§ "The proviso in paragraph (f) of Subsection one of Section fifty-one of the Act of 1903 with respect to sufficiency of investments shall be construed as applying only to the investments mentioned in paragraphs (c) and (f) of that Sub-section."
§ Mr. BIRRELLI beg to move the second reading of the Clause. It relates to a matter of great practical importance and interest to those concerned in the investment of moneys arising under the operation of the Land Purchase Act. Section 51 of the Act of 1903 was certainly a measure in no sense deficient in title. The provisions are very sweeping, because they authorise the investment of the purchase money in any of the securities named in the various Subsections, and these investments can be made at the request of a tenant for life without the consent of any other person whatsoever, however great his interest may be in the future of the property, and they may be made notwithstanding any provision to the contrary in the settlement, and also have the effect of relieving the trustees of the settlement of any liability by reason of their making any such investment.
I congratulate the right hon. Gentleman (Mr. Wyndham) upon the courage of the party to which he belongs in tearing up trusts when he has a mind so to do, because, having all my life before, fortunately or unfortunately, I became a Member of this Administration, practised at the Chancery Bar, all I can say is that anything more sweeping, more startling, and, I dare say, useful, than these Clauses I never heard of, because they enable a tenant for life, a person profoundly interested in increasing his own income, to set aside the trusts of the deed under which alone he became entitled to the property; and, in order to secure that that can be done without any opposition from the trustees, the Act goes on to relieve the 2497 trustees from any liability by reason of the investment being made. I do not quarrel with it at all, but I feel bound to mention the fact that it is of a very sweeping character. Six of the several classes of investments are authorised in Subsection 1, and there has been a decision of the Court of Appeal, in the Blacker Douglas estate, in 1905 First Irish Reports, which decides that these investments, which are included in paragraph (c) of Sub-section 1, debentures or mortgages of any railway company in the United Kingdom incorporated by Act of Parliament, are included without regard to the usual conditions that a dividend must have been paid on its ordinary stock for some period, and that those in paragraph (f) refer only to the shares in any home, colonial, or foreign railway which is registered in the United Kingdom. I do not know that this last condition is one to which I would attach very much importance. The whole question, to my mind, is really the character of the investment and how far it can safely be made, and, although I can understand the legal mind which prefers a foreign railway which has a registered office in the United Kingdom, where notices and the like can be served, I do not know that a business man would attach any greater importance to a foreign railway which had a registered office in this country than he would to one that had not. I think the hon. Baronet (Sir F. Banbury) would agree with me in that. All foreign railways would require to be considered with the utmost care before any investment was made in them; but I am not disposed to think that the mere fact of a foreign railway having a registered office in this country would justify one in making an investment in it while excluding perhaps a much better railway that was not registered in this country.
I think everybody will agree with regard to a range of investment which is so wide, though not in my judgment unnecessarily wide—I should be willing in some respects to see it wider, having regard to the kind of investments that prudent men have been in the habit of making during the last few years—but still it is a very wide choice of selection, and I think, having regard to the fact that these investments may be made with the consent of the tenant for life and without anybody else's consent, and that the risk of liability of the trustees is swept to one side, some provision must be necessary to protect the interests 2498 of persons claiming under the settlement other than the tenant for life. Thereupon the proviso for which I think the right hon. Gentleman is not responsible, at the end provides that the sufficiency of any such investments as are hereinbefore in this Section recited to realise the sum invested therein on the death of the tenant for life or the termination of the trust, shall be secured to the satisfaction of the Public Trustee under this Act. I think that that must have been done in the House of Lords. But, however that may be, it throws a very great burden on that functionary. "Secured" has been held, I believe, in the Irish courts to mean "established." It has got to be established to the satisfaction of the Public Trustee The proviso extends to all the six new classes of investments mentioned in the Sub-section. A Public Trustee placed in that position is not very likely, you could hardly expect him, to approach the question with a very open mind, because there is a very considerable liability imposed upon him. He is made the only person standing between the remainder man and the tenant for life. Therefore, it is not surprising that it is found difficult to induce him to authorise all these investments which, as a fact, business men would recognise to be a safe kind. I do not wish to say anything against the Public Trustee. I think he has discharged his duties perfectly well. In fact, I think he shows more courage certainly than I should have done in the same circumstances. But at the same time there he is; and I think if you look at these investments you will see that in (c) and (f) in the Act of 1903 it would be impossible to relax these conditions. I do not propose to remove the restrictions with regard to them. I think that as regards (c), debentures or mortgages of railway companies in the United Kingdom incorporated by Act of Parliament, investments should not be made, unless the Public Trustee is satisfied that they establish the security of the persons entitled. In the same way (f), debentures or fully-paid shares of any railway company where for 10 years immediately preceding the date of investment has paid dividends on its ordinary shares, there again I think that if you are to act with prudence you must secure the protection which is granted by the proviso. I am not altering the proviso. I am simply excluding from its operation all securities mentioned in Section (51), except (c) and (f). With regard to all the others, I think that the condition may safely be lapsed. 2499 The investments are of a truly conservative character, and I think trustees may safely invest in them without really incurring the least risk, unless it is that their trusts are of the most unusual and exclusive character. Investments of such a character in my opinion do not require the protection of the proviso. Therefore, the new Clause which I am moving is as follows: "The proviso in paragraph (f) of Sub-section one of Section fifty-one of the Act of 1903 with respect to sufficiency of investments shall be construed as applying only to the investments mentioned in paragraphs (c) and (f) of that Sub-section. "The Section of the Act of 1903 was accepted reluctantly in the other House, and on the condition that the proviso should govern all the investments authorised. I daresay the right lion. Gentleman (Mr. Wyndham) was the original begetter of many things that appeared in the other House. The only thing I am proposing now is to modify it in a particular way. Some hon. Members may express regret that my Amendment does not go further. I am perfectly willing to hear anything that may be said on the subject from the business point of view, because I feel it is of very great importance to the Irish landlords that they should be able, with safety, honour, and justice, to make the right sort of investments, and I have always felt, speaking with some experience of these matters as a lawyer, that nothing requires more careful consideration than an investment clause. A harsh, unreasonable, or foolish investment clause often prevents the fortune of a family from receiving that access which is desired. In the case of Ireland we are particularly desirous of giving assistance to the landlords who have been accustomed to rely with more or less certainty on the income derived from their land, and it will facilitate land purchase enormously if you can secure for them a good range of investments. What we want is a thoroughly sound and up-to-date investment clause, and if anybody can assist us in that matter we shall be glad.
§ Mr. WYNDHAMThe right hon. Gentleman has expressed some surprise that a Member of the Tory party should have made himself responsible for this proviso in the Act of 1903. I would remind him that one of the most honoured and one of th3 most typical representatives of the Tory party (Lord Halsbury) has always been in favour of great latitude for these investments. I do not recollect whether 2500 originally the Clause was in its present state, but I do not mind confessing that in its earlier stages it embraced even more than it does as it now stands, and in its ultimate form it excluded a certain number of investments, with the proviso that the Public Trustee should give his advice upon the security of these investments. I am very glad to associate myself with the tribute paid by the Chief Secretary to the Public Trustee for the way in which he has discharged his novel and delicate duties. What we are now asked to do is merely to say that the Public Trustee is not to give his advice upon three kinds of investment out of the five which are contemplated by Clause 51. He is a bold man who will say in this year of grace, 1909, what are going to be the safest forms of investment ten years hence. As at present advised, the Chief Secretary thinks that the advice and sanction of the Public Trustee is necessary in the case of the debentures of a railway company, because there are certain cases of railway debentures where the company does not pay a dividend on its ordinary shares. The Chief Secretary thinks the sanction of the Public Trustee is still necessary in respect of securities under (c), that is to say, debentures and mortgages of railway companies in the United Kingdom incorporated by Act of Parliament, The right hon. Gentleman points out that there are cases where railway companies pay no dividends on their ordinary shares. I should have thought that, the debentures, or even the stock of a company like the London, Chatham, and Dover, which has never paid a dividend once in the whole course of its existence, and only twice paid interest on its ordinary shares, ought not to be picked out for special condemnation from this point of view by the Chief Secretary, because when we come to the kind of security which he thinks will be perfectly safe, and may be invested in without calling in the advice of the Public Trustee, there are the ground rents of hereditaments. Under the policy on which the Government proceeds will anybody say that in 10 or 15 years' time the debentures of British railways will not be a safer form of security than ground rents arising out of hereditaments?
§ Mr. BIRRELLOr aeroplanes.
§ Mr. WYNDHAMI think that is a very irrelevant interruption. I say you cannot pick certain forms of security and be quite sure that they will be of the best character in the future. It is of the first importance 2501 that the Irish landlord should have a great latitude of investment, so that he may get the income which he derived from his land; therefore, I am always in favour of extending the latitude of investment open to him. My Amendment of Clause 51 would be to have a greater latitude of investment, but to make the advice and sanction of the Public Trustee obligatory in every case. The Chief Secretary is not relieving him of the hardest part of his duty. The right hon. Gentleman says, "I will not ask the Trustee to go into the matter if I think the security is safe, but where I think there is some doubt," as in the case of railway debentures or as in other cases of foreign railways, "then I will ask the public officer to resolve those doubts in the minds of the parties." I think it would be far more in conformity with the interests of all parties and the necessities of the case if this Clause is to be amended, to consider all the securities that might be reasonably invested in under the circumstances, and to say in every case that the advice and sanction of the Public Trustee should be given. That is an Amendment of which I should approve.
§ Mr. JOHN DILLONThis is a point on which I thought Members below the Gangway and Members above the Gangway would be able to act in harmony. This Clause was put down, I assume, by the Chief Secretary to meet, as far as he was prepared to go, the Amendment which stands on the Paper in the name of the hon. Member for the St. Stephen's Green Division of Dublin (Mr. Waldron); that Amendment proposed to repeal the proviso altogether. The hon. Member is unable to be here, but the grounds upon which he wants repeal is entirely owing to the fact that the proviso, as interpreted in a recent judgment a few years ago absolutely killed the Section. The right hon. Gentleman the Member for Dover does not appear to be aware of that fact. That judgment killed the Section and left it in operative. What was the nature of that judgment? The Attorney-General will know whether I am stating it correctly. I understand that the judgment of the Irish courts said that the Public Trustee, acting under this proviso, and giving it as his opinion that the investments would here after reproduce the capital, and if he were wrong, he might be personally held liable. What Public Trustee in the world could act under such circumstances? That is a very ex- 2502 traordinary judgment. The hon. Member for St. Stephen's Green, who is an expert in these matters, said that the Clause was killed and ceased to operate altogether. No trustee could act if he were to be held liable for an error of opinion.
§ Mr. WYNDHAMAmend that.
§ 4.0 P.M.
§ Mr. DILLONThat ought to be amended. That is the difficulty, and, in my opinion, until you get rid of that it is no use to amend it to the extent proposed by the Chief Secretary, which would still leave the Trustee helpless in paragraphs (c) and (f). It appears to me to reduce the whole Clause to an absolute absurdity. In my opinion the best way out of the difficulty would be to extend the jurisdiction of the Public Trustee all over these investments and to relieve him absolutely of personal liability in the case of these doubtful matters. I quite agree with the hon. Member that the list ought to be extended and made as wide as possible, with this check: that the Public Trustee should be satisfied whenever his power was put in force and that he should be held absolutely free from liability, because no Public Trustee, not even the hon. Baronet the Member for the City of London (Sir F. Banbury), would undertake to give a judgment as to what stock would sell for 10 years hence, if he was to be held personally liable. That is really the great point of the Clause. As regards the principle at stake in this Amendment and in the Clause, I am entirely at one, and so are all the Nationalist Members, with the right hon. Gentleman the Member for Dover. This is a clause we heartily approve of. In this case the interests of the landlords and the tenants are exactly on all fours. We are most anxious to allow the landlords the utmost possible liberty of investing their money. I have always maintained, and I know it from personal experience and knowledge, you can get absolutely sound investments—far sounder than Irish land, or than many investment sin this country that are trusteeinvestments—in American bonds which will bring you 4 per cent., or at the very lowest £3 18s., at the present price of the market. Those are not fluctuating securities, but absolutely secure, and, of course, it is manifest that in the interests of the highest degree of the tenantry, as well as of the land, that the landlord should be able to invest their money so as to get £3 15s., £3 17s., or 4 per cent. In such case 2503 they would be able to accept a lower price. Therefore, on the principle of the Clause, we are at one, and the only question is how best it can be worked out. I think the new Clause proposed by the Chief Secretary is important, but I do not think it goes far enough.
§ Sir F. BANBURYI quite agree with the right hon. Gentleman (Mr. Birrell) as to the desirability of making the field for investment as wide as possible. Nothing has struck me more during the last few years than the great change which has come over the class of investments which 30 years ago were considered to be the only investment in which a prudent man could invest his money. Cases have come within my own knowledge in which trustees have been held confined to first-class investments, and which have changed very much at the present moment. I think the general consensus of opinion in the City is that it is a mistake to limit too narrowly the scope of investments. Therefore I agree with the right hon. Gentleman that the scope should be as wide as possible. I did not quite understand what the right hon. Gentleman said about foreign railways registered in England, but I cannot find anything in his Amendment.
§ Mr. BIRRELLNo. It was a decision of the court which held that under paragraph (f) ordinary shares in any home, Colonial, or foreign railway which is registered in the United Kingdom—that is to say, if it was a foreign railway and was registered in the United Kingdom it came within the list of investments, but if it was not so registered it could not be accepted even with the sanction of the Public Trustee.
§ Sir F. BANBURYDoes the right hon. Gentleman propose to alter that?
§ Mr. BIRRELLNo. I invited the hon. Baronet to tell me his opinion on that subject.
§ Sir F. BANBURYI certainly would alter it, because it does not seem that the fact that the company is registered in the United Kingdom has any bearing. On the contrary, it may have the opposite effect, because it may be difficult to obtain the money for that railway in the country in which it is, and so they come to England for it. I venture to say it is always better to put money in an investment in which the natives of the country put their own money. Therefore it is much better to have it in an investment which is popular 2504 abroad in the country in which it exists, whereas if you limit it to companies registered in England it may be to companies which are not able to obtain the money in their own country, but have to come over here and register here.
§ Mr. BIRRELLI quite agree. I indicated in the observations I made that that was my opinion, but I desired to be fortified by that of the hon. Baronet.
§ Sir F. BANBURYThere can be no question about that. With regard to the right hon. Gentleman's Amendment, I think it would be an improvement to leave out paragraph (c). I do not say that the class of securities mentioned there have always been held to be trust securities, but with one or two exceptions it would be impossible to find debentures in a British railway which were not good securities. Therefore I do not think it is necessary to make the provision relating to the Public Trustee apply to that particular paragraph. The present Public Trustee is a very good man, but I do not know that he has had very much experience in investments, and it does not at all follow that the Public Trustee will be a good judge of investments. His duty is to see that the trust is administered according to the terms of the Act, and I do not think I should be prepared to hold him up as a man of great experience in investments. I should be inclined to agree that the less you have to do with the Public Trustee in the matter of consulting him about investments the better. It would be preferable to give a wide interpretation as to what investments are allowable. I should read paragraph (f) as including any ordinary shares or stock of any railway. It looks to me as if the paragraph got into the Act in an imperfect state. The usual rule is that you may invest in the debentures or preference shares of a railway which has paid a dividend during the last ten years or for a certain period upon its ordinary stock. Apparently this paragraph would apply to any railway in any part of the world. I think that is too wide. If the Chief Secretary would make his new Clause apply only to paragraph (f) and not to (c) there would be no objection to it.
§ Mr. BIRRELLThe Public Trustee has never been held to be liable, but there was one of those observations, which are sometimes called obiter dicta, in which the judge said that in his reading of the Clause he was a trustee in the ordinary sense of the word. A trustee in the ordinary sense of 2505 the word may under certain circumstances be personally liable, and that is quite enough to frighten any man. Therefore I agree that it would be desirable to relieve the mind of the Public Trustee from any doubt on the point.
§ Sir F. BANBURYI believe I am right in saying that an ordinary trustee is not liable at the present moment provided he does not go outside the terms of the trust, and provided he exercises his discretion, and does what he has got to do in a proper and businesslike manner.
§ Mr. DILLONAs I understand it, the effect of the judgment is that this proviso places a special duty upon the Public Trustee beyond that of the ordinary trustee; that he must be satisfied personally that such an investment is safe; and the dictum of the court was that he might be held personally liable if the investment failed. According to my information, that has absolutely paralysed the whole Section. The Public Trustee said he would not run the risk. I do not think you can expect any public official to make himself the target for innumerable actions for breach of trust.
§ Sir F. BANBURYThat would possibly be an argument for omitting the proviso from all the provisions except Section 10 of the Act of 1903. I really do not think it advisable to relieve him from all responsibility.
§ Mr. GORDONI do not think that the Chief Secretary will be quite justified in putting in an Amendment which frees the Public Trustee from liability in all cases and under all circumstances. If the Public Trustee does his duty he will take reasonable precautions to satisfy himself that the money is likely to be forthcoming. Besides, a man should take responsibility, particularly a man who is getting a good salary for it. The Public Trustee has, contrary to what has been said by the hon. Baronet, possibly as large an experience as most people as to investments and the state of the money market. I would join the hon. Baronet in suggesting to the Chief Secretary that he should omit the reference to paragraph (c). There is really very little in this matter, and I would suggest that at present it should be restricted to paragraph (f), and that the Chief Secretary should remove from this proposal paragraph (c).
§ Mr. BIRRELLWe are all agreed, I think, that in this matter we should be 2506 just as careful as if we were dealing with our own money. I would ask every Member, therefore, to put himself in the position as if he was making his own will or settlement, in the pursuance of which he would be deeply interested. And let him consider in what trusts he would wish to have his moneys invested for the purpose of securing a safe income. We are all agreed upon that. There are — — I will not say rival views, because it does not amount to as much as that — as to the investments, but we are all agreed that there should be as wide and ample a range of investments as possible, and I shall therefore, between now and the Report stage, consider this matter.
§ Sir F. BANBURYI should be only too pleased if the right hon. Gentleman would allow me to show him the terms of my trust.
§ Mr. BIRRELLIf the hon. Baronet will acquaint me with the terms of his trust—I hope it will be a long time before it comes into operation—I shall be very glad; it is just the kind of assistance I am in need of. Then you must have someone who is to have a controlling judgment. You cannot leave it to the tenant for life to pick and choose one particular moment for one particular form of investment because it might not be the best. Therefore there must be someone to exercise control, and there must be a Trustee. I have not really fully grasped the long judgment of the Court of Appeal, but I have seen enough of it to make me comprehend that it would largely affect the action, and, to some extent, limit the action of the Public Trustee, and I think there is no doubt it ought to be removed. The Public Trustee should not carryon his difficult task under any such blighting fear as that. But I agree with the hon. Member who has just sat down that the words would require great care. We are not to sanction recklessness or carelessness, or anything approaching want of good faith. The man employed has got to know he must be acting as a public official, receiving a salary, and I cannot contemplate any situation in which we could hold a man free from obligations which he had grossly neglected. I think we may find words to the effect that personal liability is not to attach to him so long as he, in the exercise of his discretion, discharges the duties for which he is paid. Then the question arises, is it necessary to distinguish between (c) and (f). They might see 2507 no good in our new investments, but I should be disposed to agree that if you have this wide range of trusts the duty of the Public Trustee attaches to both (c) and (f). It may be better to substitute a new Clause altogether, and I will undertake, with the assistance of the hon. Baronet (Sir F. Banbury) and anyone else who can give me expert knowledge and advice, to substitute a new Clause on Report.
§ Mr. WYNDHAMI think we are agreed that there must be a Public Trustee. If you have a Public Trustee he must be protected from those unexpected effects of a recent decision. I hope the Chief Secretary will be able to bring up a Clause to carry out this object.
§ Motion, by leave, withdrawn.
§ Clause, by leave, withdrawn.
§ Mr. CHERRY moved the following Clause:—