Northern Ireland Assembly Flax Flower Logo

Committee for Finance and Personnel

Report on the
Trustee Bill (NIA Bill 11/00)

Report on the Committee Stage

Ordered by the Committee for Finance and Personnel to be printed on Tuesday, 8 May 2001 Report 6/00 to the Northern Ireland Assembly from the Committee for Finance and Personnel on the Committee Stage of the Trustee Bill (NIA Bill 11/00)

COMMITTEE FOR FINANCE AND PERSONNEL: MEMBERSHIP AND POWERS

POWERS

The Committee for Finance and Personnel is a Statutory Departmental Committee established in accordance with paragraphs 8 and 9 of Strand One of the Belfast Agreement and under Standing Order No. 45 of the Northern Ireland Assembly. The Committee has a scrutiny, policy development and consultation role with respect to the Department of Finance and Personnel and has a role in the initiation of legislation.

The Committee has the power to:

MEMBERSHIP

The Committee was established on 29 November 1999 with eleven members, including a Chairperson and Deputy Chairperson and a quorum of five members.

The membership of the Committee is as follows:

Table of Contents

Report

Introduction

Deliberations of the Committee5

Appendices

Appendix 1. - Minutes of Proceedings of the Committee Relating to the Report

Appendix 2. - Minutes of Evidence of the Committee

Appendix 3. - Annexes to the Minutes of Evidence

REPORT 6/00
(COMMITTEE FOR FINANCE AND PERSONNEL)

REPORT ON THE TRUSTEE BILL (NIA BILL 11/00)

INTRODUCTION

1.

General

1.1

The Committee for Finance and Personnel met on the dates given in paragraph 3.1 to consider the Trustee Bill (NIA Bill 11/00) that was referred to the Committee on 26 March 2001 for consideration under Standing Order 31 (1) of The Northern Ireland Assembly.

1.2

The Committee had before it the Trustee Bill (NIA Bill 11/00) and the Explanatory and Financial Memorandum to the Bill, as introduced. The Legal Adviser, (N.I. Assembly) provided advice to the Committee on the Bill.

1.3

The Minister in charge of the Bill, Mr Mark Durkan MLA, Minister of Finance and Personnel, made the following statement under Section 9 of the Northern Ireland Act 1998.

"In my view the Trustee Bill would be within the legislative competence of the Northern Ireland Assembly."

2.

Meetings Held

2.1

The Committee considered the Trustee Bill on the following dates.

Date

Subject/Witnesses

31 May 2000

Committee agreed to a proposal from the Minister of Finance and Personnel that a comprehensive package of Trust Law Reform should be prepared and introduced to the Assembly.

28 June 2000

Committee considered written proposals from Minister of Finance and Personnel for reform of the law on trusts.

5 July 2000

Committee considered and commented upon a draft consultation paper on trust law reform.

13 February 2001

Pre-legislative (consultation) briefing by Department (Office of Law Reform Officials).

3 April 2001

Meeting with Department (Office of Law Reform Officials) on the structure and content of the Bill.

24 April 2001

Advice from Assembly Legal Adviser on issues raised by the Northern Ireland Human Rights Commission.

1 May 2001

Formal Scrutiny (Long Title, Clauses 1 - 46 and Schedules 1 - 4).

8 May 2001

Consideration of Report on the Committee Stage of the Trustee Bill.

3.

Evidence

3.1

The Northern Ireland Human Rights Commission made a substantive written submission in response to an invitation from the Committee.

3.2

Other bodies invited to make submissions were:

DELIBERATIONS OF THE COMMITTEE

4.

Introduction

4.1

The Committee gave detailed consideration to each part of the Trustee Bill over a number of meetings and concluded its deliberations with a clause-by-clause scrutiny on 1 May 2001 when the parts of the Bill were formally agreed. The decisions made and the parts of the Bill where substantial clarification was required are given below. The record of the Committee's deliberations can be found in Appendix 1 (Minutes of Proceedings) and Appendix 2 (Minutes of Evidence).

5.

Clause by Clause Consideration

5.1

There were no issues raised by the witnesses in respect of any of the Clauses of the Bill. Members themselves raised a number of issues with the Office of Law Reform about the detail of the Bill.

5.2

In Part I (Clauses 1 and 2), there was no unresolved issue and the Committee agreed to advise the Assembly that it was content with Clauses 1 and 2 as drafted.

5.3

In Part II (Clauses 3 - 7), members raised a number of points related to the power of trustees to seek advice when making investments. There was no unresolved issue arising from these discussions and the Committee agreed to advise the Assembly that it was content with Clauses 3 to 7 as drafted.

5.4

In Part III (Clauses 8 - 10), there was no unresolved issue and the Committee agreed to advise the Assembly that it was content with Clauses 8 to 10 as drafted.

5.5

In Part IV (Clauses 11 - 27), members discussed the question of intervention by trustees when reviewing an agent's performance. There were no unresolved issue arising from this discussion and the Committee agreed to advise the Assembly that it was content with Clauses 11 to 27 as drafted.

5.6

In Part V (Clauses 28 - 33), there was no unresolved issue and the Committee agreed to advise the Assembly that it was content with Clauses 28 to 33 as drafted.

5.7

In Part VI (Clauses 34 - 36), during discussions with the Office of Law Reform, members asked about the application of these provisions to a trust relating to a building. Officials explained that situation was covered by other legislation. There was no unresolved issue arising from this discussion and the Committee agreed to advise the Assembly that it was content with Clauses 34 to 36 as drafted.

5.8

In Part VII (Clauses 37 - 46), the provisions of Clause 39 relating to pension schemes were discussed. Members asked about the effect of the restriction contained in Clause 39(6), i.e. the extent to which the trustees of pension schemes would be allowed to exercise the power of delegation to agents The Office of Law Reform explained that the Law Commission had examined this issue in detail. Their consultations had revealed that it would be important to keep separate the employer (or any associated person such as an employee) and the trustees. It was considered good practice that employers and their staffs should have no direct access to the money within pension schemes. The Committee accepted the view that the Bill should leave intact the system established by the Pension (NI) Order 1995. There was no unresolved issue arising from this discussion and the Committee agreed to advise the Assembly that it was content with Clauses 37 to 46 as drafted.

5.9

In Schedule I, the Committee considered a memorandum it had received from the Northern Ireland Human Rights Commission. The Commission expressed concern about the effects of Paragraph 7 of the Schedule on the beneficiaries of a trust. It was noted that Paragraph 7 provided that the duty of care introduced in Clauses 1 and 2 of the Bill did not apply to trustees if or in so far as it appeared from the trust instrument that the duty was not meant to apply. The Commission asked the Committee to consider the possibility that this exemption could deprive the beneficiaries of a trust of the "peaceful enjoyment" of their possessions and, therefore, be in breach of Article 1 of Protocol 1 to the European Convention on Human Rights. The Commission noted that the question of whether a court would hold that such a breach had in fact occurred would depend on whether it found that the non-application of the duty of care was either "in the public interest" or within the state's margin of appreciation in enforcing "such laws as it deems necessary to control the use of property in the general interest".

5.10

The Committee sought legal advice on this matter. This advice (Annexe 2 to the Minutes of Evidence) noted that an identical provision to that set out in Paragraph 7 of Schedule 1 was contained in paragraph 7 of Schedule 1 of the Trustee Act 2000 that applied in England and Wales. It was suggested that Paragraph 7 was intended to preserve the rights of settlors to dispose of their property in whatever manner they wished. It was also noted that a trust instrument could specifically exclude the duty of care in relation to a function such as the acquisition of land while leaving the duty of care intact in respect of all other functions. In addition, the beneficiaries of a trust may still bring an action against trustees guilty of fraud or where the terms of the trust had been breached regardless of whether the duty of care had been excluded.

5.11

It was suggested that the Committee should consider whether the omission of such an exclusion might breach Article 1 of the First Protocol because the right to peaceful enjoyment of possessions included the right of a person to dispose of his property in any way he wished. It was noted that the First Protocol permited controls on the use of a person's property only if they were necessary "in accordance with the general interest or to secure the payment of taxes or other contributions or penalties". It was suggested that the omission of the exemption might not have been in the general interest but in the interest of specific beneficiaries. Moreover, the controls would not have been justifiable in the interests of securing payment of taxes, etc.

5.12

Having, considered all these issues and consulted directly with officials from the Office of Law Reform, the Committee agreed to advise the Assembly that it was content with Schedule 1 as drafted.

5.13

In Schedules 2 to 4, there was no unresolved issue arising from the discussions and the Committee agreed to advise the Assembly that it was content with Schedules 2 to 4 as drafted.

APPENDIX 1

PROCEEDINGS OF THE COMMITTEE
RELATING TO THE REPORT

MINUTES OF PROCEEDINGS OF THE COMMITTEE RELATING TO THE REPORT

Minutes of Proceedings of the Committee that relate to the Report on the Trustee Bill (NIA Bill 11/00) are given below:

Date: Subject/Witnesses:

31 May 2000 Committee agreed to a proposal from the Minister of Finance and Personnel that a comprehensive package of Trust Law Reform should be prepared and introduced to the Assembly.

28 June 2000 Committee considered written proposals from Minister of Finance and Personnel for reform of the law on trusts.

5 July 2000 Committee considered and commented upon a draft consultation paper on trust law reform.

13 February 2001 Pre-legislative (consultation) briefing by Department (Office of Law Reform Officials).

3 April 2001 Meeting with Department (Office of Law Reform Officials) on the structure and content of the Bill.

24 April 2001 Advice from Assembly Legal Adviser on issues raised by the Northern Ireland Human Rights Commission.

1 May 2001 Formal Scrutiny (Long Title, Clauses 1- 46 and Schedules 1-4).

8 May 2001 Consideration of Report on the Committee Stage of the Trustee Bill.

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

ELEVENTH MEETING
WEDNESDAY, 31 MAY 2000
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairperson)
Mr James Leslie (Deputy Chairperson)
Mr Donovan McClelland
Mr Derek Hussey
Mr Gardiner Kane
Mr Billy Bell
Mr Peter Weir
Mr Oliver Gibson

Apologies: Mr Alex Attwood
Mr Seamus Close
Mr Alex Maskey

In attendance: Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.00 p.m. The meeting was held in closed session.

Briefing on Key Issues and DFP Work Programme

Mr David Ferguson, Corporate Services Group, Department of Finance and Personnel, appeared before the Committee. He presented a paper on the key issues and work faced by the Department.

Agreed: The Committee agreed to the Minister's proposal to withdraw the current Trustee (Amendment) Bill and introduce a comprehensive package of trust law reform, as contained in his letter of 31 May.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

FIFTEENTH MEETING
WEDNESDAY, 28 JUNE 2000
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr James Leslie (Deputy Chairman)
Mr Derek Hussey
Mr Seamus Close
Mr Billy Bell
Mr Peter Weir
Mr Oliver Gibson
Mr Alex Maskey

Apologies: Mr Gardiner Kane
Mr Francie Molloy (Chairman)

In attendance: Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Ms Sharon Bowman (Administrative Support)

The Deputy Chairman took the Chair and declared the meeting open at 2.00 p.m. The meeting was held in closed session.

Trustees' Powers and Duties

The Committee deliberated on a letter dated 27 June from the Minister of Finance and Personnel enclosing a consultation paper on reforms of the law of trusts and proposals for a Trust Bill.

Resolved: The Committee agreed to consider the matter further at a later date.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

SEVENTEENTH MEETING
WEDNESDAY, 5 JULY 2000
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Derek Hussey
Mr Seamus Close
Mr William Bell
Mr Peter Weir
Mr Oliver Gibson
Mr Alex Maskey
Mr Gardiner Kane
Mr Donovan McClelland

Apologies: none

In attendance: Mr Martin Wilson (Committee Clerk)
Mr Peter Hughes (Assistant Clerk)
Mr Easton Vance (Administrative Support)

The Chairman declared the meeting open at 2.00 p.m. The meeting was held in closed session except for agenda items 4 to 8, which were opened to the public.

Trustees' Powers and Duties

The Committee deliberated on a consultation paper on reforms of the law of trusts and proposals for a Trust Bill.

Resolved: The Committee agreed to issue a formal response to the Minister of Finance and Personnel supporting the publication of the proposed consultation paper.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

FORTY SECOND MEETING
TUESDAY, 13 FEBRUARY 2001
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairperson)
Mr James Leslie (Deputy Chairperson) Mr Nigel Dodds
Mr Derek Hussey
Ms Patricia Lewsley
Mr Alex Maskey
Mr Peter Weir

Apologies: none.

In attendance: Mr Martin Wilson (Principal Clerk)
Mr Peter Hughes (Clerk)
Ms Edel Gillen (Executive Support)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.17 p.m. The meeting was held in open session.

Trustee Bill

Officials from the Office of Law Reform briefed the Committee on the Policy Memorandum on the proposed Trustee Bill. The Committee deliberated.

Resolved: That the Committee was content with the aims of the Policy Memorandum.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

FIFTIETH MEETING
TUESDAY, 3 APRIL 2001
ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairperson)
Mr James Leslie (Deputy Chairperson)
Mr Billy Bell
Mr Seamus Close
Mr Derek Hussey
Mr Alex Maskey
Mr Peter Weir

Apologies: Ms Patricia Lewsley

In attendance: Mr Martin Wilson (Principal Clerk)
Mr Peter Hughes (Clerk)
Mr Joe Sloan (Assistant Clerk)
Ms Edel Gillen (Executive Support)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.45 p.m. This session was held in public.

Trustee Bill - (NIA 11/00)

The Committee received briefing and questioned officials from the Office of Law Reform.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

FIFTY SECOND MEETING
TUESDAY, 24 APRIL 2001
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Alex Attwood
Mr Billy Bell
Mr Seamus Close
Mr Nigel Dodds
Mr Derek Hussey
Mr Alex Maskey
Mr Peter Weir

Apologies: none.

In attendance: Mr Martin Wilson (Principal Clerk)
Mr Peter Hughes (Clerk)
Ms Edel Gillen (Executive Support)
Ms Sharon Bowman (Administrative Support)

The Chairman declared the meeting open at 2.39 p.m. The meeting was held in public session

Trustee Bill

The Committee was given advice by an Assembly Legal adviser on the concerns raised by Mr Brice Dickson, Chief Commissioner, Northern Ireland Human Rights Commission.

Members concluded that concerns raised by the Human Rights Commission had been adequately dealt with by the Bill and that no changes were required to paragraph 7 of Schedule 1. The Committee agreed to commence the Clause by Clause scrutiny at the next meeting. The Committee also sought an extension to the Committee stage of the Bill.

Resolved: The Committee agreed that a motion should be put forward seeking an extension of the Committee Stage of the Bill to 22 June 2001

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

FIFTY THIRD MEETING
TUESDAY, 1 MAY 2001
COMMITTEE ROOM 144, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Alex Attwood
Mr Nigel Dodds
Ms Patricia Lewsley
Mr Alex Maskey
Mr Peter Weir

Apologies: Mr Billy Bell
Mr Seamus Close
Mr Peter Robinson

In attendance: Mr Martin Wilson (Principal Clerk)
Mr Peter Hughes (Clerk)
Mrs Margaret Miskelly (Clerk)
Ms Edel Gillen (Executive Support)
Mr Jonathan Briggs (Administrative Support)

The Chairman declared the meeting open at 2.41 p.m. The meeting was held in public session

Minutes of Evidence

Resolved: The Committee agreed the Minutes of Evidence for 3 April 2001 on the Trustee Bill.

Trustee Bill

Officials from Office of Law Reform attended for the Consideration of the Bill. The Committee clerk explained that there were no concerns raised other than the issue raised by the Human Rights Commission regarding Paragraph 7 of Schedule 1. Members had already agreed that they were content with Paragraph 7 of Schedule 1 and it should remain unchanged.

The Committee considered the Long Title.

The Committee deliberated on the Long Title.

Resolved: That the Committee is content with the Long Title as drafted.

The Committee considered Clauses 1 and 2.

The Committee deliberated.

Resolved: That the Committee is content with Clauses 1 and 2 as drafted.

The Committee considered Clauses 3 to 7.

The Committee deliberated.

Resolved: That the Committee is content with Clauses 3 to 7 as drafted.

The Committee considered Clauses 8 to 10.

The Committee deliberated.

Resolved: That the Committee is content with Clauses 8 to 10 as drafted.

The Committee considered Clauses 11 to 27.

The Committee deliberated.

Resolved: That the Committee is content with the Clauses 11 to 27 as drafted.

The Committee considered Clauses 28 to 33.

The Committee deliberated.

Resolved: That the Committee is content with Clauses 28 to 33 as drafted.

The Committee considered Clauses 34 to 36.

The Committee deliberated.

Resolved: That the Committee is content with Clauses 34 to 36 as drafted

The Committee considered Clauses 37 to 46. In particular the Committee deliberated on the issue in clause 39(6) and took further advice from the officials of the Office of Law Reform.

The Committee deliberated.

Resolved: That the Committee is content with Clauses 37 to 46 as drafted.

The Committee considered Schedules 1 - 4. Office of Law Reform noted the concerns raised by Prof. Dickson, Human Rights Commission and concluded it was not in breach of Article 1 of Protocol 1 to the European Convention on Human Rights.

The Committee deliberated.

Resolved: That the Committee is content with the Schedules 1 - 4 as drafted.

The Principal Clerk to the Committee explained that a motion had been put forward seeking an extension to the Committee Stage however this could be withdrawn if the draft Report was agreed at the next meeting.

FRANCIE MOLLOY
Chairman

COMMITTEE FOR FINANCE AND PERSONNEL
MINUTES OF PROCEEDINGS

[EXTRACT RELATING TO THE REPORT]

FIFTY FOURTH MEETING
TUESDAY, 8 MAY 2001
SENATE CHAMBER, PARLIAMENT BUILDINGS

Present: Mr Francie Molloy (Chairman)
Mr James Leslie (Deputy Chairman)
Mr Seamus Close
Ms Patricia Lewsley
Mr Peter Weir

Apologies: Mr Billy Bell

In attendance: Mr Martin Wilson (Principal Clerk)
Mr Peter Hughes (Clerk)
Mrs Margaret Miskelly (Clerk)
Mr Joe Sloan (Assistant Clerk)
Ms Edel Gillen (Executive Support)
Mr Jonathan Briggs (Administrative Support)

The Chairman declared the meeting open at 1.05 p.m. The meeting was held in public session.

Trustee Bill - (NIA 11/00)

The Principal Clerk briefed the Committee on the draft Report and explained that the proposed motion to extend the Committee Stage could be withdrawn if members were content that the Report should be printed. The Committee deliberated.

Resolved: The Committee agreed to the printing of the Report and that the proposed motion to extend the Committee Stage should be withdrawn.

FRANCIE MOLLOY
Chairman

APPENDIX 2

MINUTES OF EVIDENCE

Tuesday 3 April 2001

Members present:
Mr Molloy (Chairperson)
Mr Leslie (Deputy Chairperson)
Mr B Bell
Mr Close
Mr Hussey
Mr Maskey
Mr Weir

Witnesses:
Mr M Foster ) Office of
Mrs E Harkness ) Law Reform

1.

The Committee Clerk: Today representatives of the Office of Law Reform will explain to us how the various clauses of the Bill achieve the objectives of the Bill. We again welcome Mr Michael Foster and Mrs Ethne Harkness. At a previous meeting they explained the principles of the Bill but, as we did not actually have it in front of us, we were unable to see how the clauses achieve those objectives. It would be helpful to our examination of the Bill to have an explanation of how the clauses produce those objectives. The Committee office has written to a fairly wide range of public consultees, and the next step will be to receive those responses over the next week or two.

2.

I propose that at our next meeting we should take evidence from any organisations that have raised concerns about the Bill. Today will be basically a briefing on the way in which the clauses reflect the objectives.

3.

Mr Foster: Thank you. As the Clerk has pointed out, the Bill has now implemented the policy document that members received were briefed on last month. It also takes into account the results of the various consultation processes that have taken place over the last number of years.

4.

The Bill itself is divided into seven broad parts, each of which deals with a specific area of the Bill. It has 46 clauses and four schedules. Part I outlines the duty of care which a trustee will be subject to from now on. Part II sets out the general powers of investment conferred on trustees. Part III introduces a new power to acquire land. In Part IV there are various clauses dealing with agents, nominees and custodians. Parts V, VI and VII deal with various other aspects of the law which the main parts of the Bill will refer to.

5.

Mrs Harkness will now start the detailed analysis of each of the clauses and relate them to the policy document.

6.

Mrs Harkness: Thank you. The core of the policy behind the Bill is focused on the investment powers of trustees and their ramifications in a number of different areas.

7.

The discussion originally arose out of dissatisfaction in relation to investment issues - in particular the defects in the existing system of trustee investments that were highlighted in the case of Nestlé versus the National Westminster Bank in 1993. These defects have focused the reform proposals that we are now putting forward here.

8.

That case involved a trust fund that had been in existence from 1922 to 1986. An initial capital of £54,000 in 1922 had become £250,000 by 1986. Prior to the case some studies were done on returns and investments, and it was suggested that the outcome of that fund, with good investment, could have been £2·6 million rather than £250,000. Not surprisingly, an action was then brought on behalf of the beneficiaries in the Nestlé family against the trustees - the National Westminster Bank. A number of issues were raised, all of which, it is hoped, are addressed in the Bill.

9.

The first difficulty - and I say this by way of identifying the policy objectives that we are going to try to trace in each of the clauses of the Bill - is that the trustees, despite being in a bank, had misunderstood what their powers of investment were. There was a lack of clarity about what powers of investment they had. Furthermore, when statutory powers were changed in 1961, they then misunderstood the way in which those applied to them - so they added insult to injury in that way.

10.

They had not carried reviews of investments between 1922 and 1986. The National Westminster Bank had only changed one investment during that period, and that was because the investment in question had become defunct and something else had taken its place. With that catalogue of errors in investment, it is amazing to discover that the trustees were held to be not liable. There was a test based on a prudent businessman at that time, and they were supposed to live up to that. However, it was held that there was no liability based on the fact that they had not made a big enough mess of the situation to be held liable.

11.

Basically that case established that the standard demanded of trustees was not challenging enough - it was a victory for complacency at that time. Many demands for changes in the system arose from that case. The basic principle is that you first look at the trust instrument - the document setting out the primary source of the powers and duties of trustees - to see what trustees can do, although in some cases trust documents do not go into detail about what those powers and duties are. In that situation trustees without their own separate trust document details fall back on what is called a default regime. It is the default regime that we are changing through this legislation.

12.

The present default regime is based on the Trustee Investments Act 1961. That introduces a very complicated, cumbersome, restricted and expensive to administer regime which pushes trustees into limiting themselves to a narrow range of investment - often to government bonds and bank or building society accounts. It tends to keep a large part of their funds away from equities. It is estimated that that alone costs trustees' beneficiaries substantial amounts of money - amounts that are very difficult to estimate. In the House of Lords, in relation to the charity sector, an estimate of £40 million per year less than the expected returns was recently given. That is the effect of the default regime under the 1961 Act and that is what the legislation aims to change.

13.

It became apparent that there were many matters apart from investment that needed to be changed to make the investment system work better. Issues such as supplementary powers to appoint agents, to use fund managers to place investments in nominees and to pay remuneration to trustees are to be dealt with. Also the default regime operates alongside a regime set up by people who have professionally drafted trust instruments of their own. Therefore you have an obvious contrast - there is the state scheme, but, running alongside, it is the procedure that the real experts have devised for themselves. That shows the difference between the two and invites a comparison. That comparison is at the heart of the policy behind this Bill. The Bill endeavours to extend to default trusts the sort of advantages and benefits enjoyed by the professionally drafted trusts. We have an example of what can be done, and the Bill gives an opportunity to do it.

14.

I will just sum up the overall policy objectives. We aim to keep the basic principle of a trust instrument and a default regime. However, the default regime should be a beneficial one and not a second class system. It should be simplified, deregulatory, flexible and cost- effective. There is, however, a need for balance if there are going to be wider powers for the trustees. There also has to be counterbalancing protection for beneficiaries. Those are the basic policy objectives.

15.

I will now turn to each part of the Bill. Part I of the Bill - clauses 1 to 2 - is about the duty of care. It imposes a duty of reasonable care and skill on trustees. The standard of care is "reasonable in the circumstances", but takes into account the knowledge and experience of the individual as well as the circumstances of the case. Clause 2 refers to schedule I, which lists the situations in which the duty of care is to apply.

16.

As regards policy objectives, this is delivering a balance, or a protection to beneficiaries, against negligence, exuberance or a lack of prudence on the part of trustees. The duty of care is protecting against that. It applies across a range of situations and so gives clarity and uniformity. It is clear as to when it applies and what it consists of, but it also has flexibility. Those are the objectives behind that.

17.

Committee members might wish to looking at a point in schedule 1. Paragraph 7 makes it plain that it is possible to exclude the duty of care by a term in the trust instrument saying that it is not meant to apply. That obviously keeps the basic principle that the trust instrument is the primary source of the powers and duties. However, it does raise questions about the scope for exempting liability.

18.

The Chairperson: Do members have any questions about the duty of care?

19.

Mr Close: How would the duty of care have operated over this past 12 months in relation to large investments? The person who sat back and did nothing a year ago would obviously have exercised a better duty of care than the person who continued to invest. Will actions start to be taken if somebody operating a trust has continued to invest and shift money about throughout the past year and has ended up losing a lot of money because of the stock market?

20.

Mrs Harkness: Not necessarily. A lot of very prudent people might have lost money in the stock market over the last year. The fact that there is a loss does not necessarily mean that there was negligence. However, your question is possibly aimed at investment duties and not just at the duty of care, which is in Part I. There are specific duties laid down in Part II of the Bill about seeking advice and having periodic reviews of investments. That will cover balancing and perhaps issues such as returns to capital and returns to income. They are the more specific issues in relation to investment, but your basic point is correct. The duty of care applies to investments unless it is excluded, but it is a duty to do what is reasonable in the circumstances, and a changing market and changing prices are obviously relevant.

21.

Mr Close: If this legislation had been in place 12 months ago is it possible that beneficiaries would try to use it to demonstrate that a duty of care had not been exercised because they were losing money?

22.

Mrs Harkness: That is a possibility but, equally, this is not something completely new; it is putting a duty of care in a statutory form. There is already a common law duty of care. The difficulty is that its scope and application are hard to pin down. The Nestlé case that I mentioned earlier, appeared at first glance - and even on analysis - looked to be a prime case for liability but proved not to be. Practitioners have made the point to me that even if the wording of this were dissimilar to a common law duty, the fact that it is put in statutory form helps to concentrate the mind and bring the duty to people's attention.

23.

The Chairperson: OK. Are there any other questions on the duty of care?

24.

Mr Leslie: Yes. Is there any other case law that is helpful in defining the extent of the duty of care?

25.

Mrs Harkness: Yes. There is case law Whiteley - for example. Some recent case law even expands the existing duty of care in relation to awareness of the tax implications of investment decisions, which is something that is becoming increasingly important. There is therefore case law to amplify it, and the terms suggest that it will be as applicable to the new formulation as to the present common law duty of care. The case I would cite in particular, apart from Nestlé, is Whiteley.

26.

Mr Leslie: The danger is that if this were too exacting it would be very hard to get trustees. This Bill is generally pushing towards professional trustees. I do not think that there is anything wrong with that, but you have to be careful that you are not asking the trustees to do the impossible. Nobody knows what an investment market is going to do and nobody knows what tax changes there are going to be.

27.

Mrs Harkness: That is right. The point about reasonableness addresses that argument. It is not enough to show that a loss was made. It is a question of reasonableness and also of the special knowledge or experience that the trustee had or claimed to have had. The example usually quoted is that if you appoint an investment banker, a lawyer or someone from certain other professions as a trustee, you are entitled to expect more of that person than of someone from another profession, such as a bee-keeper. I do not know why beekeepers are singled out in all the commentaries. The idea seems to be that bee-keepers know less about investment than bankers do.

28.

Mr Close: Perhaps it is because they get stung more often.

29.

The Chairperson: OK. We now move on to Part II, which covers investment.

30.

Mrs Harkness: Part II comprises clauses 3 to 7 and deals with powers of investment. Basic policies delivered here include deregulation and opening up investment opportunities for trustees on the default regime. This allows them to achieve the sort of returns that are enjoyed by those with wide powers of investment under the trust documents.

31.

The other basic policy is flexibility. There is no list of authorised investments; there is instead a general power of investment that is set out in clause 3. A trustee may make any kind of investment if he or she is absolutely entitled to the assets of the trust. As that is obviously a wide power, the counterbalance is in the safeguards for beneficiaries. Those safeguards are found in the duty of care that we have mentioned and in clause 4, which directs the trustee to regard standard investment criteria. Clause 5 requires advice to be taken.

32.

Mr Weir: People have a general power to invest in whatever they see fit. Have any trusts been set up with restricted powers of investment? I am referring to an almost restrictive situation where a person has been given explicit instructions to invest in a particular type of industry. How, for example, would the general power of investment affect the case of someone who had set up a trust for a relative but, because of particular moral views, he or she decided not to invest in certain industries, such as those of tobacco or alcohol?

33.

Mrs Harkness: That is dealt with in clause 6 and clause 7. The provisions can apply to existing trusts, but the basic principle is that the settlor's wishes should be respected. Therefore if a settlor has opted out of giving wide powers to a trustee, the settlor's wishes override those of the trustee. The settlor's wishes are effective. That could be exactly what happened in your example of the person who did not want his or her trustees to invest in tobacco, or other companies.

34.

The exception to that is the situation governed by clause 7(2). It sounds slightly strange because it draws a line under 3 August 1961: any restrictions contained in trust deeds that were drawn up before 1961 are not effective, but post 1961 restrictions are taken into account. It is not an arbitrary date; the current legislation - the Trustee Investments Act - came into being in 1961, and it swept away all the existing restrictions on investment powers. They died on that date. We did not feel justified in resurrecting them and saying that the old restrictions would come into operation again, having been dead for 40 years. Post-1961 restrictions that have been operating will continue to operate. Therefore people who do not want their trustees to invest in tobacco companies can rest content that the restrictions are in place. Likewise a person setting up a trust in the future could put a restriction on it and it would be obeyed.

35.

Mr Hussey: The person setting up the trust can establish restrictions. Can beneficiaries request that restrictions be placed on what they would regard as immoral investments?

36.

Mrs Harkness: They can make a request or make representations about that, but the obligation to take investment decisions rests with the trustees. They will want, in the interests of harmony, to respond to the wishes of beneficiaries, but not at the expense of risking their own obligations.

37.

Mr Close: Please help me to get my head round the advice issue. You must take proper advice unless you consider it unnecessary to do so. OK, but what are we saying? You either "must" take advice or else you "need not"! What I am hearing is that if you can say "I did not think it necessary to take advice" then you can be excluded. To me advice would be good advice if the investment, for example, proves to be increasing. It will be looked on -

38.

Mrs Harkness: Ex post facto.

39.

Mr Close: Yes. How can you square that with this wording?

40.

Mrs Harkness: In clause 5(3) the wording is "reasonably concludes". Was it reasonable to conclude that it was unnecessary to seek advice? For example, if you were on a panel of three trustees and the panel included someone who was an investment broker, a bank manager or a financial journalist, you might reasonably conclude that it was unnecessary to seek advice from the sort of person that you already had in-house anyway.

41.

On the other hand, even with that panel of trustees, if you decided that you were going to invest in the art market, you might well feel that the people you have are not experts in art. It would therefore not be reasonable not to seek advice. It is a question of whether a trustee can reasonably conclude it to be unnecessary or inappropriate.

42.

Another factor would be size. If you have a very small trust, the most sensible thing to do might well be to invest the money in a building society. It would be pointless and a waste of resources to pay for professional advice given the scale of operations. There is flexibility there.

43.

Mr Leslie: It is the trustee's risk though. The trustee makes that decision and if he is later deemed to have done it unreasonably it is his risk.

44.

Mrs Harkness: Yes.

45.

Mr Leslie: That is fair enough. Your point about a small trust is very relevant. It is a classic example.

46.

Mrs Harkness: Yes. It would be unnecessary, or inappropriate in terms of the cost effectiveness, to seek advice.

47.

The Chairperson: Have members any further questions on Part II? OK, we move then to Part III on the acquisition of land.

48.

Mrs Harkness: Part III contains what I thought at one point we might be able to avoid in this jurisdiction. You will have noticed that the power of investment under Part II does not include investing in land. However, we have given a power to invest in land under Part III. We have had to separate that issue because there is already so much regulation in relation to land - especially in relation to settlements of land and family estates - that it was too difficult to amend existing legislation to have this included as part of the general power of investment.

49.

Alongside the general power of investment, the Bill also grants a power to invest in land. Trustees might also wish to buy land for occupation by a beneficiary. In that situation there might not be any return, so one could not term it an investment. For example, trustees might decide to buy a dwelling house for a beneficiary, such as a widow. The house will not necessarily provide an income or a return on the capital. However, allowing trustees to do so is useful and fulfils the terms of the trust. They may buy land for occupation by a beneficiary or for any other reason.

50.

Charitable trusts are among the reasons included. A school with charitable-trust status might wish to buy playing fields, for example. Again, one could not term that an investment. The point about this is that the protection that we mentioned in relation to investments and the duty of care applies in the same way when trustees act under such provisions - they do not enjoy carte blanche.

51.

The Chairperson: In the absence of any further questions, we will move on to Part IV.

52.

Mrs Harkness: Part IV relates to agents, nominees and custodians. I mentioned that the Bill arose from dissatisfaction with investment opportunities. From an examination of the ways in which investment powers might be changed, it became apparent that, for really effective investment, a number of supplementary or ancillary powers were necessary. Such powers would give trustees access to modern investment methods and markets, and to available expertise, thus opening opportunities to them which those operating under well drafted trusts are already fully exploiting. The powers are also designed with the overall objective in mind of helping trustees to administer their trusts more efficiently.

53.

On the power to employ agents - people to carry out certain functions on behalf of the trustees of a trust - the question of which functions can be delegated obviously arises. Those functions which can be delegated by the trustees are set out in clause 11. They are called "delegable functions; I have my doubts about "delegable" but it is the word that is used. Delegable functions vary for ordinary or private trustees on the one hand and charitable trustees on the other. The basic reason for that is private trustees work differently from their charitable counterparts, and their activities take in different types of things. Much of what charitable trustees do is connected with raising and accumulating funds before distributing them, whereas private trustees might well be given an initial amount to invest and distribute. Clause 11 sets out the delegable functions, and the one which allows trustees to appoint fund managers to deal with investment issues will probably prove to be the most important. Fund managers will probably be the sort of agent most frequently appointed.

54.

Apart from the question of "What can the agent do?", the second question is "Who can you delegate to and who are these people going to be?". Clause 12 deals with that, and it allows for a broad scope with very few restrictions, although it cannot be a beneficiary. Of course, the duty of care principle is still applicable to what happens.

55.

We have dealt with what can be delegated and who the delegates are. The next point is the terms on which they can be delegated and that is where clauses 13 to 15 come in. clause 13 provides that the statutory duties that we have already talked about will be brought in relation to the terms under which an agent operates. Therefore, if you are delegating to somebody in relation to investment, the standard investment criteria duties will be applied.

56.

Clause 14, entitled "Terms of agency", regulates the terms on which you appoint your agent. It gives freedom of choice to trustees in deciding to the terms on which they appoint an agent. However, there are three terms to be taken account of in clause 14(3). If you are going to appoint an agent on those terms then it can only be done if it is "reasonably necessary" to do so. The three terms are: permitting the agent to appoint a substitute; restricting the liability of the agent; and permitting the agent to act in circumstances capable of giving rise to a conflict of interest.

57.

I will move quickly on, although we can come back to those points. There are also powers to appoint nominees and custodians. Again, the legislation asks and answers the questions "who will these people be and on what terms can they be appointed?" That takes us through to clause 20.

58.

I shall explain what a nominee and a custodian are, although they are defined in the explanatory memorandum. A nominee holds investments in someone's name. Trustees appoint a nominee to hold investments in their name, and that means that if, for example, you want to sell those investments on the stock exchange, it can be done quickly without requiring all 15 of your trustees to sign documents to give powers of transfer or whatever.

59.

The Chairperson: What type of a person would actually do that? Would it be a solicitor or legal representative?

60.

Mrs Harkness: That is dealt with in clause 19 - "Persons who may be appointed as nominees or custodians". Essentially, they are people who do business of that nature; for example investment managers or brokers of some sort. They might also include certain corporate bodies.

61.

In this regard, charitable trusts are subject to another qualification or safeguard. Clause 19, subsection 4 states that charitable trusts wanting to use a nominee or a custodian will receive guidance from the Department for Social Development about the sort of people or companies that are suitable. They must then comply with that guidance.

62.

Mrs Harkness: Clauses 21 to 23 are concerned with obligations to review the work of agents, nominees and custodians. One cannot just appoint these people and then adopt an out of sight, out of mind approach. One must check, supervise, and review what is happening.

63.

Clause 23 deals with liability for agents, nominees and custodians. It concerns the extent to which the trustee is liable if these people default. This hangs on the trustee's duty of care. The trustee could be liable if he has not complied with his duty of care in selecting the person, in the terms in which they are appointed, or in supervising them.

64.

Mr Close: Does that apply to reviewing also?

65.

Mrs Harkness: Yes. That duty is encompassed in the term "supervision".

66.

I would like to recap for the sake of completeness. I have not yet drawn your attention to clause 15, which involves appointing an agent and asking him to exercise asset management functions including investment type decisions. This sets in motion special restrictions which are designed as added safeguards. Basically, you have to prepare a policy statement of guidance to guide your agent about how you want those powers to be exercised.

67.

Mr Hussey: Will you please explain clause 22 subsection 4, which deals with the power of intervention?

68.

Mrs Harkness: That involves a situation in which trustees are reviewing an agent's performance. They have got to decide whether it is satisfactory or whether they should exercise powers of intervention. Those powers include the power to give directions to the agent and the power to revoke authorisation in order to get rid of that particular person.

69.

It would be the trustees' responsibility to consider carefully whether they should intervene in that way. A choice not to intervene is made at their risk.

70.

Mr Hussey: Presumably, they also risk comeback from the appointed agent or nominee?

71.

Mrs Harkness: Yes. This might be in the form of a claim for breach of contract or something like that.

72.

Mr Hussey: Could it take the form of a complaint of a slight upon their professional handling?

73.

Mrs Harkness: Yes. That is a possibility. Trusteeship is a very onerous responsibility.

74.

The Chairperson: We will now move to Part V of the Bill.

75.

Mrs Harkness: Part V is about remuneration payment for trustees. The policy objective is essentially to encourage the effective administration of trusts. Coincidentally, I have just said that a trustee's role is very demanding.

76.

It is often argued that professional expertise is very valuable to trust administration. However, persons with professional expertise can be very reluctant to act as trustees without payment for their services. This group of clauses addresses that problem. Clause 28 focuses on the situation where a trust instrument contains an express provision governing the matter of payment. It also clarifies some ambiguities and confusion about how a clause like that should be interpreted. Clause 29 is possibly more crucial. It gives a right and entitlement of payment to certain trustees even where they do not have a trust document that says they are entitled to payment. This right is limited to trustees who are acting in a professional capacity.

77.

I shall endeavour to follow the order of the Bill. Trustees who act in a professional capacity will become entitled to remuneration. First in the list come trust corporations. These are bodies such as banks which act as trustees, especially in relation to wills. Neither charitable trusts nor sole trustees will be viewed as professional trustees for the purposes of clause 29. A situation where you have only one trustee would obviously lend scope for abuse, as he could authorise payment to himself. Remuneration can apply to arrangements where someone has a number of trustees, but the other trustees must that one is going to receive payment. Reasonable remuneration is stipulated; this basically means the rate for the job in the circumstances. However, this will not be available if the trust instrument or any statute says something inconsistent with it. Often, the trust instrument is silent in this regard.

78.

I mentioned charitable trusts. Essentially, it is recognised that different arguments apply to charitable trusts the impact of introducing remuneration for charitable trustees has not been thoroughly investigated. The solution proposed in clause 30 is to leave this issue for future resolution by empowering the Department of Social Development (DSD). In other words, DSD will have a responsibility to further investigate the regulation of charitable trusts and possibly to bring forward legislation at a later date.

79.

Clauses 30, 31 and 32 deal with expenses rather than remuneration and are fairly straightforward.

80.

Mr Maskey: If the current position is uncertain and it is left to DSD to clarify it at a later stage, is it not the case that people might be told they may well qualify for this remuneration? I presume a lot of people do this for charitable organisations probably for nothing.

81.

Mrs Harkness: Trustees have to work for nothing in this situation unless the terms of the charitable trust authorise payment to trustees. Trustees can only receive payment if they are authorised by the terms of the charitable trust, by statute or by a court order of some sort.

82.

If the trust instrument is silent on the matter, trustees are not allowed payment. That remains the case. It is argued that the administration of charitable trusts is very demanding and may benefit from expert handling. To attract the desired sort of charitable trustees it may be best to allow them to be paid; DSD is being invited to investigate the pros and cons of that argument to see whether or not that will the case. If the DSD decision is in favour of introducing the same provision for charitable trustees as the Trustee Bill introduces for non-charitable trustees, the matter will then go back to the Assembly for approval. It is argued, however, that the situation is different for charitable trustees.

83.

Mr Weir: I presume that when the charitable trustees cannot get remuneration for expenses incurred they will be covered by the provisions of clause 31.

84.

Mrs Harkness: That is correct. There is not a two-tier system for expenses.

85.

The Chairperson: There are no more questions so we will move to Part VI.

86.

Mrs Harkness: Part VI steps aside from the objectives that we have been talking about; it tidies up a gap which has become apparent in the existing provision in recent years. Part VI is about the circumstances in which new trustees can be appointed and old trustees - not necessarily existing trustees - can retire. At present that situation is regulated by The Trustee Act (Northern Ireland) 1958.

87.

A gap has been revealed and this group of clauses attempts to fill it. All the beneficiaries of a trust are adult - they are over 18 years of age - and they have got full legal capacity. As a group they could bring the trust to an end because they have total ownership. Nobody else is entitled to any share.

88.

The Trustee Act (Northern Ireland) 1958 does not allow people like that to appoint a new trustee. If all the trustees have died there is no longer anyone capable of nominating a new trustee. The beneficiaries do not have the power to nominate trustees under the 1958 Act. The proposed reforms are designed to give them the power to appoint a trustee in very limited situations.

89.

Clause 35 addresses the situation where trustees are incapable of carrying out their functions due to a mental disorder. Nobody is able to do anything about that apart from the beneficiaries. Under the current legislation they do not have the power to intervene, but this clause fills that gap by allowing them to do so.

90.

Mr Hussey: The power to appoint trustees when all of the existing trustees have died is very welcome, and I am aware of many circumstances where that applies.

91.

However, I would like to query one particular situation. Will this provision apply where an organisation has a building and appointed trustees to run that building? Suppose one of the trustees were to leave the organisation and the beneficiaries did not want that person to remain a trustee. Has that been covered?

92.

The Chairperson: I was going to ask a similar question about trustees of a building, but without investment.

93.

Mrs Harkness: That is not covered by this specific legislation. Part V of this Bill only fills certain gaps. The Trustee Act (Northern Ireland) 1958 deals with situations where there is a recalcitrant trustee: for example where one is out of line and refuses to co-operate with the others, or where the trustees have all died off. These are very specific scenarios. To address the facts which you are spelling out, you might have to go to court to get directions or to get a new trustee appointed.

94.

Part V deals with what is really a very narrow situation. Chiefly, we have a block of beneficiaries who are, as a group, absolutely entitled to all the trust fund. I get the impression that you are perhaps talking about a charitable trust or something like that.

95.

Mr Hussey: All would be over the age of 18?

96.

Mrs Harkness: I obviously cannot answer that specific question - not wearing this hat.

97.

Mr Weir: Where reference is made to direction by beneficiaries, is unanimity mandatory? Depending upon the nature of the trust, there could be either a small or a very large number of beneficiaries. Would all the beneficiaries have to sign up?

98.

Mrs Harkness: Yes, unanimity is required, and it is governed by clause 36. Although the beneficiaries can get together and join in the one document, form groups, or submit individual documents, they must all be included. None may withdraw.

99.

Mrs Harkness: Part VII contains miscellaneous supplementary provisions, and it deals with several different areas. First is the power to insure. That amends the 1958 Act, bringing it up to date and including a power to insure against any risks. Concerning prudence, we have already mentioned that trustees have responsibility for buildings. It is obviously crucial that they should have a power to take out insurance cover in respect of the property.

100.

One group of sections deals with special cases which do not quite fit the pattern set up by the rest of the Act. For those there needs to be a bit of modification or tweaking of the provisions to make them applicable in a suitable way. Personal representatives - that is, people administering the estate of a deceased person, under a will or intestacy - can be trustees, and the idea is that the provision should apply to them as far as possible.

101.

Some of the provisions will apply in relation to pension schemes, but essentially pension trustees have their own regulatory framework and it is intended that that should not be disturbed by these provisions. Myners' recent report looks again at pension trustees, so something else may come along to change the legislation in the Pensions (Northern Ireland) Order 1995. However, that is a more long-term situation.

102.

Authorised unit trusts regulated under their own regime should not be disturbed. Again there should be adequate powers of investment and so on to look after them.

103.

The provision relating to common investment schemes for charities is not widely used in Northern Ireland. However, it is on the statute book, and therefore provision is made to exclude them. I am reluctant to commit myself, but I vaguely recollect that there are actually only a couple of these schemes in operation in Northern Ireland. I think that one is connected with Queen's University.

104.

Section 42 states that the Act binds the Crown. Section 43 is on interpretation. There are then supplementary provisions in relation to amendments and the commencement.

105.

Mr Leslie: I have a question on clause 39 on the pension schemes. I have not actually looked at this in detail. It is slightly tricky - it seems to me that some bits apply and some do not. What I am really trying to understand is why Part I applies in that way. Has the pension industry expressed satisfaction with this approach?

106.

Mrs Harkness: I am not sure how to answer on behalf of the pension industry.

107.

Mr Leslie: I agree that that would be difficult.

108.

Mrs Harkness: Certainly, no adverse comments have been received. Perhaps attention has been focused in this area by the recent Myners inquiry which published a paper recently on pension trustees.

109.

Mrs Harkness: Paul Myners published a report at the beginning of March on pension schemes. That report proposed some changes to powers of investment. Proposals were also made in relation to reviewing investments and related issues. The minds of the pension industry were focused on those concerns rather than on this. This provision really leaves their regulatory structure to operate as it has done to date.

110.

Mr Leslie: In clause 39(6), it says

" The trustees of a pension scheme may not under Part IV authorise a person who is-

(a) an employer in relation to the scheme, or

(b) an associate of or connected with such an employer,

to exercise any of their functions as their agent."

111.

I am quite surprised by that. I would have thought that you might have a subsidiary or an associated company which might reasonably act as custodian, for example, for the asset. I do not know enough about other aspects of pension legislation to know whether it specifically excludes that eventuality. I cannot see that any particular harm would ensue if those people were not excluded, although I think that this piece of legislation is perhaps driven by the 'Daily Mail' or perhaps it was 'The Mirror' (pension affair).

112.

Mrs Harkness: It is perhaps the ghost of Maxwell.

113.

Mr Leslie: Exactly. I guess that it is a sort of belt and braces approach. It is not a very big issue, but I feel that we perhaps ought to examine that a bit further. I am just slightly concerned about tripping up perfectly sound pension practice.

114.

Mrs Harkness: On that specific point I would like to see what the situation is under the pensions legislation. Clause 39(6) says that the trustees of a pension scheme may not under Part IV authorise such a person to act as agent.

115.

It may be the case that they have powers to authorise an agency under some other provisions in the pensions legislation. For our purposes, the legislation before us says that they cannot do it through this vehicle. For a more complete answer I would have to look at the pensions legislation to see if that allows them to do it under that vehicle and using whatever protections. Perhaps they are allowed to do it, subject to detailed restrictions set out in the pensions legislation.

116.

Mr Leslie: I think this is all perfectly prudent, so I do not have a fundamental objection to it, it is just that I am slightly concerned about practicalities. If we have stopped a perfectly sound pension scheme operating in the way that it had been doing hitherto, albeit inadvertently, we may need to give some warning. It would require a bit of transition. I suppose it is up to the industry to have spotted it, however. As you say, who can speak for the pensions industry?

117.

Mrs Harkness: Yes. I suppose another part of the argument is that Part IV provides a default regime. In the case of a pension scheme, if they are permitted to have people in these categories acting as agent, I would expect them to be doing it on the basis of a provision in their own scheme, rather than through reliance on a provision like this.

118.

Mr Leslie: That is a perfectly fair point.

119.

The Chairperson: We will come back to this later. Are there any particular issues regarding the Schedules?

120.

Mrs Harkness: We have already mentioned Schedule 1, which determines when the duty of care applies. Schedule 2 has minor and consequential amendments. I have mentioned settled land and I have mentioned the 1958 Act. Schedule 2 also contains amendments in relation to bodies which exercise statutory powers of investment, even though they may not technically be trustees. The amendments are basically bringing the powers of investment they might have up to date, in line with this system.

121.

Schedule 3 is about transitional provisions and savings, and Schedule 4 regulates repeals.

122.

Mr Hussey: Concern has been expressed in reference to paragraph 7 of Schedule 1.

123.

The Clerk: Perhaps I can explain that. We received that letter from Bryce Dickson of the Human Rights Commission, in response to our normal letter. We read comments from 30 or 40 groups, bodies, organisations and individuals. I have copied that letter to the Office of Law Reform so that they can consider it and advise us. I have also copied it to the Assembly's legal advisor, Percy Johnston, and asked for his opinion. I suggest that once we have received all of the responses we might take evidence from Human Rights Commission. It may be the case that the letter is all we need. All of that evidence may be discussed at future sessions with the Office of Law Reform. At the moment we need to get people to mull it over.

124.

The Chairperson: That is everything for today. Obviously we will come back to this in more detail. Thank you very much.

APPENDIX 3

ANNEXES TO THE MINUTES OF EVIDENCE

The Annexes to the Minutes of Evidence of the Committee that were submitted to the Committee as evidence on the Trustee Bill (NIA Bill 11/00) are given below.

Annex 1:

Written submission by the Northern Ireland Human Rights Commission dated 29 March 2001.

Annex 2:

Advice from Northern Ireland Assembly Legal Adviser on letter from NI Human Rights Commission.

Annex 1

COMMITTEE FOR FINANCE AND PERSONNEL
INQUIRY INTO THE TRUSTEE BILL (NIA BILL 11/00)

WRITTEN SUBMISSION BY:
NORTHERN IRELAND HUMAN RIGHTS COMMISSION

29 March 2001

TRUSTEE BILL

Thank you for your letter of 26 March inviting the Human Rights Commission to comment on the Trustee Bill.

The Commission is in agreement with the overall purpose of the Bill and has only one specific concern in relation to its provisions. This relates to paragraph 7 of Schedule 1 to the Bill, which provides that the duty of care does not apply to trustees if or in so far as it appears from the trust instrument that the duty is not meant to apply. The Commission is of the view that potentially this could deprive the beneficiaries of a trust of the "peaceful enjoyment" of their possessions, which would be a breach of Article 1 of Protocol 1 to the European Convention on Human Rights (incorporated into the law of all parts of the United Kingdom by the Human Rights Act 1998). Whether a court would hold that such a breach has in fact occurred in any particular case would depend on whether it found that the non-application of the duty of care was either "in the public interest" or within the state's margin of appreciation in enforcing "such laws as it deems necessary to control the use of property in the general interest".

It seems strange to the Commission that on the face of it there can be such differential treatment between beneficial owners of property held on trust just because in one instance the trust document indicates that the duty of care is not meant to apply. We simply draw this anomaly to the attention of the Committee in order that it might more fully explore the rationale for maintaining paragraph 7 of Schedule 1.

BRICE DICKSON
CHIEF COMMISSIONER

ANNEX 2

COMMITTEE FOR FINANCE AND PERSONNEL
INQUIRY INTO THE TRUSTEE BILL (NIA BILL 11/00)

ADVICE FROM NORTHERN IRELAND ASSEMBLY LEGAL ADVISER:
ON LETTER FROM NI HUMAN RIGHTS COMMISSION

Further to your request for comments on the issues raised by Professor Dickson in his letter of 29 March 2001, I would advise as follows:

In conclusion, paragraph 7 of Schedule 1 to the Trustee Bill does not, in my view, give rise to concern in relation to potential interferences with the peaceful enjoyment of possessions as required under Article 1 of the First Protocol to the ECHR. On the contrary, I would advise that paragraph 7 serves to protect the rights of settlors under this provision of the ECHR in that it acknowledges their right to peaceful enjoyment of possessions which includes a right to dispose of their property in such a manner as they see fit and free from interference by the State.