HC Deb 07 July 1961 vol 643 cc1876-80

(1) If for the purposes of section two or four of this Act or the Second Schedule thereto a trustee obtains, from a person reasonably believed by the trustee to be qualified to make it, a valuation in writing of any property, the valuation shall be conclusive in determining whether the division of the trust fund in pursuance of subsection (1) of the said section two, or any transfer or apportionment of property under that section or the said Second Schedule, has been duly made.

(2) The foregoing subsection applies to any such valuation notwithstanding that it is made by a person in the course of his employment as an officer or servant.—[Mr. Barber.]

Brought up, and read the First time.

11.8 a.m.

The Economic Secretary to the Treasury (Mr. Anthony Barber)

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

The purpose of the Clause is to deal with a point made by the hon. and learned Member for Kettering (Mr. Mitchison) in Committee. Those hon. Members who were with us on that occasion will recall that he then moved an Amendment to Clause 2 of the Bill. He said: … attempts to put valuations on them"— that is, trustees— such as the Bill makes will frighten them unnecessarily unless it is made clear that those valuations may properly be left to their judgment as to whether they make them themselves or get a broker to value stocks or shares or employ some more formal method in more difficult types of investment."—[OFFICIAL REPORT, Standing Committee B. 25th April, 1961, c. 378.] I explained at that time, in answer to the hon. and learned Gentleman, that I thought that the words in the opinion of the trustee", which were included in his proposed Amendment, went too far, and that it would not be appropriate that the trustee should be excused from liability for loss solely on the ground that, in a matter involving perhaps a difficult valuation, he had expressed an opinion.

In our view, a lay trustee ought, if he were to enjoy the protection of the law, to take professional advice in the case of a difficult valuation. Of course, the trustee does not need any protection where the valuation is a simple matter.

We had a considerable discussion on this matter in Committee, which showed that hon. Members generally were agreed that a trustee should know that in certain circumstances he had the protection of the law when he reasonably believed that he had made a division of the fund in an appropriate manner. Otherwise, a trustee might constantly be worried that he could not show that he had made a proper division and, consequently, would not be able to show that he was not in breach of trust.

I agreed to consider the matter, and the new Clause provides that when a trustee obtains a valuation from a person whom he reasonably believes to be a qualified valuer, such a valuation, for the purposes of division and for the other purposes mentioned in the new Clause, shall not be open to question. If a trustee decides not to seek the aid of a qualified valuer, he will be open to challenge, but in those circumstances, presumably, he will be confident that he can meet the challenge. Having gone a considerable way to meeting the case of the hon. and learned Member, I hope that at the outset of our labours this morning, he will, with his accustomed magnaminity, give the Clause his full support.

Mr. G. R. Mitchison (Kettering)

I thank the Economic Secretary for the attention which he has given to this matter.

Mr. A. J. Irvine (Liverpool, Edge Hill)

I join with my hon. and learned Friend the Member for Kettering (Mr. Mitchison) in expressing thanks for the new Clause, which will be of value and which will save trustees from certain anxieties. I also take the view that the Clause comprises a correct treatment of persons employed as officers or servants.

I wish to permit myself a comment upon the breadth of language which has been employed in the new Clause. What is undoubtedly intended is that valuation as such shall be conclusive, but the words employed are: conclusive in determining whether the division of the trust fund … has been duly made. That involves a breadth of language which at some future date may attract comment and observation by the courts. I have in mind that a trustee might give to a valuer, by an oversight, an incomplete statement of the trust securities. The division of the fund which would have taken place in that event would not then have been duly made, although no one would wish to question the correctness of the valuation by the valuer so far as that valuation went.

However, with that comment upon the language used, I repeat that I welcome the general purpose and intent of the Clause.

11.15 a.m.

Mr. Leslie Hale (Oldham, West)

When my hon. and learned Friend the Member for Liverpool, Edge Hill (Mr. A. J. Irvine) referred to the breadth of the language, I thought that he meant to refer to the word "qualified". What does it mean? In relation to investment and valuation of investments, what is a qualified investor?

When I was first practising in Leicester, there was a gentleman called Arthur Wheeler, who was highly esteemed at the time, although he came to an unhappy and sticky end, which he faced with some courage, and whom I do not want to recall as an awful example. He was practising as a stockbroker and valuer, and he introduced a scheme of paying solicitors commission for going to him for valuations. I found to my surprise that the first time I obtained a valuation from Arthur Wheeler I got a cheque for 50 per cent. of the fee. It was the only time that I went to him, which probably saved me a good deal of money, but that was the sort of system. What is a qualified valuer of stocks and shares?

Either the Bill is intended to do something, or it is not. Having read it very carefully, I am not sure that it is intended to do very much. If in obtaining a valuation a trustee has only to say, "I reasonably believed that this man was qualified", and the test is in the trustee's mind, he may very well say that Mr. E. T. Hooley, who knew more about stocks and shares than any man in the Midlands—he invented quite a few of them—was qualified.

After all, if one is sure that one is getting honest advice from an experienced man, then it will be extremely valuable advice. But, so far as I know, there is no such thing as a qualified valuer for stocks and shares. There are reputable stockbroking firms which often do this sort of thing, while others generally decline.

I am speaking of my experience of a few years ago. I have had no practical experience for some years and it may be that I am out of date, so in these matters I always speak subject to correction. However, I suggest to the Economic Secretary that coming along on a Friday morning, to a small House, with a Clause of this kind, is a rather dangerous procedure. Later today we may have to unveil some other blunders to which our attention has been called at a very late stage.

I ask the Economic Secretary to bear in mind that although he is to ask for power to make regulations under a Statutory Instrument, he may have no power by Statutory Instrument to limit investments made by well-intended persons on the basis that the trustee honestly believed that they had the requisite knowledge.

Mr. Barber

By leave of the House, the hon. and learned Member for Liverpool, Edge Hill (Mr. A. J. Irvine) referred to the breadth of the wording in the Clause, and I appreciate his argument. On the other hand, we wanted to limit the Clause to the purposes which are there set out, in other words, the division of the trust fund, or any transfer or apportionment of property. I see the force of the hon. and learned Member's argument, but I do not see how we can deal with the matter in any other way. While it is useful that the hon. and learned Member should have pointed out this fact, I do not think that it can be cured.

The hon. Member for Oldham, West (Mr. Hale) put forward an argument which I found it difficult to follow, because, as he knows, a court frequently has to decide whether a person has acted reasonably. I join issue with him when he says that all the trustee has to do is simply to say, "I reasonably believed that a particular person was qualified as a valuer for the purposes of my trust." It would be open to the courts to inquire, to put it in this rather strange way, whether it was reasonable of the man concerned so to believe.

The hon. Member will remember that in the White Paper which started all this business we tried to set out a number of people whom we thought were qualified for one purpose or another. That caused some criticism and we concluded that the criticism was justified. One of the difficulties now is that having decided not to specify certain people, whom we thought would be qualified for all purposes to make a valuation, we have had to deal with the matter in a general way. I do not think that we can improve the Clause while meeting the point made in Committee by the hon. and learned Member for Kettering.

In a sense, it is rather loose, but it does mean that a trustee cannot go completely berserk and appoint someone to value a property which might involve a difficult valuation when it is obvious to all concerned that the person making the valuation is not qualified in any sense.

Question put and agreed to.

Clause read a Second time and added to the Bill.