HC Deb 21 July 1960 vol 627 cc862-7

Amendment proposed, In page 6, line 12, to leave out from "purposes" to first "be" in line 13 and to insert "of taxation and rating".—[Mr. E. Fletcher.]

9.45 p.m.

Mr. Eric Fletcher (Islington, East)

I think that my hon. and learned Friend the Member for Leicester, North-East (Sir L. Ungoed-Thomas) had finished his observations in support of the Amendment, and I have nothing to add to what he then said.

The Solicitor-General (Sir Jocelyn Simon)

I am sorry that the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) has had to wait a number of days to hear the reply to his observations—particularly as earlier, as the hon. Member for South Shields (Mr. Ede) pointed out, he had found a way, as he claimed, of asking a question in such a way that my right hon. and learned Friend would be out of order in answering it. However, now comes the time when I must try to answer his observations and at the same time keep within the rules of order.

The purpose of the Amendment is to limit the benefit of the conclusive presumption conferred by registration to the cases of taxation and rating. The effect would be to re-expose the trustees to the risk of actions at the suit of people claiming in right of a resulting trust on the footing that the trust is void if not exclusively charitable. And also, of course, equally the persons dealing with the trustees.

Perhaps I can give an example of the way in which this conclusive presumption works, and I think that the House will then be satisfied that it is necessary to preserve it in all its amplitude. I take the hypothetical example of a trust called the Smith Trust. Let us say that Mr. Smith founds a trust for "the promotion of teetotal tea shops", and the Commissioners register that trust as a Charity. The next thing that happens is that Mr. Jones, a strict teetotaller, leaves his property to trustees on trust to pay the income for a certain number of years to the Smith Trust. Then the third case is that Mr. Robinson dies and leaves all his property, as to capital and income, on trust to be paid to the Smith Trust.

The residuary legatees or the executors of Mr. Robinson's will contest the charitable status of the Smith Trust. They argue, say, that the promotion of teashops, whether teetotal or otherwise, is not a charitable purpose. The way they can contest that is by seeking to remove the Smith Trust from the register.

If they succeed, the general law takes command, and in the case of the Smith property and the unexpended portion of the Jones income and the Robinson property there is a resulting trust in favour of the donors. That is so because once there is no charitable purpose all the gifts are void, as contravening the rule that to be valid the trust must be certain in point of beneficiaries so as to be enforceable by them.

The capital of the Robinson estate, which at that stage, of course, would not have been paid over, reverts to the people who are next entitled, and, similarly there is a resulting trust in favour of the original estate which formed the Smith trust. But when we come to the Jones case, where the income was payable, it is only the unexpended income which will revert to the donor; and that means that the trustees are protected in so far as they have paid over the income which they have received from time to time in good faith—in other words, on the faith of the charitable status as registered.

I hope that the House will agree that that is a great improvement on the position whereby trustees are liable at the suit of the next of kin, indeed, as are the people who have dealt with the trustees. For example, people who have received the income are liable to repay it.

I desire to add this. The only case where the charity can be removed from the register retrospectively is under Clause 4 (3), where there has been a change in its purposes. For example, if the donor has kept a power of revocation and exercises it, and the trustees fail to notify the Commissioners so that the trust can be removed from the register, quite clearly, they are at fault, and it is entirely their fault if they are then liable. This is the only case where the charity is removed retrospectively.

The sort of case that was put by the hon. and learned Gentleman is a very rare one. The day-to-day litigation in the Chancery Division is not in relation at all to existing trusts. It is in relation to new trusts. In fact, I asked what cases the Treasury Solicitor's Department know, and they say that they cannot call to mind any case in recent years in which a testamentary gift to a going concern was sought to be impeached on the ground that the going concern was not a charity. It could, I suppose, happen, and we all learned in our early days in the law about the case of Bowman v. Secular Society in which that was sought to be done, but that was many years ago.

I hope with that explanation, the House will feel that this Clause ought to stand unamended in that respect.

Mr. Fletcher rose——

Mr. Speaker

Before I call the hon. Gentleman, I must correct an omission of my own. I meant to say that it is technically comprised in that, and I thought it would be convenient to discuss the considerations relating to the next Amendment at the same time on the Question which I have proposed.

The Solicitor-General

As I am not permitted to speak again, I am entirely in the hands of the House whether I should deal with that now or whether I should ask the leave of the House to speak again after having heard the hon. Gentleman.

Mr. Graham Page (Crosby)

On a point of order. May I suggest that it would also be convenient to take the Amendment to line 29, to insert the new subsection (4), which is closely related to it?

Mr. Speaker

As at present advised, I am not sure about that. I would prefer not to do that. I think that clearly the hon. Gentleman's Amendment to line 13 is comprised in what we must discuss on this Amendment.

Mr. Fletcher

With regard to the observations of the hon. and learned Solicitor-General, I think it would be more convenient if we heard what the hon. Member had to say in support of his Amendment before asking the Solicitor-General to deal with the second Amendment.

Mr. Speaker

I am obliged. It is my fault, and I should have indicated the position before.

Mr. Page

I am much obliged. I have listened very carefully to the arguments of my hon. and learned Friend the Solicitor-General in detailing an example of this, but it still seems to me to be wrong that, for example, a residuary legatee under a will should be precluded from questioning whether a legacy is or is not a charity when that legacy, or the income from it, depends upon that question. It may be that when the charity applies to be registered, it is of no concern to anyone other than the trustees of that charity whether it is or is not a charity. It may be of no consequence at all to anyone outside the institution applying to be registered. But later, by reason of the death of the donor, it may become of considerable concern.

The main point about the word "conclusively" in the Clause is that a gift, by will, will take effect on death, so that a residuary legatee who wishes to question whether the institution registered is a charity or is not is too late to do so after the death. The whole matter will crystallise at that point and the residuary legatee will be bound by the registration of the institution as a charity at the date of death. It therefore seems to me that we ought to leave it as rebuttable and not conclusive evidence that the institution is registered. It would be prima facie evidence. Anyone questioning it would have the burden of proof in proving that it is not a charity.

That could be satisfactory, but to preclude the person who never had any opportunity at the time it was registered to question the registration seems to me the wrong way to deal with it. He might not know that he would ever be concerned with it.

Mr. Fletcher rose

Mr. Speaker

Order. I think that the hon. Member requires the leave of the House to speak again, although no doubt he will get it.

Mr. Fletcher

With the leave of the House, may I say a word in support of the Amendment of the hon. Member for Crosby (Mr. Graham Page)? I hope that the Solicitor-General will deal with one point which I raised in Committee and which he did not deal with effectively then and which was not covered by anything he said tonight.

I am concerned with the kind of case in which a donor makes a gift to an institution which is registered as a charity not necessarily for the existing purposes and objectives of that institution but for a somewhat different or associated purpose. For example, it may be a gift to a college for a specific purpose not at that time covered by any of the activities of the college but perhaps related to them. The new purpose for which that gift is made may or may not be a valid charitable object but it would certainly be a gift to an institution which, as I read Clause 5, is to be "conclusively presumed" to have been a charity.

It therefore seems to me that questions may well arise as between such an institution and residuary legatees as to whether the gift is valid. As I read Clause 5, there is to be a conclusive presumption which would prevent the courts from investigating that matter. I cannot see why the word "conclusively" is required in that context. It seems to me right that there should be a conclusive presumption in the case of liabilities for taxation and rating but not a conclusive presumption in cases which arise as between the institution and the third parties who have had no opportunity of contesting the validity of the registration.

The Solicitor-General

If the House will permit me to speak again— —

Mr. Ede

On a point of order. Is it not a fact that the Minister in charge of a Bill on Report can speak more than once in resisting or commenting on any of the Amendments?

Mr. Speaker

The right hon. Gentleman is, of course, quite right. I owe an apology to the hon. Member for Islington, East (Mr. Fletcher). He did not need the leave of the House, either, because it was his Amendment.

Mr. Ede

I have no responsibility for this Bill.

The Solicitor-General

I asked leave of the House only because I got into trouble the other day in similar circumstances for not asking leave.

May I first deal with the case which the hon. Member for Islington, East (Mr. Fletcher) put. In the case which he put it is the creation of a new unregistered charity. It does not matter at all that the trustees—

It being Ten o'clock, the debate stood adjourned.