House of Lords - Explanatory Note
Trustee Delegation Bill [H.L.] - continued          House of Lords

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EFFECTS OF THE BILL ON PUBLIC SECTOR FINANCES

9.     None are expected.

EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER

10.      None are expected.

SUMMARY OF THE REGULATORY APPRAISAL

11.     A Regulatory Appraisal is not necessary for the purpose of this Bill as the new legislation will amend an existing statutory regime without imposing any additional costs on business, charities or voluntary bodies.

COMMENCEMENT

12.     Clauses 1 - 12 will come into force on such date as the Lord Chancellor may order.

EUROPEAN CONVENTION ON HUMAN RIGHTS

13.     Section 19 of the Human Rights Act 1998 requires the Minister in charge of a Bill in either House of Parliament to make a statement about the compatibility of the provisions of the Bill with the convention rights (as defined by section 1 of that Act). On 2nd December 1998 the Lord Chancellor made the following statement before second reading of this Bill in the House of Lords:

    In my view the provisions of the Trustee Delegation Bill are compatible with the Convention rights.

ANNEX A

SECTION 10 OF THE POWER OF ATTORNEY ACT 1971

Effect of general power of attorney in specified form

10. (1) Subject to subsection (2) of this section, a general power of attorney in the form set out in Schedule 1 to this Act, or in a form to the like effect but expressed to be made under this Act, shall operate to confer -

    (a) on the donee of the power; or

    (b) if there is more than one donee, on the donees acting jointly or acting jointly or severally, as the case may be,

authority to do on behalf of the donor anything which he can lawfully do by an attorney.

(2) Subject to section 1 of the Trustee Delegation Act 1999, this section does not apply to functions which the donor has as a trustee or personal representative or as a tenant for life or statutory owner within the meaning of the Settled Land Act 1925.

Note: text in italics denote amendments introduced by the Bill

                                             ANNEX B

SECTION 25 OF THE TRUSTEE ACT 1925
as amended by Section 9 of the Powers of Attorney Act 1971

Power to delegate trusts during absence abroad

25. (1) Notwithstanding any rule of law or equity to the contrary, a trustee may, by power of attorney, delegate for a period not exceeding 12 months [deleted] the execution or exercise of all or any of the trusts, powers and discretions vested in him as trustee either alone or jointly with any other person or persons.

(1A) A delegation under this section -

(a) commences as provided by the instrument creating the power or, if the instrument makes no provision as to the commencement of the delegation, with the date of the execution of the instrument by the donor, and

(b) continues for a period of twelve months or any shorter period provided by the instrument creating the power.

(2) The persons who may be donees of a power of attorney under this section include a trust corporation but not (unless a trust corporation) the only other co-trustee of the donor of the power [deleted].

(3) An instrument creating a power of attorney under this section shall be attested by at least one witness [deleted].

(4) Before or within seven days after giving a power of attorney under this section the donor shall give written notice thereof (specifying the date on which the power comes into operation and its duration, the donee of the power, the reason why the power is given and where some only are delegated, the trusts, powers and discretions delegated) to-

    (a) each person (other than himself), if any, who under any instrument creating the trust has power (whether alone or jointly) to appoint a new trustee; and

    (b) each of the other trustees, if any;

but failure to comply with this subsection shall not, in favour of a person dealing with the donee of the power, invalidate any act done or instrument executed by the donee.

(4A) A power of attorney given under this section by a single donor -

     (a) in the form set out in subsection (4B) of this section, or

     (b) in a form to the like effect but expressed to be made under this subsection,

shall operate to delegate to the person identified in the form as the single donee of the power the execution and exercise of all the trusts, powers and discretions vested in the donor as trustee (either alone or jointly with any other person or persons) under the single trust so identified.

(4B) The form referred to in subsection (4A) of this section is as follows-

    "THIS GENERAL TRUSTEE POWER OF ATTORNEY is made on [date] by [name of one donor] of [address of donor] as trustee of [name or details of one trust].

    I appoint [name of one donee] of [address of donee] to be my attorney [if desired, the date on which the delegation commences or the period for which it continues (or both)] in accordance with section 25(4A) of the Trustee Act 1925.

    [To be executed as a deed.]

(5) The donor of a power of attorney given under this section shall be liable for the acts or defaults of the donee in the same manner as if they were the acts or defaults of the donor.

(6) For the purpose of executing or exercising the trusts or powers delegated to him, the donee may exercise any of the powers conferred on the donor as trustee by statute or by the instrument creating the trust, including power, for the purpose of the transfer of any inscribed stock, himself to delegate to an attorney power to transfer but not including the power of delegation conferred by this section.

(7) The fact that it appears from any power of attorney given under this section, or from any evidence required for the purposes of any such power of attorney or otherwise, that in dealing with any stock the donee of the power is acting in the execution of a trust shall not be deemed for any purpose to affect any person in whose books the stock is inscribed or registered with any notice of the trust.

(8) This section applies to a personal representative, tenant for life and statutory owner as it applies to a trustee except that subsection (4) shall apply as if it required the notice there mentioned to be given-

    (a) in the case of a personal representative, to each of the other personal representatives, if any, except any executor who has renounced probate;

    (b) in the case of a tenant for life, to the trustees of the settlement and to each person, if any, who together with the person giving the notice constitutes the tenant for life;

    (c) in the case of a statutory owner, to each of the persons, if any, who together with the person giving the notice constitute the statutory owner and, in the case of a statutory owner by virtue of section 23(1)(a) of the Settled Land Act 1925, to the trustees of the settlement.

Note: text in italics denote amendments introduced by the Bill (deletions are indicated)

                                             ANNEX C

GLOSSARY OF TERMS

Beneficial Interest: the rights of a beneficiary in respect of property held under a trust for him or her.

Beneficiary: a person entitled to benefit from a trust.

Charge: an interest in property creating a security for the performance of an obligation: for example, a mortgage of land may secure an obligation to repay a debt.

Conversion: the doctrine of conversion states that where land is held on trust for sale, the interests of the beneficiaries are deemed to be interests in the proceeds of sale, even before the land has been sold. Treating interests in land in this way simplified conveyancing but produced artificiality and inconsistency in relation to the categorisation of interests as interests in land or in the proceeds of sale.

Conveyance: in general terms a conveyance is a legal document (other than a will) which transfers property. It is defined in the Law of Property Act 1925 s 205(1)(ii) as including a mortgage, charge, lease, assent [an assurance by personal representatives of a deceased person vesting property in the person entitled], vesting declaration [a declaration in a deed appointing new trustees that the property vests in the trustees], vesting instrument [a deed vesting settled land], disclaimer, release and every other assurance [a disposition and transfer] of property or an interest therein by any instrument, except a will.

Deed : is a written document executed with the necessary formality (Law of Property (Miscellaneous Provisions) Act 1989 s 1).

Donee: the person who is given authority under a power of attorney.

Donor: the person who gives a power of attorney to a donee.

Enduring Power of Attorney: a power of attorney made in accordance with the Enduring Powers of Attorney Act 1985. An enduring power may be effective notwithstanding the mental incapacity of the donor. In the Bill "enduring power" is defined by reference to the Enduring Powers of Attorney Act 1985, which provides in particular that an enduring power must be granted in the prescribed form and be executed in the prescribed manner by the donor and the attorney (Enduring Powers of Attorney Act 1985, s 2(1)). The present prescribed form is set out in the Enduring Powers of Attorney (Prescribed Form) Regulations 1990 SI 1990/1376.

Equitable Interests: all interests in land which are not legal interests are equitable interests. The rights of the beneficiaries against the trust assets are equitable interests.

Execution: describes the way in which a person signs or seals (in the case of a corporation) a document and gives it legal effect.

Instrument: a formal legal document.

Interests in land: rights of ownership of or over land are interests in land. Interests may be estates, interests or charges (although an estate is simply a special kind of interest). These may be legal or equitable. See also equitable interests and legal interests.

Land: land is defined in the Trustee Act 1925 as land of any tenure, and mines and minerals, whether or not severed from the surface, buildings or parts of buildings, whether the division is horizontal, vertical or made in any other way, and corporeal hereditaments [rights in property which may be inherited]; also a manor, an advowson [a right to present a clergyman to a benefice], and a rent and other incorporeal hereditaments, and an easement [a right over land for the benefit of other land, such as a right of way], right, privilege, or benefit in, over, or derived from land, (Trustee Act 1925, s 68(6) as amended by the Trusts of Land and Appointment of Trustees Act 1996 s 25(2) and schedule 4).

Legal interests in land: today, the only legal estates are those for either a fee simple absolute in possession or a term of years absolute: in broad layman's terms a freehold or a leasehold. See Law of Property Act 1925 ss 1(1) and 205(1)(x). The other types of legal interest and charge are relatively few (Law of Property Act 1925 s 1(2)). All other interests are equitable interests (Law of Property Act 1925 s 1(3)). In relation to a trust of land, the trustees hold the legal estate. Third parties will usually want to acquire the legal interest free of the rights of the beneficiaries under the trust.

Overreaching: to overreach an interest on a disposition of property means to dispose of the property free of that interest. It is a mechanism whereby the rights of a beneficiary in trust land are detached from it and transferred to the proceeds of the sale of land, via the doctrine of conversion, enabling property to be sold where appropriate.

Power of Attorney: a power of attorney is both the authority given by one person ('the donor') to another person ('the donee' or 'attorney') to act for the donor in a transaction or a series of transactions or in the management of his or her affairs and the document by which that authority is given. Under the law of England and Wales a power of attorney made by an individual must be executed as a deed (Powers of Attorney Act 1971 s 1(1)).

Purchaser: is defined in the Law of Property Act 1925 as a person who, acting in good faith, acquires an interest in, or charge on, property for money or money's worth (Law of Property Act 1925 s 205 (1)(xxi) as it applies to Part I of that Act).

Settled land: land held or deemed to be held on trust (usually referred to as a settlement) subject to the terms of the Settled Land Act 1925. Trusts of this kind may now only be created in exceptional circumstances (see Trusts of Land and Appointment of Trustees Act 1996 s 2 and schedule 1). Such trusts were used in relation to land in which two or more beneficial interests were to exist in succession to one another. See Settled Land Act 1925 s 117(1)(xxiv).

Trustee function of the donor: a trustee function of the donor is one the donor has as a sole trustee or one he or she exercises jointly with fellow trustees.

Trust and trustee: a trustee is a person who has property or rights which he holds or is bound to exercise for or on behalf of another or others, or for the accomplishment of some particular purpose or purposes. He or she is said to hold the property on trust for that other or others, or for that purpose or purposes.

Trust corporation: a trust corporation is one of certain companies with a large paid up capital, or one of certain officials. The most commonly encountered trust corporation is perhaps an executor and trustee company owned by one of the major banks or financial institutions. The term is defined in the Trustee Act 1925 (s 68(1) para (18) which definition was extended by Law of Property (Amendment) Act 1926 s 3.

Trust for sale: a trust imposing a duty on the trustees to sell property subject to the trust and to hold the net proceeds of sale for the beneficiaries. Before the coming into force of the Trusts of Land and Appointment of Trustees Act 1996, a statutory trust for sale was imposed on co-owned land other than settled land (Law of Property Act 1925 ss 34 - 36 before amendment by the 1996 Act).

Trust of land: a trust of land is any trust of property which consists of or includes land subject to exceptions for settled land and land to which the University and College Estates Act 1925 applies (Trusts of Land and Appointment of Trustees Act 1996 s 1).

Trustee: See trust and trustee.

Trustee function means the trusts, powers and discretions vested in the donor as trustee (Trustee Act 1925 s 25(1); Trusts of Land and Appointment of Trustees Act 1996 s 9(1) and clause 5(6) of the Bill).

 
 
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Prepared: 4 december 1998