Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Mishcon moved, as an amendment to Amendment No. 25, Amendment No. 26:

Line 12, after ("disposition,") insert ("or
("(ii) by a will made before the commencement of this Act even if the testator dies after the commencement of this Act (unless the will is republished by a codicil made after such commencement which expressly provides that subsection (1) shall apply) or by an assent under such a will;").

The noble Lord said: Government Amendments Nos. 23 and 25 introduce the right to opt out of the Part II rules in new trusts created after the Bill comes into effect and exclude the operation of those rules for existing trusts unless their settlor opts in within a one-year transitional period. As with Clause 11, I venture to propose that a trust created by a will of a person dying after commencement should count for that purpose as an existing trust unless the will itself was made after commencement or republished after

25 Mar 1996 : Column 1554

commencement by a codicil which expressly adopts the new rules. That would avoid an inadvertent application of the rules simply because, for example, the testator made a short codicil--I have used those words before--altering the amount of just one legacy. I beg to move.

The Lord Chancellor: I am as content to consider this amendment as I was to reconsider the earlier amendment which it substantially replicates, but in a different connection.

Lord Mishcon: I am trying to find new words to say that I ask leave to withdraw the amendment, but I cannot think of any for the moment, so perhaps I may use the same words again and beg leave to withdraw the amendment.

Amendment No. 26, as an amendment to Amendment No. 25, by leave, withdrawn.

On Question, Amendment No. 25 agreed to.

8.15 p.m.

Lord Mishcon had given notice of his intention to move Amendment No. 27:

Page 11, line 24, at end insert--
("( ) This part does not apply to any trust scheme within the meaning of Part I of the Pensions Act 1995.").

The noble Lord said: The noble and learned Lord referred earlier to consideration that he was giving to the Pensions Act 1995 and generally in regard to pension matters. I tabled this amendment to meet concerns expressed during our Second Reading debate, as the noble and learned Lord knows. In the circumstances and in view of what the noble and learned Lord has said, I do not intend to move Amendment No. 27.

[Amendment No. 27 not moved.]

Clause 22, as amended, agreed to.

Clauses 23 to 28 agreed to.

Schedule 1 [Provisions consequential on section 2]:

The Lord Chancellor moved Amendment No. 28:

Page 14, line 34, leave out ("the chargee") and insert ("giving effect to the charge").

The noble and learned Lord said: Amendments Nos. 28 to 30 effect technical changes to the provisions of Schedule 1, and I propose to speak to all three amendments together. Schedule 1, which is consequential on Clause 2, makes provision for cases which presently result in a strict settlement being imposed under the Settled Land Act and provides that after commencement those cases will instead result in a trust of land under the new regime. Amendment No. 28 clarifies paragraph 3, which deals with family charges; that is, cases where land is charged in consideration of marriage or by way of family arrangement with a rentcharge for a person's life or with capital, annual or periodical sums for any person. Any such charge made by an instrument coming into effect after commencement of the Act will have effect as a declaration of trust in favour of the chargee.

25 Mar 1996 : Column 1555

Amendment No. 28 makes it clear that the land is held on trust, not for the chargee as such, but rather so that effect may be given to the charge.

Amendments Nos. 29 and 30 clarify the position where, after commencement of the Act, a person purports to create an entailed interest. It will not be possible under the new regime to create entailed interests, and paragraph 5 provides for the attempt to grant such an interest to any person to take effect as a declaration that the property is held in trust for that person. Amendment No. 29 makes it clear that the property is to be held in trust absolutely for that person absolutely, so that he or she, if of full age and capacity, can have the property transferred to him or her. Amendment No. 30 closes a possible loophole; namely, where a person attempts to create an entailed interest not by granting it direct to another but by declaring himself a trustee in tail. In that case, the declaration of trust in tail is simply ineffective, and the effect may be illustrated by an example. If A purports to declare himself trustee in tail for B, he will simply remain the owner; and if he purports to declare himself trustee for B for life and C in tail thereafter, B's life interest will not be affected, but the property will simply revert to A, or his estate, when that life interest ceases. I beg to move.

Lord Meston: I am slightly concerned about the drafting, if not the result, of Amendment No. 28. As presently drafted, the last line of paragraph 3 reads:

    "the instrument operates as a declaration that the land is held in trust for the chargee".
As amended, it would read, "the instrument operates as a declaration that the land is held in trust for giving effect to the charge". In other words, the provision would refer to the purpose of the trust rather than to the individual beneficiary. I find that clumsy and I am not sure that I understand it. Will the noble and learned Lord confirm that it is intended that the instrument shall be treated as operating as a declaration that the land is held in trust solely to give effect to the charge? If that is the intention, I wonder whether the wording can be reconsidered.

The Lord Chancellor: The intention is that the land should be held so that effect may be given to the charge. However, I am happy to reconsider the wording.

On Question, amendment agreed to.

The Lord Chancellor moved Amendments Nos. 29 and 30:

Page 15, line 6, after ("trust") insert ("absolutely").
Page 15, line 8, at end insert--
("( ) Where a person purports by an instrument coming into operation after the commencement of this Act to declare himself a tenant in tail of real or personal property, the instrument is not effective to create an entailed interest.").

The noble and learned Lord said: I have already spoken to these amendments with Amendment No. 28 and, with the leave of the Committee, I beg to move them en bloc.

On Question, amendments agreed to.

Schedule 1, as amended, agreed to.

25 Mar 1996 : Column 1556

Schedule 2 [Amendments of statutory provisions imposing trust for sale]:

The Lord Chancellor moved Amendment No. 31:

Page 17, line 15, leave out from ("subsection") to end of line 20 and insert ("(2)--
(a) after "a trust" insert "for the persons who (but for this Act) would from time to time be entitled to the ownership of the land by virtue of its reverter with a power, without consulting them,", and
(b) for the words "upon trust" onwards substitute "in trust for those persons; but they shall not be entitled by reason of their interest to occupy the land."").

The noble and learned Lord said: Amendment No. 31 is part of a group, comprising also Amendments Nos. 32 and 37, which seeks to minimise the possibility of practical problems in the peculiar circumstances of cases arising under the Reverter of Sites Act 1987. With your Lordships' leave, I shall speak to all three amendments together.

Section 1 of the Reverter of Sites Act 1987 concerns any enactment (such as the School Sites Act) which provides for land to revert to the ownership of a particular person where that land was made available for particular purposes and has ceased to be used for those purposes. The land, instead of reverting, vests on trust in the persons in whom it was vested before the particular use ceased; and the trust in question is an express trust to sell the land and hold the net profits until sale and the net proceeds after costs and expenses on trust for the people who would, but for these provisions, be entitled to the land on reverter. The present amendments in paragraph 6 of Schedule 2 substitute for this trust for sale a trust of land, with a power to sell and to retain, and a duty to consult certain beneficiaries. Practitioners in this specialised area--as undoubtedly it is--have, however, alerted my department to possible practical problems with this approach which the present group of amendments sets out to rectify.

The great advantage of the present provisions of Section 1 of the Reverter of Sites Act 1987 is that they make the position of the trustees very clear and simple in cases where there are often no beneficiaries, only people claiming to be beneficiaries whose entitlement may be difficult to sort out. Irrespective of the identity of the beneficiaries, the trustees can sell the land and, out of the proceeds of sale, deduct all their costs and expenses and meet the capital gains tax liability which they have as trustees. They can sort out the difficult question of entitlement later, if necessary going to court for directions with the proceeds of sale available to cover their costs of doing so in good faith. Under the Reverter of Sites Act, as amended by the Bill at present, however, the question of sale is neutral and there is a duty to consult.

The difficulty which has been identified is that the trustees are put at risk if they sell against the wishes of a claimant who asks for the land to be conveyed to him in specie but whose entitlement is in doubt. If that claimant's entitlement is subsequently established in court proceedings, he may sue for loss as a result of the land being sold rather than conveyed to him in specie. Trustees will also be faced with the difficulty that if

25 Mar 1996 : Column 1557

claimants do not wish them to sell and there are difficult issues which need the directions of the court, they may have to incur the costs out of their own resources before they have any proceeds of sale out of which they can be paid.

In view of the fact that the trustees in reverter of sites cases have the trust thrust upon them and will often be such persons as the incumbent and churchwardens (particularly in the case of school sites), there appears to be a strong case for treating this as a special case, rather analogous to the position of personal representatives of a person who dies intestate. Amendments Nos. 31, 32 and 37 accordingly change the existing amendments which the Bill makes to the Reverter of Sites Act so as to ensure that the trust imposed permits the trustees to sell the land and hold the proceeds for the putative beneficiaries without being required to consult them or allow them to occupy the land, and with provision for meeting necessary costs, expenses and taxes. I beg to move.

On Question, amendment agreed to.

Next Section Back to Table of Contents Lords Hansard Home Page