UK Hansard- Commons and Lords

Official References to Cestui que use and trusts

As Cestui Que Vie Trusts may be defined as hidden trusts, knowledge of their ubiquitous
existence as the framework of commerce for all modern democracies is largely unknown,
even by most public officials.
However, their existence is impossible to be denied as the following official extracts of
Hansard demonstrate.
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INCOME (PROPERTY) TAX.HL Deb 17 June 1842 vol 64 cc2-89

Lord Brougham was desirous of taking that early opportunity of stating to their Lordships the
views which he still entertained, and which the reflections of the last two months since he
brought the subject before the House, had tended to con. firm, upon this most interesting
and important question, interesting not only to the Government and to the finances of the
country, but to the comfort and well-being of the people; and he was the more anxious to
take that early opportunity of doing so, having the misfortune to differ in some points from
his noble Friend who had so recently addressed the House; for he felt, that he should not do
justice to his noble Friend, or to his own opinion, if he did not at the earliest possible
moment, endeavour to remove the impression which the speech of his noble Friend must have
made upon their Lordships, with respect to those points on which it was his misfortune to
differ from him. It formed no subject of difference, that his noble Friend should have
expressed again on that, as both of them had expressed on 40 other occasionsthe strongest
in his noble Friend, the almost invincible, and in his altogether invinciblerepugnance to this
impost. He agreed with his noble Friend, in all his comments upon the inequality of its
tendencyits inability faithfully and effectually to perform its office of abstracting money
from the pockets of the communityabstracting, as it did, unequally, unjustly, and
oppressively, and above all, he agreed with his noble Friend in the opinion he had expressed
of the inquisitorialnecessarily inquisitorial, he admittednature of such an impost; and
there was one inequality which his noble Friend had omitted to consider, which more than all
the rest gave him a repugnance to such a measure; that was its great power for all purposes
not merely like the elephant to which his noble Friend had referred, with a proboscis so
sensitive, that it could pick up a needle, but that it was also equal to the tearing up of a tree,
or the splitting of a rockit was a weapon so powerful, that he could not consent to place it
in the hands of any Government, as a regular and permanent financial resource. It was a
resource to be confined to times of extreme exigency, a resource the employment of which
absolute necessity alone could justify; but as a means of ordinary revenue, it was open to all
the most serious objections, that could be urged against such a weapon. Whether the
Government were one which he distrusted, or whether it were one in which he reposed the
most entire confidence, it should not with his con-sent have in its hands a power which would
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enable it by the mere stroke of a pen at any time, to raise any sum of money it might please
to demand, and to impose any amount of tax which it might consider the people could bear
to increase, merely by the turning of a screw, in this well-contrived engine, 100,000l. or
200,OOOl. to 10,000,000l. or 20,000,000l. or more. He repeated, that this was a powera
temptation to extravagancewhich he would entrust to no Government, except in a case of
overwhelming and absolute necessity. Let their Lordships remember what had occurred in
reference to the former property-tax. On Monday, the 18th March, 1816, the property-tax was
destroyed, though to his noble Friend, it was a matter of almost vital importance to enact it
again in any terms, and to any amount, however small, as a permanent or regular branch of
financial resource. They had previously to that memorable vote been told by another 41 noble
Friend of his, the late Secretary for Foreign Affairs, then Secretary at War, that his army
estimates were reduced to the lowest possible amount, and that consistently with the safety
of the State, no further reduction could be madethat they had reached the maximum of
economy, and had brought down the army to its minimum. On the 18th of March, the
property-tax was rejected; and on the 22nd down came his noble Friend and put off his
estimatesand the next week, or the week after, came the new set of estimates, framed in
accordance with the new measure of parliamentary liberality, and the consequently altered
state of the feeling of the Government. And so would it be again, whatever means of
expenditure were at the disposal of the Government, they would spend up to themthe
Government should always be kept on short allowance, and its expenditure would always be
regulated by the strict watch which was maintained over it by Parliament. When, however,
the question washe would not say national bankruptcybut when it was between the
discredit of the countrygoing on with a continuing deficit in the revenue year after yeara
deficit not diminishing but increasing with each year, and that so clearly and so surely, that
the deficit of the year ending in April in each of the two last years, was greater than the
deficit of the year ending in Januarythen it was that Parliament was imperatively called
upon, and was absolutely bound, if it did not desert altogether the duty it owed to the
country, to exert its power and put an end to a state of things thus going on from bad to
worse, and from worse to worst of alland which, if not stopped in time, must finish with
something which might, without any figure of speech, be called an approach to a state of
national insolvency. In the propriety of devising a remedy, all, he believed, were agreed. His
noble Friend near him had complained that his noble Friend opposite had exhausted himself
in demonstrating a number of propositions which all were prepared to grant him. To be sure
no man would propose to re-enact the salt-tax, or that still worse tax, the tax on printed
cotton goods. The question then being, how they were to meet the deficiency in the public
revenue, and a growing deficiency, amounting, according to one estimate, to 3,000,000l., and
according to the lowest estimate, of 2,500,000l.; and which 2,500,000l., if 42 correct, must
not be understood as the whole amount of deficiency for the yearfor it must be
remembered that a very large increase of expenditure would be occasioned by the operations
in the east, even if those operations were as successful as the most sanguine of their
Lordships could expectthis deficit having to be met, the question was, whether the plan of
his noble Friend near him, or the Government proposition of an Income-tax, was the fittest to
be adoptedall admitting that an Income-tax was the worst, if the other were possible. His
noble Friend's plan was that of the Government of last year, only varied a little as to the
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sugar duties, which plan was brought forward with a view to commercial legislation, not
revenue, and in all respects except as to the sugar duties, appeared to him and others as
being calculated to produce a great improvement in our commercial code. But a different
view of that plan must be taken when brought forward as a measure of finance alone; for in
that case, however good it might be in other respects, if it would not meet the financial
difficulty it was not sufficient to prevent their having recourse to an Income-tax. He had
already stated that an Income-tax could be justified only by the most urgent necessity, but if
his noble Friends behind him had always entertained the same uncompromising hostility to an
Income-tax which he entertained to it, and which now induced his noble Friend to prefer any
other tax to it, those noble Friends would have adopted a different course in dealing with the
proposition; for the obvious course in that case would have been, when the Government
proposed their plan, to have resisted it at once, and to have allowed not one single instant to
elapse ere they announced their uncompromising hostility to such a plan. But was that the
course taken by his noble Friends? Did they oppose this measure when it was first brought
forward? By no means: it was brought forward on Friday, the 11th of March; and it was one
whole week before they could make up their minds to oppose it at all. That was a fact; nay,
when it was brought forward a noble Friend of his (Lord J. Russell) avowed, that although
there might be a difference of opinion, and time might be required in order to make up their
minds upon the detail of the Government plan, yet that, as a whole, all parties must clearly
admit that it was a great plan, worthy of the Ministers of a great coun- 43 try. But was the
Income-tax no part of that great plan? Was it no material portionwas it a mere trifle,and a
thing to be passed over without even a word? His noble Friends could not dispute the accuracy
of his quotation; for he could assure them those were the words in which the opposition to
the measure were expressed; and he was never more surprised in his life, for, remembering
the feeling always entertained towards this tax, he at least expected that not one moment
would be lost to cry out against the abuse of it and its details, and to regard it as an
enormity, to be palliated only by the extreme urgency of the necessity, and to endeavour, by
all possible means, to reduce its mischief within the smallest possible compass. But the
general approval of the Ministerial plan as a great measure, worthy of the Ministers of a great
empire and nation, was all the resistance that was offered; and not even a protest was made
against the plan until a week had elapsed from the moment of its being proposed. However,
on Monday, the 14th of March, an opportunity was given to his noble Friends to reconsider
their rash admission of the preceding Friday; and he took the liberty of coming to that House,
and in his place moving a set of resolutions upon this whole question. Now it might not be
necessary for his noble Friends to agree to all his resolutions; they might take a totally
different view of the first of them, in which a statement was made of the evils of the tax, and
an assertion that nothing but absolute necessity could justify its imposition; they might differ
from that, and hold that no necessity could justify its imposition; or they might deny another
of the propositions, which averred the existence of that necessity, and state, as his noble
Friend had done to-night, that it was not necessary, inasmuch as there were o her means of
providing for the deficit, without having recourse to this tax. They might agree with or
dissent from the other proposition that he brought before their Lordships, stating the
necessity of altering the tax as it had been formerly laid on, and making it more equal upon
various kinds of income. But the propositions were laid on the Table on Monday, and the
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consideration of them put off at the request of one noble Lord and another until the Thursday
following. Time was therefore given to his noble Friends to have at length made up their
minds whether the Income-tax was to be opposed or 44 not; but even on the Thursday, when
the debate was brought forward, and when the statement, of which his noble Friend (Lord
Lansdowne) had spoken in terms of far too great commendation, was made by him to their
Lordships in moving the resolutionseven then his noble Friends had not made up their minds
on the subject, for they were not prepared to announce any opposition whatever, and his
resolutions were of course negatived without a division. Now, something happened on that
day, or early the next day, which showed that there was an appearance of some agitation in
the city upon one question connected with the Income-tax. A meeting had been held of bank
proprietors on the subject of terminable annuities, and the very great inequality of this tax
was pointed out as one of the most crying evils, and to which the most serious objections
existednamely, that terminable annuities were taxed to the same amount with perpetual
annuities and other permanent property. That feeling had been expressed in the city, and
even then his noble Friends were not prepared to form their opposition; for if they had been,
excitement would not have been wanting to produce it in that House. Although the agitation
in the city produced no effect here, it was announced the night afterwards in the other
House, that there was an intention to advance an opposition to the measure. But,
notwithstanding all the arguments which his noble Friend had now brought forward, and so
eloquently supported, and the reasons he had given against this tax, he had still avowed his
intention not to throw' any obstacles in the way of the passing of this bill. Therefore, he could
not help thinking that the difference between him and his noble Friend on this subject was
not, in reality, so great as it seemed to be, and that he did not entertain a much greater
aversion to this tax than himself, holding it as he did, in as great abhorrence as it was
possible to hold any measure, provided a possibility existed of avoiding the imposition of it.
Now then they came to the question of the existence of that possibility, and the first thing
proposed by his noble Friend (Lord Lansdowne) was a tax upon bread. 1,700,000l. was to be
raised, leaving only a deficit of 800,000l., and to make up that sum every person must think
that a measure of this sort was out of the question. Was there any chance of raising that sum
by the tax proposed by his noble Friend? He would at 45 once declare that he was here at
issue with his noble Friend, for he did not regard the measures of last year as anything like
measures of finance, and it was utterly impossible any one could entertain a contrary opinion
after considering of what they consisted. In the first place, there was a tax of 8s. fixed duly
upon corn. It was said, that 900,000l. would arise from that tax; but how was it to arise?
Provided there was a certain quantity of grain imported in the year, so much duty per quarter
was to be levied upon it, but if there were no grain imported there would be no levy of
money and no duty received. Then what became of the 900,000l.? But he did not want to
have the chance of obtaining revenuenot a ticket as it were in the finance lottery, giving a
beneficial chance of having 800,000l. or 900,000l., or of not having it, according to
circumstances. He did not wish to run the chance of having 900,000l. this year, and 500,000l.
next year, and perhaps 300,000l. another year, and nothing at all the year after. The deficit
in the revenue was not a matter of chance, it was always pressing upon them whether the
seasons were good or bad, and it was to supply that deficit that they were now reduced to
the necessity of finding out a means of taxation not contingent, not accidental, not of the
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hap-hazard kind, which might either be great, or middle-sized, or little, or nothing at all,
according to the circumstances of the year. And what were those circumstances?anything
very steady, anything very much to be relied upon, anything very safely and securely to be
looked forward to by statesmen intrusted with the most delicate, difficult, and important
part of a nation's concerns,the management of her finances, the support of her credit? No,
it was something neither more nor less steady, nor more nor less to be relied upon, than the
proverbially steady, fixed, calculable winds, and rain, and storm, and floodsin one word,
the weather of the year in this kingdom. Come a bad season, and they had the importation;
come a moderate season, and they had little or nothing imported; come a good season, and
they had absolutely nothing imported at all; and with all that jeopardy, and the supply failing
when, perhaps, they wanted it most, they were asked to build upon this foundation their
hopes of a permanent, steady, and regular supply of nearly 1,000,000l. sterling. Then there
was another thing to 46 be taken into the account. When there was a bad season here, and
grain and food were dear, corn would, no doubt, be imported, and the 8s. duty be levied, and
thus the revenue supplied; but was there nothing to set-off against that? It was just in a year
of such a sort that the excise was likely to be deficient, because the higher the price of food
the less able were the poor to indulge in those articles which formed the subject of the excise
duties, and accordingly in that year when they had the greatest chance of receiving a supply
to the revenue by the fixed duty on foreign grain imported came the deficit in the supply of
the excise, and they must set-off that deficit against the paltry sum that the impost would
bring of a duty on the importation of foreign corn. When, therefore, there was a chance of
one portion of the revenue being benefitted there was a certainty of a deficit and a greater in
another portion, He and several of his noble Friends had, however, contended that they had
no right to lay on this tax, because it was a tax upon the food of the people, and to all intents
and purposes a bread-taxa poll-tax laid upon the rich and poor equally, for all were equal
consumers of food. Yet they were now called upon to take it and to rely upon it as a
permanent, constant, habitual portion of the revenue. Now he had said, that the measures of
last year, with a view to commercial legislation, appeared to him to be very considerable
improvements. He preferred the fixed duty of 8s. to the former state of the law, and he
thought the sliding-scale would be no improvement upon the fixed duty, but as a measure of
finance he fairly stated his opinion, that he did not think it was originally intended as such.
And in support of that opinion, he would quote the remarkable words of a right hon. Friend of
his,words of which any one might envy the eloquence, and no one could surpass the
candour That the Government of last year brought forward the measure of the Corn-laws
urged by the importunity of their friends and goaded by the taunts of their adversaries. The
words were not hishe did not trench upon that groundtractent fabrilia fabribut they fully
bore out his opinion that the Corn-laws were not brought forward as a measure of finance. He
would now come to the second proposition as regarded the sugar duties. He cared not
whether they took it as these duties were originally proposednamely, 24s. a cwt., 47 or as
the proposal had been now modified36s. was to be the duty on foreign sugar, reduced from
63s.; there was the same per centage of differential duty. Now precisely the same principle
applied to the sugar duties as to the timber duties when the protecting duty was reduced
from 150 to 100 per cent.namely, by taking off 5s. from the duty on Baltic timber, and
adding 10s. on Canada timber, or rather increasing it from 11s. 6d. to 21s. 6d. He entirely
5

differed from the view taken by his noble Friend (Lord Lansdowne) with respect to the sugar
duty, and wished to enter his protest against the opinion his noble Friend had pronounced
before their Lordships, unless his noble Friend confined that opinion to the question of
slavery, and of slavery alone, as contradistinguished from the slave-trade. [Lord Lansdowne
had made the distinction, and stated that he did not allude to the slave-trade but to slavery.]
He was certain that he and his noble Friend could not entertain different opinions on that
subject, but he thought the admission entirely disposed of the argument with regard to the
sugar duties. They were now to reduce the duty on our own colonial sugar to 20s., and on
foreign colonial sugar the duty was to be reduced from 63s. to 30s., taking off 33s.; and it
was expected, that the protecting duty being no longer 162 per cent., but SO per cent., a
large amount of foreign colonial sugar would be imported into this country. Now, he should
show to the satisfaction of his noble Friend and the House that the refusal to equalize the.
sugar duties was not made to protect the colonies, but to afford protection to the African
negroes against the African slave-trade. It was mighty well and easy to talk of commodities,
and of importations, and of duties, and of lowering the foreign duty, and of keeping our
colonial sugar at the same rate, and by a differential duty increasing the amount imported,
and of adding to the comforts of the people, and giving them what before was not within
their reachall these were fine smooth phrases; but if the House looked beneath the
surfaceif they paused, and asked the meaning of all this, and what lurked beneath these
expressions depicting the smiling aspect of increased produce, and larger consumption of the
whole people, they would find that it was meant that some 20,000 or 30,000 or it might he
40,000 unhappy Africans were to be instantly taken from Africa, and sent forward through all
the horrors of the middle passage to culti- 48 vate Cuba and the Brazils. That was the
meaning of this plan of finance. It was not a remote or a contingent, but the absolute and
inevitable result of a change of duty. This was no question of preference of slave-grown sugar
over free-grown sugar. If it was he should agree with what his noble Friend had stated to their
Lordships. He might lament, but he could not help other nations cultivating their fields by
slave labour. But those who knew anything of West-Indian affairs must be aware that there
was a wide difference in the condition of the unhappy cultivator of sugar and that of the
producer, even of coffee and cotton, much more of corn. The slave-trade was no institution
it was not to be ranked with any institutions of any country. It violated the laws of nature as
well as nations, and instigated one nation against the other. If the duty was lowered, and our
ports opened, the demand for Cuba and Brazilian labour would cause, as a matter of
necessity, negroes to any amount to be poured into those colonies and that kingdom for the
purpose of supplying the demand which we should thus occasion. He held it to be an
inevitable consequence, that the instant the duty on sugar was lowered, 40,000 or 50,000
negroes would be taken from Africa to endure all the horrors of the middle passage and be
hurried away to the West-Indian colonies. Every additional hogshead meant and caused an
addition to the slave-trade. On a former occasion, he stated his objections to the present bill,
and if he should not be exhausting their Lordships, he would repeat a few of them; although
he was afraid, that under the existing system, any attempt to make any alterations in the bill
in that House would be hopeless. If their Lordships would look carefully into the arrangements
of the bill, they would be convinced, that there were matters involved, which although it
might be vain to think of altering in that House, might not only be advantageously altered,
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but must be, to allow the measure to work. There were portions of the bill relating to the
levying of the tax, which he was satisfied, when their Lordships had calmly applied their
minds to them, would be found to require alteration. But that House could not alter themit
was too lateand there was no alternative between adopting the bill as it stood in this
respect, or throwing it out. This fact showed how expedient it was that the House should
have come to some 49 understanding on these matters, as he had formerly moved, and that it
should be suggested to the other House to relax in their exercise of that high privilege which
they claimed in all their proceedings relating to money. He would now name one or two of his
objections. The first part of the bill, and the foundation of the whole measure, provided for
the appointment of commissionersthose who were called commissioners for general
purposeswho had in the first instance to work the measure, though certainly, as the bill
stood, in a way most unintelligible. But he begged to assure his noble Friend, that in his
observations he did not wish to act invidiously towards the authors or framers of the bill. His
observations would have reference to a more general and a higher principle, one which was
essential to the fit performance of the legislative functions of the two Houses. Now, the landtax commissioners were to meet, and to set down in writing the names of such of the
commissioners appointed as should be qualified to act as required by the bill, and to set down
the names of those persons chosen to act. Any seven of the whole numbernot less than
seven, and in no case less than three of the persons set down in orderwere required to take
upon themselves the execution of the act. Now, let it be observed, that if on any exigency a
mandamus was to be issued, or indictment preferred against a commissioner refusing to act,
how was he, amongst three, or seven, or thirty-four, to know that it was against him that
they were directed? And how was the name of the person to be ascertained? Again, if a
person were absent, there was no notice provided, and the clerk was not called upon to
deliver any. So that being absent from the meeting, he was to have no notice from the clerk,
and yet was liable to be moved against by mandamus, and indicted for failing to take on
himself the duties. It went on Provided always, that where seven persons qualified to act
as herein required shall be chosen to act for any district, no other person shall interfere as a
commissioner. What if there were only three? The 6th clause was, And be it enacted, that in
case there shall not be a sufficient number of commissioners chosen." They might be
chosen to act as commissioners, and it was not said by whom they 50 were to be chosen. Then
came the 8th section, and the requisition was still more stringent. It was, It shall be lawful
for the commissioners appointed to execute the said Land-tax Act, being respectively
qualified as directed, and they and every one of them, not in any case exceeding the number
of seven, are hereby strictly enjoined and required to take on themselves forthwith the
execution of this act;" or notice of such neglect and want of appointment was to be given
to their clerk, with no provision that the clerk was to give them notice. So that they were
strictly enjoined to find that they were any persons not less than seven; and they were
strictly enjoined to act upon a notice, which they were not to receive themselves, but which
another person, who was not to communicate it to them, was alone to receive. As to courts of
justice, the 30th clause provided, that the Lord High Chancellor, the judges, and the principal
officer, or officers of each court, or public department of office, civil, judicial, criminal, or
ecclesiastical, should respectively have authority to appoint commissioners. How was that to
be executed? Was it the Chancellor, or Chief Justice, or the Chief Justice and one of the
7

masters, or the Chancellor and Chief Justice, and principal officer or officers? So that if they
happened to be sitting the clerk of the rules might come and say, "Why don't you admit me to
your council; I have as good a right to appoint as any of you." The commissioners were treated
as if they would decline acting, but no effectual provision was made for that event. It was
assumed, that nobody would like to execute the powers of this act, whereas he thought there
would be found too great a disposition to execute some of its powers. Without its being
specified where they were to meet, a provision was made by which any two or more of the
commissioners for general or special purposes, or any other commissioners, were to be
enabled to execute all instruments, to do all acts, and execute every power. Any two
commissioners might act. There was no provision who were the persons to be present. What
was the consequence? He went and he claimed an exemption of two; they refused to give it.
He went to another twoany two might execute the I powerand they signed a certificate
which was binding on the commissioners 51 for special purposes; they were to issue a warrant
which was binding on the receiver-general of the taxes, and he was to honour the warrant
and pay the money according to the certificate. Therefore, having been refused exemption by
the general body of the commissioners, any two of the commissioners was entitled, by the
191st section, to give the exemption. The last circumstance to which he wished to call their
attention (he had passed over many), related to persons in the situation of trustees, agents,
guardians of infants, committees of lunatics. They were all, by the 44th clause, entitled to
deduct from the means of the infant, cestui que trust, principal in the care of agent, or
lunatic, coming into their hands, whatever sums they had been assessed at, and they were
indemnified. But then came the 61st, 165th, and other sections, by force of which, if a person
had not been so assessed as to enable him to deduct, he was to be entitled, after the
expiration of a year, to obtain a certificate, and to be repaid the money which he should have
advanced. The guardian of the infant, or committee of the lunatic, might go and claim at the
expiration of the year: they received the warrant and certificate of the commissioner; they
went with the warrant of the special commissioner to the receiver of taxes, the receiver was
bound to pay them the money, and there was not one title of requisition calling on them to
account for the money to the estate for which they were guardian or trustee. If they put the
interest into their own pocket, they had absolute and complete indemnity whatever sums
they had been allowed. The 166th section was worth attending to with this view. It was,
Whoever shall fraudulently be guilty of any fraud or contrivance in making any such claim, or
obtaining any such exemption, or whoever shall fraudulently conceal 'or' (not 'and') untruly
declare any income. Not fraudulently, not falsely, but untruly, in optim fide, believing it to
be so, Shall be fined 20l. and pay the duty chargeable, making 35,l. That was if he was the
principal; but how was the accessory to be dealt with? He who aided or abetted in this untrue
declaration was fined 50l. The same observation as to the division of the bill into two parts,
which he had already made, applied to the only other matter to which he would call their
attention, viz.those parts of 52 the bill relating to oaths. There was schedule F, containing
five forms of oaths, to be taken by various functionaries and officers. Of late years great
improvement had been made in bills which had passed through their Lordships' House, by
reducing the number of oaths as far as possible, and substituting declarations for oaths,
wherever it could effectually and safely be done. He had no doubt that if this bill could have
been divided, that schedule would have been entirely changed; that oaths would have been
8

struck out, and declarations substituted. Last of all, the examination of persons on oaths
which was provided for in the 124th section, and all that exacerbation of the mischief, and all
that was odious and intolerable, might have been left out. He particularly alluded to the
125th section, That it should be lawful for the commissioners to summon any person whom
they might think likely to be able to give them evidence respecting the assessment to be
made, to appear before them and to be examined respecting the assessment made on any
other person. Neighbours, friends, relativesall but one excepted class, viz., agents or
confidential trusteesmight be called before the commissioners and examined into their
whole circumstances and mode of living. The conclusion was lame and impotent, for by
paying 20l a man might avoid all examination. Some persons would rather undergo the
examination than pay the penalty. He made no doubt that some persons in every
neighbourhood would be found too ready to lend themselves to the inquiries of the
commissioners, and to give all the information which they had, or thought they had,
respecting the affairs of their neighbours. But solicitors might be examined as to the amount
of money they had paid to counsel. Correspondents of merchants might be examined as to all
that passed between them and their mercantile correspondents. Consignees of merchants in
the same way might be examined as to the most delicate affairs of their consigners;
tradesmen, as to the affairs of their customers; customers, as to their expenditure,
payments, when they paid their last accounts, how much money was due, how much debt
there was of A B in the books of C D. There was no confidential trust between a customer and
a tradesman, therefore these parties were not protected. A banker was not a trustee; he was
merely in the nature 53 of a shopkeeper who kept a shop, and the banker might be called
before the commissioners and examined touching the nature of the account; the son might be
examined as to the father, the father as to the son; and all this the commissioners not only
might, but were somewhat in duly bound to undertake as often as there was any doubt on
their minds respecting the accuracy or fulness of the disclosures. Now, having the opinion
which he had already expressed of the absolute and unavoidable necessity of this measure
being quite aware that pass it mustfor what purpose did he urge these observations? Not in
the light of hopelessly objecting to the measure, not to prevail upon their Lordships to do
that which it would be hopeless, even if he felt that there was not a necessity for passing it,
to prevail upon them in this stage to doviz., reject it; but for the purpose of again
reminding this House of the consequences of the rule being so rigorously adhered to which
excluded the revision and correction in this House of the most important legislative acts that
came up from the other House of Parliament He said that it was no self laudation in this
House, or in a Member of this House, to assert, which he most confidently did, that in this
House, by its constitution, by the manner in which its business was transacted, by the manner
in which it was composed, having within its walls not only the statesmen who adorned this
country, and who had so long and so eminently served it, not only men of all other
professionsif he might speak of a statesman as carrying on a professionbut the sages of the
law as well as statesmenthe judges who presided in the tribunals of the country, who were
best versed in its lawsthe House itself being a high judicial body as well as a branch of
Parliamentthat in a place of an aspect like this all the arrangements of the bill could be
more accurately, more safely, more fruitfully sifted and corrected by their Lordships than by
the other House, And what precious advantage was thrown away, what great risk of error was
9

incurred, what constant pitfalls were laid by the other House of Parliament to surround and
beset its own steps in legislation, by insisting on their Lordships' positive and absolute
exclusion from all share in perfecting by correction the most important measures. He had no
more doubt, than that he was now addressing their Lordships, that if these and other clauses,
54 to which he had taken leave to direct their attention, had been embodied in a separate
bill, or if they had been suffered to enter into an examination of those which they had not
the power of examining, the result would have been very different although he could not say
that it would have had the effect of making this measure much better or much more
palatable; for when he looked at the mass he Was disposed to agree with his noble Friend's
character of it, who shrunk back with honor at its huge bulkat the hideous aspect of its
arrangementsat the odious nature of its details, to which he might add its darkness and
obscurity, in all the particulars to which he had directed their attention. Monstrum
horrendum, informe, ingens, cui lumen ademptum. They would, however, have purged the
measure of some of its defectsthey would have cleared it of its obvious errors, and made it
more certain to raise the revenue required. If passed in its present form it would not be
sanctionedit would not long be tolerated by the people of this country.

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THE TRUSTEES RELIEF BILL.HC Deb 15 July 1847 vol 94 cc336-7 336
Upon the Order of the Day for the Third Reading of the Trustees Relief Bill,
MR. STUART said, he had serious objections to this Bill, though he did not mean to divide the
House upon the question. According to the present law, a legacy of money in trust for the
benefit of an infant could not be summarily placed in the Court of Chancery; but by this Bill,
a trustee of 500,000l, if he thought the money might be laid out beneficially in land, could
summarily put the whole trust fund in Chancery, and the trustee would be acquitted of all
obliga- 337 tion to account. This might be done by a majority of the trustees against the wish
of others, and of the cestui que trust, and the infant might be mulcted of his benefit through
a depreciation of the property in which the fund had been invested. The attention of the
House had not been sufficiently called to this part of the Bill. It was going a monstrous way to
say that any part of any sum of money might, without the consent of the parties beneficially
interested, be suddenly thrown into Chancery, to be got out again as it could. If the Bill had
been brought in at an early period of the Session, it could have been more attentively
considered; but he had discharged his duty in calling attention to what he considered an
insurmountable objection to this Bill. His suggestion was, that the Bill should proceed no
further this Session.
Bill read a third time and passed.

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10

SECOND READING.
HL Deb 28 July 1857 vol 147 cc547-53
LORD ST. LEONARDS said, he did not rise to oppose this Bill; on the contrary, he approved a
great portion of it, and gave it his hearty concurrence; but he very much lamented that it
should have been found necessary to make trustees the subject of such highly penal
provisions in case of their misapplication of trust funds. No doubt if a trustee, not meaning to
act dishonestly, but having the control of trust money, was induced by some tempting
speculation to invest that money and so lost it, the beneficial owner suffered grievous wrong.
If, however, he (Lord St. Leonards) were asked who upon the whole had suffered most
persons entitled to trust money by the acts of their trustees, or trustees by misapprehension
and neglect through being pursued by the beneficial owners and compelled to make good the
losses to the estate, he should be inclined to say that greater hardship was sustained by
trustees in the honest discharge of their duties than was occasioned to beneficiaries by the
acts of dishonest trustees. He could not but regret that it had been proposed to inflict so
serious a punishment as penal servitude upon defaulting trustees, because he believed that
under 550 such a law it would be very difficult indeed, and almost impossible, to find any
man who would consent to become a trustee. The Bill did not distinctly define who should be
considered a trustee under it, if it should become law. There was much of the Bill which he
approved. It was a great improvement on the Bill which was at first submitted to Parliament
on this subject. The more he looked at it the stronger became his conviction that no honest
trustee would be much endangered by its becoming law, but trustees in general would
apprehend great danger from it. There had been many instances in which men of perfect
honour had invested money belonging to those for whom they were trustees for their own
benefit in speculations of different sorts. Nobody could defend that. If there was a profit
those trustees put it into their own pockets, but if there was a loss it fell upon those for
whom they were trustees. Nevertheless, the courts in this country had been accustomed to
deal leniently with such cases, when it was clear that there was no intention to defraud. It
would be necessary to take care in defining what persons came within the Act as trustees; he
thought the interpretation clause, to which his noble and learned Friend had referred, did not
meet the difficulty. Their Lordships were aware that he had laid on the table a Bill to relieve
trustees who acted honestly, though erroneously, from the liabilities to which they were at
present exposed. He had already explained the nature of that Bill, which he hoped might pass
into law, because he felt confident that unless the Legislature relieved trustees from liability
in respect of innocent breaches of trust, men would refuse to act as trustees. Their Lordships
should bear in mind what was the relationship between a trustee and his cestui que trust. It
had always been of a confidential nature. That confidence might have been abused, but
surely those trustees who had, without any fraudulent intent, and in mere ignorance,
committed a breach of trust, ought to be protected against penal consequences. Latterly,
owing to the difficulty of obtaining private trustees, the office of trustee and executor had
become a mere trade, and the late South Sea Company had proposed to establish themselves
a limited liability company for the purpose of performing for a certain profit the office of
11

trustee and executor; their Bill had, however, partly owing to his own exertions, been
defeated; but companies of that sort 551 must thereafter be resorted to unless the
Legislature took care how they dealt with trustees who had no intention to defraud. He
understood that some parties were availing themselves of the Limited Liability Act to
establish such a company. He (Lord St. Leonards) entirely objected to the principle of such a
company. Hitherto the office of trustee had been filled without the trustee receiving a single
shilling of remuneration for his labour. If heavy responsibilities were now to be imposed by
the law upon trustees, the Legislature ought to enact that trustees should be legally entitled
to remuneration. But how were they to estimate the labour of trustees? If trustees were to be
expected to sacrifice their time and risk their property gratuitously, the law ought not to deal
harshly with them. He concurred with his noble and learned Friend on the woolsack in
thinking that that part of the Bill which enacted that a prosecution against a trustee should
require the sanction of one of the Judges ought to be amended, because if a man were sent
to trial upon the recommendation of a Judge, his case would be thereby prejudged, and he
would be sent, as it were, with a halter round his neck.

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THE INCOME TAX.RESOLUTION.HC Deb 23 April 1863 vol 170 cc61451

THE CHANCELLOR OF THE EXCHEQUER said, the hon. Gentleman would excuse him if he
made no reply to the last observation. As to the amount to be derived from the abolition of
the exemption, he estimated it at about 100,000 a year. There would be ample
opportunities of discussing the question on the clauses of the Bill.
MR. AYRTON said, he understood that these charities were nothing more than trusts, for the
benefit of persons among whom the funds were distributed. In ordinary cases the trustees
paid the income tax, and the cestui que trusts, if their incomes were less than 100, had the
amount returned to them. As he understood, that would still be done. In the 648 case of
railway companies the directors deducted the income tax from the dividends, and any
shareholder whose total income was less than 100, obtained a return of the amount so
deducted. Charities, like railway companies, were corporations, and their aggregate revenue

12

did not affect individual exemptions. If that were so, the proposition to tax charities came to
nothing, and would add nothing to the revenue.

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SECOND READING.HC Deb 15 February 1872 vol 209 cc470-515 470

Order for Second Reading read.
Motion made, and Question proposed, "That the Bill be now read a second time."(Mr. W. E.
Forster.)
THE ATTORNEY GENERAL FOR IRELAND (Mr. DOWSE) said, that the hon. and gallant Gentleman
who had just spoken had given the House his views with great vigour and with great
eloquence, and he had advanced some strong reasons in favour of the recent Irish elections.
He had, however, to deal more particularly with the two preceding speeches, which put
forward very succinctly the arguments against the Ballot. He was glad that the question had
been discussed without any reference to first principles and without any allusion to "the social
contract," or "the rights of man." They were content to take things as they found them. He
should start with the proposition that the House of Commons governed this great Empire. He
did not wish to detract from the position of the House of Lords, or from that of any other
power in the realm; but it was an undoubted fact that all great questions were discussed and
determined in that House, and Members who were elected to serve in that House should be
elected by the 481 freely recorded votes of a free electoral body. The question was, how to
enable the electors to record their votes freely, and it was the opinion of the Government, as
also his own, that the Ballot was the only machinery adequate for the purpose. Cicero called
the Ballotand it was not a bad definitionvindex tacita libertatis. The hon. Member for
Northumberland (Mr. Liddell) who was not usually pedantic, had said that the Ballot did not
mean secret voting, which, of course, strictly speaking, it did not; but it was idle to quarrel
about words when the meaning was unmistakeable. A Bill for establishing the Ballot, in the
popular sense of the term, was before the House, and he hoped that when it was sent up to
the other House, with the approval of a large majority of the representatives of the people, it
would be received with a little more courtesy than it had met with on a previous occasion.
The Ballot was, in fact, the only adequate remedy for the evils of which they were
complaining. They had been told that it was antagonistic to the habits and repugnant to the
character of the people. That was only another way of expressing that which they had been in
the habit of hearing in former timesnamely, that the Ballot was un-English. It was not
English because it was not the law in England; but if the present Bill passed, it would in ten
years be as eminently English as any institution we had, just as many things which at first
were stigmatised as un-Constitutional had become Constitutional when passed into law. The
House had already affirmed the principle of this Bill by large majorities, and no one would
venture to say that that House was not the representative of the people of England. If what
was wanted could be brought about by other means, he should be no advocate for the Ballot;
13

but the existing evil must be remedied, and it could not be repugnant to the feelings and
character of the people to secure to them the free exercise of the franchise. He was glad that
nothing had been said about the trustee argumenta point on which great stress was formerly
laid. In his opinion, there was nothing in such an argument. If the voter was a trustee for
himself, secrecy was no great matter, and if for his co-voters, they might be supposed to
divide the responsibility between them; while if he was a trustee for people not to be trusted
482 with the suffrage, they clearly had no right to control him. In the Court of Chancery, a
cestui-que trust could force the trustee to do certain things, provided they were within the
scheme of the trust. It was admitted that the non-electors had no right to dictate to the
elector for whom he should vote, and for them to know how he voted was no security that he
performed his trust, since they could not know what was passing within his mind nor the
motives which actuated his conduct. When first brought in contact with electioneering
matters, he saw a trustee walking to the poll between a file of soldiers and police, with a
large mob of cestui-que trusts ready to break his head; and he (the Attorney General for
Ireland) observed to a friend who was with him on the occasion"There is a man charged with
the responsibility of discharging a solemn trust, and he has to be guarded by a band of
soldiers from the cestui-que trusts, who are seeking by threats and intimidation to prevent
him from voting at all." That illustration convinced him of the fallacy of the trustee
argument. The hon. and gallant Member for West Sussex (Colonel Barttelot) had twitted
certain hon. and right hon. Gentlemen with having changed their opinions upon this question.
Now, were the mummy-pits of Hansard explored, it might doubtless be found that some
Members had changed their opinions since 30 years ago; but a man who had not changed an
opinion on any subject during 30 years had no opinion worth changing at all. Hon. Gentlemen
opposite, moreover, should remember the cries raised on the difference between a 7 rating
and a 7 rental; that the country was in danger, that the Monarchy was imperilled, and that
the Pope was about to make a voyage of discovery to these shores. These prophets of evil,
their vision clarified by the spectacles of office, plunged the country within nine months into
household suffrage, so that they should be the last persons to taunt others with inconsistency.
He agreed, too, with the American writer Emerson, that consistency was the bugbear of little
minds, and that if a man was satisfied of the truth of an opinion he had formed he was bound
to enforce it when a fitting opportunity offered. If hon. and right hon. Gentlemen were
satisfied that they had good reason for changing their 483 opinions, and that the time had
come for the change, they should not be twitted with inconsistency. He would unhesitatingly
say perish consistency, if consistency were to be an obstacle in the path of such reforms as
that now called for. As to bribery, which it was said would not be prevented by the Ballot, he
thought the Ballot would have a considerable effect in that direction, though he did not
expect any legislation to put down bribery altogether. If the law was in advance of public
sentiment and public morals, it would only have a partial operation; but he looked forward to
a time, which he believed would be accelerated by this Bill, when it would be deemed as
unjust and immoral for an English gentleman to bribe as it is now for him to tell an untruth,
or to commit any other mean action. In a mercantile community men would not be so willing
to pay for a vote, whether before or after an election, if they had no certainty of receiving
that vote. Ingenious systems of bribery, such as that practised at the Dublin election of 1868,
would certainly be put an end to by the Ballot. Moreover, the state of the poll would not be
14

known while the election was going on. The political thermometer on the polling-day of a
contested election began at zero, and gradually rose to fever heat; and in small
constituencies, where 60 or 70 men turned the election on either side, the effect of the
announcement at 3 o'clock that one was five ahead, and ten remained to be polled, might
easily be imagined. He wondered what the value of those ten men would be. Such men looked
forward with the greatest interest to party quarrels and disputes in Parliament, in the hope of
a Ministerial crisis and a General Election; and so strong was this feeling, that in a borough in
the West of Ireland the chairman whose duty it was to revise the list was appealed to by one
voter in the name of all the Saints not to strike his name off, because if he did his bread
would be gone. Much good had been effected by changing the venue of Election Petitions, and
still further good would be done by the passage of this Bill. It would be very efficacious with
regard to intimidation and undue influencenot the intimidation which could be dealt with on
Petition, such as the intimidation of large mobs, whose employers could be 484 traced, but
that which worked unseen. He referred to the intimidation exercised by landlords on tenants,
a form of which existed in England and Scotland, as well as in Ireland, by employers on the
employed, by customers on shopkeepers. He had known instances of intimidation by a
shopkeeper on a customer, by a lawyer on a client, by a doctor on a patient, and on a patient
by a doctor. He had known half a congregation leave their parson and set up another place of
worship on account of his vote, thus depriving him of a considerable part of his income. It was
important to guard against the intimidation exercised by one class on another, and also on
that exercised by men in a particular class against their fellows. The proceedings of the
International Society, and of trades unions, ought to be considered, and the suffrage having
been conferred on the massesa privilege alleged to have been unasked for, and, perhaps,
not desiredParliament was bound to protect them in its exercise. The intimidation supposed
to be exercised by the Nationalists in Ireland had been referred to, and the hon. Member for
Northumberland (Mr. Liddell) had cited the Kerry and Galway elections as proofs that the Irish
people had no difficulty at present in expressing their opinions. This, however, was assuming
that the results of those elections really expressed their opinions. He was not going to say
they did not, and he should be very careful on this point, for, having regard to the recent
date of the elections and to certain contingencies, it would not be fair for him to offer an
opinion. The hon. and gallant Member for West Sussex had asked whether the Ballot would
have altered those elections, evidently assuming that it would not; but if he himself had a
lurking opinion to the contrary, who could say which opinion was correct? The only way would
be to make trial of the Ballot, and see how the next elections went. He admitted to the full
the advantages which had been conferred on Ireland by the Church Act and Land Act, but
sufficient time had not passed for the fruition of the advantages they conferred; but he
believed the Ballot was required in Ireland by the Irish people in order that they might be
free to exercise a free franchise. [Mr. NEWDEGATE asked why Ireland was not in the Bill?]
Ireland 485 was in the Bill. He hoped he understood the hon. Member. He was ready to
answer any question of the hon. Gentleman; but there was what lawyers called a condition
precedent, and that was that he understood him. At the last Meath election an hon.
Gentleman (Mr. Martin), who boasted of his return as evidencing the desire of the people for
Home Rule, polled only 1,040 votes, his opponent, Mr. Plunket, receiving 684, and 2,503
electors not voting at all; whereas, in 1868, Mr. Corbally polled more votes than Mr. Martin
15

and Mr. Plunket put together. This seemed to show that the electors would not vote when
they found an overwhelming power overawe them; but were they secured from landlord
coercion on the one hand, and from intimidation on the other, they would exercise the
franchise, and even if the result were the return of 60 or 80 Home Rulers this would be better
than dissatisfaction, and, perhaps, insurrection. Though he should regret their return, some
advantage might flow from itthey would mix with English and Scotch Members; they would
see that there was no disinclination to listen to the voice of Ireland; they would see how
business was conducted, and how conscientious opinions were formed on both sides of the
House; and he believed that were Home Rule brought to the touchstone of discussion,
Parliament would be benefited by their presence. He did not think a result of the Bill would
be to bring those men into the House. He hoped it would not, for he firmly believed that the
welfare and salvation of Ireland depended upon the Imperial connection. He believed this was
a good measure for England, Scotland, and Ireland. They were all open to criticisms as well as
the Bill. The time had now come for the passing of this measure; this was plain from what had
been said that night, for if the allusion that the work last Session was done by foreign
workmen applied to hon. Members below the gangway, it implied that the workers on the
Front Opposition wished not to impede the passing of the measure. It was said that it was
easy to criticize, and there was high authority for saying that critics were men who had failed
in literature and art; but this, of course, he was bound to say, did not apply to politicians.
Destruction was easy, but construction was difficult, and he agreed 486 with the words
quoted by Lord Coke"Blessed be not the complaining tongue, but the amending hand." That
had been the principle of those who had brought forward this Billnamely, a conscientious
desire to reform the Constitution, not by introducing violent changes, but by giving to voters
the power of freely exercising the power of voting which had been conferred upon them. He
thought the result would be to strengthen the Constitution and to strengthen the Monarchy,
to which we owed all the liberty we now enjoyed, and he hoped the time would never come
when there would be in this country any institution like the Commune of Paris or the
Tammany Ring of New York. If the House secured the well-being and happiness of the people,
if they enabled voters to come forward and record freely their opinion on public affairs, they
would increase their claims to be considered the representatives of the people of England.

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COMMITTEE. [Progress 3rd July.]HC Deb 04 July 1873 vol 216 cc1787805 1787
Bill considered in Committee.
(In the Committee.)
Clause 18 (Power to transfer jurisdiction of Judicial Committee by Order in Council).

16

THE SOLICITOR GENERAL proposed an Amendment whereby the proposed alterations of the
law would not be confined to the High Court of Justice and Court of Appeal respectively, but
would be extended to all England, stating that if it was thought necessary words could be
introduced, on the recommitment of the Bill, applying it to Ireland.
DR. BALL, in opposing the Amendment, called the attention of the Committee to the state
of the jurisdiction of the Admiralty Courts of England and Ireland, and in pointing out how
differently it operated, said it was a strange thing that in two countries, separated only by a
sail of four hours, vi Holyhead, the lines of administration of the law relating to Admiralty
jurisdiction, in matters of collisions between foreign vessels, were not governed by the same
rules. In illustration of that, he mentioned a case of collision in the Pacific Ocean between a
Swedish and an American vessel. One of those vessels arrived in Cork, which gave jurisdiction
to the Irish Court of Admiralty. The Court pronounced its decision, after having heard the
arguments of counsel, awarding damages; but had the ship arrived in an English port instead
of an Irish one, the English Court of Admiralty would have divided the damages, in its
decision, between the litigating 1798 parties. Should the proposition of the hon. and learned
Gentleman the Solicitor General be adopted, he hoped steps would be taken on the next
stage of the Bill to extend its operation to Ireland, so that the administration of the law
should be the same in the two countries.
Amendment agreed to.
MR. MATTHEWS moved, in page 14, line 34, to leave out sub-section 2, providing that no
claim of a cestui que trust against his trustee for any property held on an express trust shall
be held to be barred by any Statute of Limitations. The sub-section imperfectly stated the
doctrine of the Court of Equity, and it spoiled it in stating it.
THE SOLICITOR GENERAL said, the sub-section made no alteration in the law. The words,
which were not his, had been very carefully considered, and were designed merely to express
the law as it stood.
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SUPPLYNAVY ESTIMATES.HC Deb 28 June 1880 vol 253 cc975-1080

SIR H. DRUMMOND WOLFF said, he was sorry the hon. Gentleman opposite (Mr. E. J. Reed)
had referred to the Reports of departments, as he did not think himself that the question of
Greenwich Hospital was exhausted. The right hon. Gentleman the Secretary of State for War
(Mr. Childers) really could never wish them, in any way, to rely on the bargain of which he
spoke. The right hon. Gentleman asked them to take that speech as a standard to apply to
the compromise that had been effected. But the speech to which he (Sir H. Drummond Wolff)
referred seemed to have been delivered several years ago, and which nobody, so far as he
was aware, recollected, and which did not appear to have been reported. He would call their
attention to the fact that since that time the right hon. Gentleman had not only been in
Opposition, but had also been in other departments of the Service; and it appeared to him
rather unreasonable to refer to that to explain the reasons why seamen and marines were
17

deprived of a fair revenue for that valuable property. The question was, in fact, greater than
many hon. Members supposed. They had, in fact, the Lords of the Admiralty acting in two
capacitiesas trustees for the aged seamen and marines on the one hand, and as Lords of the
Admiralty on the other. They took the money of their cestui que trustent and put it into the
pockets of the Admiralty. 100 a-year was clearly an inadequate rent: the buildings were
assessed at from 4,000 to 5,000 a-year, and they were asked to say they considered 100
sufficient rent. He thought that was unworthy of the Admiralty, acting in their capacity of
Lords of the Admiralty, to make a profit out of that property. He sin- 997 cerely trusted that
the hon. and learned Member for Chatham (Mr. Gorst) would bring that matter up in a
forcible manner next year, and in such time as to have ample opportunity for discussing it, so
that it should not be hurried over as it was that night, in order that the rights of seamen and
marines might be less curtailed than they were at present with reference to that subject.

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SECOND READING.HL Deb 26 July 1887 vol 318 cc1-8 1
Order of the Day for the Second Reading, read.
LORD HERSCHELL said, there could be no doubt that the position of a trustee was one of very
considerable risk. Latterly that risk had narrowed down to the general honesty of those who
were conducting the legal affairs of the country. In individual eases now and then the risk had
become felt, and had involved the most lamentable consequences. It was a risk from which no
trustee could absolutely free himself; for it was impossible for any trustee to give that
personal attention to every detail, every action, which alone could insure his complete
security. On the other hand, it was very difficult to refuse a trusteeship, though many would
gladly do so. There was scarcely any trustee who knew whether any property which he
believed to be his own was really so, or whether it was liable to; meet the defalcations of
those who managed the trust. This measure would, to some extent, meet a much-felt want,
and, if its provisions were carefully considered, might be of public service. He had always
looked forward to the time when they might see the creation of an official trustee with
absolute security for the cestuis que trustent; and he did not think such a measure as this
would stand in the way of such a proposal. He trusted the noble and learned Lord would not
carry the Bill beyond a second reading that Session.
LORD BRAMWELL remarked that, though not so well acquainted with the Law of Trust as he
was, or ought to be, with the Common Law of England, it would not be amiss that he should
express his goodwill towards this Bill. One advantage that the Bill possessed was that it was
entirely voluntary in its application, no one being bound to employ these Companies as
trustees. He Believed that at present trust funds were more often wasted by improper
investment, under pressure from the cestuis qua trustent, for the purpose of obtaining higher
interest, than from actual dishonesty. That danger would be avoided if the Companies were
trustees, as no pressure could be brought to bear to 8 tempt them to invest in dangerous
securities. He sincerely hoped the Bill would pass into law.
18

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(NO. 24.) SECOND READING.HL Deb 08 March 1888 vol 323 cc534-8

LORD HERSCHELL , in moving that the Bill be now read a second time, said, it was introduced
at the instance of the Incorporated Law Society, who had devoted much attention to this
subject. It was intended to relieve trustees from some of the liabilities to which they were
now subject, and to remove disabilities under which they at present laboured. The measure
was one of detail, and did not involve any general principleeach provision was to be 535
considered by itself. There could be no doubt that trustees had long suffered under burdens
which most of them considered very grievous, and anything that could be justly and properly
done to give them relief would have a sound and wholesome effect. In fact, the liability of
trustees for acts perfectly innocent in themselves had been pushed to such a point that it was
often difficult to get persons to act in that capacity at all. The first provision of this Bill was
very simple. This Bill, proceeding on the lines of the Conveyancing Act of 1881, which did not
apply to trustees, would enable a trustee to appoint a solicitor to be his agent to receive and
give a receipt for money on behalf of the trustee. It often happened in cases when it was
desired to effect a sale on satisfactory terms that it became necessary to insert certain
restrictions in the conditions of sale, which were known as "depreciatory conditions." But as
the law at present stood, trustees could not insert "depreciatory conditions," and an
impediment was thus placed in the way of their obtaining as much as they otherwise would if
they were ordinary vendors, and often, when it was sought to enforce a particular sale, a
person was enabled to get out of his bargain by alleging that the trustees sold under
conditions which a trustee could not insert. It had been held that a trustee was not justified
in advancing trust money on house property to more than one-half of its value, while on
landed property he could advance to the extent of two-thirds of its value. But there did not
seem to be any substantial reason for thinking, in these days, that house property was more
subject to fluctuation than landed property, and the present restriction placed a difficulty in
the way of trustees securing good investments. This Bill proposed to place house property and
other landed property on the same footing. At present a trustee could not buy or lend without
obtaining a "full title." This Bill proposed to enable a trustee to dispense with a full title,
where the title appeared perfectly sound and good without it. It was decided in a particular
case that a trustee, in obtaining a valuation of the property upon which he intended lending,
was bound to obtain the assistance of a surveyor carrying on his profession in the neigh- 536
bourhood of the property. That was a very inconvenient restriction, and the Bill provided that
if a trustee employed a surveyor of skill that was sufficient. Another provision of this Bill
enabled a trustee to employ an agent to perform certain work under the trust, even though it
was work that the trustee was mentally and physically capable of performing. At present a
trustee could not charge anything for his own services, and could not employ any one else for
reward to do anything which he was himself capable of doing. The consequence was that he
was often put to considerable expense and inconvenience. It did not seem unreasonable that
he should be allowed in certain cases to employ an agent. The last provision in the Bill was
19

the most important of all. It enabled a trustee to plead the Statutes of Limitation in certain
cases. At present an ordinary defendant was entitled to meet any claim against him by setting
up the Statutes of Limitation, unless where fraud was proved. But at present, however
innocent the breach of trust on the part of the trustee might have been, no lapse of time
barred the right of the cestui que trust. A trustee might have taken the opinion of the most
eminent counsel, who might have advised that the trustee was entitled to do certain things;
but it might turn out by a decision delivered 50 years after that the trustee was not entitled,
and had committed a breach of trust. This Bill provided that a trustee should be entitled to
the benefit of the Statutes of Limitation, save where he had been guilty of fraud, and where
the money had actually come to his hands. It did not seem reasonable that trustees more than
other persons should be liable to stale claims where they had been guilty of no fraud or
misconduct. He begged to move the second reading of the Bill.

COLONIAL SECURITIESINVESTMENT OF TRUST FUNDS.HC Deb 11 December 1888 vol 331

cc1757-8 1757
MR. ANDERSON (Elgin and Nairn) asked Mr. Chancellor of the Exchequer, Whether the
Government have received communications from various Colonial Governments, urging them
to consent to a provision permitting Trust Funds to be invested in certain Colonial securities;
and, whether the Government intend to accede to the wishes of the Colonies on this point?
1758
THE CHANCELLOR OF THE EXCHEQUER (Mr. GOSCHEN) (St. George's, Hanover Square) , in
reply, said, representations had been made to the Government by various Colonial
Governments on the subject; but he considered it was not so much a question for the Colonial
Governments as one to be determined by the interest and safety of the cestui que trust. He
would, however, see the Agents General of the Colonies in the course of the week on the
subject.
MR. ANDERSON said, all he desired was to get the clause introduced which had been struck
out in the House of Lords.
MR. GOSCHEN said, he was not prepared to assent to the re-insertion of the clause in
question.
*******************************************************************

SECOND READING.HC Deb 03 April 1889 vol 334 cc1481-511 1481

Order for Second Reading read.
*MR. COZENS-HARDY (Norfolk, N.) It is a remarkable fact that until the year 1859 there was
absolutely no Statute which dealt with the subject of Trust Investments, and Lord Eldon
pointed out, a good many years ago, that it was necessary for trustees to follow, as they best
20

could, what was the rule of the Court of Chancery. It was not until this century that trustees
were authorized to invest in mortgages, and in 1859 Lord St. Leonards introduced a Bill, by
which the power of trustees was extended to Bank Stock and East India Stock. Further
legislation followed in 1860, and in 1867 an Act authorized trustees to invest in any Stock the
interest of which was guaranteed by Parliament. In 1871 Parliament decided that investments
might be made in Stock issued by the Metropolitan Board of Works, and in 1882 there was a
further intervention by Parliament in the Settled Land Act, which authorized trustees to
invest capital in what I may call, speaking generally, first class Railway Debenture Stock. In
1884 the late Lord Advocate brought in a Bill, which applied only to Scotland, but which gave
a wide power of investment to all Trust Funds in Scotland. There has been an enormous
increase in the amount of 1482 Trust Funds, and no one but the Chancellor of the Exchequer
can have any correct idea of the rapidity with which these funds are increasing. I believe they
are increasing at the rate of millions a year, and side by side with that fact, the old-fashioned
Trust Investments have diminished, or become undesirable. Government securities, happily,
have been to a considerable extent paid off, and, quite apart from that fact, they have been
largely taken up by the Court of Chancery and the Savings Banks authorities, who hold Consols
to a very considerable amount. As to mortgages, they are not as much favoured as they were,
on account of the great depression of landed property. Legislation is required in order to
make the law of England and Ireland uniform; in the next place, to make it more simple, and,
thirdly, in order that trustees may be allowed a wider range of investment than they have
now. There is no doubt that the fall in the value of money has worked with extreme hardship
in a great number of cases. Funds have been set apart in the belief that the interest produced
from them would be an adequate provision for a widow or a child; but in many instances the
investments are now unsatisfactory, and it is not unreasonable that Parliament should give a
wider range and a wider choice. This is, no doubt, what the creator of the Trust would
himself have done, could he have foreseen the events which are now happening. In its main
features the Bill does not come before the House without some authority. Last Session the
House of Lords passed some clauses in the Trustee Bill which agree with some of the
provisions of the measure, and Lord Salisbury, on the Third Reading, stated that it was
desirable to pass the clauses which gave to 1483 trustees an increased power of investment,
and that he should be sorry if the Bill were rejected. It came then before the Standing
Committee, by whom it was passed, without an adverse opinion being expressed against it.
The present measure deals with Trust Investments very much on the lines of the Bill of last
year. It consolidates all the existing law, repeals all the old enactments, and puts them in one
section under separate heads; it enlarges the list of securities so as to include first-class
Debenture Stock authorized by Parliament and the annuities granted by the Indian
Government; it also authorizes the inscribed stock of Corporations and County Councils; and it
deals with the rights and duties of trustees in the matter of the purchase above par of Stocks
which are redeemable at par. It is in every way important that some law should be laid down
to govern the action of trustees in these matters. At least they are entitled to know what
their position is, and they should not be left to the risk of having a Court of Law declare that
they have exercised their discretion in a wrong way. There are two securities that are not
included in the Billthe Colonial and the Irish Tramway Securities. Colonial Securities raise a
question of great interest and importance, but it is a question which, if necessary, can be
21

raised in Committee and there dealt with. Personally, I did not feel myself at liberty to
introduce it into the Bill. The same remark applies to the Irish Tramways Stock. It is a
question in which many of the Members for Ireland take a deep interest; but it is a small
question in amount, and can easily be dealt with in Committee. There is one other matter. I
may be asked how I propose to deal with old Trusts and with Trusts where there is an express
limitation as to the nature of the investment. It is not proposed by the Bill to override any
express provision in the Trust, but unless there is an express provision the trustees are to
have power to invest the trust money in accordance with the provisions of the Bill. I do not
suggest that it is a perfect measure. It is a measure that will require, and, if it is read a
second time, will doubtless receive considerable discussion; but I trust I have satisfied the
House that it is a matter which is 1484 ripe for legislation, and that it is a matter with which
the House of Commons ought to deal. I ask the House, in moving that the Bill be read a
second time, to recognize in it, at least, an honest attempt to grapple with a difficult
question.
Motion made, and Question proposed, "That the Bill be now read a second time."(Mr.
Cozens-Hardy.)
MR. A. O'CONNOR (Donegal, E.) I do not for a moment pretend to argue that there is no
need for some Bill relating to the Irish law of investments. Not long ago Mr. Justice Kay
declared his conviction, derived from long experience, that there was great need for a radical
reform of the law in regard to Trusts. The hon. and learned Gentleman who has moved the
Second Beading of the Bill sees very clearly the necessity for some kind of amending Act in
regard to one part of the question, but he only touches a very small portion of one side of it;
and he admits that, even with regard to that small portion, he has left out a not
inconsiderable part. He suggests that the Bill may be amended in Committee in the direction
of the enlargement of the powers which it proposes to confer; but, while taking care of the
trustee, the hon. and learned Member loses sight altogether of the beneficiary. These Trust
Funds are increasing every year. There are many millions of property in the hands of trustees
in regard to which the people for whose benefit the Trusts were executed and for whose
benefit the trustees have accepted the duties of trustees have practically no information or
control. To bring in a Bill to amend the law relating to Trusts, to enlarge the power of
trustees, to extend their discretion, and to minimize their responsibility, and at the same
time to leave unprotected the interests of those who are to benefit by the Trusts, certainly
seems to me to be a patchwork and niggling way of dealing with the question. The Bill has
evidently been drafted by someone skilled in the drafting of Bills, but it is equally apparent
that it has been drafted hastily; and I fear that, if we read it a second time and take it to a
Committee, the only result will be a considerable waste of time. It will either be rejected, or
it will be so imperfectly amended that it 1485 will do more harm than good. The measure of
the hon. and learned Gentleman is imperfect and ill-digested; and it is undesirable that it
should be allowed to stand in the way of other important questions which urgently demand
the consideration of Parliament. The second Act of Lord St. Leonards practically gave
everything the Bill of the hon. and learned Member desires to effect, because the 11th
section provides that trustees having power to invest in Government or Parliamentary
22

securities may invest in any other securities in which funds under the control of the Court of
Chancery may be invested. From time to time the powers of trustees in this respect have
been considerably enlarged, and last year the hon. and learned Gentleman brought in a Bill
upon the lines of the present measure. That was a remarkable Bill. It protected trustees who
had committed a breach of trust at the instance of the beneficiary of the trust, oven if she
was a married woman, and it further gave trustees the benefit of the Statute of Limitations.
One would think that ought to have satisfied the hon. and learned Gentleman. But he comes
again this year in the same way as last, and he brings in this Bill, which, as I said before, is
fragmentary. Even putting aside the question with which he has undertaken to deal, he
mentions in the Schedule a number of different Acts dealing with Trust Funds, but he does
not say a word about a number of other Acts. Now, in dealing with Colonial Stocks or Irish
Tramways, why, if he includes all these Acts I have mentioned, does he not include 34 & 35 of
Victoria, chap. 27? If this was a Consolidating Bill there would be something to say for it; but
were this Bill passed, the whole of our law would be distributed over a number of different
volumes, and would require consolidation just as much as ever. There is another Act, four
years later than the one I mentioned, by which trustees who are authorized to invest in the
Debenture Stock of any railway or any other company may invest in Debenture Stock named
under the Actthat was, the Local Loans Act of 1875giving a further enlargement of the
powers of trustees. There was there, of course, the same limitation that the hon. Member
says he wishes to put in this Bill 1486 namely, that the investment should not be made if
there is a contrary intention expressed in the deed of trust. That goes as a matter of course;
you find that in every case. Again, in 1880, there was an Act further enabling trustees to
invest in bonds or debentures of Indian railways, or in securities of the United Kingdom. Why
does the Bill of the hon. and learned Gentleman not propose to deal with those Acts, and
others which I have not had time to note down? He is dealing in an unequal and fragmentary
sort of fashion with a matter which, if dealt with at all, ought to be dealt with in a large and
comprehensive manner, after full consideration of the circumstances of the case. Then,
again, with regard to the hasty drafting. There is a Definition Clause put in the first section,
and in it we have such terms "as the purchase of freehold ground rents or fee farm rents or
rents reserved on leases for lives renewable for ever." These are securities which the hon. and
learned Gentleman desires trustees always to be empowered to possess. If freehold ground
rents are to be recognized as proper investments, why not improved ground rents? Then,
again, with regard to leases for lives renewable for ever. This is a kind of holding, or interest,
which exists very much more extensively in Ireland than in this country, but the hon. and
learned Gentleman seems to treat them, in the case of Ireland, as fee farm rents. Only three
weeks ago this House decided that it would not read a Bill a second time because it purported
to deal with one class of prisoners, while another class of prisoners was not dealt with. By
parity of reasoning, inasmuch as this Bill deals only with certain interests, while there are left
out other interests more important and more numerous, I do think the House ought not to
consent to the Second Reading. There are a great many different kinds of trusteessome who
may be allowed almost unlimited discretion, and others of a different character. There is the
honest trustee who suddenly dies, leaving his accounts in a muddle. There is the easy-going
trustee, who leaves everything to his co-trustee; there is the speculative trustee, and the
fraudulent trustee. With regard to each of these four trustees, what is the protection which
23

1487 the beneficiary has now? It is perfectly true that in a case of breach of trust he can take
his remedy in the Courts of Chancery. But what satisfaction is that to a beneficiary who has
had reason to suppose that his property was in a perfectly healthy condition, and in the hands
of a perfectly intelligent trustee? The very uncertainty of trusts now leads to heart burnings
and to litigation, which always costs a great deal of money. It is perfectly true, also, that a
cestui que trust, if he has reason for doubt, can get an injunction. But that is almost as
unsatisfactory and expensive as bringing an action for actual breach. That is not what you
want. What you want is to provide some machinery by which there may be a constant check
upon the trustees in the investment and use they make of the funds placed at their disposal. I
wish, when the hon. and learned Gentleman referred to Amendments which might be made in
Committee, he had expressed his willingness to accept some Amendment by which
periodically the trustees would have to tell the beneficiaries how the funds really stood on
which they depended for subsistence. Under the circumstances, and for the reasons I have
mentioned, I beg to move that the Bill be read this day six months.
Amendment proposed, to leave out the word "now," and at the end of the Question to add
the words "upon this day six months."(Mr. Arthur O'Connor.)
*MR. TOMLINSON (Preston) It is with some reluctance that I have come to the conclusion
that it is my duty to support the Motion that the Bill be read a second time this day six
months. I admit that the Bill deals with a subject of great importance. I concede the principle
which underlies the Bill of my hon. and learned Friendnamely, that trustees should be
allowed as much latitude as may be possible in investing their Trust Funds consistent with the
safety of the funds. But I feel very strongly that we ought never to lose sight of the fact that
the safety of the Trust Fund is the first consideration. I believe our first duty is to see that in
any changes which are made, nothing is done to impair the security of the funds on which
widows and orphans rely. There 1488 are two classes of cases within the purview of this Bill.
The first is where the creator of the Trust has given no directions as to the investments. The
second is where such directions have been given less wide than the provisions of the Bill. If
that second class had been concerned only this Bill would hardly have been introduced. I take
it that the principal object of the hon. and learned Gentleman is to deal with those cases in
which no express directions have been given for investment. But where directions of a limited
character have been given we ought more especially to keep within the strictest bounds of
absolute safety. We have, further, a right to ask that those who desire to alter the law should
make up their minds what is the alteration of the law required. This is an attempt to separate
the sheep from the goats and to divide investments into two kinds and to say that all the
investments which we put on this side are safe, and that all other investments cannot be
looked upon as safe, and are, therefore, excluded from the favoured list. And I say we have a
right to expect that when distinguished and competent adviser comes forward with proposals
dealing with this subject there should be an element of finality and completeness in the
proposition they offer for our consideration. Now, comparing this Bill with the clause in the
Liability of Trustees Bill of last Session, I find that some securities were included in that
which are not in this Bill, and vice vers. The hon. and learned Gentleman has alluded to the
reasons which actuated him in leaving out of this Bill a very important element that was in
24

the Bill of last yearnamely, Colonial Securities. But I think he sat down without leaving upon
the House any definite impression as to what his opinion was with reference to including or
excluding these securities. He says it is a matter for the Committee. Then we have some
securities introduced for the first time under the head J., which seem to require some fuller
explanation of Clause F. than he has given. What reason is there for naming these securities
and omitting others of a similar character? We begin, then, with great difference of opinion
among competent persons as to what ought to be introduced into this Bill. This measure will
go to some form of Committee, and 1489 what will be the consequence? The question of what
Stocks are to be introduced will be settled one way or the other. Then in some future year
someone will come to this House and say"You have admitted securities which are of a
doubtful character, but I have here a security which is equally good. Whatever reasons there
are for including Colonial or other Stocks belong equally to this security, and I shall bring in a
Bill and claim to have the law altered so as to introduce my security." I ask whether it is in
the interests of Trust Funds that the question of what fund the trustee should be enabled to
invest in should be left open to successive efforts at legislation? I contend that, whatever
provision we make, it ought to contain the elements of finality and completeness. I should
like to test the question of safety with reference to one or two of the objects which are put
in the Bill. I take the case of the nominal or inscribed Stock of municipal boroughsI leave out
the question of County Councils as pertaining more to the future. Will anyone say, who knows
the condition of municipal boroughs at the present time, that a Stock of that kind is
necessarily a safe investment? The security for the Stock is the borough rate. Many boroughs
borrow very largely, and the larger the debt the higher will be the rates. The amount of the
rate is very often an important element in the prosperity of a borough. There may come a
time when the burdens are too heavy to bear, at any rate when some Corporation Stocks may
be immensely depreciated in the Market. I venture to think you could not put down Municipal
Stock as offering a security unimpeachably safe. It is said there is a precedent for this in the
case of Metropolitan Stock. But that is a case sui generis, because the provision, enabling the
trustees to invest in that Stock was inserted in the Bill by which the Stock was created, and
Parliament had the power of defining the condition on which the money should be raised, and
all the other circumstances which go to the consideration whether it is a safe security. Then
there is the other case of freehold ground rents and fee farm rents. It is true that the
conditions on which 1490 alone by this Bill trustees are allowed to invest are such as in an
ordinary case would make a safe investment. But there are cases in which the conditions
stated in the Bill afford no criterion of the safety of the investment. A case came recently
under my notice in which I found that a ground-rent, which satisfied all the conditions of the
Bill, was far from being a satisfactory security. If there are these objections to the Bill, then I
think we should very carefully consider whether we ought to read it a second time; for I think
we ought to even err on the side of leaving out a safe security rather than allow a doubtful
one. I must confess I viewed with considerable alarm the discussion on the clause of last
year's Bill in this House in Committee last year. It seemed to me that many Members entirely
left out of sight the safety of the money. Some hon. Members seem to me not to appreciate
at all the object of that Bill. The tone of the debate was this"Let us be as generous as we
can; let us include as many Trust Funds as we can, to give a wide scope of investment to
trustees." It is that kind of vicarious generosity which is so prevalent now that seems to
25

indicate to me a point of danger in passing a Bill of this kind through Parliament. Now, Sir,
having expressed my desire to extend the power of the trustee as far as can safely be done, it
is only right that I should say a word or two as to my alternative to the present Bill. The
alternative I would suggest is, to proceed on the lines on which the extension of the trustees'
powers of investment have already been effected by allowing all trustees to invest in
securities on which cash under the control of the Supreme Court is allowed to be invested. If
any further extension is required in the powers which were originally vested in the Court of
Chancery, I would allow anyone interested in any particular security to go before the Court
and produce such evidence as might satisfy a judicial body that it is a proper fund in which
trust money can be invested. I do not think we have any reason to doubt that that power
would be carefully exercised; and in cases where those who have the control of any particular
investment could not satisfy an im 1491 partial judicial body, it would be far better that,
even if the proposed investment were a safe one, it should be left out of the list than that
the risk should be run of putting trust funds into an insufficient security. I beg leave to second
the Amendment.
MR. F. MACLEAN (Woodstock) The Bill now under discussion is to my mind an important
beneficiary measure, and one that will be watched by every trustee in the country. The
speech of the hon. Gentleman who has just sat down seems to me to have been one that
would have been better addressed to the Committee stage of the Bill, than to the Second
Reading. What we have to consider is, the question of principle involved in the Bill; and that
question is this: whether wider powers of investment than they now possess should be given
to trustees by this House. In endeavouring to arrive at a conclusion on this question it is not
immaterial to see what was the past policy of Parliament in this direction. In old daysthe
days of Lord Eldon, for instanceit used to be thought that the only safe investment for
trustees was Consols or Government securities; bnt as trade increased, the policy of
Parliament has been materially to increase the power of investment on the part of trustees.
This is clearly exemplified in the five Statutes mentioned in the Schedule of the Bill, which it
is proposed to repeal merely for the purpose of re-enacting all the Acts of Parliament under
which Trust Funds may be safely invested. That is the principle, and the only objection has
come from my hon. Friend opposite and the hon. and learned Gentleman below the Gangway.
As to the former, he admitted that the widest latitude should be given to trustees in the
matter of investments, assuming that they were of a safe character.
*MR. TOMLINSON What I said was, as great latitude as could be given, provided always that
the condition of safety was regarded as the first consideration.
MR. F. MACLEAN I agree with the hon. and learned Gentleman, who said that the first thing
to be considered in relation to all Trust Investments is the safety of the Fund. If you look
through the Investments mentioned in the Bill, I venture to say that most of them are of a
sound character.
1492
THE CHANCELLOR OF THE EXCHEQUER (MR. GOSCHEN,) St. George's, Hanover Square Not all.
26

 MR. F. MACLEAN I am obliged to the right hon. Gentleman. What I said was "most of them,"
not all; and if the Bill gets into Committee, there are some of the Funds mentioned in which I
think it would be advisable not to authorize trustees to invest; and there are some that are
not mentionedpossibly Colonial Securitiesin which it might be advisable to authorize
trustees to invest. I think, however, that, taking the Investments named as a whole, they may
be regarded as safe investments of a first-class character. I do not propose at this stage of the
Bill to go into detail with regard to the Investments, because those matters will be more
properly discussed in Committee; but I would point out that my hon. and learned Friend
opposite has made a suggestion which I think would be a very unfortunate one for the
trustees if it were acted upon. He says in substance that it would be better, instead of laying
down in statutory enactments the securities in which trustees may invest, that trustees
should have power to go to the Court of Chancery and ask its sanction to particular
investments.
*MR. TOMLINSON That was not the suggestion. What I intended to suggest was that where
the proprietors of the funds thought they were good investments they might be allowed to go
to the Court and satisfy the Court that those investments were good.
MR. F. MACLEAN That is in substance what I have said, and I think it would be a most
lamentable thing to give the trustees that power. Again and again in my experience have I
seen small trust funds, when they come into the Chancery Division to ask for a change of
investment, swallowed up by costs to the extent of half a year's income.
*MR. TOMLINSON I do not say that the trustees should go to the Court, but those who have
the control of the funds, such, for example, as a municipality.
MR. F. MACLEAN I am only dealing with the alternative suggestion of the hon. and learned
Member. The hon. Member for Donegal (Mr. A. O'Connor) took exception to the Bill as one
which was not for the benefit of the 1493 beneficiaries. With all due respect for the hon.
Gentleman's opinion, I submit that the whole object of the Bill is the benefit of the
beneficiaries. I hare no doubt that if those persons who are in the position of trustees were
acting for themselves, their inclination would generally be to invest all the funds at their
disposal in Consols so as to get rid of any responsibility that might otherwise attach to their
action, and I say that the Bill is conceived, not in the interests of the trustees, but entirely in
the interests of the beneficiaries. The fact has been alluded to that there is an enormous
increase in the trust funds of the country, and it is impossible to avoid the conclusion that if
the cestui que trusts were consulted on the point there would be not a few of them in favour
of the suggestion that means should be given to them of making investments of a first class
kind. On the grounds I have put before the House, I trust it will give a Second Reading to the
Bill, leaving it open to the House at a later stage to say what should be the nature of the
investments in which trustees should embark.
*THE FIRST LORD OF THE TREASURY (Mr. W. H. SMITH,) Strand, Westminster I think, Sir, that
the House ought to approach this question with very great deliberation. The Bill proposes to
give to trustees powers which the men who create the trusts had no conception whatever
27

would be given to trustees. A person who creates a trust could not have foreseen that
Parliament would interfere and say that powers not expressly forbidden should be given to
the trustees. When he gives directions, he would naturally suppose that those directions
would be carried out faithfully by the trustees and would not be interfered with by any ex
post facto Act of Parliament. The hon. and learned Gentleman who moved the Second
Reading said the object of the Bill is to give to trustees a wider range than they are at
present allowed for the investment of property, and he justified it on the ground of the fall in
the value of money, which has inflicted great hardship on the cestui que trusts. Undoubtedly
there has been a very great fall in the value of money, but that has affected to a much larger
extent trusts created during the last four or five years, during which the 1494 fall in value has
occurred, than it has affected trusts created many years ago As far as Consols are concerned,
the hon. Member was doubtless accurate in his description of the hardship which has been
incurred, but if the hon. and learned Gentleman carries his memory back he will find that
investments made 40 or 50 years ago, or even 20 years ago, and which had anything of a
permanent character, produce almost the same income now as they produced when the
investments were effected. The capital sum invested in this property is of much greater
value, but the income derived from the trusts is nearly the same as it was at the time of their
inception. The object of the present measure is to afford facilities for the investment of trust
property in securities of a first-class character, and the hon. and learned Gentleman who has
just addressed the House has said it will be watched with the greatest interest by sanguine
beneficiaries in all parts of the United Kingdom. There rests the danger of legislation of this
character. There is undoubtedly throughout the country a very great desire on the part of
persons who possess limited incomes that their trustees should be allowed greater facilities
for investment, in order to get a higher rate of interest. I have a recollection of one of the
recent periods of excitement, when clergymen, professional persons, and widows were
induced to invest in speculative securities which hailed from Honduras and other parts of the
world. Those investments were, however, most unfortunate in their results. Therefore I would
recommend Parliament to be exceedingly cautious in dealing with a measure of relaxation of
this character. I think there is a very great danger in raising expectations which certainly
cannot be realized with safety. It has been rightly observed by my hon. and learned Friend
behind me that the great object we ought to secure is the absolute safety of Trust Funds. Any
legislation which imperils the safety of those Funds is legislation for which we should incur
grave responsibility if we gave it any support whatever. It seems to me that if we proceed at
all to legislate on this subject, Sub-section O of Section 3 contains almost all that Parliament
would be justified in providing at the present time. That sub-section provides 1495 that
investments may be made in any Stocks, Funds, or other securities which are under the
control of or subject to the Court of Chancery. If the Bill goes into Committee, it ought to be
examined with the greatest care, with the view of making the beneficiaries as secure as
possible in the enjoyment of their incomes.
*MR. J. B. BALFOUR I would remind the House that in 1884 a Bill was passed for Scotland
which proceeded very much on the lines of the present measure. That Act gave a considerably
increased range of power in the matter of investments, and the result of the working of that
measure has, I believe, been entirely good. The result of the working of the Act during the
28

four or five years which have since passed has, I believe, been very satisfactory. It was, at the
time, considered of great advantage to the beneficiaries. Something has been said in the
course of the debate as if it were for the interest of the trustees that they should have a
large range of investments. But I say it is thoroughly immaterial to them whether the range is
a large or a small one; they have only to consider the interests of the beneficiaries. The
problem to be solved is how to hit the proper medium of a fair return. Remember that the
beneficiaries are generally persons who have no other means of earning their own livelihood,
and it is necessary that the trust funds on which they depend should give a fair return,
accompanied by a proper measure of safety. Hundreds of securities which do not give a large
return have, of late years, proved to be accompanied with considerable risk, and one result is
that those which were considered prime investments before now hardly yield a fair return, or
are attended with a degree of hazard. There ought to be no hazard. In Scotland there has not
been the disadvantage which it has been suggested would result from the exercise of these
powers; but there has been found this advantage, that the modest income of very many
persons deriving their livelihood from trust funds has been increased from 2 to 3 per cent,
and sometimes more. It is needless to point out how great a benefit that is. Before the Scotch
Bill was introduced, persons familiar with what are regarded as adequate 1496 and fair trust
investments carefully considered the enlargement of the range of investments, and, as far as
I have heard, there has never been any objection taken to it on the ground that it was too
large. There have been some objections to it on the ground that it unduly restricted the
powers of trustees. It does seem to me to be an experience at all events worthy the
consideration of this House, seeing that it has worked well in Scotland for between four and
five years. Something was said by the right hon. Gentleman the First Lord of the Treasury as
to giving powers which the settlor had not himself given. I venture to think that the great
majority of settlors will be quite content to have the investment left to the wisdom of
Parliament. Unless settlors desire a distinctive range of securitiesand in that case they could
give expression to their wishit ought to be left to the law, and I believe to say the settlors
will, as a rule, be quite content with what the law allows to be done. It is really not doing any
violence to their wishes if the law finds, in course of time, that the range of investments is
unduly restricted and should be amplified. It has been a common experience of late years
that there has been an enormous increase of wealth in this country which has been invested
in the funds until it has become almost impossible to get a fair return. If the trust yields an
inadequate return, then Parliament must try that the medium of a fair return in income
security for the capital should be ascertained. I do not propose to say anything with regard to
the particular investments mentioned in this Bill. As to some there may be a difference of
opinion; as to others there may be none. But I may, perhaps, be allowed to say that if a
Committee of this House should extend the powers beyond those which are given by the
Scotch Act of 1884, I hope the right hon. and learned Gentleman the Lord Advocate will
consider whether by a short measurefor I do not think it could conveniently be done by an
amendment of this BillScotland could not be kept pari passu with England in this matter. I
repeat I do not think it would be easy to adapt this particular Bill to Scotland, because the
customs of that country differ so much from those of England. I do not ask at this moment any
expression of opinion 1497 from the right hon. and learned Gentleman. I only desire that he
will undertake to consider the matter.
29

 *THE LORD ADVOCATE (Mr. J. P. B. ROBERTSON,) Bute I think with the right hon. Gentleman
that the question which he has just raised is premature in one sense; but if Parliament should
decide on sanctioning an increased range of investments for England, we may fairly see how
we can best take advantage of that decision in order to amend the law of Scotland. But the
difference of opinion in this House which has been elicited by this debate is so great that I
cannot usefully enter into any engagement other than a most general one. I agree with my
right hon. Friend in thinking it is not convenient, looking to the existing Scotch legislation
dealing with trust estates, to have an incidental reference to Scotland in a purely English Act.
If the general opinion of Parliament is in favour of extending the powers of investment
beyond the limits of the Scotch Act of 1884, the proper plan would be to have a specific
Scotch Act. I rather gather, Sir, from the right hon. Gentleman's observations that he shares
my view that we have to look, to a large extent, to the convenience and easy working of the
legal practitioner, and I think it would be unfortunate if, by a chance and casual reference to
Scotland in an English Act, we imposed on Scotch practitioners the necessity of entering into
the perusal of an English Act. I have no more to say. I do not understand the right hon.
Gentleman expects me to do more than indicate my concurrence with the view that whatever
powers are considered by Parliament as proper to give to England should be extended to
Scotland, not by an incidental reference in a Scotch Act, but rather by a specific enactment
following upon the English decision.
*SIR HENRY JAMES (Bury) I have risen to urge on the Government the desirability of allowing
this Bill to be read a second time. When the Chancellor of the Exchequer introduced his
Conversion Scheme last year, he struck a very severe blow at persons dependent on limited
and fixed incomes, and a great many representations were made to Members of the House
that great injustice would be inflicted upon such persons if their income were lessened 1498
by perhaps one-sixth, in consequence of the Conversion Scheme of the Chancellor of the
Exchequer. Indeed, the lessening of the income from 3 to 2 per cent imposed a very serious
burden on cestui que trusts. The Chancellor of the Exchequer gave a promise at that time
that the subject should be fully considered, and a hope was also held out in the debate on
Lord Herschell's Bill dealing with the duties of trustees that there should be some
consideration given to the question, which was then urged upon the House by the right hon.
Gentleman the Member for Wolverhampton. I want to see some fulfilment of that promise. I
admit it was not a definite promise, but there was a pledge on the part of the Government
that some consideration should be given to the case of these persons, and I desire to urge on
the Chancellor of the Exchequer the claims cestui que trusts to have their income maintained
at its former level. The Chancellor of the Exchequer is the guardian of the public, and he is to
some extent opposed to any alteration in the law affecting investments in the interests of the
public, because, as I understand him, he says that if we diverted the natural flow of
investment into Consols we should thereby, to some extent, run the risk of lessening their
value. I hope, on the other hand, to see the National Debt diminished and the value of
Consols increased thereby. But while the Chancellor of the Exchequer speaks in this sense, he
must consider the public from every point of view. I would rather, for my part, see the
burden fall on the public as a whole than that it should fall on the persons least able to bear
itnamely, the persons of small fixed incomes, who are generally without the power of
30

earning more money for themselves. We must see that no injustice is done to them by the
Conversion Scheme. At present, however, an undue proportion of the loss falls on them.
Indeed, the general taxpayer gains by the Conversion Scheme. The Chancellor of the
Exchequer has the right to point to it as a great success; but, after all, the sufferers are those
persons whose incomes have been reduced by at least one-sixth in consequence of it. Now,
we want a remedy for this state of things, and we are throwing no extra burden on the 1499
taxpayer generally by providing that the opportunities of investment shall be enlarged and
increased without risk to the cestui que trusts and liability on the part of the trustees. We
can guard against that risk, and can find securities in this country which will pay 3 or 3 per
cent with perfect safety. If that can be done it ought to be done, because it would do no
injury to the general taxpayer. This is the proposition we are making to the Government. This
is not, as suggested by the First Lord of the Treasury, a Bill in relief of the trustees. From our
point of view it does not protect the trustee. He may be a very selfish person, but he can take
care of himself. He may say"I will only invest in Consols, as I do not suffer if I only get 2
per cent." The person we are considering is the person who is receiving the income, and we
desire that he shall not bear an undue portion of the burden created by the Chancellor of the
Exchequer's Conversion Scheme. I think we are bound to see that he obtains a percentage
somewhat similar to that which he received when Consols paid 3 per cent. I do not object to
the very proper desire of the Chancellor of the Exchequer to guard the public. What we want
is that the receiver of the income shall be regarded as the person principally interested. We
shall not interfere with the value of Consols: they will be maintained at their level; and if the
person who creates the Trust chooses that the funds shall be invested in Consols, let him say
so. All we are asking is that there shall be an increased opportunity of investment; that we
shall allow trustees to invest without incurring personal liability in certain defined securities.
It is our duty to see that the securities are not speculative, and we must not allow
investments in securities which pay high interest, but we can find securities which will not
only pay a somewhat higher rate of interest to the beneficiaries, but which will be good
security for the trustee. I do not wish to go into details in discussing the Second Reading of
this Bill, but I think the First Lord of the Treasury spoke somewhat without consideration
when he took exception to some of the securities mentioned in the 3rd clause of the Bill. He
said he doubted whether trustees should be allowed 1500 to invest in the railways of Ireland;
but under Lord St. Leonard's Act, 22 and 23 Vict., there is power, under prescribed
conditions, to invest Trust Funds in railways in "Great Britain or Ireland," so that this
provision, which was pointed out as a fatal defect in the Bill, which embodies a consolidation
of the present powers of investment, coupled with some enlargement, does not go beyond
the present law. I would suggest to the Government to allow this Bill to be read a second
time. There will be no attempt on the part of those in charge of the Bill to take one step
which will not meet with the sanction of those who are the natural guardians of the taxpayer
and of those who ought to protect the beneficiaries and the private individuals who receive
the income. We have already admitted that there should be some compensation to those who
have suffered grievously by the change of the 3 per cent investment into a 2 per cent,
without any fault of their own, and without such a diminution of interest being in the
contemplation of the settlor. On the whole, believing that this Bill marked a step in the right

31

direction, I hope the Government will not throw any obstacles in the way of its being read a
second time.
MR. S. HOARE (Norwich) The discussion which has taken place this morning proves, I think,
the great interest taken in the subject involved in this Bill. When the Conversion Scheme of
the Chancellor of the Exchequer was discussed, there were many of us in this House who, like
the right hon. Gentleman the Member for Bury, realized that the incomes of a vast number of
people would be materially affected by that scheme, and we thought at the time that
Government would introduce some such Bill as is now before the House, to give an
opportunity for those interested in Trust Funds invested in Consols to reinvest them, so that
they should not be such heavy losers as they necessarily were under the Conversion Scheme. I
supported the Conversion Scheme most warmly; but I always felt that a Bill giving enlarged
powers to trustees was a necessary sequence of it. Consequently, I have taken some little
part in bringing this Bill before the House. Now, in speaking on it, I feel somewhat at a
disadvantage, because almost the whole of the discussion hitherto has 1501 been from a legal
point of view, and I desire to approach it from a business standpoint. I must say I was rather
surprised at the objection of the hon. Member for Donegal, who thought that the House ought
not to waste time by pressing forward a Bill of this kind. I conclude that the hon. Member is
not interested in funds invested in Consols at the present time, and he cannot know, as many
hon. Members know, of cases where the reduction in the rate of interest on Consols has
materially affected those interested in the Trusts. I regard the Bill as affording a protection
to beneficiaries, because it enables them to get a larger income without, as we believe,
sacrificing their security. With reference to the suggestion that the securities named are not
all that could be fairly taken, I quite realize that objections might be found to that list, but I
should be prepared to satisfy the Committee that each investment is good and sound, and
that they will enable tenants for life to enjoy increased investment from Trust Funds, while
not getting more than their proper share of the income arising from the funds invested. Every
precaution is taken that life beneficiaries shall not benefit at the expense of those who
follow. I can assure hon. Members that great care has been exercised in the selection of the
list of securities embodied in this Bill. My hon. Friend the Member for Preston said he did not
like the policy of dividing the goats from the sheep. I can assure him the securities named are
all sound and suitable for trust investments.
*MR. TOMLINSON My point was that the Bill assumes to be able to determine that the
securities named in it are sound and that all others are not.
MR. HOARE And I shall be prepared in Committee to prove that each proposed investment is
sound. The hon. Member alluded to the proposal to allow investment in Eastern Bengal
Annuities and other Indian Railway Stocks. Sir, the very insertion of the provision shows how
very carefully the interests of the beneficiaries have been studied. We have only included
those annuities where there is a Sinking Fund; so that at the end of a given period the capital
of the annuity is repaid. The hon. Member also objects to investments in Corporation Stock.
Why, at the present moment these Stocks stand at a 1502 very high price in the market. It
must be remembered that they are under the control of Parliament, and the policy pursued in
the selection of investments in this Bill has been, as far as possible, to take those which are
32

under the control of this House. Therefore, Inscribed Stock has been put in, and we believe it
to be a good, sound, and safe security. Excepting what has been said by the First Lord of the
Treasury, I do not think any real objection has been brought against the Bill. The First Lord,
perhaps rightly, looks upon the Bill as too wide, but, at the same time, his remarks show that
some Bill of the kind is required. As to the course to be pursued to-day, I hope the House will
pass the Second Reading, as I believe that everyone will feel that some such Bill is necessary.
I do not say it is a perfect Bill, but I believe it is a good Bill as a groundwork for consideration.
I hope the Government will support the Second Reading of the Bill, and that it will then be
referred to a Select Committee which, I think, will consider the questions involved with
greater advantage to the country than a Committee of the whole House. I think trustees and
others interested in Trusts would be better satisfied to have investments settled in that way
than by the Judges of the Chancery Division of the High Court. Even Lord Salisbury himself has
said that the Judges are not the best tribunals to settle investments. The Bill, if passed,
would be a great advantage not only to beneficiaries, but to trustees who now have the
responsibility of selecting investments.
SIR G. BADEN-POWELL (Liverpool, Kirkdale) I should not like to see so very wide a subject
dealt with without ample opportunity for consideration and debate. I should like to see the
power of the Judges of the Court of Chancery revised in regard to Trust Investment, and I
should like to know definitely whether if the Bill goes to a Select Committee it will have
power to deal with the delicate question of interfering with the powers of the Judges; I
should like also to know whether the question of colonial securities will be dealt with by the
Committee? I think that the Bill as it stands ought not to be allowed to pass a Second Reading,
and I should only agree to its being so passed if the whole subject 1503 were capable of being
dealt with in Committee.
SIR GEORGE CAMPBELL (Kirkcaldy) I have a very strong feeling that the principles impressed
on the House by the First Lord of the Treasury should have very great weight with hon.
Members, and I shall not vote for the Second Reading unless those who are responsible for
advising the country on such mattersnamely, the First Lord of the Treasury and the
Chancellor of the Exchequeradvise me to support it. I am rather surprised at the suggestion
to refer the Bill to a Select Committee. A Bill of this kind went to a Standing Committee last
Session, and that body treated its proposals very unfavourably, and therefore the desire to
send it now to a Select Committee seems to show an anxiety to escape the criticism of the
Standing Committee. I think if the Bill is referred to any Committee it should be a Standing
Committee. If investments are put into a list in this Bill they will be ear-marked as first-class
investments, and the whole influence of the Stock Exchange will be used to put others into
the list.
MR. E. W. BECKETT (York, N. R., Whitby) I wish to join in the appeal to allow the Bill to be
read a second time. I am bound to say that in looking through the list of securities, it contains
many which I, for one, cannot approve. At the same time, I think there can be no question
that there is an ever-increasing necessity for extending the powers of the Court of Chancery
in regard to trust investments, and I therefore hope the House will agree to the Second
Reading, on the understanding that the Bill should then be referred to a Select Committee, to
33

consider the Schedule of authorised investments. I think the hon. Gentleman who has just
spoken could not have heard the very excellent speech of the Lord Advocate, which showed
that we might follow the example set by Scotland in this matter on prudent lines. I trust that
the Government will not oppose the Second Reading of the Bill, but will let it be referred to a
Select Committee. I am quite aware that the Chancellor of the Exchequer's Conversion
Scheme succeeded in a most extraordinarily satisfactory manner, and, perhaps, therefore, he
will not now be less inclined to consider the possibility of carry 1504 ing out the objects
aimed at by this Bill.
SIR H. DAVEY (Stockton) I earnestly hope the Government will see their way to accept the
proposal to read the Bill a second time, and refer it to a Select Committee. The object of the
Bill has been somewhat misunderstood. It has been treated as a Bill to relieve trustees; but
that is a mistake. The primary object of the Bill to collect into one Act the securities in which
trustees may invest. At the present time such securities can only be ascertained by searching
through a number of Acts of Parliament, the subject-matter of many of which is of an entirely
different character. For instance, an Act which enables the Metropolitan Board of Works to
create Stock gives power to trustees to invest in it. The Bill will, therefore, be very useful;
and in my opinion, if it did nothing more than this, it ought to be read a second time. But the
Bill goes beyond this, and proposes to enlarge the scope of investment now allowed by law. I
quite agree with the First Lord of the Treasury that we ought not to hold out any
encouragement to trustees to speculate with Trust Funds. That is a sound principle; but, on
the other hand, I think the House will agree that the true policy is to give the beneficiary as
full an enjoyment of the produce of a Trust Fund as is consistent with the safety of the
capital of the fund. The First Lord of the Treasury (Mr. W. H. Smith) has objected to certain
securities mentioned in the Bill, but the right hon. Gentleman was particularly unfortunate in
his selection. I believe that the two securities which the right hon. Gentleman specifically
mentioned were real securities in England, Wales, and Ireland, and Debenture Stock in English
and Irish Railways. I must say that it requires some courage to state that there is wild
speculation in investing money in the Debenture Stock of English Railways. The Bill applies to
Irish as well as English trustees, but it does not propose to give power to invest in securities
which the Will or Settlement expressly prohibits. With regard to the objection raised by the
right hon. Gentleman opposite to investments in Irish mortgages, I would point out that, even
if the Bill does not pass, the present law gives power to invest in mortgages in England,
Wales, or Ireland, 1505 and the First Lord of the Treasury, in objecting to this security, is
objecting to the existing law. By the 32nd section of the Act which bears the name of Lord St.
Leonards, a trustee, unless expressly forbidden, is permitted to invest Trust Funds in
mortgages in any part of the United Kingdom. I presume that Gentlemen opposite will agree
with me that Ireland is part of the United Kingdom, and I may observe that the objection to
Irish mortgages which the right hon. Gentleman made comes with rather a curious aspect
from the Leader in this House of a Party which tells us that its great object is to encourage
the introduction of capital into Ireland and to restore confidence in the country. I may say,
however, that I have hardly ever seen a Settlement or a Will which does not contain a clause
expressly forbidding investments in Irish mortgages. The objection of the First Lord of the
Treasury on this point is an objection to the present law. Perhaps the right hon. Gentlemen is
34

not aware that trustees are not allowed to invest on more than a certain proportion of the
value. The right hon. Gentleman's other selection of what he deemed a mild spculation was
particularly unfortunate. He objected to authorizing trustees to invest in debentures of
railway companies which have paid dividends during ten years. Perhaps the right hon.
Gentlemen is not aware of the rule made by the Judges of the High Court for the investment
of funds under the control of the Court. I hold in my hand a copy of the last Order, dated
November 14, 1888, and signed by the Lord Chancellor, the Lord Chief Justice, the Master of
the Rolls, and four other Judges. The Order provides that cash under the control of the Court
may be invested in debenture, preference, guarantee, or rent charge stocks of railways in
Great Britain or Ireland which have for ten years next before the investment paid a dividend
on ordinary shares. But, Sir, Parliament has already sanctioned this itself, because I find that
in an Act which goes by the name of that wild speculator and revolutionist, Lord Cairnsthe
Settled Land Act 1882capital money which has arisen from the sale of settled land is
allowed to be invested in, amongst other things, 1506 the security of the bonds, mortgages
or debentures of any railway company in Great Britain or Ireland and having ten years next
before the investment paid a dividend on its ordinary shares. The objection made by the
hon. Member for Kirkcaldy (Sir G. Campbell) seems to me to go too far, because the more you
restrict the power of investment by trustees the more you will raise the price of the stocks in
which they were allowed to invest. I can quite appreciate the motives of the Chancellor of
the Exchequer in wishing to restrict the area of Trust Investments. I can quite understand his
wishing to restrict such investments to the Consols which bear his name. But surely the rights
or interests of persons beneficially entitled under Settlements ought not to be cut down in
order to maintain the price of Government Stock. That seems to me a consideration that
ought not to enter into the view of the House in this matter. The more you enlarge the area
of Trust Investments the less effect they will have in raising or varying the price of particular
Stocks. I think that any gentleman who has had experience in these matters will agree that
the list of securities named in the Bill is such as will be found given in any ordinary welldrawn Settlement or Will without special instructions, and they are all securities of a public
character and guaranteed. I believe the Bill will be found strictly beneficial both to trustees
and to cestui que trusts, by enabling them to make the most beneficial use of their funds
consistent with due security.
*MR. GOSCHEN My right hon. Friend the First Lord of the Treasury (Mr. W. H. Smith) did not
offer any objection to the Bill on the ground that it might be detrimental to the interests of
the Public Funds. He carefully abstained from urging that argument. My hon. and learned
Friend (Sir H. Davey) says it is an error to suppose that this Bill was introduced to any extent
in the interests of trustees, but on reflection he will, I think, see that his argument points to
its being a useful Act for the relief of trustees, as affording them a better and surer light, and
giving them an indication of what is called the "wisdom of Parliament." I am not at all
prepared to share the view, however, that testators would be 1507 perfectly prepared to
leave the care of their settlements, and the future of those in favour of whom they make
settlements, to be decided by the "wisdom of Parliament." The discussion shows that
Parliament may make a mistake, and there is great force in the objection of the hon. Member
for Kirkcaldy (Sir G. Campbell). The Bill has two currents in its favour. There is the pressure
35

of the cestui que trusts and also the strong pressure of those who wish to see their securities
take a higher rank as being sanctioned by an Act of Parliament as fit for the investment of
Trust Funds. If a Bill of this character be passed there will be no undertaking which will not
do its best to induce Parliament to put its name and title on the favoured list. And would it
not be necessary continually to revise the list which Parliament in its momentary wisdom
might make? Reference has been made to Lord St. Leonard's Act, enabling trustees to vary
Trusts, so that money invested in Consols may be invested in real securities. Lord St. Leonards
acted on the Parliamentary view of that day, which was that capital might be advantageously
converted into land; but it has since turned out that mortgages are not the excellent security
they were supposed to be. The wisdom of Parliament was at fault, and it would almost make
some settlors and testators turn in their graves could they know that while they gave
directions for safe investment in Government securities for those in whom they were
interested, the wisdom of Parliament authorized investment in mortgages which had turned
out to be a bad security and had not paid the interest expected. The objection has been
taken to the Bill that there are easy trustees and fraudulent trustees as well as honest
trustees. An easy trustee cannot go far wrong now, for this Bill will give him a large choice of
investments, the list of which is as long as the calendar, and of which the easy trustee would
be likely to choose the more dangerous rather than the safe class. The fraudulent trustee
might, under this Bill, sell out of a safe investment and put the Trust Funds into other
investments which would promote his own speculations or his own interests. 1508 He might, if
he had a number of houses of his own, invest the funds in them.
SIR H. DAVEY I think the right hon. Gentleman will at once admit that that would be a gross
breach of trust, and that a trustee who did that would find himself at once in difficulties in
the Chancery Division.
*MR. GOSCHEN Of course I bow to the decision of the hon. and learned Gentleman, but it
seems to me that there would be no dishonesty whatever in making such an investment,
though it would be extremely injudicious. I fully admit that there are some things in this Bill
which are advantageous and which it would be expedient to consider. There is the question of
the consolidation of the law; and I think it is expedient that the undertakings which are
authorized by Parliament as investments for Trust Funds should be dug out of the various Acts
in which they are embedded so that Parliament should know to what extent the number of
securities have already been increased. Furthermore, I think it is right we should settle the
moot point as to what is the liability of trustees with regard to investments above par. Again,
I trust that if the Bill is referred to a Select Committee or to any other Committee, the
question as to whether it ought to be retrospective or not will be considered. If I make a
settlement on my daughter and say that the investments must be made in Consols or Indian
Securities or in some other guaranteed Government Stock, and I die, she may at once put
pressure on her trustees to change the investment to mortgages on land in Ireland. I object to
my views being set aside by Parliament the moment after I have made a Settlement. I think
Parliament would be embarking on a dangerous course in laying down what are safe
investments and what are not, although there may be something to be said in favour of such a
course. Still, the Trusts and Settlements which have quite lately been made, and been made
36

with a full knowledge of present cir-circumstances ought not to be set aside under the
pressure of the cestui qui trust who may naturally be wishful to increase his income part
passu probably with an increase of his family. The Government will not object to the Second
Beading of the Bill, but their view is, 1509 that the Bill should certainly he referred either to
a Select Committee, or to a Standing Committee similar to that to which the Bill of last year
was referred. The Government would prefer to take time to consider which of the two causes
would be best.
*MR. AINSLIE (Lancashire, N., Lonsdale) Having some knowledge of some of these
investments, I think it right to offer a few remarks. I desire particularly to refer to the Stock
mentioned under the letter K. I daresay many hon. Members are not aware what the true
significance of that Stock is, or in what sense it cannot be said to be a safe and proper
investment for Trust Funds. I had occasion a few years ago to object to the investment of
some Trust money in this particular Stock, because, although it is described as bearing a
guarantee from the Secretary of State for India, although the Company does receive 5 per
cent from the Secretary of State, it does not follow necessarily that the 5 per cent goes to
the holder of the Stock. Take the case of the Great Indian Peninsular Railway. It may be that
that railway's stock stands at a high premium indeed, but I remember when it was little above
par. It may descend to that level again. That will be in consequence of a falling off of traffic
which may occur through panic. If the traffic receipts fall so that the income will not permit
of a dividend being paid without the assistance of the Secretary of State for India no money
would come to the beneficiaries. I believe it is not known to investors that that is the position
of the holders of the Stock of some of the Indian railways. I agree with the hon. Member for
Kirkcaldy (Sir G. Campbell) that the Bill will open the door to speculations on the Stock
Exchange, and this, I think, ought to cause hon. Members to pause before they let the Bill
pass even a Second Beading unless there is a strong recommendation to the Committee to
which it is referred that the list of the securities should be seriously cut down.
*MR. ELTON (Somersetshire, Wellington) I cannot but share the fears which have been
expressed about the Second Reading of the Bill, although I have great confidence in the
judgment of the hon. Gentlemen opposite who have spoken in its favour. I am quite willing it
should be confined to 1510 Settlements made after the date of the passing of the Bill if that
is the feeling of the House, but what I rose particularly for is to point out that there are some
investments mentioned in the list which the House ought to encourage by every means in its
power. I refer especially to the investment in Borough Stock. It is very difficult for any of the
large boroughs to get powers inserted in their local Acts to enable trustees to invest in their
Stock, although I know from personal experience that there is a great demand by trustees of
cestui que trust to invest in such Stock. But there are some Stocks in the List which ought not
to be there. Take the case of freehold ground rents. I have not the slightest objection to
freehold ground rents, but we ought to prevent the investment of Trust Funds in them, for it
is well-known they may become insecure. It is necessary the Bill should go to a Committee in
order that that particular investment may be struck out.
*MR. SWETENHAM (Carnarvon, &c.) I have heard with the greatest pleasure that the
Government do not propose to oppose the Second Reading of this Bill, which I regard of the
37

greatest importance, not only to trustees, but to the cestui que trusts. Some observations
have been made as to the hardships that occasionally would occur to widows and orphans if
the Bill passes. But there are hardships under the law as it at present stands, and it is with
the view of removing these hardships that I intend to support the Bill. I deprecate in the
strongest manner anything like allowing trustees to invest funds in speculative securities, but
all the observations made by the Mover and Seconder of the Amendment appear to me to be
of such a character that they can be very properly dealt in Committee. I have not heard any
real objection to the principle of the Bill; and what we have now to deal with is the principle
of the measure. In Committee it will be the province of the House to investigate carefully
what are the securities in which it shall be lawful to invest trust money. I should like a clause
inserted providing that in all cases where it is possible the consent of the cestui que trusts
must be had before the trustees can invest in the securities. It has been suggested that the
operation of 1511 the Bill should be confined to Settlements made after the passing of the
Act. I cannot help thinking there would be very great hardships under the present system if
the Bill is not allowed to have a retrospective effect. To use the language of the Mover of the
Second Reading, the Bill will be greatly conducive to simplicity of knowledge, not only on the
part of the trustees, but on the part of the cestui qua trusts. If it is known that Parliament in
its wisdom has directed that certain securities may be considered safe, that will be conducive
to the peace of mind of the persons interested in the investment of Trust Funds. I do not
know any measure which will prove of greater practical importance than this, and therefore I
shall heartily support its Second Reading.
*******************************************************************

SECOND READING.HC Deb 03 April 1889 vol 334 cc1481-511

MR. A. O'CONNOR (Donegal, E.) I do not for a moment pretend to argue that there is no need
for some Bill relating to the Irish law of investments. Not long ago Mr. Justice Kay declared
his conviction, derived from long experience, that there was great need for a radical reform
of the law in regard to Trusts. The hon. and learned Gentleman who has moved the Second
Beading of the Bill sees very clearly the necessity for some kind of amending Act in regard to
one part of the question, but he only touches a very small portion of one side of it; and he
admits that, even with regard to that small portion, he has left out a not inconsiderable part.
He suggests that the Bill may be amended in Committee in the direction of the enlargement
of the powers which it proposes to confer; but, while taking care of the trustee, the hon. and
learned Member loses sight altogether of the beneficiary. These Trust Funds are increasing
every year. There are many millions of property in the hands of trustees in regard to which
the people for whose benefit the Trusts were executed and for whose benefit the trustees
have accepted the duties of trustees have practically no information or control. To bring in a
Bill to amend the law relating to Trusts, to enlarge the power of trustees, to extend their
discretion, and to minimize their responsibility, and at the same time to leave unprotected
the interests of those who are to benefit by the Trusts, certainly seems to me to be a
patchwork and niggling way of dealing with the question. The Bill has evidently been drafted
by someone skilled in the drafting of Bills, but it is equally apparent that it has been drafted
38

hastily; and I fear that, if we read it a second time and take it to a Committee, the only
result will be a considerable waste of time. It will either be rejected, or it will be so
imperfectly amended that it 1485 will do more harm than good. The measure of the hon. and
learned Gentleman is imperfect and ill-digested; and it is undesirable that it should be
allowed to stand in the way of other important questions which urgently demand the
consideration of Parliament. The second Act of Lord St. Leonards practically gave everything
the Bill of the hon. and learned Member desires to effect, because the 11th section provides
that trustees having power to invest in Government or Parliamentary securities may invest in
any other securities in which funds under the control of the Court of Chancery may be
invested. From time to time the powers of trustees in this respect have been considerably
enlarged, and last year the hon. and learned Gentleman brought in a Bill upon the lines of the
present measure. That was a remarkable Bill. It protected trustees who had committed a
breach of trust at the instance of the beneficiary of the trust, oven if she was a married
woman, and it further gave trustees the benefit of the Statute of Limitations. One would
think that ought to have satisfied the hon. and learned Gentleman. But he comes again this
year in the same way as last, and he brings in this Bill, which, as I said before, is fragmentary.
Even putting aside the question with which he has undertaken to deal, he mentions in the
Schedule a number of different Acts dealing with Trust Funds, but he does not say a word
about a number of other Acts. Now, in dealing with Colonial Stocks or Irish Tramways, why, if
he includes all these Acts I have mentioned, does he not include 34 & 35 of Victoria, chap. 27?
If this was a Consolidating Bill there would be something to say for it; but were this Bill
passed, the whole of our law would be distributed over a number of different volumes, and
would require consolidation just as much as ever. There is another Act, four years later than
the one I mentioned, by which trustees who are authorized to invest in the Debenture Stock
of any railway or any other company may invest in Debenture Stock named under the Act
that was, the Local Loans Act of 1875giving a further enlargement of the powers of trustees.
There was there, of course, the same limitation that the hon. Member says he wishes to put
in this Bill 1486 namely, that the investment should not be made if there is a contrary
intention expressed in the deed of trust. That goes as a matter of course; you find that in
every case. Again, in 1880, there was an Act further enabling trustees to invest in bonds or
debentures of Indian railways, or in securities of the United Kingdom. Why does the Bill of the
hon. and learned Gentleman not propose to deal with those Acts, and others which I have not
had time to note down? He is dealing in an unequal and fragmentary sort of fashion with a
matter which, if dealt with at all, ought to be dealt with in a large and comprehensive
manner, after full consideration of the circumstances of the case. Then, again, with regard to
the hasty drafting. There is a Definition Clause put in the first section, and in it we have such
terms "as the purchase of freehold ground rents or fee farm rents or rents reserved on leases
for lives renewable for ever." These are securities which the hon. and learned Gentleman
desires trustees always to be empowered to possess. If freehold ground rents are to be
recognized as proper investments, why not improved ground rents? Then, again, with regard
to leases for lives renewable for ever. This is a kind of holding, or interest, which exists very
much more extensively in Ireland than in this country, but the hon. and learned Gentleman
seems to treat them, in the case of Ireland, as fee farm rents. Only three weeks ago this
House decided that it would not read a Bill a second time because it purported to deal with
39

one class of prisoners, while another class of prisoners was not dealt with. By parity of
reasoning, inasmuch as this Bill deals only with certain interests, while there are left out
other interests more important and more numerous, I do think the House ought not to consent
to the Second Reading. There are a great many different kinds of trusteessome who may be
allowed almost unlimited discretion, and others of a different character. There is the honest
trustee who suddenly dies, leaving his accounts in a muddle. There is the easy-going trustee,
who leaves everything to his co-trustee; there is the speculative trustee, and the fraudulent
trustee. With regard to each of these four trustees, what is the protection which 1487 the
beneficiary has now? It is perfectly true that in a case of breach of trust he can take his
remedy in the Courts of Chancery. But what satisfaction is that to a beneficiary who has had
reason to suppose that his property was in a perfectly healthy condition, and in the hands of a
perfectly intelligent trustee? The very uncertainty of trusts now leads to heart burnings and
to litigation, which always costs a great deal of money. It is perfectly true, also, that a cestui
que trust, if he has reason for doubt, can get an injunction. But that is almost as
unsatisfactory and expensive as bringing an action for actual breach. That is not what you
want. What you want is to provide some machinery by which there may be a constant check
upon the trustees in the investment and use they make of the funds placed at their disposal. I
wish, when the hon. and learned Gentleman referred to Amendments which might be made in
Committee, he had expressed his willingness to accept some Amendment by which
periodically the trustees would have to tell the beneficiaries how the funds really stood on
which they depended for subsistence. Under the circumstances, and for the reasons I have
mentioned, I beg to move that the Bill be read this day six months.
Amendment proposed, to leave out the word "now," and at the end of the Question to add
the words "upon this day six months."(Mr. Arthur O'Connor.)
*MR. TOMLINSON (Preston) It is with some reluctance that I have come to the conclusion
that it is my duty to support the Motion that the Bill be read a second time this day six
months. I admit that the Bill deals with a subject of great importance. I concede the principle
which underlies the Bill of my hon. and learned Friendnamely, that trustees should be
allowed as much latitude as may be possible in investing their Trust Funds consistent with the
safety of the funds. But I feel very strongly that we ought never to lose sight of the fact that
the safety of the Trust Fund is the first consideration. I believe our first duty is to see that in
any changes which are made, nothing is done to impair the security of the funds on which
widows and orphans rely. There 1488 are two classes of cases within the purview of this Bill.
The first is where the creator of the Trust has given no directions as to the investments. The
second is where such directions have been given less wide than the provisions of the Bill. If
that second class had been concerned only this Bill would hardly have been introduced. I take
it that the principal object of the hon. and learned Gentleman is to deal with those cases in
which no express directions have been given for investment. But where directions of a limited
character have been given we ought more especially to keep within the strictest bounds of
absolute safety. We have, further, a right to ask that those who desire to alter the law should
make up their minds what is the alteration of the law required. This is an attempt to separate
the sheep from the goats and to divide investments into two kinds and to say that all the
40

investments which we put on this side are safe, and that all other investments cannot be
looked upon as safe, and are, therefore, excluded from the favoured list. And I say we have a
right to expect that when distinguished and competent adviser comes forward with proposals
dealing with this subject there should be an element of finality and completeness in the
proposition they offer for our consideration. Now, comparing this Bill with the clause in the
Liability of Trustees Bill of last Session, I find that some securities were included in that
which are not in this Bill, and vice vers. The hon. and learned Gentleman has alluded to the
reasons which actuated him in leaving out of this Bill a very important element that was in
the Bill of last yearnamely, Colonial Securities. But I think he sat down without leaving upon
the House any definite impression as to what his opinion was with reference to including or
excluding these securities. He says it is a matter for the Committee. Then we have some
securities introduced for the first time under the head J., which seem to require some fuller
explanation of Clause F. than he has given. What reason is there for naming these securities
and omitting others of a similar character? We begin, then, with great difference of opinion
among competent persons as to what ought to be introduced into this Bill. This measure will
go to some form of Committee, and 1489 what will be the consequence? The question of what
Stocks are to be introduced will be settled one way or the other. Then in some future year
someone will come to this House and say"You have admitted securities which are of a
doubtful character, but I have here a security which is equally good. Whatever reasons there
are for including Colonial or other Stocks belong equally to this security, and I shall bring in a
Bill and claim to have the law altered so as to introduce my security." I ask whether it is in
the interests of Trust Funds that the question of what fund the trustee should be enabled to
invest in should be left open to successive efforts at legislation? I contend that, whatever
provision we make, it ought to contain the elements of finality and completeness. I should
like to test the question of safety with reference to one or two of the objects which are put
in the Bill. I take the case of the nominal or inscribed Stock of municipal boroughsI leave out
the question of County Councils as pertaining more to the future. Will anyone say, who knows
the condition of municipal boroughs at the present time, that a Stock of that kind is
necessarily a safe investment? The security for the Stock is the borough rate. Many boroughs
borrow very largely, and the larger the debt the higher will be the rates. The amount of the
rate is very often an important element in the prosperity of a borough. There may come a
time when the burdens are too heavy to bear, at any rate when some Corporation Stocks may
be immensely depreciated in the Market. I venture to think you could not put down Municipal
Stock as offering a security unimpeachably safe. It is said there is a precedent for this in the
case of Metropolitan Stock. But that is a case sui generis, because the provision, enabling the
trustees to invest in that Stock was inserted in the Bill by which the Stock was created, and
Parliament had the power of defining the condition on which the money should be raised, and
all the other circumstances which go to the consideration whether it is a safe security. Then
there is the other case of freehold ground rents and fee farm rents. It is true that the
conditions on which 1490 alone by this Bill trustees are allowed to invest are such as in an
ordinary case would make a safe investment. But there are cases in which the conditions
stated in the Bill afford no criterion of the safety of the investment. A case came recently
under my notice in which I found that a ground-rent, which satisfied all the conditions of the
Bill, was far from being a satisfactory security. If there are these objections to the Bill, then I
41

think we should very carefully consider whether we ought to read it a second time; for I think
we ought to even err on the side of leaving out a safe security rather than allow a doubtful
one. I must confess I viewed with considerable alarm the discussion on the clause of last
year's Bill in this House in Committee last year. It seemed to me that many Members entirely
left out of sight the safety of the money. Some hon. Members seem to me not to appreciate
at all the object of that Bill. The tone of the debate was this"Let us be as generous as we
can; let us include as many Trust Funds as we can, to give a wide scope of investment to
trustees." It is that kind of vicarious generosity which is so prevalent now that seems to
indicate to me a point of danger in passing a Bill of this kind through Parliament. Now, Sir,
having expressed my desire to extend the power of the trustee as far as can safely be done, it
is only right that I should say a word or two as to my alternative to the present Bill. The
alternative I would suggest is, to proceed on the lines on which the extension of the trustees'
powers of investment have already been effected by allowing all trustees to invest in
securities on which cash under the control of the Supreme Court is allowed to be invested. If
any further extension is required in the powers which were originally vested in the Court of
Chancery, I would allow anyone interested in any particular security to go before the Court
and produce such evidence as might satisfy a judicial body that it is a proper fund in which
trust money can be invested. I do not think we have any reason to doubt that that power
would be carefully exercised; and in cases where those who have the control of any particular
investment could not satisfy an im 1491 partial judicial body, it would be far better that,
even if the proposed investment were a safe one, it should be left out of the list than that
the risk should be run of putting trust funds into an insufficient security. I beg leave to second
the Amendment.
MR. F. MACLEAN (Woodstock) The Bill now under discussion is to my mind an important
beneficiary measure, and one that will be watched by every trustee in the country. The
speech of the hon. Gentleman who has just sat down seems to me to have been one that
would have been better addressed to the Committee stage of the Bill, than to the Second
Reading. What we have to consider is, the question of principle involved in the Bill; and that
question is this: whether wider powers of investment than they now possess should be given
to trustees by this House. In endeavouring to arrive at a conclusion on this question it is not
immaterial to see what was the past policy of Parliament in this direction. In old daysthe
days of Lord Eldon, for instanceit used to be thought that the only safe investment for
trustees was Consols or Government securities; bnt as trade increased, the policy of
Parliament has been materially to increase the power of investment on the part of trustees.
This is clearly exemplified in the five Statutes mentioned in the Schedule of the Bill, which it
is proposed to repeal merely for the purpose of re-enacting all the Acts of Parliament under
which Trust Funds may be safely invested. That is the principle, and the only objection has
come from my hon. Friend opposite and the hon. and learned Gentleman below the Gangway.
As to the former, he admitted that the widest latitude should be given to trustees in the
matter of investments, assuming that they were of a safe character.
*MR. TOMLINSON What I said was, as great latitude as could be given, provided always that
the condition of safety was regarded as the first consideration.
42

 MR. F. MACLEAN I agree with the hon. and learned Gentleman, who said that the first thing
to be considered in relation to all Trust Investments is the safety of the Fund. If you look
through the Investments mentioned in the Bill, I venture to say that most of them are of a
sound character.
1492
THE CHANCELLOR OF THE EXCHEQUER (MR. GOSCHEN,) St. George's, Hanover Square Not all.
MR. F. MACLEAN I am obliged to the right hon. Gentleman. What I said was "most of them,"
not all; and if the Bill gets into Committee, there are some of the Funds mentioned in which I
think it would be advisable not to authorize trustees to invest; and there are some that are
not mentionedpossibly Colonial Securitiesin which it might be advisable to authorize
trustees to invest. I think, however, that, taking the Investments named as a whole, they may
be regarded as safe investments of a first-class character. I do not propose at this stage of the
Bill to go into detail with regard to the Investments, because those matters will be more
properly discussed in Committee; but I would point out that my hon. and learned Friend
opposite has made a suggestion which I think would be a very unfortunate one for the
trustees if it were acted upon. He says in substance that it would be better, instead of laying
down in statutory enactments the securities in which trustees may invest, that trustees
should have power to go to the Court of Chancery and ask its sanction to particular
investments.
*MR. TOMLINSON That was not the suggestion. What I intended to suggest was that where
the proprietors of the funds thought they were good investments they might be allowed to go
to the Court and satisfy the Court that those investments were good.
MR. F. MACLEAN That is in substance what I have said, and I think it would be a most
lamentable thing to give the trustees that power. Again and again in my experience have I
seen small trust funds, when they come into the Chancery Division to ask for a change of
investment, swallowed up by costs to the extent of half a year's income.
*MR. TOMLINSON I do not say that the trustees should go to the Court, but those who have
the control of the funds, such, for example, as a municipality.
MR. F. MACLEAN I am only dealing with the alternative suggestion of the hon. and learned
Member. The hon. Member for Donegal (Mr. A. O'Connor) took exception to the Bill as one
which was not for the benefit of the 1493 beneficiaries. With all due respect for the hon.
Gentleman's opinion, I submit that the whole object of the Bill is the benefit of the
beneficiaries. I hare no doubt that if those persons who are in the position of trustees were
acting for themselves, their inclination would generally be to invest all the funds at their
disposal in Consols so as to get rid of any responsibility that might otherwise attach to their
action, and I say that the Bill is conceived, not in the interests of the trustees, but entirely in
the interests of the beneficiaries. The fact has been alluded to that there is an enormous
increase in the trust funds of the country, and it is impossible to avoid the conclusion that if
the cestui que trusts were consulted on the point there would be not a few of them in favour
43

of the suggestion that means should be given to them of making investments of a first class
kind. On the grounds I have put before the House, I trust it will give a Second Reading to the
Bill, leaving it open to the House at a later stage to say what should be the nature of the
investments in which trustees should embark.
*THE FIRST LORD OF THE TREASURY (Mr. W. H. SMITH,) Strand, Westminster I think, Sir, that
the House ought to approach this question with very great deliberation. The Bill proposes to
give to trustees powers which the men who create the trusts had no conception whatever
would be given to trustees. A person who creates a trust could not have foreseen that
Parliament would interfere and say that powers not expressly forbidden should be given to
the trustees. When he gives directions, he would naturally suppose that those directions
would be carried out faithfully by the trustees and would not be interfered with by any ex
post facto Act of Parliament. The hon. and learned Gentleman who moved the Second
Reading said the object of the Bill is to give to trustees a wider range than they are at
present allowed for the investment of property, and he justified it on the ground of the fall in
the value of money, which has inflicted great hardship on the cestui que trusts. Undoubtedly
there has been a very great fall in the value of money, but that has affected to a much larger
extent trusts created during the last four or five years, during which the 1494 fall in value has
occurred, than it has affected trusts created many years ago As far as Consols are concerned,
the hon. Member was doubtless accurate in his description of the hardship which has been
incurred, but if the hon. and learned Gentleman carries his memory back he will find that
investments made 40 or 50 years ago, or even 20 years ago, and which had anything of a
permanent character, produce almost the same income now as they produced when the
investments were effected. The capital sum invested in this property is of much greater
value, but the income derived from the trusts is nearly the same as it was at the time of their
inception. The object of the present measure is to afford facilities for the investment of trust
property in securities of a first-class character, and the hon. and learned Gentleman who has
just addressed the House has said it will be watched with the greatest interest by sanguine
beneficiaries in all parts of the United Kingdom. There rests the danger of legislation of this
character. There is undoubtedly throughout the country a very great desire on the part of
persons who possess limited incomes that their trustees should be allowed greater facilities
for investment, in order to get a higher rate of interest. I have a recollection of one of the
recent periods of excitement, when clergymen, professional persons, and widows were
induced to invest in speculative securities which hailed from Honduras and other parts of the
world. Those investments were, however, most unfortunate in their results. Therefore I would
recommend Parliament to be exceedingly cautious in dealing with a measure of relaxation of
this character. I think there is a very great danger in raising expectations which certainly
cannot be realized with safety. It has been rightly observed by my hon. and learned Friend
behind me that the great object we ought to secure is the absolute safety of Trust Funds. Any
legislation which imperils the safety of those Funds is legislation for which we should incur
grave responsibility if we gave it any support whatever. It seems to me that if we proceed at
all to legislate on this subject, Sub-section O of Section 3 contains almost all that Parliament
would be justified in providing at the present time. That sub-section provides 1495 that
investments may be made in any Stocks, Funds, or other securities which are under the
44

control of or subject to the Court of Chancery. If the Bill goes into Committee, it ought to be
examined with the greatest care, with the view of making the beneficiaries as secure as
possible in the enjoyment of their incomes.
*MR. J. B. BALFOUR I would remind the House that in 1884 a Bill was passed for Scotland
which proceeded very much on the lines of the present measure. That Act gave a considerably
increased range of power in the matter of investments, and the result of the working of that
measure has, I believe, been entirely good. The result of the working of the Act during the
four or five years which have since passed has, I believe, been very satisfactory. It was, at the
time, considered of great advantage to the beneficiaries. Something has been said in the
course of the debate as if it were for the interest of the trustees that they should have a
large range of investments. But I say it is thoroughly immaterial to them whether the range is
a large or a small one; they have only to consider the interests of the beneficiaries. The
problem to be solved is how to hit the proper medium of a fair return. Remember that the
beneficiaries are generally persons who have no other means of earning their own livelihood,
and it is necessary that the trust funds on which they depend should give a fair return,
accompanied by a proper measure of safety. Hundreds of securities which do not give a large
return have, of late years, proved to be accompanied with considerable risk, and one result is
that those which were considered prime investments before now hardly yield a fair return, or
are attended with a degree of hazard. There ought to be no hazard. In Scotland there has not
been the disadvantage which it has been suggested would result from the exercise of these
powers; but there has been found this advantage, that the modest income of very many
persons deriving their livelihood from trust funds has been increased from 2 to 3 per cent,
and sometimes more. It is needless to point out how great a benefit that is. Before the Scotch
Bill was introduced, persons familiar with what are regarded as adequate 1496 and fair trust
investments carefully considered the enlargement of the range of investments, and, as far as
I have heard, there has never been any objection taken to it on the ground that it was too
large. There have been some objections to it on the ground that it unduly restricted the
powers of trustees. It does seem to me to be an experience at all events worthy the
consideration of this House, seeing that it has worked well in Scotland for between four and
five years. Something was said by the right hon. Gentleman the First Lord of the Treasury as
to giving powers which the settlor had not himself given. I venture to think that the great
majority of settlors will be quite content to have the investment left to the wisdom of
Parliament. Unless settlors desire a distinctive range of securitiesand in that case they could
give expression to their wishit ought to be left to the law, and I believe to say the settlors
will, as a rule, be quite content with what the law allows to be done. It is really not doing any
violence to their wishes if the law finds, in course of time, that the range of investments is
unduly restricted and should be amplified. It has been a common experience of late years
that there has been an enormous increase of wealth in this country which has been invested
in the funds until it has become almost impossible to get a fair return. If the trust yields an
inadequate return, then Parliament must try that the medium of a fair return in income
security for the capital should be ascertained. I do not propose to say anything with regard to
the particular investments mentioned in this Bill. As to some there may be a difference of
opinion; as to others there may be none. But I may, perhaps, be allowed to say that if a
45

Committee of this House should extend the powers beyond those which are given by the
Scotch Act of 1884, I hope the right hon. and learned Gentleman the Lord Advocate will
consider whether by a short measurefor I do not think it could conveniently be done by an
amendment of this BillScotland could not be kept pari passu with England in this matter. I
repeat I do not think it would be easy to adapt this particular Bill to Scotland, because the
customs of that country differ so much from those of England. I do not ask at this moment any
expression of opinion 1497 from the right hon. and learned Gentleman. I only desire that he
will undertake to consider the matter.
*THE LORD ADVOCATE (Mr. J. P. B. ROBERTSON,) Bute I think with the right hon. Gentleman
that the question which he has just raised is premature in one sense; but if Parliament should
decide on sanctioning an increased range of investments for England, we may fairly see how
we can best take advantage of that decision in order to amend the law of Scotland. But the
difference of opinion in this House which has been elicited by this debate is so great that I
cannot usefully enter into any engagement other than a most general one. I agree with my
right hon. Friend in thinking it is not convenient, looking to the existing Scotch legislation
dealing with trust estates, to have an incidental reference to Scotland in a purely English Act.
If the general opinion of Parliament is in favour of extending the powers of investment
beyond the limits of the Scotch Act of 1884, the proper plan would be to have a specific
Scotch Act. I rather gather, Sir, from the right hon. Gentleman's observations that he shares
my view that we have to look, to a large extent, to the convenience and easy working of the
legal practitioner, and I think it would be unfortunate if, by a chance and casual reference to
Scotland in an English Act, we imposed on Scotch practitioners the necessity of entering into
the perusal of an English Act. I have no more to say. I do not understand the right hon.
Gentleman expects me to do more than indicate my concurrence with the view that whatever
powers are considered by Parliament as proper to give to England should be extended to
Scotland, not by an incidental reference in a Scotch Act, but rather by a specific enactment
following upon the English decision.
*SIR HENRY JAMES (Bury) I have risen to urge on the Government the desirability of allowing
this Bill to be read a second time. When the Chancellor of the Exchequer introduced his
Conversion Scheme last year, he struck a very severe blow at persons dependent on limited
and fixed incomes, and a great many representations were made to Members of the House
that great injustice would be inflicted upon such persons if their income were lessened 1498
by perhaps one-sixth, in consequence of the Conversion Scheme of the Chancellor of the
Exchequer. Indeed, the lessening of the income from 3 to 2 per cent imposed a very serious
burden on cestui que trusts. The Chancellor of the Exchequer gave a promise at that time
that the subject should be fully considered, and a hope was also held out in the debate on
Lord Herschell's Bill dealing with the duties of trustees that there should be some
consideration given to the question, which was then urged upon the House by the right hon.
Gentleman the Member for Wolverhampton. I want to see some fulfilment of that promise. I
admit it was not a definite promise, but there was a pledge on the part of the Government
that some consideration should be given to the case of these persons, and I desire to urge on
the Chancellor of the Exchequer the claims cestui que trusts to have their income maintained
46

at its former level. The Chancellor of the Exchequer is the guardian of the public, and he is to
some extent opposed to any alteration in the law affecting investments in the interests of the
public, because, as I understand him, he says that if we diverted the natural flow of
investment into Consols we should thereby, to some extent, run the risk of lessening their
value. I hope, on the other hand, to see the National Debt diminished and the value of
Consols increased thereby. But while the Chancellor of the Exchequer speaks in this sense, he
must consider the public from every point of view. I would rather, for my part, see the
burden fall on the public as a whole than that it should fall on the persons least able to bear
itnamely, the persons of small fixed incomes, who are generally without the power of
earning more money for themselves. We must see that no injustice is done to them by the
Conversion Scheme. At present, however, an undue proportion of the loss falls on them.
Indeed, the general taxpayer gains by the Conversion Scheme. The Chancellor of the
Exchequer has the right to point to it as a great success; but, after all, the sufferers are those
persons whose incomes have been reduced by at least one-sixth in consequence of it. Now,
we want a remedy for this state of things, and we are throwing no extra burden on the 1499
taxpayer generally by providing that the opportunities of investment shall be enlarged and
increased without risk to the cestui que trusts and liability on the part of the trustees. We
can guard against that risk, and can find securities in this country which will pay 3 or 3 per
cent with perfect safety. If that can be done it ought to be done, because it would do no
injury to the general taxpayer. This is the proposition we are making to the Government. This
is not, as suggested by the First Lord of the Treasury, a Bill in relief of the trustees. From our
point of view it does not protect the trustee. He may be a very selfish person, but he can take
care of himself. He may say"I will only invest in Consols, as I do not suffer if I only get 2
per cent." The person we are considering is the person who is receiving the income, and we
desire that he shall not bear an undue portion of the burden created by the Chancellor of the
Exchequer's Conversion Scheme. I think we are bound to see that he obtains a percentage
somewhat similar to that which he received when Consols paid 3 per cent. I do not object to
the very proper desire of the Chancellor of the Exchequer to guard the public. What we want
is that the receiver of the income shall be regarded as the person principally interested. We
shall not interfere with the value of Consols: they will be maintained at their level; and if the
person who creates the Trust chooses that the funds shall be invested in Consols, let him say
so. All we are asking is that there shall be an increased opportunity of investment; that we
shall allow trustees to invest without incurring personal liability in certain defined securities.
It is our duty to see that the securities are not speculative, and we must not allow
investments in securities which pay high interest, but we can find securities which will not
only pay a somewhat higher rate of interest to the beneficiaries, but which will be good
security for the trustee. I do not wish to go into details in discussing the Second Reading of
this Bill, but I think the First Lord of the Treasury spoke somewhat without consideration
when he took exception to some of the securities mentioned in the 3rd clause of the Bill. He
said he doubted whether trustees should be allowed 1500 to invest in the railways of Ireland;
but under Lord St. Leonard's Act, 22 and 23 Vict., there is power, under prescribed
conditions, to invest Trust Funds in railways in "Great Britain or Ireland," so that this
provision, which was pointed out as a fatal defect in the Bill, which embodies a consolidation
of the present powers of investment, coupled with some enlargement, does not go beyond
47

the present law. I would suggest to the Government to allow this Bill to be read a second
time. There will be no attempt on the part of those in charge of the Bill to take one step
which will not meet with the sanction of those who are the natural guardians of the taxpayer
and of those who ought to protect the beneficiaries and the private individuals who receive
the income. We have already admitted that there should be some compensation to those who
have suffered grievously by the change of the 3 per cent investment into a 2 per cent,
without any fault of their own, and without such a diminution of interest being in the
contemplation of the settlor. On the whole, believing that this Bill marked a step in the right
direction, I hope the Government will not throw any obstacles in the way of its being read a
second time.
MR. S. HOARE (Norwich) The discussion which has taken place this morning proves, I think,
the great interest taken in the subject involved in this Bill. When the Conversion Scheme of
the Chancellor of the Exchequer was discussed, there were many of us in this House who, like
the right hon. Gentleman the Member for Bury, realized that the incomes of a vast number of
people would be materially affected by that scheme, and we thought at the time that
Government would introduce some such Bill as is now before the House, to give an
opportunity for those interested in Trust Funds invested in Consols to reinvest them, so that
they should not be such heavy losers as they necessarily were under the Conversion Scheme. I
supported the Conversion Scheme most warmly; but I always felt that a Bill giving enlarged
powers to trustees was a necessary sequence of it. Consequently, I have taken some little
part in bringing this Bill before the House. Now, in speaking on it, I feel somewhat at a
disadvantage, because almost the whole of the discussion hitherto has 1501 been from a legal
point of view, and I desire to approach it from a business standpoint. I must say I was rather
surprised at the objection of the hon. Member for Donegal, who thought that the House ought
not to waste time by pressing forward a Bill of this kind. I conclude that the hon. Member is
not interested in funds invested in Consols at the present time, and he cannot know, as many
hon. Members know, of cases where the reduction in the rate of interest on Consols has
materially affected those interested in the Trusts. I regard the Bill as affording a protection
to beneficiaries, because it enables them to get a larger income without, as we believe,
sacrificing their security. With reference to the suggestion that the securities named are not
all that could be fairly taken, I quite realize that objections might be found to that list, but I
should be prepared to satisfy the Committee that each investment is good and sound, and
that they will enable tenants for life to enjoy increased investment from Trust Funds, while
not getting more than their proper share of the income arising from the funds invested. Every
precaution is taken that life beneficiaries shall not benefit at the expense of those who
follow. I can assure hon. Members that great care has been exercised in the selection of the
list of securities embodied in this Bill. My hon. Friend the Member for Preston said he did not
like the policy of dividing the goats from the sheep. I can assure him the securities named are
all sound and suitable for trust investments.
*MR. TOMLINSON My point was that the Bill assumes to be able to determine that the
securities named in it are sound and that all others are not.

48

 MR. HOARE And I shall be prepared in Committee to prove that each proposed investment is
sound. The hon. Member alluded to the proposal to allow investment in Eastern Bengal
Annuities and other Indian Railway Stocks. Sir, the very insertion of the provision shows how
very carefully the interests of the beneficiaries have been studied. We have only included
those annuities where there is a Sinking Fund; so that at the end of a given period the capital
of the annuity is repaid. The hon. Member also objects to investments in Corporation Stock.
Why, at the present moment these Stocks stand at a 1502 very high price in the market. It
must be remembered that they are under the control of Parliament, and the policy pursued in
the selection of investments in this Bill has been, as far as possible, to take those which are
under the control of this House. Therefore, Inscribed Stock has been put in, and we believe it
to be a good, sound, and safe security. Excepting what has been said by the First Lord of the
Treasury, I do not think any real objection has been brought against the Bill. The First Lord,
perhaps rightly, looks upon the Bill as too wide, but, at the same time, his remarks show that
some Bill of the kind is required. As to the course to be pursued to-day, I hope the House will
pass the Second Reading, as I believe that everyone will feel that some such Bill is necessary.
I do not say it is a perfect Bill, but I believe it is a good Bill as a groundwork for consideration.
I hope the Government will support the Second Reading of the Bill, and that it will then be
referred to a Select Committee which, I think, will consider the questions involved with
greater advantage to the country than a Committee of the whole House. I think trustees and
others interested in Trusts would be better satisfied to have investments settled in that way
than by the Judges of the Chancery Division of the High Court. Even Lord Salisbury himself has
said that the Judges are not the best tribunals to settle investments. The Bill, if passed,
would be a great advantage not only to beneficiaries, but to trustees who now have the
responsibility of selecting investments.
SIR G. BADEN-POWELL (Liverpool, Kirkdale) I should not like to see so very wide a subject
dealt with without ample opportunity for consideration and debate. I should like to see the
power of the Judges of the Court of Chancery revised in regard to Trust Investment, and I
should like to know definitely whether if the Bill goes to a Select Committee it will have
power to deal with the delicate question of interfering with the powers of the Judges; I
should like also to know whether the question of colonial securities will be dealt with by the
Committee? I think that the Bill as it stands ought not to be allowed to pass a Second Reading,
and I should only agree to its being so passed if the whole subject 1503 were capable of being
dealt with in Committee.
SIR GEORGE CAMPBELL (Kirkcaldy) I have a very strong feeling that the principles impressed
on the House by the First Lord of the Treasury should have very great weight with hon.
Members, and I shall not vote for the Second Reading unless those who are responsible for
advising the country on such mattersnamely, the First Lord of the Treasury and the
Chancellor of the Exchequeradvise me to support it. I am rather surprised at the suggestion
to refer the Bill to a Select Committee. A Bill of this kind went to a Standing Committee last
Session, and that body treated its proposals very unfavourably, and therefore the desire to
send it now to a Select Committee seems to show an anxiety to escape the criticism of the
Standing Committee. I think if the Bill is referred to any Committee it should be a Standing
49

Committee. If investments are put into a list in this Bill they will be ear-marked as first-class
investments, and the whole influence of the Stock Exchange will be used to put others into
the list.
MR. E. W. BECKETT (York, N. R., Whitby) I wish to join in the appeal to allow the Bill to be
read a second time. I am bound to say that in looking through the list of securities, it contains
many which I, for one, cannot approve. At the same time, I think there can be no question
that there is an ever-increasing necessity for extending the powers of the Court of Chancery
in regard to trust investments, and I therefore hope the House will agree to the Second
Reading, on the understanding that the Bill should then be referred to a Select Committee, to
consider the Schedule of authorised investments. I think the hon. Gentleman who has just
spoken could not have heard the very excellent speech of the Lord Advocate, which showed
that we might follow the example set by Scotland in this matter on prudent lines. I trust that
the Government will not oppose the Second Reading of the Bill, but will let it be referred to a
Select Committee. I am quite aware that the Chancellor of the Exchequer's Conversion
Scheme succeeded in a most extraordinarily satisfactory manner, and, perhaps, therefore, he
will not now be less inclined to consider the possibility of carry 1504 ing out the objects
aimed at by this Bill.
SIR H. DAVEY (Stockton) I earnestly hope the Government will see their way to accept the
proposal to read the Bill a second time, and refer it to a Select Committee. The object of the
Bill has been somewhat misunderstood. It has been treated as a Bill to relieve trustees; but
that is a mistake. The primary object of the Bill to collect into one Act the securities in which
trustees may invest. At the present time such securities can only be ascertained by searching
through a number of Acts of Parliament, the subject-matter of many of which is of an entirely
different character. For instance, an Act which enables the Metropolitan Board of Works to
create Stock gives power to trustees to invest in it. The Bill will, therefore, be very useful;
and in my opinion, if it did nothing more than this, it ought to be read a second time. But the
Bill goes beyond this, and proposes to enlarge the scope of investment now allowed by law. I
quite agree with the First Lord of the Treasury that we ought not to hold out any
encouragement to trustees to speculate with Trust Funds. That is a sound principle; but, on
the other hand, I think the House will agree that the true policy is to give the beneficiary as
full an enjoyment of the produce of a Trust Fund as is consistent with the safety of the
capital of the fund. The First Lord of the Treasury (Mr. W. H. Smith) has objected to certain
securities mentioned in the Bill, but the right hon. Gentleman was particularly unfortunate in
his selection. I believe that the two securities which the right hon. Gentleman specifically
mentioned were real securities in England, Wales, and Ireland, and Debenture Stock in English
and Irish Railways. I must say that it requires some courage to state that there is wild
speculation in investing money in the Debenture Stock of English Railways. The Bill applies to
Irish as well as English trustees, but it does not propose to give power to invest in securities
which the Will or Settlement expressly prohibits. With regard to the objection raised by the
right hon. Gentleman opposite to investments in Irish mortgages, I would point out that, even
if the Bill does not pass, the present law gives power to invest in mortgages in England,
Wales, or Ireland, 1505 and the First Lord of the Treasury, in objecting to this security, is
50

objecting to the existing law. By the 32nd section of the Act which bears the name of Lord St.
Leonards, a trustee, unless expressly forbidden, is permitted to invest Trust Funds in
mortgages in any part of the United Kingdom. I presume that Gentlemen opposite will agree
with me that Ireland is part of the United Kingdom, and I may observe that the objection to
Irish mortgages which the right hon. Gentleman made comes with rather a curious aspect
from the Leader in this House of a Party which tells us that its great object is to encourage
the introduction of capital into Ireland and to restore confidence in the country. I may say,
however, that I have hardly ever seen a Settlement or a Will which does not contain a clause
expressly forbidding investments in Irish mortgages. The objection of the First Lord of the
Treasury on this point is an objection to the present law. Perhaps the right hon. Gentlemen is
not aware that trustees are not allowed to invest on more than a certain proportion of the
value. The right hon. Gentleman's other selection of what he deemed a mild spculation was
particularly unfortunate. He objected to authorizing trustees to invest in debentures of
railway companies which have paid dividends during ten years. Perhaps the right hon.
Gentlemen is not aware of the rule made by the Judges of the High Court for the investment
of funds under the control of the Court. I hold in my hand a copy of the last Order, dated
November 14, 1888, and signed by the Lord Chancellor, the Lord Chief Justice, the Master of
the Rolls, and four other Judges. The Order provides that cash under the control of the Court
may be invested in debenture, preference, guarantee, or rent charge stocks of railways in
Great Britain or Ireland which have for ten years next before the investment paid a dividend
on ordinary shares. But, Sir, Parliament has already sanctioned this itself, because I find that
in an Act which goes by the name of that wild speculator and revolutionist, Lord Cairnsthe
Settled Land Act 1882capital money which has arisen from the sale of settled land is
allowed to be invested in, amongst other things, 1506 the security of the bonds, mortgages
or debentures of any railway company in Great Britain or Ireland and having ten years next
before the investment paid a dividend on its ordinary shares. The objection made by the
hon. Member for Kirkcaldy (Sir G. Campbell) seems to me to go too far, because the more you
restrict the power of investment by trustees the more you will raise the price of the stocks in
which they were allowed to invest. I can quite appreciate the motives of the Chancellor of
the Exchequer in wishing to restrict the area of Trust Investments. I can quite understand his
wishing to restrict such investments to the Consols which bear his name. But surely the rights
or interests of persons beneficially entitled under Settlements ought not to be cut down in
order to maintain the price of Government Stock. That seems to me a consideration that
ought not to enter into the view of the House in this matter. The more you enlarge the area
of Trust Investments the less effect they will have in raising or varying the price of particular
Stocks. I think that any gentleman who has had experience in these matters will agree that
the list of securities named in the Bill is such as will be found given in any ordinary welldrawn Settlement or Will without special instructions, and they are all securities of a public
character and guaranteed. I believe the Bill will be found strictly beneficial both to trustees
and to cestui que trusts, by enabling them to make the most beneficial use of their funds
consistent with due security.
*MR. GOSCHEN My right hon. Friend the First Lord of the Treasury (Mr. W. H. Smith) did not
offer any objection to the Bill on the ground that it might be detrimental to the interests of
51

the Public Funds. He carefully abstained from urging that argument. My hon. and learned
Friend (Sir H. Davey) says it is an error to suppose that this Bill was introduced to any extent
in the interests of trustees, but on reflection he will, I think, see that his argument points to
its being a useful Act for the relief of trustees, as affording them a better and surer light, and
giving them an indication of what is called the "wisdom of Parliament." I am not at all
prepared to share the view, however, that testators would be 1507 perfectly prepared to
leave the care of their settlements, and the future of those in favour of whom they make
settlements, to be decided by the "wisdom of Parliament." The discussion shows that
Parliament may make a mistake, and there is great force in the objection of the hon. Member
for Kirkcaldy (Sir G. Campbell). The Bill has two currents in its favour. There is the pressure
of the cestui que trusts and also the strong pressure of those who wish to see their securities
take a higher rank as being sanctioned by an Act of Parliament as fit for the investment of
Trust Funds. If a Bill of this character be passed there will be no undertaking which will not
do its best to induce Parliament to put its name and title on the favoured list. And would it
not be necessary continually to revise the list which Parliament in its momentary wisdom
might make? Reference has been made to Lord St. Leonard's Act, enabling trustees to vary
Trusts, so that money invested in Consols may be invested in real securities. Lord St. Leonards
acted on the Parliamentary view of that day, which was that capital might be advantageously
converted into land; but it has since turned out that mortgages are not the excellent security
they were supposed to be. The wisdom of Parliament was at fault, and it would almost make
some settlors and testators turn in their graves could they know that while they gave
directions for safe investment in Government securities for those in whom they were
interested, the wisdom of Parliament authorized investment in mortgages which had turned
out to be a bad security and had not paid the interest expected. The objection has been
taken to the Bill that there are easy trustees and fraudulent trustees as well as honest
trustees. An easy trustee cannot go far wrong now, for this Bill will give him a large choice of
investments, the list of which is as long as the calendar, and of which the easy trustee would
be likely to choose the more dangerous rather than the safe class. The fraudulent trustee
might, under this Bill, sell out of a safe investment and put the Trust Funds into other
investments which would promote his own speculations or his own interests. 1508 He might, if
he had a number of houses of his own, invest the funds in them.
SIR H. DAVEY I think the right hon. Gentleman will at once admit that that would be a gross
breach of trust, and that a trustee who did that would find himself at once in difficulties in
the Chancery Division.
*MR. GOSCHEN Of course I bow to the decision of the hon. and learned Gentleman, but it
seems to me that there would be no dishonesty whatever in making such an investment,
though it would be extremely injudicious. I fully admit that there are some things in this Bill
which are advantageous and which it would be expedient to consider. There is the question of
the consolidation of the law; and I think it is expedient that the undertakings which are
authorized by Parliament as investments for Trust Funds should be dug out of the various Acts
in which they are embedded so that Parliament should know to what extent the number of
securities have already been increased. Furthermore, I think it is right we should settle the
52

moot point as to what is the liability of trustees with regard to investments above par. Again,
I trust that if the Bill is referred to a Select Committee or to any other Committee, the
question as to whether it ought to be retrospective or not will be considered. If I make a
settlement on my daughter and say that the investments must be made in Consols or Indian
Securities or in some other guaranteed Government Stock, and I die, she may at once put
pressure on her trustees to change the investment to mortgages on land in Ireland. I object to
my views being set aside by Parliament the moment after I have made a Settlement. I think
Parliament would be embarking on a dangerous course in laying down what are safe
investments and what are not, although there may be something to be said in favour of such a
course. Still, the Trusts and Settlements which have quite lately been made, and been made
with a full knowledge of present cir-circumstances ought not to be set aside under the
pressure of the cestui qui trust who may naturally be wishful to increase his income part
passu probably with an increase of his family. The Government will not object to the Second
Beading of the Bill, but their view is, 1509 that the Bill should certainly he referred either to
a Select Committee, or to a Standing Committee similar to that to which the Bill of last year
was referred. The Government would prefer to take time to consider which of the two causes
would be best.
*MR. AINSLIE (Lancashire, N., Lonsdale) Having some knowledge of some of these
investments, I think it right to offer a few remarks. I desire particularly to refer to the Stock
mentioned under the letter K. I daresay many hon. Members are not aware what the true
significance of that Stock is, or in what sense it cannot be said to be a safe and proper
investment for Trust Funds. I had occasion a few years ago to object to the investment of
some Trust money in this particular Stock, because, although it is described as bearing a
guarantee from the Secretary of State for India, although the Company does receive 5 per
cent from the Secretary of State, it does not follow necessarily that the 5 per cent goes to
the holder of the Stock. Take the case of the Great Indian Peninsular Railway. It may be that
that railway's stock stands at a high premium indeed, but I remember when it was little above
par. It may descend to that level again. That will be in consequence of a falling off of traffic
which may occur through panic. If the traffic receipts fall so that the income will not permit
of a dividend being paid without the assistance of the Secretary of State for India no money
would come to the beneficiaries. I believe it is not known to investors that that is the position
of the holders of the Stock of some of the Indian railways. I agree with the hon. Member for
Kirkcaldy (Sir G. Campbell) that the Bill will open the door to speculations on the Stock
Exchange, and this, I think, ought to cause hon. Members to pause before they let the Bill
pass even a Second Beading unless there is a strong recommendation to the Committee to
which it is referred that the list of the securities should be seriously cut down.
*MR. ELTON (Somersetshire, Wellington) I cannot but share the fears which have been
expressed about the Second Reading of the Bill, although I have great confidence in the
judgment of the hon. Gentlemen opposite who have spoken in its favour. I am quite willing it
should be confined to 1510 Settlements made after the date of the passing of the Bill if that
is the feeling of the House, but what I rose particularly for is to point out that there are some
investments mentioned in the list which the House ought to encourage by every means in its
53

power. I refer especially to the investment in Borough Stock. It is very difficult for any of the
large boroughs to get powers inserted in their local Acts to enable trustees to invest in their
Stock, although I know from personal experience that there is a great demand by trustees of
cestui que trust to invest in such Stock. But there are some Stocks in the List which ought not
to be there. Take the case of freehold ground rents. I have not the slightest objection to
freehold ground rents, but we ought to prevent the investment of Trust Funds in them, for it
is well-known they may become insecure. It is necessary the Bill should go to a Committee in
order that that particular investment may be struck out.
*MR. SWETENHAM (Carnarvon, &c.) I have heard with the greatest pleasure that the
Government do not propose to oppose the Second Reading of this Bill, which I regard of the
greatest importance, not only to trustees, but to the cestui que trusts. Some observations
have been made as to the hardships that occasionally would occur to widows and orphans if
the Bill passes. But there are hardships under the law as it at present stands, and it is with
the view of removing these hardships that I intend to support the Bill. I deprecate in the
strongest manner anything like allowing trustees to invest funds in speculative securities, but
all the observations made by the Mover and Seconder of the Amendment appear to me to be
of such a character that they can be very properly dealt in Committee. I have not heard any
real objection to the principle of the Bill; and what we have now to deal with is the principle
of the measure. In Committee it will be the province of the House to investigate carefully
what are the securities in which it shall be lawful to invest trust money. I should like a clause
inserted providing that in all cases where it is possible the consent of the cestui que trusts
must be had before the trustees can invest in the securities. It has been suggested that the
operation of 1511 the Bill should be confined to Settlements made after the passing of the
Act. I cannot help thinking there would be very great hardships under the present system if
the Bill is not allowed to have a retrospective effect. To use the language of the Mover of the
Second Reading, the Bill will be greatly conducive to simplicity of knowledge, not only on the
part of the trustees, but on the part of the cestui qua trusts. If it is known that Parliament in
its wisdom has directed that certain securities may be considered safe, that will be conducive
to the peace of mind of the persons interested in the investment of Trust Funds. I do not
know any measure which will prove of greater practical importance than this, and therefore I
shall heartily support its Second Reading.

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QUESTIONOBSERVATION.HL Deb 17 May 1889 vol 336 cc341-5

THE LORD CHANCELLOR My Lords, it cannot be expected that I should answer the question of
the noble Lord in the affirmative without giving some little explanation. I hope that I may
very shortly be able to introduce such a Bill as is desired; but upon the question as to the
union of the character of Public Trustee and Executor, I will not undertake to say that it is
54

absolutely certain that that can be done. The two questions are very different. Whether the
public should undertake the duties of an executor is one thingquite different from whether
they should undertake the duties of a trustee. But with reference to both questions I can only
say that the matter is under the anxious consideration of Her Majesty's Government at the
present moment. The noble Earl mentioned one of the qualities of a Public Trustee, which I
regard as most valuablenamely, his inflexibility. One of the great difficulties which have
arisen is the fact that trustees will be good natured and will do what their cestui que trusts
urge them to do contrary to the trust. The Courts of Law can only decide according to the
law, and they must, therefore, if the trusts have not been properly carried out decide
accordingly. I think a Public Trustee would not be open to any pressure of the kind. He would
look to the terms of the trust, and would absolutely refuse to do anything that was not
thereby authorized. That I take to be a circumstance of very great value in favour of a public
345 trustee. I can only say that as soon as the decision of the Government is arrived at, I will
inform my noble and learned Friend here, and I trust the noble Earl will consider that the Bill
satisfies his desires.

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COMMITTEE.HL Deb 17 March 1890 vol 342 cc961-72

THE LORD CHANCELLOR I should like to say one word, because one part of my noble and
learned Friend's argument is a little technical, and, without explanation, may be liable to be
misunderstood. He says that the guarantee can only be against actual breaches of trust. That
is quite true; but assuming that shareholders have paid up all their liability upon shares, there
will be no further capital available for speculation, or to meet losses made in that way,
because those would not be companies with unlimited liability. But if there is a liability, and
if there is uncalled-up capital, the result will be that the shareholders' liability may not be
available, and the power of the company to pay or make good breaches of trust will be
impaired upon the failure of any portion of this speculative business. If the company 967
should be dealing with shares, for instance, and by some sudden change in the market the
company were called upon to supply some 200,000 or 300,000, although that would have
nothing to do with the particular investments which the company had been making, the
ability of the company to pay, which is all the cestui que trusts have to rely upon, is gone in
face of another liability to perhaps the full extent of all their property and business. Then it
seems to me there is no guarantee in those circumstances. The hypothesis in all these cases
must be that Trustees shall be able to produce at any time the property entrusted to them,
and if the property has not been misapplied there will be no doubt about it. But the property
may, on the other hand, have been misapplied, and the company may have used the Trust
Funds in a way they should not, and in that case all the unfortunate cestui que trusts have to
look to is the unlucky shareholders, who are just as liable to be called upon in regard to
outside speculations as for making good their Trust Funds.

55

 LOED HERSCHELL No doubt such cases might arise, but that is true also of private Trustees,
and in their case you do not provide for keeping a reserve fund. You would, therefore,
certainly be no safer with a private Trustee than with a company. Suppose you have a Trust
Company which is doing none but Trust business, you will naturally have but a very small
capital called up and duly invested. My noble and learned Friend would leave the company to
speculate with its reserve fund, which is all the cestui que trusts have to look to, just as it
pleases. It may invest that in order to get its 40 per cent, in the most speculative schemes in
the world, and it will be sure to do so, because that is the only way in which to make its
business pay.

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WAYS AND MEANS.HC Deb 16 May 1892 vol 4 cc985-1082 985

Considered in Committee.
(In the Committee.)

1. Motion made, and Question proposed, That, towards raising the Supply granted to Her
Majesty, the Duties of Customs now chargeable on Tea shall continue to be levied and
charged on and after the first day of August, one thousand eight hundred and ninety-two,
until the first day of August, one thousand eight hundred and ninety-three, on the
importation thereof into Great Britain or Ireland (that is to say) on
Tea the pound Four Pence."
*MR. H. H. FOWLER I am not just now discussing the question of where my right hon. Friend
erred. What I want to do exactly is to make it clear to the Committee what was the position
when he proposed his Conversion Scheme. The Money Market was more favourable then than
it was in 1888. The terms which my right hon. Friend the Member for South Edinburgh offered
were much more favourable to the fundholder than those offered by the Chancellor of the
Exchequer. There were some other peculiarities about that scheme. My right hon. Friend the
Member for South Edinburgh was not allowed by the Parliament of that day in any way to deal
with trust funds under the control of the Court or the Government, or even with private
trusts, without the consent of the cestui que trust. I remember when the late Leader of the
House (Mr. W. H. Smith) came down and strongly supported another late Member of the
House, Mr. Gregory, when the proposal was carried that there should be no dealings whatever
made with Trust Fund Consols except with the consent of the parties interested, and that
there should be no conversion of funds under the control of the Court without a number of
safeguards conceived in the interests of the fund-holder, which practically gave him an
opportunity of expressing his own opinion; and there was no man who was more strongly in
favour of that view than the late lamented Leader of the House. The Act of Parliament under
56

which the present scheme was carried out materially differed from that. By the Act under
which the scheme now in operation was carried out, the cestui que trust was not bound to
give his assent at alla provision was inserted very adroitly. 1063 I often wondered how it was
done, and by whom it was done. When the Bill was introduced there were certain provisions
inserted in order that the persons interested in the fund might have an opportunity of being
heard, and that a trustee should not have power to consent to Conversion without the
consent of those for whom he acted; but some words were inserted in the earlier clauses to
the effect that accepting new Stock should not be treated as a change in an investment, and
would not, therefore, require the consent of those parties whose consent would otherwise be
required, and subsequent clauses dealing with consent were quietly dropped. Therefore,
practically this Conversion was carried out without the consent of the parties really
interested. There were 100 millions of Consols under the control of the Government and the
Court, practically, where no consent was required; and, therefore, there was an enormous
difference between that operation and the operation proposed by my right hon. Friend the
Member for South Edinburgh. But I could tell the hon. Member for Reading another
distinction. He said my right hon. Friend the Member for South Edinburgh erred. He did err;
but in what did he err? He did not offer any commission to the banker. That was the essential
difference between the two schemes.

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FINANCE BILL.(No. 190.)HC Deb 12 June 1894 vol 25 cc928-90 928

COMMITTEE. [Progress, 11th June.
[ELEVENTH NIGHT.]
Bill considered in Committee.
(In the Committee.)
Clause 5.
MR. CARSON (Dublin University) said, he should like to have some assurance from the
Solicitor General in respect of this clause. He had an Amendment down to which he hoped the
Solicitor General would turn his favourable attention, and that was to strike out alto 940
gether the words referring to the executor. The Government were attempting to introduce
into the law a new principle in the administration of estates by executors. He could not
conceive how an executor was to administer a personal estate if he was to be allowed to pay
Estate Duty with respect to property over the administration of which he had no control
whatever. Supposing in Ireland an executor were to pay Estate Duty in respect of real estate,
how long did the Solicitor General think it would be before he could administer the personal
estate which it was his duty to administer within a year? During the last 12 or 13 years he (Mr.
Carson) believed there had not been a single landed estate sold in Ireland except under the
57

Land Purchase Acts. He wished to know whether the administration of an Irish estate was to
be tied up for perhaps 13 years and then for another 18 years as far as the purchase money
retained by the Commissioners was concerned. For what reason and on what principle was an
executor who had nothing whatever to do either with the settled estates or the real estates
of the deceased to be allowed to apply money put into his hands for a different purpose in
payment of the debts of another manfor it really came to thatand to the detriment of his
own cestui que trust? He could see no possible reason why there should be so complete a
change in the law as was-suggested. If this new burden was to be thrown upon executors,
there certainly ought to be some means provided of recouping the estate advanced. He
should like to know what would be the personal position of the executor in the event of his
paying more than he really ought to pay under this provision? Would he under such
circumstances be personally liable? If so, all he (Mr. Carson) could say was that it would be
found much more difficult in the future, to get executors than it was at present. If the
executor was not to be personally liable, were his cestui que trusts to lose through what had
occurred, not through the fault of the executor, but through unforeseen circumstances in
relation to property in which they had no interest whatever? It appeared to him that if the
provision of the Bill were passed it would be impossible in future to administer personal
estates.

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ROYAL PATRIOTIC FUND.HC Deb 14 December 1900 vol 88 cc819-20

819
Address for Return for (1) Account of the Net Moneys or Securities paid over or transferred
to the Commissioners of the Royal Patriotic Fund on behalf of and for the relief of the
Families, or Near Dependents, of the Officers and Men of Her Majesty's Forces, including the
Colonial troops, who have lost their lives in, or in consquence of, the war operations in South
Africa; (2) Schedule of the Widows, Children, or Near Dependents, or other Cestui-que-trusts,
ascertainable up to date, entitled to benefit under such 820 Scheme, and the amounts and
conditions of their relief in the following form:
Schedule of Beneficiaries.
58

Name and rank of husband, father, or decreased. Name of Widow. Amount of allowances or
other relief. Names of Children. Dates of their births. Amount of allowance. Name of other
Cestui-que-Trusts.
(Mr. Kearley.)
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AMENDMENT OF LAW.HC Deb 01 May 1907 vol 173 cc904-56 904

7. "That it is expedient to amend the law relating to the National Debt, Customs, and
Inland Revenue."
MR. ASQUITH thought it would perhaps save time if he volunteered an explanation as far as
he was able to give it. The Question arose under Section 21 of the Finance Act of 1896, and in
order to understand the situation created by that section, he would remind the House that
before Sir William Harcourt's Finance Act of 1894, Mr. Goschen, when he was Chancellor of
the Exchequer, by the Finance Act of 1888 increased the succession duties by certain
percentages. In 1889, the right hon. Gentleman went a step farther and proposed a further
estate duty, the object of which was subsequently carried out by the Act of 1894.These
proposals were carried out effectively by the Act of 1894, but the Act of 1896 made them
permanent, and prevented overlapping of the two sets of duties. It provided that Goschen's
enhancement should not be levied in addition to the Harcourt enhancement. The whole
object was that the value should be taken at the present value of the estate.
* MR. COURTHOPE thanked the right hon. Gentleman for his explanation, which, however,
did not cover the point that he wished to raise. So far as he could gather from reading the Act
of 1896, the result was that where a man had died setting up a trust by his will, the duty
which was paid or payable on his death on the amount of his property which was the subject
of that trust was to be deducted from the amount which was paid on the death of the cestui
que trust.
MR. ASQUITH said that must be so, because that applied to deaths which took place prior to
1904.
* MR. COURTHOPE said he took it that under the Finance Act of 1896 the amount deducted
was the actual sum paid or payable on the death of the testator. The proposal now before the
House would, however, do away with that, and would enact that the amount deducted should
be the amount that would have been paid or payable if the assessment had taken place at the
948 time of the second death and not at the time of the first.
MR. ASQUITH At the time when the estate duty becomes payable yes.
* MR. COURTHOPE asked whether that might not lead to great hardships.
MR. ASQUITH said it might in some cases, but on the balance of cases he did not think it
would. Where one man would lose another man would gain, and it was an advantage to have
59

a fixed date. In this case there would be the very great advantage of knowing exactly what
was the date.
* MR. COURTHOPE said the right hon. Gentleman would admit that there was no doubt as to
the amount which was paid or payable on the death of the testator, but now quite a different
sum might be deducted on the death of the cestui que trust. In some cases that would lead to
great injustice, and he hardly thought it was possible to justify one person receiving less than
he ought, or, to put it the other way, paying more than he ought because another man paid
less than he ought.
MR. ASQUITH pointed out that the capital value in respect to which they had to make a
deduction was a capital value which need not have been valued at the death of the testator,
and was therefore speculative. The duty was therefore speculative. They would now know
definitely what duty was payable.
* MR. COURTHOPE said that the amount was not hypothetical, because it was the amount
either paid or payable. It must therefore have been assessed at the time of the first death.
He still failed to appreciate the right hon. Gentlemen's contention, but the matter was really
so technical that he would not discuss it further with him today.
MR. ASQUITH We will discuss it again in Committee.
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PUBLIC TRUSTEE AND EXECUTOR BILL.HC Deb 30 June 1905 vol 148
cc657-99
MR. GIBSON BOWLES said that unless the Amendment were accepted the effect of the Bill
would be to abolish all private friendship and services and place the larger part of the
property in this country under the feeble, antiquated, and stupid administration of a salaried
official. That would abolish the essential principle of private property, and would deprive
every testator of attaching the conditions which he desired to be carried out. The interest of
the cestuis que trustent was often diametrically opposed to that of the estate. One of the
greatest troubles a trustee had was their rapacious avidity, while the primary duty of the
trustee was to preserve the property of which he was trustee. If they gave to persons who
came after the settler or testator the power to vary or alter the 691 terms of the deed or
will, they might just as well abolish the power of settling altogether. The law was bound to
respect the wishes of a testator. The ideal trustee was the man selected on account of his
friendship and personal integrity. Practically they were fighting a tendency to abolish the
private trustee altogether, to abolish arrangements by which men were called upon to render
the greatest service one man could render to another, to abolish a large amount of human
gratitude and put in its place a wretched makeshift which had failed in every department of
life from the telephone upwards, which must fail because it was wooden and bound by rules
and regulations, and which had absent from it all those human considerations which were
desirable and necessary in the mind of a trustee, and which the testator had presumed to be
60

necessary in naming the particular trustees whom he appointed. Great as might be the
necessity for appointing a public trustee, if he was to be appointed without some such
restriction as this Amendment proposed to make, his appointment would be a most
unmitigated curse to the country.

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PUBLIC TRUSTEE AND EXECUTOR BILL.HC Deb 07 July 1905 vol 148
cc1505-27 1505
As amended (by the Standing Committee), further considered.
SIR ALBERT ROLLIT said that under the Bill, if the clause were not amended, the Cestui que
trust might be placed in a 1517 worse position than the ordinary beneficiary. The trustee
might be accused of indiscretion, but the remedy would be at the cost of the estate. The
cases in which there would be a remedy would, however, be limited to fraud or negligence.
The hon. Member for York pressed the Solicitor-General to state whether the public trustee
would be as liable as an ordinary trustee for breaches of trust. He would put a case which
would not be covered by the words of the Bill. An investment, not in a trust security, might
be made neither by fraud nor negligence, but might possibly lead to the loss of the estate, in
which case the beneficiary would suffer. He invited a special Answer to his hon. friend's
Question. Was there an indemnity on the part of the State in connection with the public
trustee for breaches of trust? If not, the last state of the beneficiary might be worse than the
first; he might be out of the frying-pan into the fire. And if the State had to pay the piper,
the cost to the taxpayers of all this officialism, red tape, buildings, losses, etc., might be
enormous, for no proportionate benefit. The Bill was a clumsy and badly drawn measure for
its purpose, for to the principle of the proper protection of trust funds by a responsible
custodian, whether public or private, he had no objection whatever, but the contrary.
SIR JAMES JOICEY said that it appeared quite evident when the Bill was Introduced that the
public trustee would take on himself all the responsibilities of an ordinary trustee. He was,
however, rather suspicious at the refusal of the Government to assent to the words "breach of
trust." He certainly thought the public trustee would be placed under the same conditions as
an ordinary trustee; and the Solicitor-General should make the matter clear now. It seemed
to him extraordinary that the Government should protect the public trustee from ordinary
responsibility.
SIR WILLIAM TOMLINSON (Preston) said it was an extraordinary provision that the Courts
should be given the power proposed.
1518

61

 SIR F. DIXON-HARTLAND asked how the public would be benefited by the Bill if they
received no security that the estate, when it came to the public trustee, would be properly
administered. At the present time if a trustee got rid of the trust property he was liable to
make it good, and had to pay it back, bat as the Bill now stood if the public trustee did
anything wrong, except they could prove mala fides, the public were worse off than before
because he was not liable.
MR. GEORGE FABER (York) urged the House to be extremely careful to see that the remedy
was not worse than the disease. The Lord Chancellor would have a free hand in the making of
the rules, and upon that would depend the efficacy or otherwise of the enactment. The bait
held out from the beginning was that they would get away from the fraudulent solicitor to
some person of security, but apparently the condition of things would not be any better under
this clause but rather worse, because under the present condition of the law a trustee was
liable for breach of trust, but under this clause they would have a public trustee comfortably
ensconsed behind a fat salary whom they would not be able to make responsible unless he
was guilty of fraud or negligence. On the other hand, directly it was sought to make the
public trustee liable for all breaches of trust the Treasury came forward and said they were
putting a larger burden on the Consolidated Fund than they were entitled to do. He urged the
Committee, in their desire to get out of the clutches of rogues, not to fall into the hands of
fools; because, it was not unlikely that the person who would be appointed public trustee
would not be a trained man of business, and would thus be incapable of discharging
satisfactorily the great responsibilities of his position. Let them not, in avoiding Scylla, fall
into Charybdis.

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DRAFT MANDATE FOR EAST AFRICA.HL Deb 23 June 1921 vol 45 cc74959 749
LORD PARMOOR rose to call attention to the Draft Mandate for East. Africa (British) in the
form in which the Council of the League of Nations will be invited to approve it. The noble
Lord said: My Lords, I am afraid that the terms of my Notice are not very specific, but I have
had an opportunity of communicating with the noble Lord, the Duke of Sutherland, who I
understand represents the Government upon this matter, and I have been 750 enabled to tell
him exactly what. are the points on which I desire further enlightenment. It is hardly
necessary, although I should like to do so in a few words, to emphasise the importance of the
Mandate principle. It is a new principle as regards Colonial development, introduced into the
League of Nations, and, if properly exercised, as I hope it will be, it appears to me to he one
of the most beneficent results which have conic from the late war.
If I may quote one passage from Article 22 of the Covenant of the League of Nations, I think
it would be the easiest way of illustrating what I mean when I speak of the importance of the
Mandate principle. The Mandates are to be applied to countries "inhabited by peoples not yet
62

able to stand by themselves under the strenuous conditions of the modern world.' In other
words, there is a recognition that in the relationship between more advanced countries and
the less advanced countries the less advanced countries should be treated as in the nature of
a cestui que trust, and their interests should be regarded as a primary duty by the Mandatory
country, whatever it may be.
Your Lordships will know and I say this in order that it may be understood within what limits
I am speakingthat there are three forms of mandates, known as A, B and C. Mandate A has
to do with ex-Ottoman territories, and I do not intend to go Lack upon the points which have
already been raised with regard to Palestine and Mesopotamia by the noble Lords, Lord
Sydenham and Lord Lamington. Form C applies to what is called contiguous territory
Mandates. I think Lord Islington's Question may raise matters with regard to these Mandates,
and, therefore, I do not intend to deal with them. Form B is the form of:Mandate to which my
Question relates, and I can illustrate the importance of that form of Mandate by merely giving
two figures. According to calculations which I have seen, these Mandates, which are Mandates
in tropical Africa, will apply to an area of 600,000 square miles, and to a population of about
12,000,000. Of course, the population in a district of that kind must., to a great extent, be a
matter of estimate, and I saw it stated in the same paper- I am not sure about the accuracy.
that it really means an area of about three times the area of France at the present time. I
have not looked into the figure, but at any rate it is a very large One.
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SITUATION IN IRELAND.HL Deb 11 May 1922 vol 50 cc397-419 397

LORD CARSON had given Notice to call attention to the treatment of British subjects in
Ireland. The noble and learned Lord said: My Lords, I make no apology for inflicting upon your
Lordships a second speech on the matter regarding which I have placed a Notice upon the
Paper. I can assure your Lordships that I ant not going back on any part of our old
controversy. The truce, as it was called, and the Bill are passed. The Government are
irretrievably committed to the policy of that Act. They have withdrawn their troops and all
protection from their adherents in Ireland, and that is the situation we have to accept. Let us
see how British subjects are still getting on there. I said a few moments ago that it is five
months since the Treaty was passed, and I cannot help thinking that it is a lamentable
reflection that out of all that abject surrender we never got peace for one man.
My speech this afternoon will, I hope, be short, but the meaning of it is this. You have gone
out of Ireland, and you have set up nothing in your place. Let us be under no delusion; let us
try to see a real picture of Ireland, however poorly I may portray it; and let us then ask the
Government how that situation is going to be dealt with. We hear a good deal about a
Provisional Government, for whom we passed a Bill, to whom you have handed over arms, and
who, you say, are the 398 Government of Ireland. It is perfectly plain to anybody who is
following what is going on in Ireland that there is no Government at all. I have no doubt the
63

Prime Minister was perfectly genuine at the moment, with that enthusiasm which always
follows upon a new surrenderI have no doubt he was perfectly sincere and enthusiastic
when he thought of the great joy that this surrender would bring to everybody, and the
impassioned loyalty that in the future we should receive from Ireland.
But what is the condition of affairs? Many people think that there is a contest going on, and
that this is the whole matter of dispute between Mr. Collins and his Party, as representing the
Provisional Government, and Mr. de Valera, as representing a Republican Party who are
opposing the Treaty. That is a very, very small part of what is going on in Ireland. But those
two Parties have each paralysed the other. In addition, throughout Ireland there are
independent armies all operating on their own, and doing locally exactly what they please in
the way of handing over the property of one set of men to the other. Look at Dublin. Do you
tell me that there is a Government in Dublin? If there is a Government in Dublin why are the
Four Courts allowed to remain in the hands of a Republican Army which has no connection
even with Mr. de Valera? He is out on his own with his army. He has ousted the Judges
appointed by His Majesty, who were handed over by the so-called Treaty to the Provisional
Government. This army is in possession not only of the Law Courts, but of the offices. They
are in possession of all the records under which minors, cestui que trusts, and other people
entitled to properties administered by the Court, receive their moneys. If all those documents
were destroyed it would throw into utter chaos every one of the estates concerned.
And yet we are told that there is a Government in Dublin! What are they doing, and why do
they not put an end to such a state of affairs? The truth is that there is no Government, as I
said before. Almost every important house in Dublin is in the hands of one army or the other.
They have seized the offices of the Port and Docks Authority.

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FINANCE BILL.HC Deb 06 June 1940 vol 361 cc1019-106

The Attorney-General (Sir Donald Somervell) I do not think that my hon. Friend has
appreciated the purpose behind this Clause. The general condition of the law is this. If
anyone has securities, stocks and shares in a foreign country he pays on the income arising
from them irrespective of whether he brings the income here or not. That seems perfectly
fair. He has got the money, and if he wants to spend it in America, it is because he has some
need in America which he wishes to satisfy, but that does not alter his position that this is
income of which he has the disposal. There were two Archer-Shee cases. They arose in
relation to someone in this country who had a beneficial interest in property held in trust in
America. That property consisted, I think, of stocks and shares. If no trust intervened, Income
Tax would have been exigible on income 1049 arising, irrespective of whether it was brought
here. In the first Archer-Shee case, which proceded on the basis that the American trust law
was the same as ours, it was held that although a trust intervened the cestui que trust had a

64

sufficient property in and right to the dividends on the stocks and shares to make Income Tax
exigible exactly as if he held them himself.
However, there was a second Archer-Shee case, in which the taxpayer produced evidence as
to the American law. That evidence was to the effect that American trust law was different
from ours and that a cestui que trust, under American trust law, had no property, legal or
equitable, in the trust property or the dividends or income arising from it. The only right the
beneficiary had was a right to have the trust administered. The effect of that was this, that
the House of Lords said, "As under this trust law these are not your stocks and shares at all,
because the trust imposees an impenetrable screen, and we cannot look behind the trust to
what is inside, therefore the income falls under foreign possessions which are taxed not on
the extent of the income arising but simply on the amount remitted here."
It seemed to various people, including the right hon. Gentleman the Member for East
Edinburgh (Mr. Pethick-Lawrence) who has brought up this matter before, to be an anomaly
that whereas the holder of stocks and shares has to pay Income Tax on the income arising, if
his interest is in stocks and shares held in trust then he does not have to pay tax on the
income arising in spite of the distinction which my hon. Friend pointed out, that he may be
unable to control the capital, may be unable to induce the trustees to change the security.
This has been represented as an anomaly, and my right hon. Friend the Chancellor of the
Exchequer has agreed that it is an anomaly, and the purpose of this Clause is to put those who
have interests in trust property on the same basis as those who own property direct. This
Amendment would really cut across that principle. The obvious basis of my hon. Friend's
second Amendment was that we are here directing ourselves to tax avoiders or evadersI am
not sure that I realise the differencebut that is not so. It is true that since the Archer-Shee
case there may be more trusts than there would have been, 1050 but most of those, I think,
have probably been hit by other Clauses in earlier Finance Acts. This Clause is not directed
against tax evasion, but is to correct what is felt to be an anomaly, namely, that where a
trust is interposed a man should not be in a better position than if he owned the securities
himself.
My hon. Friend said there was a point here, and that he hoped my right hon. Friend would be
able to deal with it. I agree that in certain cases, of which the case he put may well be one,
there is a point here, but the point is not one which could be or should be dealt with by
accepting this Amendment, and I doubt whether it can be dealt with in this year 1940. The
real problem is the problem of double taxation as between different countries. I think that is
a real problem which in happier days, when countries are at peace with each other, might
well be dealt with on more satisfactory lines than exist at present. Already we have
arrangements with our Dominions, and I think, possibly, certain arrangements with other
countries, but obviously this is not the moment to ask countries to take up that matter. Apart
from that, on the broad issue I can see no particular reason why a person who is subject to
our tax laws should pay less tax than his neighbour because his income comes from a foreign
trust and because his circumstances are such that he desires to educate his children in
America or to use his income abroad rather than here. I agree that there may be cases in
which hardship results from double taxation, but I cannot advise the Committee to accept
65

these Amendments, because the purpose of this Clause is to correct what we feel to be an
existing anomaly.

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TRUSTEE (WAR DAMAGE INSURANCE) BILL. [H.L.]HL Deb 17 June 1941 vol 119
cc407-13
LORD MANCROFT My Lords, my noble friend on the Woolsack has introduced a Bill which is
likely to have the full support of your Lordships; it certainly has my full support. I think it is a
good Bill and necessary, intended, as my noble friend has said, to remove doubts. There may,
however, be two doubts in the Bill to which I will ask your Lordships to allow me to draw your
attention. I trespassed a little when this Bill was introduced last week and I ask pardon for
having done so. I did not realise then that it was only the First Reading of the Bill. The point I
then raised, which was mentioned also by the noble Earl, Lord Clanwilliam, seems to me to
need further elaboration.
In the first place, let me say this. I know well that the provision in Part II of the War Damage
Act of 1941, dealing with chattels, is a voluntary provision. I know also that this Bill, so far as
trustees are concerned, is also non-obligatory, and that a voluntary option is given to trustees
to insure or not, as they may like to do. Let me draw your Lordships' attention to one of the
points which I think ought to be cleared up. I make these observations from my own personal
experience. Let me be allowed to assume this: There are chattels in a private house in a part
of England which has not been affected by the war so far, and which, so far as human
knowledge can foresee, is likely to be a safe area. The trustees wish to insure. The cestui que
trust opposes. Under this Bill the trustees can disregard the wishes of the cestui que trust.
That is quite clear to me. But the trustees are under no obligation whatever to insure. 409 It
does not matter what the tenant for life or the remainder men may say. The trustee is not
under an obligation to insure.
But my noble friend on the Woolsack drew attention to paragraph (b) which says: to apply
any capital money and, pending" the word "pending" raises a doubt the making of
provision for such application as aforesaid, to apply the income of any property subject to
those trusts, without obtaining the consent of any person entitled wholly or partly to such
money, securities or property or to the income thereof. That is not clear to me. "Pending"
confuses me. The money for the premium can be obtained by applying capital. Docs this
paragraph operate only when capital assets have been sold and the capital money is used, or
does it mean that if income is ultimately used and not capital the income is not freed from
the provision put in this paragraph? The word "pending" makes the meaning doubtful by giving
a temporary meaning to the source of the premium. I therefore draw my noble friend's
attention to that and ask him if this paragraph should be stated to apply where income as
well as capital is used alternatively.
66

Now, let me make a case of another kind. In a part of England with which I am closely
acquainted, some areas are in the heart of the country and may be regarded as likely to be
free from bombing risk. A man lives, there. He has his own house and his own chattels. He
insures under Part II of the 1941 War Damage Act. In the next parish is a house for which he is
trustee, with chattels in that house of which he is also trustee for the tenant for life and
onwards. If he is himself insured under Part II of the Act of 1941, he may say to himself,
"Well, my trust chattels in the next parish are almost out of danger; I do not think I should put
my cestui que trust and the remainder men to the expense of insuring, and the tenant for life
is not anxious that I should insure. He is quite willing I should not insure." One day the house
is bombed; the trust chattels are destroyed, and the tenant for life is killed. Then come along
some remote beneficiariesit may be a hospital or they may be remote descendants of the
settlorand if the trustee has not insured the chattels, they 410 say: "You were prudent
enough to insure your own chattels in the next parish, but not prudent enough to insure our
chattels." I remember roughly what the late Lord Lindley said about the duty of trusteesthat
in the matter of a trust you not only must be as prudent as you would be with your own
possessions but you must be more prudent as a trustee than you would in your own case. It
seems to me, therefore, that if a trustee insures his own chattels and does not insure trust
chattels, he is not more prudent but less prudent than he was in his own case.
I think there is something that must be cleared up here, because if a remainder man, after
the death of a tenant for life, should attack the trustee and say he was imprudent and bring
the matter into Court, the Judge would be likely to say that instead of being prudent he had
been less prudent and that he must pay what those uninsured chattels were worth, if they
were destroyed. I therefore make the suggestion to my noble and learned friend that he
should make it more clear in this Bill that a trustee has complete and full discretion to do
what he thinks best; that what he does in accordance with his own unfettered decision should
not put him in peril of being called upon to make good anything which might be lost if he had
not insured against war damage of chattels. I bear in mind that he is not compelled to insure,
but the Bill does not say that he shall not be held liable if he has not thought proper to insure
against war damage under the powers of this Bill. A trustee should be given in this Bill the
definite right to decide whether to insure or not and he should come within no mischef if he
does not insure. My noble friend the Earl of Clanwilliam has written me to say that he would
have been here to support my plea if he were not compelled to be in Ireland. As your
Lordships may have seen in the Official Report, the noble Earl raised a similar point last
week.
The noble Lord, Lord Faringdon, put last week a question as to the relation of insurance
premiums and Income Tax. I know that under Section 82 of the War Damage Act, 1941, a man
who pays a war damage premium is not allowed to debit that premium against his Income Tax
return. That seems to me an unjust and a wrong thing, and for this reason 411 If the chattels
are destroyed and they are not insured no values in chattels or money are there upon which
Estate Duty or other duty will at intervals accrue to the State. After all, in all our private
possessions the State is a partner of the private person and at the present time a very big
partner. It seems, therefore, that if a person has to find out of capital or income money to
67

pay a premium to preserve assets, the State, which is at any rate a partner in the benefits,
should allow the premium to be debited against Income Tax returns of the person who
provides the premium.

There is a precedent for that. I think there is a form called Form 99 under Schedule A of the
Income Tax system on which a man can claim allowance or credit in relation to his extra
maintenance expenditure on his taxed Schedule A property. Among other things he is allowed
to debit a fire insurance premium because it protects the capital value upon which the State
ultimately takes tax and duty benefits. For that reason I think that Section 82 of the War
Damage Act should be reconsidered. It is an injustice that it puts all the burden of protective
insurance expenditure on the taxpayer, although part of the benefit arising from preservation
of the value of property which may be destroyed will eventually accrue to the State. I have
tried to explain what is in my mind on the various points and perhaps my noble and learned
friend on the Woolsack will guide me as to whether my doubts are ill-founded.
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TRANSPORT BILL.HL Deb 09 July 1947 vol 150 cc261-394 261

2.47 p.m.
LORD BEVERIDGE My Lords, the Amendment which stands in the name of the noble Lord, Lord
Rankeillour, and myself is fundamentally different from the Amendment moved on the
Committee stage, as he has pointed out, in being limited to the sale and subsequent
investment of stock first received by the trustees as compensation. I think the Amendment as
moved by the noble Lord in Committee was subject to the criticism made by the noble and
learned Viscount, the Lord Chancellor, that it would mean amending the whole of the trustee
legislation through the Transport Bill, because it would have been possible under that
Amendment, for trustees who wished to get extended powers, just to buy a parcel 390 of
transport stock and then sell it again and, of course, the Stock Exchange would have seen
that there always was a convenient parcel which passed from hand to hand, setting the
trustees free from their trustee obligations. But this is not that Amendment at all; this is
absolutely limited. The words make it quite clear that it is limited to the trustees who first
receive stock in compensation for securities or other property held. If the words are not clear
enough, I am sure that the noble Lord, Lord Rankeillour, and certainly I myself, would be
willing to use any other words which make it absolutely clear.
The Amendment, by limiting the concession to the first recipient, avoids making the
Transport Bill a means of amending the whole of the Trustee Acts. It follows the precedent of
the Coal Act. What reason is there for disregarding that precedent? What are the differences?
There is one difference, of course, that we have a Government of a different political colour;
but none of us thinks that that ought to make a difference, and I am quite sure that the noble
and learned. Viscount on the Woolsack does not make that difference. It is the business of all
Governments to protect the interests of trusts, which means, of course, watching the
68

interests of the beneficiaries of the cestui-que trusts in the changed circumstances of to-day,
and protecting them from hardship and loss, if possible.

*******************************************************************

Clause 1.(POWER BY ORDER IN COUNCIL TO ESTABLISH FEDERATION,

ETC.)HC Deb 09 June 1953 vol 516 cc37-180
Mr. Davies The right hon. Gentleman is in a dilemma. When I follow on his argument to its
logical conclusion he protests that I am putting words into his 88 mouth or that I am carrying
the argument too far. An agreement had to be made, and was made, between Her Majesty's
Government in the reign of Queen Victoria and the then chiefs. First, in regard to Nyasaland,
agreement was made somewhere about 1891. It is referred to in an Order in Council of 14th
May, 1891, as follows: By virtue of an agreement made with the chiefs of Nyasaland the
land has now become a Protectorate of Her Majesty Queen Victoria. We sought the consent
of the people at that time in order that we might throw our protecting arm around them. Why
is it now not necessary to seek that consent again when a new form of Constitution is being
set up? The right hon. Gentleman said that as we were now trustees we were always entitled
to do what we, the trustees, liked, although it was something which the beneficiaries or
cestui que trust did not like. In stating that, the right hon. Gentleman is contradicting his own
statement that all the Africans are welcoming this new Constitution. If this is being done by
the trustees because they alone are satisfied that it will be in favour of the Africans, then
those two arguments cancel one another out. Surely if we made an agreement with the chiefs
as to the kind of Constitution they were to have, we should make a new agreement when we
propose to change that Constitution.

*******************************************************************

New Clause.(POWER TO MODIFY PROVISIONS AS TO DIVISION OF

TRUST FUND.)HC Deb 07 July 1961 vol 643 cc1881-918
Mr. A. J. Irvine I think it right that should say a word at this point upon certain mattersI
shall be very briefarising from the speeches made by my hon. Friend the Member for
Ashfield (Mr. Warbey) and my hon. Friend the Member for Oldham, West (Mr. Hale). I think it
is desirable that we should make it plain to my hon. Friends what has been in our minds in
this connection having regard, among other things, to the kind of considerations to which my
hon. Friend the Member for Ashfield has referred.
I thought that my hon. Friend spoke on this matter with great reasonableness and cogency,
and I wish to make it quite clear that I agree with a great deal of what he says. I agree with
69

him that the economic policies which have been pursued have contributed markedly to the
movement of what we are, I think, calling for this purpose gilt edged. But I would ask him to
remember that we do not regard it as following from the passing of the legislation now that it
will, perhaps, have an ill effect on gilt-edged prices. We do not regard that as a necessary
event.
1897 What we are doing here is making an attempt in the Amendments which we have tabled,
and the attitude we have taken up, within the limits imposed by the Bill, to help a particular
class of person who is affected, and very sadly affected, in the way my hon. Friend has so
reasonably and cogently described. After all, some of the people who are suffering from the
movement of prices of gilt-edged stocks are trusts and beneficial trusts. My hon. Friend will
have constituents of this class of person who are being adversely affected by this movement. I
want him to realise that those of us who have been concerned in the matter are anxious,
within the limits that the subject of the Bill imposes, to come to the assistance of a particular
class of person who is suffering precisely in the way he has described. We cannot go further.
Our interventions in this field have been designed with that purpose in mind.
In conclusion, I would say to my hon. Friend that he must also realise that any action to be
taken by a trustee under the Bill is optional. A trustee is not required to take action. He need
not do anything if he does not care so to do, but if he wants to take action which he thinks
will have the effect of safeguarding or improving the prospects of the beneficiaries of his fund
or of the cestui que trust, then he can take that action. We have been inclined to take the
view, and do take the view, that the trustee should be given considerable liberty when he has
come to a decision about the action which he should take.
Mr. Warbey Before my hon. and learned Friend sits down, I should like to put this to him. He
said that his hon. Friends took the view that the Bill, and more particularly this new Clause,
would not make the situation worse as far as gilt-edged securities were concerned, but I
would remind him of the passage which I quoted from the speech of our hon. Friend the
Member for Gloucester (Mr. Diamond), in which he said that the Bill, and, still more, the
variations of the fifty-fifty relationship, would, in fact, lead to a situation in which there
would be a further fall in gilt-edged securities and that the power of the Government to
borrow cheaply would be prejudiced.
Mr. Irvine In reply to my hon. Friend, I would only say, first, that I do not 1898 admit that
this will be the necessary consequence of the Bill. What I do say to the House and to my hon.
Friend is that if that is a possible consequence, then for goodness' sake let us give trustees
the opportunity, by provisions of this kind, to come to the assistance of beneficiaries and
cestui que trusts who are likely in that event to suffer.
Mr. Stratton Mills (Belfast, North) This Bill is likely to become law at some time later this
year. At that time there may be a lot of funding going on in the steel industry and the yield
there will be about 5 per cent. and 5 per cent. and may well be attractive to trustees. Can
the hon. and learned Gentleman give any assurance to trustees who are very likely to invest

70

in these shares that they will be protected from people like the hon. Member for Ashfield (Mr.
Warbey)?
Mr. Speaker Order. I think that shows that it is necessary to consider what the rules of order
must be in this discussion.
The Solicitor-General This debate has ranged very wide, but I desire to make just three or
four observations. First, I want to make it plain that the Bill is not erected on a basis of, and
does not presuppose, a secular inflation causing a fall in gilt-edged and a rise in equities. As I
pointed out on Second Reading, in a situation of economic growth, which is what all parties
wish to see, the strong tendency will be a rise in equities without any inflation. It is because
of that that the Bill is intended to give a new flexibility in the investment policies of trustees,
so that the beneficiaries can take advantage of and participate in the country's economic
growth.
Having said that, I find myself in complete agreement with the hon. Member for Ashfield (Mr.
Warbey) when he emphasised that it is still risk capital, and it was for that reason that we
built into, and still have built into, this Bill the fifty-fifty basis. When I pointed out that it was
risk capital, I did not, because I wanted to avoid controversy on the Bill, link it to the naked
exercise of political terrorisation that we have had from the hon. Gentleman, but even apart
from political risks this necessarily remains risk capital in the wider-range part of the fund.
1899 It is also true, as the hon. Member for Oldham, West (Mr. Hale) pointed out, that we
must not be concerned only with large trustees, institutional trustees, in London. What we
are concerned with is the whole mass of small trustees who may not, as the hon. Gentleman
said, be able to call rapidly on expert advice. That is why we have this fundamental feature
of the fifty-fifty basis.
Nevertheless, we saw that it was desirable to give a certain greater flexibility, which is what
is done by this proposed new Clause. Whether the proportion of fifty-fifty shall be varied at
any time will depend on the circumstances of the case and of the time, and a decision can be
taken in the light of the prevailing and prognosticated circumstances. I therefore commend
the new Clause to the House.
Question put and agreed to.
Clause read a Second time.
12.15 p.m.
Mr. Mitchison I beg to move, as an Amendment to the proposed Clause, in line 6, to leave out
from the beginning to "as".
This Amendment seeks to leave out the limiting words which provide that the proportion shall
not be greater than three to one.

71

Turning to the other Amendments which it has been agreed shall be taken with this one, that
in the same lineto leave out "three" and to insert "ten"is an alternative to the Amendment I
have moved because it would substitute a limitation of ten to one which is, of course, a much
wider limitation then the three-to-one limitation.
The next Amendmentin line 8, at the end to insert: and a proportion includes the
proportion of one to nothing " really goes with the first Amendment, and provides for a
proportion which the more mathematically inclined of us will suspect corresponds to infinity.
The object of all these three Amendments is to extend the present prescribed limitation, or
to remove it.
The next Amendmentin line 26, at end insert: (which may be greater than three to one)
1900 is related to a slightly different question. Subsection (4) of the new Clause provides that
the Order may be revoked by a subsequent Order prescribing a greater proportion.
The right hon. and learned Gentleman, when speaking on the Clause itself, explained that
that was not intended to be a proportion greater than three to one, but was to enable the
Treasury if, finally, the proportion was to come down to three to one, to get there in stages
and, perhaps, first prescribe two to one and then, by a subsequent Order, prescribe three to
one. We, on the contrary, feel that there should be no limitation on the first Order so, a
fortiori, there should be no limitation on a second Order, and that, at any rate, it should not
be tied to the proportion of three to one. Those are the four Amendments we are now
considering.
I am sorry that my hon. Friend the Member for Oldham, West (Mr. Hale) has left, because I
want to say that in approaching this matter I feel very strongly that we have to do what we
can to protect people who are the beneficiaries under comparatively small trusts, many of
them arising out of a death and a will, and others arising out of simple marriage settlements
and the like, and including, as in fact they do, some much larger trusts, because, when we
come to a later part of the Bill, it will be found that the limitations we are now considering
apply also to local authority investments.
I feel that in all these casesbut, perhaps, particularly in those of the smaller trustswe are
concerned to be fair to the trustees, and I would accept that the Government have
endeavoured to do so without regard to any effect on the gilt-edged market. What effect
there will be is a matter of judgment, and my own view, for what it is worth, is that the
effect is not likely to be very great.
That, however, is not quite the point. These are usually people not well off, who will be
landed with irredeemable War Loan, to give an example, and other Government stocks that
have depreciated very severely. They should be given the opportunity to get out of those
stocks if the only reason that they cannot get out of them is the terms of the trust.
1901 It is the case, I think, that the great majority of recent trusts make much wider
provision than even the law enjoins as the minimum, or as the Bill would allow but, assuming

72

that there are no such provisions in these comparatively small and simple trusts, those are
the people with whom we are particularly concerned.
One has in mind people like the constituent of my hon. Friend the Member for Ashfield (Mr.
Warbey)people with whom one has every sympathywho found her funds tied up in 3 per
cent. War Loan, or whatever it was. There are many such people, and many of these trusts
are cestui que trusts, not by virtue of any formal instrument but under wills, and we should
try to be fair to them. It is because we on this sideindeed, I hope on both sidesare anxious
to do what we can for these people that we have supported a considerable enlargement even
of the terms of the B[11 and in the direction of giving people the opportunity to choose, if
they so wish, to get out of the stock.
I agree that broader questions are involved, but one simple proposition that seems to be quite
clear is that the law ought not to be such as it has been for some time; that people are
compelled to keep the whole of a small trust in one particular form of security, because it is
a Government security when they do not to
Mr. Warbey I am obliged to my hon. and learned Friend for giving way. Is he aware that
although my constituents most certainly want to get out of irredeemable War Loan, they do
not want to get into industrial equities but into other Government securities and, in
particular, into Defence Stocks, which would be disregarded by the National Assistance Board.
Mr. Mitchison They are, of course, at liberty to do that under the law as it stands at
present, unless there is some special provision to the contrary in the trust. Nothing in the Bill
removes that liberty; they will remain just as much at liberty to do that as now. There are
people who have a lot of money tied up in irredeemable or long-dated securities and want to
get out and in some, although not all, cases they are only prevented from doing so by the
present provisions.
1902
Sir H. Lucas-Tooth When the hon. and learned Member says that they are only prevented
from getting out by these provisions, it would be fair to say that to switch, for example, from
3 per cent. War Loan to stock in I.C.I. would mean a loss of 50 per cent, income, and that is
a strong deterrent.

*******************************************************************

Constitutional Reform Bill [H.L.]HL Deb 14 July 2004 vol 663 cc1297350 1297
5.47 p.m.
Lord Renton: It would be very helpful if the noble and learned Lord the Lord Chancellor could
explain a little matter. In Schedule 1(5) as it now stands, on page 43, there is a reference in
73

French, which is very unusual in describing an Act of the British Parliamentthe Cestui que
Vie Act 1707. As a common lawyer, I find the following provision strange: Any reference to
the Lord Chancellor and keeper or commissioners for the custody of the great seal of Great
Britain for the time being in section 1 of the Cestui que Vie Act 1707 is to be construed as a
reference to a judge of the Chancery Division". Can the noble and learned Lord the Lord
Chancellor say what that means and whether he intends to perpetuate it?
Lord Falconer of Thoroton: I cannot tell the noble Lord what it means. I am sure that it is
extraordinarily sensible to transfer the Lord Chancellor's function to a Chancery Division judge
there. Cestui que Vie has some resonance with trust law but I cannot explain precisely how. I
defend myself in being unable to explain it by the fact that none of my technical amendments
relates to that paragraph. But I shall write to the noble Lord and explain why thisI agree,
somewhat eccentricprovision appears.
Viscount Bledisloe: There is here a whole raft of amendments to Schedule 1. The noble and
learned Lord has pointed out that Schedule 1 must be amended 1335 in an enormous number
of respects to change references to "the Secretary of State for Constitutional Affairs" to "the
Lord Chancellor". As I understand it, his department will undertake that laborious task and
bring forward all those amendments on Report.
As I understand it, these amendments further amend Schedule 1. We saw some 400 of them in
the Select Committee and dealt with them in what turned out to be a very efficacious way.
The noble and learned Lord very kindly made available the officials in his department, who
had a mastery of the detail such as would have enabled them to answer the question of the
noble Lord, Lord Renton. They explained the details of the amendments to the noble Lord,
Lord Carlisle of Bucklow, and me. We were able to satisfy ourselves and the Select
Committee, to which the role was delegated, on the suggestion of the noble and learned
Lord, Lord Howe, to the two of us, that 99 per cent of the amendments seemed wholly
acceptable.
I suggested to the noble and learned Lord that we took the same approach here. He has
suggested as an alternative that we make the amendments to the Bill now; that we have such
a discussion before Report; and that it is then open to us to return to any with which we are
not satisfied. I confess that I find that an extremely attractive solution which would save a
great deal of your Lordships' time. Speaking for myself, I would be happy to nod through all
the amendments to Schedule 1 proposed today on the basis that on Report all the references
to "the Secretary of State" will be changed to "the Lord Chancellor", and that it will be open
to us to bring forward any individual points on which the officials cannot convince us. If that
is the proposal that the noble and learned Lord makes, it is eminently satisfactory.
Lord Howe of Aberavon: I have sat in silence for most of the day, but I wish simply to say
how proud 1 feel that the precedent that I suggested in the committee of dealing with this
vast raft of mysterious provisions in this informal fashion is being followed in this way.
Procedure is always intended to help us and not to get in the way. I commend the wisdom of
all concerned and wish them luck during the weeks ahead.
74

 9.15 p.m.
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Constitutional Reform Bill [H.L.]HL Deb 07 December 2004 vol 667

cc818-41 818
Consideration of amendments on Report resumed.
Schedule 4 [Other judiciary-related functions and organisation of the courts]:
Lord Goodhart moved Amendment No. 25:
Page 112, line 4, at end insert 270A (1) Schedule 4 (authorised bodies) is amended as
follows.
(2) For "each of the designated judges" in each place substitute "the Lord Chief Justice".
(3) In paragraph (5) (advice of designated judges)
(a) in sub-paragraph (4), for "give such advice to the Secretary of State as he thinks fit"
substitute "notify the Secretary of State whether he concurs with the application";
(b) after sub-paragraph (4) insert
(5) If the Lord Chief Justice does not concur the Secretary of State shall not grant the
application.
819
(4) In paragraph (6) (decision by Secretary of State), in subparagraph (1) at beginning insert
"If the Lord Chief Justice has concurred with the application and".
(5) In paragraph (6)(1), omit paragraph (c)."

The noble Lord said: My Lords, we seem to be a little short-handed at the moment, so I shall
speak very slowly until a few more people come in.
Amendment No. 25 has been brought back from Committee. It amends Schedule 4 to the
Courts and Legal Services Act 1990, as amended by the Access to Justice Act 1999 or, to be
strictly accurate, it amends, not the whole of Schedule 4, but Part 1 of that schedule,
because similar amendments would be needed to Parts 2, 3 and 4.
Under Schedule 4 to the 1990 Act, the Lord Chancellor has power to designate professional
bodies whose members have rights of audience in the courts and the right to conduct
litigation, and to revoke that designation. The Lord Chancellor has power to approve
alterations of rules made by the designated bodies, and can impose rule changes on them.
75

The Lord Chancellor must consult the heads of division but, unlike the situation between 1990
and 1999, there is no need for the heads of division in the courts of England and Wales to
concur.
These are extremely extensive powers that relate to the independence of the legal
profession, which is a matter of very great importance. Indeed, it is almost, although perhaps
not quite, of equal importance to the independence of the judiciary because, plainly, an
independent professional service, willing to act for people whose causes are popular or
unpopular, and willing to act without fear of the consequences, is of the greatest importance
in achieving a society that recognises and follows the rule of law.
The judicial concordat, which we discussed a good deal earlier today, provides that in
relation to the judiciary a number of powers previously exercised by the Lord Chancellor on
his own can only be exercised by the Lord Chancellor with the concurrence of the Lord Chief
Justice. That is because, as a result of the Bill, the Lord Chancellor is seen more as a political
figure and less as a judicial figure than was previously the case. It is therefore thought by the
judiciary to be appropriate that there should be a double lock, and that forms part of the
concordat. Of course, the concordat does not extend to the legal profession, as opposed to
the judiciary, but it seems to us that the same principle should apply. We should have a
similar double lock to ensure the continued independence of the legal profession.
This amendment provides for a double lock. It has the support of both the president of the
Law Society and the chairman of the Bar Council. I believe that the appropriate keyholder of
the second lock is the Lord Chief Justice. The Lord Chief Justice should be able to block the
exercise by the Lord Chancellor of powers in the schedule if the Lord Chief Justice feels that
the way in which the Lord Chancellor is proposing to exercise those powers is a threat to the
independence of the legal profession.
820
It is obvious that the powers given to the Lord Chancellor under this Bill are such that if we
had a Lord Chancellor who was determined to undermine the independence of the legal
professionand we certainly hope that that will never happenthe Bill, as it stands, would
give the Lord Chancellor power to do just that. I beg to move.
Lord Kingsland My Lords, I think I am right in saying that the mischief to which the noble
Lord, Lord Goodhart, addresses himself was created by the Access to Justice Act 1999. Am I
right about that?
Lord Goodhart Yes, my Lords, it was indeed created by the Access to Justice Act 1999. We
protested at the time, but the problem has become more acute because the Lord Chancellor
is losing his judicial functions and becoming more of a political animal, if one can put it that
way.
Lord Kingsland My Lords, I now recall that in the course of that Bill's consideration, we
united with the Liberal Democrats in an attempt to see off the attempt by the predecessor of
76

the noble and learned Lord the Lord Chancellor to remove what, in effect, was a veto by the
designated judges on the Lord Chancellor's ability to change the rules of the professions.
I wholly support what the noble Lord, Lord Goodhart, is seeking to do in this amendment. I
think that it provides us with an opportunity to redress a wrong that was established in the
1999 Act and to ensure that the Lord Chief Justice has, as the noble Lord, Lord Goodhart,
puts it, a second lock on any future initiative by the Lord Chancellor to change the rules of
both professionsthe Bar and the solicitors. I feel sure that in the spirit of the separation of
powers approach to this new legislation, the noble and learned Lord the Lord Chancellor will
feel entirely at ease with this amendment.
Lord Falconer of Thoroton My Lords, the noble Lord, Lord Goodhart, puts the matter
incredibly clearly, as ever. The arrangements set out in the amendment relate to the
consideration of applications from a body to grant its members rights of audience or rights to
conduct litigation or applications from organisations such as the Bar Council, the Law Society,
or other similar organisations, for approval of changes to their qualification regulations or
rules of conduct. It is very important, because the regulation of the legal profession in this
respect is of considerable importance to the independence of the judiciary and, separately,
to access to justice for individual members of the public.
The amendment of the noble Lord, Lord Goodhart, would reverse Parliament's decision in
1999 to place the determinative role for dealing with these applications with a Minister
accountable to it. The amendment is not out of line with the concordat. but it is not in line
with any specific provision in relation to it.
821 Under the 1999 Act, the role that the Minister plays is quite complicated in the sense that
it can be carried out only through a transparent statutory process, and he is under a duty to
consult the Legal Services Consultative Panel, the Director General of Fair Training and each
of the four designated senior judges. The panel and the OFT have a duty to publish their
advice; the Minister has a duty to send their advice to the designated judges, and he makes
his decision while balancing the advice that he receives from the panel, the OFT and the
judges.
The objective that Parliament has given him is to make provision for new or better ways in
which to provide legal services and a wider choice of person providing them, while
maintaining the proper and efficient administration of justice. There is plainly an issue about
the extent to which one wants either a Minister or the judges to have a complete lock on the
issue, because there is an issue about how the public are best served, in relation to both the
independent judiciary and the provision of legal services.

As noble Lords are aware, and as I said on 14 July, in July 2003 I announced a review of the
framework of legal services regulation, which is being led by Sir David Clementi. I gave Sir
David wide terms of reference and he is considering the whole regulatory framework and the
roles and responsibilities within it. The consultation paper issued by his review team earlier
77

this year asked questions about regulatory models and, specifically, about a regulator and the
role of the judiciaryin particular, though not exclusively, the role of the Master of the Rolls,
who has a particularly significant role in relation to the regulation of solicitors.
The noble Lord's amendment makes it clear that what is sought is to restore the judicial veto
to ensure adequate protection for the legal professions so that their independence is upheld.
There is an issue about the extent to which the judges want such a veto, as coming with such
a veto is an obligation to be involved in a whole series of quite complex and detailed issues.
The role of the judiciary in the regulation of the legal professions is one of the factors that Sir
David has been bearing in mind. He intends to publish his report in the week commencing 13
December. I suggest that it would be unwise to alter the existing arrangements until I have
received and considered his report. It is extraordinarily unlikely that, having received his
report in the week beginning next Monday, the Government would come to a conclusion
before either the Third Reading of the Bill in this House or, probably, the completion of its
passage through the Commons.
I suggest to the noble Lord, while understanding that the position of a new Lord Chancellor
will be different from that of the old one, in the sense that the new Lord Chancellor would
not be a judge as the old one was, that nevertheless it would be unwise to impose a judicial
veto at this stage, when the issue of the regulation of the legal profession is under review by
Sir David Clementi. I can give him the clearest possible 822 undertaking that in exercising my
powers under the 1999 arrangements, I shall exercise them with a view to ensuring that
neither the independence of the judiciary nor access to justice is adversely affected. I hope
that, in the light of that reassurance, the noble Lord will feel able to wait until Sir David's
report and what the Government do in relation to it.
Lord Goodhart My Lords, I should say that we recognise the need for the Lord Chancellor to
have the powers that he is given by Schedule 4 to the 1990 Act as amended. We recognise
that the Law Society and the Bar Council act as a form of trade union and, like other trade
unions, are sometimes concerned with the interests of their members to the detriment of the
interests of the general public. Therefore, it is clear that there should be some outside body
which is capable of imposing rule changes on them in appropriate circumstances.
We certainly do not seek to restore the veto to the form in which it existed from 1990 to
1999, in which there were four senior judges, each of whom had a separate and independent
veto. However, at the same time we believe that it is undesirable to leave the second lock
uninstalled for an indefinite period of time. It is certainly my concern that if we do not put
something into this Bill, the second lock will never be introduced because there would be no
incentive whatever for the Government to go ahead with it.
I accept that it is unrealistic to press this matter to a vote at this time of night. I also accept
that it is at least worth waiting to see the Clementi report, which will be issued before we
reach Third Reading, even if, as I hope will be the case, we reach Third Reading on 20
December. However, unless a quick scan of the Clementi report persuades me that there is

78

some reason to the contrary, I am likely to bring this amendment back at Third Reading.
Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Falconer of Thoroton moved Amendment No. 26: Leave out Schedule 4 and insert the
following new Schedule
"OTHER FUNCTIONS OF THE LORD CHANCELLOR AND ORGANISATION OF THE COURTS
PART 1 AMENDMENTS
Habeas Corpus Act 1679 (c. 2)
1 The Habeas Corpus Act 1679 is amended as follows.
2 In section 1 (bringing before Lord Chancellor or other judges) omit "the lord chauncelior or
lord keeper of the great seale of England for the time being or".
3 In section 2 (appeal to Lord Chancellor or other judges) omit
(a) "the lord chauncellour or lord keeper or" in each place;
(b) "lord chauncellor lord keeper";
(c) "the said lord chauncellor or lord keeper or" in the first and second places;
(d) "lord chauncellor or lord keeper or" in the last place.
4 In section 9 (Lord Chancellor or other judge unduly denying writ) omit "the said lord
chauncellor or lord keeper or".
823
Cestui que Vie Act 1707 (c. 72)
5 Any reference to the Lord Chancellor and keeper or commissioners for the custody of the
great seal of Great Britain for the time being in section 1 of the Cestui que Vie Act 1707 is to
be construed as a reference to a judge of the Chancery Division of the High Court.

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79