HL Deb 12 July 1966 vol 276 cc76-8

3.0 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.—(Lord Hughes.)

On Question, Motion agreed to.

House in Committee accordingly.

[The EARL OF LISTOWEL in the Chair.]

Clauses 1 to 5 agreed to.

Clause 6[Amendment of Section 5 of Trusts (Scotland) Act, 1961]:

THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES) moved to leave out subsection (2) and to insert instead: (2) The restrictions imposed by the said section 5 shall apply in relation to a power to accumulate income whether or not there is a duty to exercise that power, and they shall apply whether or not the power to accumulate extends to income produced by the investment of income previously accumulated. The noble Lord said: The effect of this Amendment which I now move is that the restrictions on accumulation under Section 5 of the Trusts (Scotland) Act 1961—that is, what are sometimes called the Thellusson restrictions, shall apply not only where the relevant deed specifically directs accumulation, but also where it merely permits it. It follows a similar provision for England and Wales, in Section 13(2) of the Perpetuities and Accumulations Act 1964.

Your Lordships may recall that a provision to the same effect, which was, however, declaratory in form, was included in the earlier Bill which was before your Lordships' House earlier this year, and at that time the noble and learned Lord, Lord Guest, expressed misgivings about it. In the first place, he considered that it represented a change in the law rather than a declaratory provision: at that time this was stated as being a declaration of the law rather than a change of it. On the merits, he was apprehensive that its effect would be to require charitable trusts to disburse all their income, even in years where they found it unnecessary to do so. The noble and learned Lord accordingly suggested that the provision should be dropped till some such body as the Scottish Law Commission had considered it. This course was adopted, and the Amendment before your Lordships gives effect to the advice which has been received from the Commission.

The Commission considered in the first instance the present law on the subject. This is highly complex and technical, and I do not think that for the present purpose I need do more than indicate their conclusion: that there are indications, but no more, that discretion to accumulate would probably be interpreted as falling within the operation of the Thellusson Statutes. Accordingly, the Amendment does not purport to declare the existing law, which is evidently in some doubt. On the merits of the matter, however, the Commission recommend in favour of the provision. There should not, they consider, be very serious difficulties for charitable trusts, since the restrictions do not strike at holding income, as undistributed income, for distribution the following year. What the Statute strikes at is accumulation; that is, rolling up income to form a capital fund. They say that the absence of the provision against permissive accumulation, particularly in contrast with the corresponding English Statute, would be an encouragement to evasion of the law against accumulations: deeds would be framed with a power to accumulate: not a direction, but the settlor would give an indication of his wishes in a letter which would not be legally binding, but which would doubtless be acted upon.

In accordance, therefore, with the Commission's advice, the Amendment strikes at permissive accumulation: but it does not purport to declare the existing law. In this connection, I am sure your Lordships would have welcomed the opinion of the noble and learned Lord, Lord Guest, on this Amendment. Unfortunately, when I sought to consult him, I learned that he is still indisposed and is unable to be with us to-day. I hope your Lordships will accept that I have amply fulfilled the undertaking which I gave to him earlier in the year, and that there is justification now for acting on the advice of the Scottish Law Commission. I beg to move.

Amendment moved— Page 4, line 25, leave out subsection (2) and insert the said new subsection.—(Lord Hughes.)

On Question, Amendment agreed to.

Clause 6, as amended, agreed to.

Remaining clauses and Schedule agreed to.

House resumed: Bill reported, with the Amendment.