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Lord Mishcon: My Lords, it takes a Lord Advocate with the clarity of mind and speech of the noble and learned Lord to introduce the Second Reading of this highly technical and to a large extent esoteric Bill with comparative simplicity, and even succeed in making it sound interesting. In speaking for the Official Opposition I have the pleasant task of congratulating him on that introduction, and of thanking the Law Commission for its two reports and for all the work and erudition that went into them, while noting, as I am sure the House will, that these reports were made as long ago as 1989. I can tell the House that the Law Society, as well as leading academics, having been extensively consulted as the noble and learned Lord mentioned, approves generally of the principles governing this Bill, and that this is one of those occasions when the Opposition can announce that the government measure is not opposed and indeed has their support.

Any necessary modernisation or tidying up of the law is a good thing. That is what the Bill achieves, based as it is, with some fairly minor amendments, on the two Law Commission reports which have been summarised by the noble and learned Lord.

Trust law has never been simple, but it did not have to be as complex as it has been, or as self-defeating, by having different legal consequences resulting from trusts for sale and strict settlements in respect of land. The basic proposition in the Bill, as it was in the recommendations contained in the Law Commission's two reports, is to have a new, single system of co-ownership of land known as "the trust of land". That will apply to all trusts of land, including bare trusts, but excepting strict settlements under the Settled Land Act 1925 already in existence when the Bill becomes law and is effective, and certain new settlements derived from such settlements.

I express my appreciation to the noble and learned Lord the Lord Advocate and to the noble and learned Lord the Lord Chancellor, which they in turn may wish to pass on to or share with Parliamentary Counsel, for their decision not to follow the form of the draft Bills which, with its usual helpfulness, the Law Commission

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attached by way of appendix to its two reports. As the noble and learned Lord the Lord Advocate knows, the present Bill has been extensively redrafted as against the method adopted in the commission's draft of textual amendment of existing legislation. That is, and especially in this instance would be, a cumbersome and confusing method by which to legislate, and would not be appreciated by legal practitioners, not to mention the unfortunate proverbial occupant of the Clapham omnibus in the event of his choosing this Bill as light reading on his journey. Instead of adopting such a procedure, the reforming measures provided in the Bill are formulated as new, freestanding provisions.

I should also like to emphasise, as did the noble and learned Lord, the importance of the manner in which under the Bill trustees have been given broader and more flexible powers and beneficiaries, for their part, rights which they do not now have. Included in those rights is a very new one, where beneficiaries not only under trusts of land but of personalty become entitled in certain circumstances where it is necessary to appoint somebody new as a trustee to direct the trustees to appoint someone of their own choice. Under Clause 19 of the Bill trustees are required to serve notice of intention to appoint a new trustee on their beneficiaries if all are of full age and capacity and to give the beneficiaries the opportunity to exercise by direction their right to choose a trustee themselves.

Clause 21 of the Bill gives the beneficiaries a similar right to choose a trustee where an existing trustee is mentally incapable and there are no other trustees willing and capable of making an appointment. The Law Society has suggested that those provisions could give rise to some difficulties in practice and that trustees may in future want to ensure that trusts and wills expressly confer power of appointment in order to avoid their operation.

While dealing with the right to nominate trustees perhaps I may mention that the Bill does not appear to deal with any overlap with the Pensions Act 1995, which includes some similar provisions; for example, members of pension schemes having the right to nominate trustees. I understand that draft regulations under that Act are the subject of consideration and consultation. Where pension trustees hold land as assets of the pension fund both pieces of legislation might apply unless specific provisions are made to avoid overlap. Would the noble and learned Lord the Lord Advocate care to look at that?

Furthermore, the existing provisions in Section 26(3) of the Law of Property Act for statutory trusts for sale under which trustees must consult beneficiaries of full age and capacity wherever practical when exercising their functions are also extended in Clause 11 to all trusts of land unless expressly excluded. As the noble and learned Lord the Lord Advocate may know, it has been suggested by some practitioners that that could well prove onerous in some circumstances and is causing some concern.

Again on this subject, it is appropriate that the Bill should not give discretionary beneficiaries rights which should sensibly be kept for beneficiaries who are

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definitely entitled to share in the trust. Apart from the principle that a discretionary beneficiary has no right until he is appointed to receive a benefit, I am sure that the noble and learned Lord would agree that it would be wholly impracticable for everyone in a large class of discretionary beneficiaries to be consulted on trust matters.

Perhaps the use in various clauses of the Bill of the word "ascertained" in relation to beneficiaries is intended to exclude merely potential beneficiaries under a discretionary trust. However, in view of past uncertainties over language in existing legislation on the same point (for example, whether discretionary beneficiaries have an "interest"), might it not be much safer to put the position beyond doubt rather than use shorthand expressions on such an important point? I appreciate that that is more of a Committee point, but I thought that it might be useful to mention it at this stage so that it can be duly considered.

One particular reform contained in the Bill, which was emphasised by the noble and learned Lord in his opening speech, will interest the House and the public at large, the majority of whom would think that they had no personal interest or connection with the law appertaining to trusts. What they may not have realised, until some lawyer explains it to them when it becomes appropriate to do so (sometimes, unfortunately, on a matrimonial break-up) is that when with the other spouse they jointly purchased their matrimonial home they created in law a trust for sale. Technically that means that there is a duty to sell even if the law implies a power to postpone the sale.

As the Law Commission report points out, house ownership is a common feature today among all sections of our community. The figures are interesting. The proportion of owner-occupied dwellings goes from 7 per cent. in 1914 to 43 per cent. in 1938 and 66 per cent. by 1992. In the old days joint ownership on the title deeds by husband and wife was a rarity. In these days it is very common, and the intention of most spouses when purchasing the matrimonial home in joint names is not to hold it as an investment for sale or as an investment asset pending sale but to use it and keep it as a home. Lawyers have been trying to deal with the position by developing a principle, to which the noble and learned Lord briefly referred, known as "collateral purpose". That means recognising that the intention and purpose was to provide a family home so that where there is a dispute the court can refuse to order a sale. In many respects, that has made confusion more confounded in regard to what is the true legal position and, as has been pointed out, there are conflicting precedents in the judgments of the Court of Appeal.

The new concept of a single trust for land and the provisions of this Bill supply a welcome solution to a very real current problem as, under the new style trust, the trustees (in this case the husband and wife) will hold the legal estates on trust with a power to sell and a power to retain the land rather than having the primary duty of sale as in the position under the existing law.

I do not wish, especially on a Friday morning, to weary the House with a detailed survey of the many provisions of the Bill. I believe that that paraphrases the

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opening remarks of the speech of the noble and learned Lord. As I have said, that has already been done so ably by the noble and learned Lord the Lord Advocate. I have merely attempted to select some of the principles which underlie the desirable reforms which the Bill contains, to point out why some of those reforms are necessary and to put to the noble and learned Lord a few matters which have arisen in the minds of legal practitioners which can doubtless be dealt with at later stages in the Bill's history. I follow the noble and learned Lord the Lord Advocate in commending the Bill to the House and in supporting the Motion for its Second Reading.

11.32 a.m.

Lord Meston: My Lords, perhaps I may join the noble Lord in thanking the noble and learned Lord the Lord Advocate for his explanation of the Bill. I should also say how grateful I was for the early receipt of the Notes on Clauses, which give a clear description of what is a formidable subject. I am sure that I am not alone in always having been rather afraid of the bewildering law relating to trusts of land with its strange language such as "overreaching", "springing interests" and the like. The strict settlement and the trust for sale were taught to students as if they were immutable and sacrosanct, cast in the magnificent language of the 1925 legislation. They were always concepts which were very difficult to grasp--to me, at any rate--even once one had got hold of the basic point that they were mutually exclusive.

But the practising common lawyer cannot avoid the law of trusts, much as he or she may want to. The trust for sale or variants of it have become frequently used by the matrimonial courts as one solution to property and financial disputes after divorce. Conversely, when advising on potential claims against an estate under the inheritance provisions of the Inheritance (Provision for Family and Dependants) Act 1975, one is quite often faced with wills which inappropriately use a trust for sale in favour of a widow. There, the authorities suggest that the machinery of the Settled Land Act 1925 is more appropriate. Indeed, that Act is used to deal with certain claims under the 1975 legislation.

As I understand it, the Bill will not preclude that sort of flexibility in future, although the labels may change. The reforms in the Bill are, as we have been told, the product of reports from the Law Commission. They are generally welcomed, so far as I can tell, both academically and among practitioners to the north of the Law Courts. Frankly, it is hard to detect the emotional turmoil in Lincoln's Inn on almost any subject. But, as far as I have been able to discover, there is no seething discontent at the changes now proposed.

I understand that the complexity of the present law has led drafting, even by competent lawyers, to produce unexpected results. The Bill seems to produce a scheme which is simpler, albeit sometimes less certain, and may place a greater burden upon the draftsman. Of course, this is not simply an arid area of the law. The law of trusts has been creatively used to produce equitable solutions to social problems and informal arrangements between unmarried couples and between family members of different generations. For example, with the

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release of council house tenancies for sale, one quite often comes across quite elderly couples who have been tenants for a long time and so are entitled to a substantial discount under the right-to-buy scheme, who use the mortgage capability of their children to exercise that right. That all works perfectly well if everyone remains harmonious, but it can cause acute conflict if the generations fall out.

The use by the Court of Appeal of the Settled Land Act 1925 in the recent case of Costello in 1994 is a striking example of that use of the existing law to meet such a situation. A case called Dent in which the High Court found against a settled land Act tenancy for life was reported only this week. It is to be hoped that the Bill might reduce the need for such costly litigation.

Perhaps I may particularly welcome the formulation of a court's powers in Clause 14 of the Bill and the formulation of the relevant matters for consideration by the court in Clause 15, especially the express reference to the welfare of any minor child. It seems to me that that will assist in preserving the home for children so far as may be practicable.

I should like now to raise a point that I was asked to mention by the noble Earl, Lord Kinnoull, who regrets that he is unable to be present today. It concerns charitable trusts which sometimes, by historical accident as much for any other reason, can hold land either as settled land or under trust for sale. Under the Bill as drafted, a considerable difference will be created because those trusts which are settled land will not have the benefit of the powers in Clause 6 and will remain subject to the restrictions of the 1925 legislation but those which were set up as trusts for sale will be free of such restrictions.

There may be good reason for retaining such distinction in private trusts, but it is hard to see why they should affect charities, given the safeguards under the existing charities legislation. Indeed, I understand that the Charity Commission favours allowing existing charitable settlements to become trusts of land under the proposed new law but that the Home Office has suggested potential problems under Article 1 of the First Protocol to the European Convention on Human Rights. At this stage, I do not propose to swim yet further out of my depth, but I would inquire whether the Government have advanced their thinking on that topic and whether they might be prepared to bring forward their own amendments in Committee--failing which, I suspect that the noble Earl may be inclined to do so.

Finally, I should like to ask the noble and learned Lord the Lord Advocate about the present intentions as regards the commencement of the legislation. Can he tell us when that might be and whether it is intended that good notice will be given to the various professional bodies? With those remarks, I welcome the Bill.

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