SECOND READING. (Hansard, 29 March 1889)

§ LORD HOBHOUSE
My Lords' since this matter was first before your Lordships a year ago there has been no alteration in the substance or the merits of the case, and therefore I do not pro- 1140 pose to take up your time with any long argument in support of the position that the present system of individual trusteeships is fraught with evil both to trustees and beneficiaries, and that it is most desirable that there should be some change in the law. The suggested remedy has been tested for a long time over a wide field of experience. It has been applied in the United States, Canada, South Africa, and in the Australasian Colonies—in countries where the English system, the French system, and the Dutch system of trusts prevail; and it has been found equally successful in all, from which I infer that it is suited to the wants of active and commercial communities. The suggestion is that solid companies should be formed for the purpose of discharging the duties which are now discharged by individuals. I am not asking for any alteration in the law of joint stock companies, nor am I asking for any alteration in the law of trusts. On the contrary, I propose that corporate trustees should be under the same duties and obligations as individual trustees are now, But, by our law, a trustee cannot receive any profit on account of his trust unless the founder of the trust has so declared in express terms; and either by law or by inveterate practice—I hardly know which—corporations cannot be appointed to various fiduciary positions. What, therefore, is wanted is an alteration of those two rules of law, because, unless they are altered, it is clear that a very long time must elapse before new trusts are created, and even then the field of operation must be imperfect, on account of the offices to which corporations cannot be appointed. The Bill is framed with these objects. One group of clauses provides for such an alteration of the law as will enable companies to carry on business to a substantial extent—that is to say, receiving payment for the offices which they fulfil. There is another group of clauses addressed to the security of the public, in order to guard against there being bubble companies. It is provided that the subscribed capital shall be a large amount—£100,000 is mentioned in the Bill—half of which should be deposited in Court, in order to be security for the customers. The companies are to ren- 1141 der regular accounts to the Registrar of Joint Stock Companies, and any person who desires to satisfy himself of their condition may do so by applying to the Board of Trade to appoint an Inspector to overhaul the books, and the Board of Trade may, if it see fit, require an increase in the deposit. It is provided that the companies shall be under the same liabilities as those under which individual trustees now are, and that the officers shall be liable, by way of contempt and so forth, for breaches of duty by the companies themselves. The Bill has been carefully prepared, after the study of a great number of Acts in the United States and the Colonies for the creation of such companies. It is new, and runs a good deal into details. It is one of those measures wherein skilled heads may be able to detect many faults and suggest many improvements. With this object, I would suggest that, at a later stage, the Bill should be referred to a Select Committee. My Lords, I beg to move that the Bill be now read a second time.

§ THE LORD CHANCELLOR
My Lords, I do not think there is anything that can properly be urged against the principle of the Bill as I understand it; but I think it is very desirable that the principle of the Bill should be understood. In respect to one commercial company—from South Africa I believe—there was an effort to do that which I do not believe any of your Lordships or any English lawyer would recognize as a proper thing to do—namely, to permit them to treat the trust fund as a thing out of which they could make profit. I can understand the propriety of paying trustees—whether a company or individuals—but I would not consent to give any company the power to make a profit out of the trust funds. By the 18th section of this Bill my noble Friend preserves all the liabilities that a trustee would be under when a company becomes a trustee. I would suggest that, in addition to this, the directors should be themselves under personal liability in respect of the company. I do not find that exact security in the Bill, and I am convinced that it is one that is required. These are matters which require careful examination by skilled 1142 lawyers, and therefore I hope that after being read a second time the Bill will be referred to a small Select Committee.

§ LORD HERSCHELL
I entirely agree with the objects of this Bill, and heartily support the Motion for its Second Reading. I think the better plan would be to refer the Bill to one of the new Standing Committees. The Standing Committees have power under the Standing Orders to refer any particular measure to a small Sub-Committee. I should be sorry to see any unnecessary multiplications of Select Committees to do work which I hope is going to be efficiently done by the Standing Committees.