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Charitable Trusts (Validation) Bill Lords

Volume 531: debated on Tuesday 27 July 1954

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Order read for resuming Adjourned Debate on Amendment proposed [16 th July] on Consideration of Bill as amended (in the Standing Committee).

Which Amendment was: In page 1, line 9, to leave out "also", and insert "nevertheless," instead thereof.

Question again proposed, "That 'also' stand part of the Bill."

1.22 a.m.

This is a drafting Amendment that was inserted as a result of a promise made during Committee after a certain amount of discussion in which the hon. and learned Member for Leicester, North-East (Sir L. Ungoed-Thomas) was particularly interested. I do not want to detain the House upon it, but I think it is right to say, as he is here and may have something to say about it, that this Amendment was designed to make it clear that the definition in Clause 1 (1) of the imperfect trust provision includes a trust instrument which could be so construed that a trust property could be used exclusively for non-charitable purposes.

During Committee, the hon. and learned Gentleman suggested it was not clear whether this definition included an instrument of this kind, and I undertook to consider it again before Report. Subject to the provisions of Clauses 2, 3 and 4, the Bill validates a trust whose property can consistently with terms of the trust instrument be used exclusively for charitable purposes, notwithstanding that it can be used wholly or partly—it does not matter which—for non-charitable purposes. The existence of the non-charitable purposes in the trust instrument means that the trust is not, under the existing law, a valid charitable trust; the effect of the Bill is to delete the non-charitable purposes from the instrument. It was felt that the Clause as drafted might be regarded as ambiguous, because it might be said that it would exclude from the Bill one of the best known cases. This amendment has removed that possibility.

I am much obliged to the right hon. and learned Gentleman for his explanation.

But I should like to ask him why he did not save a great deal of unpleasantness between himself and my hon. and learned Friend the Member for Hornchurch (Mr. Bing) by giving the same explanation when this came before the House on 16th July.

Surely, the fact that the right hon. and learned Gentleman thinks it worthwhile to give at this late hour this very full and courteous explanation is proof positive that he was singularly lacking in courtesy on 16th July. We have a considerable affection and admiration for him, and I hope very much indeed that he will profit by this experience and learn that the House of Commons, however pressing the case may be and however short the time, must not be treated as he tried to treat it on 16th July. I think this has been a lesson that was well worth while.

If I might, by leave of the House, say one word again—the hon. Member for Dudley (Mr. Wigg), with customary and perfect courtesy, has made some very kind and, possibly, relevant remarks, and I am sorry the hon. and learned Member for Hornchurch was unable to be here this evening. He has not told us why. I am a little surprised at the hon. Member for Dudley suggesting that I was guilty of some discourtesy to his hon. and learned Friend and complaining that all I had to say was that the Amendment was a drafting Amendment. That is not usually regarded as a discourteous observation. I think there must be some misunderstanding. What I did say on the last occasion, although it appears to have escaped the eagle eye of the reporter—

On a point of order. Is it in order for the right hon. and learned Gentleman at this stage to cast doubt on the authenticity of the OFFICIAL REPORT? I have never heard of that being done before.

I do not think it is out of order to say that the OFFICIAL REPORT has been misled. We are guided by the Journal and the Votes and Proceedings.

Further to that point of order. Surely if any hon. Member, and in particular any member of the Government, wishes to challenge the accuracy of something which appears in HANSARD, commonly known as the OFFICIAL REPORT, it is open to any hon. Member to take the earliest opportunity of doing so. Surely, it is very unusual, after something like a fortnight has elapsed, for a Minister then to complain of the inaccuracy of something which not only appeared in the daily HANSARD, but also in the weekly HANSARD. Surely, the whole basis of our debates is these reports, which are taken down verbatim, with an accuracy which commands the admiration of the whole House and the whole country. Surely is is a great disservice to this admirable team of reporters to cast doubt on their accuracy in a matter of this kind after such a lengthy interval. I have often been present in the House, when some slip has been corrected the next day, or the following day. But I have never in my experience known after a lengthy interval like this on a matter of great importance, when the courtesy of an hon. Member is challenged, doubts to be cast on the accuracy of the OFFICIAL REPORT.

I would respectfully submit that there is a matter of principle involved here. It would be very unfortunate if it were regarded as a precedent, that doubt could be cast on the accuracy of the OFFICIAL REPORT.

I certainly cast no doubt whatever on the accuracy of the OFFICIAL REPORT. What I said was that it may be, and possibly was, that the reporter did not catch what I thought I said on that occasion. What I certainly believe I did say, though I might have been inaudible, as I sometimes am, was that the Amendment was inserted as a result of a promise made in Committee. That was the effect. The hon. and learned Member for Hornchurch, who had not given us the benefit of his assistance in the Committee, was present on that occasion, and he rose and accused me of gross discourtesy in not giving detailed information.

1.30 a.m.

As my hon. and learned Friend the Member for Hornchurch (Mr. Bing) is not here. I think I should reply to the Attorney-General's remark that he had not given services on the Committee. He was not a member of the Committee, so how, therefore, could he give his services. Twenty to 30 members of the Committee were absent during the discussion. He was not a member of the Committee, and that should not be said.

Whether he was a member or not does not arise. We are discussing an Amendment, and there was a question of courtesy on one side. I thought we were dealing with that.

I raised the point of order perfectly seriously. The Attorney- General has remarked that the hon. and learned Member for Hornchurch had not given his services on the Committee. Surely that means clearly to anyone who reads it in the OFFICIAL REPORT, or hears it, that my hon. and learned Friend did not perform his duties by attending the Committee. But he was not a member of the Committee. He could not serve on it because he had no right to.

I want to say that I am glad that the Attorney-General has made the explanation that he did. I hope the House will recollect that the brief remarks he made, whether correctly heard or not, were made about 3.59 p.m., when we on this side had withdrawn our opposition, or our comment on another Bill, to enable it to be passed. We were a little surprised that the right hon. Gentleman appeared to want to take this complicated Measure through almost on the nod. He said that the Amendment was made in pursuance of a promise given in Committee. With great respect, what was said in Committee was this: my hon. and learned Friend the Member for Leicester North-East (Sir L. Ungoed-Thomas) said the word "also" was an unfortunate word and should be altered. There was no suggestion that "nevertheless" was the right word, nor, indeed, was this mentioned in Committee at all. He said, "I will consider the point, and we will see what can be done."

We still come to the point as to whether "nevertheless" is the right word. This is a serious and an important point. Most of us who have had any dealing with the business of charitable trusts know it is a nightmare. I know that my right hon. and learned Friend, the Member for Leicester, North-East may find it simple, because he is a specialist in these matters, but for those of us who deal with the ordinary work of the drawing up of charitable trusts and wills are continually trying to meet that inevitable difficulty that arises, because every person acquiring or settling property of charitable trusts always wants them to be as wide as possible, and every legal officer has to advise him that they must be as narrow as possible because the interpretation of trusts has always been extremely narrow.

The very case that gave rise to the whole of this Act is in many ways founded on the Diplock case in 1940, which said that the words "charitable" or "benevolent" made the whole trust void from the charitable point of view. I have always thought these interpretations were too narrow. We have always had to face a quite fantastic dilemma, and it would be convenient if I put one dilemma here and now, because I do not want to speak twice and I do not want to delay the House.

The right hon. and learned Gentleman will remember the case of Ellis, which has been referred to constantly in the Nathan Report, the Catholic church case. The normal trust for the Catholic church is to limit a building for the purposes for which it was built, and then have a general clause that it should be subject to such tests as the Bishop or appropriate authorities lay down. The dilemma is this, and it is worth considering, that if that is not done, no money can be borrowed on the building because, unless there is an ultimate reversion for ordinary uses, no bank will lend money. They will say that the building is strictly limited for use as a Catholic school, that it is of no use to them, that they cannot use it, that they could not sell it, that there is no security, that it is worthless. On the other hand, if they allow such wide trusts as give a resulting power for a mortgagee in opposition to sell the premises and development, the whole thing is void under the charitable trust; that is why we welcome the Bill.

I think my point arises on the word "nevertheless," but I am anxious that at this time of the morning we should raise one point and not try to do it piece-meal by coming back to it on Third Reading. If the right hon. and learned Gentleman refers to the Oxford Group case, which was the Income Tax case, he will remember there that so far as it refers to a limited company, they have the remedy in their own hands. They amend their objects clause and they have opportunities of varying a trust which are not available to the ordinary trust provisions.

If we go to the other extreme and widen this Clause completely, it seems to me that the right hon. and learned Gentleman ought to consider the extent to which he is making possible widespread tax avoidance in these matters. Because, as I understand the Clause whether the word "also" is in or is substituted by the word "nevertheless," the careful draftsman will be able to look at it now on the basis of the Clause as at present drawn, and trusts which provide ostensibly for charity nevertheless give power to operate the funds for non-charitable purposes and for benevolent purposes. I should have thought that, unless we are careful, at 1·40 in the morning and without much consideration we are running the risk of giving the draftsman the chance of driving a coach and horses through some of the taxation laws which refer to bogus charities.

In other words, whether we use "nevertheless" or "also" draft charitable trusts under the provisions of this Clause, which have only to pay lip service to the theory of charity, which by then giving the alternatives would be able to establish, whether as a limited company or as an institution, opportunities of making profits and of exemption from taxation laws which have not been discussed. That is a serious point for the consideration of the right hon. and learned Gentleman and that is all I have to say.

This is the Clause which has created a great deal of difficulty both on policy and on drafting. The Government have been in doubt that the Ellis type of case is within Clause 1 of this Bill. The difficulty has arisen over the Diplock type case, to which my hon. Friend referred; in other words the case where the gift is for a charitable or benevolent purpose, where the whole of the property can be used exclusively for a non-charitable object.

Personally I would prefer to see the Diplock type of case excluded. There are differences of view, and that is my personal view. My reason is that it is not only since the Diplock case that it has been known that a charitable or benevolent gift is a bad gift in law to charity. That has been known for many years, and is well established, so that there is no reason for the legislature to intervene in that type of case. By covering that type of case in this Clause we are making retrospective legislation altering the law, although that law has been perfectly well known and established. It is a classical instance of retrospective legislation which, I warn the Government, will not be forgotten.

It is unnecessary, it is contrary to the principles of law, and it makes for uncertainty in the law. Regarding drafting, I took the view on Second Reading, and in Committee, that the Diplock type of case was not covered by the Bill as it was drafted. There seemed to be doubt about it, and I pressed that the matter should be cleared up. I understood from the Attorney-General during the Committee stage that, although there was misapprehension about it, he agreed with my view of the interpretation of the Clause, and that it was the intention of the Government that the Diplock type of case should not be covered by the Clause. Apparently there was some confusion, and it now transpires that it is the intention of the Government that the Diplock type of case shall be covered.

Therefore we have an amendment of the drafting not, as I had hoped, to make clear that this type of case is excluded, but to make clearer that the Diplock type of case is covered. I am opposed to the Government on policy in this matter, but I welcome the alteration of the drafting, taking the view that it is better to have a defect of drafting cleared up rather than have litigation through it. To that extent I favour the Amendment, although, like the hon. Member for Oldham, West (Mr. Hale) I doubt whether the Amendment makes the matter as clear as it could be made. I would like to see it made clearer.

As I understand it, this Clause covers cases where there is a gift to a benevolent purpose. It goes further than the Diplock type of case. No one has suggested, as far as I know, that a gift to a benevolent purpose should ever be considered as a charity. In other words, the Clause is far wider in scope than was ever contemplated, it seems to me, in the Report of the Nathan Committee. I wish the Government would change their view about the matter. Even so, I consider it desirable to have this Amendment. It makes the Government's intention clear, and will avoid the litigation which I am sure would otherwise ensue.

1.45 a.m.

With regard to the hon. Member for Oldham, West (Mr. Hale), I think that his point is really met by the fact that Clause 1 (2) makes it clear that the validation which is brought into effect by the Bill only applies to instruments taking effect before 16th December, 1952. As to his idea that the draftsmen with evil intent have allowed scope for tax evasion, I wonder whether he has not missed something because this deals with the past. As his hon. and learned Friend pointed out, the Section is retrospective, and I think that meets the hon. Member's point.

As regards the hon. and learned Gentleman, he is really differing very largely from us on a question of policy which goes back a long way. The Lord Chancellor did deal with this matter and was quite clear about it from the very beginning. It was his desire to validate the Diplock type of case. That may be a matter for dispute—and of course I may be out of order in discussing it at any length on this Amendment, because all we are trying to do is to put it beyond doubt that we are covering the Diplock type of case. We are now clear that, however desirable or undesirable this may be, we have succeeded in doing that. The hon. and learned Gentleman, who has been most helpful and courteous about this matter—as he always is over legal matters—will agree that although there may be a matter of principle between us, we are agreed upon that.

The first paragraph of Clause 1 to which I was referring refers to "imperfect trust provision," and that is the definition in every Clause. It goes on to cover instances before the Nathan Report and applies the same definition to all sizes of instruments made since, so my observations in connection with the suggestions of tax evasion are certainly valid.

I am not concerned here with tax evasions, but if it turns out there is any difficulty, I have no doubt it will be dealt with as any other matters of tax evasion.

Question put, and negatived.

"Nevertheless" there inserted in the Bill.

[ Queen's Consent signified.] Bill read the Third time, and passed, with Amendments.