cestui que trust n. (properly pronounced ses-tee kay, but lawyers popularly pronounce it setty kay) from old French. 1) an old fashioned expression for the beneficiary of a trust. 2) “the one who trusts” or the person who will benefit from the trust and will receive payments or a future distribution from the trust’s assets. (See: beneficiary)
CESTUI QUE TRUST, A barbarous phrase, to signify the beneficiary of an estate held in trust. He for whose benefit another person is enfeoffed or seised of land or tenements, or is possessed of personal property. The cestui que trust is entitled to receive the rents and profits of the land; he may direct such conveyances, consistent with the trust, deed or will, as he shall choose, and the trustee (q.v.) is bound to execute them: he may defend his title in the name of the trustee. 1 Cruise, Dig. tit. 12, c. 4, s. 4; vide Vin. Ab. Trust, U, W, X, and Y 1 Vern. 14; Dane’s Ab. Index, h.t.: 1 Story, Eq. Jur. Sec. 321, note 1; Bouv. Inst. Index, h.t.
// A Law Dictionary, Adapted to the Constitution and Laws of the United States. By John Bouvier. Published 1856.
COLONIAL SECURITIES—INVESTMENT OF TRUST FUNDS.
§MR. ANDERSON(Elgin and Nairn) asked Mr. Chancellor of the Exchequer, Whether the Government have received communications from various Colonial Governments, urging them to consent to a provision permitting Trust Funds to be invested in certain Colonial securities; and, whether the Government intend to accede to the wishes of the Colonies on this point?
§THE CHANCELLOR OF THE EXCHEQUER (Mr. GOSCHEN)(St. George’s, Hanover Square) , in reply, said, representations had been made to the Government by various Colonial Governments on the subject; but he considered it was not so much a question for the Colonial Governments as one to be determined by the interest and safety of the cestui que trust. He would, however, see the Agents General of the Colonies in the course of the week on the subject.
ROYAL PATRIOTIC FUND.
|Schedule of Beneficiaries.|
|Name and rank of husband, father, or decreased.||Name of Widow.||Amount of allowances or other relief.||Names of Children.||Dates of their births.||Amount of allowance.||Name of other Cestui-que-Trusts.|
Constitutional Reform Bill [H.L.]
It would be very helpful if the noble and learned Lord the Lord Chancellor could explain a little matter. In Schedule 1(5) as it now stands, on page 43, there is a reference in French, which is very unusual in describing an Act of the British Parliament—the Cestui que Vie Act 1707. As a common lawyer, I find the following provision strange:
Any reference to the Lord Chancellor and keeper or commissioners for the custody of the great seal of Great Britain for the time being in section 1 of the Cestui que Vie Act 1707 is to be construed as a reference to a judge of the Chancery Division”. Can the noble and learned Lord the Lord Chancellor say what that means and whether he intends to perpetuate it?
§Lord Falconer of Thoroton: I cannot tell the noble Lord what it means. I am sure that it is extraordinarily sensible to transfer the Lord Chancellor’s function to a Chancery Division judge there. Cestui que Vie has some resonance with trust law but I cannot explain precisely how. I defend myself in being unable to explain it by the fact that none of my technical amendments relates to that paragraph. But I shall write to the noble Lord and explain why this—I agree, somewhat eccentric—provision appears.
AMENDMENT OF LAW.
§ 7. —”That it is expedient to amend the law relating to the National Debt, Customs, and Inland Revenue.”
thought it would perhaps save time if he volunteered an explanation as far as he was able to give it. The Question arose under Section 21 of the Finance Act of 1896, and in order to understand the situation created by that section, he would remind the House that before Sir William Harcourt’s Finance Act of 1894, Mr. Goschen, when he was Chancellor of the Exchequer, by the Finance Act of 1888 increased the succession duties by certain percentages. In 1889, the right hon. Gentleman went a step farther and proposed a further estate duty, the object of which was subsequently carried out by the Act of 1894.These proposals were carried out effectively by the Act of 1894, but the Act of 1896 made them permanent, and prevented overlapping of the two sets of duties. It provided that Goschen’s enhancement should not be levied in addition to the Harcourt enhancement. The whole object was that the value should be taken at the present value of the estate.
§*MR. COURTHOPE thanked the right hon. Gentleman for his explanation, which, however, did not cover the point that he wished to raise. So far as he could gather from reading the Act of 1896, the result was that where a man had died setting up a trust by his will, the duty which was paid or payable on his death on the amount of his property which was the subject of that trust was to be deducted from the amount which was paid on the death of the cestui que trust.
New Clause.—(POWER TO MODIFY PROVISIONS AS TO DIVISION OF TRUST FUND.)
I want to express substantial agreement with what has been said by hon. Members on both sides of the House in the last few minutes, although I hope that my constituents will not accept my hon. Friend’s precise description of Stock Exchange operations. I am not sure that I am a half-wit, or even a quarter-wit, but I have never met with any success in my limited excursions into the Stock Exchange. Therefore, I doubt whether my constituents will profit if they assume that they can operate there without any knowledge. Indeed, it is the exposition of explicit knowledge which is much more desirable in those operations.
I want to speak briefly, because I do not desire to obstruct the Bill in any way. I know that sometimes, in the interchange of ideas in our debates, we may say a lot about the difference in the effect of various party policies, but it is fundamental in this case, and what my hon. Friend the Member for Ashfield (Mr. Warbey) said is quite correct. I am not trying to make a polemical point; I am talking about trustee investments. I began to practise in 1923, when the postwar inflation was just about to come to an end, and I lived in a time when equities fell so rapidly that some drastic events followed.
I recall the case of one large estate, the administration of which, thank goodness, I had nothing to do with. It was a very substantial estate which, deprived of a reasonably rapid realisation after probate, was not then sufficient in value to pay the Estate Duty, and so became bankrupt, in the few weeks that had elapsed between the death and the granting of probate, because of the fall in the value of equities. These things happen.
In 1937 or 1938 banks were advising investment in 3½ per cent. Conversion Stock, and it was not then bad advice. Very few of us had realised what a disastrous effect could come from the absence of dating. I have never had much knowledge of these matters, and I do not now profess to have any specialised knowledge. I have rarely had any investments, and those that I have had have nearly all been bad, but so far as I recall there was no previous striking example of the fact that dating the redemption could produce such disastrous results as occurred in this period of a rise in the value of equities.
What worries me about Bills of this kind is that I have a feeling that they have been thought out in the City of London. I do not say that there is anything nefarious about it. I would not wish to use the old description of the City of London as the moneylenders of the world. I am merely pointing out the geographical position of London as the capital City of the Empire, which provides expert services in these matters and where advice is readily available. What happens in the little estate in the country, however, is that the trustees go to a solicitor and say, “We will leave it to you.”
The average country solicitor is likely to have more things to think about than the value of equities, and he goes to the bank. Sometimes he is told, “Why not resign and transfer to our trustee investment department? Leave them to carry on. They have rather more expert advice.” In general, he will take the advice which the bank gives him. He invests the estate as advised, and it will not be until about five years later—unless something drastic has happened economically, or a General Election has occurred—that he realises that 25 per cent. of the estate has gone, or that there has been an accretion.
This is really what happens and I do not see any way of avoiding it. It is for this reason, of course, that the whole of our law of trusteeship frowned on investment in equities where the trustee was liable to be the least well-informed person in connection with the operations of the company concerned. It really is true that my right hon. Friends are committed on this part of their policy—with my support—to a reduction of the interest rate. A reduction of the interest rate would inevitably, if it succeeded at all and allowing for the fact that the operation would involve some dangers—I am not trying to make a political point—mean a rise in what my hon. Friend, who is always a kindly man, calls gilt-edged and a fall in the value of equities. It would be almost inevitable.
However, it is not even limited by this. The result of the policy of this Government from time to time, whether they be right or wrong, wise or not, have had immense repercussions on the Stock Exchange. The coming of the bank squeeze meant that people whose overdrafts were secured by Government stocks were often forced to sell those stocks in order to realise the money with which to pay off the overdrafts at a price very much lower than the investment, although normally trustees would not, of course, be interested in overdrafts.
It is a wrong thing that when the bank squeeze comes along again trustees could be penalised in any event. Their difficulties are very great. The right hon. and learned Gentleman will, I know, recall one of the stories of the law about the articled clerk who was given a book on trusts and trusteeship to study. He studied it for six months and then his boss called him in for one of those interviews which are inevitable in such circumstances, and said to him, “How far have you got with the book?” The articled clerk replied, “I have come to the conclusion that only a fool would become a trustee, I certainly would not become one.” The boss said to him, “You have mastered the matter.”
One must also remember that, after all, if the testator is concerned about his investments, he has directive powers. If he wants investment in certain stocks he can authorise it. He can provide much wider powers on investment if he wishes to do so. He can give the trustees absolute discretion as to investment. Very often he gives a discretion to retain certain investments, and so on, and, provided the will is sufficiently clear, the testator’s wishes can be carried out and the trustees can still apply their own caution to the matter in the exercise of discretionary powers.
The Bill goes further, and I suggest that if we are to lay down proportions we might well say three equities to one gilt-edged during a Conservative Government, three gilt-edged to one equity during a Socialist Government, fifty-fifty in the event of a Liberal Government, and no power at all to invest during a Communist Government, and thus have the matter covered. Otherwise, it means that trustees and solicitors will have to have a political liaison officer constantly reading the Press reports of Parliament to try to ascertain the Government’s intentions regarding investments which they hold on behalf of widows, orphans, or the object of the trust.
§Mr. A. J. Irvine I think it right that should say a word at this point upon certain matters—I shall be very brief—arising from the speeches made by my hon. Friend the Member for Ashfield (Mr. Warbey) and my hon. Friend the Member for Oldham, West (Mr. Hale). I think it is desirable that we should make it plain to my hon. Friends what has been in our minds in this connection having regard, among other things, to the kind of considerations to which my hon. Friend the Member for Ashfield has referred.
I thought that my hon. Friend spoke on this matter with great reasonableness and cogency, and I wish to make it quite clear that I agree with a great deal of what he says. I agree with him that the economic policies which have been pursued have contributed markedly to the movement of what we are, I think, calling for this purpose gilt edged. But I would ask him to remember that we do not regard it as following from the passing of the legislation now that it will, perhaps, have an ill effect on gilt-edged prices. We do not regard that as a necessary event.
What we are doing here is making an attempt in the Amendments which we have tabled, and the attitude we have taken up, within the limits imposed by the Bill, to help a particular class of person who is affected, and very sadly affected, in the way my hon. Friend has so reasonably and cogently described. After all, some of the people who are suffering from the movement of prices of gilt-edged stocks are trusts and beneficial trusts. My hon. Friend will have constituents of this class of person who are being adversely affected by this movement. I want him to realise that those of us who have been concerned in the matter are anxious, within the limits that the subject of the Bill imposes, to come to the assistance of a particular class of person who is suffering precisely in the way he has described. We cannot go further. Our interventions in this field have been designed with that purpose in mind.
In conclusion, I would say to my hon. Friend that he must also realise that any action to be taken by a trustee under the Bill is optional. A trustee is not required to take action. He need not do anything if he does not care so to do, but if he wants to take action which he thinks will have the effect of safeguarding or improving the prospects of the beneficiaries of his fund or of the cestui que trust, then he can take that action. We have been inclined to take the view, and do take the view, that the trustee should be given considerable liberty when he has come to a decision about the action which he should take.
§Mr. Warbey Before my hon. and learned Friend sits down, I should like to put this to him. He said that his hon. Friends took the view that the Bill, and more particularly this new Clause, would not make the situation worse as far as gilt-edged securities were concerned, but I would remind him of the passage which I quoted from the speech of our hon. Friend the Member for Gloucester (Mr. Diamond), in which he said that the Bill, and, still more, the variations of the fifty-fifty relationship, would, in fact, lead to a situation in which there would be a further fall in gilt-edged securities and that the power of the Government to borrow cheaply would be prejudiced.
§Mr. Irvine In reply to my hon. Friend, I would only say, first, that I do not admit that this will be the necessary consequence of the Bill. What I do say to the House and to my hon. Friend is that if that is a possible consequence, then for goodness’ sake let us give trustees the opportunity, by provisions of this kind, to come to the assistance of beneficiaries and cestui que trusts who are likely in that event to suffer.
§Mr. Stratton Mills(Belfast, North) This Bill is likely to become law at some time later this year. At that time there may be a lot of funding going on in the steel industry and the yield there will be about 5 per cent. and 5½ per cent. and may well be attractive to trustees. Can the hon. and learned Gentleman give any assurance to trustees who are very likely to invest in these shares that they will be protected from people like the hon. Member for Ashfield (Mr. Warbey)?
86A PROCESS FOR MAKING RULES OF COURT UNDER SECTION 84
My Lords, I recall that when this matter came to your Lordships’ attention earlier this year, the question was posed to the noble and learned Lord the Lord Chancellor by the noble Lord, Lord Renton, about the Cestui que Vie Act 1707. Has the noble and learned Lord the Lord Chancellor had the opportunity to delve into the mysteries of this legislation and take the matter up with the noble Lord?
No—although I cannot definitively say no—I will need to check this. My recollection is that I wrote a letter on that, but I will instantly check when I get back to my department and provide the noble Lord with a copy—
§Lord Falconer of Thoroton My Lords, encouragingly, but not convincingly, I am being told that I did write such a letter. I will send a copy to the noble Lord. If I did not send such a letter, I will instantly write one and send it. I apologise for not being in entire grip of that aspect.
§Lord Mackay of Clashfern My Lords, the noble and learned Lord referred to the justices’ clerks. I have certainly been conscious of a certain, what shall I say, anxiety in that quarter. I am not altogether unaware of this having been expressed some years back in legislation that was put forward for altering the arrangements for the magistrates’ courts.
Is there any line management arrangement for the justices’ clerks? Are they completely independent, or are they answerable to managers within the Courts Service agency?
§Lord Falconer of Thoroton My Lords, they have line management responsibilities, and that is what is causing the problem, in that the Courts Act 2003 in effect made the justices’ clerks civil servants, and therefore responsible, in an employment way, to people above them. The concern was that if they were not delivering on things that might be perceived to be the goals of the administration that might be prejudicial to them in relation to promotion or movement.
Therefore, we have sought to provide arrangements that protect the sanctity and objectivity of the process by which judgments are made about the appointment of justices’ clerks and the movement or promotion of justices’ clerks, and to achieve that by involving the Lord Chief Justice if there is any question in relation to that. The direct answer to the question asked by the noble and learned Lord is yes, they are responsible to a manager in some respects. That is why, I believe, the anxiety arose.
§Lord Goodhart My Lords, before the noble and learned Lord sits down, I should say that we have been in communication with the Justices’ Clerks’ Society, which is not satisfied with the steps that have been taken so far. There is an amendment tabled in our name which will be taken at a considerably later stage of the Bill, and we shall return to that issue on that occasion, when we will take into account the changes proposed in this amendment.
DRAFT MANDATE FOR EAST AFRICA.
§LORD PARMOOR rose to call attention to the Draft Mandate for East. Africa (British) in the form in which the Council of the League of Nations will be invited to approve it. The noble Lord said: My Lords, I am afraid that the terms of my Notice are not very specific, but I have had an opportunity of communicating with the noble Lord, the Duke of Sutherland, who I understand represents the Government upon this matter, and I have been enabled to tell him exactly what. are the points on which I desire further enlightenment. It is hardly necessary, although I should like to do so in a few words, to emphasise the importance of the Mandate principle. It is a new principle as regards Colonial development, introduced into the League of Nations, and, if properly exercised, as I hope it will be, it appears to me to he one of the most beneficent results which have conic from the late war.
If I may quote one passage from Article 22 of the Covenant of the League of Nations, I think it would be the easiest way of illustrating what I mean when I speak of the importance of the Mandate principle. The Mandates are to be applied to countries “inhabited by peoples not yet able to stand by themselves under the strenuous conditions of the modern world.’ In other words, there is a recognition that in the relationship between more advanced countries and the less advanced countries the less advanced countries should be treated as in the nature of a cestui que trust, and their interests should be regarded as a primary duty by the Mandatory country, whatever it may be.
Now, one or two words as regards Article 22, in order to see what is the purpose of these Mandates, before I come to the actual terms of the particular Mandate. I think the principle is very well stated at the beginning. The principle is “that the well-being and development of such peoples (in the Mandated territories) form a sacred trust of civilisation.” That shows clearly that the object of the principle of the Mandate is not to exploit the Mandated territories in favour of the Mandatories in any way, but to place upon the Mandatories a high and solemn obligation to carry out their duties so that they shall do their best for the well-being and development of the people. That may be merely in one sense a matter of language, but it is a very important matter of language. But the Article goes on to say:—” Securities for the performance of this trust should be embodied in this Covenant.”
§ Another question which I indicated to the Duke of Sutherland as one to which I wanted an answer was, What is the form of the securities for the performance of this trust, which either has been embodied, or which the Government think should be embodied, in one of these Mandates of what I call Form B? The next paragraph in Article 22 is extremely striking. It does not use the word “trust” again, but the word “tutelage.” “Tutelage,” of course, implies the relationship either between a parent and a child or between an instructor and a child. The paragraph goes on to make the statement that this tutelage should be exercised by them as Mandatories on behalf of the League. I want the noble Duke to say in what sense that is to be carried out. There has been a discussion as to whether the League there means the Assembly of the League or the Council of the League, but for my purpose, whether it means one or the other, I want to know how this instruction is to be carried out.
I have heard with the greatest pleasure that the Government do not propose to oppose the Second Reading of this Bill, which I regard of the greatest importance, not only to trustees, but to the cestui que trusts. Some observations have been made as to the hardships that occasionally would occur to widows and orphans if the Bill passes. But there are hardships under the law as it at present stands, and it is with the view of removing these hardships that I intend to support the Bill. I deprecate in the strongest manner anything like allowing trustees to invest funds in speculative securities, but all the observations made by the Mover and Seconder of the Amendment appear to me to be of such a character that they can be very properly dealt in Committee. I have not heard any real objection to the principle of the Bill; and what we have now to deal with is the principle of the measure. In Committee it will be the province of the House to investigate carefully what are the securities in which it shall be lawful to invest trust money. I should like a clause inserted providing that in all cases where it is possible the consent of the cestui que trusts must be had before the trustees can invest in the securities. It has been suggested that the operation of the Bill should be confined to Settlements made after the passing of the Act. I cannot help thinking there would be very great hardships under the present system if the Bill is not allowed to have a retrospective effect. To use the language of the Mover of the Second Reading, the Bill will be greatly conducive to simplicity of knowledge, not only on the part of the trustees, but on the part of the cestui qua trusts. If it is known that Parliament in its wisdom has directed that certain securities may be considered safe, that will be conducive to the peace of mind of the persons interested in the investment of Trust Funds. I do not know any measure which will prove of greater practical importance than this, and therefore I shall heartily support its Second Reading.
Here’s an interesting one:
DURATION OF PARLIAMENTS.
Parliament must also partake of that excitement, being the representative of the people. The feelings of the people might however, soon pass away: but the member of Parliament was likely to continue still a partisan. Hence, a great evil might arise from the Parliament thinking one way, whilst the people were thinking another; and out of that, another evil might arise, greater even than a contest between the people and the King—he meant a contest between the people and the Parliament. He therefore contended, that if new and frequent parliaments were necessary to Control the Ministers, new elections were necessary for the people to control the Parliaments. He agreed with the noble Lord, that the power of the House of Commons was now great, and that it had been doubled by the passing of the Reform Bill; but did it follow, that because it was great it was therefore to be of long duration? The noble Lord said—”its power is great, therefore it must last seven years.” He (Mr. Sheil) said—”Its power is great, therefore let it be short-lived.” The noble Lord said “the trust is vast,” and he (Mr. Sheil) “let the trustee, then, go the more frequently to the cestui que trust, and let him the more speedily pass his accounts. It had been said,” Let us give this Reformed Parliament a trial before we venture to prefer a charge on its constitution.” He maintained that it had had a trial, and that it had done enough to warrant a judgment.
(No. 15.) SECOND READING.
§ Order of the Day for the Second Reading read.
§Moved, “That the Bill be now read 2ª”—(The Lord Chancellor.)
…… Mr. Kennedy, thinking that law was on his side, went to every court in Westminster Hall; but all the courts decided as they ought to have decided—that he was not entitled to recover a single shilling; so that all his ability had been successfully employed for his client without any remuneration for himself. Was Parliament now to enable attorneys to do what barristers could not? do? Would their Lordships enable attorneys to do that which, from the nature of things, ought not to be done? Coming to another portion of his noble and learned Friend’s measure, he had to observe that in the Bill of last year his noble and learned Friend proposed that if, of two trustees or executors, one, being an attorney, proposed to commence a suit, he would not be entitled to his fees as an attorney unless he had obtained the consent of the other trustee or executor to the suit being instituted; but under the Bill now before their Lordships an attorney in such a position was not required to obtain the consent of his co-trustee nor of his cestui que trust, so that his first act might be to institute a suit against himself, instructing himself and paying himself out of the assets. With regard to the second clause, be would remind their Lordships that the Act of 1860 empowered a Judge in equity to order interest to be paid at 4 per cent on taxed costs; and the same Act also enabled attorneys to acquire a charge upon property which they might recover or preserve by their exertions.
HIGH COURT OF JUSTICE BILL—(No. 72.) —APPELLATE JURISDICTION BILL.
My Lords, these Bills contain one of the most magnificent schemes of law reform which has been proposed in my time; but in proportion to its grandeur is its difficulty………
The present practice has come down to us from the very earliest times; the Courts have gone on administering justice in a manner with which the people are familiar; and now you are asked to alter this system in some unknown way, which will not be submitted to the judgment of Parliament. The object is to pull down what I have before ventured to term the wall of partition which now exists between the Courts of Law and Equity; but all that my noble and learned Friend proposes to do by this Bill is to declare that the jurisdiction exercised by the Court of Chancery shall be modified by the Common Law to the extent to which it differs from it. Now, there are numbers of relations known to the Equity which are ignored by the Common Law Courts. The relations, for instance, of trustee and cestui que trust are unknown to the Common Law. The same remark applies to the power of husband and wife of dealing with each other as if they were separate persons. Much more effectual legislation, therefore, than this will be required to accomplish the object which we have in view—that a suitor shall not be driven from one Court to another. I hope my noble and learned Friend will perceive that I have not spoken in any other sense than to promote that object, which I fear cannot be effectually done until the Bill comes before us clothed with all those forms which are necessary for the purpose. I have no doubt, I may add, that we shall see the time when such a measure will be passed, to the great credit of my noble and learned Friend, and of the legislation of the House of which he is a Member.
COMMITTEE. ADJOURNED DEBATE.
The franchise is a trust; the electors stand in a fiduciary relation to the unenfranchised portion of the community; the latter have a right to know and to scrutinize how the duties connected with the trust have been discharged by the limited portion in whom the whole community vested it. But now, when much the greater proportion of the people have obtained the right to vote, the residue, in respect of whom alone this fiduciary relation arises, are so few that the obligation to them either ceases, or is reduced in extent and amount to a degree not deserving to be taken into account. It has been shown already by my hon. and learned Colleague (Mr. Plunket) that, as a fact, the enfranchised still bear but a small proportion to the unenfranchised. The number of the former has been increased, and of the latter in proportion diminished. But mere variation of number, even if it were more than has occurred, cannot destroy a relation of this kind. If there were a trust, it must continue so long as any objects, be they mere or less numerous, continue. It is absurd to talk of the addition of a million or two from the whole population to the electors, being capable of terminating the responsibility of the latter, if it ever existed. To effect this, strict logical reasoning would demand the total absorption of the whole community into the electoral body, in other words, universal suffrage. But the truth is, reasoning of this kind is fallacious, and illustrates the danger of determining great questions by arguments drawn from analogies, and the incidents of what appears analogous. Nullum simile est idem. What is like is not the same. See, for a moment, where such a line of reasoning leads in respect of the subject in hand. The franchise is a trust; therefore the limited number of electors must surrender their convictions to the demands of their cestuis que trust, the masses of unenfranchised; the franchise is a privilege, therefore the elector may rise it for his own personal advantage. Accurately speaking, the franchise partakes of the nature of a trust, and of the nature of a privilege; but it is not strictly one or the other; certainly not so as to engraft into its own nature all the incidents of either, or enable its existence, or the conditions of such existence, to depend upon reasoning applicable to those incidents.