§ 2.57 p.m.
§ Order of the Day for the House to be put into Committee read.
§ Moved, That the House do now resolve itself into Committee.—(The Earl of Dundee.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD AILWYN in the Chair.]
§ Clause 1:
§ New powers of investment of trustees
§ (3) No provision of any Act or instrument relating to the powers of the trustee which was passed or made before the passing of this Act shall limit the powers conferred by this section, but those powers are exerciseable only in so far as a contrary intention is not expressed in any Act or instrument so relating which is passed or made after the passing of this Act.
LORD HAWKE moved, in subsection (3), to leave out all words after "expressed" and to insert instead:
in any Act. will or other instrument so relating which in case of an Act is passed, in the case of a will is made or in the case of any other instrument takes effect, after the passing of this Act
§ The noble Lord said: In the dusty boxes in solicitors' offices there exist wills with narrow Victorian trust clauses. Humanity, as regards wills, is divided into changers and non-changers. The changers we all know: they send for their lawyer and their will at very frequent intervals, as and when their relatives go up and down in their estimation. But among the non-changers the will tends to lie, unknown and forgotten, in these boxes. My point is one which I think is probably covered in the Bill, but there is no harm in making certain.
§ I want to make sure of the position in the case of a testator who has one of these old-fashioned clauses. If he dies before this Bill becomes an Act, quite clearly his trustees will get the benefit of the Act. But suppose he dies after the Act has become operative and leaves the same will. Will it be supposed that he had the opportunity of changing his will but did not do so, and thus signified his wish, in his narrow clause, to override the greater freedom given by the Bill? I want to ensure that the relevant date on which he is held to have made his decision is the date of his will and not the date of his death or the coming into force of his trust provisions. As I said before, I hope and believe that this is covered in the Bill, but I should like the assurance of my noble friend. I beg to move.
Page 1, line 18, leave out from ("expressed") to end of line 19 and insert the said new words.—(Lord Hawke.)
§ THE LORD CHANCELLOR
I am glad to be able to assure my noble friend that his hope and belief are right, and that his doubts are wrong. The clause as drafted specifically provides that the date on which the instrument (which would include a will) is made is the date which determines whether or not a contrary intention should be recognised. The vital time is when the instrument is made. If I may say so with respect, I do not think that my noble friend's Amendment would help on the matter, but can certainly give him that assurance, which I think deals with the possible difficulty that he has in mind. That difficulty does not exist, and the only case where the contrary intention comes up is in the case of a will or other 274 instrument made after this Bill comes into force.
May I, with great hesitation, express some doubt as to whether the matter is entirely clear? I agree with everything that the noble and learned Viscount the Lord Chancellor has said, but there seems to me to be a casus omissus. The case in which I feel there may be difficulty is this. If somebody makes a will before the passing of this Act, that will be covered because it has been made. But suppose that, after the coming into force of the Act, the testator adds a codicil in which he confirms his will. Surely in that case he ought to he entitled to override the Act: because the usual form of a codicil, as my noble and learned friend knows, is that it ends by saying, "In all other respects I hereby confirm my will". Now that would be a deliberate act, done after the coming into force of the Act; a deliberate act adopting a restrictive clause. SO I wondered whether that ought not to be allowed to stand, and I thought that was probably covered by the words in the Amendment of my noble friend Lord Hawke,… in the case of any other instrument…A codicil would be another instrument and, if it confirmed the will, I think that might be the thing. I think that perhaps it might be clearer if the subsection said something to this effect,Provided that, if the will is made before the passing of this Act but is confirmed by a codicil made after the passing of this Act, the will shall be deemed to have been made after the passing of the Act.I am not moving an Amendment, but I would ask that my noble and learned friend the Lord Chancellor might consider that before we come to the Report stage.
§ THE LORD CHANCELLOR
I will certainly consider that. I should have thought that the codicil was an "instrument…made after the passing of the Act". I think my noble and learned friend Lord Cohen is inclined to that view.
§ THE LORD CHANCELLOR
Therefore the effect would be as he suggested. But I should like to consider it. I think my noble friend Lord Hawke was really 275 on the point of whether the critical date was the making of the will or other instrument or the death, and on that I am quite sure that I am right—and I am glad to see that confirmed by my noble and learned friend Lord Cohen. I will willingly have another look at the codicil point, although, as I say, with all reservations as to forms, which I am sure my noble and learned friend would like me to make, I am inclined to agree with him as to the effect.
I thank my noble and learned friend very much for his assurance. Before withdrawing my Amendment, may I say that I forgot to mention that my Amendments are purely home-made drafting and, therefore, if accepted as they stand, would have the most devastating effect on the Bill. Therefore, I hope that will save him the trouble of saying, on future Amendments, what evil consequences will ensue if they are accepted. They are worded only to express, as clearly as I can, what I am trying to get at. I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 1 agreed to.
§ Clause 2:
§ Restrictions on wider-range investment
§ 2.—(1) A trustee shall not have power by virtue of the foregoing section to make or retain any wider-range investment unless the trust fund has been divided into two parts (hereinafter referred to as the narrower-range part and the wider-range part), the parts being, subject to the provisions of this section. equal in value at the time of the division; and where such a division has been made no subsequent division of the same fund shall he made for the purposes of this section, and except as hereinafter provided no property shall be transferred from one part of the fund to the other.
§ (3) Where any property accrues to a trust fund after the fund has been divided in pursuance of subsection (1) of this section, then—
- (a) if the property accrues by reason of the exercise of any right or remedy arising from ownership of property comprised in either part of the fund, it shall be treated as belonging to that part of the fund;
- (b) in any other case, the trustee shall secure, by apportionment of the accruing property or the transfer of property from one part of the fund to the other, or both, that the value of each part of the fund is increased by the same amount.
§ (4) Where after any such division as aforesaid property is taken out of a trust fund, the trustee shall secure, by an appropriate selection of property to be taken out from each part of the fund or by the transfer of property from one part to the other, or both, that the value of the narrower-range part of the fund is not decreased by more than the decrease in the value of the wider-range part nor, in so far as the value of the property belonging to the narrower-range part permits, by less:
§ Provided that where property is taken out of a fund by way of appropriation to form a separate fund.—
- (a) the trustee shall secure, by an appropriate selection of property to be taken out from each part of the fund or by the transfer of property from one part to the other, or both, that if the fund continues to subsist after the appropriation the proportion which the value of one part bears to the other is the same immediately after the appropriation as it was before:
- (b) if any such separate fund is divided in pursuance of subsection (1) of this section, the two parts of that fund shall be so constituted as to bear to each other the same proportion as the corresponding parts of the fund out of which the separate fund was created bore to each other before the appropriation.
§ 3.5 p.m.
LORD CONESFORD moved, in subsection (1), to leave out "the parts being, subject to the provisions of this section, equal in value" and insert:
the value of the former being one eighth of the value of the latter".
The noble Lord said: Your Lordships will remember that, if advantage is to be taken of the new powers conferred by this Bill, a division has to be made of the trust fund. It has to be divided into two parts: the narrower-range part and the wider-range par; and the Bill provides that these shall be equal at the time of the division. My Amendment would make the value of the narrower-range part one-eighth of that of the wider-range part; that is to say, its value would be one-ninth of the trust fund. This does not mean, of course, that I think that only one-ninth of a trust fund ought to be invested in fixed-interest bearing securities, and that the rest should be invested in equities. It may often be advisable to invest a far larger proportion (at times, even the whole) of the trust fund in fixed-interest bearing securities. That will be possible if my Amendment is accepted, just as it is possible under the Bill as now drafted.
§ I would ask all noble Lords to bear in mind two facts, one of which has been 277 sometimes overlooked even in contributions to financial papers. The first is that the whole or any part of the wider-range part can at any time be invested in gilt-edged and other fixed-interest bearing securities set out in Parts I and II of the First Schedule. This results from the very first subsection of Clause 1 of the Bill. The second fact to bear in mind is that nothing in the narrower-range part can be invested in equities. This: results from Clause 2, subsection (2), of the Bill. The purpose of my Amendment is to limit to one-ninth of the trust fund at the time of the division the amount that must for ever remain in fixed-interest bearing securities, no matter how undesirable, or even disastrous, such a course may appear to be to the trustees and their advisers. Of course, as I indicated in my speech on Second Reading, I should prefer the abolition of the division altogether, but I have not much hope of revising the Bill in that manner. My Amendment would, at least, make the division far less harmful than under the Bill as it stands, and possibly, for reasons which I shall later give, would cause the harm done to be almost negligible.
§ I say that the provision in the Bill as it stands might be disastrous—because that is what an obligation confining a trustee to fixed-interest bearing securities becomes in a period of great inflation. In such a period, the real value of a fixed-interest bearing security declines with the real value of the currency, until the value may disappear altogether. This, as your Lordships know, has happened in other countries. Noble Lords may well hold the view that that will never happen to our currency. I certainly hope that they are right, but I would ask them to bear this in mind. The investing powers of trustees may depend in substance on the Trustee Act, 1925. If the present: Bill becomes law in 1961, it will have taken 36 years to obtain a new Act. Is there any noble Lord in this Committee, no matter what his political allegiance, who is quite certain that no British Government in the next 36 years will adopt a policy that will depreciate the value of the pound? Of course, there is nobody who believes any such thing.
§ But what does the Bill say if my Amendment is rejected? It lays down this: that at a time of threatened inflation the trustees must not even make 278 an attempt to save the narrower-range part; that is to say, what was half the total of the trust fund at the time of the division. The provisions of Section 1 of the Trustee Act, 1925, were unenlightened and obsolete even in the year in which that measure was passed. Even at that date some people must have heard of Keynes. That Act of 1925 has caused appalling and quite unnecessary losses to innumerable beneficiaries. If we insist on this equal division in 1961, we shall certainly be sinning against the light.
§ There is no risk, whatever, if my Amendment is accepted, that there will be a rush by trustees away from fixed-interest bearing securities. What is, I believe, known as the reverse yield gap will prevent that.
§ Most trustees are familiar with the problem of reconciling the need of the tenant for life for immediate income and the interest of the remainderman that the property shall not be unduly depreciated. The needs of the tenant for life will generally make a considerable investment in fixed-interest investments necessary, because at the present time, of course, good equity investments, such as trustees, if well advised, wish to invest in, give a much smaller immediate return than fixed-interest bearing securities. Accordingly the interest of the tenant for life alone would almost certainly render a considerable investment in fixed-interest securities necessary. Apart from that, of course, it may sometimes be desirable even to invest the whole of the trust funds in fixed-interest bearing securities. But I think, if we are honest with ourselves, we shall all agree that the best investment will be made if you have good trustees taking competent advice and varying the proportion between fixed-interest bearing securities and other investments from time time time, as the best advice may indicate. What we should not do is to compel trustees to leave a large proportion of the trust funds—a half at the time of the division —in fixed-interest bearing securities at a time when to do so threatens disaster.
§ No explanation of the 50 per cent. limitation appears in paragraph 289 of the Nathan Report from which I have no doubt this limitation is derived. It is there referred to as a possible safeguard, though a safeguard that can cause such 279 irreparable disaster should not, I think, be termed a safeguard. But there is another explanation which has been advanced to me in conversation by various people who have been trying to find some explanation and defence of the provision in the Bill. It is said, and said truly, that in this Bill we are interfering with the express wishes of testators and seniors, and it is implied that, if we interfere in this way, our interference should not go too far.
§ The answer, I submit, is quite simple. This basis and justification for our interference with the express wishes of testators and settlors is this: that at present the effect of the Statute Law is to bring about the precise opposite of the result which they themselves intended. The justification for the present measure is that we are intending to substitute for the terms that they laid down in their wills or trusts what they themselves would substitute if they were alive and were free to do so to-day. To some extent, of course, what they would do to-day may be a matter of doubt, but we can get a fairly good idea from observing what settlors do at the present time when competently advised. They give the maximum possible discretion to trustees, and do not—or do only in the rarest possible cases—prescribe this limitation of 50 per cent. at present laid down in the Bill.
§ Not only is this greater freedom being given in every modern settlement and will. The Court of Chancery is giving it at the present moment when applications are made to it under the Variation of Trusts Act, 1958. More than a year has passed since Mr. Justice Vaisey announced that, in future, no expert evidence need be filed in support of these applications for more appropriate investment powers. The Court of Chancery has taken judicial notice of the economic facts of life. Why not Her Majesty's Government? I beg to move.
Page 2, line 5, leave out ("the parts being, subject to the provisions of this section, equal in value") and insert ("the value of the former being one eighth of the value of the latter")—(Lord Conesford.)
§ 3.18 p.m.
I had not intended to intervene, but may I just correct something which I think might create a false 280 impression as to the attitude at the Court of Chancery. I do not remember a case in which the Court of Chancery has gone much beyond what the Bill proposes. The cases in which they grant complete discretion must, I think, be few and far between. I have some experience personally as trustee of a charity. I know or advise that we should be lucky to get more than one-half, though we might have asked for two-thirds. Therefore, I should not like this Amendment to be discussed on the basis that the Court of Chancery was giving unlimited powers to invest in anything trustees like, notwithstanding the views of the testator.
§ 3.19 p.m.
I should like to give some qualified support to this Amendment, because this Bill arouses in me a considerable amount of uneasiness. Anyone who has had any experience of some of the many vicissitudes that trustees have to meet must feel that this Bill is a very artificial way of extending their powers. The point that troubles me most is the duty that is laid on them, if they have to realise a large sum to meet a new set of death duties or for any necessary expense, to raise it from both funds equally.
This Bill seeks to give an extension to trustees to invest in equities as a guard against inflation and undue depreciation of their trust funds. Investing in equities gives a certain guard against the effects of inflation, but it entails one disadvantage. If trustees invest in equities, they must not be compelled at any given moment to realise those equities, because, although they fluctuate a great deal, in the end they share in the prosperity of the country and gradually appreciate. If, at any given moment, the trustees have to give a sum of money and are not allowed to realise it on the narrower-range securities but have to spread it over the wider range as well, they may be in an unfortunate position. They may be either compelled to sell equities at the bottom of the market or to go to their banker and ask him to advance them money in the hope that later on their equities will recover and they will be able to sell them at better advantage. I do not know whether that would be debarred by the Bill. But, whether or 281 not it be debarred, I submit that it is not a proper activity for trustees. Trustees are put into an unfortunate position, and it seems to me that in that way the Bill is giving with one hand and withdrawing with another, by reason of the artificiality of conditions.
I should like to comment on one other matter. Equities are always supposed to be—and they are to a great extent—a security against inflation; but I would remind your Lordships of what happened in Germany in 1924. People who thought that equities were a safeguard against inflation of that kind were deceived because, as one person who had a great deal of experience put it to me, fixed-interest securities fell to nothing, but the others "went through the roof", because working expenses and replacements were so enormously expensive that in the end all securities whichever brand they were lost their value. I should be pleased to have some answer to this point.
§ THE EARL OF DUNDEE
My noble friend's argument on his Amendment does not go quite so far as that which I have already answered—namely, that trustees should not be permitted to invest any Of their funds in any trustee securities, for which an argument could be made out. My noble friend's Amendment would enable trustees to invest up to 87½ per cent. of their funds in equities, and be has repeatedly suggested that to have a large proportion of trust funds in trustee stocks may be disastrous. He used the phrase "irreparably" disastrous. We shall all agree that sometimes it might be highly disadvantageous, but it can be even more disadvantageous to have trust funds in contain kinds of equities. It is conceivable that equity shares, instead of going down from 100 to 60, or whatever it may be, may go down from 100 to nil and may never recover.
While I agree with what my noble friend said, that a good trustee, with competent advisers will do better if he has freedom to put everything into equities this Bill is designed to cater primarily for smaller trusts and the many trustees whom it affects will not have access to expert advice of high quality. Therefore, we think that it is wiser to place a limit on the extent to which in 282 vestments can be made in these risk-bearing securities.
The figure of 50 per cent., as my noble friend said, was originally taken from the recommendations of the Nathan Committee. Here I should say that the noble Lord, Lord Nathan, has been kind enough to write and apologise for not being here this afternoon. We should all have been very glad if he had been able to come and help us. If your Lordships should think that the view of the Nathan Committee is out of date, I would point out that much more recently various Acts of Parliament enabling local authorities to invest part of their funds in equities have usually fixed the ratio at 50 per cent. We thought that on the whole a "fifty-fifty" basis provided a ratio which seems to be most in accordance with the present state of opinion on this matter and with such expert recommendations as we have at our disposal. At the same time, your Lordships will remember that so far as the narrower-range half of investments is concerned, the First Schedule List in this Bill very considerably widens the dist of trustee securities under the 1925 Act. So that, besides giving power to invest in equities in the wider-range half, we are considerably liberalising the narrower-range part of investments as well.
My noble friend mentioned the Variation of Trusts Act, 1958. I had intended in any case to say a word on this Amendment about Section 57 of the Trustee Act, 1925, which I think is really the operative niece of legislation, enabling trustees to go to the courts and have their trust limitations set aside or widened. In some cases, the courts give power to invest more than 50 per cent., although, as your Lordships were interested to hear from the noble and learned Lord, Lord Cohen, often they do not go so far as the noble Lord, Lord Conesford, suggested that they might go.
I should like to make it clear that this Bill is intended to appeal to the generality of trusts, and is not intended in any way to provide a suggestion to the courts that they should not go beyond 50 per cent. when cases are brought to them under Section 57 of the 1925 Act. What the courts have to do is to judge every case on its merits. Normally it is not to be expected that anything but fairly 283 exceptional cases would go to the courts, although, as I argued on Second Reading, the fact that the cases which do go are so greatly increasing in number is an argument for changing the law on the subject. But the courts have to consider exceptional cases whereas this Bill is intended to apply to all trusts and particularly the smaller trusts. I agree with my noble friend that there are some trusts in which it might be right to have a larger proportion in equities, and it is not our intention that the practice of the courts should in any way be made uniform or changed or modified by the provisions of this Bill. I hope the Court of Chancery will continue to judge the merits of each case without regard to this Bill, as they have done before.
I should like to say that I think: the noble Earl's own argument reinforces what I said. There are these people to whom he especially refers as being without experience and not having expert advice, and they are going to receive this Bill with joy. They are going to invest 50 per cent. of their securities in equities,.and when the time for realisation comes, and they find they have to provide half the funds they are badly in need of by realising equities at the bottom of the market—not perhaps having fallen to nil, because they could not do that—then they will feel that they have been "sold" by this Government and will feel resentment at the position they are in. The bigger trusts will realise the situation much better, and they may or may not make full use of the Act. But it is the smaller people who really deserve consideration because of the realisation clauses coming into operation later on.
§ LORD CONESFORD
I find my noble friend's reply extremely disappointing. Under this Bill itself there is a later clause making it obligatory on trustees to obtain advice. At any time, almost. since 1925 even moderately good advice would have ensured that a substantial part of the trust fund was placed in equities and not left in fixed-interest bearing securities which have led to such appalling loss. What I find so distressing in the speech of a person for whose intelligence I have such respect as i have for that of my noble friend is the assumption that there is something safer 284 about a fixed-interest bearing security than an equity. My noble friend Lord Saltoun talked about the risk of difficulty in selling the equity. I can only say that in my experience as a trustee I have never found it so hard to sell an equity at a decent price as to sell some of the fixed-interest bearing securities at a real value anywhere near that which they bore at the time of the investment.
The fact is that the reverse interest gap (as I think it is termed) is the market's estimate of the danger of investing in fixed-interest bearing securities. It is not only the fact that equities yield rather less because there is a hope that they will rise; there is the fear that nobody would be so mad as to leave money permanently in fixed-interest bearing securities unless they were rewarded by a substantial yield for the risks they were taking. I regard this idea of the Government that there is something intrinsically safe in a fixed-interest bearing security as a view that was obsolete in 1925 and is prehistoric to-day. I deplore the reply.
§ LORD DOUGLAS OF BARLOCH
I want to support this Amendment. I listened carefully to what the noble Earl. Lord Dundee, said, but I did not find in his speech any reasoned argument founded upon facts in support of the division "fifty-fifty" between fixed-interest securities and others. The only argument in favour of it was that the Nathan Committee had recommended it. But I do not know that the Nathan Committee gave any reasoned argument founded upon economic facts in favour of that recommendation; and I do not see how any economic argument can be brought forward in favour of it. The facts of history are only too apparent, and they show conclusively that it is disastrous to leave a fund over any long period invested in fixed-interest securities, and especially in those which are irredeemable. That is a fact which cannot possibly be denied.
The only argument which has been brought forward is that it may be possible by investment in equities to make investments which lose their value completely, and that that is not likely to happen in the case of fixed-interest, securities. I agree that that is a possibility. But this Bill makes an express provision for the purpose of dealing with and endeavouring to avoid that: namely, 285 that the trustee is to seek advice of a competent character before he makes the investment; and, indeed, that provision in the Bill applies not only to the investments in Part III, but also to the investments in Part II of the First Schedule. The only investments which the trustee in future will be allowed to make without taking any expert advice are those in Part I of the First Schedule—namely, savings certificates and savings bonds or deposits in trustee savings banks, or other hank deposits which carry interest. That is the entire range of the trustee's unguided freedom in the future.
For all other investments, of whichever class they may be, he is required under this Bill to take advice. When he lakes that advice he will presumably submit to his adviser the terms of the: trust instrument, so that the adviser will know what the provisions of the trust, are and will bear in mind, in advising about the investments, the possibilities of the dates at which it may be necessary to realise the investments and to turn them into money. That, I think, helps to meet part of the point which !was raised by the noble Lord, Lord Saltoun, as to the difficulties which might arise during a period in which equities were suffering some temporary recession in value. So that, by and large do not see that there is any necessity Whatever for this purely arbitrary provision of "fifty-fifty" between the two classes of securities.
May I now refer to the point which was raised by the noble and learned Lord, Lord Cohen? I have no statistics as to what the Court of Chancery has done in the oases in Which it has decided to vary the investment powers of trustees. I can speak with regard to only a few casein of which I happen to have personal knowledge. In all those cases the Court has, without any hesitation, given the trustees a wide power of investment upon the lines comprised in Parts I, II and III of the First Schedule, and without imposing any condition that 50 per cent. shall be invested in one class and 50 per cont. in. another. If this Bill is carried in the form in which it now stands, I fear that the Court of Chancery thereafter might well be more hesitant in giving wider powers to trustees than it is at the present moment, because it might conceivably say that when Parliament has so recently considered this matter and given 286 general directions as to what are permissible trustee investments, the Court would not be inclined to give wider powers unless an extremely cogent case was made out upon the facts of the particular instrument.
Therefore, as far as instruments made in the past are concerned, this Bill might have the effect of lessening the opportunity to get power for the trustees to make investments in a reasonable fashion, and might confine them entirely to what is here contained, as compared with the greater freedom which they can get at the present moment by applying to the Court to get the terms of the trust deed varied. I sincerely hope that the Government will give this matter some further thought before sticking doggedly to this division of "fifty-fifty".
§ LORD SILKIN
I feel that perhaps a word from this side might be opportune, if only to say that we are sorry we do not see altogether eye to eye with my noble friend who has just spoken. I hope that that will not be regarded on the same plane as some of the other differences which exist in my Party at this moment. We feel that this Amendment is misconceived. It really is an attack against the principle of the Bill—indeed, the noble Lord, Lord Conesford, made no secret of it. The basis of this Bill is that the trustees are to be given a discretion to invest as to 50 per cent., broadly speaking, in equities. If the noble Lord, Lord Conesford, had his way and, I imagine, the noble Lord, Lord Douglas of Barloch, as well, they would give the trustees complete freedom. That is exactly what this Bill is designed to prevent. If they had wanted to pursue that objection, their logical course, it seems to me, would have been to have voted against the Second Reading.
§ LORD DOUGLAS OF BARLOCH
Would my noble friend excuse me? I did not suggest that trustees should have complete freedom. All I was suggesting was that they should have freedom within the range of investments which are specified in Parts I, II and III of the First Schedule of this Bill, but not that they should be empowered to go outside into securities which are not even mentioned there.
§ LORD SILKIN
When I said, "complete freedom", I really meant that. 287 That is what I had in mind. Both noble Lords complained that there was no logical basis, and no explanation, for the 50 per cent. If there is no logical basis for that, I really do not understand what can be the logical basis for dividing the fund into 87½ per cent. and 12½ per cent. The noble Lord gave no answer for suggesting 8 to 1 or 9 to 1. On the speech that he made it might equally have been 20 to 1. LORD CONESFORD: I am grateful to the noble Lord for allowing me to intervene. The reason why I did not vote, or urge anybody to vote, against the Second Reading, was that the Bill improves the position that at present exists. As we have had to wait since 1925 for that, naturally I was in favour of the measure. I should have regarded any attempt to abolish the division altogether as hopeless. But I cannot see anything illogical in trying to a minimum that part in which the trustees cannot do anything at all to save trust fund in the event of inflation. The reason why I think one-ninth of the trust fund will not do harm is that it is almost impossible to imagine a case where something will not have to be done to provide enough current income for the life tenant.
§ LORD SILKIN
I do not know whether the noble Lord feels that he has answered the question as to his suggested division of the trust fund of 9 to 1. I do not feel that he has answered it to my satisfaction. I think we have to remember that, in the normal case, the creator of the fund will have complete discretion as to how his fund should be dealt with and he can say so in his trust instrument. This is designed for those who have not the knowledge or experience to speak for themselves. I think it would be presumptuous on the part of the Government to say to those people, "You must invest nine parts in equities against one part in fixed securities." That is the Amendment which the noble Lord is suggesting. I know the trustees can invest more if they choose. But this is what the noble Lord wants us to put in the Bill, and I think it would be presumptuous to do so.
In the vast majority of cases, people who make wills or create trusts get advice before they do so. The mere fact 288 that they normally have to go to a solicitor to get the instrument drawn is an indication that they would normally it I cannot imagine any solicitor sitting down and merely drawing up an instrument exactly as he is told, without expressing some view on it if it seemed to be absurd. So we are dealing with a really exceptional case. In that exceptional case I think the indication of the Government that the fund should be divided equally between fixed-interests and equities is reasonable.
One need only look at what has happened in the past twelve months with equities to see that an investment in equities is not necessarily such a safe thing—even equities which would be included in the Schedules. I have had a look at the high and lower figures for 1960 in the Economist, as I suppose most noble Lords have done. The variation in one of the securities which would be covered in the Schedule is enormous. The variation is between 30s. and 19s. That is not exceptional by any means. I know others which are even worse. Therefore, you are not really safeguarding the trust by giving them the wider powers which the Amendment requires. It is very difficult to find a balance. Certainly 9 to 1 does not strike me as being any balance at all. On the whole, I think both the Government and the Nathan Committee have been wise in suggesting that it should be "fifty-fifty" as between fixed-interest securities and equities.
§ 3.50 p.m.
§ THE LORD CHANCELLOR
I hope my noble friend Lord Conesford and the noble Lord, Lord Douglas of Barloch, will feel on reflection that there is a great deal more to be said for the provisions of the Bill than their speeches suggested. It has been put in the speech of the noble Lord, Lord Silkin, a moment ago. I should just like to sum up the matter, and I hope that my Amendment. I think the first thing we ought to do is to look at the difference which this Bill makes and compare the proposals in the Bill with the present range of authorized trustee investments. Hitherto a trustee confined to the trustee list has been compelled to invest in a comparatively narrow range of fixed-interests stocks, and of course this 289 applies, as the last Amendment emphasised, to trustees who at present are limited in this way. After the Bill, apart from the 50 per cent. in equities they are able to select other investments from a wider range of securities, including, in particular, company debentures. I do not think either of the noble Lords have paid enough attention to that extension of powers on the narrow-range side. In view of that, I do not think that the first charge, that we have not followed an enlightened policy, is really a fair one.
§ ,LORD CONESFORD
May I ask one thing of my noble and learned friend? The thing that worries me most is that there is nothing in the narrower range part as far as I can see—if I am wrong perhaps he can point it out—which is any protection against the depreciation of the pound. Is there anything in Part I or Part II of the First Schedule in which a trustee can invest the narrower part, which would not be threatened by the depreciation of the pound?
§ THE LORD CHANCELLOR
In the sense that it will have a fixed interest which is paid in pounds, then of course if the value of the pound goes down the true value to you of that amount goes dawn. But I should have thought, in the broader sense as to whether these securities would stand up against subsequent inflation, one could not give as easy an answer as that. One would have to consider the strength of the securities, but it must always have the first point which I made.
I have dealt with the matter from the point of view of the changes, which are great changes. Then I was going to look at it from the point of view of precedents. First of all, we have the Nathan Report. Up to to-day we have, or most of us have—I certainly have—paid great tributes to that Committee for the work they have done in this sphere; and I do not think it is a bad beginning, when you are looking for what are the precedents, to say that this is recommended by the Nathan Report. But it does not step there. As my noble friend Lord Dundee pointed out, and there has been no answer to this, it is the figure that has been chosen by Parliament itself in recent Sessions in adopting a limit on the investment of equities for local authority funds; they have adopted 50 per cent. 290 I am sure that our colleagues and the Members of another place who deal with local legislation would not make too high claims for themselves, but I think we make fairly high claims for them; we are not bound by their modesty—at any rate those of us who do not sit on these Committees—and I think that is a very good test.
Then we have the third test of the Court of Chancery; the evidence on that point was that of my noble and learned friend Lord Cohen, and I think we shall all agree we could not have better evidence than that. My noble friend Lord Dundee made the point, which I am not sure if the noble Lord, Lord Douglas of Barloch, had appreciated, that it is not the desire of the Bill to limit, and there is nothing in the Bill which will in any way limit, the rights of the Court of Chancery or lay down a code of guidance to them. The Court of Chancery can deal with every case on its merits. As far as the precedents go. the Government are following them. Then I come to the point raised by my noble friend Lord Saltoun. With the greatest respect to him, I would say that his argument was really in favour of the Bill, because the more you increase the equities as the noble Lord., Lord Conesford, would suggest, the more you run into the difficulties Lord Saltoun has put up.
On the general question, of course, it remains a matter for the trustees. They must take and consider the advice and eventually they must do their duty within the framework of the Bill. But again I repeat—I apologise for repeating what my noble friend Lord Dundee said—that this is designed to cater primarily for the smaller trusts. They will, of course, have advice, but not advice of the same sort as is open to the larger ones. After all, we are by this Bill making a very big experiment and taking a very big step forward, and in those circumstances I think we ought to set a limit on the amount that they can invest in the risk-bearing securities.
I am very conscious that I have not added much to what has been said before, but I would ask my noble friend Lord Conesford to look back over the crisis difficulties, the tragedies of the past in investment, and to bear that in mind from this point of view. I do not 291 want to arouse unhappy memories by mentioning names, but I am sure he must have in mind, as I have and other noble Lords have, examples of investments in which people invested on the best advice but the thing went wrong. I am sure that we are right in starting in this balanced way, and I hope that my noble friend on reflection will see fit to withdraw the Amendment to-day.
§ On Question, Amendment negatived.
§ 4.0 p.m.
§ THE EARL OF DUNDEE had given Notice of two Amendments to subsection (1), the first being to leave out "except as hereinafter provided The noble Earl said: This and the next two Amendments on the Paper have as their object to give a trustee more flexibility by allowing him to make compensating transfers between the two parts of the fund. May I just give your Lordships an example of how this power of transfer might be used? Suppose the trustee has divided the fund and has constituted the two parts, half in the narrower range consisting of £5,000 worth of Consols, and, in the wider range, £3,000 worth of equities and £2,000 worth of Colonial stocks which could be put into the narrower range. Suppose that some time later he decides that he would like to convert into equities £2,000 of his holding in gilts. He wants to do this by selling Consols, not by selling Colonial stocks; and as the Bill is at present drafted, he is precluded from doing this. The effect of the Amendment would be to allow him to transfer the £2,000 worth of Colonial stocks to the narrower-range part of the fund provided that he transferred £2,000 worth of Consols in the opposite direction. He could then sell the Consols which he transferred to the wider-range half of the fund and reinvest the proceeds in equities, thus achieving his objective.
§ Another reason for this Amendment is that it makes it easier to accept a later Amendment in the name of my noble friend Lord Hawke on the subject of debentures, as it will give a trustee an opportunity of transferring to the wider-range part of the fund any shares which he receives when the debenture has been converted. I beg to move.292
Page 2, line 8, leave out ("except as hereinafter provided").—(The Earl of Dundee.)
§ LORD PETHICK-LAWRENCE
I should like just to ask one question. The word "value" seems to be one which is a little uncertain in its meaning. At the time when the two sets of shares were bought, the meaning, of course, would be perfectly clear; but as that time has gone by, when a transfer is made, is "value" to be taken at the face value, or at the purchase price, or at the price at the moment when it is proposed to make the transfer? It seems to me to be somewhat difficult, without some interpretive words, to know what is intended by the Amendment.
§ THE EARL OF DUNDEE
The position is that when you make your division, to begin with the two halves must be of equal value. After that, if one half goes up and the other half goes down it is not necessary to adjust them. But if an exchange is made an equal amount of value must be transferred from each side to the other at the time when the exchange is made.
§ LORD PETHICK-LAWRENCE
What I am anxious about is this: that the wording of the Amendment is not fully adequate to express that, because the value might be misunderstood. It may be taken at the market price at the time the transaction takes place. Perhaps the noble and learned Viscount the Lord Chancellor will help. I should have thought that the words were ambiguous.
§ THE EARL OF DUNDEE
We will certainly look into the matter and make sure that the words of the Amendment give effect to our intetntion. I think they do, but we will look into it.
§ LORD SILKIN
If it merely said "equal value at the time of the transfer" or words like that, would that not do?
§ THE EARL OF DUNDEE
That is certainly our intention. So far as I know, the present wording would give effect to that, but I will make sure that it does.
May I say that this is the type of phraseology which is causing great puzzlement among all the people who will eventually have to compete with the Bill? That is why there 293 are so many doubts expressed as to what the Bill really means.
§ On Question, Amendment agreed to.
Page 2, line 10, at end insert ("unless either—
§ On Question, Amendment agreed to.
Page 2, line 15, after ("shall") insert ("either be transferred to the wider-range part of the fund, with a compensating transfer, or").—(The Earl of Dundee.)
§ On Question, Amendment agreed to.
§ 4.5 p.m.
LORD HAWKE moved, in subsection (3) (a), to leave out "that part of the fund" and to insert:
whichever part of the fund its nature would entitle it to belong".
The noble Lord said: This Amendment deals with a particular small point of which I think the authors of the Bill may well have been legitimately in ignorance. It deals with the question of certain types of rights issues which are offered to the shareholders of some investment trusts. Very often, these rights consist of a parcel of preference shares and ordinary shares offered in one block, and the purpose is not so much to upset the gearing of the trust as to keep the fixed-interest and the equity in line. But sometimes, in the case of one or two trusts, they habitually make to the holders of the ordinaries an offer of a parcel of debenture stock and ordinary shares. As the Bill stands, if the holder of the ordinary shares takes up his rights which consist partly of debentures, so far as I can see he will have to put the debentures in the wider part of his trust, thus taking up space in the wider part which could legitimately be used to help equities. If the principle of my Amendment is accepted, then the combined parcel of rights will be divided between
the two parts of the trust according to the nature of the two investments accepted. Again, I am quite sure that my wording is wrong; but that is the principle I should like to see embodied in the Bill, and I shall be interested to hear whether my noble friend is prepared to accept that principle. I beg to move.
Page 2, line 23, leave out ("that part of the fund") and insert the said new words.—(Lord Hawke.)
§ THE EARL OF DUNDEE
I think that subsection (1) (a) of this clause as it stands is consistent with the basic principle of a once-for-all division of the fund. Property which is generated internally as from a rights issue accrues to that part of the fund which generates it, and the rights issue is not an exercise of right or remedy out of the shares. In the case of an issue which was not a free issue, if a certain amount of cash had to be paid—possibly a good deal less than the market value of the shares which were being given for it in order to take up an issue—then, so far as additional cash is concerned, that would be regarded as a new investment altogether, and it would have to be treated in exactly the same way as if the investment had been made from funds which were added to the trust. Of course, the trustees might decide to sell part of their rights in order to give them enough credit to take up the remainder without paying anything at all. If the Amendment were accepted a trustee would be able to invest some of the narrower-range part of his fund in, say, convertible debentures, in the certain knowledge that at some later date this would result in a transfer of property from the narrower-range to the wider-range part of the fund, and in this way the wider-range pant of the fund could be progressively augmented at the expense of the narrower-range part of the fund, and the principle of the division of the fund into two equal parts would be undermined. I hope, therefore, that my noble friend will not press his Amendment.
I know that it is a matter which is not immediately easy to understand, but I believe that the Bill as it stands now carries out the principles of division on which it is based; and I do not think that any addition to one part, of the fund which was entirely generated from 295 funds held in that division would in any way prejudice the ability of trustees to hold the full amount on the wider-range half of the fund in equities. If desired, the debentures could be sold and converted into equities and would not have to be transferred to the narrower-range part of the fund.
§ LORD SILKIN
I do not know whether the noble Lord, Lord Hawke, had in mind the kind of case where, a decision having been made and the fund having been divided into two equal parts, the fund of the wider range comprises perhaps certain stock on which rights are given to acquire further stock at a very favourable price. Trustees would be precluded from taking advantage of that, once the division is made, because they would have no funds with which to acquire those rights, however favourable, except by disposing of stock in the narrower range—and that they would be precluded from doing, having made their choice. I imagine it was that kind of case, among others, that the noble Lord. Lord Hawke, had in mind, and if so I have considerable sympathy with him. I do not know whether the noble Earl would consider that kind of case. It would arise strictly in the narrow case of rights becoming available and being offered to holders of existing stock; and that is usually on advantageous terms. Thinking aloud, I suppose one could sell those rights—
§ LORD SILKIN
—but I do not know whether or not the noble Earl can say whether an exception could be made there.
§ THE EARL OF DUNDEE
I will gladly do what the noble Lord wishes me to do, because the possible permutations and combinations of changes of investment in circumstances of that kind are so numerous that I do not think one ought to say straight off that we should be unwilling to consider the hypothetical case which the noble Lord has just put. What I imagine would usually happen where there was a very favourable rights issue would be that, if the trustees had no cash available to take up those rights, they could sell other securities in the 296 wider-range part of the trust to get funds with which to take up those rights. I believe the noble Lord, Lord Silkin, envisaged a possible case where trustees might not even be able to do that, and he wanted to know whether it would be possible to find some other way of getting funds temporarily out of the other half of the trust. I will certainly look into that and see whether it is possible.
§ THE EARL OF DUNDEE
I believe I mentioned in my original reply that selling half the rights was a course trustees would be likely to follow. It is one very obvious possibility. I thought the noble Lord, Lord Silkin, had in mind the possibility that the new rights issue might be so favourable that it would not be right for trustees to sell half the rights. I thought he wanted the Government to look into the possibility that trustees might be deprived of the power to do something which was much more favourable to the beneficiaries of the trust than selling half the rights.
There is a lot in the Bill about division of the funds. but I cannot find any provision which deals directly with the case where trustees have to realise funds to meet either taxation or some charge put upon them by the instrument under which they act. What I should like to see in the Bill—and perhaps the Government would consider it—is a provision that where such a case occurred the trustees should have absolute discretion as to the fund, whether wider-range or narrower-range, from which they raised the money. provided that if it was raised from the narrower-range securities only, the trustees should be bound within five years to reimburse that fund from the wider-range fund. That would avoid the trouble of which I spoke on the previous Amendment, and it would. I think satisfy me.
§ THE EARL OF SWINTON
I hope that my noble friend will look at this point again. The wise investor naturally goes for sound investments where he believes there is likely to be capital appreciation; and that is just the kind of company one 297 wants to encourage people to invest in—companies which do not distribute a large proportion of their profits but plough back a large proportion into reserves. In the ordinary course of events those reserves are capitalised and distributed. Supposing a trustee holds 1,000 ordinary shares in a company which offers a very generous bonus issue with no payment at all—perhaps of another 500 shares. I take it that the trustee could take that up because there is no cash involved. That is a very sensible thing to do. The issue of rights shares to shareholders on generous terms enables. more capital to be raised while, at the same time, giving what is really a generous cash bonus. It seems to me that quite a lot is involved here. In the case of a free issue of bonus shares, I think the: trustees would be able to take them up. In the case of the rights issue on very 'generous terms the trustee will not be allowed to do so unless he can borrow from the bank, which he is unlikely to be able to do, or sell shares from that particular section of the trust.
§ THE EARL OF DUNDEE
I do not think this is illogical because trustees can do what has been suggested by many of us—that is, sell part of their rights, leaving themselves with enough to take up what is left of the new shares, which would be the equivalent of their accepting the benefit of the rights. The balance which they may have to pay in order to take up the whole of the new rights ought properly, I think, to be regarded as an entirely new investment, and it should be legally regarded as such under this Bill. The situation I promised to look into was whether, if the trustee thought this new investment (which must be treated as an investment) was so exceptionally good that it was the duty of a prudent trustee to do everything be could to take it up) that could, or should, be made a little easier, without undermining the principles of the Bill.
I started off on a very particular point which, so far as know. applies only to the issue of one or two particular investment trusts, and it seems to have developed into a wider argument which is yet another argument for my case that the Bill is so obscurely drafted that no one really knows what happens under it. We have rather lost 298 sight of my particular case, which, is the parcel of ordinary shares plus debentures—in other words, what would normally be held, the former in the wider half and the latter in the narrower half—offered as a right to holders of shares held in the wider half. Wherever the cash comes from to take it up a matter which I should have thought was to some degree relevant—it seems to me anomalous if, when the cash conies from the wider half, we are going to end up with a situation in which debentures have to he held in the wider half. I thought the wider half was entirely for equity securities. But I am in very deep waters indeed on a rather minor point, and I hope that the noble Earl will have a really good look at it, because if he could work the thing in connection with convertible debentures I am sure he could work it with this particular type of case. I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ 4.21 p.m.
§ THE EARL OF DUNDEE
The object of lines 29 to 36 on page 2 is to ensure that as far as possible when property is taken out of a trust fund half should come from the narrower-range part and half from the wider-range part. That. of course. may not always be possible. For instance, if you have to take £8,000 out of a trust whose total value is £10,000, and if the value of the narrower-range part was only £3,000 and the value of the wider-range part £7,000, it would clearly be impossible to withdraw £4,000 from each part. This Amendment allows a trustee to withdraw a lesser amount from the narrower-range part. In the example which I quoted. the trustee could withdraw £3,000 from the narrower-range part and £5,000 from the wider-range part. But suppose the value of the narrower-range part was £7,000 and that of the wider-range part only £3,000. Then, in order to get £8,000 from the fund the trustee would have to take more from the narrower-range part than out of the wider-range part. That is what the clause as at present drafted prohibits. The Amendment rectifies this deficiency and allows the trustee latitude if the amounts standing in either the narrower-range part or the wider-range part of the fund are insufficient to permit of the withdrawal being apportioned equally between the two parts.
Page 2, line 33. leave out from ("that") to end of line 36 and insert ("so far as the value of the property belonging to each part of the funds permits. the decrease in the value of the fund due to the taking out of the property is divided equally between the two parts of the fund").—(The Earl of Dundee.)
§ On Question, Amendment agreed to.
LORD HAWKE moved to leave out subsection (4) and to insert:
(4) Where after any such division as aforesaid property is taken out of a trust fund and the value of the narrower range part of the fund is thereby decreased by more than that of the wider range part of the fund then no further property shall be taken out of the narrower range part of the fund until by transfer of property from the wider to the narrower range part of the fund or by other means the value of the narrower range part of the fund hears the same ratio to the value of the wider range fund as it did before the property was taken out of the fund".
§ The noble Lord said: We now come on to a point which is a matter of some importance and principle. My noble friend's Amendment No. 7 makes clear the intention that whenever money has to be found from a trust fund, liquidation should take place equally from the narrow and wider parts. The intention of my Amendment is to deal particularly with the question of death duties. I want to make it possible for trustees to take the money from either side of the fund as they think fit, provided it is replaced under some arrangement. The trustees who have powers to hold equities, in some cases to-day hold gilt-edged as well, particularly with a view to this death duty problem.
§ Nobody knows when the time of death is going to arrive and it is very often important to get probate, and something that can be sold quickly and easily is desirable in many trusts. Nobody will know what markets will be like. There are some cases of fortunes which have melted away while selling was taking place for probate. Sometimes, of course, the equity market will be very bad and, equally, on occasions the gilt-edged market is very bad. Sometimes it will be difficult to sell some of the wider-range investments, particularly if there is rather a lot in one company. It is essential, I believe, that trustees should have some freedom for manœuvre.
§ I do not suggest that trustees should use it as a method of removing securities out of the narrower-range part of the 300 fund for ever, but that there should be an arrangement whereby they can overrun on the narrower range and replace in due course. I am not wedded to any particular method of replacement but I believe that they must have temporary freedom. This business of having to sell "half and half" could be extremely embarrassing at times, and I hope that my noble friend is going to give a sympathetic reply to this point; even though, of course, I realise that my Amendment as drafted obviously could not be accepted.
Page 2, line 29, leave out subsection (4) and insert the said new subsection.—(Lord Hawke.)
This is really in essence what I asked for before, and I apologise for having mentioned it before. What my noble friend Lord Hawke said would completely satisfy me. There is, however, another case which might possibly occur and for which I think the Government have some sympathy. There may be cases (I have not sufficiently thought one out) where the wider division consists largely, or almost entirely, of shares in a family business. In a case like that it would be very inequitable to force the family to sell its business rather than to sell securities which probably have been accumulated with a view to paying death duties. That point also should be considered.
§ THE EARL OF DUNDEE
This Amendment does not set any specific limit to the period during which a trustee would be required to restore the balance between the two parts of the fund. Unless the need arose to make a further payment, the state of unbalance might continue for a good many years. Moreover, the Amendment visualises that the balance between the narrower-range and wider-range parts could be restored or partially restored by means other than a transfer. That might, indeed, happen if, after a preponderance of equities had been withdrawn, the property remaining in the wider-range part of the fund appreciated. But in that case the debt due from the wider-range to the narrower-range part of the fund would never be discharged.
As the clause is drafted it is not so entirely inflexible as one might think at first sight. For example, if a payment 301 fell due at a time which was not propitious for selling fixed-interest investments, then there is nothing in the Bill which would prevent the trustee from raising the whole of the money by selling equities provided he made an appropriate transfer of fixed-interest stocks to the wider-range part of the fund as required by Clause 2. Admittedly, there is not the same flexibility if the trustee wishes to raise all the money by selling fixed-interest securities, but this could not be achieved without giving trustees a degree of latitude which might jeopardise the whole basis of the Bill. And, while we entirely sympathise with the feelings of my noble friends who wish to give more latitude in this respect, it is very difficult to see how it can be done without enabling the trustees to dispense entirely with the narrower-range half of the fund and to keep whatever may be left in the wider-range half only. I hope, therefore, that my noble friend will not press this Amendment. I entirely understand the reasons why he has moved it, but I do not think his object could be achieved without destroying the "fifty-fifty" basis of the Bill.
May I ask the noble Earl to consider this case rather carefully? Take the case of a manufacturer who owns a family business, who has accumulated a large fund in Government stocks to meet death duties, and who dies intestate. There arises precisely the case that I am envisaging. In that case, according to this Bill, it seems to me that the family will have to part with a large proportion of their own shares in the family business in order to meet death duties, instead of meeting the death duties out of the Government stocks which have been accumulated for that purpose. Believe me, that is the kind of situation which arouses really deep and bitter resentment and gives rise to very strong feelings. And one can understand it when a man and his family have built up a successful business which is prospering.
§ THE EARL OF DUNDEE
That would arise only if he had placed the family business, or a pant of it, in trust before he died. If he merely died intestate, without having made a trust, Ms executors could sell everything except the family business, and would not be affected by this Bill at all. This Bill applies only 302 to trusts which have been made under the Trustee Act, 1925.
§ EARL FORTESCUE
I was concerned some years ago with a case which I think is rather apposite to this discussion. There was a very large trust in which I was concerned, amounting to something over £1 million. The policy was to have it built up for grandchildren. The life tenant was extremely elderly; and the investments consisted of a big block of town property, with the remainder largely invested in investment trust company ordinary funds. The town property had to be sold, though I cannot remember exactly why. Anyhow, there was an enormous amount of money derived from investments in the trust and, in view of the life 'tenant's age (he was over 90), the trustees, very rightly, decided to put the money into Victory Bonds, which, as your Lordships probably know, can be used for paying death duties at 100 if they have been held for six months. Anyhow, the trustees put the whole of this new money into Victory Bonds. The life tenant died within a year, and the Victory Bonds were tendered en bloc and paid the entire death duties of the trust, thereby leaving the investment trust company ordinary stocks, which it had been the policy to buy for [the grandchildren, intact. If that trust bad been subject to what we are now discussing—"fifty-fifty", or equal portions—only half the Victory Bonds could have been used for death duties, and the remainder would have had to come out of the proceeds of sale of the investment trust company ordinary stocks, which would have defeated the whole object of the trust.
§ THE EARL OF DUNDEE
I am most interested in what my noble friend has just said. To begin with, I think that if this trust held real town property, and also a large number of equities, it must surely have been a trust instrument which was not confined to the trustee investment list of 1925. Therefore, it would seem to me that this Bill would not affect it, because the object of this Bill is to release trusts whose instruments hind them to the trustee investment list of 1925 to the extent contained in the Bill. Of course, there are a great many trusts—and, in the opinion of many of your Lordships, much wiser ones—which 303 do not limit the trustees' powers of investment to the trustee investment list of 1925.
I thank the noble Earl for his explanation, and I am glad to hear that, in that part of the Bill which I am afraid I still do not understand, there is some slight relief. His explanation was to a large extent a technical one setting out the dire consequences of my Amendment, and for that reason, of course, I could not possibly try to force its inclusion in the Bill, particularly as this Bill is starting in your Lordships' House and this is the first time the Government have had an opportunity of seeing what people think about it. But I would seriously suggest to him that, if the Government wish to find a method by which trustees can have some flexibility in taking money out of a fund for the payment of death duties, it is not beyond the wit of the draftsmen to devise such a method with appropriate safeguards—for instance, that the money must be restored to the other side of the fund within a certain period, or something of that sort. I feel that this is a very important point for all trustees who have to meet death duties. I think the Government will find that the point will be discussed (certainly on Committee stage) in another place as well, and therefore it will be an advantage to everybody if, by the Report stage, they can devise some method for providing this extra degree of flexibility. I beg leave to withdraw my Amendment.
§ Amendment, by leave, withdrawn.
§ THE EARL OF DUNDEE
I understand that one or two of your Lordships would like to say a word on the Question, That the clause stand part. As I think it has been arranged through the usual channels that we should interrupt the Committee stage of this Bill at about half past four and proceed with the Weights and Measures Bill, perhaps your Lordships will be agreeable to leaving, until we next meet, the Question, That the clause stand part. I would then now beg to move that the House be now resumed.
§ Moved, That the House do now resume.—(The Earl of Dundee.)
§ On Question, Motion agreed to.
§ House resumed accordingly.