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Mr. Deputy Speaker (Mr. Michael Lord): Order. I hesitate to interrupt the hon. Gentleman because I am conscious that his remarks relate to the Bill, but this is a Third Reading debate and he must talk specifically about the Bill's contents, not what is not in it or what it cannot do.
Mr. Meale: The Bill does not fully cover the need to protect the beneficiaries of such trusts. As I said, the trusts involve many hundreds of millions of pounds, yet 3,200 beneficiaries can obtain no help. Despite repeated requests for a representative on the board of trustees, that has been denied them.
Can the Minister give some assurance that some of those 3,200 beneficiaries will be allowed to represent their interests on the board of trustees? The trust was managed in such a way that huge amounts were transferred from the provident to the charitable fund. Interests were clouded, and Mr. Bailey Thomas's personal fund, which had to be transferred on his death, was transferred to the charitable fund not to the provident fund, as it should have been under its remit. Two or three people are now sitting on hundreds of millions of pounds, at least a third of which should be in the rightful ownership of and managed by the beneficiaries of the provident trust, but it is not.
Will the Minister give some assurance that such situations will not occur in the future? Will he further use his good offices and the Bill to influence the public trustees to examine whether a representative of the beneficiaries could be appointed to protect their interests? Will he use his influence to cause the Public Trust Office, of which he has charge, to change the current public trustee? I can say categorically that, of the 3,200 beneficiaries who have a claim to the beneficiaries' cash, not one has any faith whatever in the person holding that position.
5.54 pm
Mr. Simon Hughes (Southwark, North and Bermondsey): I apologise for not being here at the beginning of the debate, which I knew would come quickly and pass relatively quickly. I propose to make a
couple of comments, but I am conscious that, like the hon. Member for Surrey Heath (Mr. Hawkins), for today's purposes I am from the substitutes bench. Like the hon. Member for Eddisbury (Mr. O'Brien), my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) cannot be here, and I give his apologies to the House. He is opening a school in Devon today, which he regarded as something that only he could do, whereas I could easily fill in for him here.I also wish to place on record, as my hon. Friend did at an earlier stage, our thanks to our colleagues in the other place, particularly our noble Friend Lord Goodhart, who is an eminent trust lawyer. I did my trust law course at university, and it produced the only memorable quote from any lecture during the whole of my three-year law degree, and that was from Gareth Jones, himself an eminent trust lawyer. The week before our final exams, which were to take place on Ascension day, he said, "Some of you will understand this and some of you will not understand it, and next week some of you will go up and some of you will not go up." Some of us just managed to get up high enough to be able to move on, at least to another degree.
Trusts, as the Minister said, are perceived by the outside world as being dull, dry, technical, legal and complex, but they are everywhere. I, probably like every other hon. Member, am a trustee of a few small, relatively unimportant trusts. We are all asked to perform that role, either in a family or community context. But trusts are often responsible for huge assets and important issues.
I thank the Minister, his colleagues, and the Conservative spokesmen for their collaboration and co-operation. The Bill was brought forward as a result of the Law Commission's view that the law needed to be reformed, and it received widespread support throughout both the profession and the professions, and on both sides of the House. Whatever its demerits--Liberal Democrats have not argued that it is a perfect Bill--it improves the law considerably, particularly in the way in which it widens investment powers, which was its main purpose.
I want to ask the Minister the one question that has remained as a recurrent theme in the speeches, contributions and questions of my hon. Friend the Member for Torridge and West Devon, and that concerns people in professional capacities, not usually lawyers, although they could be, charging trusts, which have no recourse, at such a level that their funds are seriously depleted. We are all conscious that it is easy for professionals--if I may be so bold to say so, it is often banks and such organisations--to charge considerable amounts of money, because they administer funds and are effectively in control of day-to-day management, unlike in the auditing of accounts for a small local community or organisation, which is done for £400 a year.
People have often sought a way to challenge professional fees. That is not dealt with here, but it is a recurrent concern. When the Minister replies will he say how the Government envisage remedying that problem? What recourse is there? Do they contemplate either further legislation in the context of trust law, or further legislation in the context of Department of Trade and Industry legislation, which will deal with the regulation of professional bodies and their accountability?
There are one or two other matters of lesser importance that my hon. Friend raised to which at some stage the House will return, but, consistent with the approaches of
other hon. Members, it is sufficient at this stage to say that the Bill considerably improves the law and is a good piece of legislation. Society will be better off as a result and we wish it well.5.59 pm
Mr. Alan Hurst (Braintree): Like others, I propose to speak briefly. First, I declare an interest as a practising solicitor and doubtless a trustee of several small trusts.
I am spurred to speak by my hon. Friend the Member for Mansfield (Mr. Meale). I am not in a position to speak about the facts relevant to the trusts to which he referred. However, I fully comprehend the difficulties that beneficiaries encounter, especially in cases of clear, blatant and dishonest breach of trust. Such a breach may be a matter for the criminal law, but that does not necessarily help the beneficiary if the money has been made away with and there is nothing left.
The Bill is to be applauded for introducing a concept of duty of care. I am not sure how much further it goes beyond the obligation on trustees to act in good faith. The hon. Member for Southwark, North and Bermondsey (Mr. Hughes) hinted at the difficulty of enforcement when a problem arises. It becomes even greater if the trust is relatively small. In some ways, it is easier when a large sum of money is disputed. The cost of seeking a legal remedy for breach of trust in the case of small sums may outweigh any possible gain.
If I remember it correctly, the case of Jarndyce v. Jarndyce in "Bleak House" was pursued for decades and ended only when all the trust money was spent on the fees of the competing lawyers. I do not necessarily claim that that is the worst that can happen, but it is not helpful to trustees for moneys to be squandered in that way. I therefore hope that, in due course, my hon. Friend the Minister might be able to consider remedies that would make it easier for beneficiaries to follow up what they perceive as defects in the administration of the trust.
I should like to consider the way in which to undertake a proper assessment either of the trustees or those whom they employ, as the Bill envisages. In some ways, it is easier if those involved are solicitors. I shall have to consider the matter in more detail, but it may be possible to obtain a remuneration certificate for charges from the Law Society. That facility does not exist when the relevant trustee or agent is not a solicitor, but perhaps a banker. People, who are possibly elderly and in circumstances that worry them, often enter into a trust arrangement with their bank on standard term document clauses. Those clauses carry horrific charges, to which they have already agreed, for remuneration. I referred to that briefly in Committee.
When a small trust has been entered into, perhaps many years previously under the terms of a will, and the testator dies and the estate is very small, banks are not unknown to renounce probate. They thus abdicate their responsibility for what they took on as a profitable exercise 20 years previously because it is no longer profitable for them. That might be regarded as a breach of trust. It certainly does not constitute acting in good faith, and there is currently little remedy for the beneficiary who suffers the consequences.
6.3 pm
Mr. Lock: With the leave of the House, I shall respond to the debate. I am grateful for the welcome that hon. Members of all parties have given the debate. I shall attempt to respond as briefly and succinctly as possible to the various points that hon. Members have made.
First, let me deal with the points of the hon. Member for Surrey Heath (Mr. Hawkins), and the matters that I set out in detail in a letter to the hon. Member for Eddisbury (Mr. O'Brien). The Bill contains two separate secondary legislation powers. First, clause 30 includes the power to make regulations for remunerating charitable trustees. That is highly appropriate because the definitions of the circumstances in which some charitable trustees should be remunerated, and adaptations to them, are ideally suited to secondary legislation.
The main anxiety of the hon. Member for Surrey Heath was about clause 41 and the suggestion of a Henry VIII power to make regulations to overrule trustee investment criteria in local or private Acts. I am afraid that the hon. Gentleman simply made a bad point. Schedule 2 amends the Cereals Marketing Act 1965, the Betting, Gaming and Lotteries Act 1963, the National Heritage Act 1980, the Universities and College Estates Act 1925 and several other measures. They are all the relevant measures that we have been able to find, but a full Lexis search will not reveal every single trust. To hamper the beneficiaries of a trust under a private Act that has not yet been identified with having to wait for primary legislation before doing the good for them that the Bill does for all other trusts is an outrageous proposition, which does not bear consideration.
I must place on record the way in which my hon. Friend the Member for Mansfield (Mr. Meale) has diligently pursued the interests of his constituents in relation to the Mansfield brewery trusts. He has done that relentlessly and is fully aware of the need for the trustees to be accountable to the beneficiaries. The standard investment criteria in clause 4(3) may assist him. Paragraph (b) provides for trustees to bear in mind
- the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust.
Jurisdiction over the public trustee is not within my ministerial capacity, but I will draw the remarks of my hon. Friend the Member for Mansfield to the attention of my hon. Friend the Parliamentary Secretary, Lord Chancellor's Department, the Member for Liverpool, Wavertree (Jane Kennedy). She is primarily responsible for that aspect of policy, and I am sure that she will write to my hon. Friend in response to his remarks.
The hon. Member for Southwark, North and Bermondsey (Mr. Hughes) and my hon. Friend the Member for Braintree (Mr. Hurst) talked about trustees overcharging. That is a serious point, which was made in a responsible fashion in Committee, and I am grateful for the opportunity to return to it. Clause 29 provides that trustees of a trust corporation, not a charitable trust, are entitled to receive reasonable remuneration from the trust. My hon. Friend the Member for Braintree and the hon. Member for Southwark, North and Bermondsey
described circumstances in which trustees do not act in the best interests of the trust or of the beneficiaries, but primarily serve the interests of the trustees, as a commercial body. That is not appropriate behaviour by trustees.It is now clear that trustees are entitled to charge only reasonable remuneration--the definition of reasonable is not the same for a multi-million pound trust and for a small trust in a will. One would expect proportionality between charges and the assets in an estate. That is incorporated in the Bill. I bear in mind the comments about renouncing trusteeship, but the Bill is a warning to professional trustees that, if they take on a trust, they must ensure that their charges are no more than reasonable. The Bill provides that clarity, and I hope that that is welcome.
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