HL Deb 16 March 1971 vol 316 cc412-8

8.15 p.m.

LORD DIPLOCK

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Diplock.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD CHAMPION in the Chair.]

Clause 1 agreed to.

Clause 2 [Abolition of deposit or filing of instruments creating powers of attorney]:

LORD DIPLOCK moved Amendment No. 1: Page 1, line 19, at end insert ("under section 25 of the Trustee Act 1925, section 125 of the Law of Property Act 1925 or section 219 of the Supreme Court of Judicature (Consolidation) Act 1925.")

The noble and learned Lord said: This is not a substantial Amendment; it is put down for clarification only. Although I have no doubt that it will be known to solicitors what are the relevant provisions under which powers of attorney are deposited or filed at the Central Office, this is not so transparently clear to others, including Law Lords, and to insert these words into the Bill will make the position clearer to them.

On Question, Amendment agreed to.

Clause 2, as amended, agreed to.

Clauses 3 and 4 agreed to.

Clause 5 [Protection of donee and third persons where power of attorney is revoked]:

LORD JANNER moved Amendment No. 2: Page 3, line 10, at end insert ("in good faith and")

The noble Lord said: I do not propose to keep the Committee for long, but I should like to point out in connection with' this Amendment that the Law Society, after giving extremely careful consideration to the Bill (incidentally, solicitors and the Bar are in favour of the Bill and believe it to be a good one), feel that from a practical point of view the words to which I have referred should be inserted. Their worry concerns Clause 5(2). Although it seems that a power of attorney can be revoked without any formality, it is quite another matter for a donor to make sure that a donee does not go on acting under it, perhaps using certified photo-copies which might still be in circulation after the donor has destroyed the original. It is difficult to get to the root of this problem, but the Law Society think that from a practical point of view it might help—and I believe it would—to tidy up Clause 5(2) slightly as suggested in the Amendment. I beg to move.

LORD GARDINER

It would help me, and no doubt other members of the Committee, if my noble friend were to explain how any third party can be acting in bad faith if he does not know that the power of attorney has been revoked.

LORD JANNER

In the view of the Law Society circumstances may arise in which, if these words were not inserted, the donee might be in a position to act. They feel—as I say, the point has been very carefully considered—that these words would help.

8.20 p.m.

THE LORD CHANCELLOR

I hope that the noble Lord who has proposed this Amendment, in admirably concise terms, will, when he has heard the explanation that I give, not wish to press it. Clause 5 provides for the protection of the donee of the power of attorney, and third persons who deal with him, against the consequences of revocation. Subsection (2) provides that: Where a power of attorney has been revoked and a person, without knowledge of the revocation, deals with the donee of the power, the transaction between them shall, in favour of that person, be as valid as if the power had then been in existence. This Amendment would require the third person not only to have no knowledge of revocation but to be "in good faith" for the validity of the transaction to be upheld.

I share the difficulty of the noble and learned Lord, Lord Gardiner. It is difficult at first sight—and I am not sure that one would actually go much further than first sight however deeply one penetrated—to see that this is not purely tauto logical. At any rate, whatever "good faith" may mean, it must in very great part at least be comprehended by lack of knowledge. It would be unfortunate—and we all agree—if the courts were given the impression that a whole second limb was required for validity (when it is not) and then left to puzzle out what that second limb can be—to the possible prejudice of clarity and the certainty of transactions. I therefore accept the criticism implied in the question of the noble and learned Lord to the noble Lord, Lord Janner.

But let us suppose that the noble and learned Lord, Lord Gardiner, is wrong: I do not think he is—it seems almost impossible. But let us suppose that in fact he is wrong and that I am wrong, too. Let us assume, therefore, that a second limb, whatever it may mean and however obscure the meaning, is required and the purchaser ought to be in good faith, a; well as ignorant of the revocation. This, if it were so, would expose a deeper objection to the Amendment; namely, that it is both inappropriate and also irrelevant to the form of the subsection. If the subsection said that in these circumstances a purchaser will gel a good title, the question of good faith might be relevant. But it does not. All it says—and I stress these words—is that if the condition (of lack of knowledge of revocation) is satisfied, then the transaction shall be as valid—that does not mean to say valid, it means neither more valid nor less valid—as if the power had not been revoked.

Even if the condition is satisfied, and the power must be treated as if it had not been revoked, the transaction may still be invalid for some quite different reason—for instance, because the purchaser is knowingly a party to a fraud by the donee. It is at this stage, and not before, that the question of good faith, if it is different from knowledge, becomes relevant.

The Law Commission have accordingly taken the view that the Amendment is misconceived and should be resisted. I hope that the noble Lord, Lord Janner, who has done us all a service by putting forward the view of the Law Society, will on reflection feel that it would not be wise, at any rate at this stage, to press the Amendment until he has fully considered the objection I have put forward.

LORD JANNER

I appreciate the point which has been made. Part of that point was made by the Law Commission, for whom I have a high regard—I do not want the Committee to be under any misunderstanding about that. The Law Society feel that as the matter stands at present there might be difficulties, but I am quite prepared to consider the points put forward and leave it for another stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

LORD DIPLOCK moved Amendment No. 3: After Clause 5, insert the following new clause:

Additional protection for transferees under stock exchange transactions

" .—(1) Without prejudice to section 5 of this Act, where—

  1. (a) the donee of a power of attorney executes as transferor, an instrument transferring registered securities; and
  2. (b) the instrument is executed for the purposes of a stock exchange transaction,
it shall be conclusively presumed in favour of the transferee that the power had not been revoked at the date of the instrument if a statutory declaration to that effect is made by the donee of the power on or within three months after that date.

(2) In this section "registered securities" and "stock exchange transaction" have the same meanings as in the Stock Transfer Act 1963".

The noble and learned Lord said: I beg to move Amendment No. 3, the object being to insert an additional clause after Clause 5. This is an Amendment of substance because on consideration, particularly by the Stock Exchange, the conclusion was reached that the existing Clause 5, particularly the provision for the statutory declaration, would not work in the case of Stock Exchange transactions. This results from the fact that under the Stock Transfer Act 1963 the form of transfer is not signed by the transferee, and indeed is often not seen by him. Further, in the case of a broker's transfer, which takes place where the original holding has been split up, the transferee may never know who the transferor was.

In those circumstances, if he were to be required, as under Clause 5(4), to make a statutory declaration to the effect that he did not know of the revocation of the power at the material time, it would be a nonsense; because at the material time he would not even know whether the transfer was made under a power of attorney or not. In those circumstances, it is thought that the position is best preserved by the new clause which requires the statutory declaration to be made by the donee of the power.

This is a matter which has been discussed between the Law Commission and the Stock Exchange and it has the approval of both. It is thought that it will work in a practical way so far as Stock Exchange transactions are concerned. I would draw attention to the fact that the clause is limited to Stock Exchange transactions. I beg to move.

On Question, Amendment agreed to.

Clauses 6 to 8 agreed to.

Clause 9 [Effect of general power of attorney in specified form]:

8.27 p.m.

LORD JANNER moved Amendment No. 4: Page 5, line 42, after ("effect") insert ("but expressed to be made under this Act,").

The noble Lord said: I propose to be very brief in moving this Amendment. The problem is to be sure what form will satisfy the statutory requirement. I agree that the reference to "a form to the like effect" is fairly standard in these cases, but solicitors who have to put these things into practical effect feel that it should be made clear beyond a doubt that a person is not to be regarded as having conferred the very wide powers provided for in the clause unless he has specifically indicated his intention to do so by at least referring to the Act. In those circumstances, I hope that the Committee will accept the Amendment. I beg to move.

LORD GARDINER

I hope that the noble and learned Lord, Lord Diplock, and the noble and learned Lord the Lord Chancellor, may be favourably inclined to accept this Amendment. I cannot see that it would do any harm. I am not even clear that without these words an appointment would be valid under Clause 9. It is clearly most desirable, I think, that any appointment should include these words, and on those grounds I hope that the noble and learned Lord will feel inclined to accept my noble friend's Amendment.

THE LORD CHANCELLOR

This is very much a question of judgment, but the Law Commission in fact considered this proposal and on the whole came to the conclusion that it would be better not to accept it. I should like to tell the Committee why I do not think that this is an Amendment either for which or against which one should die in the last ditch; but I should like to tell the Committee why the Law Commission, on balance, were against it. They thought that powers of attorney sometimes have to be executed at very short notice. It would be unfortunate if proper identification of the Act in precise terms became a formal requirement, when, for example—and I am using a phrase which might be used by somebody who did not have the Act of Parliament before him with the actual schedule form in it—"I grant this general power of attorney under the Act of Parliament in that behalf", or some such words, is perfectly plain. The Law Commission thought on balance that such a form should be valid and that the clause seemed better without the Amendment. I can only give the Committee the wisdom of the Law Commission on this subject because, to be perfectly candid, I do not have any strong feelings about it. I do not think any great harm would be done either way, but I was persuaded, on balance, that the Law Commission were right.

LORD DIPLOCK

So far from being prepared to die in the last ditch over this, I am completely neutral.

LORD JANNER

In the circumstances, may I ask that the view of the Law Society, which, after all, is dealing with practical practitioners, be considered? While I have the highest regard for the Commission—as I have said before, they have done remarkably good service—nevertheless, the actual practitioner who has to deal daily with these matters in his hands and the Society which represents him feel that this should be inserted. In view of that fact—it is not a question of a last ditch matter—I thought the Committee would see its way to accept the Amendment.

On Question, Amendment agreed to.

Clause 9, as amended, agreed to.

Clause 10 [Short title, repeals, consequential amendments and extent]:

LORD DIPLOCK moved Amendment No. 5:

Page 6, line 20, at end insert— ( ) This Act shall come into force on 1st October 1971.

The noble and learned Lord said: This is simply an Amendment to provide the date when the Bill shall come into force. It was thought better that it should not come into force immediately on passing, but that a short time should be given for the profession to familiarise itself with it and the Land Registry to consider some alterations in its rules as a result. The date, October 1, 1971, being the first day of the legal term, was thought to be a suitable date for that purpose. I beg to move.

On Question, Amendment agreed to.

Clause 10, as amended, agreed to.

Schedules agreed to.

House resumed: Bill reported with the Amendments.