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Page 5, line 27, leave out ("an existing express trust of land") and insert ("a trust of land created before the commencement of this Act by a disposition").
Page 5, leave out line 29.
Page 5, line 35, leave out subsection (4).

The noble and learned Lord said: My Lords, I spoke to Amendments Nos. 10 to 12 with Amendment No. 9. I spoke to Amendments Nos. 13 and 14 with Amendment No. 1. I beg to move.

On Question, amendments agreed to.

Clause 17 [Application of provisions to trusts of proceeds of sale]:

The Lord Chancellor moved Amendments Nos. 13 and 14:

Page 8, line 35, leave out from ("property") to end of line 40 and insert ("(other than a trust of land) which consists of or includes--
(a) any proceeds of a disposition of land held in trust (including settled land), or
(b) any property representing any such proceeds.").
Page 9, line 6, leave out from ("to") to ("includes") in line 7 and insert ("settled land").

On Question, amendments agreed to.

Clause 19 [Notice to beneficiaries of proposed appointment of trustee]:

The Lord Chancellor moved Amendment No. 15:

Leave out Clause 19.

The noble and learned Lord said: My Lords, Amendments Nos. 15 through to 32, 35 and 38 together radically change the approach of Part II of the Bill, broadly in line with the approach urged on the Government in Committee by the noble Lord, Lord Mishcon. These amendments are really interconnected in such a way that I believe it would be appropriate to speak to them all together in moving Amendment No. 15, so that the House may have the whole picture.

The approach of this group of amendments is to give a wider power to the beneficiaries, in essence reversing the 1948 decision in the case of Re Brockbank. That decision is to the effect that beneficiaries who are entitled to have the trust property conveyed to them because they are together absolutely entitled to it may nevertheless not control appointment of the trustees other than by ending and reconstituting the trust--which is unattractive because of the tax implications. Part of the new scheme is that Clause 19 should be deleted, since the power now to be given to beneficiaries will be exercisable at any time, not only when the existing trustees are in the position of having to appoint a new trustee, and so the notice requirements in Clause 19, to which the noble Lord drew our particular attention on the last occasion, would be superfluous.

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Amendment No. 15 accordingly deletes Clause 19, and this makes it possible to remove a number of subsequent provisions which are only necessary because of the notice requirement, and to avoid attendant complications and possible problems in practice. Accordingly, Amendments Nos. 23 and 26 together delete subsections (3), (4) and (6) of Clause 22. The deletion of Clause 19 and insertion of the new clause effected by Amendment No. 16 necessitate a number of purely consequential changes in Clause 22, to change references to "this Part" or to "Clause 20" into references to the new clause and Clause 21 or to the new clause alone as appropriate, and Amendments Nos. 20, 25, 27 and 28 are concerned with this.

Amendment No. 16 is the pivotal amendment, and the comments which I made earlier about being ready to consider suggestions concerning the precise wording apply most particularly here. It inserts in place of Clause 20 a new clause which confers on beneficiaries, subject to qualifying conditions, a power to direct any trustee or trustees to retire from the trust, or to direct the appointment of a new trustee or trustees of the beneficiaries' own choosing, or to do both. The new clause operates independently rather than by reference back to the Trustee Act 1925, and so certain aspects of Section 36 of that Act must be spelt out since they are no longer incorporated by reference.

The qualifying conditions for the clause to apply, set out in subsection (1), are that no person has been nominated for the purpose of appointing trustees, and that the beneficiaries are all of full age and capacity and, taken together are absolutely entitled to the trust property.

Subsection (2) sets out the directions which the beneficiaries are able to give, and since they include a direction to retire, Amendment No. 22 is necessary, to insert a reference in Clause 22(2) to the person specified for retirement as well as for appointment. Likewise, Amendment No. 35 provides for a consequential amendment to Section 40 of the Trustee Act 1925, so that it encompasses directed as well as voluntary retirement, and Amendment No. 38 amends the Long Title of the Bill by inserting a reference to retirement as well as to appointment of trustees.

Subsection (3) of the new clause is a very important provision. A trustee who is directed to retire may have rights in respect of the trust property, for example rights to reimbursement or indemnity for expenses incurred in relation to the trust, and may need to take action to ensure that he can enforce those rights.

Subsection (3) is intended to apply to a trustee directed to retire, whether or not he is being replaced, and to ensure that he does not have to comply with the direction unless reasonable arrangements have been tendered which will be effective when the retirement becomes effective. It also reproduces the protection afforded by the retiring trustee's involvement in the paperwork which is necessary to make the retirement effective.

Subsection (4) is intended to make clear the persons on whom a direction to appoint a trustee of the beneficiaries' choosing must be served; and subsection

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(5) makes it clear that the power is subject to the general restrictions on numbers of trustees, which needs to be spelt out because it is no longer incorporated by reference.

Amendment No. 17 aims to ensure consistency by importing into Clause 21 the same beneficiary qualification as in the new Clause 20. Amendment No. 18 simplifies the drafting of the clause by removing subsection (3) and incorporating the essentials of it in subsection (2). Amendment No. 19 works together with Amendment No. 24 in Clause 22, which makes it clear that subsection (7) of Section 36 of the Trustee Act 1925 applies to a trustee appointed under the new Clause 20 or Clause 21 as if the trustee had been appointed under Section 36. The need to spell this out for the new Clause 20 as well as for Clause 21 arises because the new clause no longer operates by reference to Section 36; and, once this is done by Amendment No. 24, subsection (4) of Clause 21 becomes superfluous and falls to be deleted, which is done by Amendment No. 19.

Amendment No. 21 deals with a point made by the noble Lord, Lord Mishcon, in Committee, and makes it clear that any direction made by the beneficiaries can be revoked if one or more of them withdraws it in writing before it becomes effective.

Amendment No. 29 does, mutatis mutandis, the same thing in respect of the transitional provisions for Part II of the Bill as Amendment No. 9 does in respect of those for Clause 11, providing for the position of pre-commencement wills which become effective on a post-commencement death. Additional changes to the transitional provisions are made by Amendments Nos. 30 to 32, in the light of representations by the Law Society. The new approach provides for Part II of the Bill to apply to a trust created before commencement of the Act unless the settlor by deed excludes it, and for the settlor to be able to make such a deed at any time, so that he may thus stop a direction from becoming effective, but may not thus affect an appointment or retirement already effective. I beg to move.

Lord Mishcon: My Lords, it does not fall often to Members of your Lordships' House to be able at one stage of the Bill to move that a clause does not form part of that Bill, to withdraw that amendment, and to find the Government agreeing with it in the next stage of the Bill. I happen to be in that happy position, having moved that Clause 19 should not form part of the Bill.

However, I ask for your Lordships' indulgence because, as noble Lords will have seen, many clauses and amendments have been dealt with by the noble and learned Lord in a very succinct manner. They cover a great number of clauses in the one speech that he made on these various amendments. Perhaps I may, therefore, be forgiven if I take some little time in making the points that I wish to make in particular on behalf of the Law Society. Perhaps I may deal with the various points under the appropriate amendment numbers which were covered in the all-embracing speech of the noble and learned Lord.

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Starting with Amendment No. 16, subsection (1) provides that the first condition for the application of Clause 20 and therefore the whole machinery of Part II is that there is no person nominated for the purpose of appointing new trustees. I refer your Lordships to the wording of Amendment No. 16:

    "This section applies in the case of a trust where...there is no person nominated for the purpose of appointing new trustees".
My first query arises out of that wording. What is the position where the person was nominated but is now dead? Will the noble and learned Lord confirm that Clause 20 is intended to apply where there is no person now alive with the power to nominate trustees as well as to cases where no such person was ever nominated in the first place? In making that point, I excuse myself by saying that in the amendment that I tried to put forward in Committee I was careful to ensure that the wording covered the fact that the person concerned was still in existence. There may be many cases where the person originally nominated has been dead for many years.

Subsection (3) deals with the protection of the position of a trustee directed to retire. For example, he is protected against contractual liabilities to third parties and against taxation liabilities which might be enforced against him after retirement. I tried to emphasise in Committee that this was an extremely important topic, given the element of compulsion involved. The wording of the subsection will require him to retire as soon as he has been--I emphasise this word--"offered" reasonable arrangements. That is quite all right in principle, so long as it is clear that the arrangements on offer are to be implemented no later than the time when the actual retirement takes place. Can the noble and learned Lord please consider whether, on Third Reading, there should be wording which makes that clear and gives emphasis to it?

Can it also be confirmed that no trustee who is directed to retire can in practice be removed from office under these provisions, whether or not in combination with existing provisions of the Trustee Act 1925, without himself executing a deed of retirement and therefore having the ability to defer doing so until reasonable arrangements for his protection have been made? That has been agreed as the correct principle, but it is thought that further drafting amendments may be necessary to ensure that the mechanics work properly.

Lastly, under Amendment No. 16 it is not entirely clear what situation subsection (4) is intended to deal with. It appears to specify to whom a notice is to be given in certain circumstances. Some clarification of how the subsection is intended to work would undoubtedly be helpful. In particular, if a direction has been given under subsection (2)(a) requiring the retirement of all the existing trustees, should the direction under subsection (2)(b) not be given to those outgoing trustees since they are the persons who have power to appoint their successors? Here again, I submit respectfully that further drafting may be necessary.

I now turn to Amendment No. 21 which affects Clause 22. The provision makes clear that a beneficiary can withdraw from a direction given under the new provisions at any time before the direction has been

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complied with. I tried to voice the provision about the risk of undue influence in Committee. I am most grateful, as is the Law Society, for the consideration given to the point. Withdrawal should be possible, whether the beneficiary in question signed a single joint direction or one of several identical ones. It is unclear from the way the amendment is expressed--I am talking in particular about introducing the additional words at the end of line 6--whether that is achieved; in other words, whether the additional wording qualifies just paragraph (b) of Clause 22(1) or both paragraphs (a) and (b).

I turn to Amendments Nos. 29 and 30 to Clause 22. The amendments reverse the present presumption of the Bill, with the consequence that Part II will apply to existing trusts unless the settlor or settlors by deed provide to the contrary. The reversal of the presumption as regards existing trusts is appropriate, given acceptance of the revised scheme for Part II to which the noble and learned Lord referred. The essence of the scheme is that it only applies in circumstances where the beneficiaries could remove the trustees by putting an end to the trust altogether, under the rule in Saunders v Vautier. Were the Bill put forward in its present form it is my submission that it would certainly not be correct to reverse the presumption in this way.

In cases where the settlor or testator has died, the effect of Amendments Nos. 29 and 30 appears to be that the new provisions will not apply if the trust is created or arises under a will made before the Act comes into force, whether the settlor died before or after commencement. They will, however, apply if the trust was created otherwise than by will, even if that was before commencement. The distinction between inter vivos and testamentary dispositions appears to be an anomalous result and is presumably unintended. In view of the reversal of the basic presumption for existing trusts, will the noble and learned Lord consider whether there is still reason, in this context, to retain a special provision relating to pre-commencement wills as set out in Amendment No. 29?

It is with relief, I am sure so far as your Lordships are concerned, that I deal with the last amendment, Amendment No. 30 to Clause 22. The right for a settlor to opt out for his trust at any time raises the question of how this is to interact with anything done under the provisions before he does so. It is clear that it must not be allowed to upset any appointment or retirement of trustees which has actually taken place in the meantime, even if carried out pursuant to a direction given by the beneficiaries. However, can the noble and learned Lord confirm that the fact that the provisions have already operated once does not stop the settlor from opting out so that they cannot operate again in the future; and if a direction has been given to the beneficiaries but has not yet been acted upon by the trustees and the settlor disapproves of the action taken by the beneficiaries, he can deprive their direction of any effect by opting out before the trustees act on the direction? That may be of particular significance in the period immediately after commencement when beneficiaries may be seeking to pre-empt action by settlors in respect of existing trusts.

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I have said quite a lot in dealing with these grouped amendments. I do so only because I believe that these matters are of some importance and use in making the Bill as efficient as we all want it to be. I realise that I have put a pretty heavy burden upon the noble and learned Lord were he to deal with all these matters now and upon noble Lords had they to listen to a very long and detailed reply. The purpose is to put these matters on record.

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