to pick it up. It was found that there was a flaw in the Bankruptcy Act of 1869, and in 1883 an Act was passed to put a stop to defalcations. What in the 1883 Act had stopped defalcations? The audit. What had made the judicial factor in Scotland a success? The audit. What was the principal protection under the Judicial Trustee Act? Simply the audit. What had made the defalcations under trust deeds possible?How oft the sight of means to do ill ededs Makes ill deeds done !The trustee knew that if he had a trust for children ten or twelve years of age he had ten years to run and nobody to bring him to book when the accounts were not subject to audit. Defalcations were not so likely to occur where trust accounts were audited every year as they were largely in England now, and as they had been almost universally in Scotland for years. The hon. and gallant Member for Central Sheffield must know of the case of the Corporation of Sheffield v. Barclay. In that case a trustee forged a transfer in 1896, and the forgery was not discovered until he died in 1903, but if there had been an audit every year could it be supposed that that trustee would have touched the money? He would have known that he had facing him an audit in a few months time when he would have to produce the stock, and that he would be unable to do so. That and similar cases had brought about the cry for some public functionary whose business it would be at the public expense to protect trust funds. He admitted that there were eases of the poor where some protection was required. But why use enormous machinery like that proposed to save poor people's money when it could be done through the County Court, and through half-a-dozen ways without this machinery? They were told that it was to protect the poor. It was nothing of the kind. It was a great measure for public trustees, in all estates throughout the country. If it was to be successful they must have a whole host of officials. 1280 They were told that it would cost the State nothing. They were told that when the Act of 1883 came into force, but according to the Report for 1904 it was costing the country over £20,000 now. If that was the cost where trade money was concerned, what would be the cost of this measure if only 10 or 20 percent, of the people took advantage of its provisions? He asked the House to consider how this Act would work. Let them imagine a widow in her trouble at the death of her husband: instead of a friend, of the family coming with his sympathy and assisting her for a time, there would be a man from Somerset House who would take an inventory of and seal up everything. Would anyone wish that to be done? If any man had a difficulty in getting a trustee for his estate he could obtain the help he required under the Judicial Trustees Act. Reference had been made to the Judicial Factors Act. A judicial factor might be anybody the Court appointed; he was not a functionary with an established office and all the paraphernalia proposed by this Bill. If only 20 per cent, of the people took the benefit of this measure the mischief complained of would still go on in the case of the remaining 80 per cent, and the cost of administration must cause heavy loss to the Exchequer. The only good thing in the Bill came in at the tail, and that was very imperfect. It provided the protection of an audit to anyone who applied. The true remedy for defalcations might be found by passing a short Act ordering that every trust account should be audited and filed along with the will at Somerset. House where any beneficiary might go and see the account from time to time. The difficulty a beneficiary had with a trustee at present was this. He might think that things were not going right, but he did not like to ask the trustee, probably a member of his own family, for information in regard to the accounts; he wished to avoid anything which might give offence to the trustee. If there was a place where he could go without the intervention of the trustee and by paying a shilling see what was doing in the trust, the whole difficulty would be got over. The whole thing could be done for a very small sum. He might tell the House that he had seen a trust estate of £100,000 capital, income £3,000 with an audit fee of seven guineas per 1281 annum; another trust estate of £250,000 capital with an income of £6,000, audit fee twenty guineas. By adopting the system ho recommended, the whole thing could be done by excellent men for a very small sum on the poorest estates—there was no difficulty at all in the matter—without creating at great expense an enormous establishment of officials, all of whom would have to be pensioned. He spoke from large experience, and he was perfectly certain that, no matter what the learned Attorney-General might say, with the means he suggested not 20 per cent, but the whole 100 per cent, of testator's money would be protected, and the robbery of trust monies would be effectually stopped. He appealed to the House to adopt this purer, securer, and more economic way. This was not the time to risk £20,000 or even £5,000 a year of State monies. Only yesterday the Scottish Members cried out for £20,000 to help them in Scotland out of their educational difficulties. If this Bill passed there would be an official in every town and village in England and he was certain the cost would be £30,000 a year to the country. He held a brief for no class or party—not even the chartered accountants, of whom he was one. In Scotland the trustee had to keep a capital account, an income account, and a list of securities. These securities had to be produced every year, inspected by the auditor and certified accordingly. But if they started the machinery under this Bill they would be establishing an enormous bureaucracy. He appealed to the Government to drop this child, and let its putative father have it back again. It was not a Bill for a Liberal Government to adopt at all.
§ *MR. GEORGE FABER (York)
said that the reason why he rose to say a few words on this Bill was that, as a banker, he took an insignificant part in opposition to the Bill of last year when it was in Committee. It was therefore due to the House that he should explain the sentiments he now held toward the measure, introduced by his hon. and learned friend the Attorney-General. Let him say at once that as a banker, speaking in his own behalf, and in behalf of a number of country bankers, he viewed this Bill with a much more benevolent eye than the Bill of last year. Indeed, he might go further and say 1282 that not only was this Bill, as introduced in another place, in a more palatable form to bankers than the Bill of last year, but that when it went into Committee in another place, the Lord Chancellor accepted suggestions made by bankers with such cordial and kindly consideration, that certain of the bankers objections were largely removed, more especially in regard to Clause 11. What the country bankers feared in regard, to the Bill as originally introduced was that there was going to be a large central establishment set up in this metropolis controlled by Government officials and that the inevitable result would be to sweep money away from different parts of the provinces, where it was most wanted to promote commerce and industry, to London. That, they contended, would be most inimical to the provinces and to the banking community in the provinces. Clause 11, although it did not go the whole way, went a certain way to meet the views of the country bankers. It said that—The public trustee may employ for the purposes of the trust such…bankers… as lie may consider necessary, and in determining the persons to be so employed in relation to-any trust the public trustee shall have regard to the wishes of the creator of the trust and of the other trustees (if any), and of the beneficiaries, either expressed or as implied by the practice of the creator of the trust, or in the previous management of the trust.That was a distinct direction in the Bill. If A. B. in Sheffield, Leeds, or Manchester acted as banker to a testator, the public trustee should have regard to that fact and should continue to employ him. Therefore, that clause had gone far to mitigate the inimical opinion of the country bankers regarding the Bill. He could not say on behalf of himself or of bankers generally that they approached the Bill with open arms; but if the Bill had to be passed, he confessed that a kindly endeavour had been made to meet their opinions on the matter. He hoped the House would not consider that bankers were without bowels of compassion. He might say that he had been largely impressed by what the hon. and learned Gentleman the Attorney-General said in his opening speech. They all know that there had been serious defalcations in the matter of trusts by trustees and others. Nobody could read the newspapers without knowing that. 1283 But what he wanted to impress on the House was that they must be careful, in running away from one evil, that they did not run into another; that in seeking to avoid the dangers of Scylla they did not run on the rocks of Charybdis. He saw difficulties in working the Bill. He assumed that the Bill was to be voluntary; that there was to be no compulsion at all. As regarded poor estates he would point out that in the early part of the Bill the public trustee was given an option as to whether he would take up such estates or not. In Clause 2 it was stated that—Subject to and in accordance with the provisions of this Act and the rules made there under, the public trustee may, if he thinks fit, for the purpose of saving expense to persons of small means, act in the administration of estates of small value.
§ *MR. GEORGE FABER
(reading)—The public trustee shall not decline to accept any trust on the ground solely on the small value of the trust.Very well; he would leave that point, and venture to put the matter a little more broadly. Did hon. Members believe that the people of this country would be largely inclined to take up the machinery provided by the Bill? He should doubt it. He tried to put himself in the position of the public, and not of a a banker. The people of this country generally did not like officialism; and over and above that ho asked himself, would the machinery of the Bill conduce to efficiency in winding up estates? That was an important question. He doubted it. To begin with, the public trustee would not necessarily be a business man. He was to be chosen from a public Department. Having been in official life in a large office for nine years, he might be allowed to say, with some degree of knowledge, that public servants were not always business men. And that was one of the dangers of the measure, if care was not taken, that they were going to run estates into great risks. A man might be a good public official, but a bad business man. This Bill would hold out to the whole community the idea of making use of this Department. There would be many people who would assume that a man appointed to be public 1284 trustee would know all about business; but the reverse might be the case. Some years ago he was appointed trustee to a very complicated and difficult estate which required a great deal of care and attention to handle to the best advantage. It was not the case of a business but of an estate which included all sorts of securities and mortgages which had to be dealt with. In order to fully realise that estate it was necessary that it should be wound up gradually, and time was wanted for that purpose. The securities had to be realised at the proper moment and the mortgages called in gradually. It was eleven years ago since he was appointed trustee, and that estate was not wound up to-day, although he believed he had conducted the business to the best advantage, both of those who owed money to the estate and of the estate itself. If the House passed this Bill, and a public trustee was a pointed, they all knew that red tape covered all official proceedings, and that trustee might not think it his duty to give the time and trouble that he himself had given in dealing with this particular estate. The public trustee would want to wind up the estate at once, and this in many cases would mean immense loss and disadvantage, not-only to the estate itself, but to those who were indebted to it. There was nothing within the four corners of the Bill to provide that the public trustee should be a business man, and even if he were he would probably become saturated with officialism. He would not, in all probability, take a broad view, but he would put all estates upon the same footing and wind them up in the same way. To take another point, it was not likely that the public trustee was going to run any risks. How was he going to invest trust money? He knew what he should do if he were in the position of the public trustee. He should put everything into Consols. Of course, the beneficiaries would suffer, because a much less income would be obtained, but risk would be avoided. Ono could not help being driven to the conclusion that on the whole the change proposed by the Bill was not going to redound to the benefit or the advantage of the public. Was there not a remedy for the evils of which complaint was made without resort to legislation of this character? They all knew that there were large companies and corporations whose financial 1285 position was beyond doubt and who acted in the capacity in which the public trustee would act under this Bill. Those companies were above suspicion, and they now carried on this class of business. He was inclined to believe that the safety valve was to be found there, and if that was so, was there any sufficient reason for loading the Statute-book with a Bill of this kind? The working of the Bill would, he thought, be very costly. It was said that it was not going to cost anything, and the hon. and learned Attorney-General had said that former Chancellors of the Exchequer and the present Chancellor of the Exchequer agreed that no charge upon the public revenue was likely to arise. He could not help feeling, however, that unless some form of mutual insurance was provided in regard to every estate that came within the purview of the public trustee, there must be some loss to the public Revenue. In that case the beneficiaries would provide their own insurance, while the public trustee administered the trusts. It was in his judgment doubtful whether the system would work out to the advantage of the beneficiaries or would result in economic administration. It appeared that everybody who put their estate in the hands of the public trustee would have to contribute to a mutual insurance system, and if a loss supervened the State would reimburse themselves out of the insurance fund. He disagreed with the hon. Member who suggested that they should pay £5,000 a year to the public trustee. He should think that £1,500 a year would be quite sufficient the Permanent Secretary to the Treasury received only £1,500 a year, and surely that sum would also be sufficient for the public trustee. But whatever the salary was, he should like to know whether the Exchequer was going to pay it, or whether it was to come out of the pool provided by the sums obtained from the estates themselves. He was not treating this as a Party question, but, as a member of the community he was discussing whether the remedy hold out was really going to fulfil the aspirations of those who believed in it and remove the evils of which complaint was now made. Upon the Second Reading he would not vote against the Bill, although he reserved his rights to discuss in Committee the points he had put forward.
§ THE PARLIAMENTARY SECRETARY OF THE TREASURY (Mr. GEORGE WHITELEY,) Yorkshire, W.R, Pudsey
said he wished to make an appeal to the supporters of the Bill not to continue the discussion at any length. There was a large number of uncontentious measures following it upon the Paper, and when he was pressed to put this Bill down first it was understood that the discussion would go through very quickly. Of course, he could not appeal to those hon. Members who wore opposed to the Bill to forward it, but he thought he was justified in appealing to those who supported it to help the Government in passing the measure.
§ *MR. BERTRAM (Hertfordshire, Hitchin)
said that after the speech of the Patronage Secretary he only desired to make a few observations to the House. He was a member of a profession which was largely interested in this question, and after a careful study of the Bill before the House he was entirely favourable to it. His speech would resolve itself into an appeal to the hon. Member for East Islington to withdraw his opposition the hon. Member, who belonged to the same profession as himself, had put his arguments with great force, but he hoped that he would; not persist in his resistance to the Bill. The opposition was conducted on two main grounds. First of all, it was said that the creation of a public trustee and of a new Government department would entail additional expenditure by the taxpayers of this country, and secondly, it was said that people would not be anxious to avail themselves of the advantages offered by the Bill. In his judgment beneficiaries, and particularly poor beneficiaries, would be most anxious to avail themselves of the provisions of the Bill and to take advantage of a system which would not only preserve the trust funds but enable them to let in the light of day upon trust accounts. That was the chief purpose of the Bill, and it was because the Bill provided the machinery to enable poor people, who had few friends or advisors, to obtain proper administration of their affairs, that he supported it. Ho was not concerned for rich people, because they could safeguard their interests by appointing eminent solicitors or bankers as trustees. It was, 1287 however, desirable that a Bill should pass which provided machinery to enable poor people to secure a trustee upon whom they could depend, and he was sure that if the poor people of the country came to understand the Bill it would be largely operative. If it became so the other ground of opposition to the Bill failed, because the department of the public trustee would under such circumstances pay for itself. He could not help thinking, however, that the success of the experiment must depend upon the care which was exercised by the Government in starting the machinery, and by the agents who were responsible for the management of the department. It was necessary that their methods should be cheap and economical. If that policy was pursued, he thought there was every reason to expect that we should, if not at once, in a short time see an end of dishonesty on the part of bankers and solicitors who became trustees, and of those pitiable and sordid crimes which inflicted great hardship upon and destroyed the homes of poor people. As he had said, his sympathy was not with those who could afford to employ bankers and solicitors and obtain expert opinion. Rich people could always obtain an expert to conduct their affairs and pay him a considerable salary in addition to pickings out of the estate. This was not possible in the case of a poor man, and he desired to support this Bill because he considered it would be of great benefit to the people of the country whose small savings were constantly in danger of being misappropriated by dishonest trustees.
§ *MR. HILLS (Durham)
said that, speaking as a solicitor, he should support the Bill. He did not intend to deal with the measure itself, because it had already been sufficiently dealt with. What wore the grounds of opposition to it? The first was that it was not required. In his opinion it needed a great deal of courage to come down and tell the House that this Bill, for which there had been a growing demand for many years past, was not required. He might say that members of the profession to which he belonged were especially in favour of the measure. He himself had always been a supporter of its principle, and his support had grown stronger as time went on. The Attorney-General had, he thought, minimised very con- 1288 siderably the amount of the defalcations by trustees. He had put the sum at £162,000, extending over a period of years. That estimate was much too small. In his own personal experience of fifteen years he had himself known cases in which the total loss was far larger than that.
§ SIR JOHN WALTON
said the sum he had mentioned was only the amount of the defalcations which had come to the official knowledge of his predecessor. It did not include very large sums which had undoubtedly been lost, but of which there was no official knowledge.
§ *MR. HILLS,
said he was sorry he had misunderstood the hon. and learned Gentleman. The losses had undoubtedly been very large. As to expense, the experience of New Zealand, a poor country, was conclusive on that point. He was quite of opinion that the procedure provided would be very largely used, and if it were largely used it would easily pay its way. Next, as to the complaint of officialdom. He thought the hon. Member for York, who was very severe on officials, was a standing example to the contrary. He had explained to the House with what great care and skill he had managed a large and complicated estate, and at the same time he had told them that for many years he was a Government official. Surely he could not separate himself into two parts like that, and, he for one was quite confident that the hon. Member would show in an official capacity the same care and skill that he had shown in his private capacity. All the points which be (Mr. Hills) had dealt with were purely negative. Two schemes had been proposed to take the place of this Bill, and the first of those schemes was a compulsory audit. In the first place the present Bill gave a very good machinery for audit, and in the next be did not think an audit alone was sufficient. Certain classes of fraud could nut be discovered by the auditor, and he thought we must have some moans by which people who were poor and had few friends of business training could be quite certain of obtaining a competent adviser and director on their business affairs. The most plausible alternative to the Bill was that there should be an assimilation 1289 of the law of personal property to the law of settled estates. The Settled Land Act had worked extremely well, and for the very simple reason that the man who was life tenant and was trustee for himself, could not by any means steal the land. But it was quite different when they came to the case of personal property. If it was invested in stocks, they stood in his name, or, at all events, the cash would pass through his hands, and, anyhow, it could not be contended that that was on the same basis as settled land. Even though the man was honest, he had a great temptation to mix the trust fund with his own property, and hopeless confusion would certainly arise. He appealed to the Government to make this Bill as simple and cheap as possible. For small estates it would at present be too expensive, for the public trustee could charge a fee and employ solicitors. He suggested that no fee should be charged in small estates; but that was a question which could be considered in Committee.
§ Question put, and agreed to.
§ Main Question put, and agreed to.
§ Bill read a second time, and committed for Monday next.