I move that the Bill be now read a Second Time. This is, to a large extent, an agreed measure, as the previous Government had approved the preparation of legislation on the general lines of the Bill.
The Bill does not amend the general law relating to trusts. Its primary purpose is to redefine the investments in which trustees may invest trust moneys unless expressly forbidden by the instrument (if any) creating the trust. The law concerning the investment of trust funds affords guidance to trustees who are given no specific direction or authority in the instrument of trust. For the protection of the beneficiaries, the choice of trustees, in such cases, is limited by law to certain investments. The primary qualification of these investments is that they should be secure and, subject to this, that they should favour the life tenant in regard to the annual yield so far as that is compatible with the preservation of the capital for the benefit of the remainderman.
The law to-day in this country in regard to trustee investments is based for the most part on the Trustee Act, 1893. Subsequent to that Act, numerous amendments of and additions to the basic list of trustee investments were made by British statutes up to the time of the setting up of the Irish State. Since then the range of trustee investments has been further affected by a number of Irish statutes and by the rules of the High Court and the Supreme Court. At present a wide range of statutes and the rules of court have to be consulted to ascertain what are trustee investments, and there is doubt about the trustee qualifications of some of the securities mentioned in the earlier British Acts. Apart from the difficulty of ascertaining what are in law trustee securities, some which are legally available to trustees are not appropriate to the circumstances of this country.
The Bill, therefore, amends and, at the same time, consolidates the list of authorised trustee securities so as to make it more appropriate to current Irish conditions. It was circulated in draft form to interested bodies, including the Central Bank, the Irish Banks Standing Committee, the Dublin and Cork Stock Exchanges, the Federation of Irish Manufacturers, the Incorporated Law Society, the Chief Justice, the President of the High Court and the Superior Courts Rule-making Committee. The draft Bill was amended so as to take into account, where appropriate, various points raised by these bodies. After the Bill had been introduced, one of these bodies—the Incorporated Law Society raised points in connection with the investment of court moneys and redeemable bond insurance policies; there matters will be further examined prior to the Committee Stage.
Section 1 of the Bill lists the securities in which trustees may, in the absence of any prohibition in the trust instrument, invest trust moneys. This list replaces that set forth at Section 1 of the Trustee Act, 1893, as amended and extended by subsequent enactments. It is, broadly, the 1893 list, so amended and extended, with the exclusion of foreign securities, other than British Government securities inscribed or registered in the State, and with the addition of certain Irish investments such as deposits in the Post Office Savings Bank and Trustee Savings Banks, certain local authority stocks and debentures or debenture stocks of certain Irish industrial and commercial companies.
It is considered desirable that, in general, foreign securities should be excluded from the authorised list not alone because they are outside the jurisdiction but also because, so long as capital for domestic needs is scarce and there is an adequate range of Irish investments suitable for trust moneys, it is inappropriate that trustees should have statutory authority for investing trust funds outside the State. British Government securities registered or inscribed in the State have, however, been retained in the list in deference to the view expressed that their inclusion would provide a more gradual approach to the intention of the Bill and would enable trustees to avail of the convenience of a local register. The retention of these securities in the list does not involve a departure from the principle that, ultimately, foreign securities should not have trustee status. No new securities have been added to the Irish Legister since 1922 and the existing securities on the Register will, therefore, eventually disappear through redemption and sales; since 1922 the nominal value of British Government securities on the Register has diminished from £100,000,000 to its present figure of £40,000,000.
Taking marketable securities alone, that is, ignoring items which are not quoted on a stock exchange, such as bank deposits, saving certificates and real securities, the total nominal value of the quoted securities included in the authorised list is about £314,000,000. An active market for the National Loans included in the list is secured by the arrangement initiated in 1954 by which the Government stock broker stands ready to buy and sell Governmental Stocks at stated prices and up to stated amounts. These arrangements have also been extended to certain local authority and other securities included in the authorised list. I am satisfied, therefore, that the revised list will provide trustees with adequate investment outlets. If, however, this expectation is not realised, the Bill provides machinery in Section 2 whereby the list can be varied, as considered necessary from time to time. Variations will be effected by Orders which will be made after consultation with outside bodies and which will not come into effect until they have been approved by each House of the Oireachtas.
Section 3 of the Bill provides that moneys under the control of the courts shall be invested only in the securities authorised for the investment of trust funds. Under the Trustee Act, 1893, a trustee may invest in any securities authorised by the High Court for the investment of cash under its control. In consequence of this position there are at present two codes of trustee investments; one consisting of the securities specified in the 1893 statute, as extended and amended, and the other consisting of those authorised by rules of court. The power of the courts to add further to the trustee list was removed by Section 13 of the Approved Investments Act, 1933, but the courts were left authority to invest court moneys as they saw fit to prescribe. By prescribing the same investment list for court moneys as for trustee funds, the Bill completes the process which was begun in 1933. Given an adequate range of trustee investments specifically authorised by an Act of the Oireachtas, there is no case for a separate court list.
Section 4 enables trustees to effect redeemable bond insurance policies, against redemption by drawing of bonds at a price less than current or cost price, and also provides for the charging of the premiums against income or capital, or partly against income or partly against capital. Under the section, trustees would, for example, be empowered to take out insurance against the redemption of land bonds by lot at a price less than market or cost price. In present circumstances, when the market prices of such bonds are less than par, the question may not be material, but the power to take out such insurance could be of importance to trustees in the future, as it has been in the past.
Section 5 contains a saver for existing trustee and court investments. The position of existing trustee investments is already secured by Section 4 of the Trustee Act, 1893, Amendment Act, 1894, which provides that a trustee shall not be liable for a breach of trust by reason only of his continuing to hold an investment which has ceased to be an investment authorised by the instrument of trust or by the general law. Since, however, the present Bill consolidates and amends the authorised investment list to which the investment of court funds would also be restricted, it is considered desirable that it should contain an express saver for existing trustee and court funds.
Section 6 provides for the repeal of previous enactments which conferred trustee status on certain investments.
It will be seen from Section 7 that the Bill will not come into operation until three months after it has been passed. This waiting period will give adequate notice to trustees with money in course of investment.
