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Orders of the Day

Trustee Bill [Lords]

Not amended in the Standing Committee, considered

Order for Third Reading read.--[Queen's consent, on behalf of the Crown, and Prince of Wales's consent, on behalf of the Duchy of Cornwall, signified.]

5.37 pm

The Parliamentary Secretary, Lord Chancellor's Department (Mr. David Lock): I beg to move, That the Bill be now read the Third time.

I shall be extremely brief. This is a Law Commission Bill, which has been received with approval by right hon. and hon. Members on both sides of the House. It has been thoroughly debated both here and in another place. It provides for the reform of the law of trust, especially as it relates to the powers of trustees to invest trust funds in default of the inclusion of express powers of investment in the will or trust instrument. In England and Wales, it recommends a range of reforms that is intended to facilitate more effective trust administration in areas including collective delegation by trustees, the use of nominees and custodians, powers of insurance and the remuneration of professional trustees. The Bill has been widely welcomed by the great majority of commentators. Those with reservations have, in the main, wanted the Bill to do more. Few have objected to what it does achieve.

The Bill will be of substantial benefit to beneficiaries of trusts, including many charitable trusts. As I have said, it has already been debated at length. There was a long debate on Second Reading and extensive consideration in Committee. I commend the Bill without further explanation.

My noble Friend the Lord Chancellor and I are grateful for the generally constructive atmosphere in which debate on the Bill has been conducted, both here and in another place. In many respects, it has been a model of the way to run uncontroversial Bills, and I hope that it is a model to which we can return where appropriate in future.

5.39 pm

Mr. Nick Hawkins (Surrey Heath): I confirm what the Minister has said about the way in which the Bill has been dealt with. Its passage has been relatively uncontroversial in another place and in Committee, both in the Second Reading Committee and in Standing Committee. However, one or two matters have been raised in another place, and in this place by my hon. Friend the Member for Eddisbury (Mr. O'Brien), who has given his apologies both to me and to the Minister for the fact that he is unable to be in the Chamber this afternoon.

The Minister will confirm that there was a relatively extensive debate in Standing Committee A on my hon. Friend's amendments in relation to clause 30 dealing with the remuneration of trustees of charitable trusts. My hon. Friend raised concerns that had been raised with him by the Institute of Chartered Secretaries and Administrators, and by others. Those points were similar to those that were raised by several Lords in another place.

Following Standing Committee A, the Minister wrote at considerable length both to my hon. Friend and to other members of the Committee. I should mention that my

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hon. and learned Friend the Member for Harborough (Mr. Garnier) has dealt with the matter at all its Commons stages. I declare my interest as a member of the Bar, although I add, as most other Members in both Houses have done, that I have never pretended to be any sort of expert on trust law. However, like, I suspect, the Minister, I had to pass examinations on it as part of my Bar finals. I remember some interesting, arcane points about the Trustee Investments Act 1961, the weaknesses of which the Law Commission has sought to address in putting forward the proposals that led to the legislation.

I join Lord Kingsland, the shadow Lord Chancellor, in paying tribute, as many other Lords did, to the work of the law commissioner Mr. Harpum, who led the work that led to the Bill. I know that the Minister and the Lord Chancellor have similarly paid tribute to him in debates.

I return to the Minister's detailed letter, which runs to four and a half pages. We still have a concern, which I would like him to deal with. In his letter, he rejected my hon. Friend's arguments about issues relating to clause 30. It says:

meaning my hon. Friend--

It goes on to set out the reasons why the Government chose to address the particular issues in the way that they did--by giving powers for secondary legislation.

The concern that I share with my hon. Friend is that it should have been possible for the Government to accept the thrust of his points in this primary legislation. We have repeatedly pointed out, both in the Chamber and in Committee, our concern that the Government are making a practice of giving themselves many more general powers to enact later delegated legislation. The Bill is perhaps only a small example of that, but given that amendments were tabled in another place by the Government--the Lord Chancellor tabled a number of amendments put forward by the Charity Commission, which were accepted by Members on both sides in another place--we think that there should have been time for the Minister to table amendments to meet my hon. Friend's concerns in the Bill itself. There was no particular time problem. We certainly do not have any particular time problem this evening. We think that, in the four-and-a-half page attempt to justify their position, the Government have got it wrong.

It is only a small point. We have given a general welcome to the Bill. Nothing that I say this evening should be taken to undermine that general welcome--the Bill is undoubtedly a welcome updating of trust law--but I hope that the Minister will try to give a better answer than he did in the letter.

We do not think that the Government have finished the job. It is always unsatisfactory when, in a short Bill designed to enact Law Commission proposals, the Government leave a gap. We believe that they have done

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so on this occasion, and that the Minister's reply is inadequate. I speak not just for my hon. Friend the Member for Eddisbury, but for a number of those outside the House who are specialists in this field of law and who backed my hon. Friend's arguments in Committee and the same arguments when they were put in another place.

5.45 pm

Mr. Alan Meale (Mansfield): While the Bill is before the House, I take the opportunity to highlight concerns that have arisen since my recent experience in dealing with trust law, with the help of the Parliamentary Secretary, Lord Chancellor's Department, my hon. Friend the Member for Wyre Forest (Mr. Lock).

I refer to three trusts centred on my constituency--the F. B. Bailey Thomas charitable fund trust, the F. B. Bailey Thomas provident fund trust, and the F. B. Bailey Thomas personal fund trust. The trusts were set up in 1970 to prevent a situation whereby, under the Mental Health Act 1959, the moneys from the trusts could be lost to the many workers employed at Mansfield Brewery. A considerable sum was involved--for all three trusts, a combined total of many hundreds of millions of pounds.

Another reason for the establishment of the trusts was to safeguard the independence of the Mansfield Brewery company and the interests, welfare and employment of the many thousands of people who work for the company.

As my hon. Friend knows, the trusts were run by a gaggle of people who served on all three trusts simultaneously. One of the members on the personal trust acted as the solicitor for all the trusts. The provisions of the trusts contained a rider to the effect that the shares in the brewery should not be sold unless that was in the interests of the beneficiaries, but members of the trusts decided on that while serving on all three trusts at the same time. A contract was awarded for private consultation with one of their own companies. Indeed, a senior trustee on two of the trusts was a senior director at Ernst and Young, which was involved with the trusts.

That is not a satisfactory situation. Despite all the work done by the Standing Committee, there are still tremendous gaps in trust law--for example, in the case of trustees serving on a number of trusts, all intermixed, and handling matters in which they have pecuniary interests. Conflicts of interest must inevitably arise. Mr. Nagel whom I mentioned as a director of Ernst and Young is an example. Another example is the solicitor who was a trustee and also acted as the solicitor for all three trusts.

Pecuniary interests were also involved when trustees who held shares in the company saw an opportunity to cash in those shares and took decisions that favoured themselves and their families to the tune of many millions of pounds. The Bill does not cover all those situations, as I have pointed out privately to my hon. Friend.

I am concerned also about the role of the public trustees. When these matters arose 12 or 14 months ago, I met the public trustees more than once. It seemed that they were intent on only one thing: allowing the sale of the shares on the open market. I pointed out to them that in the case of the provident fund, which was established to protect the welfare of the beneficiaries--people who used to work for Mansfield Brewery or still worked there, numbering about 3,200 in total--not a single one of the beneficiaries wanted the sale of shares to go ahead. Petitions were presented to the Public Trust Office,

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the Minister and the company, showing that no beneficiary wanted any part of their shares sold on because it would put at risk their jobs. Nevertheless, the sale of those shares proceeded.

Other matters also caused much concern. For instance, of the many hundreds who applied for aid from the provident fund, which held millions of pounds, who had worked in the company for a number of years after 1970, nearly all were denied. They were told firmly by the trustees in charge at that time that the trusts were established not to benefit the beneficiaries, but as a simple mechanism to prevent funds leaving the company, possibly damaging it. That flies in the face of all the evidence and the rules on which such matters were established. Not one case of a collective submission for aid from the company's workers to the trustees has been passed, stretching back many years.

In many trusts, only about 10 or 20 people, and certainly fewer than 100, are involved. But in this case, more than 3,000 workers were involved, and we are talking not about a few pounds or a few thousand pounds but--

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