Clause 6.—(AMENDMENT OF S. 5 OF TRUSTS (SCOTLAND) ACT 1961.) (Hansard, 26 July 1966)

§ The Minister of State, Scottish Office (Mr. George Willis)

I beg to move, That this House doth agree with the Lords in the said Amendment.

The effect of the Amendment is that accumulations under Section 5 of the Trusts (Scotland) Act, 1961 the so-called Thellusson restrictions-shall apply not only where the relevant deed specifically directs accumulation, but also where it merely permits it. It follows a similar provision for England and Wales in Section 13(2) of the Perpetuities and Accumulations Act, 1964.

A provision to the same effect was included in the earlier Bill which was before Parliament earlier this year. On the Second Reading in another place, however, the noble and learned Lord, Lord Guest, expressed misgivings about it and it and suggested that the provision should be dropped until some such body as the Scottish Law Commission had considered it. This course was adopted. The hon. and learned Member for Edinburgh, Pentlands (Mr. Wylie) subsequently expressed doubts about whether Lord Guest's doubts were well-founded, but agreed to await the Scottish Law Commission's consideration.

On Report stage of the Bill, I informed the House the Law Commission's advice had just been received and that we hoped to finalise consideration of this matter and take the necessary action by way of Amendment in another place. This resulted in this Amendment, which gives effect to the advice of the Law Commission. The advice was, briefly, in favour of the provision. There should not, they considered, be serious difficulties for charitable trusts, since the 1673 restrictions do not strike at their holding income, as undistributed income, for distribution the following year. What the Statute strikes at is accumulation, that is, rolling up income to form a capital fund.

The Commission went on to say that the absence of the provision against permissive accumulation, particularly in contrast with the corresponding English Statute, would be an encouragement to evasion of the law against accumulation. Deeds would be framed with a power to accumulate, not a direction, but the settler would give an indication of his wishes which would doubtless be acted upon.

With regard to the state of the existing law, which was another matter which Lord Guest raised, the Commission gave it as their view that there are indications—but no more—that discretion to accumulate would probably be interpreted as falling within the operation of the Thellusson Statutes. In view of the fact, however, that the Commission conclude that the existing law is in some doubt. we have thought it desirable to leave existing rights undisturbed, but to clarify the position for the future. The Amendment achieves this.

§ Mr. N. R. Wylie (Edinburgh, Pentlands)

The Amendment is welcomed by my hon. Friends. It relates to a highly technical sphere of trust law which has followed parallel courses in England and Scotland since 1800.

In the original draft that parallel course was observed. As the Minister of State said, doubts were raised in another place at earlier stages of this Measure's predecessor in the last Parliament, and the Bill rather went off the rails. However, it seems to be back on the rails and we are now in line with Section 13 of the Perpetuities and Accumulations Act, 1964, which applies to England and, in this sphere of the law which dates back more than 150 years, it is obviously desirable that the law in both countries should he the same. I had expressed doubts on the matter, when the Measure was originally drafted, and I very much welcome the Amendment.