SECOND READING. (Hansard, 26 July 1887)

§ LORD HOBHOUSE,
in moving that the Bill be now read a second time, said, it was difficult to find proper persons to be trustees under wills and settlements. 2 Trustees had very burdensome duties to perform, and under the existing law they could not receive remuneration for their services unless special directions had been given by the creator of the trust that they might do so. The object of this Bill was to enable Companies to discharge trusts—a function which Corporations could not now undertake, because no profits were derived from the trusts, and because Corporations could not be appointed to fiduciary positions. No doubt the innovation he was proposing was a considerable one, but our present system of the discharge of trusts by wholly unpaid volunteers was as unsatisfactory from the point of view of the owner of trust funds as it was from that of the trustees themselves. Persons intending to create trusts had, in the first place, to find some friends competent and willing to perform the duties; not unfrequently they had to resort to their solicitors to become trustees, but the solicitor must be paid somehow, and the combination of the two offices was a; dangerous thing. There was no trust of long standing in which a change or several changes of trustees did not occur, Every one of those changes involved the original trouble of the choice of trustees, besides trouble and expense in the transfer of securities, while such transfer involved some risk to the property, for 3 which agents must be employed and money must be in a single hand for some space of time; and in a considerable proportion of the cases in which trust funds had been lost, the loss had occurred while property was in transitu. He thought that of all classes of Her Majesty's subjects trustees were about the most ill used. They had a great deal of trouble; they had some risk; they had no pay; they had no thanks; and they usually had a great deal of blame cast upon them. Although not paid, they did not enjoy the position of ordinary unpaid bailees, but were visited by the Court of Chancery with extreme rigour, and treated as though they were enemies of the human race, whom it was necessary to restrain by severe examples from doing wrong. He referred to the case of "Driver v. Scott," and "Bartton v. Beard," as illustrations of cruel hardship. He did not pretend that Trust Companies would be perfect, but he thought they would possess these advantages, which would induce a number of people to employ their services. In the first place, they would always be at hand to be chosen. Then we should have trustees who would be always competent, always willing, who did not die, who did not fall ill, who did not go abroad, who did not become too busy to attend to the trust business, who, being paid, would expect no thanks, would be indifferent to reproach, and might suffer some loss without feeling the sense of cruel injustice which embitters the minds of trustees in cases such as those he had referred to. For instance, Mr. Rigby, Q.C., after saying that it was not likely that such Companies would be an unmixed advantage, added— I have myself been so much impressed with he hardship of existing rules of law with reference to unpaid trustees, that I should welcome any well-considered scheme of legislation on the basis of the note which you send to mo I have not been without experience of the working of Trustee and Executorship Companies in the Colonies, and, on the whole, my opinion is that they do good. Mr. Romer, Q.C., also stated— It is clear that now-a-days men of business, of means, and of ability, cannot be obtained to take upon themselves the duties in question; the duties being onerous and attended with heavy responsibilities, while the performer obtains no remuneration, and very often no thanks. It is getting even difficult to obtain a person to fill the offices in question, who has any one of the qualifications I have mentioned or 4 any qualification for the post at all, and I think that something ought to he done, and that speedily. Mr. Lewis Fry, a solicitor who had conducted a large practice in Bristol, wrote— The idea of such an association as you have in view is not new to me, and I entirely approve of it. When I was in practice T more than once made an approximation to your scheme by advising clients to appoint a firm of public accountants in whom I had great confidence as professional trustees at a commission. Another solicitor, in large practice in Lincoln's Inn, remarked that— If the law were altered so as to enable trustees to he paid for their work, I believe the existing Insurance Companies or some of them would at once lay themselves out for this class of business, and I should have often found it very convenient in practice to have such a body to recommend. With regard to the appointment by Trust Companies, and executors, and administrator? he had ventured to consult the highest authority in England. He had given a copy of the Bill to Sir James Hannen, who said in answer— I entirely approve of the objects of your Bill. I would suggest that power might usefully be given to the Probate Court to appoint the proposed Corporations to act as administrators pendente lile." So much for principle and authority. As regards experience, we had none in England. For some years the South-African Colonies and the Colonies of New Zealand and Victoria had adopted the; system he proposed; and there might be other Colonies, of which he did not know. Colonial opinion was favourable to them. He had seen something of their working in two appeals, he believed the only cases that had come before the Judicial Committee. It would be remembered that Judges dealt with the pathology of human institutions, and saw their seamy side. They were not asked in until some wrong had been done or alleged and a quarrel had arisen. Of course, disputes and friction would arise with paid trustees, as with others. Then their doings were subjected to severe I criticism by their opponents. But even in those cases of complaint, it was not suggested that any instance had occurred of deflection or malversation of trust funds. The strong impression on his mind was that these Companies were playing a very useful part in the communities where they had been adopted. It was certain that they were largely 5 used and had attracted public confidence. In the United States of America the system had been at work n great many years. He had communicated on the subject with the eminent lawyer, Mr. Phelps, who represented the United States in this country, and he wrote to him as follows:— The Trust Companies, as they are called in the United States, have been very Successful, and have proved very useful. They transact a large business in the custody, investment, and application of trust funds in various ways; and they are reckoned among our soundest institutions. They do also a considerable deposit business upon which they allow moderate rates of interest, and are much employed for the custody of securities and collection of dividends and coupons thereon. They are frequently named as trustees to whom corporate mortgages are executed. My opinion is strongly in favour of the usefulness, safety, and convenience of such institutions under proper restrictions and regulations. But he did not expect the House to be satisfied with his opinion. He could quote the testimony of other lawyers of great experience. He had now given to the House all the help he could in the way of principle, authority, and experience, and he would go on to explain the mode in which it was proposed to launch the new system. The Bill had three main objects. The first was the removal of those disabilities which prevented Companies from having a chance of starting; the second to provide due safeguards before they started; and the third was to provide official control to regulate them when they had started in their business. The first object was provided for by allowing Courts and persons, who had authority to appoint trustees, to choose Companies for the purpose, and by allowing the Companies to receive payment for their services. The second object was met by Clauses 12 and 18, which provided that before a Company could start in business it must have a subscribed capital of £100,000, of which £50,000 was to be deposited in Court to be invested in the name of the Paymaster General, and to be a security for the beneficiaries in priority to the claims of any other creditors of the Company, and that the Board of Trade should be empowered to require a further deposit whenever they might think it needful. By Section 18 a Company was required before starting in business to state in the articles of association a scale of charges, and there would be certain re- 6 strictions as to the alteration of such charges. The other clauses of the Bill sought to attain the third object. Clause 16 provided that the Companies should be under the same liabilities and rules as individual trustees. By Section 21 power was given to the Board of Trade to inspect the affairs of these Companies and to appoint an auditor at the Companies' expense whenever needful; an annual statement would have to be made to the Registrar, and by Clause 23 the beneficiaries might without action and in a summary way have an account taken of any funds that belonged to them. He begged to move the second reading of the Bill.

THE LORD CHANCELLOR (LORD HALSBERY)
said, he confessed that he had not had an opportunity of mastering the whole of the proposals made by the Bill; but one thing struck him as somewhat startling—namely, that these Corporations were to be entitled, he supposed, to speculate with the trust funds. He understood from the noble and learned Lord that, besides getting remuneration, the Companies were to use the trust funds for commercial adventures. [Lord HOBHOUSE dissented.] If he were wrong he would withdraw the observation. He would only say, that if there was one thing more than another to be guarded against it was that trust funds should be used by those who managed them. The measure would require very careful examination; and while he would not oppose the second reading, he trusted that before further progress was made with it an opportunity would be given to their Lordships to thoroughly master its details.

§ LORD FITZGERALD
said, that the practice introduced by this Bill had already been in operation in the United States and in various of our Colonies; but the introduction of what he might call a foreign system into this country: required great care. He would recommend their Lordships to read the Bill a second time, as he believed it to be a well conceived attempt to provide for a great want in our legal system; but he thought the measure should not be further proceeded with until it had been carefully examined in detail. He quite agreed with the principle of the Bill as to the delegation of trusts; but there 7 ought to be the most satisfactory guarantees that the trust funds should be preserved intact. He would advise his noble and learned Friend to be content with the second reading of the Bill then, and to re-introduce it next Session, when it could be referred to a Select Committee.

§ LORD HERSCHELL
said, there could be no doubt that the position of a trustee was one of very considerable risk. Latterly that risk had narrowed down to the general honesty of those who were conducting the legal affairs of the country. In individual eases now and then the risk had become felt, and had involved the most lamentable consequences. It was a risk from which no trustee could absolutely free himself; for it was impossible for any trustee to give that personal attention to every detail, every action, which alone could insure his complete security. On the other hand, it was very difficult to refuse a trusteeship, though many would gladly do so. There was scarcely any trustee who knew whether any property which he believed to be his own was really so, or whether it was liable to; meet the defalcations of those who managed the trust. This measure would, to some extent, meet a much-felt want, and, if its provisions were carefully considered, might be of public service. He had always looked forward to the time when they might see the creation of an official trustee with absolute security for the cestuis que trustent; and he did not think such a measure as this would stand in the way of such a proposal. He trusted the noble and learned Lord would not carry the Bill beyond a second reading that Session.

§ LORD BRAMWELL
remarked that, though not so well acquainted with the Law of Trust as he was, or ought to be, with the Common Law of England, it would not be amiss that he should express his goodwill towards this Bill. One advantage that the Bill possessed was that it was entirely voluntary in its application, no one being bound to employ these Companies as trustees. He Believed that at present trust funds were more often wasted by improper investment, under pressure from the cestuis qua trustent, for the purpose of obtaining higher interest, than from actual dishonesty. That danger would be avoided if the Companies were trustees, as no pressure could be brought to bear to 8 tempt them to invest in dangerous securities. He sincerely hoped the Bill would pass into law.

§ LORD HOBHOUSE
said, that he should not proceed further with the Bill this Session, but would, as had been suggested by his noble and learned Friend, bring it forward again at an early period next year.