§ 4.5 p.m.
§ Order of the Day for the Second Reading read.
§ THE LORD CHANCELLOR (LORD DILHORNE)
My Lords, I beg to move that this Bill be now read a second time. As your Lordships will see, the Bill gives effect, with some minor exceptions, to the recommendations made in the Fourth Report of the Law Reform Committee about what is known to lawyers as the rule against perpetuities. I fear that this is a somewhat complex and technical subject and the provisions of the Bill are therefore necessarily themselves somewhat complicated. But in essence the problem is a straightforward one. It arises from the fact that the law has for centuries set its face against the possibility of a person's tying up his property in perpetuity.
The law, which was worked out by decisions of the courts over a long period, but particularly in the 18th and early 19th centuries, is that a disposition of any future interest in property is void if the interest is capable of vesting after a period consisting of a life or lives in being at the date of the disposition and 21 years thereafterwards. This period was presumably taken because it is one during which parents may have a family and the children attain full age. The Law Reform Committee thought that if there had still to be some restrictions on the extent to which a man could tie up his property in perpetuity—and this they took to be beyond argument—the basic rule which the courts had worked out at a time during which the traditional forms of family settlement were taking shape was still the right one.
237 The trouble about the rule is that it has become encrusted with a number of subsidiary rules which allow it to operate capriciously and unreasonably. The effect of the rule as it stands is that a disposition of property will be invalidated from the outset if there is any possibility of the interest in question failing to vest within the permitted period, even though the possibility that it may vest outside that period is so remote as to be quite unreal. Moreover, for the purposes of the rule, the courts refuse to recognise a woman as incapable of having further children, however old she may be. The Law Reform Committee, in their very full Report to which I should like to pay tribute, accordingly recommended a number of modifications in the rule which would enable it to achieve its object without the injustices and anomalies to which it is at present capable of giving rise.
The Committee made three principal recommendations which your Lordships will find in the first three clauses of this Bill. First, they thought that, as an alternative to the present period of lives in being and 21 years thereafter, a settlor or testator should be entitled as an alternative to take a fixed period of years within which his disposition should have to take effect, if it was to take effect at all. The Committee suggested 80 years for this purpose, and this suggestion has been adopted in Clause 1 of the Bill. The Committee hoped that by this means conveyancers would be dissuaded from using the device which is frequently adopted at present in an effort to tie property up for as long as possible within the permitted period. This is done by what has come to be known as a "Royal lives" clause, whereby the draftsman provides that the disposition is to vest within 21 years after the death of the last survivor of, let us say, His late Majesty King George V living at the date of the disposition.
Secondly, the Committee recommended that for the purpose of the rule against perpetuities there should be a presumption that no one under the age of 14 should be capable of having a child and that no woman over the age of 55 should be capable of having one. Such a presumption would, of course, be capable of being rebutted by evidence to the contrary. We have adopted this 238 proposal in Clause 2 of the Bill, except that in the case of a woman the lower age is 12 and not 14, as the Committee suggested. Your Lordships may perhaps think that this takes rather more account of practical possibilities. It is interesting to recollect that until 1929, when the age was raised to 16 for both sexes, 14 and 12 were ages below which males and females respectively were unable to contract a valid marriage.
The third of the Committee's three main recommendations was that, instead of requiring the validity of every disposition to be tested from the outset to see whether it could possibly offend the rule against perpetuities, one should have regard to the events that actually happen. In other words, the principle should be "wait and see". Effect is given to this by subsection (1) of Clause 3, which provides that a disposition is to be treated as if it were not subject to the rule against perpetuities until such time, if any, as it becomes established that the event on which the disposition depends can take place only outside the perpetuity period. In the meantime, anything done in relation to the disposition by way of advancement of capital, application of income or otherwise, is to be valid. Under this new "wait and see" rule there will be no obvious means of ascertaining the lives which are to be taken as relevant in determining the length of the perpetuity period. Subsection (2) accordingly specifies the classes of lives which may be taken for this purpose.
Clause 4 provides two methods of validating dispositions which are not saved by the "wait and see" rule that I have attempted to describe. If, for example, there is a gift to the first son of X, a living person, to reach the age of 30 and at X's death his eldest son is 8, the "wait and see" rule will not help, for the perpetuity period will expire 21 years after X's death, and at that time his son will not have reached the age of 30. Provision was made for cases of this kind by the Law of Property Act 1925, which provides that in such a case the age of 21 is to be substituted for the age specified by the testator or the settlor. The Bill gives closer effect to the intentions of the settlor or testator by providing 239 that one is in future to take the age nearest to that in fact specified which would be sufficient to prevent the disposition from being made void. In the example I have given your Lordships, where the son was 8 at his father's death, this means that he would take the property at the age of 29 instead of the age of 30 mentioned in the disposition.
There was some disagreement between the members of the Law Reform Committee on the question whether the "wait and see" rule should, or should not, be applied before what I may call the age-reduction rule contained in the Law of Property Act. The majority of the Committee thought that one should apply the age-reduction rule in appropriate cases without waiting to see whether, and to what extent, it might be necessary to apply the rule in the events which in fact happen. The minority thought that it would be better to give effect to testators' or settlors' intentions, if one possibly could, by waiting to see what happens instead of doing violence to such intentions in every case by reducing the age to 21. I am bound to say that I think the minority were right on this point. I am fortified in that belief by seeing that the noble and learned Lord, Lord Gardiner, was included among their number. As your Lordships will see, the Bill gives effect to the views of the minority.
The Committee made a number of other recommendations designed to ensure that dispositions of property take effect more readily than they do at present, and I think I can say that all these recommendations are dealt with in the remaining clauses of the Bill. Your Lordships will not, I am sure, wish me to deal with these provisions in detail now, although I should be happy to do so at a later stage.
There are only three further provisions which I ought briefly to mention now. The first is Clause 9, which deals with options relating to land. Subsection (1) of that clause provides that the rule against perpetuities is not to apply to an option conferred on a lessee to acquire the freehold or other reversionary interest, the reason being that leasehold options can be said to be in the public interest to the extent that they 240 enable a lessee to secure for himself the fruits of his expenditure on the land comprised in the lease.
Other options, such as the ordinary option to purchase, are in a different category. For, as the Law Reform Committee pointed out, they tend to discourage rather than foster the maintenance and development of the land, because a landowner will be unwilling to spend money on his land if he is at risk of having the fruits of such expenditure taken from him by the exercise of the option. Clause 9(2) accordingly requires all options of this kind to be exercised within 21 years from their creation, after which they are to be treated as void in all respects, even as between the original parties to them.
Clause 12 deals with the periods for which the income of property may be validly accumulated. The law on this subject dates from the time of the Accumulations Act, 1800, which was passed after a certain Mr. Thellusson had bequeathed the bulk of his very considerable estate to trustees upon trust to accumulate the rents and profits at compound interest during the lives of all his sons, grandsons and great-grandsons. The last of these did not die until 1856, by which time the value of Mr. Thellusson's estate had been considerably dissipated by the number of law suits to which his will had given rise.
The Act of 1800, which is generally known as the Thellusson Act, provided four different periods during which alone income might he validly accumulated, and these provisions were re-enacted in the property legislation of 1925. The Law Reform Committee thought that it would be convenient to have two additional periods during which it should he possible to accumulate income. These, as your Lordships will see from Clause 12(1), are 21 years from the date of the relevant disposition, or the duration of the minority or minorities of any persons living at that date.
Finally, I should perhaps mention Clause 13, which applies the presumptions in Clause 2 as to the ages below and above which people are presumed to be incapable of having children to the rule of law enabling beneficiaries to put an end to any provisions of a trust requiring income to be accumulated for 241 their benefit. This is a matter of considerable practical importance. As the law stands, all beneficiaries under a trust who are of full age and capacity can agree together to put an end to the accumulations and divide the whole trust fund between themselves. But they cannot do this where there is any possibility, however remote, of another beneficiary coming into existence, although very often the only possibility of this happening is that an elderly woman will have another child. It seems obviously desirable that this possibility should be brought within bounds, and accordingly, by applying Clause 2, it would be presumed that no woman over 55 is able to have another child unless the contrary is shown.
My Lords, I fear that, as I warned your Lordships, the provisions of this Bill have turned out to be complicated and, perhaps, dull. They are none the less of considerable importance to all concerned with the law of property. It is interesting to notice that quite a large number of countries in the Commonwealth and States in the United States have found it desirable to legislate on this subject in terms not entirely unlike those in the present Bill, and we have indeed for some little time been pressed to follow their example.
It may be said that we have taken a long time to implement the Law Reform Committee's Report, which was published as long ago as 1956. That, my Lords, is perfectly true, but I ask your Lordships to bear in mind that we have been far from idle in the field of law reform. So far as the Law Reform Committee itself is concerned, effect has now been given to the recommendations in the First, Second, Third, Sixth, Eighth and Ninth Reports, while some important recommendations in the Tenth Report are dealt with in the Hire-Purchase Bill now before Parliament.
In addition to this, a very considerable number of law reform Acts have passed through Parliament in the last ten years. I will not weary your Lordships with a long list of them now. I would only remind you that last Session alone we passed two important measures of law reform, the Limitation Act and the Wills Act, each of which gave effect to the recommendations of the Committees which had considered the subjects with 242 which the Acts were concerned. It is perfectly true that no Government can find all the time it would like for Government Bills on law reform, which is why we so often have to rely on the assistance of Private Members, both in your Lordships' House and in another place. But it is revealing no secrets to say that Private Members who introduce law reform Bills can generally count on having the assistance of the Parliamentary draftsmen as well as of my office or other Government Department concerned.
I sometimes wonder whether those who criticise the way in which we deal with law reform really appreciate all that has been done. I do not wish to be complacent or to suggest that there is not still a great deal to be done, but I do think that the need for measures of reform is sometimes somewhat exaggerated. However this may be, there is little point in asking Committees to produce Reports unless one can have some reasonable assurance that Parliamentary time is likely to be found for their implementation.
Law reform, like politics, is the art of the possible, and one has to proceed by stages. Looking at the matter from the standpoint of what is reasonably practicable, I venture to say that we have nothing in our record of which we need feel ashamed. I hope your Lordships will forgive me for having strayed for a moment or two from the subject matter of this Bill, but I thought it might be useful if I were to say something about the general subject of law reform. I think your Lordships will agree that the Bill now before you represents an important instrument of reform which should be acceptable to all sides of the House, and I accordingly ask you to give it a Second Reading. I beg to move.
§ Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
§ 4.20 p.m.
§ LORD SILKIN
My Lords, the noble and learned Lord the Lord Chancellor, in introducing this Bill, referred to it as complex, complicated, dull; and I would add, difficult. Indeed, when I first tried to master the Bill I found it almost beyond my comprehension. I was therefore very grateful to the noble and learned Lord for his very clear explanation. I think that I almost understand the Bill, although how long I shall retain 243 that understanding I am not sure. But he certainly made fairly clear what was, for me, an impossible Bill.
I was interested to find that in one respect the Minority view of the Committee had prevailed with the Government. I am very glad of that, because minorities are sometimes right, as has been often demonstrated in this House. I hope the views of minorities will be taken more notice of by this Government than has been the case in the past. I was also interested to hear mention of my old friend Thellusson. He was a very famous figure in my student days in relation to the law against accumulations, and it was nice to hear of him again. In regard to the merits of the Bill, there is little that I need say at this stage. Broadly, it implements the recommendations of the Fourth Report of the Law Reform Committee, and in principle I am sure that the whole House will accept it. There may be one or two matters to raise in Committee, on a point put to me by the Law Society, which I will not raise at this moment. No doubt the noble and learned Lord Chancellor has heard of the point, and it may be that we can discuss it fully in Committee.
Since the noble and learned Lord has referred to the Law Reform Committee, I should like to say a word or two about it. The question of law reform is certainly not a controversial subject. It is of the greatest importance, in a civilised community, that from time to time our laws should be examined, and that those which are out of date or obsolete, or which no longer meet the convenience of the general community, should be reviewed and, where necessary, altered. I consider that the machinery of the Law Reform Committee is an excellent one, and, if I may, I should like to congratulate the Government (I see that there are not many of my noble friends here, and therefore I can do it freely) on the number of recommendations of this Committee which they have been able to implement.
One question that I should like to ask is why it is necessary to wait seven years. As I have said before, seven years seems to be the normal period of gestation of a Report of this kind. We implemented the other day a Report of the Law Reform Committee on the Court of 244 Criminal Appeal. That also took seven years. It could be said that this particular measure is a difficult one and needed a great deal of preparation. I cannot think that the previous measure needed all that time. We seem to be taking too long to implement these Reports, and it is rather discouraging to those members who take part in their preparation. In this particular case Lord Jenkins was the Chairman; the present Lord Chief Justice, Lord Parker of Waddington, was a member, and so were Lord Devlin, Lord Justice Diplock, my noble and learned friend Lord Gardiner, Professor Goodhart and others—all eminent men in the law. They gave over two years of their time to this very difficult task. It is rather discouraging for them to find that, having produced a Report which at the end of the day is being very largely implemented, they should have to wait over seven years before the Government can find the time to introduce a measure.
I hope (and I am not moving a Vote of Censure on the Government over this) that it will be possible in future to speed up the implementation of these Reports, and to give the encouragement which is very much needed if we are to find volunteers to serve on these Committees; so that they find that, at the end of their arduous task—and this was an arduous task—their work is appreciated and implemented. I hope that it will be found possible in the future, whichever Government is in office, to do this. As to the Bill itself, I am not surprised to see that that there is only one other speaker, the noble and learned Lord, Lord Evershed, because it is not a subject with which I imagine most noble Lords will be very familiar.
§ 4.27 p.m.
§ LORD EVERSHED
My Lords, as the noble Lord, Lord Silkin, has anticipated, I should like to add my support to the Motion for Second Reading of this Bill introduced by the noble and learned Lord on the Woolsack. I have spent my professional life in what is, I think your Lordships will admit, the more respectable branch of the law, known as the Chancery Division. It was, of course, there where one came across the rather fantastic results which the rule sometimes produced. That great 245 lawyer, Lord Blanesburgh (as he became when a Member of this House) once described the results as being "the stringent, almost penal, character of the rule".
Without again going over what has fallen from the noble and learned Lord the Lord Chancellor, I would venture to draw your Lordships' attention to one matter. One unhappy result of a provision being held to be void through infringing the so-called rule against perpetuities was that a subsequent limitation dependent upon the first one was also rendered void. That blemish—for such it is—is remedied by Clause 6 of the Bill. I was pleased that by this Bill the Minority view of the Committee, which was the view of my noble and learned friend Lord Gardiner, had been preferred to that of the Majority that is to say that one first applies the "wait and see" rule, and then one applies the amended provisions of Section 163. As was pointed out in the Minority Report, that seemed to be the better rule. I have one example to hand of support for that view; namely, the corresponding Act of Western Australia passed in 1962, which in all essential respects followed the same principles as are followed in this Bill.
My Lords, it is perhaps right to observe that it was the view of the Committee—and I think it is generally accepted—that to enable a man who has the means to make it worth doing to tie up, as we say, his property, so that not only his children but his grandchildren also may benefit, is regarded as socially sensible and sound; and that general rule which has long been afoot is preserved. What this Bill does is to prevent—again, I use Lord Blanesburgh's words— "the stringent, almost penal, character of the rule ", when it is, sometimes literally, carried into operation.
I shall not delay your Lordships further. As has been pointed out, this Bill may be said to lack the gripping, exciting interest that some matters have—such as those relating to motor cars and the like—which come before the House. But this is a case where, as I venture to submit, the law should be amended so that a rule fundamentally sound should not by extravagant example become a subject of public disrespect. It is indeed a complicated measure. I have 246 myself been much interested in the problem, and in that connection have been in communication with a notable professor at Harvard University, Professor Barton Leach, who has been responsible for similar legislation in his own State of Massachusetts, and elsewhere. Because the Bill is so complicated, I should like, if I may, having regard to my knowledge of the subject, to pay my respects and offer my congratulations to the draftsman upon his skill in putting into this Bill what is necessarily recommended and is desired to be achieved. It must obviously have been a difficult task, and it has been well performed. As the noble Lord, Lord Silkin, said, there may be matters to be discussed at a later stage. But on this occasion I hope that your Lordships will accept what is suggested and give this Bill a Second Reading.
§ 4.33 p.m.
§ LORD CONESFORD
My Lords, may I add a word in support of this measure, in which I take personally a special interest, for reasons which I shall give to the House? Some years ago I found that it was very desirable that a settlor should incorporate in a settlement something which it will be possible to achieve under Clause 12 of the present Bill, but which could not be achieved in the then state of the law—namely, to provide for accumulation of income for 21 years from the date of the settlement. I was informed by my Chancery friends that the desirability of this reform had been recognised in this very powerful Report of the Law Reform Committee published in 1956. As this particular recommendation was one which was within my own comprehension, I wrote to my noble and learned friend Lord Kilmuir, who was then Lord Chancellor, asking whether there was any prospect of legislation and saying that I thought I could myself introduce a Bill which would at least effect this reform. I am sure he will allow me to disclose his reply. He thought it was very desirable that, when we legislated on this subject, the Bill should incorporate the whole of the Report of the Law Reform Committee, and should be prepared with great skill by the Parliamentary draftsman.
My Lords, my next connection with the matter was when my noble and 247 learned friend now upon the Woolsack took up his great office, and in conversation with him I expressed the view, which the noble Lord, Lord Silkin, expressed just now, that it was desirable to embody in legislation some of these admirable Reports; and I gave this one, the Fourth Report of the Law Reform Committee, as an example. I think it was then that my noble and learned friend extracted from me a promise that, if it were drafted, I was willing to introduce it. Then I forgot all about the matter until, a short time ago, he said that the Bill was almost ready and it would fall to me to introduce it.
I took the very reasonable precaution of approaching the Chancery Law Lords, and finding out whether they were generally favourable and were willing to give all necessary assistance, and I thought that I should be able to answer anybody who raised any question by saying that, of course, on that difficult problem the House would wish to have the reply from my noble and learned friend upon the Woolsack. Therefore, when I saw the nature of this Bill and its complication, I was delighted that Her Majesty's Government decided themselves to take over the Bill; and I join with the noble Lord, Lord Silkin, in congratulating my noble and learned friend on the Woolsack on his very lucid explanation of its provisions. I wish, however, to say how much I welcome the precedent that my noble and learned friend is now setting of introducing a Government measure in which to embody this reform. I have some reason to know how many of these matters have been left to Back-Benchers, because it has been my task, I think, to pilot through this House no fewer than four legal reform Bills, always with the support, as the noble Lord, Lord Silkin, points out, of noble Lords in all sections of the House—because this House is always most willing to carry out important legal reforms.
My Lords, the House will remember the recent most interesting maiden speech of the noble and learned Lord, Lord Gardiner, who drew attention to the very high respect in which English law and our administration of justice were held abroad; and he also included in his speech some points on which 248 admiration was less universal. Nobody admires English law more than I do, but there are branches of the law which from time to time require reform. As a result of the rule that the House of Lords as a Judicial Assembly is itself bound by its own decisions, the only method now of securing law reform is by Statute. And what better method of preparing for a Statute can there be than referring these difficult matters to this admirable body, the Law Reform Committee? But, my Lords, when the Law Reform Committee does at last produce one of these admirable Reports, I do not think there should be so much delay as there sometimes is; and in this matter I associate myself with what was said by the noble Lord, Lord Silkin. I am perfectly certain that there will always be, in both Houses of Parliament, private Members willing to introduce such Bills when they have the assistance of Parliamentary draftsmen. But I do not think that the possibility of law reform should depend upon that chance. I am delighted that on this occasion my noble and learned friend on the Woolsack has himself introduced this as a Government measure, and I hope that that admirable precedent will be followed in future cases.
§ 4.40 p.m.
§ LORD GARDINER
My Lords, I had not intended to say anything on this matter to-day, but as each noble Lord who has spoken on this Bill has referred to me I should like, if I may, very shortly, to join in the welcome which is being given to this Bill. It is, as your Lordships know, merely in implementation of a recommendation by the Law Reform Committee, of which I was a member, though I played a very humble part on this most abstruse Chancery subject; but I am naturally gratified to find that, on the one point on which there was any division of opinion, the view of the minority, of whom I was one, has found favour with the Government.
As a certain amount has been said on the work of the Law Reform Committee, I hope that none of your Lordships will think that, because we have a Law Reform Committee, this Committee will see that English law is brought up to date. Having been a member of that Committee for twelve years, I resigned from it largely because I was persuaded by my 249 experience that it was quite impossible for a Committee of that kind to do more than scratch the surface. As my noble and learned friend Lord Evershed has pointed out, this particular branch of our law has been known to be wrong since the time of Lord Blanesburgh, but nothing was done at all until the Law Reform Committee was asked to go into it.
It reported, as your Lordships know, in October, 1956; and I cannot altogether join in the congratulations which the noble and learned Lord on the Woolsack heaped upon himself for the speed with which law reform has lately progressed in this country. My noble friend Lord Silkin said that seven or eight years was the average time it took to implement a report of this Committee, but I did once spend considerable time and trouble trying to ascertain what was the average period of time between the moment when all lawyers agreed that some particular reform in the law was necessary and the moment when it was carried out, and I found that the average time was 35 years.
Therefore, while I welcome the Bill and congratulate the noble and learned Lord on the Woolsack for having, at last, sought to implement the recommendations of the Committee, it is, I think your Lordships will observe, only one of many Bills which have been introduced lately which, though admirable Bills, would have been better still if they had been introduced during the period of stagnation which we have had during the last ten years. Therefore, while congratulating my noble and learned friend on at last introducing this Bill, I would venture to express the hope that reforms in his field may come rather more quickly in the future.
§ THE LORD CHANCELLOR
My Lords, I am grateful for the way in which your Lordships have received this Bill. I should like to say to the noble Lord, Lord Gardiner, that he rather misrepresents me if he suggests that I sought to heap congratulations on myself (I think those were his words) for the speed with which this Bill has been introduced. What I said is within your Lordships' recollection. I do not think I said anything of that sort.
My Lords, views may differ as to the extent of law reform that is necessary, 250 but I join with the noble Lord, Lord Silkin, in his view that the machinery of the Law Reform Committee is an excellent one. It is a powerful body, and although I know that the noble Lord, Lord Gardiner, resigned from it not so very long ago, that Committee has served, and will continue to serve, a very useful purpose indeed. I should not like it to be thought that any criticism can legitimately be made of the work of that body. Indeed, I should like to do all I can to encourage them in their labours, which do not, I think, perhaps get all the appreciation that they deserve. Nor is it right, in view of the record of legislation, to talk about stagnation in the last ten years. I am not going to take up time now in detailing the list of law reform Bills which have been passed during the last ten years, but I am quite sure that that record in the preceding years, during record in the preceding years, during the Socialist Administration.
This is a Bill dealing with the rule against perpetuities. I am glad the noble and learned Lord, Lord Evershed, was able to give it his support, with his great experience of how that rule works. I moved the Second Reading of this Bill with a considerable amount of trepidation because I have never had any practical experience in the courts of the operation of this rule. But I remember, my mind going back to the last time I had any acquaintanceship with it before now, which was when I was approaching my Bar examinations, what a formidable hurdle I then found the rule against perpetuities to be.
I think this is indeed a useful reform. I am sorry, too, that it has taken so long, since the Committee produced its report, to present a Bill on this subject to your Lordships. I would say only this. It is not always easy, as I think those of your Lordships who are aware of the problems know, to find space in legislation—Government or, indeed, Private Legislation—for all the measures that one would wish; but it certainly should not be accepted that a delay of seven years is anything like the general rule. I could quote instances to the noble Lord, Lord Silkin, to show that other reports have been implemented in a much shorter space of time. I should like to conclude by thanking your 251 Lordships for the way in which this measure has been received, and by hoping that we can avoid any further delay in putting it soon upon the Statute Book.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.