HL Deb 22 April 1996 vol 571 cc954-71

7.3 p.m.

Report received.

Clause 1 [Meaning of "trust of land"]:

The Lord Chancellor (Lord Mackay of Clashfern) moved Amendment No. 1: Page 1, line 17, leave out subsection (3) and insert— ("(3) The reference to land in subsection (1)(a) does not include land which (despite section 2) is settled land or which is land to which the Universities and College Estates Act 1925 applies.").

The noble and learned Lord said: My Lords, Amendment No. 1 is the first of a group of nine amendments, the others being Amendments Nos. 2, 4, 13, 14, 33, 34, 36 and 37. The amendments are very closely interlinked and, with your Lordships' leave, I think it would be appropriate to speak to the whole of this group together in moving Amendment No. 1. This group of amendments will make changes in respect of charitable, ecclesiastical and public trusts involving land, argued for at Second Reading by the noble Lord, Lord Meston, on behalf of my noble friend Lord Kinnoull. The amendments are supported by the Charities' Property Association and the Charity Commission.

The Bill presently draws no distinction between charitable trusts and what may be termed "private" settlements, where land is limited in succession for individuals. As the Bill is presently drafted, all settlements in existence at the time of commencement would remain untouched by the new regime and subject to the Settled Land Act for as long as they remain in existence as settlements. It has been cogently argued, however, that charities would benefit from the more flexible trustee powers conferred on trustees of land, and that while it would not be right to convert existing "private" settlements into trusts of land and change the position of the tenant for life, there is no such problem in the case of charitable trusts. This group of amendments therefore provides for existing charitable, public and ecclesiastical trusts to become trusts of land on commencement, with two exceptions which I shall explain in a moment.

Amendment No. 2 inserts in Clause 2 of the Bill a new subsection which provides that land held on charitable, ecclesiastical or public trusts shall not be settled land after commencement of the Act (and therefore is no longer subject to the Settled Land Act 1925), even if it was settled land before commencement. Because of the all-embracing definition of a trust of land in Clause 1, this will have the effect that charitable, public and ecclesiastical trusts will be trusts of land, whether created before or after commencement of the Act. Amendment No. 1 provides an exception for land to which the Universities and Colleges Estates Act 1925 applies, so that the trusts of land regime will not apply to such land. This is because land to which that Act applies is in an unusual position, having never been subject to the Settled Land Act scheme but rather having its own detailed, self-contained scheme, and representatives of those who deal with such land have indicated that they would prefer to continue to operate in accordance with that separate scheme.

Amendment No. 4 provides that subsection (1) of Clause 8, which allows the powers of trustees of land to be restricted or excluded by the disposition creating the trust, shall not apply in the case of charitable, ecclesiastical or public trusts. This restores the present effect of Section 106 of the Settled Land Act 1925 for charitable trusts which become trusts of land, in response to concerns expressed by those responsible for the administration of charities, including the Charity Commission.

Amendments Nos. 13 and 14 ensure that the definition of a, trust of proceeds of sale of land", in Clause 17 meets the new approach under which some trusts now subject to the Settled Land Act will become trusts of land on commencement: the wording will ensure that proceeds of dispositions made before commencement in such settlements will be covered.

Amendment No. 33 ensures that the changes effected by this group of amendments do not apply in relation to the deeds of settlement for the Chequers Estate and the trust instrument for the Chevening Estate, which are set out by statute. The settlements of those two estates are in a very unusual position in that they are not charitable, ecclesiastical or public trusts within Section 29 of the Settled Land Act so as to be part of the class of trusts which this group of amendments sets out to effect; but they are not "private" settlements in the ordinary sense either. Those responsible for administering these settlements believe it would he better for them to be treated for the purposes of the Bill like private settlements, so that they will remain subject to the Settled Land Act in the same way as at present, since it would be a very complex and delicate task to amend the statutory deeds.

Amendment No. 34 replaces the present provisions of paragraph 4 of Schedule 1 to the Bill with new provision to ensure that certain requirements relating to dealings with charity land in Section 29 or the Settled Land Act 1925 will continue to apply under the trusts of land regime as they do at present.

Since there is now to be no difference between existing and new charitable trusts for the purposes of the Bill, Amendment No. 34 simply reproduces the necessary parts of Section 29 for those trusts which fall outside the Charities Act 1993, together with the provisions of Section 29 concerning dealings by managing trustees. This means that both Section 29 and the words in Sections 37 and 39 of the Charities Act 1993 which exclude it from applying to charities within that Act can be repealed altogether. Those repeals are effected by the provision inserted by Amendments Nos. 36 and 37. With that lengthy preamble, I beg to move Amendment No. 1.

Lord Mishcon

My Lords, my remarks on the amendments to which the noble and learned Lord has just referred will be very much shorter. I gather from what he said that all those bodies which are vitally interested in the amendments have been consulted. For the purpose of the record, no doubt the noble and learned Lord will confirm that that has been done.

The Earl of Kinnoull

My Lords, as my noble and learned friend was kind enough to mention me at the beginning of his remarks, perhaps before he replies to the noble Lord I may thank him for bringing forward the amendments to clear up certain technical issues affecting a number of old and historic charitable trusts. My noble and learned friend has already said that delicate matters were discussed and formed the subject of meetings between his department and the representatives of the Charities' Property Association as well as the Charity Commission, and indeed the Home Office. I wish to place on record on behalf of the association its thanks to the officials of my noble and learned friend for the courteous and thorough way in which the matter has been handled, and especially for the satisfactory conclusion reached within this most useful Bill.

The Lord Chancellor

My Lords, I am extremely grateful to both noble Lords who have spoken. I can confirm that those affected as the professional body, together with the Charity Commission and the Home Office, have been consulted and that the amendments are the product of that consultation. I am also grateful on behalf of my officials for what my noble friend said about the nature of the consultations. It is exactly what I would have expected of officials in the Lord Chancellor's Department. However, it is very nice to hear it confirmed by others in such a felicitous way. I am most grateful.

On Question, amendment agreed to.

Clause 2 [Trusts in place of settlements]:

The Lord Chancellor moved Amendment No. 2: Page 2, line 16, at end insert— ("(4A) No land held on charitable, ecclesiastical or public trusts shall be or be deemed to be settled land after the commencement of this Act, even if it was or was deemed to be settled land before that commencement.").

On Question, amendment agreed to.

Clause 6 [General powers of trustees]:

The Lord Chancellor moved Amendment No. 3: Page 3, line 5, leave out from ("Where") to second ("the") in line 6 and insert ("in the case of any land subject to a trust of land each of the beneficiaries interested in the land is a person of full age and capacity who is absolutely entitled to the land,").

The noble and learned Lord said: My Lords, before I speak to this technical amendment, I should like to make some comments which concern all of the amendments in my name to which I have not yet spoken. They arise in the main from points made in Committee by the noble Lord, Lord Mishcon, with assistance, it would be fair to say, from the Law Society's representatives. The amendments as they are now before the House follow extended discussions involving the Law Society's representatives, myself, the Law Commission, departmental officials and parliamentary counsel; and I believe there to be general agreement as to the principles which underlie them. In the event that there are still queries as to the wording or precise effect of any of the amendments, I am ready to consider suggestions for revision with a view to arranging, if necessary, for final changes on Third Reading to ensure that the Bill gets everything right as far as that may he possible.

I ought to express here my gratitude to those who took part in the discussions and especially to those who represented the Law Society in such matters, both of whom were extremely technically qualified to discuss the issues. I am most grateful to them for taking the time to do so in the public interest. I am of course also grateful to the Law Commission and to officials in the Lord Chancellor's Department, as well as to parliamentary counsel. Indeed, parliamentary counsel took a great deal of trouble with the technical issues involved in a reasonably short time-scale for such matters. I am most grateful.

As to Amendment No. 3 itself, the noble Lord, Lord Mishcon, stated in Committee his belief that the trustees' power to convey trust land to beneficiaries under Clause 6(2) is to be exercisable where each of the beneficiaries in question is absolutely entitled; that is, on the basis of concurrent interests, as joint tenants or tenants in common. The amendment to Clause 6(2) is intended simply to make it clearer that the noble Lord's belief is entirely correct. The amendment also makes it clear that the power exists where one particular parcel of land is held for beneficiaries absolutely, regardless of whether absolute interests exist in other land or other assets of the trust. I beg to move.

Lord Mishcon

My Lords, in regard to the introductory remarks made by the noble and learned Lord, perhaps I may tell him how grateful the Law Society is not only to his officials but also to all those others whom he mentioned as having been consulted since the Committee stage. However, I should like to express a very definite sense of the gratitude of the Law Society and its representatives for the way in which the noble and learned Lord himself agreed to participate in discussions in order to resolve certain matters which were of great importance. That courtesy was very much appreciated.

The Lord Chancellor

My Lords, I am most grateful.

On Question, amendment agreed to.

Clause 8 [Exclusion and restriction of powers]:

The Lord Chancellor moved Amendment No. 4: Page 4, line 10, at end insert— ("() Subsection (I) does not apply in the case of charitable, ecclesiastical or public trusts.").

On Question, amendment agreed to.

7.15 p.m.

Clause 9 [Delegation by trustees]:

The Lord Chancellor moved Amendment No. 5: Page 4, line 17, at end insert— ("() Where trustees purport to delegate to a person by a power of attorney under subsection (1) functions relating to any land and another person in good faith deals with him in relation to the land, he shall (in the absence of evidence to the contrary) be presumed in favour of that other person to have been a person to whom the functions could be delegated.").

The noble and learned Lord said: My Lords, Amendments Nos. 5 to 8 are all concerned with aspects of the trustees' power of delegation in Clause 9 and, with your Lordships' leave, I believe that it would be appropriate for me to speak to them all together.

Clause 9 enables trustees of land to delegate their functions as trustees to a beneficiary or beneficiaries beneficially entitled to an interest in possession in that land. Delegation is by way of power of attorney, which must be given by all of the trustees jointly and accordingly may be revoked by any one of them. Amendment No. 5 carries through an additional element of protection for third parties from Section 29 of the Law of Property Act 1925, which Clause 9 supersedes. A person dealing with a beneficiary-delegate is entitled to assume that the delegate is a person who qualifies to have the function or functions in question delegated to him, unless there is evidence to the contrary, so that he is protected in the event of a mistaken delegation. In the event of revocation of the power, of course, the protection of Section 5 of the Powers of Attorney Act 1971 will be available.

Amendment No. 6 seeks to clarify the position where there is a change in the line-up of trustees. It is intended that the power of attorney effecting a delegation should not be revoked automatically where one of those who jointly gave it ceases to be a trustee because, as the noble Lord, Lord Mishcon, said in Committee, there is no reason in such circumstances to suppose that the continuing trustees will necessarily wish the power to terminate at that time. However, the position is different where a new trustee is appointed. In that case, the power is revoked by the new appointment and the new and continuing trustees must grant a renewed power at or after the time when the appointment takes effect.

Amendment No. 7 seeks to clarify the position where functions have been delegated to a beneficiary or beneficiaries and the beneficiary in question or one of them ceases to be entitled to the interest in the land which qualifies him to have such functions delegated to him. In the case of a single delegate, the power delegating the functions to him is automatically revoked. Matters are more difficult where functions were delegated to a number of beneficiaries either jointly, or jointly and severally. In the former case, the power delegating the functions is not automatically to be revoked if one of the joint delegates ceases to have the qualifying interest, so that the remaining joint delegates can continue, together, to exercise the delegated functions, unless of course the trustees take the view that this is inappropriate and revoke the power themselves. In the latter case, the power in effect terminates pro tanto, so that it is revoked in so far as it relates to the beneficiary who ceases to have the requisite interest but remains effective in respect of the remaining delegates.

Finally, Amendment No. 8 is intended to clarify the standard of care to be observed by trustees in deciding whether to delegate any of their functions in this way.I accept the force of the argument that the noble Lord, Lord Mishcon, put forward in Committee that the question of whether it is reasonable for the trustees to delegate could offer the possibility of confusion because something may be argued to be a reasonable thing to do, even though done without regard to the possible consequences.

The amendment is intended to require the trustees to observe the precautions of a reasonably prudent person in deciding whether to delegate those particular functions to that beneficiary or beneficiaries in the particular circumstances of the trust. That is in line with the well-settled test in Speight v. Gaunt. I beg to move Amendment No. 5. With your Lordships' leave, I hope later to move Amendments Nos. 6 to 8 together en bloc.

Lord Mishcon

My Lords, I hope that the noble and learned Lord will take it for granted that, after the talks and discussions that have taken place, there is no opposition to the amendments. However, there are some points which arise out of them. The noble and learned Lord may feel it convenient to deal with them as I raise them, or he may think that it would he very much more beneficial for them to be dealt with in further discussions between the officials of his department and the Law Society. If I may do so in courtesy, I leave to the noble and learned Lord to decide which course he wants to adopt.

I raise a point first of all on Amendment No. 5. The presumption provided for in this new subsection is in favour of a person▀×call him A—dealing in good faith with the attorney or the attorneys. Does the noble and learned Lord consider that any similar presumption is needed in favour of successors in title to A, perhaps even a stronger one to the extent that the successor should be allowed to assume that A did not know of evidence to displace this presumption? As the noble and learned Lord will know, the presumption of non-revocation in the Powers of Attorney Act 1971 proceeds on that basis.

There is another question that arises upon this amendment. Can the noble and learned Lord the Lord Chancellor confirm the intention to be that A's position is not prejudiced if evidence to the contrary becomes known to him after his dealing has been completed; in other words, that what matters is whether he deals without notice of such evidence? The present amendment, I suggest, is not entirely clear on that point.

The noble and learned Lord understandably grouped in his remarks Amendments Nos. 5 to 8. I have just spoken to Amendment No. 5. I have no comment to make on Amendment No. 6. I say at once that the wording of Amendment No. 7 is so much clearer than the original Clause 9(3) which appeared in the original Bill. In regard to Amendment No. 8, I was troubled about the reasonableness test and to what it applied, and that amendment suitably deals with that point.

The Lord Chancellor

My Lords, I am grateful to the noble Lord, Lord Mishcon, for those comments. I shall look further into the first point that he mentioned. I would assume that this amendment is sufficient to have the result to which he referred in that connection in relation to a successor of A. As regards the second point the noble Lord mentioned, I think it is reasonably plain on this amendment that the relevance, or the time that is relevant, is the time of the dealing, and therefore information that comes to his notice after the dealing has been completed would he quite plain. I think that the clause as drafted meets that point. It is obvious that the intention in relation to the first point is that a successor of A should be protected also. If we have not succeeded in doing that so far, obviously we would wish to consider amplifying that aspect of the matter. I do not believe there is any policy difference between us on that point.

On Question, amendment agreed to.

The Lord Chancellor moved Amendments Nos. 6, 7 and 8: Page 4, line 19, at end insert (": and such a power is revoked by the appointment as a trustee of a person other than those by whom it is given (though not by any of those persons dying or otherwise ceasing to be a trustee)."). Page 4, line 20, leave out from ("Where") to end of line 25 and insert ("a beneficiary to whom functions are delegated by a power of attorney under subsection (I) ceases to be a person beneficially entitled to an interest in possession in land subject to the trust—

  1. (a) if the functions are delegated to him alone, the power is revoked,
  2. (b) if the functions are delegated to him and to other beneficiaries to be exercised by them jointly (but not separately), the power is revoked if each of the other beneficiaries ceases to be so entitled (but otherwise functions exercisable in accordance with the power are so exercisable by the remaining beneficiary or beneficiaries), and
  3. 961
  4. (c) if the functions are delegated to him and to other beneficiaries to be exercised by them separately (or either separately or jointly), the power is revoked in so far as it relates to him.").
Page 4, line 38, leave out ("it was not reasonable for the trustees") and insert ("the trustees did not exercise reasonable care in deciding").

The noble and learned Lord said: I beg to move Amendments Nos. 6 to 8 en bloc.

On Question, amendments agreed to.

Clause 11 [Consultation with beneficiaries]:

The Lord Chancellor moved Amendment No. 9: Page 5, line 24, leave out from ("in") to ("or") in line 25 and insert ("relation to a trust created by a disposition in so far as provision that it does not apply is made by the disposition, () in relation to a trust created or arising under a will made before the commencement of this Act,").

The noble and learned Lord said: My Lords, in moving Amendment No. 9 I wish to speak also to Amendments Nos. 10 to 12. These together change the transitional provisions in Clause 11, and it therefore seems appropriate for me, with your Lordships' leave, to speak to them all together.

At present, the trustees' duty to consult under Clause 11 will not apply to an existing express trust of land unless the settlor provides by deed within a year of commencement of the Act that it is to apply, but nothing is said about cases where the trust is created by a pre-commencement will but the testator dies after commencement. Since a will speaks from death, this would mean that such will trusts would not be treated as existing express trusts and so the burden would be on the testator as from commencement of the Act to consider whether to take steps to exclude this duty to consult. This could lead to cases where the testator assumed when making his will that the trustees would not have to consult but the trustees are nevertheless put under that duty because the testator for one reason or another did not revisit his will after he made it.

Amendment No. 9 accordingly provides for any trust created or arising under a will made before commencement of the Act to be treated as an existing express trust. The words "created or arising under", which are based on the precedent of paragraph 6 of Schedule 3 to the Family Law Reform Act 1969, are intended to cover not only will trusts proper but also trusts which may be created by assents by the personal representatives to beneficiaries under the will.

Amendment No. 11 removes the time limit within which a settlor of an existing express trust may opt to bring it within the provisions of this clause, the Law Society believing the limit to serve no useful purpose. That was one of the matters that we discussed at the meeting to which the noble Lord, Lord Mishcon, kindly referred. Consequential on that change, Amendment No. 12 deletes subsection (4) which defines the terms

"transitional period" and existing express trust of land",

and Amendment No. 10 replaces the term, existing express trust of land", where it occurs earlier in the clause with the precise wording describing such a trust, doing away with the need for a definition. I beg to move.

Lord Mishcon

My Lords, in the same spirit that I spoke on the previous amendment I put to the noble and learned Lord on the Woolsack two points arising out of Amendment No. 9. This amendment, as he rightly says, protects trusts arising under the will of a testator who dies after the Act comes into force, if the will was made before commencement. Can the noble and learned Lord confirm that if a trust of land is created by an assent—when, as he well knows, the executors vest the land in themselves or others as trustees—that would not make the new provisions apply if the will predates the commencement of the Act; in other words, that it is the time of creation of the beneficial trust which determines whether it counts as an old trust or a new one? That is my first point.

The same point would seem to arise where additional land becomes comprised in an existing old trust after the Act comes into force, whether through a further gift by the settlor or through a purchase by the trustees. Which regime does the noble and learned Lord consider should apply to that situation, and is it clear that this result flows from the wording of the Bill? I said when posing these points, which do not go to principle but to clarification, that it may well be that the noble and learned Lord would prefer to take note of them and not deal with them now. However, I repeat that I leave that entirely to him.

The Lord Chancellor

My Lords, I shall say how I see the matter, subject to correction. I think that Amendment No. 9 will have the effect that the trust will be regarded as coming into existence for the purposes of these provisions at the time that the noble Lord, Lord Mishcon, stated. The words "created or arising under" refer back to the time at which the original expression of the trust was made, and the fact that there are later assents will not derogate from that.

So far as concerns new land, one might consider new land not to make a new trust. In other words, the fact that you have added land to an existing trust might not make a new trust. I can see an argument also for the view that the trust is defined by reference to the disposition—that is to say, the directions as to what is to happen—and to the subject matter, namely a specific piece of land, and, therefore, that the other option is possible under the provisions as drafted. It may he that we should consider this point. It is one of interest that I would wish to look at further to see whether we should expressly deal with the situation where the subject matter of the trust is enlarged. I can see an argument that until that other piece of land is affected by the trust, even though the trust provisions are the same affecting a different and earlier piece of land, there is no trust in existence in respect of that second piece of land.

With that rather hesitant response at this stage, I hope that the noble Lord will allow me to consider the matter further. It may well be that we should consider an amendment at Third Reading to deal with the second point.

On Question, amendment agreed to.

7.30 p.m.

The Lord Chancellor moved Amendments Nos. 10 to 12: Page 5, line 27, leave out ("an existing express trust of land") and insert ("a trust of land created before the commencement of this Act by a disposition"). Page 5, leave out line 29. Page 5, line 35, leave out subsection (4).

The noble and learned Lord said: My Lords, I spoke to Amendments Nos. 10 to 12 with Amendment No. 9. I spoke to Amendments Nos. 13 and 14 with Amendment No. 1. I beg to move.

On Question, amendments agreed to.

Clause 17 [Application of provisions to trusts of proceeds of sale]:

The Lord Chancellor moved Amendments Nos. 13 and 14: Page 8, line 35, leave out from ("property") to end of line 40 and insert ("(other than a trust of land) which consists of or includes—

  1. (a) any proceeds of a disposition of land held in trust (including settled land), or
  2. (b) any property representing any such proceeds.").
Page 9, line 6, leave out from ("to") to ("includes") in line 7 and insert ("settled land").

On Question, amendments agreed to.

Clause 19 [Notice to beneficiaries of proposed appointment of trustee]:

The Lord Chancellor moved Amendment No. 15: Leave out Clause 19.

The noble and learned Lord said: My Lords, Amendments Nos. 15 through to 32, 35 and 38 together radically change the approach of Part II of the Bill, broadly in line with the approach urged on the Government in Committee by the noble Lord, Lord Mishcon. These amendments are really interconnected in such a way that I believe it would be appropriate to speak to them all together in moving Amendment No. 15, so that the House may have the whole picture.

The approach of this group of amendments is to give a wider power to the beneficiaries, in essence reversing the 1948 decision in the case of Re Brockbank. That decision is to the effect that beneficiaries who are entitled to have the trust property conveyed to them because they are together absolutely entitled to it may nevertheless not control appointment of the trustees other than by ending and reconstituting the trust—which is unattractive because of the tax implications. Part of the new scheme is that Clause 19 should be deleted, since the power now to be given to beneficiaries will be exercisable at any time, not only when the existing trustees are in the position of having to appoint a new trustee, and so the notice requirements in Clause 19, to which the noble Lord drew our particular attention on the last occasion, would be superfluous.

Amendment No. 15 accordingly deletes Clause 19, and this makes it possible to remove a number of subsequent provisions which are only necessary because of the notice requirement, and to avoid attendant complications and possible problems in practice. Accordingly, Amendments Nos. 23 and 26 together delete subsections (3), (4) and (6) of Clause 22. The deletion of Clause 19 and insertion of the new clause effected by Amendment No. 16 necessitate a number of purely consequential changes in Clause 22, to change references to "this Part" or to "Clause 20" into references to the new clause and Clause 21 or to the new clause alone as appropriate, and Amendments Nos. 20, 25, 27 and 28 are concerned with this.

Amendment No. 16 is the pivotal amendment, and the comments which I made earlier about being ready to consider suggestions concerning the precise wording apply most particularly here. It inserts in place of Clause 20 a new clause which confers on beneficiaries, subject to qualifying conditions, a power to direct any trustee or trustees to retire from the trust, or to direct the appointment of a new trustee or trustees of the beneficiaries' own choosing, or to do both. The new clause operates independently rather than by reference back to the Trustee Act 1925, and so certain aspects of Section 36 of that Act must be spelt out since they are no longer incorporated by reference.

The qualifying conditions for the clause to apply, set out in subsection (1), are that no person has been nominated for the purpose of appointing trustees, and that the beneficiaries are all of full age and capacity and, taken together are absolutely entitled to the trust property.

Subsection (2) sets out the directions which the beneficiaries are able to give, and since they include a direction to retire, Amendment No. 22 is necessary, to insert a reference in Clause 22(2) to the person specified for retirement as well as for appointment. Likewise, Amendment No. 35 provides for a consequential amendment to Section 40 of the Trustee Act 1925, so that it encompasses directed as well as voluntary retirement, and Amendment No. 38 amends the Long Title of the Bill by inserting a reference to retirement as well as to appointment of trustees.

Subsection (3) of the new clause is a very important provision. A trustee who is directed to retire may have rights in respect of the trust property, for example rights to reimbursement or indemnity for expenses incurred in relation to the trust, and may need to take action to ensure that he can enforce those rights.

Subsection (3) is intended to apply to a trustee directed to retire, whether or not he is being replaced, and to ensure that he does not have to comply with the direction unless reasonable arrangements have been tendered which will be effective when the retirement becomes effective. It also reproduces the protection afforded by the retiring trustee's involvement in the paperwork which is necessary to make the retirement effective.

Subsection (4) is intended to make clear the persons on whom a direction to appoint a trustee of the beneficiaries' choosing must be served; and subsection

(5) makes it clear that the power is subject to the general restrictions on numbers of trustees, which needs to be spelt out because it is no longer incorporated by reference.

Amendment No. 17 aims to ensure consistency by importing into Clause 21 the same beneficiary qualification as in the new Clause 20. Amendment No. 18 simplifies the drafting of the clause by removing subsection (3) and incorporating the essentials of it in subsection (2). Amendment No. 19 works together with Amendment No. 24 in Clause 22, which makes it clear that subsection (7) of Section 36 of the Trustee Act 1925 applies to a trustee appointed under the new Clause 20 or Clause 21 as if the trustee had been appointed under Section 36. The need to spell this out for the new Clause 20 as well as for Clause 21 arises because the new clause no longer operates by reference to Section 36; and, once this is done by Amendment No. 24, subsection (4) of Clause 21 becomes superfluous and falls to be deleted, which is done by Amendment No. 19.

Amendment No. 21 deals with a point made by the noble Lord,Lord Mishcon, in Committee, and makes it clear that any direction made by the beneficiaries can be revoked if one or more of them withdraws it in writing before it becomes effective.

Amendment No. 29 does, mutatis mutandis, the same thing in respect of the transitional provisions for Part II of the Bill as Amendment No. 9 does in respect of those for Clause 11, providing for the position of pre-commencement wills which become effective on a post-commencement death. Additional changes to the transitional provisions are made by Amendments Nos. 30 to 32, in the light of representations by the Law Society. The new approach provides for Part II of the Bill to apply to a trust created before commencement of the Act unless the settlor by deed excludes it, and for the settlor to be able to make such a deed at any time, so that he may thus stop a direction from becoming effective, but may not thus affect an appointment or retirement already effective. I beg to move.

Lord Mishcon

My Lords, it does not fall often to Members of your Lordships' House to be able at one stage of the Bill to move that a clause does not form part of that Bill, to withdraw that amendment, and to find the Government agreeing with it in the next stage of the Bill. I happen to be in that happy position, having moved that Clause 19 should not form part of the Bill:

However, I ask for your Lordships' indulgence because, as noble Lords will have seen, many clauses and amendments have been dealt with by the noble and learned Lord in a very succinct manner. They cover a great number of clauses in the one speech that he made on these various amendments. Perhaps I may, therefore, be forgiven if I take some little time in making the points that I wish to make in particular on behalf of the Law Society. Perhaps I may deal with the various points under the appropriate amendment numbers which were covered in the all-embracing speech of the noble and learned Lord.

Starting with Amendment No. 16, subsection (1) provides that the first condition for the application of Clause 20 and therefore the whole machinery of Part II is that there is no person nominated for the purpose of appointing new trustees. I refer your Lordships to the wording of Amendment No. 16: This section applies in the case of a trust where...there is no person nominated for the purpose of appointing new trustees". My first query arises out of that wording. What is the position where the person was nominated but is now dead? Will the noble and learned Lord confirm that Clause 20 is intended to apply where there is no person now alive with the power to nominate trustees as well as to cases where no such person was ever nominated in the first place? In making that point, I excuse myself by saying that in the amendment that I tried to put forward in Committee I was careful to ensure that the wording covered the fact that the person concerned was still in existence. There may be many cases where the person originally nominated has been dead for many years.

Subsection (3) deals with the protection of the position of a trustee directed to retire. For example, he is protected against contractual liabilities to third parties and against taxation liabilities which might be enforced against him after retirement. I tried to emphasise in Committee that this was an extremely important topic, given the element of compulsion involved. The wording of the subsection will require him to retire as soon as he has been—I emphasise this word—"offered" reasonable arrangements. That is quite all right in principle, so long as it is clear that the arrangements on offer are to he implemented no later than the time when the actual retirement takes place. Can the noble and learned Lord please consider whether, on Third Reading, there should be wording which makes that clear and gives emphasis to it?

Can it also be confirmed that no trustee who is directed to retire can in practice be removed from office under these provisions, whether or not in combination with existing provisions of the Trustee Act 1925, without himself executing a deed of retirement and therefore having the ability to defer doing so until reasonable arrangements for his protection have been made? That has been agreed as the correct principle, but it is thought that further drafting amendments may be necessary to ensure that the mechanics work properly.

Lastly, under Amendment No. 16 it is not entirely clear what situation subsection (4) is intended to deal with. It appears to specify to whom a notice is to be given in certain circumstances. Some clarification of how the subsection is intended to work would undoubtedly be helpful. In particular, if a direction has been given under subsection (2)(a) requiring the retirement of all the existing trustees, should the direction under subsection (2)(b) not he given to those outgoing trustees since they are the persons who have power to appoint their successors? Here again, I submit respectfully that further drafting may be necessary.

I now turn to Amendment No. 21 which affects Clause 22. The provision makes clear that a beneficiary can withdraw from a direction given under the new provisions at any time before the direction has been complied with. I tried to voice the provision about the risk of undue influence in Committee. I am most grateful, as is the Law Society, for the consideration given to the point. Withdrawal should be possible, whether the beneficiary in question signed a single joint direction or one of several identical ones. It is unclear from the way the amendment is expressed—I am talking in particular about introducing the additional words at the end of line 6—whether that is achieved; in other words, whether the additional wording qualifies just paragraph (b) of Clause 22(1) or both paragraphs (a) and (b).

I turn to Amendments Nos. 29 and 30 to Clause 22. The amendments reverse the present presumption of the Bill, with the consequence that Part II will apply to existing trusts unless the settlor or settlors by deed provide to the contrary. The reversal of the presumption as regards existing trusts is appropriate, given acceptance of the revised scheme for Part II to which the noble and learned Lord referred. The essence of the scheme is that it only applies in circumstances where the beneficiaries could remove the trustees by putting an end to the trust altogether, under the rule in Saunders v Vautier. Were the Bill put forward in its present form it is my submission that it would certainly not be correct to reverse the presumption in this way.

In cases where the settlor or testator has died, the effect of Amendments Nos. 29 and 30 appears to be that the new provisions will not apply if the trust is created or arises under a will made before the Act comes into force, whether the settlor died before or after commencement. They will, however, apply if the trust was created otherwise than by will, even if that was before commencement. The distinction between inter vivos and testamentary dispositions appears to be an anomalous result and is presumably unintended. In view of the reversal of the basic presumption for existing trusts, will the noble and learned Lord consider whether there is still reason, in this context, to retain a special provision relating to pre-commencement wills as set out in Amendment No. 29?

It is with relief, I am sure so far as your Lordships are concerned, that I deal with the last amendment, Amendment No. 30 to Clause 22. The right for a settlor to opt out for his trust at any time raises the question of how this is to interact with anything done under the provisions before he does so. It is clear that it must not be allowed to upset any appointment or retirement of trustees which has actually taken place in the meantime, even if carried out pursuant to a direction given by the beneficiaries. However, can the noble and learned Lord confirm that the fact that the provisions have already operated once does not stop the settlor from opting out so that they cannot operate again in the future; and if a direction has been given to the beneficiaries but has not yet been acted upon by the trustees and the settlor disapproves of the action taken by the beneficiaries, he can deprive their direction of any effect by opting out before the trustees act on the direction? That may be of particular significance in the period immediately after commencement when beneficiaries may be seeking to pre-empt action by settlors in respect of existing trusts.

I have said quite a lot in dealing with these grouped amendments. I do so only because I believe that these matters are of some importance and use in making the Bill as efficient as we all want it to be. I realise that I have put a pretty heavy burden upon the noble and learned Lord were he to deal with all these matters now and upon noble Lords had they to listen to a very long and detailed reply. The purpose is to put these matters on record.

Lord Meston

My Lords, after that tour de force I wish only to reinforce the first point made by the noble Lord, Lord Mishcon; namely, that it should be clear in the new clause whether the reference to the person nominated by the instrument is intended to be a reference to someone who is both still alive and still competent.

The Lord Chancellor

My Lords, that point, reinforced by the noble Lord, Lord Meston, made by the noble Lord, Lord Mishcon, was certainly addressed by parliamentary counsel. I know that for a fact as I was involved to some extent.

The point is that the verb is in the present tense: there "is" no person nominated. Accordingly, that falls to be tested at the time when this section is under construction. Therefore, the policy, as both noble Lords said, based on the advice that I have so far, is that when a person who was nominated is dead before the application of this section is in question, there "is" no person nominated if that person has already died. If the words had been "has been nominated", the situation would be different.

I am in a position to deal in some way with most of the other matters raised. However, I am not sure that it would be particularly useful to do so in detail now for the reason stated by the noble Lord, Lord Mishcon.

Perhaps I should just state the intentions and leave aside the arguments. So far as subsection (3) of the new clause dealt with in Amendment No. 16 is concerned, the intention is certainly that the arrangement should be such as to be effective when the retirement is effective. Secondly, the intention is also that the retiring trustee shall not have to comply in all ways with the direction to retire until he is protected; that is to say, he requires to make a deed.

The opening words of subsection (4) are intended simply to cover circumstances in which the beneficiaries exercise their powers. Counsel has specifically indicated a willingness to revisit the wording if there is doubt about it.

To refer again to Amendment No. 16, the intention in regard to retraction of a direction is that once unanimity is broken and a beneficiary makes that clear in writing, the direction falls. We shall see whether more needs to be done to ensure that both (a) and (b) are covered, but that is certainly the intention.

Turning to Amendments Nos. 29 and 30, I certainly have no objection to examining whether will trusts and inter vivos trusts shall be covered differently or in the same way. I will take that matter up with the draftsman to seek his further advice.

In relation to Amendment No. 32, it was not the intention that the settlor should be able to opt in and out. It was intended, because it is simple, that a settlor should be able to stop a direction in its tracks. If there is real objection to that, we shall be happy to look again at the clause. I rather took it from the remarks of the noble Lord, Lord Mishcon, that he wished the matter to be reasonably clear. I believe the intention we have is probably an intention in common. The only question is whether the wording effectively arrives at that or effectively declares that intention.

I shall certainly consider all these matters in the light of what has been said. If further amendments are required, I hope to put them forward in good time for Third Reading.

On Question, amendment agreed to.

Clause 20 [Appointment of trustee at instance of beneficiaries]:

The Lord Chancellor moved Amendment No. 16: Leave out Clause 20 and insert the following new Clause—

APPOINTMENT AND RETIREMENT OF TRUSTEE AT INSTANCE OF BENEFICIARIES (".—(1) This section applies in the case of a trust where—

  1. (a) there is no person nominated for the purpose of appointing new trustees by the instrument, if any, creating the trust, and
  2. (b) the beneficiaries under the trust are of full age and capacity and (taken together) are absolutely entitled to the property subject to the trust.
(2) The beneficiaries may give a direction or directions of either or both of the following descriptions—
  1. (a) a written direction to a trustee or trustees to retire from the trust, and
  2. (b) a written direction to the trustees or trustee for the time being to appoint by writing to be a trustee or trustees the person or persons specified in the direction.
(3) Where a trustee has been given a direction under subsection (2)(a), as soon as there has been made to him an offer of reasonable arrangements for the protection of any rights of his in connection with the trust, he shall by deed declare that he has been given such a direction; and if his co-trustees by deed consent to his being discharged from the trust and to the vesting in them alone of the trust property—
  1. (a) he shall be deemed to have retired from the trust and shall be discharged from the trust, and
  2. (b) he and the continuing trustees shall do anything necessary to vest the trust property in them alone.
(4) In circumstances in which either section 36(1) of the Trustee Act 1925 applies or a direction is or has been given under subsection (2)(a), a direction under subsection (2)(b) shall be given to the surviving or continuing trustees or trustee or the personal representative of the last surviving or continuing trustee. (5) This section has effect subject to the restrictions imposed by the Trustee Act 1925 on the number of trustees.").

The noble and learned Lord said: My Lords, I spoke to Amendments Nos. 16 to 32 with Amendment No. 15; to Amendments Nos. 33 and 34 with Amendment No. 1; to Amendment No. 35 with Amendment No. 15; to Amendments Nos. 36 and 37 with Amendment No. 1; and Amendment No. 38 with Amendment No. 15. With the leave of the House, I therefore propose to move Amendments Nos. 16 to 38 inclusive en bloc.

On Question, amendment agreed to.

Clause 21 [Appointment of substitute for incapable trustee]:

The Lord Chancellor moved Amendments Nos. 17 to 19:

Page 10, line 27, leave out ("are of full age and capacity and") and insert ("under the trust are of full age and capacity and (taken together)").

Page 10, line 36, leave out from ("appoint") to first ("the") in line 39 and insert ("by writing").

Page 10, line 41, leave out subsection (4)

On Question, amendments agreed to.

Clause 22 [Appointments: supplementary]:

The Lord Chancellor moved Amendments Nos. 20 to 32:

Page 11, line 1, leave out (" 20") and insert ("(Appointment and retirement of trustee at instance of beneficiaries)").

Page 11, line 6, at end insert— ("and is not by writing withdrawn by any of them before being complied with.").

Page 11, line 8, after ("appointment") insert ("or retirement")

Page 11, line 9, leave out subsections (3) and (4).

Page 11, line 17, at end insert— ("() Subsection (7) of section 36 of the Trustee Act 1925 (powers of trustees appointed under that section) applies to a trustee appointed under section (Appointment and retirement of trustee at instance of beneficiaries) or 21 as if he were appointed under that section.").

Page 11, line 18, leave out (" 20") and insert ("(Appointment and retirement of trustee at instance of beneficiaries)").

Page 11, line 23, leave out subsection (6).

Page 11, line 26, leave out ("This Part does") and insert ("Sections (Appointment and retirement of trustee at instance of beneficiaries) and 21 do").

Page 11, line 27, leave out ("it does") and insert ("they do"). Page 11, line 27, at end insert (", or () in relation to a trust created or arising under a will made before the commencement of this Act.").

Page 11, leave out lines 28 to 30 and insert— ("(8) Sections (Appointment and retirement of trustee at instance of beneficiaries) and 21 do not apply in relation to a trust created before the commencement of this Act in so far as provision to the effect that they do not apply is made by a deed executed-").

Page 11, line 36, leave out subsection (9).

Page 11 , line 41, at end insert— ("() Where a deed is executed for the purposes of subsection (8)—

  1. (a) it does not affect anything done before its execution to comply with a direction under section (Appointment and retirement of trustee at instance of beneficiaries) or 21, but
  2. (b) nothing shall be done after its execution to comply with such a direction.").

On Question, amendments agreed to.

Clause 26 [Minor and consequential amendments and repeals]:

The Lord Chancellor moved Amendment No. 33:

Page 12, line 27, at end insert— ("() Neither section 2(4A) nor the repeal by this Act of section 29 of the Settled Land Act 1925 applies in relation to the deed of settlement set out in the Schedule to the Chequers Estate Act 1917 or the trust instrument set out in the Schedule to the Chevening Estate Act 1959.").

On Question, amendment agreed to.

Schedule 1 [Provisions consequential on section 2]:

The Lord Chancellor moved Amendment No. 34:

Page 14, leave out lines 37 to 46 and insert— ("4.—(1) This paragraph applies in the case of land held on charitable, ecclesiastical or public trusts (other than land to which the Universities and College Estates Act 1925 applies).

(2) Where there is a conveyance of such land—

  1. (a) if neither section 37(1) nor section 39(1) of the Charities Act 1993 applies to the conveyance, it shall state that the land is held on such trusts, and
  2. (b) if neither section 37(2) nor section 39(2) of that Act has been complied with in relation to the conveyance and a purchaser has notice that the land is held on such trusts, he must see that any consents or orders necessary to authorise the transaction have been obtained.

(3) Where any trustees or the majority of any set of trustees have power to transfer or create any legal estate in the land, the estate shall be transferred or created by them in the names and on behalf of the persons in whom it is vested.").

On Question, amendment agreed to.

Schedule 3 [Minor and consequential amendments]:

The Lord Chancellor moved Amendment No. 35:

Page 20, line 7, at end insert— ("() In section 40(2), after the word "appointed" insert "or under section (Appointment and retirement of trustee at instance of beneficiaries)(2)(a) of the Trusts of Land and Appointment of Trustees Act 1996".").

On Question, amendment agreed to.

Schedule 4 [Repeals]:

The Lord Chancellor moved Amendments Nos. 36 to 37:

Page 27, line 30, column 3, at end insert—

("Section 29.")

Page 33, line 20, at end insert—

("1993 c. 10. The Charities Act 1993. Section 37(6).
Section 39(5).")

On Question, amendments agreed to.

In the Title:

The Lord Chancellor moved Amendment No. 38: Line 4, after("appointment") insert ("and retirement").

On Question, amendment agreed to.

Baroness Trumpington

My Lords, I beg to move that the House do now adjourn during pleasure until 8.5 p.m.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 7.56 to 8.5 p.m.]