TRUSTEE INVESTMENTS BILL [H.L.] (Hansard, 31 July 1961)

§ THE EARL OF DUNDEE

My Lords, I beg to move that the Commons Amendments be now considered. I understand that there is a general desire on the part of your Lordships that we should discus's all these Commons Amendments together. In any case, it is my intention to invite your Lordships to agree with them all. I think the majority of them, or at least the majority which have a great deal of substance in them, arise from various matters which were raised by your Lordships while the Bill, which was introduced in this House, was before us. The Bill left us in the early part of the Session on December 20, and it is seven months since we parted company with it.

The first Amendment on Clause 1 is drafting. The Amendments on Clause 2 are all either drafting or consequential, except for Amendment No. 6, which is a major Amendment permitting the trustees at their discretion to make withdrawals from either part of the fund. This was a matter about which your Lordships were greatly exercised in our debates. The noble Lord, Lord Hawke, moved an Amendment on the subject on December 12, pointing out that it was unfair that when withdrawals were made from the trust fund for certain purposes, those withdrawals would have to be in the same proportion between the narrower range and the wider range investments as the rest of the trust fund. He advanced strong arguments in support of his case; and I replied that, while I entirely sympathised with his feelings and those of 'others of your Lordships who wished to give more latitude in this respect, I found it difficult to see how we could accept the Amendment without destroying the fifty-fifty basis of the Bill. We have since reconsidered the 14 matter, and we have now amended the Bill so as to give the trustees full discretion as to how they deal with withdrawals from the fund. That should ease the lot of trustees, and I think your Lordships will agree that it fully compensates for any breach of principle in the 'original proposals of the Bill which it entails.

Clause 3 deals particularly with the subject of special powers, another matter on which many of your Lordships expressed anxieties both on Second Reading and during the Committee stage of the Bill. On December 13 again my noble friend Lord Hawke expressed dissatisfaction with the position of special powers under the Bill, and I think my noble friend Lord Conesford was also worried about it. The position under the Bill was that it did not put the trustees who had special powers in a more favourable position than they are now. It could not raise the permitted proportions to any more favourable ratio than fifty-fifty. The Amendment which has now been agreed to in another place permits trustees to segregate certain investments which they hold under special powers, and the fifty-fifty ratio under the Bill will apply only to the remainder of their funds. That is a substantial change which will give trustees not wholly reliant on the powers conferred by the general law greater latitude which will be welcome. It has also, incidentally, made it possible to re-draft Clause 3 in a slightly less complicated manner than its original form, which gave us all some slight difficulty in our discussions on the Committee stage of the Bill.

On Clause 4 the only Amendment not consequential is No. 11, which is designed to give a trustee more latitude in allocating property to each part of the fund when he is creating a new trust fund on appropriation of property from an existing trust fund which has already been divided. That, again, was a matter which was raised by many of your Lordships on both sides of the House. The new clause after Clause 4 is Amendment No. 14 which assures the trustee that he is making a proper division of the fund by giving him protection if he obtains advice from a qualified valuer.

Then we come to Clause 5, which I think in the new printed Bill is Clause 6 15 because the new clause after Clause 4 is printed. That deals with the present rigid wording of paragraph (a) of subsection (1) of Clause 5 with regard to diversification. This was another matter, I remember, on which my noble friend Lord Conesford was not wholly satisfied. During the Committee stage of the Bill he asked me particularly whether the words in the Bill as it then stood correctly gave effect to the intentions which both the Government and my noble friend agreed were the right intentions. He wanted to know, among other things, whether it allowed a unit trust to be regarded as providing sufficient diversity although it was only one investment. I assured my noble friend that I thought the wording of the Bill was adequate, and he accordingly withdrew his Amendment. But we have now endeavoured to make it plainer by this Amendment, No. 15, which provides that on page 6, line 3, there should be left out the words from "for" to the end of line 7 and to insert in their place: diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust". I think the only other Amendments to which I need refer specifically are Nos. 25 and 26. No. 25 is a proposed new clause after Clause 9, which provides that the Government shall have power to vary the general principle of 50–50, but their powers do not go beyond the proportion of 75–25. It has been decided that an Order to create a proportion of 3 to 1 would be going far enough without fresh legislation, but it is felt that it is a good thing to make the ratio a little more flexible than it is now. I ought to make it clear that at the moment the Government do not intend to alter the ratio, but I think your Lordships will agree that, from the point of view of many of your Lordships, it is a good thing to give them the power to do so if circumstances and the general pattern of investment in the country should seem to warrant it.

Amendment 26, concerning the powers of the court under the Variation of Trusts Act, 1958, which proceeded originally from the Trustee Act, 1925, is a question that gave us a considerable amount of trouble in Committee stage of the Bill. My noble friend Lord Conesford 16 raised it twice, first of all in Committee upon an Amendment which was also spoken to by the noble Lord, Lord Saltoun, and the noble and learned Lord, Lord Cohen. The point was brought in question whether, after we had laid down this new ratio in the Bill, courts of law would feel morally bound, even though they were not legally bound, in their variations of trusts under the 1958 Act not to go beyond this new limit which Parliament had prescribed. I said to my noble friend Lord Conesford [OFFICIAL REPORT, Vol. 227, col. 283]: 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. And I added: 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. My noble friend returned to the matter on Report stage. He moved an Amendment on which there was a long discussion, my noble friend expressing the view that, although according to the strict wording of the Bill the powers of the court were not affected, the judges might feel they ought to modify their decisions in the light of the general ratio which was being laid down in this Bill. My noble and learned friend the Lord Chancellor told Lord Conesford that he was very anxious to meet the point which had been put with such clarity and he gave an undertaking that before the Bill went to another place he would consult the Judges of the Chancery Division about this matter. He said (col. 951): If they see no objection to the proposed new clause, even though it is not, strictly speaking, necessary, we will consider moving an Amendment on similar lines. With that assurance Lord Conesford withdrew his Amendment, and after the consideration promised by the Lord Chancellor the Amendment which is now No. 26 on the Paper was introduced and agreed to in another place. I hope that those of your Lordships who were interested in the matter will agree that that is satisfactory from the point of view of those who had doubts on the subject.

I think, my Lords, that all the other Amendments are either concerned with definition or clarification, or else are drafting or consequential. I am moving now that the Commons Amendments 17 be considered, after which, if your Lordships are agreeable, I will move without further discussion that the House agrees with the Commons in these Amendments.

§ LORD NATHAN

My Lords, those of your Lordships who know, as most of you do, the past history of this Bill will realise that I have a very special personal interest in it, as I expressed on the Second Reading. I am glad that to-day I am able to take part in this discussion in which your Lordships will say farewell to this Bill. The next stage will be its enactment. My interest arises out of the fact that as long ago as 1949 I was appointed by my noble friend Lord Attlee, then Prime Minister, Chairman of the Charitable Trusts Committee. It is as long ago as 1952 that that Committee presented its Report. Nine years is a very long time for any individual to wait to see the result of his labours. But I regard myself fortunate in the fact that the proposals set forth in my Committee's Report should now have reached the stage at which we are about to see them passed into law.

If your Lordships recall the Report made by the Charitable Trusts Committee, you will know that there was imported into it a chapter on the range of trust investments. I have just been looking at the Report and I see that in it the subject covered four pages. Here in this Bill 17 pages are required to do what we did in 4. However, I do not complain of that. It is very natural and very proper that this Bill should elaborate in precise terms the more general propositions which were set forth in the Report to which I have referred.

As to what the noble Earl has said, this Bill left your Lordships' House a good many months ago. During that period of time in another place a great deal of care has been taken—I say "during that time", not "throughout that time"—to dot "is" and cross "is". That inevitably involves the importation of a good many ifs and buts; and there is no doubt that, in consequence, the document, as a document, is far more complex than when it left your Lordships' House. It is equally the case 18 that, as the result of those activities in another place, with these Amendments which we are considering to-day, the Bill as a piece of machinery is far more workable, and perhaps even more understandable, than it was before. For my part, with my noble friends on these Benches I concur, if that is not too bold a phrase, in these Amendments. I think they are an improvement to the Bill.

Your Lordships' House is indebted to the noble Earl opposite for the care which he has taken in presenting to your Lordships the substance of the main Amendments comprised in these papers which are before us here to-day. I believe that the scheme which has been adopted in this Bill is a common-sense scheme, and one which should work appropriately and achieve the object for which the Bill was designed. That is not to say that there are not some Amendments which one might have wished to import, or some other Amendments which one might, perhaps, have wished to see phrased differently. In particular, there is one matter which I regret does not appear in the Bill at all.

In the chapter on the range of investments contained in the Report to which I have referred, there was a reference to power being given to trustees to invest in land. I am bound to say that the trustees then in mind were trustees of charitable funds, rather than the general body of trustees. When Her Majesty's Government came to consider that Report and issued a White Paper upon the subject setting out their views, they included an adoption of the recommendation that land should be comprised in the power of trustees for investment purposes. That has now gone. The noble and learned Viscount sitting on the Woolsack, speaking in your Lordships' House on December 13, stated why it had gone, adopting as his reason (from which I should not wish to differ) that such a wide provision relating to trustees at large—and it is to them that this Bill refers.-might not be appropriate, although it was wholly appropriate for the more limited purpose of charitable trusts, to which my Committee's Report referred.

I know that among charitable trustees There is to-day some anxiety upon the range and extent of their powers in this respect. I therefore put forward the 19 opinion—I cannot put it forward any higher than as an opinion—that, as the noble Earl opposite has pointed out today, the powers of the Chancery Division of the High Court are left unaffected, and it is open to charitable trustees to apply to the Court for permission to invest in land; but since the powers of the High Court are exercisable by the Charity Commission, a simpler course open to the trustees would be to adopt the Cheap, simple and relatively swift course of putting their case to the Charity Commission, who may thereby be induced to extend to trustees in particular cases the power to include the right to invest in land. That does not appear in the Bill. I offer this obiter (if I may use that term) because I know that there are large numbers of Charity trustees—particularly, perhaps, the City Livery Companies—who hold large amounts of land and who wish to know how they stand. I believe that what I have said is 'a sound proposition in point of law and practice; that they can invest in land by taking, the proper steps, although they cannot do so under the provisions of this Bill. If I should be mistaken in that, there might perhaps be an opportunity, if the noble and learned Viscount should think fit, to correct me; but I have taken some care in the matter, and I hope and believe that I am correct in that general statement.

Now, my Lords, there are other matters to which these Amendments refer and upon which I will delay your Lordships but a moment. I think it very right—though perhaps a little surprising—that Her Majesty's Government should have taken power to extend the list of wider-range investments up to 75 per cent. of the fund. I looked with some care to see whether the Treasury were equally to have power to reduce or diminish the range. I am glad to know that that power does not exist in the Bill, and that the only power in that respect which the Treasury has is, by order, to enlarge the wider-range investments. I think that is all to the good, although I note, and I quite understand, that the Government do not intend at any immediate moment to exercise that right.

There is one matter to which I referred on Second Reading and to which much regard has been given in the Press. I 20 know that there exists a general feeling of agitation among large bodies of the public as to the position of undated securities. I had myself rather hoped that Her Majesty's Government might have thought it proper to exclude from the narrower range of investments Government undated securities. Whilst they are in the list there is a suggestion implicit in that fact that undated securities are sound securities in which trustees may invest. Practice and experience, however, show that that is far from the fact. Undated securities have indeed been a lamentable disaster for very large parts of the population, both trustees and private persons.

I do not know whether your Lordships fully appreciate (I did not myself until I looked into this matter again not long ago) that when 3½ per cent. Conversion Loan came into existence it was not dated but was stated to be 3½ per cent. War Loan "1952 or after". I think that the ordinary, uninstructed people were entitled to believe that if there was going to be no repayment, no redemption, in 1952, then there was at least going to be a repayment not long after; or, if not not long after, at least at some time. To ask people to invest in securities repayable in "1952 or after" and then to say that "after" means never is not, I think, a very frank way of dealing with investors from all classes of the population, whether trustees or otherwise.

There can be no doubt that great numbers were deceived by this, and great numbers have suffered very great losses. I have a table in front of me which shows that, whereas this security was in 1948 standing at its highest at 10411/16 in 1961 it has been as low as 527/16 That means an enormous loss, even within that limited period of time. I have referred to this subject before, and I now most earnestly suggest to Her Majesty's Government that, in order to keep faith with the people who have subscribed, and the people who will now be asked to subscribe to securities in future, the term "or after" should be given some real meaning. "After" does not necessarily mean to-morrow; but it does mean some time. It does not mean a future so indefinite as to imply never. It means a time to which those who invest may reasonably look 21 forward, if not within their own lifetime, at all events to some period of time when the money which they have invested will come back to them or their successors.

It must be borne in mind that the origin of this security was the perils of the war of 1914. I very well remember, when I was in the trenches in Gallipoli, receiving The Times newspaper containing the prospectus for 5 per cent. War Loan. Every possible inducement and every possible phrase was used to activate the feelings of patriotism of those who received and read that prospectus. I was one of them. I was then a young officer, arid I signalled to Cox's in London to put £50 into this Loan, which at that time was pretty well all the money I had. I have kept the security ever since because it was the first investment I ever made. I still have it to-day, and I reflect upon the emotions with which I read the prospectus, and the sentiment which induced me at once to signal to the agents in London to put my only £50 into this Loan. And now, what do I, like so many others, find? We were told that we should be repaid at a certain period of time or after; it is now 1961, and we are still told that there is no likelihood of repayment.

My experience is only one instance, a very small instance. And I give it to your Lordships as an example of the emotions which were stirred up by all the resources of advertisement and other appeals for patriotism, and to show that the response received has not been dealt with in the way in which I think it should. There are large groups of people, both trustees of charitable trusts, family trusts, and private persons, who invested at that time, and who, like myself, still hold the security but find the Government's appeal, to which they responded, resulting in a devastating loss to them.

There are many thousands of families, almost innumerable over the country, who suffered disaster, crippling disaster, because of their investment in this undated security—and other undated securities, too—on the faith that 22 the Governments would see to it that their money would always be worth, or in time would be worth, what it was when they pat their money in. I do not speak here of the reduction in the value of money, but it should at least have the same nominal value as it had when the money was put in. The Government cannot rely or depend upon people responding to such appeals in future unless they show willingness to treat differently from the way they have done hitherto those who subscribe to the loans now existing under the influence of patriotic feelings, consciously and intentionally stirred by the Government so as to induce that result.

I do not mind whether it is within a short period of time or a longer time. Supposing the Government were to adopt the same procedure as for premium bonds, and do something in the way of drawings; or supposing they were to give a date, even if it were 25 years ahead, that would at least show, I would say, a proper mind toward honourable dealing on the part of the Government. And at the same time it would bring a certain measure of confidence to many people who have been so hard hit. While I address myself to noble Lords opposite, because they represent Her Majesty's Government today, no responsibility for this matter attaches to them for what has been done in the past. All Governments since 1915 are, I think, equally blameworthy in this matter, which I believe has influenced the minds of the public of this country, especially at this difficult time, beyond what is readily understood. It is not wise to destroy people's confidence in the Government, whether it be the Government of the day or of a past day.

I hope that, in saying farewell to this Bill, the Government will not feel that there is not still something further to be done as regards trusts, and in particular undated securities, and that they will direct their minds to what I regard as a matter of importance far beyond what might appear on the surface.