§ House in Committee (on Re-commitment) (according to order).
§ THE LORD CHANCELLORMy Lords, I have an Amendment to offer to your Lordships. It raises an important question, whether or not the Trust Companies, which are to be permitted to carry out this business under the sanction of Parliament are to be allowed to go outside Trust Companies' business, and to engage in any speculations which the directors of those companies may think would be profitable for the share-holders. At the time this alteration of the law was first proposed it was suggested to your Lordships, as I think upon very substantial and reasonable grounds, that there was a great want of Trustees, and that it was often very hard on people to be called upon by Friendly Societies, or otherwise, to undertake the burdensome, difficult, and responsible duties of Trustees, when, as a matter of fact, they had no interest whatever in carrying them out beyond care for relations and friends, and yet were frequently made liable for losses, and often incurred severe pecuniary expense. That want is admitted, and the Government has endeavoured to supply that want by the Bill by which it is 962 intended to create a public Trustee. But apparently the ground has, to some extent shifted, and the idea now is, that these companies may turn out to be preferred by many people, and that they will do so large a business as to become very profitable. I am told that some of the companies who now do business in this way, though restricted to their proper Trust business, actually divide as much as 40 per cent., which, I think, ought to be enough to satisfy any reasonable persons. But if this perfectly unlimited ambit of speculation is permitted, I cannot help fearing that one of these days a great crash may happen. It cannot but be within the knowledge of many of your Lordships that companies are sometimes brought out under such circumstances as that commercial success is not likely to follow, and it is the fact that many of them do undoubtedly engage in very speculative business. My noble and learned Friend has pointed out that people are not compelled to appoint these companies, and that the Bill only gives them the option of doing so. That is true of all companies; you do not force people to take shares in them; but I think the Government would, by legislation of this kind, be rather inviting people to take shares in companies of this description; and that, at all events, it ought not to allow this. Bill to pass without some kind of protest and provision being made against such companies going outside their proper functions, and engaging in every kind of speculation. I would put it to your Lordships that if you were selecting a Private Trustee you would not choose a person who was likely to go into all kinds of speculation; and if there is no limit placed to the speculations in which these Trust Companies may engage, it appears to me that you would be holding out a premium to every kind of company of this description, good and bad, sound and unsound, engaging in rash speculation; and they may, in that way, get many dupes to trust them. I, therefore, think it undesirable to alter the law in the way in which this Bill would alter it, without some safeguard; and the particular Amendment now proposed to your Lordships is, first, to leave out the word "include." If your Lordships negative that, I do not propose to go further with these Amendments, in 963 order to prevent the decision which the House may arrive at being final. I, therefore, ask your Lordships' judgment in the first place on the omission of the word "include," and if that is carried I shall then move the consequential Amendments which stand in my name.
§ Amendment moved, in Clause 2, page 1, line 11, to leave out the word "include," and insert the word "are."—(The Lord Chancellor.)
§ LORD HERSCHELLI hope your Lordships will not accede to the Amendment which has been proposed by my noble and learned Friend, because, in my judgment, it would go far to render the Bill altogether useless. I do not put this, of course, as in any way binding the House; but I would suggest that the matter was fully discussed before the Grand Committee the other day, and the Amendment proposed by my noble and learned Friend was rejected by a majority of 15 to 8, and I need hardly say that that large majority was not composed of noble Lords on the political side to which I belong, but of the Party to which my noble and learned Friend belongs. It was, therefore, as your Lordships see, in no way treated as a Party question in the Committee of this House, and I trust it may be treated as entirely distinct from Party feeling here as it was there. Now, my noble Friend has suggested, I think, that this proposal was a kind of afterthought, put forward to oust his proposal for the appointment of a public Trustee. Well, I think there is a little chronological defect in that argument, namely, that this Bill was before the House before my noble and learned Friend made any proposal about a public Trustee; and it was only when this Bill had been introduced, and as bearing upon the subject of this Bill, that he for the first time proposed to deal with this question, and satisfy the want to which he alludes by the appointment of a public Trustee. I am not indicating the slightest hostility to the proposal for a public Trustee. I said when my noble and learned Friend first proposed it that I should render him every assistance in endeavouring to pass it into law. There is no necessary rivalry that I can see between the two schemes. Some people would, perhaps, prefer to appoint a public Trustee, and there are others who have great dislike to and 964 distrust of what they call officialism, and of the delay and red-tapeism which is supposed to be characteristic of a public office. Those people will very likely prefer a Trust Company to a public Trustee, and my suggestion is simply to leave people perfect freedom in the matter. Why we should treat people as children or idiots, and incapable of managing their own affairs, I am entirely unable to understand. At the present time a man may choose whom he pleases as his Trustee. He may, if he pleases, choose the most speculative person in the world, the most worthless person in the world, or the most impecunious person in the world—it rests with himself. Why if a person desires to appoint a Trust Company as his Trustee are you to say to him, "You are only to appoint a company which does that kind of business, and nothing else," and why you are not to leave him to his choice, and if he thinks it best appoint a company which does not limit its business to undertaking the duties of Trusteeship, I cannot see. It is assumed that a company which limits its operations to Trusteeship will be a better and a safer company than others, but it does not follow at all that that will be the case. It is likely that there will be many strong companies which do not limit themselves to this kind of business, who would be much safer Trustees than the companies to which my noble and learned Friend proposes to limit the Bill. It seems to me it will not do at all to say that if you are going to have Trust Companies you must only have those to which my noble and learned Friend chooses to limit this measure, instead of leaving it open to probably much stronger companies, with much larger paid up and unpaid capital. What is the reason for it? Why should not you leave men to choose for themselves the companies which they think they can trust best? Where is the risk in doing that? My noble and learned Friend talks about companies speculating with their Trust Funds, but the truth really is that as they have not the right neither will they have the opportunity of speculating with the money entrusted to them. They are bound, just as any other Trustee is bound, and they would simply be going beyond their powers and duties as Trustees in so dealing with Trust money. Of course, a 965 Trust Company may be dishonest, as an individual Trustee may be dishonest, but I do not know why there should be any more reason for supposing dishonesty in the one case than in the other. Indeed, the contrary may be expected. One has had experience in numbers of cases in which Trustees have unfortunately proved to be dishonest, and you cannot prevent dishonesty do what you will. That is no ground of objection therefore, and if persons prefer a Trust Company of this description, I do not see why the Legislature should stand between them and their wish. It is not as though people were to be compelled to adopt one course. This Bill proposes that Trust Companies may be appointed in two ways; in one case it is left to the person's choice, just as now, and in the other case there may be a selection made among these companies. That is the selection the consequences of which my noble Friend so much fears. But is it the province of this House to teach people their business, and to prescribe for them whom they are to trust and whom they shall not? I am entirely against any interference which would prevent them from managing that matter for themselves. Then, there is one other great objection which I have to this proposed limitation, and it is this: If you limit the operation of this measure to companies which carry on the business of Trusteeship alone, it appears to me that they will be likely to make much heavier charges for the work they do than companies which do not limit their business in that way, because companies of that kind would be' able to distribute their charges over their general business, and they would have much less cause to charge heavily for this work than companies whose work is limited to Trust work only. This is one of my objections to this limitation: That you not only limit a man's choice, but you drive him to a company which may be undesirable for his beneficiaries and for the Trust Fund. My noble Friend says that some of these companies have divided 40 per cent. I should very much like to know where they are to be found, and how it can be done except by making tremendous charges for the work performed I am at a loss to understand. Suppose a company only does the work of Trusteeship, and that it divides the 40 per cent, profits. I will tell my noble 966 and learned Friend what I think the nature of that company will probably be. I believe that would be a company which invests a great deal of its money in land in one of the colonies, and that the profits are made by what I will call land speculation: that is to say, it invests its reserve funds, which are to stand against any of its liabilities under the Trust, upon land in situations where the company thinks it will improve in value, and will yield large profits, But that is a sort of speculative company which may one day invest its capital in land which may turn out to involve a loss, or to be unprosperous, and the company's dividends may disappear. I do not think a company which pays 40 per cent. in that way is a specially safe company. That tremendous percentage of profit cannot be made without risk in some way or other, and it would very soon cease if it were made, for it would probably be driven out of the field by rivals competing for such profitable business. I am, therefore, a little sceptical with regard to companies which make 40 per Cent, in this business. I ask your Lordships to pass this Bill, which was passed by the House last year, and sent down to the House of Commons without this limitation in it. If it was unobjectionable then without that limitation, it is surely unobjectionable now, and I cannot think there is sufficient reason for preventing people from applying to companies which deal with their funds in other ways, if they choose.
§ THE LORD CHANCELLORI should like to say one word, because one part of my noble and learned Friend's argument is a little technical, and, without explanation, may be liable to be misunderstood. He says that the guarantee can only be against actual breaches of trust. That is quite true; but assuming that shareholders have paid up all their liability upon shares, there will be no further capital available for speculation, or to meet losses made in that way, because those would not be companies with unlimited liability. But if there is a liability, and if there is uncalled-up capital, the result will be that the shareholders' liability may not be available, and the power of the company to pay or make good breaches of trust will be impaired upon the failure of any portion of this speculative business. If the company 967 should be dealing with shares, for instance, and by some sudden change in the market the company were called upon to supply some £200,000 or £300,000, although that would have nothing to do with the particular investments which the company had been making, the ability of the company to pay, which is all the cestui que trusts have to rely upon, is gone in face of another liability to perhaps the full extent of all their property and business. Then it seems to me there is no guarantee in those circumstances. The hypothesis in all these cases must be that Trustees shall be able to produce at any time the property entrusted to them, and if the property has not been misapplied there will be no doubt about it. But the property may, on the other hand, have been misapplied, and the company may have used the Trust Funds in a way they should not, and in that case all the unfortunate cestui que trusts have to look to is the unlucky shareholders, who are just as liable to be called upon in regard to outside speculations as for making good their Trust Funds.
§ LOED HERSCHELLNo doubt such cases might arise, but that is true also of private Trustees, and in their case you do not provide for keeping a reserve fund. You would, therefore, certainly be no safer with a private Trustee than with a company. Suppose you have a Trust Company which is doing none but Trust business, you will naturally have but a very small capital called up and duly invested. My noble and learned Friend would leave the company to speculate with its reserve fund, which is all the cestui que trusts have to look to, just as it pleases. It may invest that in order to get its 40 per cent, in the most speculative schemes in the world, and it will be sure to do so, because that is the only way in which to make its business pay.
§ * LORD BRABOURNEIt is, I am afraid, very presumptuous in me to interfere in a discussion between a Lord Chancellor and ex-Lord Chancellor, but there are two points upon which I should desire to say a few words. One is, that I would invoke the interference of the head of the Government in favour of our Standing Committees; otherwise I fear that if the Government come down and ask your Lordships to reverse the decision of a Standing Com- 968 mittee after it has met and considered and taken a particular view, the attendance at Committee meetings will become rather scanty. We did consider this question fully, and decided by a majority of 15 against 8 in favour of the Bill as it stands; and I think to reverse such an opinion would weaken the authority of Standing Committees. I do not think the argument put forward by the Lord Chancellor is at all valid, because the greater the share capital which might be possessed by a company doing such other business as has been referred to the better security for the stability of the Trust Company. I may mention that I am acquainted with a Trust Company which is incorporated principally for that object, but which does a very extensive business, in another direction; and I would humbly submit that the stability and fitness of that company to be a Trust Company is increased by the fact of its carrying that other business, and that it is more likely therefore to be a solvent Trustee than if it had only the limited business appertaining to trusteeship. I sincerely hope, therefore, that this Amendment, put forward, no doubt, with the best possible motives, will be regarded as a direct restriction upon commercial enterprise, and that people may be supposed to be sufficiently wide-awake to their own interests not to choose an undesirable Trustee, I hope, therefore, this limitation will not be made.
THE LORD PRESIDENT OF THE COUNCIL (Viscount CEANBROOK)I rather protest against the noble Lord's, view that nothing is to be reviewed in this House which has been decided in one of the Standing Committees. A Standing Committee may happen to have a majority one way or the other according to the attendance of noble Lords upon it; and to say that there should be no revision would be to reduce the House to an impotence which I am quite sure the noble Lord would not wish. I was one of those, I may say, who voted with the Lord Chancellor in the Committee, and I myself do feel strongly that a Bill of this description should guard the public in every possible way in reference to the operations of these Trust Companies. I cannot imagine that this is so simple a matter 969 as the noble and learned Lord opposite would submit to the House. We have such considerable experience of companies in these latter days, and of so many of them coming to grief, that we cannot be too careful. If it be, as it will be, supposed that they have received special Parliamentary authority to take up private Trusts for individuals, we may easily imagine, though that in itself is not any real security, yet it may tempt people to so appoint them, and to invest in them as in the case of Friendly Societies in which without any guarantee on the part of the State people have been induced to invest their funds, and often invest them in that which is not a good security. Here we have a Bill before us of a great many clauses, and I am quite sure my noble and learned Friend would not wish to bring in a Bill which would not offer every security. At the same time, the very fact that you require some provision of the sort for this purpose shows that you must deal with companies much more strictly than with individuals. In the case of these companies there will be supposed to be a Parliamentary security; and I can only say that if there be a Division, I shall be obliged to repeat the vote I gave in Committee.
§ LORD THRINGAs your Lordships know, the object of this Bill is to enable Trust Companies to occupy the place of Trustees and Executors. There are certain technical regulations imposed by law relating to Probate and executory dispositions, and no doubt it has been found necessary that safeguards should be introduced. But I do trust your Lordships will not accede to the proposal of the Lord Chancellor. Joint Stock Companies have now for more than 60 years been struggling to emancipate themselves from the fears of capitalists and the quibbles of lawyers; and now what is proposed to be done is that we shall introduced the thin edge of the wedge. It is proposed to limit the operation of these companies, and that would be, I think, merely a prelude to putting fetters on companies in general. I believe no greater benefit has been derived by mankind from anything than from the freedom which has been accorded to companies. Your Lordships are aware that many banks have become Limited Companies, like many other large commercial undertakings, and I trust your 970 Lordships will not accede in this particular case to a proposition to put companies in fetters, which will not only disable them from making money for their shareholders, but will diminish, instead of increasing, their security. Besides all that, what possible ground can there be for dry-nursing people? People select their own bank, which is rather an important matter, and surely they can be left to select a Trustee as well as a bank. In appointing an executor, they may just as well appoint a particular company as a particular man. In neither case can there be absolutely security against dishonesty, and I hope your Lordships will not sanction this most retrograde piece of legislation for the purpose of limiting the operations and business of companies, a provision which would reverse the whole policy of our legislation in these matters for the last 60 years.
§ EARL GRANVILLEMy Lords, it seems to me the argument has been very nearly on one side, and that the matter is viewed by the House in the same way as it appeared to the Committee after a great deal of discussion. But the point which I wish to draw to your Lordships' attention is this: I entirely agree with the Lord President of the Council that there can be no question as to the House abdicating its right to discuss and amend any arrangements made in the Committee. On the other hand, I think it is very much to be deprecated that when a legal detail of this sort has to be fairly considered the House should not be left entirely open to vote as it may think right, and that the Government should not be invited to use pressure or in any way assist in a particular course being taken. And I think so the more strongly here, for I believe I am rightly informed that in the large majority of 15 to 8 there were, except Members of the Government, only four of the noble Lords on the Committee who took the same view as the Lord Chancellor.
§ * LORD SUDELEYThere is one point in this Bill which your Lordships ought, I think, to bear in mind. It may be a good or a bad thing that Trustee Companies should exist, but I think your Lordships ought to remember the exact position in which we are placed as the law stands at present. I think the Lord Chancellor will agree with me that 971 you can have Trustee Companies to any extent. In fact, it is very well known that a large, number of Trust Companies do exist, and that Trustees' work is very much undertaken, especially for large Debenture issues. But what does this Bill do? The whole object of it was that if people are to be allowed to place funds in the care of Trustee Companies, they should be companies which are responsible concerns. Care should be taken that they are companies which have large reserves, that the Board of Trade shall occasionally look into their accounts and see that there is a proper reserve, and that the whole thing is properly done. Undoubtedly there are further conveniences afforded by this Bill which will enable existing Trusts to be undertaken by these companies; but as the law stands at present, there is nothing to prevent new trusts being created and put in charge of these Trustee Companies. As I believe, the great security is to make Trustee Companies as strong as possible, to allow them to do legitimate finance work and then establish large reserves. To limit their powers as proposed by the Lord Chancellor seems to me to cripple them and render them weak. You have no guarantee whatever at present that these Trustee Companies shall have proper reserves or that they are properly looked after. I apprehend, therefore, that if the view of the Lord Chancellor is right in this matter in not letting this Bill pass without such safeguards he ought to see that they are imposed by further legislation, and that companies engaging in business of that character shall possess large reserves, and are properly looked after.
§ THE LORD CHANCELLOROne word in answer to what the noble Lord the leader of the Opposition has said. I hope nobody will vote for the Amendment simply because it is moved on the part of the Government, and that everybody will exercise his own discretion in the matter. Entertaining the strong view which I hold in this matter, I think it right to take the opinion of the House upon it.
§ On Question, "That the words proposed to be left out stand part of the Clause," the House divided:—Contents 23; Not-Contents 38
972§ EARL GRANVILLEI would only say that it is extremely kind of the Lord Chancellor to announce that the Government do not wish to influence the House, but leave them to exercise their individual judgment. I would point out however, that it is hardly consistent with that announcement that the Tellers opposed to my noble and learned Friend should both be Government Tellers.
§ THE LORD CHANCELLORThere are some Consequential Amendments. I need not say anything about them.
§ LORD HERSCHELLOf course, I shall not oppose the Consequential Amendments; but I desire to say that as regards the Bill, now so absolutely worthless after the decision to which the House has come, I should not proceed further with it but for the hope that, the view now taken by a comparatively small majority may not be taken elsewhere. That is my only reason for proceeding with it.
§ Other Amendments made.
§ LORD HERSCHELLI propose to omit Clause 17 in order to insert a new clause in consequence of a decision that was recently come to turning upon an old doctrine of law that a Corporation and an individual could not be as Trustees joint tenants, as there would be no question of survivorship between them. The proposed new clause enacts that they may be registered together, and are to be treated as joint tenants. I suppose the noble and learned Lord will have no objection to that. It is a somewhat elaborate clause, but that is the purport and intention of it.
§ Report of Amendments to be received on Thursday next, and Bill to be printed as amended.—(No. 42.)