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Baroness Turner of Camden: I thank the Minister for that detailed response, some aspects of which I welcome. What prompted the amendments was the feeling that in insolvency situations the members are even more vulnerable. Therefore it seemed necessary that the regulator should have a role in relation to the appointment of independent trustees. I note what the Minister said; in particular I am glad to hear that the

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intention is to have discussions with the insolvency service to try to draw up notes of guidance in relation to insolvency practitioners. That is a welcome development. We look forward to hearing more about it.

I do not intend to press the matter to a vote tonight. However, there are probably instances of disappointments and anxieties about the way in which official receivers have sometimes dealt with pensions schemes. That is another reason why we thought it a good idea to replace "practitioner or official receiver" with the regulator. However, having heard what the Minister said, we shall look closely at his remarks in Hansard tomorrow. If we think it necessary, we may come back with a variant of the amendments on Report. Meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 116F and 116G not moved.]

Lord Lucas: I beg to move that the House do now resume. In moving the Motion I suggest that the Committee stage begin again not before 7.50 p.m.

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

House resumed.

Law Reform (Succession) Bill [H.L.]

7.7 p.m.

The Lord Chancellor (Lord Mackay of Clashfern): My Lords, I beg to move that this Bill be now read a second time.

I am, as ever, pleased to be able to bring before your Lordships a Bill to give effect to recommendations of the Law Commission. The Bill effects reforms of the technical rules governing the distribution of estates of persons who die intestate, claims for financial provision by members of the deceased's family circle and the effect of divorce or annulment of marriage on testamentary gifts or appointments in favour of the former spouse.

Full Notes on Clauses are available for any Members of this House who may wish to examine the technical provisions in greater detail, and fuller explanation of the current law and the proposed changes may be found in the two Law Commission reports from which the Bill derives, on Distribution on Intestacy (Law Com. No. 187) and The Effect of Divorce on Wills (Law Com. No. 217). With your Lordships' leave, however, I propose to explain the Bill's provisions in fairly broad terms. Although the Bill implements most of the recommendations in the two Law Commission reports I have mentioned, it does not implement all of them, as I shall explain in a moment.

Clauses 1 and 2 of the Bill give effect to the minor recommendations made by the Law Commission in the intestacy report, which were all considered to be uncontroversial. The starting point is Sections 46 and 47 of the Administration of Estates Act 1925 which provide an order of priority for sharing in the estate of a person who dies either wholly or partially intestate. This is a safety net calculated to reflect both the way in which those who make wills tend to dispose of their property

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and the policy that the surviving spouse should generally be enabled to remain in occupation of the matrimonial home. Consequently, a surviving spouse heads the order of priority and will receive the deceased's personal chattels plus a fixed net sum (the "statutory legacy") out of the estate and will share the residue (if any) with other relatives. The amount of the statutory legacy depends upon whether the deceased left issue. If there is no issue then the statutory legacy will be greater than it otherwise would be.

The commission's primary recommendation was that the surviving spouse should not share at all with relatives on intestacy but should automatically receive the whole estate, whatever its size. This proposal was conceded by the commission itself to be contentious, and I am obliged to the noble Lord, Lord Mishcon, who raised the issue in this House in June 1992, when it became clear that there was anxiety about it on all sides of the House as well as on the part of such bodies as Justice and the Law Reform Committee of the Bar. Despite the attractions of simplicity and clarity, I am not persuaded that it would be appropriate to exclude other members of the family completely in all cases, particularly where the deceased left children from a previous marriage. However, the need for the amount of the statutory legacy to be kept under review is recognised, and indeed it was raised in December 1993 to its present rate of £125,000 at the lower level and £200,000 at the higher level.

The other recommendations of the Law Commission give rise to no such concerns. Clause 1 of the Bill will introduce a rule that a surviving spouse should inherit on intestacy only if he or she survives the deceased by a period of 14 days. As the commission pointed out, it has long been considered good practice for a provision to similar effect to be inserted in wills in order to prevent arbitrary results where the family of just one spouse inherits the property of both should the two die within a short time of one another, as, for example, after a road accident.

Clause 1 also abolishes the "hotchpot" rule, by which certain payments made by a person who dies intestate, and certain interests acquired under the will of a person who dies partially intestate, must be brought into account by the recipient against the share in the estate to which he would otherwise be entitled. The rule has proved difficult to operate in practice, causing particular difficulties for lay administrators and resulting in consequences which would probably not have been in accordance with the deceased's intentions.

Clause 2 amends the Inheritance (Provision for Family and Dependants) Act 1975 which enables members of a deceased's family circle to apply for financial provision from the estate if the will or intestacy rules leave them without reasonable provision. At present, someone who lived with the deceased as husband or wife must demonstrate that he or she was actually dependent on the deceased. This can leave a long-term cohabitant who contributed fully to the household without provision and unable even to use this safety net. The commission considered this to be unfair and proposed the change implemented by Clause 2 whereby a cohabitant (using the well-settled definition

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in the Fatal Accidents Act 1976) may make an application without having to show actual dependence. The definition of "reasonable financial provision" remains the same as for other applicants apart from spouses, but the factors to be taken into account in assessing what is reasonable include, mutatis mutandis, those relevant for spouses. This recognises the contribution which each cohabitant may make to the common household, while preserving the distinction between the respective claims of married and unmarried partners.

Clauses 3 and 4 of the Bill give effect to the commission's recommendations in the report The Effect of Divorce on Wills. The basic principle of the present law is that, unless there is a contrary intention apparent from the will, a former spouse should not benefit from a will made before the marriage was dissolved or annulled but that the will should not be affected in any other way.

No change is proposed to this basic principle, but the commission criticised the current means of achieving it by the "lapse" rule (contained in Section 18A of the Wills Act 1837). This provides that a gift to a former spouse lapses; it does not take effect and reverts to the testator. This rule can fail to give effect to the presumed intention of the testator and can bring about unintended results, such as where the will provides for a gift over should the spouse fail to survive the testator. An example is the case of Re Sinclair in 1985, where the Imperial Cancer Research Fund was deprived of the gift over because the conditions of the gift were not fulfilled, the former wife still being alive, and the estate fell into intestacy.

Clause 3 counters this difficulty by providing instead for any gift to a former spouse to be revoked and for the property which would otherwise have passed to the former spouse to pass as if the former spouse had died on the date when the marriage was dissolved or annulled. In this way only the former spouse, and not any other beneficiary, will be deprived of any benefit which he or she might otherwise have acquired. Unintended results such as that in Re Sinclair will be avoided. As at present, the rule will be displaced by a contrary intention of the testator.

The new rule will also apply to all appointments in the will. Consequently, again subject to any expressed contrary intention, any appointment of a former spouse as an executor or as a trustee, or as a donee of a power of appointment, will take effect as if the former spouse had pre-deceased the testator.

Clause 4 of the Bill deals with the appointment of a former spouse as guardian of the testator's children. The current law, under which divorce has no effect on testamentary guardianship, is unsatisfactory, since in those cases where the child is the child of the testator but not of the former spouse, and the former spouse does not have parental responsibility, it is very doubtful that the testator would want the appointment of his former spouse as guardian to remain effective after their divorce. This is less likely to be the testator's view where the child concerned is the child of the testator and the former spouse; but in such cases the former spouse will already have parental responsibility for the child,

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which is not affected by divorce, and therefore the revocation of any such appointment will not have any practical effect. Therefore, in order to achieve the practical effect which is most likely to reflect the testator's wishes, and in the interests of clarity and simplicity, Section 6 of the Children Act 1989 will be amended to provide that, subject to any expressed contrary intention, any appointment of a former spouse as guardian should be revoked.

Clauses 5 and 6 cover repeals, the Bill's title and its extent, which is limited to England and Wales.

Each of these reforms is to come into effect in respect of estates of, or wills or appointments made by, persons dying on or after a fixed date. The date chosen is 1st January 1996, both to ensure a memorable date and to allow sufficient time to ensure that proper publicity may be given to the changes before they have effect in any individual case.

This Bill represents a useful and uncontroversial measure of law reform. We are all grateful to the Law Commission for the careful work which it put into the preparation of the reports on which the Bill is based. My normal assumption is that one would wish to give effect to Law Commission proposals. As regards the main one with which I have dealt in connection with the intestacy proposals, I have explained why, so far, I have not thought it wise to give effect to it. I accordingly ask the House to give the Bill a Second Reading.

Moved, That the Bill be now read a second time.—(The Lord Chancellor.)

7.17 p.m.

Lord Irvine of Lairg: My Lords, we on these Benches strongly support the expeditious placement on the statute book of Law Commission recommendations concerning lawyers' law where those recommendations are not politically controversial. We have felt able to agree this Session that a number of measures which are not politically controversial and which concern technical law are suitable for enactment by way of the procedures of a special Public Bill Committee.

This Bill would in principle have been suitable to be committed to such a committee. But its brevity and clarity are such that it can perhaps be considered most expeditiously on the Floor of the House in the usual way. That leaves for special Public Bill Committees more substantial measures of law reform, which are especially likely to benefit from the procedures of these committees, in particular the facility to take evidence from and to question experts in the field of law at issue and representatives of special interest groups.

I also think it appropriate to put on record the appreciation on the part of these Benches of the fine work of the Law Commission and to express the support of these Benches for fast-track procedures to give effect to many of its reports. That is not to say that its recommendations should be uncritically accepted, nor that the commission would wish them to be; although I tend to agree that we start with a strong presumption in their favour.

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That they should not be uncritically accepted is well illustrated by the fact that the Government have not—and we think rightly not—accepted the commission's primary recommendation that the surviving spouse should automatically, on an intestacy, receive the whole of the estate, regardless of its size, to the exclusion of the interest of other relatives. The noble and learned Lord has been good enough to remark on the important role of my noble friend Lord Mishcon in calling attention to the concern that is felt in many quarters about that particular recommendation.

The noble and learned Lord summarised the provisions of the Bill and explained them clearly. I do not feel that this debate would be enhanced by my seeking to offer an additional summary and explanation of the provisions of the Bill. Therefore, I confine myself to putting on record the fact that we support the Second Reading of the Bill and its expeditious progress thereafter through your Lordships' House.

7.20 p.m.

Lord Meston: My Lords, I, too, would like to thank the noble and learned Lord for his explanation of the Bill. As is clear, the Bill gives effect to only part of the recommendations of the Law Commission on intestacy. Clause 1, dealing with survivorship and with "hotchpot" makes useful changes, for the reasons advanced by the Law Commission. However, the significance of that part of the Bill lies not in what it contains but in what it does not contain. The Law Commission described the defects in the present intestacy rules and recommended a major reform, whereby on intestacy the surviving spouse could receive the whole estate.

The Law Commission described the case for reform as overwhelming. However, the Government and others, including, I believe, the noble Lord, Lord Mishcon, were not overwhelmed. I well understand why. Most recently Professor Cretney, in The Law Quarterly Review, only last month suggested that, although the Law Commission may have overstated the case for reform, its principal recommendation had much to commend it. He suggested further reflection. I hope that will take place.

The Law Commission emphasised the need for rules which are "certain, clear and simple". Intestacy rules are inevitably a second-best means of distribution of estates. There is no substitute for a considered, up-to-date will. Intestacy rules are the price that some families have to pay if their nearest and dearest do not get round to making a will. There are still a remarkable number of people who do not make wills, for all sorts of reasons, including superstition.

Neither the present rules nor the Law Commission's straightforward alternative can reflect the justice of every situation. They cannot distinguish between happy and unhappy marriages; between long and short marriages; between marriages where the survivor made particular contributions or sacrifices and those where the survivor's moral claims are less strong; or between cases where the survivor is wealthy or has been well provided for or badly treated during the lifetime of the deceased. The existing rules cannot take account of the geographic variation in property values. Likewise, where there are

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children as well as a surviving spouse, under the existing rules there may be cases in which a mother has to make a claim for more provision from the estate and her children become respondents to her application to the court. Under the Law Commission's proposal, I readily understand that it could be the other way round.

A particular problem of the existing system is that it requires periodic uplifts in the statutory legacy. I have recently acted for a widow, whose husband died suddenly and unexpectedly just before the statutory legacy went up from £75,000 to £125,000. Had her husband died only weeks later, she might well not have considered recourse to the family provision legislation. Whatever else may occur, I urge on the Government the view of Professor Cretney in his recent article. He said:

    "it is not satisfactory to proceed by using delegated legislation at irregular and unpredictable intervals to vary the amount of a surviving spouse's entitlement without any clear statement of the principle upon which the variation is made".

It may well be that, after further consideration, it is decided that the existing rules are as fair and reasonably predictable as any arbitrary system can be expected to be.

Certainly, one objective must be to try to minimise the need for recourse to the discretionary family provision legislation. Litigation under the 1975 Act is costly to estates, which are seldom able to sustain the luxury of legal expenses. It is litigation which is often divisive and distressing to the competing relatives, each of whom may have his own idea of what the deceased would or would not have wanted had he got round to making a will. The 1975 Act has a number of distinct limitations and it is also an area of discretionary law in which practitioners do not find it particularly easy to advise with certainty on the outcome, if the case has to go to a court.

Therefore, I support the view that, before the safety net of the intestacy rules is altered, the underlying further safety net of the family provision legislation should also be checked for holes, strength and positioning. That review is almost certainly too wide ranging to involve this Bill in the special committee procedure of this House.

This Bill deals with one reform of the 1975 Act, which is a useful new provision for cohabitees. It will apply to situations in which there may be inadequate testate provision as well as where there is an intestacy. The existing law requires proof of dependency. Mere financial or other sacrifice for the sake of the deceased does not qualify for a claim under the 1975 Act. That is probably the result of insufficient thought being given to that problem during the parliamentary passage of the 1975 Act. Clause 2 of the Bill goes some way towards changing that. I assume that it will not extend to cohabitants of the same sex, but I should welcome clarification.

Clauses 3 and 4 of the Bill are welcome. They strive to achieve what most testators would wish. Clause 3 minimises inconvenience to innocent third parties, both individuals and charities. I am not so sure about the Law Commission's suggestion of a booklet to accompany the decree absolute of divorce in place of the existing simple notice. Certainly that notice, as now printed on a

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decree absolute, warning of the effects of a divorce on wills, may well have to be modified when the Bill becomes law. Good solicitors will always draw the consequences of the decree to the attention of their clients. However, perhaps it is not too much to hope that, with the possibility of a do-it-yourself divorce being followed by a do-it-yourself will, there could be something left over for the lawyers.

7.27 p.m.

Lord Mishcon: My Lords, times change and social conditions change, but sometimes the law does not. I believe that we all pay tribute to the Law Commission and to the great Lord Chancellor, Lord Gardiner, who set it up, for the fact that we now have a body of people looking at our law from time to time and bringing before Parliament, as indeed we are experiencing now, suggested changes to bring things up to date. I shall not repeat what noble Lords have said so well. Certainly I shall not summarise the provisions of the Act, which the noble and learned Lord the Lord Chancellor did with his usual lucidity. I intend merely to comment upon some of the provisions of the Bill.

One first notes that survivorship for 14 days is established by the Bill as being a necessary condition for inheritance (if I may put it that way) on intestacy. As a practising lawyer drawing up wills, it is my practice, following upon the practice of my learned colleagues and predecessors, to provide for a survivorship clause in a will. We do that for a minimum period of one month and usually for a maximum period of three months. So I pause for a moment to consider whether it is not wise to carry that practice into effect when dealing with intestacy. It is most unlikely that letters of administration will be granted within 14 days or even 28 days. Therefore, in order to protect the position, one would have thought it sensible not to make the period 14 days but the minimum of 28 days. I merely throw that suggestion most respectfully to the noble and learned Lord for his consideration.

I turn next to what the noble and learned Lord described as an alternation of the "hotchpot" rule, indeed, its abolition in the case of intestacy. I have one query. The law at the moment is this. On a partial intestacy, where a will bequeaths an interest to a surviving spouse, that surviving spouse must bring that into account when looking at the statutory grant which is made to the surviving spouse on an intestacy. The Bill abolishes that provision and I wonder why. It seems to me a little illogical.

If we look at the report of the Law Commission on Family Law: Distribution on Intestacy, upon which the Bill is based, and turn to page 14, paragraph 55 states:

    "Two special hotchpot provisions apply on partial intestacy. The first provides that a surviving spouse who acquires any beneficial interests under the will takes the statutory legacy less the value at the date of the deceased's death of those beneficial interests. As we have recommended that the surviving spouse should receive the entire estate this rule becomes redundant".

It is a decision of the Government and one I fervently support that the surviving spouse should not receive the entire estate and that provision therefore is not in the Bill. Since that rule is no longer redundant in the sense

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that the surviving spouse must bring in "hotchpot", why does the Bill abolish the hotchpot rule in the case of the surviving spouse?

I turn to the all-too-gracious remarks of the noble and learned Lord and my noble friend in regard to my intervention earlier in the history of this House in relation to the recommendation of the Law Commission that the surviving spouse should inherit everything. I confess that I should not have done more than say thank you for those remarks were it not for the comments of the noble Lord, Lord Meston.

The noble Lord correctly referred to an article in The Law Quarterly Review by Professor Cretney. I was grateful to receive that article from him, as no doubt was the noble Lord, Lord Meston. But on reading it I did not follow the same thought pattern in relation to that article as did the noble Lord, Lord Meston. Perhaps I can mention two passages from the article so that we do not in any way misunderstand what the professor was saying. First, in regard to the question of a surviving spouse inheriting all, at his conclusion on page 98 the professor said,

    "The Law Commission's principal recommendation that a surviving spouse should inherit the whole of an intestate's estate has much to recommend it in terms of achieving a simple code of succession law which would give effect to the intestate's presumed wishes in the majority of cases. However, social and economic changes have the consequence that such a code would lead to injustice in some cases".

Earlier, at page 87 of his article, the professor said—and this is extremely important—

    "In 1925, there were only 2,657 divorces in England and Wales; in 1952 there were 31,966; today there are some 160,000 divorces each year. For present purposes, these figures are significant not so much because of the vastly increased probability that an intestate will leave more than one former spouse—the divorce court has extensive powers to reallocate property at the time of the divorce—but because of the likelihood that the deceased's widow may never have had any parental relationship with the children of his first marriage, and may not feel under any obligation to pass on to them any of the property she inherits from their father".

In days gone by I deemed that to be a reason for my venturing to differ from the recommendation of the Law Commission. Professor Cretney underlines that point as one of the things to be taken into account.

There is one other point I wish to mention before I endeavour to make your Lordships smile, if only a little. The noble and learned Lord said, quite correctly, that it was a good idea, one promulgated by the commission, that one should adopt the wording of the Fatal Accidents Act in dealing with the inheritance provisions Act which would now apply under the Bill to cohabitees. If one looks at the draft bill, at page 20 of the Law Commission's report, one sees that it faithfully copies the wording of the Fatal Accidents Act:

    "Where on or after 1st January 1991 a person dies domiciled in England and Wales and is survived by a person who was living with the deceased in the same household".

That is the wording of the draft Bill and is the actual wording of the Fatal Accidents Act. If one turns to the Bill, one finds that for some reason, in Clause 2(3), after the words "the person was living", the words "with the deceased" are left out. I do not know why. As I said, the draft Bill was faithfully followed and includes those

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words. The Fatal Accidents Act has those words and I can see the reason for them. Somebody may live in the same household who has decided to live separately from the cohabitee and in those circumstances will not fulfil the requirements—one may think justly so—for benefiting under the Bill. That person would not have been living with the deceased. As I said, the Fatal Accidents Act contains those words and the draft Bill contains those words. I ask as a meaningful question why the words are omitted from this Bill.

As I said, I wanted only to bring a smile to your Lordships' faces by saying that presumably the Law Commission has decided to find a reason why a former spouse has become a former spouse. If your Lordships will look at the top of page four of the report you will find that on two occasions in paragraph 2.7 the reason that has been given is that the former spouse has "pre-decreased" the testator, presumably meaning that her extravagance has led to her becoming a former spouse. The word "pre-decreased" is used with the testator twice in that paragraph. If that remark proves nothing else, it proves that I took the trouble to read the Law Commission's report.

7.40 p.m.

The Lord Chancellor: My Lords, I am extremely grateful to all noble Lords who have spoken. I would have assumed, before we had our debate on a previous occasion, that the noble Lord, Lord Mishcon, had read the Law Commission's report. However, if there was any lingering doubt in my mind about that, he has demonstrated tonight beyond all possible doubt that he has read it carefully.

There is a good deal in Professor Cretney's article which merits careful consideration. I am grateful to Professor Cretney, who was a colleague of mine on law commissions in the past, for also sending me a copy of his article. He had kindly provided the typescript to my officials earlier. He is advocating that further consideration be given to the question of what should replace the Law Commission's proposal. He thinks that it was understandable to some extent as to the question of to what degree we should not have adopted it. But his plea is for further consideration of that question. Your Lordships may think that it is a question which could merit further consideration. That is the main matter of general importance that has been raised.

The noble Lord, Lord Mishcon, asked about the Law Commission's repeal of the "hotchpot" rule relating to the statutory legacy. The view was taken on the decision not to proceed with the Law Commission's main recommendation that, since it was recommending the abolition of the "hotchpot" rule, that particular aspect of the "hotchpot" rule should be repealed as part of the abolition of the "hotchpot" rule. On the question of cohabitants who will not require to demonstrate dependency, the view that was taken on the drafting of this Bill—the clause is slightly different in appearance—is that the words to which the noble Lord, Lord Mishcon, referred are now superfluous because they appear not only in the first part of the definition in the Fatal Accidents Act but also in the last part. If your Lordships look at the definition as counsel has framed

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it for this Bill, you will see that he has used the words of the 1975 Act without unnecessary repetition whereas if he had put in the whole of the provision it would have appeared that "with the deceased" would have come in twice and therefore be superfluous.

That is the kind of matter which needs to be looked at with the clause fully in front of one. In view of the noble Lord's question, I shall certainly ask parliamentary counsel to reconsider the matter. However, my understanding of why this phrase has been couched in the way that it has is that it was thought that from the way in which it is expressed in this Bill to repeat the phrase "living with the deceased" would have been superfluous. The clause requires that for all the period in question the person should live with the deceased as husband and wife.

With regard to the question of the noble Lord, Lord Meston, "living as husband and wife" appears to us, as the law stands, to apply to partners of opposite sexes and not to partners of the same sex.

I am grateful to the House for the support that has been given to the Bill. I agree with the view that the Bill would have been suitable for a Special Standing Committee, but in the light of the consideration that has been given and the fact that some time ago before the Bill was brought forward we had a debate in the House about the really substantial departure from the Law Commission's recommendations, I have reached the view—I hope your Lordships agree with it—that in the circumstances of this case the ordinary procedure in the House is appropriate. Therefore, I am not asking for any special procedure here. I commend the Bill to the House.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

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