§ Order for Second Reading read.
§ 7.45 p.m.
§ The Attorney-General (Sir John Hobson)
I beg to move, That the Bill be now read a Second time.
This is yet another measure of law reform and a further step in the steady process of improving our laws which has been carried on by this Government continuously over the years. It does not represent something attempted in intervals when they could not think of what to do or how to do it. Since 1959 this House has passed 34 substantial Measures of law reform covering a wide field, from the administration of criminal justice to charities, matrimonial proceedings, magistrates' courts and legal aid.
Even in this Session we have dealt with, or are dealing with, such topics as support for successful unassisted litigants, the power of the Court of Criminal Appeal to order a new trial, the order of speeches in criminal trials and compensation for victims of crimes of violence. Each Measure must of necessity be limited in its scope, but their cumulative effect over the years is very substantial in the modernisation of our law.
Hon. Members will realise although others may not, what are the pressures on our Parliamentary time and the difficulties of fitting such debates into the legislative programme when so many other matters require the attention of the House. I should not wish to appear complacent in any way, but while I recognise that the law will always require reform and bringing up to date with changing conditions, it is the case that the present Government, in their long series of law reform Measures have made an important contribution to the modernisation of the law.
This Bill represents a very real step forward in the modernisation of property law and is not an unimportant matter for conveyancers. The House has been talking about drugs and I hope that I shall not drug the House by talking about this Bill. It is a very complicated matter and one which is technically very difficult, but it does 680 illustrate the value of the Law Reform Committee which is available, at the invitation of my noble Friend the Lord Chancellor, to examine any aspect of the law which seems to require attention. The Committee is able to apply a great wealth of legal learning and practical experience to complicated problems and to call on the services of experts in any particular field. Its Reports are invariably closely reasoned and a valuable contribution to the cause of adapting the law to the conditions of modern society.
If this Bill becomes law, it will mean that eight out of 11 Reports of the Law Reform Committee will have been implemented. The only exceptions will be the Fifth Report, on conditions and exceptions in insurance policies, in which no action was recommended; the Seventh Report, on the effect of tax liability on damages, when the Committee was unable to agree and the majority recommended no action, and the Eleventh Report, which was made only in April, 1963, on the loss of services, in connection with which legislation has not yet been introduced.
It may interest the House to know that the average length of time between the submission of a Report by the Law Reform Committee and its implementation, in respect of the eight Reports which have been implemented, was two-and-a-half years. I am sure that the House will join with me in recognising the importance of the work done by the Law Reform Committee; in paying tribute to its members for their splendid efforts and in recognising their work to be very difficult indeed when dealing with matters of this nature. It would be hard to find a better committee to deal with such matters.
The Bill gives effect, with some minor modifications, to the recommendations made by the Law Reform Committee in its Fourth Report in which it dealt with the rule of property law known as the rule against perpetuities. It has for centuries been regarded as undesirable, and contrary to the public interest, that the owner of property should, when he comes to dispose of it, fetter to an unreasonable extent the future enjoyment of that property. While the property is his he may deal with it as he will; but when, during his lifetime or 681 at the time of his death, he wishes to hand it over to another, he must not impose, for an indefinite period, restrictions on its future devolution. A system of rules has therefore been evolved to prevent this from happening.
One of these is the rule against remoteness of vesting, which invalidates any disposition of a future interest in property which might possibly fail to vest within the period consisting of a life or lives in being at the date of the disposition and 21 years thereafter. The rule is, of course, concerned entirely with possibilities. The disposition will be void from the outset if it is possible for it to vest outside the period, no matter how unlikely this possibility may be, and no matter whether it actually happens or not. In other words, the disposition is valid only if it is clear from the start that it must necessarily vest within the committed period. This is the present rule as it exists.
The Law Reform Committee considered this rule and decided that it was still basically sound. The Committee accepted without question that it was still necessary to place a time limit on the vesting of future interests, and came to the conclusion that the length of the period, which had been evolved by our courts in the eighteenth and nineteenth centuries at a time when the traditional forms of family settlements were taking shape, should not be altered. The Committee then examined the body of working rules which have grown up round that rule and it decided that sometimes these rules create anomalies and defeat, quite unnecessarily, the intentions of the testator or settlor. Accordingly, the Committee recommended a number of modifications which are now embodied in this Bill.
Clause 1 gives effect to the first recommendation by allowing a settlor or testator to choose a fixed number of years, up to a maximum of 80, as the period within which his disposition must vest, as an alternative to the present period of a life or lives in being and 21 years thereafter. The Clause does not change the perpetuity period in general, but it does provide an alternative, which, if it is to apply, must be expressly provided for in the disposition. The use of this alternative will, I suggest, give draftsmen the opportunity to 682 stretch the perpetuity period simply and with certainty.
It will, I hope, no longer be necessary to rely on the device known as the "Royal lives" Clause, whereby the draftsman, in an effort to stretch the period to its limit, provides that the disposition is to vest within 21 years after the death of the last survivor of those descendants of either his late Majesty King George V or some other chosen monarch, who are living at the date of the disposition. "Royal lives" clauses are however not invalidated by the Bill and may therefore still be used.
The Committee considered whether such clauses should be prevented and whether it might not be possible to provide that the period of limitation should be confined to such lives as were connected with the trust or which might take an interest in the property, but concluded that the difficulties of doing this would create more troubles than they would cure. If one looks at the Report of the Law Reform Committee one sees that this would create very great difficulties and the ingenuity of conveyancers would no doubt be able to impose shadowy interests of royal personages which would enable them to employ the "Royal lives" clauses.
This provision is to allow the procedure to be used more simply but not to alter the general nature of the length of period for which the trust can now be created by employing the "Royal lives" clauses. Although I recognise that there may be an argument now for having nothing like the "Royal lives" clauses and for connecting the period of the possible vesting date to interests under the trust, it would be difficult to define what those interests may be and to limit the circumstances in which other lives might be brought in.
Subsection (2) of Clause 1 adapts the new 80-year rule to the exercise of special powers of appointment. Broadly speaking, the exercise of a special power is valid only if the interest granted thereby must necessarily vest within the perpetuity period as measured from the date when the disposition which created the power took effect. The subsection therefore provides that an interest granted by the exercise of a special power will be valid if it vests 683 within 80 years of the creation, and not the exercise, of the power.
Clause 2 abolishes one of the most arbitrary and unreal presumptions of the present rule, namely, that nobody is incapable of having children, whatever his or her age. The effect of this presumption is that a disposition is sometimes rendered void for perpetuity because of the faint theoretical possibility that parents of advanced age might have a child, however improbable that might be in practice. The Clause therefore substitutes a presumption that for the purposes of the rule against perpetuities males over 14, and females between 12 and 55, can have children, but that persons not falling into these categories cannot. This presumption will be capable of being rebutted by evidence to the contrary in any particular case. The Committee recommended that 14 should be accepted as the lower age limit for women as well as for men, but the House may agree that in taking 12 instead of 14 as the lower limit for women, the Bill is in greater accord with practical possibilities.
Clause 3 gives effect to what is perhaps the most important of the Committee's recommendations. At present, as I mentioned earlier, the validity of a disposition has to be tested once and for all at the outset to see whether it might possibly offend against the rule against perpetuity. A settlement or will may therefore be invalidated on the grounds that it is possible that the interest might not vest within the permitted period, even though in the event the possibility does not occur and accordingly the interest would—if it had not been invalidated—have vested within the period. The intentions of the settlor or testator are thus sometimes frustrated quite unnecessarily, and to prevent this the Clause introduces the principle of "wait and see".
This provides that a disposition is not to be void for remoteness until such time—if any—as it is established that the interest in question can only vest outside the perpetuity period. In the meantime the disposition is to be treated as if it were not subject to the rule against perpetuities, and trustees may properly exercise all their normal powers of advancement of capital, maintenance 684 of infant beneficiaries out of income, and the like. Of course, if it is apparent from the outset that the interest cannot vest within the permitted period, then the disposition is void ab initio. But otherwise it is to be valid unless and until it is established that it must vest, if it vests at all, after the end of the period.
The introduction of a "wait and see" rule creates one problem which is dealt with by subsection (2) of Clause 3. At present there is no great difficulty in ascertaining the life or lives in being for the purpose of determining the perpetuity period, but under the new rule there will be no obvious means of ascertaining what are the relevant lives. The subsection therefore lists the classes of lives which may be taken for this purpose. Of course, if the draftsman chooses the fixed period of 80 years, there will be no need to take lives into account at all.
Clause 4 provides two more methods of saving dispositions which would otherwise be void for perpetuity. Firstly, where there is a disposition to a person at a specified age over 21, and it becomes clear that the disposition is void but would have been valid if the age of 21 had been specified, then the specified age is to be treated as reduced so far as is necessary to save the disposition. If, for example, there is a gift to the first son of X to reach the age of 30, and X dies when the son is only 8, the disposition would, even under the "wait and see" rule, be void, as it would be established that the interest could not vest for a further 22 years. But if the specified age had been 29, the disposition would be valid, as it would necessarily vest within 21 years of X's death. The effect of the subsection on this example is therefore to reduce the age at which the son takes to 29, which is the nearest age to 30 necessary to save the disposition. This is in effect an extension of a provision in the Law of Property Act, 1925, which provides that in such a case the age of 21 is to be substituted for the specified age. By reducing the age only so far as is necessary to save the disposition, the Bill gives closer effect to the intentions of the settlor or testator.
Secondly, subsections (3) and (4) of Clause 4 provide for validation of a disposition by the exclusion of members of 685 a class. Under the present law a class gift is totally void if it is possible that the interest of even one member of the class might not vest within the perpetuity period. It is now provided, in accordance with the recommendation of the Law Reform Committee, that in such a case the class gift is not to be invalidated, and the disposition is to be construed as if it was only to those members of the class who comply with the perpetuity rule.
The combined effect of Clauses 3 and 4, where all their provisions are applicable, is that the "wait and see" rule is applied first, and if in the light of the events which actually happen the whole disposition is valid, there is no need to look further. But if the "wait and see" rule does not save the whole disposition, the "age reduction" provisions are applied in the hope of giving effect to the gift even if some of the beneficiaries take at an earlier age than was envisaged by the settlor or testator.
Finally, if neither of the preceding rules can save the disposition, class members are excluded so far as is necessary to give at least partial effect to it. This is the order of priority favoured by the minority of the Committee in the only recommendation over which there was any disagreement. The majority thought that there would be practical difficulties in applying this solution, and recommended that the order should be first age-reduction, then the "wait and see" rule, then exclusion of class-members. But the minority view seems preferable because it does less violence to the wishes of settlors and testators and the difficulties envisaged by the majority did not, on further examination, turn out to be very grave ones. I think in the House of Lords the adoption of the minority view was generally welcomed. Indeed, Lord Gardiner was one of the members of the minority whose view has now been adopted and he was able to welcome the fact in another place.
The remaining Clauses of the Bill give effect to other recommendations of the Committee. They are designed to reduce the occasions on which dispositions of property will fail by reason of the operation of the rule against perpetuities. Most of the Clauses deal with situations which arise comparatively rarely and I 686 do not think that hon. Members would wish me to enumerate them in detail at this stage. There are, however, one or two of the provisions which I think I ought to mention.
Clause 9 deals with options relating to land. Subsection (1) provides that the perpetuity rule is not to apply to an option conferred on a lessee or his successors in title to purchase the freehold or other reversionary interest, provided the option is exercisable only during the currency of the lease or within one year thereafter; while subsection (2) deals with all other options to purchase land, to which the rule against perpetuities will continue to apply.
It provides that the perpetuity period applicable to such options is always to be 21 years. No "Royal lives" clause can be used to extend the period; nor—since Clause 1 is expressly excluded—can any 80-year clause. The reason for this provision, which was recommended by the Committee, is that the grant of options to purchase, other than those dealt with in subsection (1), connected with leases, tends to discourage the maintenance and development of the land; an owner who has such an option hanging over his head for any length of time will be unwilling to spend money on land which he may lose if the option is exercised. The Clause therefore allows the land to be tied up in this way for the comparatively short period of 21 years only. If the option is not exercised within that time, it is to be treated as void in all respects.
The proviso to subsection (2) does, however, make special provision for churches. A special problem is posed by the fact that churches generally require to own the freehold of the land on which they build, while local and public authorities generally only grant leases of their land to developers. This problem is at present met by the use of a conveyancing device adopted with the general agreement of the institutions representing the churches and the local authorities, whereby the local authority conveys the freehold of the land to the church subject to an option to repurchase the land if it ceases to be used for religious purposes. The proviso enables this practice to continue; but, of course, as hitherto, the right of pre-emption will need to comply with the ordinary perpetuity rule; in 687 other words, the option will remain valid during the period allowed by, for example, a "Royal lives" clause, or the 80-year period permitted by Clause 1 of the Bill.
Finally, Clause 13 adds two new periods to the existing four periods for which income of a trust can be validly accumulated. The two new periods added by the Clause are 21 years from the date of the disposition and the minority, or respective minorities, of any person or persons in being at the date of the disposition. These will be additional to the four statutory periods already set out in Section 164 of the Law of Property Act 1925: the Committee recommended that their addition would be a considerable convenience to persons making settlements inter vivos.
With one exception, the Bill will apply only to instruments taking effect after the Bill becomes law. The Committee examined the possibility of retroactive operation but found that it could only be achieved at the price of more capriciousness and complication than seemed justifiable.
The Committee pointed out that in many cases property will already have been disposed of on the footing of a prior limitation being void for perpetuity and that it would be quite impracticable to reverse this process in cases where the new rules would have saved the prior limitation. It considered a suggestion that it might be possible to except such cases from a general retro-active provision, but decided that this would cause unfair discrimination between a person who had already received property on the basis that a prior limitation was, under the former rules, void for perpetuity, and a person who, on the same basis, was entitled to some property but had not yet actually received it.
If there were to be limited retroactive operation in the way suggested, the former would be allowed to keep the property, but the latter would be deprived of his right to it. The Committee decided that it was preferable to exclude any retro-active operation and, in accordance with its recommendation, the Bill will apply only to settlements executed, and to the wills of testators dying, after it becomes law.
688 The exception arises out of Clause 8, which provides that the rule against perpetuities is not to invalidate the exercise by trustees of their administrative powers of dealing with trust property in the interest of beneficiaries. That Clause is to apply to powers conferred by instruments taking effect before, as well as after, the Bill becomes law. The proposal involves no disturbance of beneficial interests, and there is no reason why trustees of existing trusts should not be able to exercise such powers in the future, whether or not they have done so in the past.
Those are the principal provisions of the Bill which, as I have said, implements to a very large extent the recommendations made by the Law Reform Committee. I fear that the provisions of the Bill may not be very inspiring, and are certainly most difficult. They are, none the less, of considerable importance to all concerned with the law of property and the administration of trusts and settlements.
The House will be interested to know that quite a number of countries in the Commonwealth and states in the United States have legislated on this topic in terms not entirely unlike those in this Bill. If the Measure assists in carrying out more truly the intentions of settlors and testators it will be welcomed by the House. In the famous words of Lord Atkin:—I anticipate with satisfaction that, henceforth, the group of ghosts of dissatisfied testators who, according to a late Chancery judge, wait on the other bank of the Styx to receive the judicial personages who have misconstrued their wills, may be considerably diminished.I commend the Bill to the House.
§ 8.8 p.m.
§ Sir Frank Soskice (Newport)
The right hon. and learned Gentleman the Attorney-General certainly achieved one remarkable purpose in the course of his speech. He began his discussion of the Bill on a controversial note and launched out into what I thought was a touching apologia for the Government's record over their 12 years in office in the sphere of legal reform. It occurred to me that possibly his conscience had been stung when he read some observations made by my right hon. Friend the Leader of the Opposition in a notable speech which he recently delivered to the Society of Labour Lawyers.
689 I will not follow the right hon. and learned Gentleman, although I hope he will allow me to say that it seemed that his apologia was far from adequate, and if he will be so good as to reread that speech, which certainly seemed to have moved him deeply, he will see that it touched on a large number of important topics to which the present Government have not addressed themselves but to which the Government who will, no doubt, he in office after October this year will certainly address themselves. I hope that I have not been trespassing on the rules of order, but it seems to me that possibly the comments I have made have not been altogether uninvited by the no doubt laudable efforts of the Attorney-General to wrest himself free from the leaden bonds of this rather dreary Bill.
Having made that attempt to get his head above water, the right hon. and learned Gentleman lapsed back into a tone which seemed to be more appropriate to the abstruse and remote subject of this extraordinary Measure. He proceeded to recite, no doubt from a carefully prepared script, the objects of the Bill. It would be a hardheaded hon. Member who would criticise him for reciting from a script and for reading his text. Normally the House is indulgent to the Chancellor of the Exchequer when he reads his Budget statement and the Foreign Secretary when reading important announcements on foreign policy. I think that the House would certainly be ready to admit a third ex-ception to the rule against reading speeches; in the case of the unfortunate Attorney-General of the day when explaining to such hon. Members as are present on both sides of the House the contents of a Bill of this sort, which is difficult to understand and difficult to expound—and I hope that the right hon. and learned Gentleman will not mind my describing it as an explanation which was rather dreary to listen to.
With those preliminary observations—which are made, I can assure the Attorney-General, in the best spirit and with all good will towards him—I must say in regard to the content of the Measure that I accept, as does the Law Reform Committee, that it is clearly in the public interest that there should be some limit in time to the period for 690 which dispositions of property can extend. It is not in the public interest, except, perhaps, in the case of charitable trusts, with which we are not dealing, that individuals who own property can limit and settle their property in perpetuity. It was for that reason that the rule we are discussing was evolved by decisions dating back certainly to the eighteenth century, probably earlier, and settled, I think, in a case as early as 1685. We are, therefore, discussing a rule of considerable antiquity.
I am most comforted when I see present before me the hon. Member for Hendon, South (Sir H. Lucas-Tooth) and the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), possibly the only hon. Members among us able to swim easily and comfortably through the various intricacies of the proposals contained in this Measure. We common law practitioners must find our way rather gingerly through them.
Having so far begun my speech on that note of accord with the reasoning of the Law Reform Committee in its fourth Report, I join issue with the members of the Law Reform Committee on some points which are made in the course of their review of this subject. Before referring to those, however, I must say that I am in wholehearted agreement with the proposals in the Report in so far as they make for the removal of uncertainty and seek to prevent gifts, settlements and limitations of property from failing to take effect owing to some unexpected event.
Among the Clauses which are designed for that purpose and which, therefore, would have my support, I would list the Clause which, for example, introduces what I think is called the "Wait and see rule", an obviously sensible rule. Then there is the Clause which relates to the situation of a settlement of property on a man and his wife, and then on children of the survivor of the two. It seems unreasonable that a settlement of such property should be defeated because of the circumstance of the husband marrying a lady who, at the time of the settlement, was not yet born. This would obviously be an accident on the part of the draftsmen and it seems unreasonable that that sort of situation should present itself and that the settlement should fail.
691 Equally obviously in the public interest is it that uncertainty should be removed by the qualification as to the presumption that a woman of any age can have children. The new presumption inserted in Clause 2 as to the capacity to have children is a clear improvement. It makes for certainty and prevents long periods of waiting which otherwise must elapse. I would commend that and, equally, I would commend Clause 4, which relates to dispositions to persons over the age of 21, along with the subsections of Clause 4, which relate to the exclusion of members of a class who may present themselves and defeat the gift, contrary to the intention of the disponor and settler.
I also consider that the case is made out for the changes made in regard to the options to purchase land and property as contained in Clause 9 and the distinction between the case in which a lessee has an option to purchase the freehold and other options in relation to which the perpetuity rule is to apply under the terms of Clause 9. These sort of things represent a distinct improvement in this ancient branch of the law.
I rather join issue with the proposals of the Law Reform Committee in this. There must be a limit in time and at the moment that limit is a life in being and 21 years thereafter. The members of the Law Reform Committee propose an alternative limit of time—of 80 years. It seems to me that it is not altogether easy to justify that proposal. If one looks at the ground for this proposal set out in the Committee's Report, so far as I can see—and I do not wish to do injustice to the Report, which has been prepared as a result of devoted and valuable work on the part of the members of the Committee—for which we are grateful—is that the habit of using "Royal lives" in settlements is a wide-spread habit and the drafting device of "Royal lives" may produce the consequence that a very long period indeed may elapse during which a settlement may be valid.
It seems that conveyancers resort to that device and, in that way, enlarge the period to what may be not far short of a century. Whatever the period, it is certainly longer than one life in being and 21 years thereafter. I wonder if 692 that is an adequate reason, by itself, for proposing the alternative period of 80 years? I should have thought that there were serious objections to incorporating that alternative period as one which could be used by settlors of property. I say that because—and the hon. Member for Hendon, South will correct me, a common law practitioner, if I am wrong—it seems that if one provides the alternative period of 80 years one is giving almost carte blanche to those who draw up settlements which contain discretionary trusts for a period of 80 years.
Broadly speaking, though I agree that there may be exceptions to the general proposition which I am about to advance, I should have thought that the discretionary trust is not a trust which conduces to any really useful public purpose. I should have thought that it was the general experience of lawyers, that discretionary trusts operate often for the purpose, in the first place, of defeating creditors. In the second place they operate for the purpose of setting at defiance the Inland Revenue, avoiding payment of Surtax, and for purposes of that sort.
I should have thought that there was no really corresponding advantage to be gained by the use of a discretionary trust, a trust under the terms of which trustees can at their discretion pay income to persons who may not be able to manage their own affairs as they ought to manage them. They may in certain circumstances be useful, but I should have thought that the anti-social use of discretionary trusts very greatly outweighs the advantages from the general public interest point of view which are to be derived from the use of discretionary trusts.
It seems to me that the Bill says, in effect, to draftsmen, "Here you are, you can easily now create a discretionary trust for 80 years", with all the undesirable features attendant on it. If the answer is that they can do that already by using the "Royal lives" device it seems to me, with great respect to the Attorney-General, that that is not an adequate answer. It is a case of saying that two blacks make one white, and because one can use that device it does not seem to me that there is any case for providing an easier alternative 693 method of achieving a purpose which fundamentally should not be encouraged.
I would join issue therefore with the Law Reform Committee in its proposal that there should be this alternative 80 years' period which can be used by settlors of property. It seems to me that the case is not made out for that. I should have thought that we would want considerably greater justification for that proposal than we have had hitherto. I would say, in general, with regard to the findings of the Law Reform Committee in its Report, that we should look at the rule against perpetuities and accumulations, not so much in the setting in which it was evolved when it related to large landed estates in the eighteenth and nineteenth century but in the setting of today, when I suppose that there are a considerable number of people with modest fortunes, which they have secured by their labours in their working lives, who want to make provision for their widows and, when their widows die, for their children. I should have thought that a life in being plus 21 years thereafter was the appropriate period.
The Attorney-General, when dealing with the "Royal lives" device, pointed out that the Law Reform Committee had come to the conclusion that it was difficult to limit by definition the lives in question, by reference to which the period is to be determined, in such a way as to connect them in some way with the trust or disposition in question. No doubt there are serious difficulties of definition. If, however, these difficulties of definition could be overcome I should have thought that this would be a better Bill if the lives in question could be limited in some way to the beneficiaries of the trust rather than that we should provide this alternative period of 80 years.
These are all matters which, no doubt, we shall examine more closely in Committee. I would not advise the House to refuse the Bill a Second Reading, because it seems to me that the improvements which the Bill makes very easily outweigh the defect in it of providing the alternative 80 years' period. I hope, therefore, that the House will give the Bill a Second Reading. I am sure that hon. Members will wish to look at it rather more closely in Committee and that we shall then 694 examine individually the proposals in the separate Clauses rather more minutely than we normally do on Second Reading. If that is the right approach, I hope that the House will give the Bill a Second Reading.
§ 8.23 p.m.
§ Sir Hugh Lucas-Tooth (Hendon, South)
I agree with both my right hon. and learned Friend the Attorney-General and the right hon. and learned Member for Newport (Sir F. Soskice) that this is a disgustingly technical Bill. As it is now nearly a quarter of a century since I had the honour of addressing a Chancery judge, I do not find it any easier to read or understand the Bill. I would prefer to describe it as "caviare to the general" rather than as an ocean of boredom, as suggested by the right hon. and learned Member for Newport. But though it is technical, the Bill is of great importance because it is concerned with the individual's power to dispose of his property freely. I should have thought that that would be one of the most important things that we could discuss in the House.
Many men desire to extend their control over their property into the future, and even long after they will be dead. That wish is perfectly natural and perfectly proper, and it is of great value. I believe that nothing does so much to stimulate and guide the economic activity of many men, and particularly of able men, as the dual wish to perpetuate their life's work and to provide for their family. It is true, of course, that this kind of wish can be excessive. It has certainly been curbed since 1894 by the provisions of the Finance Act, importing Estate Duty. Recently, the effect of inflation has also tended to prevent this wish being so present in people's minds as it used to be, but I think that its influence remains, and remains important.
The Bill deals with fundamental principles of our law in this connection and we must look at it very carefully for that reason. In the preface to the leading work on this subject, Gray on Perpetuities. the following passage is to be found:The doctrines derived from the feudal law…have passed away. Of all that forest of learning there remains here and there only a stump over which the unlucky 695 testator may stumble. But the Rule against Perpetuities is in full vigour. Where the Legislature has interfered, it has been to increase its stringency. Indeed, the Rule is substantially, at the present day, the law of future interests.Later there is the passage:In no part of the law is the reasoning so mathematical in its character: none has so small a human element.Those words were written in America in 1886. I think that they are still true in England at the present time.
I certainly welcome the intention of the Bill to make the law more sensible and less rigid, more human and less mathematical, but there are criticisms which can be made against the precise proposals of the Bill. Under Clause 1, as the right hon. Member for Newport has said, the new power to tie up property for as long as 80 years seems to me to be for a very long time. I do not believe that anyone at any time can cast his mind forward to consider what the position will be like 80 years from the time of making a particular disposition. I do not believe that anyone desiring to give property can contemplate the merits of any gift which is only effective to take place 80 years hence.
I know that the provision in the Bill is based upon the recommendation of the Law Reform Committee's Report, and particularly on the sentence in paragraph 9 on page 7:It is necessary to specify a substantial period such as 80 years in order to attract draftsmen away from the 'Royal lives' clauses…The Committee was clearly uneasy about the length of the period of 80 years which it itself suggested. The Committee is defending that period, saying that, in effect, it is defensible only because, if there is some shorter period, draftsmen will go on using the "Royal lives" clauses and not this new proposed provision.
I myself think that that is a bad principle. I object to encouraging people to think that they should make trusts for fixed periods of time. I am perfectly happy that some trusts should go on for long periods. Where a very small child takes a benefit, the trust may well need to run for a very long time. But the perpetuity period has so far been based 696 on the principle that a person can give a benefit to another person for his or her life, and this is introducing an entirely new principle, that it is proper to tie up property for as long as 80 years.
For my part, I should prefer to leave the law in this respect as it stands. I should prefer us to leave draftsmen who wish to make long trusts and testators or settlors who wish to give instructions to draftsmen to have to contend with these devices. The mere fact that one has to use devices is, at least, some warning to those concerned that what they are doing is not really proper and is not really countenanced by the Legislature. In my view, if we are to have a fixed period somewhat longer than the present 21 years, it should be at the most about twice that, say 40 years. At all events, I should like something substantially less than 80 years.
The troubles to which the rule against perpetuities has given rise are not altogether due to the absence of such a power as is given by Clause 1. They are almost all due to inadvertence. Sensible people do not wish to tie up their property for long periods, certainly not in the age in which we are now living. Sometimes, of course, long periods are desirable. The case of the spendthrift child is one example. Perhaps the strongest is the case of the young daughter married to a spendthrift husband. I am not for a moment saying that one should not ever make trusts extending over 40 years, but I am saying that those are essentially trusts for particular lives. People make wills and settlements with their actual families and the actual circumstances of the time in mind, and they forget that circumstances may change. Draftsmen are capable of making mistakes.
It is these misadventures or inadvertancies which have led to undesired and sometimes even disastrous results. But such results will not in any way be prevented by the power given by Clause 1. That power will merely enable trusts to be made for very long periods, possibly, as the right hon. and learned Member for Newport suggested, long discretionary trusts not really intended to benefit particular individuals in the mind of the donor or testator but with a view, rather, to perpetuating his own personality over a long period to come. In my view, that is wrong in principle.
697 The best use of a long fixed period would be, I think, by way of a saving proviso, something validating all dispositions actually taking effect within the period of 40, 50 or 60 years, whatever it might be. In my view, it would be better, if we are to change the law here, that we should import into every trust some such saving proviso as that which could be ousted in case of need by express provision within the trust instrument.
I think that the "wait and see" principle introduced by Clause 3 is quite acceptable. It gives more flexibility. On the other hand, the House should realise that, while giving flexibility, it will take away a good deal of simplicity. I shall give a specific example. Suppose that a will gives property to be divided among the children of the testator and it then provides that, in the case of a daughter, she shall take only a life interest, and, after her death, then to the children, say, at the time of their marriage. That gift over would at present be invalid for perpetuity, because, of course, the children might not be born or might not be married within 21 years. So, the further provision being bad, the present law provides that daughters are to take the original interest given to them, namely, the absolute interest, and they will take an absolute share in the property from the date of the testator's death. That is the principle which, I think, was laid down in Hancock v. Watson.
As I understnad it, that disposition will be upset by Clause 3 because it will be possible that, if one waits and sees, none of the daughter's children will be married outside the perpetuity period so that such a daughter, instead of taking an immediate absolute interest, will have to wait until the day of her death until it is known whether her interest is absolute or merely a life interest.
I think that this will create considerable difficulty, and I am not sure that the problems so created will be altogether outweighed by the advantages of the flexibility which the Clause gives. On the whole, my inclination is to think that the principle of the Clause is right, but certainly as regards such cases as those coming within the Hancock v. Watson rule, we shall have to look at the Clause again.
698 There are many technical matters to be discussed during the Committee stage. I hope that the points which I have mentioned can be dealt with and that the Bill will be improved. Subject to that, it has my warm support.
§ 8.38 p.m.
§ Mr. Charles Fletcher-Cooke (Darwen)
The Report on which the Bill is based is signed by people of extreme distinction and is of unsurpassed elegance. I am amazed that great people with such needle-sharp brains should ever have found the time to come together to write this elegant and admirable Report. I thoroughly support my right hon. Friend the Home Secretary in his defence of the Government's record in law reform, but I wonder whether we will be able to rely for ever on such distinguished people being able to do such distinguished work in their spare time. I do not understand how this miracle was achieved.
The important and somewhat revolutionary treatment of the perpetuity rule in this Bill finds its kernel in the wait-and-see provisions as opposed to the present and ancient ab initio approach. I do not agree with the right hon. and learned Member for Newport (Sir F. Soskice) that this will in any way conduce to certainty. I agree with my hon. Friend the Member for Hendon, South (Sir H. Lucas-Tooth) that it will in many cases lead to uncertainty. What the Committee has done, and what the Bill does, is to prefer fairness to certainty. Always in the law and in the reform of the law one has this balance, which is so difficult to strike, between the demands of certainty and the demands of fairness. As present, when the matter is decided ab initio, the moment the instrument speaks one gets certainty, although often the results are unfair.
I think that now we shall get much greater fairness but that the passage of time and the applications to the court which will be made many years after the death of the testator or settlor, as the case may be—and only then will any certainty emerge—will provoke in future rather more difficulties of administration and of expectation, and indeed of decision-making by the courts, than has been envisaged.
§ Sir F. Soskice
I did not express myself clearly. I did not rely on that particular Clause as increasing certainty, but I commended it as a Clause which prevented gifts failing. I believed that that was its value
§ Mr. Fletcher-Cooke
I thought that that was probably the case. It does not lead to certainty, but it leads to fairness, particularly in the matter which the right hon. and learned Member has mentioned—the capricious failure of gifts owing to some error in drafting the instrument. I believe that this uncertainty and the need for greater numbers of applications to the court is a price worth paying. I think that that has been the experience in the State of Pennsylvania and other States in America which have fairly recently adopted this approach instead of the old approach. It is, I think, to be welcomed.
My right hon. and learned Friend the Attorney-General explained that the Bill is not to be retroactive. That must surely be so, because a great many interests have now become vested in every sense of the word and it would be quite wrong to upset them where the consequences of the old rule are clear. I think that the old rule is much clearer than some hon. Members have suggested. It would therefore be very unwise for any practitioners, from the day that the Royal Assent is given to the Bill, to throw away their editions of Gray, or Morris and Leach, or Snell, or Cherry or any important works like these, because they will need them for a long time. Even after 80 years or more they will always be able to sell them in Dublin, or British Guiana, or in some place which has retained the old law, as we often find to be the case.
The Bill is retroactive with regard to trustees' administration powers, but there is a further respect in which it should be retroactive because the law is not clear. Where the law is clear, I see the very strong argument for it not being retroactive. A recent decision of Mr. Justice Cross, which will be familiar to all hon. Members, dealt with the future easements of sewers and drains. This has thrown many fluttering feathers into Lincoln's Inn. Briefly, the decision was that the grant of easements for drains and sewers and other such common 700 appurtenances which have not yet been created but which are to be built are void for being a perpetuity.
This at one time provoked a certain amount of trouble in the Law Society, although my noble Friend the Lord Chancellor persuaded their lordships that the Law Society had rather withdrawn its objection. The law, however, is by no means clear, in spite of the great eminence of Mr. Justice Cross, because in a decision in Sharpe v. Durrant in 1910, Mr. Justice Warrington, of equal eminence and distinction, who later became Lord Warrington, although holding that such easements were void, nevertheless said that he was prepared to grant an injunction to restrain not only the original contracting parties but also their assignees, against doing anything which would infringe the covenant, which, of course, was part of the easement. Therefore, the same result would be obtained as if the easement was not void for perpetuity.
I could give a quite interesting lecture on the point, but it would take a long time. All I am seeking to persuade my right hon. and learned Friend the Attorney-General is that the law on this point is in confusion. That being so, it would surely be a good idea to take the chance of the Bill to clear it up. At present, the decision of Mr. Justice Cross, although great authority must be attributed to it, is only that of a court of first instance. There is the slight conflict with Sharpe v. Durrant, and in any event, whatever the rights or wrongs, it is surely desirable that people should be able to grant easements not only of drains and sewers which exist at present but of those which are contemplated and are liable shortly to be created.
There is a precedent for that. Section 162 of the Law of Property Act, which was passed at a time when there was doubt whether easements even of existing sewers, drains and the like might not be void for perpetuity. It provided "that for removing doubts"—and if ever there were doubts, they exist now—the rule against perpetuities did not apply and should be deemed never to have applied to certain easements, namely, the working of mines, the felling of timber, the execution of repairs or 701 alterations on adjoining land and constructing and maintaining sewers, watercourses, drains, gas pipes, electric wires or other like works.
The learned authors of the second edition of Morris and Leach go on to say:This does not apply if the sewers are to be constructed at some time in the future after the easement is granted.I suggest that it should apply and that we ought to make it apply in the Bill, because, as so often happens in commercial realms where the law against perpetuities was never expected to apply, it produces the most ludicrous results.
My other two points on the Bill, which otherwise I entirely welcome, are, first, a slight doubt upon altering the presumption relating to childbearing. It is wrong to have a presumption either way. It seems to me to be quite wrong that it should be presumed—and, indeed, conclusively presumed—that any woman of any age is capable of bearing a child for the purpose of ascertaining the perpetuity period. But it also seems to me to be wrong to presume the opposite. I say this not because I think that they are likely to do so but because under the Adoption Acts which the House of Commons has recently passed an adopted child has exactly the same status as a natural child. Therefore, if any sort of presumption that women over 55 are incapable of having children is made, we shall get into some difficulty, even though that presumption is rebuttable, if the question of the adopted child is ignored.
It is true to say that it is very rare for children to be adopted in the United Kingdom when the adoptive parent is over 55, though I do not think that it is impossible and I do not think that it has never been done. It is quite often done abroad, particularly in France. The life, the 21 years, and all the provisions relating to evolution, apply just as much to foreigners or to British citizens domiciled abroad who can adopt over the age of 55 as it does to those in this country. I should very much like my right hon. and learned Friend to look once again to see that he has not gone too far in altering the presumption round the other way.
It seems to me that no presumption is necessary either way and under the "wait 702 and see" procedure, which we all commend, it should be possible for the court to look at the matter in a commonsense way, irrespective of presumptions.
Finally, Clause 9 is somewhat out of keeping with the rest of the Bill, The rest of the Bill, as the Long Title shows, seeksto modify the law of England and Wales relating to the avoidance of future interests in property on grounds of remoteness…In other words, it seeks to reduce the incidence of the perpetuity rule. In Clause 9(2), however, it does the opposite; it seeks to enlarge the perpetuity rule, if indeed it can be properly so described in this connection.
The perpetuity rule, strictly so called, has nothing to do with Clause 9(2). It is used in Clause 9(2) in the sense of a law against the duration of an interest. Some of the argument which took place between the right hon. and learned Member for Newport and my hon. Friend the Member for Hendon, South seemed to regard the perpetuity rule as a rule dealing with the duration of an interest. That is not a strict definition of the perpetuity rule. The perpetuity rule deals with the commencement of an interest. It is when the interest concerned shall first begin, and not how long an interest shall last. However, in Clause 9(2) it seems to me that the laxer, and, in my view, debased, definition of the perpetuity rule has been adopted.
As to options in gross, which are what Clause 9(2) deals with, the provision is this:In the case of a disposition consisting of the conferring of an option to acquire for valuable consideration any interest in land, the perpetuity period under the rule against perpetuities shall be twenty-one years…The rule against perpetuities, strictly, under the re Chardon decision and according to Mr. Gray's authoritative work, to which reference has been made, does not deal with the duration period at all. It deals with the vesting of an interest. Under the effect of Clause 9(2), an option in gross—that is, an option in a personal covenant between two people—shall be able to last for only 21 years, whether or not it is assigned, whether or not it is devolved.
This seems to me to be a misuse of language. It may be that it is only that. 703 It may be that the combination of Clause 10 with Clause 9(2) makes it clear that the rule against perpetuities is being used in a wider sense than the correct, classical sense. But it should be cleared up. I have heard doubts expressed by eminent lawyers on the subject, and if the rule against perpetuities is being there used in the sense of a period of duration and not of a method of discovery when the interest first bites, that should be made much clearer.
I ask myself one question. Even assuming that the effect is as the Government say it is, and henceforward a duration period of 21 years shall be the maximum creating an option in gross of this sort, is that the right public policy? I do not quite see why one should fetter the freedom of contract in this way.
Supposing two neighbouring land-owners agree to give each other first refusal on their land, should either ever wish to sell, at a price to be agreed by arbitration. They both live for longer than 21 years. Why should the agreement not continue in force? What is wrong with that? Yet it would be caught by these provisions. Why should not two neighbours agree to grant each other options to purchase each other's land for a longer period than 21 years? It does not seem to me that it is essential to interfere with the freedom to make a contract of that sort, and if it is not essential then it is essential not to, under the philosophy of these benches.
I do not see why it is necessary to do this and I think we shall get into trouble. Indeed, trouble has already been got into. As my right hon. and learned Friend the Attorney-General said, there is to be an exemption because Lord Silsoe, in another place, discovered that it would cause great trouble for churches in new towns. But there are similar instances—schools in old towns, for example—in which it is convenient to grant options either to purchase or repurchase for periods of longer than 21 years.
I therefore ask myself whether we really need this provision. It is out of accord with the rest of the Bill, which 704 does not seek to make the rule against perpetuities more rigid but less rigid. Suddenly, here the Bill would make it tighter. We are not relieving the dead hand of its grip, but are actually putting the living hand on with a firm grip, and that is wrong.
I do not feel that this is either such an abstruse or dull subject as the right hon. and learned Member for Newport suggested. We are doing something to modernise the property laws of the country, which is something that we surely all should welcome. For that reason, I am delighted that my right hon. and learned Friend the Attorney-General has done what he has done tonight.
§ 9.0 p.m.
§ The Attorney-General
I do not intend to detain the House for long. I merely wish to emphasise that every speaker in the debate has, in general, welcomed the Bill although there have been one or two criticisms of some of the Clauses. I can foresee that in Committee there will be plenty of caviar for those who have the privilege of attending to these fascinating problems and that we will be able to embark upon the important—from the point of view of those involved—and interesting—from the point of view of lawyers—technical problems about the property law and how it can be improved.
It would not be appropriate at this stage for me to embark upon a discussion of the very interesting points raised. I am grateful to all right hon. and hon. Members who have spoken for the helpful criticisms they have made. I will certainly consider them. Obviously, we will consider them in Committee and, therefore, I do not think it would be appropriate for me now to take up the further time of the House in dealing with the details. As the Bill has had a general welcome, I hope that the House will now give it a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).