VARIATION OF TRUSTS BILL

HC Deb 06 December 1957 vol 579 cc768-807

Order for Second Reading read.

11.6 a.m.

Mr. F. P. Crowder (Ruislip-Northwood)

I beg to move, That the Bill be now read a Second time.

This is a dull Bill. It might be described as a tidying-up Measure. I feel in a rather unusual position, as a Member of the Bar, in seeking to overrule a decision of the House of Lords in the case of Chapman v. Chapman, which was decided three years ago, in 1954. As a practising member of the Bar, I am in an equally difficult position in trying to find my way through the labyrinthine realms of the Chancery Division. However, it may be of some comfort to the House to know that, normally, this is not my particular field of business and what I have to say will in all probability be in English and, I hope, understandable.

The reason for the Bill is that, before the case of Chapman v. Chapman, it was thought that people who were beneficiaries—I might even describe them expressly as "victims"—of a trust could go to a court and ask the court to vary the terms of the trust in the interest of all the beneficiaries. It happened that certain trusts were worded in such a way that the beneficiaries were often, as needs must be, under age or unborn. It was thought that, provided the courts took the view that the variation proposed was in the interests of the children, those who were not sui juris and under age and those who were unborn, that could be done. It was done, until the House of Lords reached a definite decision in the case which I have mentioned.

The result of that now is that the court, which is generally looked upon as the friend and guardian of children in such matters, becomes, in a sense, the enemy of the children. We have a situation at the moment which is both unfair and inequitable. Take a case where a large sum of money may well be involved; provided the situation is such that all the beneficiaries are sui juris, grown up, as it were, they can go to the court today and vary the trust in accordance with the conditions which prevail at the moment. If it happens that there are children connected thereby, no matter how satisfied the courts may be that the variation is both necessary and wholly in their interests, it has no power whatsoever to intervene.

We are put in the position that the children are being throttled by the straps which bind them to the infant's chair. It is hardly necessary for me to remind the House that, with penal taxation and penal death duties, conditions are very different today from what they were when many of these trusts were being written out with quill pens in the dusty offices of Victorian solicitors about forty or sixty years ago.

Here I might pause for a moment and remember that the person who is the maker of a trust has, of course, a perfect right to be considered. Those who made a trust towards the end of the last century could not have had any idea of the enormous rate of death duties which prevails today and the very heavy incidence of Surtax which is imposed upon anybody enjoying a large income. If they had been able to foresee such conditions, of course, those trusts and deeds would have been very differently drafted. Anyone making a trust today, naturally—knowing the situation, seeing the possibility only of inflation in the future, dependent on which Government is in office, perhaps—can include such clauses as will give the trustees room to move on behalf of the beneficiaries.

Lest anyone should feel that in interfering with a trust one is interfering with a will, I should like to put it forward this way. It may be said with certainty that anybody who makes a trust for his dependants or children does so wholeheartedly for their benefits. They would be the first people in the world, if they were able and alive, to come forward and say, "That, of course, is the very last thing I intended should happen in connection with this particular sum of money."

I might remind the House that the sort of things which require altering today are investment clauses. Many old-fashioned trusts contain very restricted investment clauses, dealing perhaps only in gilt-edged market and Government securities, whereas today, if the best possible advice is taken, it might well be advisable—not only from the point of view of the capital appreciation and stability on that side of the trust, but also from the point of view of income—that an investment of a large sum or even of a small sum should be rather more widely and shrewdly spread. But, as I say, where there are unborn children and infants the trust must remain rigid and the court has no power whatsoever to intervene.

There are other matters in connection with capital. Many trusts drafted years ago have no clause in them which would allow a young married couple to buy a house or which would, in extreme circumstances, allow the trust to advance small capital sums for education, illness or emergencies of that sort. Those are the sort of conditions which the maker or settlor of the trust, if he could have thought or known of them, would possibly have liked to have provided, but one knows very well the handicaps which any layman making a trust has to face.

He goes into a solicitor's office—as we know, some solicitors are better than others—and says to the solicitor, "Here is a lump sum. I want my children to have the income for life. Will you draw up a trust as you think fit?" The trust is then drawn and he reads it. It is in the sort of language he finds difficult to understand, and which I, as a common lawyer, also find difficult, but he signs it.

That is the end of the matter until, thirty or forty years after, someone says that it is fantastic that money should be invested in this way, or, when money is required for a purpose for the benefit of everyone concerned, the dusty deed is produced. Then it is discovered that the courts have no power to intervene and the terms of the trust were not drawn sufficiently widely.

There is one other matter which is worthy of reference. A court has still a power of intervention on this basis. Anybody who is the victim or beneficiary of a trust which is badly drawn is in a very much more fortunate situation, on occasion, than a person dealing with a trust which is properly drawn. By that I mean that if there are two constructions which the court can place upon the terms of the trust concerned it is still open to the court to choose the best construction open to them, whether infants are concerned or not. That, of course, deals only with a very limited range of persons.

Other people who are fortunate so far as trusts are concerned are lunatics and those whose parents are divorced, because there again the court has certain powers. In the case of a lunatic the court of protection can intervene and vary the terms of the trust. If a husband and wife are divorced the Divorce Court has power, even today after the case of Chapman v. Chapman, to vary a marriage settlement, to avoid tax, or death duties. The child of a happy marriage, through no fault of his own, is the one who is severely prejudiced. To vary a trust, why should one have to be a lunatic or a child of divorced parents?

There is another anomaly. In the case of Chapman v. Chapman the Lords were not concerned with Section 64 of the Settled Land Act, 1925. I need not trouble the House with the details of that at this stage, but why should an infant whose interest is in land be better off than an infant whose interests are in goods, personalty or chattels? I should perhaps add that Chapman v. Chapman did decide that the court had a jurisdiction where there is a compromise of rights which are genuinely in dispute or, as I have said, a trust concerning land.

To sum up, the position where children or unborn children are concerned is, briefly, this. The court has no power, with the best will in the world and however it may wish to do so, to intervene. However glaring a necessity there may be, it has no power except in cases which concern the Settled Land Act, 1925, in cases where there is a genuine dispute as was decided in Chapman v. Chapman, in cases where there are lunatics, and in cases where there are divorced persons.

Clause 1 of this Bill enables the court, under these new provisions, to assent to any variation or revocation of trusts or to any alteration of the administrative power of the trustees which the court considers would be for the benefit of any beneficiary, who is incapable of assenting by reason of infancy or any other incapacity …. any person who may be entitled to an interest if he fulfils a specified require- ment by a future date, but not a person in whose case the requirement would be fulfilled if the determining event had happened at the date of the application to the court, and, thirdly, any unborn beneficiary.

I wonder whether I might give the House an example. This is only a theoretical case. Suppose, for instance, the case is of property settled by will on a testator's daughter for life with the remainder for her husband for life, if he survives her, with the remainder to stay with her children and remoter issue in such shares as she may by will appoint, with the ultimate remainder, in default of appointment, to the persons who would have been her next of kin if she had died unmarried. At the time of the application to the court the testator and his wife are dead and his daughter is still unmarried and her brother grown up, namely, 21 years of age.

The persons interested in the trust are, accordingly, the daughter, her future husband if any, her issue if any, her brother if he survives her and any remoter relative who may survive her if her brother does not. I apologise for wearying the House with such a complicated and tangled example, but this is just the sort of situation which faces the courts every day and it is the sort of situation where they should intervene for the benefit of all concerned; but, owing to the House of Lords decision, they have not the power to intervene.

Under Clause 1 (1, b) the court will be able to assent to a variation on behalf of the girl's possible future husband and issue and on behalf of all persons who would have been regarded as her next-of-kin on her death, on the assumption that she dies unmarried, except, of course, her brother, who, being of age, must assent on his own behalf.

Before I come to what I know will be of great interest to the House—the question of tax avoidance—I must deal with the principles which necessarily concern the Bill, and I should perhaps draw the attention of the House to Clause 1 (2), which deals with the case of property held on what are known as protective trusts. Under an arrangement of that kind the principal beneficiary is entitled to the property provided that he has not alienated or otherwise dealt with his interests in such a way as to cause a forfeiture of it. In other words, a protective trust is a provision against the spendthrift. In that event the trustees are directed to hold the property on trust for the maintenance or support of the principal beneficiary and of a number of other persons specified in the trust instrument, who commonly include many comprehensive classes whom the creator of the trust has no practical intention of benefiting. The provision is made by subsection (2), and subsection (3) defines "protective trusts" as meaning trusts specified in Section 33 of the Trustee Act, 1925, or any trusts to like effect.

The House has the Bill before it, and I have no doubt that those who have far greater learning and knowledge in these matters than I can ever hope to have will speak upon it this morning in greater detail, but I do not think that I need trouble the House any further with the Clauses and details of the Bill. Looked at generally by a layman, this is a short and simple Bill and amounts to nothing more or less than a tidying-up Bill. I can say, as the leading article of The Times said this morning, that it will be accepted by the whole of the legal profession, I imagine without opposition.

Indeed, if one wanted further commendation one has the Report which hon. Members have seen of the Law Reform Committee. That Report deals almost entirely with what is contained in the Bill and the case of Chapman v. Chapman. That Committee was presided over by no less a person than Lord Justice Jenkins, assisted by many other learned people, including Lord Justice Parker and Lord Justice Pearce. That Bill agrees with and recommends almost everything which is contained in the Bill. There are some slight deviations and variations of a very minor nature.

These Reports which one receives are all very well, but the House of Commons is far too robust a place to allow this country to have its laws made and to be governed by judicial committees, however eminent may be the people who preside over them. However right they may be in their conclusions, other considerations apply, not only from a national point of view but also from a political point and moral point of view. I should like now to deal with some of those considerations.

It is only right and fair that in putting forward the Bill I should remind the House of what was said by Lord Morton of Henryton during the case of Chapman v. Chapman. What is said is directly in opposition to what I propose here. He said: If the court had power to approve and did approve schemes such as the present scheme —he was dealing with the case of Chapman v. Chapman— the way would be open for a most undignified game of chess between the Chancery Division and the Legislature. The alteration of one settlement for the purpose of avoiding taxation already imposed might well be followed by scores of successful applications for a similar purpose by beneficiaries under other settlements. The Legislature might then counter this move by imposing fresh taxation upon the settlements as thus altered. The beneficiaries would then troupe back to the Chancery Division and say, 'Please alter the trusts again. You have the power, the adults desire it and it is for the benefit of the infants to avoid this fresh taxation. The Legislature may not move again.' So the game might go on … I do not think that that is likely to happen. I think that the learned Law Lord, on that occasion, was placing too great a stress on something which might happen occasionally here and there and too great an exaggeration on how, with common sense and fairness, these matters are likely to work out. After all, Lord Morton of Henryton should have remembered that already there are vast numbers of trusts which can be altered and are being altered every day. In a sense, the game of chess, as he so eloquently described it, has been going on for many years now. It does not seem to have troubled this House, it does not seem to have troubled the Inland Revenue, and I am quite certain that it has not unduly overworked the Chancery Division.

In dealing with the vexed question of whether it is right that this House should pass any form of legislation which will make it possible and easier for certain groups of people to realise capital sums and perhaps to arrange their affairs in such a way that the incidence of death duty will be smaller, there are many aspects to bear in mind. This is a question which I know that the House will want to consider very carefully.

It is, of course, only right that when considering this question, and this Bill together with it, we should remember that in fairness we should not look at the question too broadly. Whether we like it or not, the situation at the moment is that the great proportion of people in this country who pay their taxes have it open to them to arrange their affairs in a businesslike and sensible way on the basis that they do not pay more in taxation than they have to pay. Of course, any sensible person adjusts his affairs accordingly. Why should that enjoyment and facility not be afforded to one particular group of people, namely, those who are beneficiaries of a trust which was made perhaps thirty or forty years ago, where the court has no power to intervene?

On that issue, it is interesting to consider the events which led up to and the arguments advanced in relation to the Married Women's (Restraint upon Anticipation) Act, 1949. The Bill was introduced by the Socialist Government. It was intended, and does, in fact, enable, those married women who were formerly subject to restraint to deal with their property in such a way as, among other things, to avoid the incidence of tax. In my submission, that Bill and the arguments put forward by its sponsors provide a very close parallel indeed with this one.

The Bill was conceived in the early days of 1949. The House will remember a Private Bill which was called the Mountbatten Bill. The situation there was that Lady Mountbatten who, during the course of the debate on the Bill, was described as a very wealthy heiress whose property was subject to restraint, sought leave to introduce a Bill to remove the restraint on the grounds that high taxation had made it impossible for her to fulfil her public commitments from current income without embarrassment.

The Bill was opposed by a number of hon. Members on this side, and I understand that one of the main reasons for the opposition was that it was not right that such a Bill should be brought forward for one private person who happened to have the resources at her disposal to afford it. It was, therefore, I think I am right in saying—and hon. Members who were in the House then, and let me say at once that I was not, will remember—suggested that if such measures were to be taken in respect of Lady Mountbatten it should be by means of a Government Bill which should apply to everybody—

Sir Lynn Ungoed-Thomas (Leicester North-East)

Will the hon. Member explain a rather interesting aspect of the matter which has puzzled us a little on this side; why those same Members did not take exactly the same attitude to the Duke of Norfolk's Bill?

Mr. Crowder

Of course, I was not one of those who took any particular attitude to that Bill and, as the hon. and learned Gentleman will appreciate, it is sometimes very difficult to look into the minds of one's hon. Friends in these matters—

Sir L. Ungoed-Thomas

That is what the hon. Member is doing now.

Mr. Crowder

I am attempting to, but, as I say, I was not one of those who opposed or particularly favoured the Duke of Norfolk's Bill. However, if I may say so, that is straying somewhat from the point I was making.

I hope that the hon. and learned Gentleman will accept it from me that had I been in the House then I would have been the last person in the world to oppose the Mountbatten Bill. At the same time, he would agree that it was perhaps a good thing that it was opposed, and opposed on the basis that it was wrong that a rich, private person should, as it were, have the facilities of the House of Commons, because of her wealth, to bring forward a Private Bill, whereas such an opportunity would not be open to those with smaller resources.

Sir Hugh Lucas-Tooth (Hendon, South)

If my hon. Friend will permit me, I think the difficulty that the House feels is that the Mountbatten Bill did not, in fact, come to this House. It was introduced in another place and was thrown out there, and he is really saying what were the thoughts of hon. Members expressed publicly.

Sir L. Ungoed-Thomas

No, what was the Conservative view.

Mr. Crowder

I am much obliged. It is very interesting but it happened long ago now and is only of academic interest. Its only importance, and that is why I mention it—as beginning at the beginning—is that it started the Married Women's (Restraint upon Anticipation) Bill, which was introduced in another place by no less a person than the late Lord Jowitt. That Bill became law, under the Socialist Government, and it is interesting to see what the learned Lord Chancellor, as he then was, had to say in respect of those principles which I know will be troubling the House. He said: The ordinary married woman … can … raise a little ready money either by … selling part of her future income or if her children are of full age, by agreeing with them that some of the trust funds should be sold and divided between them in equitable proportions. The married woman in a pre-1936 settlement can do no such thing—that is to say, as long as she is married … The effect of this Bill on the Exchequer is purely incidental. If a man or woman not subject to restraint spends … half his or her property there is, of course, less property to be taxed. The Commissioners of Inland Revenue cannot and do not complain of this— I would like the Commissioners to take the same attitude, of course, in relation to my Bill. Having said that the Commissioners could not and did not complain, the learned Lord Chancellor then produced the following masterpiece of understatement: they continue on their way, taxing what they find and not taxing what is not there … To single out one particular class of married women and to restrain them— Here, too, it is one particular class: from doing what they wish with their property for the sole purpose of being able to tax it, would be most unfair. That is not part of the policy of His Majesty's Government, nor indeed, would such a policy even if it were just, be effective because even if the property of married women were artificially kept intact until the end of the marriage, it by no means follows that it would remain intact between the end of the marriage and the time when the Estate Duty came to be assessed."—[OFFICIAL REPORT, House of Lords, 5th July, 1949; vol. 163, c. 898–900.] It would not be right to leave this matter without referring the House to what the right hon. and learned Member for St. Helens (Sir H. Shawcross) had to say. I think that I am right in saying that he was then the Attorney-General of the day. He said: I am quite prepared to concede that in particular cases it might involve some loss to the Revenue— as, indeed, this Bill would: The Board of Inland Revenue and … the Chancellor do not consider that that is a ground on which any objection can properly be made to this Bill. I think that that, clearly, was the attitude of the Revenue in relation to that Measure, and this Bill, in my submission, involves very much the same or even less incidence, and one hopes that the Commissioners' attitude will not have changed.

The then Attorney-General went on: Indeed, it would be a very hard principle of taxation if people were to be compelled to keep property in order that they should be liable to pay tax on it …. If anyone wants to say that dispositions of capital should be made illegal because they involve a loss to the Revenue, we shall give careful consideration to that view, but let us do it generally and not in relation, to this limited class."—[OFFICIAL REPORT, 7th November, 1949; Vol. 469, c. 910.] It is such a class with which we are dealing in this Bill.

It will be seen from that that it was precisely on the grounds of fairness between all taxpayers that the Bill was supported. In other words, if it is right, fair and permissible for some to take steps to save tax then, of course, it ought to be permissible for all. One is almost reminded of a slogan used at the last Election, "Fair shares for all". It is for that reason, the Bill being based on that principle, that I have the support of certain hon. Members opposite who have been kind enough to add their names to it. In my view, those arguments which I have put forward should apply with equal force to lunatics, infants and other ascertained beneficiaries subject only to this, that such person must always have the protection and the assistance of the court.

It is only right to carry the argument a stage further and contend that the prevention of the sort of tax avoidance which my suggested change in the law would make possible ought no longer to be itself an objection on grounds of moral principle at all, because it seems to me that there is now little or no moral stigma attached to the process of tax avoidance. There is a good deal of difference between tax avoidance and tax evasion.

Reasons were very well stated in the Report of the Royal Commission on the Taxation of Profits and Income. Tax avoidance, from which must be distinguished tax evasion, is there defined as some act by which a person so arranges his affairs that he is liable to pay less tax than he would have paid but for the arrangement. The Report continues: Thus the situation which he brings about is one in which he is legally in the right except so far as some special rule may be introduced that puts him in the wrong. The Royal Commission goes on to say that there neither is nor ought to be a principle that a man owes a duty not to alter the disposition of his affairs so as to reduce his existing liability to tax. The Commission then gives two reasons, the first of which is that such a principle could never be maintained. A great deal of what is loosely called tax avoidance must, of course, consist of taking advantage of provisions which are expressly included in the Income Tax Acts for that purpose—for instance, entering into seven-year covenants, or investing in tax-free securities and so forth.

I should add that I believe it is well established—no doubt, I shall be corrected if I am wrong—that it is no part of the court's function to protect the Revenue in those cases where it has jurisdiction over the property of individuals.

I must apologise for having wearied the House with a long, dull speech because, as I said when I began, this is a dull Bill. But this is something which obviously needs doing. It is a tidying-up Measure and it is a fair, just and equitable Measure. With those principles in view, and having discussed the taxation and the moral side of the case, I hope, not unfairly one way or the other, I commend this Bill to the House and ask that it be given a Second Reading.

11.44 a.m.

Major W. Hicks Beach (Cheltenham)

I beg to second the Motion.

I am sure that it will be the wish of the House that I should congratulate my hon. Friend the Member for Ruislip-Northwood (Mr. F. P. Crowder) on the clear way in which he has explained his Bill. It is, of course, a complicated matter, but he has put it so clearly that I, who, I should disclose, am a solicitor dealing with a great number of trusts which will be affected by this Bill, wish that I could explain on other occasions such complicated matters in such a clear way.

In general, I support this Bill, but I have in mind one or two questions on its drafting and which I think it might be helpful if I mention at this stage. I suggest that several Amendments would be advisable at a later stage. When I first read the Bill I thought that, in general, it had achieved its object, but I was rather puzzled by Clause 1 (1, b). My hon. Friend has given us an explanation and, if I may say so, a rather complicated example, from which I understand that this subsection is intended to deal simply and solely with any unascertained class of person or persons. It seems to me that this is a very complicated way of doing that.

There is a provision which I suggest is used constantly in drafting documents and which is much shorter than subsection 1 (1, b) in the Bill as well as being very much clearer. This is an expression which is constantly used and I suggest that to substitute for subsection (1, b) the following: Any unascertained or unascertainable persons or classes or persons would cover in simple language the exact point which my hon. Friend is trying to cover. That phrase is certainly understood by the courts and by ordinary conveyancing practitioners.

At the top of page 2 of the Bill one finds the expression "to any arrangement." I have never liked the expression "any arrangement," in legislation, because no one knows what it means. It almost invariably leads to litigation, and I would strongly suggest that my hon. Friend should insert some qualifying words after "any arrangement." I would suggest words which, again, are commonly used in conveyancing practice. The phrase "notwithstanding that it includes" would, in my judgment, improve the subsection and, at any rate, would put some limiting feature on those words.

The other provision which I have never liked in legislation is to be found in subsection (6): Nothing in this section shall be taken to limit the powers conferred by section sixty-four of the Settled Land Act, 1925, section fifty-seven of the Trustee Act, 1925 or Section one hundred and seventy-one of the Law of Property Act, 1925. It seems to me that if, in legislation, one seeks to explain that one is not limiting powers under any particular Section or Sections, it is apt to mean that one is apparently seeking to limit powers under Sections not mentioned. I would, therefore, suggest to my hon. Friend, with respect, that that limitation is quite unnecessary. I do not think that there is anything in the Bill which could possibly be read as limiting what has been referred to, and I therefore suggest that this provision should be left out altogether.

If my hon. Friend and his advisers feel that that subsection should be included, I suggest that there is another provision, namely, Section 53 of the Trustee Act, 1925, to which reference should be made. I think that it must have been omitted in error. It is one of the Sections under which applications of this sort are commonly made to the courts to approve agreements, and undoubtedly that should be included if this subsection is going to be retained. In fact, if it will be any assistance to my hon. Friend I can give two examples which have occurred quite recently in practice where that Section has been invoked. I take it that it is just a slip in the drafting of the Bill. As I have indicated, it seems to me that it would be very much better without that subsection.

We have all had the advantage this morning of reading the very strongly worded leading article in The Times on the subject of the Bill. I do not quarrel for one moment with anything The Times says, except that I think that some answer should be given in so far as the suggestion is made at the conclusion of the article that applications under the new Bill, if it becomes law, as we hope it will, should always be made in open court.

As I understand the position, the judges have a discretion in this matter, but it has been the long-established custom in the Chancery Division and, to a great extent, in other Divisions of the High Court, that any applications or dealings concerning the interests of infants should not be made in public. I think that it would be a very dangerous precedent simply to over-rule that practice, as The Times seems to suggest. On the other hand, the suggestion that the judges should exercise their discretion to have cases of importance heard in open court is a good one, and I should have thought that that was a matter which could well be followed up.

I should not like it to be accepted that there should be a change of the present rule so that all applications concerning wards of court or the property of infants should necessarily be heard in open court. In fact, I go so far as to say that, as a general rule, it would be most undesirable. None the less, the discretion of the judges in certain individual cases of importance might well be exercised more freely. I think that what I have said covers the point made by The Times, although it is not put in quite that way.

With all possible respect, I have ventured to advance, in the most helpful manner, certain amendments which I think would improve the Bill. I will conclude by repeating that my hon. Friend the Member for Ruislip—Northwood is undoubtedly to be congratulated upon bringing the Bill before the House, and I hope that hon. Members will see fit to give it a Second Reading.

11.53 a.m.

Mr. Eric Fletcher (Islington, East)

I should like to join the hon. and gallant Member for Cheltenham (Major Hicks Beach) in expressing congratulations to the hon. Member for Ruislip—Northwood (Mr. F. P. Crowder) upon the admirably clear and lucid way in which he explained the principles underlying the Bill and the grounds and purposes for which it is introduced this morning. You will have observed, Mr. Speaker, that I am one of the backers of the Bill. In case one's attitude should in any way be misunderstood, I welcome the opportunity of giving the reason that I support the Bill in principle. In common with the hon. and gallant Member for Cheltenham, I have some reservations about matters of detail, though not the same as those which appeal to him. They are all matters with which, I think, we can deal satisfactorily in Committee.

The Bill is commended to the House on the ground that it will remove injustice and remove an anomaly in our present system of law. It will give the courts unlimited jurisdiction, enabling them in future to vary settlements even though infant beneficiaries and, perhaps, unborn beneficiaries are involved. In other words, it will give the courts a power to vary settlements similar to that which they now enjoy when all the beneficiaries are of full age.

As the hon. Member for Ruislip-Northwood has said, the argument is even stronger because, today, the courts have power to vary a settlement if one of the beneficiaries is a lunatic, and they have power also to vary a settlement, even though there are infant beneficiaries, when the settlement comes up for consideration as a result of divorce. The question is, therefore, very clearly put: why should an infant whose parents are happily married be in a worse position than a lunatic or an infant whose parents are divorced? I can see no answer to that. Again, it is said, why should an infant who is interested in land be better off than one who is interested in personality? I can see no answer to that.

The hon. Member for Ruislip-Northwood, very sensibly, I thought, dealt in advance with possible objections to the Bill which might have been urged from this side of the House on the ground that, looking at it broadly, the Bill could do something to encourage or increase tax avoidance. It was on that ground that Lord Morton of Henryton, in the case of Chapman v. Chapman expressed some doubts in giving his opinion. I need hardly say that if I thought that the Bill were primarily or, indeed, at all calculated to enable people improperly to benefit from tax avoidance, I should riot support it. Hesitations on this score are adequately dealt with, I think, by the observations of the Law Reform Committee in paragraph 15 of its Sixth Report, where it is said: The fact that some adults enter into 'tax avoidance' schemes of questionable character is no ground for refusing the Court jurisdiction to sanction on behalf of infants dispositions of their property which are beneficial to them and are morally unobjectionable. That is a partial answer to the risk which is, I think, inherent in the Bill that, without adequate safeguards, there might be sanctioned revisions of settlements which might be regarded as morally objectionable.

The present safeguards are not, think, adequate, and it is here that I part company with the hon. and gallant Member for Cheltenham. I, too, read with great interest the leading article on this subject in The Times today. Whether that leading article had appeared today or not, it was my intention to say something about the desirability of all applications being heard in open court.

I think it is true to say that we have arrived at this position in the Chapman v. Chapman case because of the practice that has grown up in the past of these applications being heard in camera.

Mr. Philip Bell (Bolton, East)

Is not the real trouble that the judgment was not given in open court? Would it not solve all the difficulties if the judgment were given in open court? In that case the details of the child's life, property and relations would not be given. Has the hon. Gentleman considered that possibility?

Mr. Fletcher

I have considered that, as I have considered a great deal of the proceedings that take place in camera. In my view, there are far too many of those cases, and I am opposed to having so many. The tendency of the courts to hear applications and proceedings in camera should not be extended, and I certainly hope that the Bill will not extend it. I should be in favour of giving the full light of publicity to all applications of this kind. I would add a reservation, enabling the judge to have a discretion in special cases—as he does in divorce cases—to ask the Press not to publish details about an infant which might be prejudicial to it.

Reverting to my last point, I would say that it is historically true that one of the causes which produced the decision of the House of Lords in Chapman v. Chapman, in which they denied jurisdiction to the courts to vary applications in regard to settlements, was the very fact that in the past applications of this kind have been made in camera and have not been reported.

The Times takes that view, because it says that although the Law Lords in Chapman v. Chapman came to a decision which seems illogical and harsh, they did so because they found no adequate precedents for the jurisdiction claimed, and there were no precedents because, although the jurisdiction had been exercised, it had been exercised in the secrecy of chambers.

The public is interested in questions of tax avoidance whether the case concerns Lord Mountbatten, the Duke of Norfolk or an ordinary member of the public. The public is interested in judging for itself whether a certain scheme of tax avoidance is morally justifiable. Views may differ; this question of tax avoidance is not a subject upon which it is possible to be dogmatic, and the legislature often has to intervene to prevent abuses.

The hon. Member for Ruislip-Northwood referred to certain schemes of tax avoidance like seven-year covenants and the purchase of interest-free securities, which in general are not questioned, but he will be the first to admit that there are a great many other schemes where it is possible that moral judgments would differ, and there are some cases which are so glaringly objectionable that the legislature, with the consent of both sides, and under both Tory and Labour Chancellors of the Exchequer, intervenes to stop them, although they have been legal in the past. The only public safeguard is for these matters to be fully and freely ventilated in public, and it would be to the public advantage if any applications which are made under the Bill had to be made in open court.

As The Times says: Why should the proceedings not be afforded the publicity necessary to enable those persons to come forward and assert their rights? Why should not every taxpayer be able to see for himself whether or not any loss to the revenue by reason of the exercise of this jurisdiction is outweighed by considerations of justice and fair play? Law in secret is a negation of law. I support that sentence. The Times suggests that the matter is one which can be dealt with by an alteration of the rules of court. There I disagree. I should prefer not to leave it in that way. I hope that when the hon. Member for Ruislip-Northwood, has had an opportunity of considering the matter, will come to the conclusion that in the interests of justice, not only for the parties but for the public, it is right to take the view that these applications should be made in open court.

I hope that he will also agree that it would not be satisfactory to ask the House merely to agree to an alteration of the rules of court; that it would be far more satisfactory to write into the Bill itself the necessary amendment, and that proceedings under it should be in open court unless there is some special reason which can be defined, and where the judge thinks that there is an overwhelming argument for the case to be heard in camera.

In that way we shall get the benefit of all worlds. The Bill will then remove an injustice to a certain class of the community which, although not seriously penalised, do suffer at present; it will simplify matters for those who practise in this branch of the law, like the hon. and gallant Member for Cheltenham (Major Hicks Beach), and it will serve the public purpose by enabling it to see and understand what is going on.

12.7 p.m.

Sir Patrick Spens (Kensington, South)

As far and away the oldest Chancery practitioner in this House, I congratulate my hon. Friends the Members for Ruislip—Northwood (Mr. F. P. Crowder) and Cheltenham (Major Hicks Beach) upon the introduction of the Bill, and the hon. Member for Ruislip—Northwood, in particular, for the brilliant way in which he, as a criminal lawyer, has gone through the intricacies of the Chancery Division. I have not the slightest doubt that as a result he will now have to divide his practice between the Old Bailey and the Chancery Division, as other people have done before.

Turning to the substance of the Bill—not for one moment would I suggest that the decision in Chapman v. Chapman was wrong. I think that it was clearly right. All the same, it is interesting to know that in the past—and I now go back to 1911 and the first variation of trust that I got through before Mr. Justice Joyce—there was not the slightest doubt that every judge in the Chancery Division believed that where infants and people suffering from an incapacity were concerned there was an inherent jurisdiction to do what the judges thought best for those persons.

I remember another much more complicated case than that to which the hon. Member referred. It came along just before August, 1914. I remember being the most junior junior in a large batch of counsel before Mr. Justice Younger—afterwards Lord Blanesburgh—and the last thing he did on the Friday preceding 4th August was to find that I was the junior and to give me the task of drawing up a very complicated order. Who eventually drew up that order or whether it was drawn up, I have no idea. I certainly did not. I had gone to my Territorial battalion. But there is not the slightest doubt that infants of many different families and unascertained persons were concerned. The whole order rested on the judge having an inherent jurisdiction to give full benefit to those classes. That has gone on right down the years until the case of Chapman v. Chapman. The result of Chapman v. Chapman is, as the hon. Member for Islington, East (Mr. E. Fletcher) said, that it leaves one small group of persons, infants and people under certain incapacities, unable to benefit from arrangements which are beneficial to every other member of the community. Therefore, there cannot be the slightest doubt that this is a highly desirable Bill in every way and the very best instance of Private Members legislation introduced in this House. I want to congratulate my hon. Friend the Member for Ruislip—Northwood once again in having introduced the Bill

Now I want to deal with the question of tax avoidance. It has been mentioned so much in the speeches we have heard. When I started as a junior at the Bar, tax avoidance was not a matter of anything like the incidence it is today. The applications in which we were concerned were not to avoid duty but to preserve property. Time after time property was tied up by trusts and could not be dealt with in a way beneficial to those interested. That was particularly the case with, for instance, large blocks of shares in private companies. Perhaps the private company was going wrong and something had to be done. It was only by a scheme of arrangement altering the trusts and authorising, perhaps, shares to be sold or money to be raised on them that the property could be preserved and increased. Those were not schemes to do down the revenue. On the contrary, they were schemes by which in the end the revenue gained because property was preserved. I understand that since I left the Bar there are now perhaps more schemes which are actuated by the incidence of high taxation.

The proper answer has been given, I think, by some of my hon. Friends, and I do not propose to repeat it. I hold that generally we cannot run the life of the nation by forbidding things that are beneficial to members of the community merely because the revenue may lose something out of the transaction. If the arrangements are beneficial and help the citizens of the country, then we cannot stop them merely because risk to the revenue is involved. I do not believe that these schemes are generally instituted for revenue tax avoidance purposes at all. They are brought in for the benefit of the families, and that is a thing we all desire. I still believe that money is better in the pockets of the citizens than in the Revenue. The more we can keep it there, the better it is for the country.

Now I come to the more difficult question which has been raised and pressed by the hon. Member for Islington, East. It has always been the practice ever since I came to the Bar in 1910 that all applications affecting infants in the Chancery Division should start in Chambers. The practice has been handed down almost from the very beginning of the Chancery jurisdiction. It has never prevented the proceedings, if a matter of great importance is concerned, being adjourned to court for argument and for a decision to be given in open court. I am bound to say that I should resist most strongly the introduction of a Clause to make it compulsory for such applications to be heard in open court. The right thing is to leave it to the discretion of the judges concerned and let them deal with it in a way most beneficial, not only to the individuals concerned, but in a way which is in the public interest. I think that would be right.

Going back to the early type of application when we used to ask for a variation of trusts to try to get out of some trouble over a property, it would be very awkward in open court to read out affidavits alleging that a private company was in grave financial difficulties and going down hill and that some special measures should be taken to preserve it. That will not help the credit of the company. It will undo any possible benefits that might come from the variation of the trusts even before the application is finally decided. There must be many cases where the right course is to hear the application, at any rate in the first instance, in Chambers. I am talking now only of the Chancery Division. Chancery Masters are very experienced people and they know quite well what sort of application should be heard in Chambers and what sort of application should be heard in open court.

I hope that nothing will be put into the Bill making it compulsory to have these applications in open court, although I am certain, having regard to what was said in the speeches in Chapman v. Chapman in another place, that the Chancery judges would obviously give great consideration to the criticism that the difficulties the judges were in in Chapman v. Chapman arose from the fact that the decisions had not been given in open court. I would leave it to the Chancery judges to make up their minds in what way they would deal with the matter.

I would like to end by saying that I hope this Bill will find its way as quickly as possible on to the Statute Book, because I think at present people are handicapped by judges not having this power. The sooner it is given to judges the better.

12.18 p.m.

Sir Lynn Ungoed-Thomas (Leicester, North-East)

I am sure that everybody has been impressed by the tale of anomalies which now exist in this branch of the law. The Sixth Report of the Law Reform Committee brings it out very clearly, as did the admirable speech of the hon. Member who introduced the Bill. I do not propose to go over that ground again.

What the Report also brings out very clearly—and it faces it very squarely in a way which I regret the hon. and learned Member for Kensington, South (Sir P. Spans) did not—is that this Bill is a tax avoidance Bill. I am not impressed by what the right hon. and learned Gentleman said about the tax avoidance provisions being incidental to other arrangements about property. I know quite well that in origin, of course, that is so and that is how the jurisdiction developed.

But one of the advantages and one of the virtues of this Committee's Report is that it fairly and squarely faces the point that its proposals are, in fact, tax avoidance proposals. The hon. Member for Ruislip—Northwood (Mr. P. Crowder), who moved the Bill, also faced that. What we have as a House to decide is whether or not we are in favour of a tax avoidance Bill on the lines recommended by the Report of the Law Reform Committee.

I stand unreservedly, if I may say so with respect, by the statement made by the late Lord Jowitt, and quoted by the hon. Gentleman the Member for Ruislip—Northwood, when Lord Jowitt, dealing with what became the Married Women (Restraint upon Anticipation) Act, which was an Act to remove the disability of restraint upon anticipation affecting married women in dealing with their property, said: To single out one particular class of married women and to restrain them from doing what they wish with their property for the sole purpose of being able to tax it, would be most unfair."—[OFFICIAL REPORT, House of Lords, 5th July, 1949, c. 900.] That opinion would commend itself to every fair-minded person, whatever his party.

The Bill with which Lord Jowitt was dealing, however, was a Bill of general legislation to remove the restraint upon women generally throughout the country and not in itself involving any application to the court. Let us be perfectly clear about it, that the provisions of this Bill go a good deal further than the principle which was enunciated by Lord Jowitt upon the Bill which he was commending at that time.

The practice of the courts, however, has already gone farther. The practice is stated by the Law Reform Committee in paragraph 14 of its Report: … if a husband and wife are divorced, the Divorce Court can sanction variations in their marriage settlement which are designed to prevent the trust fund being diminished by taxes or death duties. There we have in individual cases in the Divorce Court the court exercising a jurisdiction for the purpose of avoiding taxation.

The principle has been before the House for consideration upon the Duke of Norfolk's Bill. In that Bill the proposal was to remove, in one individual case, a disability. That is, in effect, what it amounted to. It was not proposed to remove that kind of disability in all cases by general legislation such as followed in the Mountbatten case. I myself consider that it would be far better for this House to legislate generally than to legislate for an individual case, but the House did decide, in the Duke of Norfolk's case, that for the purpose of avoiding taxation and Estate Duty that Bill should be passed, to put him in the same position as other people who are not subject to the disability to which he, like some others, was subjected by Acts of Parliament.

Therefore, we have not only the practice of the court but we have in principle the decision of this House, that it is at any rate legitimate to put people under a disability in the same position as people who are not under a disability even though it is for the express purpose of so arranging the affairs that they avoid the incidence of taxation and of duties.

Under this Bill, the arrangement would be that in each individual case where there is a disability an application would be made to the court and the court would then exercise its discretion as to whether or not it would be fair and just as between all the parties interested in the property, and whether it would be beneficial for the trust as a whole and for all those interested in the property as a whole, to have the scheme passed to avoid the incidence of Estate Duty or taxation as the case may be. Of course, there may be disputes between parties and any arrangement may be unfair between the parties, but we are not at the moment concerned with that.

What we are concerned with is that it should be right for the court to decide that, if a scheme were for the benefit of the property as a whole, the scheme should be sanctioned by the court on behalf of the infants, who are, of course, under disability and cannot act for themselves.

Isolating, for the moment, the taxation element in an application made to the court in this way, it is inconceivable, of course, that a court should say, "No, it is not for the advantage of the trust as a whole that the application should go through." Because, of course, it is: it must be in every single case. All that the court, in effect, would be concerned with would not be the avoidance provisions—I am dealing now, of course, with legitimate avoidance, not improper evasion or anything of that sort which a court would never sanction—because it would sanction the avoidance provisions in any case and all that the court, in effect, would be concerned with would be the fairness of the arrangement, whatever it was, as between the parties interested in the trust.

I am coming now to Lord Morton's point, which I do not think was adequately dealt with either by the hon. Gentleman the Member for Ruislip—Northwood, if I may say so with respect, or, if I may say so with equally great respect, by the Law Reform Committee itself. If it is to be proper and right that an application should be made to the court for the purpose of avoiding the incidence of Income Tax or Estate Duty—and it would be proper if this Bill were passed—then, if there is a change in the law, it will be equally proper for the applicants to go back to the court and say, "We want to alter the arrangements." Of course it would.

I cannot help agreeing with Lord Morton's criticism of the danger of this developing into a game of chess. Let us face it squarely. If it is right to make an application to avoid taxation—and it would be granted, obviously, because it would be beneficial to the trust as a whole—it would equally be legitimate upon a change in the law to make another application to avoid the incidence of taxation which is produced by the change in the law. Of course, the thing would go on. Lord Morton faces that squarely and brings it out clearly. What the Law Reform Committee says about that is: We doubt whether these fears are justified. The Committee does not, however, develop any kind of reasoning to sustain that statement of its doubt.

It is true it goes on, as my hon. Friend the Member for Islington, East (Mr. E. Fletcher) pointed out, at another part of paragraph 15 of its Report, to deal with improper evasion. I do not want to convey any wrong impression about this and so I hope the House will bear with me while I quote the passage: Nor is it likely that any Judge of the Chancery Division would give his sanction on behalf of infants or potential beneficiaries under a settlement to any scheme of a kind which, as a citizen and a taxpayer, he would not think it right to enter into with regard to his own property. Of course, I fully agree with that. The paragraph continues: The fact that some adults enter into 'tax avoidance' schemes of questionable character is no ground for refusing the Court jurisdiction to sanction on behalf of infants dispositions of their property which are beneficial to them and are morally unobjectionable. That was the passage that my hon. Friend had in mind. I agree with that and fully accept it, but that does not in the least touch Lord Morton's objection, which is not directed to the improper evasions, because, of course, no court would sanction an improper evasion; it is directed to a case where the Legislature lays down that it is proper to make application to the court and proper for the court to grant the application if it is beneficial to the trust; and benefit to the trust is the sole test.

Of course, in all these cases, even if there is a change in the law altering the incidence of taxation, it would be quite legitimate to go to court, and, of course, the court has not only the right to sanction but the duty to sanction a proper application. Therefore, we are landed in the position contemplated by Lord Morton in his speech.

We must not just pooh-pooh Lord Morton's objection, but face it quite squarely and say whether, in spite of his substantial objection, we are or are not in favour of the principle in the Bill. That brings me to the observations of my hon. Friend the hon. Member for Islington, East and the right hon. and learned Member for Kensington South about publicity. Quite clearly, if there were publicity in all these applications and the applications were to be made in open court in each case, and we had Lord Morton's cat and mouse game played in open court, the country could see exactly what was going on. The Legislature and the country as a whole would be able to follow the development of applications under the Bill and much of the objection which Lord Morton has to the Bill would possibly lose its substance.

Sir H. Lucas-Tooth

The hon. and learned Member is suggesting that in these cases of what one might call "leapfrogging", publicity should be given where there are infants or other people under disability. What does he say about a case where there are no infants? Does he suggest publicity in those cases, or does he want to put infants in a worse position than other people?

Sir L. Ungoed-Thomas

No. Where no infants are involved in a trust, where the parties are sui juris, they can dispose of property in exactly the same way as any person who owns the property absolutely. We are concerned with the principle how far the courts should intervene to sanction schemes of this kind. I am not objecting to the principle of the courts intervening. I not only do not object to it, but I think it ought to be done, for the reasons that I have mentioned. If there were publicity—and I shall come to whether there should be or not in a moment—by these cases being heard in open court, the substance in Lord Morton's objections could be dealt with, if they arose.

On the whole, as everybody must be, and particularly lawyers, I am in favour of having matters heard in open court as far as possible. The more we practise in the law the more anxious we are that matters should be heard publicly and not secretly at all. But, of course, there are limits in certain matters. I am personally strongly opposed to unrestrained hearing in open courts of preliminary investigations before magistrates, particularly in cases like murder. I do not consider that as in the least detracting from the principle, which I hold strongly, in favour of cases being heard in open court. The right hon. and learned Member for Kensington, South knows as well as I do how very undesirable it would be in a vast number of ward-of-court oases to have these people's private affairs, the difficulties of their families and sometimes heartrending and atrocious conditions exposed in open court, to the embarrassment of the children. Difficulties of that kind can conceivably arise in applications to the court under this Bill but, on the other hand, I am not impressed by what the right hon. and learned Member for Kensington, South said about commercial companies being embarrassed by having cases heard in open court.

All parties involved in litigation, or course, would almost invariably prefer to have their matters dealt with in secret rather than in open court, but that is not the only test. It is important that litigation as a whole should be heard openly. In these cases it is not only the parties that are concerned. The country is concerned. Human considerations which affect infants might arise and make it desirable to hear a case in camera, but unless considerations of that kind arise I do not see why these cases should not be heard in open court.

The difficulty at the moment is that the general practice in the courts is to hear all these oases in chambers, in other words in camera. As hon. and learned Members know perfectly well, they are heard openly only if there are some special reasons, such as a difficult point of law which has to be decided and the case should be reported on a point of law. I am rather attracted by the suggestion that there could be a solution on the lines of hearing the judge's decision in open court, instead of having the evidence and all the rest of it in open court; but I certainly feel that the present practice of hearing all these cases in chambers, in the absence of some extraordinary circumstance, might not be a desirable practice.

I should hesitate very much to support an Amendment to a Bill which would simply make a general sweeping provision that all these cases should be heard in open court. It is a matter in which there are many conflicting considerations and which requires investigation. It would be of the greatest advantage to the House if this matter could be considered by such bodies as we have had presided over by Lord Justice Jenkins, and to have their recommendations about it.

It would be desirable to have in an investigation of that kind not only lawyers, but laymen as well, and to give the House and the country the advantage of a considered view after a full investigation, which we cannot possibly conduct here. All that we can do here is to indicate the kind of concern that we have and why we are a little perturbed about the kind of difficulty which has been raised, for instance, in the article in The Times this morning. If the Bill goes through its various stages, I hope that the Government will state at some time whether they would favourably consider setting up a committee to inquire into the matter.

12.40 p.m.

The Solicitor-General (Sir Harry Hylton-Foster)

It might be a convenient moment for me to intervene to indicate what the Government think about the Bill in broad outline. I should like to add my congratulations to the many that have been directed to my hon. Friend the Member for Ruislip—Northwood (Mr. F. P. Crowder). Those who were fortunate in the Ballot have great benefits to bestow and, like all hon. Members, I am very glad that my hon. Friend's benevolence has fallen in the direction of this Bill.

I think the House would like me, because no one else has done it yet, to express the thanks of the House in general to the members of the Law Reform Committee. They are very busy and distinguished people. They do not get paid for what they do and put in brilliant and careful labour which enables fortunate people like my hon. Friend to be able to bring before the House a Bill of this kind. I am sure the House would wish to express their thanks to the Committee.

Sir L. Ungoed-Thomas

That is a most awful oversight. Of course, I associate this side of the House most fully with the observations of the Solicitor-General, and I am sure that we are all extremely grateful, as our remarks have in fact shown during the course of the debate, to the Law Reform Committee for the excellent work that it has done.

The Solicitor-General

I am obliged to the hon. and learned Member. I knew he was feeling like that, and I was in no sense trying to taunt him in respect of any omission.

The hon. Member for Islington, East (Mr. E. Fletcher) and my hon. and gallant Friend the Member for Cheltenham (Major Hicks Beach) have mentioned some matters which, I think they would agree, are Committee points relating to the drafting. So far as the Government are concerned, they would be very glad to give such assistance as they can to my hon. Friend the Member for Ruislip—Northwood in the consideration of those matters. I am not quite sure that I was quick enough to get down the form of words which the hon. Member for Islington, East was suggesting for Clause 1 (1, b). I hope that before he presents us with something of the kind in Committee, he will be able to clear my mind about it, as I understand that my hon. Friend the Member for Ruislip—Northwood is not seeking to say to someone whose identity is known, whose face, form and figure one can see, and also his beautiful tweed suit if need be, that he, if sui juris, should not trouble to come to the court and consent himself.

This provision, as I understand it, is directed to dealing with the person who, not yet ascertained as a beneficiary, simply cannot be found to come and consent himself because his existence is not known. The idea is, I understand, that if all that prevents him from consenting is that the event that would qualify him as a beneficiary has not happened, if he is available to consent he will have to come and do it in person under this Clause as it is now drawn.

To take an illustration such as was given by my hon. Friend, I understand that a brother not entitled to be a beneficiary at this time because lots of events would have to happen before he became one, but who is hale and hearty and capable of appearing and consenting would have to come and consent himself.

I was somewhat alarmed by what the hon. Gentleman the Member for Islington, East appeared to be saying in the course of discussion as to whether the application should be heard in court or in chambers. He appeared to be saying—I am not sure that he meant it fully—that there was more danger of improper tax avoidance occurring or undesirable tax avoidance occurring if these applications were heard in chambers.

Mr. E. Fletcher

No.

The Solicitor-General

If the hon. Gentleman was not saying that, I withdraw. I think it is perfectly clear that he and everyone would agree, as the hon. and learned Member for Leicester, North-East has just said, and the Committee said, that no Chancery judge in existence would consent to any kind of scheme or arrangement which he himself would not think perfectly proper as a lawyer and citizen.

Mr. Fletcher

Perhaps the Solicitor-General will allow me to clarify what I was saying. I entirely agree with what has been said by my hon. and learned Friend the Member for Leicester, North-East (Sir L. Ungoed-Thomas), who quoted a paragraph from the Law Reform Committee to which I referred. To make it abundantly clear, may I quote it again: Nor is it likely that any Judge of the Chancery Division would give his sanction on behalf of infants or potential beneficiaries under a settlement to any scheme of a kind which, as a citizen and a taxpayer, he would not think it right to enter into with regard to his own property. I should add this. There is not quite the clear distinction which my hon. and learned Friend suggested between tax avoidance schemes which are unquestionably ethical and those which are not. I think that there are certain borderline cases to which different moral judgments apply and in which, therefore, the public have an interest as well as the parties. I think that the desirability of these applications being made in open court is that they can have the proper gaze of publicity so that the public can judge on the merits whether they are legitimate borderline cases.

The Solicitor-General

I feel confident that that really was the view he was presenting and I withdraw my ill-founded alarm, because I suspected that we should be in agreement about the position.

As to the serious matter of whether or not these applications should invariably be heard in open Court as opposed to Chambers, I cannot at this moment offer any particular pledge. I am confident that my noble Friend the Lord Chancellor will be fully attentive to what has been said in this House today, and that is as far as I could be expected to go today, or do go today.

I am sure that the difference between the disputants in the matter seems to be remarkably small. At the present moment, the learned judge has a discretion as to what he will hear in open court or not. The learned judge has that discretion now. Persons on both sides of this controversy desire him to have that discretion in the future, and the question is really which way he should exercise such discretion as should be left remaining in him.

I do not suppose that any hon. Member has urged today any consideration to which Her Majesty's judges in the Chancery Division are not very well alive. They have been doing this work for a long time and most of these matters have come before them before. I profess a very personal point of view that the larger the discretion kept in their hands the happier I shall be.

Sir L. Ungoed-Thomas

I would not like a false impression to arise on this point. The difficulty is that all this administrative or quasi-administrative jurisdiction has been over the years as a matter of practice exercised in chambers. I respectfully agree with the Solicitor-General that I think the difference in principle, if there is a difference in principle, between us in this debate on this matter, is comparatively small. It would in practice lead to a mass of the applications being heard in open court instead of being heard in chambers, and it would make a very substantial difference to the number of cases being heard in open court or in chambers.

The Solicitor-General

I am glad that between myself and the hon. and learned Gentleman there does not seem to be much conflict. We are agreed that at least the matter is worthy of looking at by my right hon. Friend.

I turn now to a more difficult matter. Obviously, my enthusiasm for this Bill cannot be so unqualified as that of some of my hon. Friends. After all, the Government of the day have a duty to protect the Revenue. I thought that the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas), put it too high when he called this a tax avoidance Bill. I consider that an unkind label. But the hon. and learned Gentleman was completely right in supposing that people will seek to use and will succeed in using it for purposes which result in perfectly legitimate tax avoidance. It is while facing that difficulty that the Government ask the House to support this Bill.

It must necessarily be accepted that there is a risk to the Revenue involved and that it may involve some Revenue loss. The more one looks at this matter, I submit, the more it is obvious that on balance the case for the Bill, despite that disadvantage, is overwhelming. There is the point to which hon. Members have already referred, the fact that some adults could turn these provisions, designed to protect infants from being robbed of property, into grounds for making their own private schemes. But were those persons all adults sui juris they could just sit round a table and do this. There is no conceivable reason, in justice or in common sense, why people, because they are infants, should not be allowed, or the courts be allowed on their behalf, to do the things which could be done by beneficiaries if they were adult.

I think it right to emphasise another point made by the Law Reform Committee; the fact that real hardship occurs to beneficiaries now under settlements where matters of practice either do not arise or are of small importance. The instance which the Committee gives appears in paragraph 17 of the Report. There are many cases of settlements involving quite small sums in which it would be beneficial to all the beneficiaries to be enabled to spend the capital but they are unable to obtain leave of the court to do so, with the result that parents have an income insufficient for the needs of themselves and their children, and the children are unable to be given education and training such as would enable them in the future to provide for their own needs That has nothing whatever to do with tax avoidance and represents a real evil, a real hardship, arising under the law as it now is.

I prefer not to indict this as a tax avoidance Bill but rather to call it a "fair restrictions for all" Bill. It will place persons not sui juris in a parallel position as regards adult persons for the purpose of invoking the jurisdiction of the courts. The more we look at it, the more it is apparent that both justice and logic require that the law be changed in the way this Bill will change it, despite the disadvantages of the Bill which are apparent. It is not right that the competence of the court to approve an arrangement of the kind here contemplated should be dependent on a totally irrelevant consideration, like whether or no the settlement was ably or incompetently drawn or on the nature of the property comprised in the settlement or the like. It is intolerable that the law should be left like that, and so the Government think that on balance, and despite its disadvantages, the Bill should be accepted by the House.

12.54 p.m.

Sir Hugh Lucas-Tooth (Hendon, South)

I support the Bill and congratulate my hon. Friend the Member for Ruislip—Northwood (Mr. F. P. Crowder) for bringing it forward. Almost everything possible has been said in support of it, and I have even more diffidence about speaking as it is now 18 years since I was last in court as a junior member of the Chancery Bar. A good many cases have been decided since then, including the Chapman v. Chapman case.

To refresh my memory on these matters, I looked into a leading and somewhat elementary textbook. I found a passage which I think relevant, though I apologise to those of my hon. Friends who are lawyers because it will be nothing new to them. The authority by virtue of which the Court of Chancery created equitable rights and provided equitable remedies arose out of the delegation to its head, the Chancellor, of the King's prerogative to afford his subjects relief, where justice so required, in individual cases where the common law gave either no remedy at all or a remedy which was inadequate. It might be thought, in the light of such a passage which correctly defines the ambit of the equity law, that a Bill such as this is unnecessary. One might suppose that the powers proposed to be granted by this Bill were the very essence of equity. But, of course, the quotation I have given is in the past tense, and although the body of law known as "equity" was built up by the Chancellor and the judges, it is no longer growing or capable of growing, and must be regarded as something which can now be altered only by the action of Parliament.

As all lawyers know, equity is now a precise body of rules strictly construed and, except for the decision of another place in the case of Chapman v. Chapman, I still think that it is a most excellent body of rules. Nevertheless, it needs bringing up to date from time to time and this is an occasion when we can bring part of the rules up to date. Parliament has always been ready and willing to alter the rules of equity when necessary, and several hon. Members have referred to the last case in which this was done in a substantial way, when at the instigation of the then Labour Government the principle of restraint against anticipation by a married woman was finally removed.

As the House knows, equity acts through trusts, and it was by the enforcement of trusts that the Chancery Courts compelled those to whom property was given to carry out the wishes of the trustee or donor of the property as the case might be. There are two ways in which the policy of the courts might have developed. On the one hand, the court might have given trustees considerable freedom to do what they thought best within the general ambit of the wishes of the testator as expressed in his will, or, on the other hand, the courts might have compelled trustees to carry out strictly and to the letter the precise words in the will of the testator. Broadly speaking, it was the second of those two courses that the courts have followed. Unless the will or testator gives a discretion to the trustees, they have little latitude. They must act strictly in accordance with the law and the rules laid down for them, and on the whole I think that has been a sound principle. It is the principle which underlay the speeches in another place in the case of Chapman v. Chapman, but it is not one that was necessarily to be followed or that we need necessarily follow now.

Indeed, in Scotland the tendency has been in the other direction. Trustees in Scotland have been given a good deal more power, and they can act in a different way. They are not obliged to be unanimous and they can act by majority. We might consider trying to deal with the matters involved in this Bill by adding to the powers of trustees rather than by insisting upon their being kept narrowly within the powers given to them by testators and having to go to the court if they wish to vary those powers.

On the whole, the English principle of strictness is right and better than giving more latitude to trustees. But the principle has led and must lead to difficulties where circumstances change. Therefore, it seems desirable that there should be some machinery for giving trustees additional powers or for enabling trusts to be modified when necessary. That machinery already exists in the court. But, unfortunately the powers of the court are limited at the moment in effect to the making of orders to deal with emergencies or to the taking of action to salvage a trust estate.

The Bill proposes very considerably to enlarge those powers. The fundamental question of the Bill is: is it morally right to allow people who are interested in trust property to deal with it otherwise than was expressly stated by the person who gave them that property? Should the wishes of a person who may have died twenty years or even fifty years ago override the wishes of those who are now entitled to that property?

I think that everyone would answer the latter question in the negative. We would all say that where property is in the hands of a number of adults who are able to deal with it themselves they should be able to do exactly as they wish. Indeed, that is the present law. It is only when one or more people interested in the property are under age or of unsound mind, and therefore cannot agree to the property's being dealt with otherwise than in accordance with the trust, that any difficulty arises.

The purpose of schemes and proposals to vary trusts is very often nowadays the lightening of taxation on a trust. I do not agree with my right hon. and learned Friend the Member for Kensington, South (Sir P. Spens). I think that taxation is usually a very important factor in the minds of the people concerned. If the people concerned are adults they can take such measures as they please, and it seems unfair and improper to say that because one of them is either a child or a lunatic all of them should be prevented from taking any such action. That would be unjust. I hope that the House will therefore give the Bill a Second Reading.

The hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) spoke of the need for publicity in connection with the approval of these schemes. When he started I thought I should find myself differing from his views, but his concluding remarks showed clearly that, as my right hon. and learned Friend the Solicitor-General said, there is not a very great deal of difference on that score between any of those who have taken part in the debate. As much as possible of these cases should be heard in open court. There are obvious objections to doing so when infants and people of incapacity are concerned.

The right principle to be applied in this type of case seems to be that where the approval of the court is sought to a scheme with infants involved, it would be unfair to give publicity to the scheme solely on that account. If there had been no infants, the matter could have been done without any publicity. When the sanction of the court is sought to a scheme which could not be carried through by the parties, even if all of them had been sui juris and able to agree themselves—

Mr. Philip Bell

What possible scheme can there be if all the people are sui juris and can carry it out? They can do what they like.

Sir H. Lucas-Tooth

There are trusts which cannot easily be broken, even if all those concerned are sui juris. When the court is asked merely to give approval on behalf of those who cannot give approval themselves, there is good reason for saying that the general rule regarding cases concerning infants should apply. That appears to be the logic of the case. Unless the proposals are in the interests of the child the court will not approve. I do not think that any one has suggested that in, for example, the Chapman case, the proposals were not in the interests of the infants involved. In those circumstances, all we can say is that the scheme was refused on the ground that the court lacked power to approve.

I hope that the House will approve the Bill. Amendments may be put forward in Committee, but the principle is entirely sound and is in accordance with legislation which has been passed through this House during a considerable period.

1.10 p.m.

Mr. Philip Bell (Bolton, East)

I hope that the House will excuse me for intervening. I know how unpopular it is to be the last speaker in a debate of this nature, but I have been present all the time, and, to use a vulgar expression, it is "rather up my street".

I do not intend to review everything that has been said, nor to describe the process of equity, nor discuss the whole of the Bill. That has been done admirably already, but I have a new point to make. Before mentioning that, I wish to refer to the question of publicity in reference to proceedings, which does not really arise directly out of the Bill because the Bill makes no reference to it. It is a sort of afterthought arising from an article in The Times this morning.

On the whole, I do not find it difficult to agree with what has been said. The practical difficulty is that there has grown up a tradition that anything to do with infants must be heard in chambers. No one ever bothers to consider whether it really matters or not. If one went to a judge in chambers and asked, "Why can we not have this in open court?" he would say, "No, we always have this in chambers." It is a tradition and no one ever bothers about whether anyone would be hurt if it were in open court. There is a blanket rule and I would agree that that rule should be removed, not in this Bill but in other circumstances.

The next point is about the consent of the court. There is a lot of confusion about the consent of the court, because there are various forms of compromises and agreements which the Bill will cover. It may be that most of them will be concerned with tax avoidance, but, on the question of tax avoidance, the job of the court is extremely small. If there is a question in which ascertained infants are concerned the court has merely to say, "Yes" if the infant benefits, and it does not matter what others say as they are sui juris. It is only in the really complicated matters that the court has to approve settlements. Otherwise, the court does not mind if people want to give their money away. It does not have to approve their action; it is only concerned with the interest of the infant. Generally under the Bill, the only function of the court would be to give consent on behalf of the infant if the bargain was a good bargain from the point of view of the infant.

Another point which I hope my hon. Friend the Member for Ruislip-Northwood (Mr. F. P. Crowder) will consider at another stage is that made by Lord Simonds in Chapman v. Chapman when discussing this matter as the law stood at the time. He made a point about the settlor. The first thing to notice is that there were very great powers exerciseable by the court—not negligible powers—in dealing with trusts. The court could alter the investments; it could alter the beneficial interests for the purposes of maintenance. It could deal with salvage and over a varied range it had powers, but it could not simply alter the beneficial interest, even if that were agreed by all the adults.

Lord Simonds quoted what he called the "old law" and said: It is the function of the court to execute a trust, to see that the trustees do their duty and to protect them if they do it, to direct them if they are in doubt and, if they do wrong, to penalise them. It is not the function of the court to alter a trust because alteration is thought to be advantageous to an infant beneficiary. It was, I thought, significant that counsel was driven to the admission that since the benefit of infant was the test, the court had the power, though in its discretion it might not use it, to override the wishes of a living and expostulating settlor, if it assumed to know better than he what was beneficial for the infant. This would appear to me a strange way for a court of conscience to execute a trust. I ask my hon. Friend to think for a moment about that before we reach Committee stage. There is a tendency now, where property is given for any purpose, certainly public purposes, for someone to discover that those purposes are not so very good after all and that he would like a Bill to alter them no matter what the settlor gave the property for.

In the case of a settlement, not by will but by deed, where the settler is alive he may well have known that there were infants and—not on the tax point—might have known the pressures that might be brought about. He will say, "I will make the settlement, because this is my judgment and what I want." Those are his terms and it is his money. That is his trust and the Court of Equity has to carry out his trust. In those circumstances, where the settlor is alive and not wanting to see the provisions he made in regard to the infants upset, it seems a little hard that the parties and the judge, on the part of the infant, should be able to change the settlement because they think it is better.

The settlor might well make his settlement knowing there was an infant concerned and make his determination in assessment of the character and prospects of the infant. I feel that if the settlor does that and sets up the trust it should not be possible to over-rule it—unless the settlor agrees—in cases where known infants are involved, or persons whose existence he foresaw. It seems a small price that in settlements inter vivos he should be consulted.

It is so easy to think that we are wiser than our ancestors, as was mentioned in Chapman's case, that really nothing matters, and everyone should have second thoughts and that no contract binds if one can think of a better one. Trusts, it is now learned, ought to be varied according to the object or the circumstances of everybody! But there is something to be said for having a kind of fixed point which will give settlors a sense of responsibility and a sense of security that their settlements are not just bits of paper which people can alter as they think fit.

I appeal to my hon. Friend, when considering the Bill—which I join in welcoming—to consider whether he really wants, in the words of the Lord Chancellor, that these settlements inter vivos should be altered notwithstanding "the living and expostulating settlor." I hope that my hon. Friend will find some way of reconciling my point of view with his Bill.

Question put and agreed to.

Bill accordingly read a Second time.

Committed to a Standing Committee pursuant to Standing Order No. 38 (Committal of Bills).