HL Deb 16 March 1971 vol 316 cc418-32

8.35 p.m.

LORD SIMON OF GLAISDALE

My Lords, I beg to move that this Bill be read a second time. I feel that I must start with a number of apologies. The first is for introducing so technical a Bill at so late an hour. The second is that anyone so junior in the service of the House should be presuming to sponsor a Bill of this sort. I can only say that I have done so because the noble and learned Lord on the Woolsack asked me to do so, presumably because much of the Bill is concerned with a sphere of judicature and administration for which I myself am partly responsible. I am particularly sorry that I should be moving it when I am so junior, because I know that noble Lords would wish the sponsor of this Bill to congratulate the noble Lord, Lord Milner of Leeds, on being, as I understand he is to be, for the first time the spokesman from the Front Opposition Bench on this Bill, and I hope that I may be allowed to do so without being thought impertinent.

My third apology concerns the subject matter of the Bill: it would be idle to pretend that it is hilariously entertaining. I doubt whether even the noble and learned Lord on the Woolsack, with his great capacity for giving animation to inert material, could make it very gay. I certainly cannot; but I do commend it to your Lordships as a useful improvement in the law and practice governing the administration of estates—that is to say, the law and practice which authenticates the right of persons to deal with the estate of a deceased person. The Bill implements the recommendations of two Reports. The second one has received wide publicity; both have been widely welcomed. In view of that, I hope your Lordships will think that I may deal fairly summarily with the provisions of the Bill. So far as I know, there is only one clause, Clause 10, which has provoked any misgivings at all, and I propose to say a word or two about that in due course.

My Lords, the fourth matter of apology is that this Bill is concerned not only with England and English law and practice but also with those of Scotland and Northern Ireland. I am constantly conscious of my own gaps in knowledge of English law, and I am almost completely ignorant of Scottish and Northern Irish law and practice, though I am told that Northern Ireland practice and law in these matters do not differ very greatly from our own. But part of the ostensible difficulty in this Bill springs, I think, from a mere difference in nomenclature. For example, your Lordships will see in the Bill a reference to the commissarist office in Edinburgh. Now that corresponds, as I understand it, to the principal probate registry in this country, both of them being the administrative substructures of judicature in this sphere.

As to the rest, in England we speak of grants of representation, in other words the sort of authentication which I mentioned. We speak both of "probate" of a will which appoints executors and of "letters of administration"—the latter being when there is either no will or one appointing no executors. The Scottish grants of representation, as your Lordships have probably seen, have a different nomenclature. They speak only of "confirmation", where we should speak both of probate and letters of administration. There is also, though, a reference to "certificates of confirmation". I have been advised that those refer to certified extracts from confirmations which, for administrative convenience, are made in Scotland, dealing particularly with specific assets—especially, for example, with the shares of one particular company. The other term that your Lordships may see which may be unfamiliar is "additional confirmation". That, as I understand it, is merely a confirmation where the estate is not fully administered. We have a similar concept in our own probate law. As I have said, as I understand it, Northern Ireland employs very much the same sort of nomenclature as we do, as well as having a similar law and practice.

Clauses 1 to 7 abolish the necessity of re-sealing grants in the various countries in the British Isles. The problem arises where a person dies domiciled in one part of the British Isles leaving property in another part. A grant of representation can always be made in the country where the property is left, but that is quite an expensive and formal proceeding. It involves examining not only the authenticity of the document—say, a will—but also the credentials of an applicant. Therefore an alternative procedure has been evolved known as "re-sealing". Where a person dies domiciled, say, in Scotland, the grant in Scotland may be re-sealed in England. That means that only the authenticity of the document—that is to say, the grant in Scotland—is examined, and not the qualifications and credentials of the applicant. That applies not only between England and Scotland but also between England and Northern Ireland, and again between Northern Ireland and Scotland.

That, as I have said, is a simpler and cheaper procedure than the original grant, but it is still troublesome and of some expense. The Law Societies of England and of Scotland made representations on that matter to the noble and learned Lord, Lord Gardiner, when he was Lord Chancellor. In consequence, he and the Secretary of State for Scotland at the time appointed a Committee under the chairmanship of one of the registrars of the Principal Probate Registry and consisting of probate officials (as we call them) and solicitors of both countries to examine the problem. They found that the cost was by no means minimal. They estimated the annual cost of re-sealing, both the direct cost to the public and the administrative overheads, to be between £71,000 and £81,000 a year.

Their terms of reference were to see whether re-sealing any longer served any really useful purpose. They found that in Scotland it was a mere empty formality; in England it still served two useful purposes. But the Committee came to the conclusion, which I think has commanded general approbation, that those advantages could be obtained in other ways. Their conclusion was: Re-sealing does not serve any useful purpose on either side of the Border. They therefore recommended its abolition. That, as I have said, is done by the early clauses of the Bill.

I hope your Lordships will think that that is sufficient explanation at this stage. If your Lordships have any further points of detail that you wish to raise I will try to deal with them either in reply or on Committee stage. If they relate to Scottish and Northern Irish law, I think the latter course is virtually a certainty.

I turn to the second Part of the Bill which consists of Clauses 8 to 11. That is the result of the Law Commission's Report, Administrative Bonds, Personal Representatives' Right of Retainer and Preference and Related Matters. It corresponds very closely to the Bill that was drafted by the Law Commission as the annexure to their Report. There are only minor amendments, and the arguments in favour of the various steps proposed are set out with great clarity in the Law Commission's Report. Therefore I do not think I should be justified in troubling your Lordships with the detail.

The position is this. At present an administrator—not an executor—must enter into a bond that he will collect, get in and administer the estate of the deceased. That is only therefore when there is no will appointing executors. Moreover, the bond must be for double the gross value of the estate, and not merely for its value. In most cases, in addition, sureties are required for the bond—sometimes one; sometimes, and generally, two—and they are often, for convenience, an insurance company, which of course charges a premium. The cost, certainly cumulatively, is quite extensive.

I know that the Law Society were of opinion that it was questionable whether the necessity for bonds and sureties was still potent. Actions on a bond are very rare because there is an alternative available in the form of an administration action in the Chancery Division. Even the main purpose of the bond, the action against sureties, is very rarely exercised. There are, however, two indirect purposes of the bond which have considerable moment to this Bill, particularly to the clause which is the only one that has aroused misgiving. In the first place, when there is a grant to a creditor of the estate, it is always a term of the bond that he should undertake to waive any right to prefer his own claims to those of other creditors. The other one is less important: the bond sets out concisely the duties which the general law imposes on executors.

The Law Commission, after extensive consultations, came to the conclusion that bonds were no longer necessary; the interests of creditors could be otherwise safeguarded. What they recommended was that bonds should be abolished, except that a probate registrar should have a discretion to require guarantees by sureties up to the value of the gross estate—no longer twice the value—in certain types of cases which seemed to call for safeguards. Those cases are set out in paragraph 14 of the Report. They are practically entirely similar to the cases whereby under the present law and practice the sureties are required to "justify": that is a technical term for proving to a registrar that the sureties are good for their guarantees. The Law Commission went on to recommend that the rights of personal representatives to prefer their own claims to those of others was an anachronism and should be abolished. That was so whether the grant was obtained as a grant to a creditor, or in any other way. They recommended finally that the duties of a personal representative, which would be no longer defined in the bond because the bond would be abolished, should be defined by Statute.

The advice I had from the Probate Registry coincided with the advice that was proffered to the noble and learned Lord the Lord Chancellor by the Law Commission. The Law Commission also considered whether the existing right of a personal representative to prefer one creditor to another of the same class, including himself, should be perpetuated. That is the only matter that I think has aroused any misgivings. They recommended that the power should be continued only where the personal representative, acting reasonably and in good faith, pays the claim of a creditor at a time when he has no reason to believe the estate is insolvent.

My Lords, may I deal quite briefly with Clause 10? As I say, that is the only one which has been questioned; indeed all the other clauses, so far as I know, have been welcomed. That clause has two purposes. It abolishes the personal representative's ancient rights of retainer and preference, and, secondly, it affords protection to a personal representative who makes preferential payments to creditors in good faith at a time when the personal representative does not know that the estate is insolvent. In other words, it implements the Law Commission's recommendations. The Law Commission sent out invitations to professional bodies to comment, and I think there has been some misunderstanding, or miscarriage, because the Report was printed before any misgivings were expressed. So far as I am concerned, it was only at the end of last week that I knew that there was any difficulty in that clause.

May I set out what seemed to me to be the arguments in favour of the clause as it stands, and the arguments of the Law Society and part of the Bar Council—the arguments in favour of the retention of the present system. It said first that it may be necessary for the protection of a personal representative acting in good faith. It said secondly that without that power, administration might be slowed up; thirdly, with the abolition, persons might be discouraged from accepting the duties—which are often onerous—of personal representatives; and, finally, that abolition places the personal representative creditor in a worse position than other creditors. The Law Commission were not persuaded by those arguments. They felt that the right of retainer, the right to pay one's own debts in priority to creditors of the same class, was an archaic rule and was inconsistent with the general equitable principle that a person in a fiduciary position should not benefit from his trust. They felt that the personal representative acting in good faith was adequately protected in two ways: one, by advertising for claims, as he can do under the Trustee Act, and, secondly, under subsection (2) of Clause 10, which gives a new and additional safeguard. They did not feel that administration would be slowed up; they felt that subsection (2) gave sufficient safeguards for an administrator to get on with the payment of small bills, servants' wages, and so on.

I apprehend that the noble and learned Lord on the Woolsack will wish to hear the arguments that may be deployed in this debate, on that clause at any rate, so as to be in a position to advise the Committee on the matter in due course. If the noble and learned Lord is agreeable and willing for me to do so, and if the course commends itself to your Lordships, I am very willing myself to discuss this matter with the Law Commission and with the Law Society and the Bar Council, to see what measure of agreement can be obtained. That will not, of course, preclude any noble Lord from moving an Amendment at Committee stage. But since, as I understand it, that is the only clause which arouses misgiving, I trust that your Lordships will give the Bill a Second Reading. My Lords, I beg to move.

Moved, That the Bill be now read 2a.—(Lord Simon of Glaisdale.)

9.1 p.m.

LORD MILNER OF LEEDS

My Lords, may I first thank the noble and learned Lord, Lord Simon of Glaisdale, for his kind remarks? Secondly, I am sure your Lordships would wish me to congratulate the noble and learned Lord on his appointment as a Lord of Appeal in Ordinary. I should also like to thank him for introducing this Bill. We are all, I am sure, grateful to him for his explanation of its provisions. We on this side of the House welcome this Bill, subject only to some reservations in respect of Clause 10, which has already been referred to by the noble and learned Lord. As he has said, both the Law Society and the Chancery Bar Association warmly welcome this Bill, with the exception of Clause 10.

Clauses 1 to 7 relate to the reciprocal recognition of grants of probate and administration. It is now generally accepted that resealing is a useless formality which wastes time and money; and Mr. Registrar Kenworthy's Working Party, which was set up by my noble and learned friend, Lord Gardiner, and the Secretary of State for Scotland, satisfied themselves that no administrative or other difficulties would result from its abolition. The proposals in the Bill also extend to Northern Ireland.

The remainder of the Bill, as the noble and learned Lord has said, gives effect, with slight modifications, to the recommendations in the Law Commission's Report on administration bonds, and this arose out of a proposal which the Law Society made to the Law Commission in 1966. We have no objection to this part of the Bill, except to Clause 10, relating to personal representatives' rights of retainer and preference. The noble and learned Lord, Lord Simon of Glaisdale, has said he will discuss this clause with the interested parties before the Committee stage. I welcome this suggestion and am hopeful that the noble and learned Lord the Lord Chancellor will accept any proposals resulting from such discussion. My noble friend Lord Janner will be speaking next, with, I understand, particular reference to Clause 10, so I do not propose to comment further on it.

The abolition of the need to reseal grants of probate and letters of administration between the courts of England and Wales, Scotland and Northern Ireland, and the abolition of the statutory requirement that administrators must give a bond, will save personal representatives both time and money. I therefore support the request to your Lordships to give this Bill a Second Reading.

9.5 p.m.

LORD JANNER

My Lords, may I, too, offer my congratulations to the noble and learned Lord, Lord Simon of Glaisdale on his new appointment; and also to my noble friend Lord Milner of Leeds on the manner in which he has expressed himself in respect of this Bill, this being the first occasion on which he has spoken from the Front Bench. May I also say that I had no doubt, judging from the opinions which have been expressed in the profession and outside, that there was not likely to be any serious argument about the main objects of the Bill, to abolish administration bonds and the resealing of grants in different parts of the United Kingdom?

The noble and learned Lord, Lord Simon of Glaisdale, said that this was not a matter which was likely to be regarded as an hilarious one. Well, it certainly will not be a matter in which hilarity will be felt by anyone who might find himself at some time or another in a position of having commenced the administration of an estate which ultimately turns out to be insolvent. So far from being a matter of hilarity, in practice it may place him in a very serious position indeed. The Bill may seem like a very dry piece of lawyers' law, but in fact it has the sole purpose of saving members of the public unnecessary expense and delay in the administration of estates of deceased persons.

The economies of time and money will not be spectacular, but even to save a few pounds and a few days on each of quite a large number of estates every year is very welcome at a time when the usual effect of legislation is to make the administration of estates slower and more expensive. I say this as a practising solicitor myself, and I am sure that the public as a whole will appreciate this from a profession which is not always regarded as being extremely helpful—I do not know about the feeling in this House, as I have not been here long enough; but sometimes in another place, quite wrongly, it has not been regarded as being helpful in these matters. The support of a Bill of this nature means, of course, that legal costs will be saved to people who otherwise would have to incur them. This is something which the profession itself commends.

If, for example, a husband dies intestate leaving a fairly modest estate, his widow may well have difficulty in making ends meet. The inevitable expenses of administering the estate are increased by the premium on an administration bond and the legal charges for the work involved in obtaining it. If, as is quite common nowadays, some of the securities of the estate are registered in Scotland, there are the further fees and charges for the sealing of a grant in Edinburgh. All this could add up to £20 or £30, which the widow could ill afford at such a time. The solicitors' profession have for long thought that the rules requiring administration bonds and the resealing of grants are a nuisance, and have suspected they have completely outlived any useful purpose they may ever have served. We are therefore grateful to the Law Commission and to others concerned with the preparation of this Bill for having demonstrated clearly that this is so and providing its solution.

I now come to a matter which has caused a considerable amount of concern to both branches of the profession, and to which the noble Lord, Lord Simon, referred when moving the Second Reading of the Bill. The position with regard to the administration of an estate when it becomes insolvent, or if it is insolvent at the commencement, causes considerable anxiety and concern to those who would be prepared, under normal circumstances, to administer the estate, and who in the circumstances are placed in an extremely serious and difficult position. To place upon administrators obligations in the event of anything occurring at any time to make the estate insolvent—and it is not an unusual fear in present circumstances—is something which has to be very carefully considered. This is where the two professions—the solicitors' branch and the Bar—feel that the matter must be extremely carefully considered, because as the position stands at present it is almost impossible to get people, if they feel that there is a possibility of the estate becoming insolvent, to administer an estate. It is quite a reasonable attitude to take.

Let us examine, for instance, the position to-day. Who would have imagined, when winding up an estate, that shares in the Rolls-Royce company would have dropped in the manner they have done? Yet, on administering the estate, as your Lordships well know, the price quoted for those shares at the time of the death of the individual is what will be included in the application for letters of administration to be granted. As circumstances are at present, situations of that sort—though not so drastic, everybody sincerely hopes —may arise, and consequently no one can be really sure, if certain assets belong to an estate, what may happen to decrease their value.

In these circumstances, both professional bodies feel that the time has come when consideration should be given as to the method to be adopted in place of the present one, which demands that letters of administration must be taken out first, before bankruptcy proceedings can be taken in respect of an insolvent estate. And who is going to do it, with safety, unless there is some provision whereby he is protected? I think that is at the bottom of the fear and anxiety which prevails in respect of Clause 10.

As I said before, I have a high regard for the Law Commission and those connected with it, but I hope that neither they nor your Lordships will consider it impertinent if one were to say that, after all, the people who really know the difficulties in all matters are not necessarily members of that Commission. The practitioners who have to deal with these situations, both in the solicitors' profession and at the Bar, get the experience in the course of their practices of dealing with the practical issues that arise, and both sides of the profession have come to the conclusion that the situation is very unsatisfactory. Therefore it is suggested that perhaps at some later stage your Lordships may consider it advisable to remove Clause 10 from the Bill as at present drafted, and that a Committee of some kind should be set up (one appreciates, of course, that the Law Commission has heavy duties on its hands) which would consider such suggestions as that in the event of an estate appearing to be likely to be insolvent it should be dealt with perhaps by a county court or by a registrar in bankruptcy, with provision for persons concerned to intervene and to ask that the administration should proceed in the normal way, or that some method of that kind might be devised to cope with this situation.

The Law Society themselves, in a memorandum which some of your Lordships may have received, say this: It is proposed by Clause 10 of the Bill that a personal representative's right to retain a debt due to himself should be abolished altogether. We have endeavoured to apply our minds to the situation that would result from this. If the right of retainer is abolished how would a personal representative in such circumstances ever pay his own debt short of going to court? Lord Atkins' explanation of the right in Attorney General v. Jackson was this:

  • 'Without the right the executor would be bound to pay the other debts of the testator and to leave the testator's debt to himself unpaid. A personal representative cannot sue himself and therefore he cannot pay himself. Any other creditor would be entitled to say'"—

LORD SIMON OF GLAISDALE

My Lords, if the noble Lord will allow me to say so, surely that is quite exaggerated, because at the moment the condition of the bond insists on waiver of the right of preference.

LORD JANNER

Yes, my Lords, but now, with the greatest respect, the position is that you are introducing a clause which excludes altogether this possibility of retainer, and in my view—if a person enters into a bond that is an entirely different matter—he is compelled, according to the provision in Clause 10, to accept the position in which his debt can never be recovered.

THE LORD CHANCELLOR

My Lords, I think the noble Lord is wrong about that. If he looks at paragraph 8 of the Law Commission's Report, he will see it quite clearly stated therein that the abolition of the right of retainer will in no way interfere with the personal representative's right to pay his own debt pari passu with others, and I cannot see that there is anything in what the noble Lord is saying which would not entitle him to take advantage of Lord Simon's invitation to discuss this matter with him before Committee stage.

LORD JANNER

My Lords, I am loath to argue any matter on which the point of view of the Law Society may differ from that of the noble and learned Lord the Lord Chancellor, but I gathered from what he has said now that there is a possibility between now and Committee stage of the position being considered by the professions. Obviously, if that is the position, then at some later stage the two professions might get together with the Law Commissioners.

I do not want to press the noble and learned Lord the Lord Chancellor. I would certainly be happy to accept the suggestion that has been made, so that by the time we come to Committee stage the matter could be carefully considered and could be argued out. But the views I am expressing are not my views alone. I am reading from the manifesto which is issued by the profession and which has been accepted by the appropriate committee of the Bar Association.

I am quite prepared to sit down at this stage and give way to the noble and learned Lord the Lord Chancellor if he would be prepared to express himself in respect of the suggestion that was made by the noble and learned Lord, Lord Simon, because I think that everybody in the House would be very pleased if that were done. Apparently the noble and learned Lord is not prepared at this stage to agree to that.

THE LORD CHANCELLOR

My Lords, I do not want to interrupt, but I said what I had to say once, and I do not think that it would be improved by saying it twice. I was proposing to address the House when the noble Lord resumed his seat.

LORD JANNER

My Lords, if I misunderstood, I offer my apologies, and I shall not proceed further in the circumstances.

9.21 p.m.

THE LORD CHANCELLOR

My Lords, I do not want to detain the House at this late hour. I should like to echo what noble Lords have said, both in welcome to the noble Lord, Lord Milner of Leeds—whose father I sat under in another place, and whom I knew very well in this House—and also to the noble Lord, Lord Simon of Glaisdale, who I think has placed the House again in his debt by undertaking this not very exciting but, I hope, valuable piece of legislation, which he has been in a position to expound rather better than any noble Lord on either side of the House. I should like to join in the congratulations to him on his new appointment, which will bring him into this House in another capacity where, I hope, he will give incomparable service like his predecessor, the noble and learned Lord, Lord Hodson.

I do not want to weary the House at this stage, because the Bill has been so admirably canvassed by the three speakers so far. I should just like to say, on the first part of the Bill, that the Northern Ireland Government welcomes the change, and my noble friend the Minister of State for Scotland has asked me to underline the welcome which she and my Scottish colleagues give to the Bill as regards the resealing provisions. The point about the administration bonds was dealt with fully by the noble Lord, Lord Simon, from the Cross-Benches. Your Lordships simply cannot leave out Clause 10 altogether for the reason that the noble Lord advanced: that at present administration bonds prevent an administrator who is a creditor from putting the money in his own pocket in preference to the other creditors. That seems to me to be a perfectly reasonable thing to expect of an administration bond.

As we are abolishing the administration bond, we have to say something about the right of retainer. We cannot just leave it like a floating kidney until somebody has looked into the situation; it has to be dealt with in this Bill in one way or another, otherwise this part of the Bill would have to go altogether. It is unthinkable that the right of retainer should be left unspecified if the administrator's bond is being abolished. The noble Lord, Lord Simon, said that he would be prepared to discuss this matter. It has brought misgiving to members of the Chancery Bar Association and to the Law Society. I can think of nobody who could conduct those discussions better than the noble Lord, Lord Simon. If it is thought that insufficient protection is given to the personal representative in an insolvent estate, I am sure that if it is possible to find an adequate solution it will be found on Committee stage.

I must just say that I have not quite the sympathy with the personal representatives expressed by the noble Lord, Lord Janner, and by the Law Society. My advice, which comes from the Law Commission, is that there is nothing in the abolition of the right of retainer which does not entitle the personal representative to pay a debt due to him pari passu with the other creditors, but it does prevent him from putting himself in a position of advantage by reason of his fiduciary position. My own inclination was to feel wholly persuaded by the argument to that effect in paragraphs 7 to 10 of the Law Commission's Report, which advocated the abolition of the right of retainer on the terms contained in Clause 10. Basically this is a question which is better discussed on Committee, as the rest of the Bill is acceptable. The only thing which would not be acceptable would be to pass into law an Act of Parliament which abolished the administration bond and remained silent about the law of retainer, because that would be a nonsense.

In conclusion, before seeking to take the opinion of the House, I should like to express my gratitude both to the noble Lord, Lord Simon, for taking on this Bill, and to Sir Clive Bossom in another place for sponsoring this not very exciting piece of legislation. They both do all the more service to the public by undertaking legislation of this kind precisely because it is both difficult and onerous, and, as I say, it carries little kudos for those who undertake the work. I should also like to thank the noble Lord, Lord Milner, and the noble Lord, Lord Janner, for the contributions they have made to the debate.

LORD SIMON OF GLAISDALE

My Lords, I should certainly be abusing your Lordships' patience if I did more in exercising a right of reply than to thank your Lordships most warmly for what you have said about me to-day.

On Question, Bill read 2a, and committed to a Committee of the Whole House.