HC Deb 01 July 1964 vol 697 cc1499-505

As amended (in the Standing Committee), considered.

Order for Third Reading read.—[Queen's Consent, on behalf of the Crown, signified].

10.55 p.m.

The Attorney-General (Sir John Hobson)

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

This may appear to be a somewhat recondite and technical subject, but it has some important social and economic consequences because it deals with questions of whether there should be a limit to the length of time during which capital should be tied up and the length of time within which interests should vest in trust funds and funds disposed of by will.

These are important matters, first, as to whether there should be a limit in these matters and, secondly, how long that limit should be. When those matters have been discussed and decided, the question arises as to how those limits should be applied in a great variety of circumstances applying to many forms of dispositions and instruments and to many different types of interest which are created under those instruments.

It is because the Bill deals largely with those latter questions that it is a technical matter. We have been involved in some technical and, at the same time, difficult discussion on the subject. We should, nevertheless, not overlook the fact that the Bill will have important impacts, first on family settlements and on dispositions by will—not only of great estates but many individual testators and many people who are making family arrangements in relation to family businesses and quite small estates—and, secondly, it will have important impacts indeed upon pension funds, where very large funds are at stake. The impact of the Bill on these funds will concern those who have an interest in them both as to the continuation of those funds and on the right to accumulate the income of the funds.

We made some Amendments in Committee and I should like to express to hon. Members who where members of the Committee my appreciation and that of the Government for putting at the disposal of the Committee their knowledge and experience of this difficult subject and for the help they gave in trying to improve the Bill. You will have observed, Mr. Deputy-Speaker, that there were no Amendments down on Report. This is due not to exhaustion on the part of Members of the Committee but, I hope, only because they have exhausted their capacity to improve the Bill further.

The Bill removes some of the inflexibility of the present law and it will, I hope, do something to make more real the giving of effect to the actual wishes of testators and those who have made settlements. It particularly does so by looking to see what happens as time progresses, rather than considering at the moment when an instrument begins to operate every possible contingency which could occur, and saying if one of them could occur outside the proper period, then to that extent the disposition is invalid.

The other major reform is that the Bill introduces a convenience for conveyancers in allowing a fixed period of 80 years instead of a conveyancer having to rely on the device of a Royal lives clause or other device for use for private settlement and pension funds.

I wish, once more, to express the gratitude of the Government and, I am sure, of all hon. Members to the Law Reform Committee, the members of which considered this difficult subject. The Committee consisted of two lords justices, two high court judges, as they then were, three members of the Bar, two solicitors, four academic lawyers of distinction and a secretariat provided by the Lord Chancellor's Department.

I am sure that a difficult technical and complicated subject of this sort could not have been dealt with except by a Law Reform Committee that could bring expertise of the standing and quality that this Committee could bring to bear on the subject. I think it now shows that the Law Reform Committee can deal with these extremely difficult topics in a way in which almost no other committee, unless similarly constituted, could have dealt with them. It also shows that law reform is not simple and easy and cannot be done in a hurry, and requires very long and careful consideration.

I think that I need say no more as the Bill has been very thoroughly discussed on each of its stages. I commend it to the House.

11.6 p.m.

Sir Frank Soskice (Newport)

There is not much left for me to say on the Third Reading of the Bill. I certainly think that we achieved one great objective in the course of our discussions, and that was to discover what the Bill meant. It is a Bill which has far-reaching implications, as the right hon. and learned Gentleman said. It is not quite as abstruse as it looks at first sight, but it is nevertheless a Bill which, on the whole, is removed from our daily dealings and normal intercourse one with another.

I do not feel that my anxieties have been wholly removed with regard to the substitution in Clause 1 of the 80 years' perpetuity period. I do not feel more convinced than I was earlier by the argument that was used of the Royal lives device as a justification for making a discretionary trust an easier thing to draft and to incorporate in a document. However, I am glad to assent to the new proposal in the Bill because, on the whole, I think that the advantages which the Bill confers in improving the law with regard to perpetuities and accumulations outweighs that disadvantage.

I certainly agree with the right hon. and learned Gentleman that the "wait-and-see" Clause, Clause 3, is a good one. I think that it will remove a good deal of uncertainty and will give rise to much more precision in the ascertaining of the interests of beneficiaries under dispositions.

I should also like to take this opportunity of thanking the right hon. and learned Gentleman for the great help that he has given the House personally, and those associated with him, both in the course of our earlier debates on the Floor of the House and in the course of our Committee debates. I also join with him in expressing appreciation of the work of the Law Reform Committee, I agree with the right hon. and learned Gentleman that no single body of human beings could have addressed itself to this task as that Committee has done and that we owe it a great debt of gratitude for undertaking an examination of the existing law with regard to perpetuities and accumulations.

I should like to put one or two points to the right hon. and learned Gentleman. I understand that he has already received, as I have, representations with regard to the possible effect of the Bill on pension schemes. In particular, I understand that apprehension has been felt with regard to this possible result of the Bill. Clause 15 of the Bill may, so it is thought, impose serious difficulties as far as the accumulation of rules are concerned in the case of privately administered pension schemes.

That would not be the case if Section 164 of the Law of Property Act, 1925, does not apply to pension schemes. I gather that the view of the Government is that that Section, in fact, would not be applicable to such pension schemes. I believe that the Government have cited and relied upon two decided authorities, the second of them, which is the more directly in point, being the case of the A.E.G. Unit Trust, reported in 1957 in Chancery, page 415.

Although the Government relied on that case, I gather that those who have put difficulties which they feel with regard to the point are not wholly reassured, and I would be grateful to know if the right hon. and learned Gentleman has any statement which he thinks he can make on the point.

The other point that I gather has been raised with the Government is one turning not on the accumulations but on the perpetuities aspect of the Bill. The point centres on the "wait-and-see" Clause—Clause 3. I understand that it is felt that it may be well nigh impossible to administer both existing and future pensions schemes because of the new situation introduced by Clause 3. It is thought in some quarters that the possible results of that Clause may be that each individual payment under a pensions scheme will have to be treated as a separate disposition, and will have to have applied to it a separate perpetuity period. If that is the case, so the apprehension is voiced, it will be well nigh impossible to administer pensions schemes.

I have reason to think that the Government have answered the apprehensions expressed, and feel that no difficulty need be feared in that regard. Nevertheless, the doubts have been voiced, and it would be a great help to those concerned with the administration of pensions schemes if the right hon. and learned Gentleman felt able, if the House gave him leave, to say what the Government feeling is with regard to these two categories. I gather that there are other similar points of a highly technical nature which I do not think it would really help the House now to raise, but any further and general statement that the right hon. and learned Attorney-General might think fit to make would be greatly appreciated among those who have to deal with pensions schemes.

11.7 p.m.

The Attorney-General

With the permission of the House, perhaps I might deal with the points raised by the right hon. and learned Member for Newport (Sir F. Soskice). I am very grateful to him for his support of the Bill. He asked, first, whether Section 164 of the Law of Property Act, 1925, might not apply so that pensions funds would be adversely affected. He is right in saying that this point has been dealt with in correspondence and, certainly, the view of myself and those who have also considered the Bill, and of my noble Friend, the Lord Chancellor, is that Section 164 is inapplicable to pensions funds; that the Section was never intended to apply, and did not apply, and did not have reference to bargains or contracts entered into for purposes other than the purpose of accumulation, and that if that were not so it would lead to great difficulties, because it would endanger such essentially commercial transactions as partnership agreements which provide that certain sums shall be drawn from the profits, and that the remaining profits shall be accumulated and divided up only at the end of a long term of years.

Unless the principle underlying the particular cases to which the right hon. and learned Gentleman referred is that commercial transactions, contractual transactions, transactions that are not intended merely to provide a fund the income from which shall be accumulated for a number of years are not subject to Section 164, very great difficulties indeed would occur. It is quite plain, I should have thought, that should the courts disagree with the view I have expressed of the inapplicability of Section 164 to pensions funds and other such commercial transactions, any Government would have immediately to legislate retrospectively to put the matter right, because one could not leave a situation in which the accumulations that had been made under very numerous funds and very numerous arrangements were found to be invalid and improper. The matter would have to be put right in such circumstances by legislation, should the courts in the end disagree with the view that I and the Lord Chancellor in correspondence have expressed.

It might be said that this could have been dealt by putting in a Clause for the removal of doubt, and that this would have prevented any possibility that the courts might disagree with the view that has been expressed, but it would then have been necessary not only to have defined what a pension fund was to which Section 164 was not to apply, but to lay down a complete code of all those commercial and other transactions in which and to which Section 164 was not to apply. This would have raised very difficult and awkward questions, and had legislation been confined only to the question of pension funds it would have thrown very much more doubt upon the other transactions to which it is at present thought that Section 164 does not apply.

So much for the point on Section 164. As to the impact of the principle of "wait-and-see" contained in Clause 3 upon pension funds, I find it difficult to understand how it can be thought that that provision will apply to each individual contribution as it is made to a pension fund. Most pension funds will still be subject to either a Royal lives clause or possibly in future a fixed period of 80 years which, whatever one may say about family settlements, will be of great use to conveyancers in drawing up a perpetuity period for a pension fund. What one will have to wait and see is whether the fund set up lasts for the specified number of years or when the Royal lives drop.

Until that happens the fund can properly be carried on without any contravention of the perpetuities rule and therefore it does not seem that there can be any cause or any reason why anybody should consider that individual contributions must be separately analysed, because if at the moment when they are made the "wait-and-see" period has not come to an end they will be a proper contribution to an existing fund which is being properly carried on.

I therefore find great difficulty in understanding what is the point that is being made under this heading. Those on whom I rely for advice also find it difficult to see that there is any cause for anxiety and I hope that the House will accept the Bill and give it a Third Reading.

Question put and agreed to.

Bill accordingly read the Third time and passed, with Amendments.