Agricultural Credit Bill, 1977: Committee Stage (Resumed).

Question again proposed: "That section 47 stand part of the Bill."

(Cavan-Monaghan): We had, I think, teased out this section. It is the section which gives the tenant for life the right to borrow money on the security of the farm which he is entitled to enjoy for life only. I can see the merit in providing finance to enable the tenant for life to engage in good husbandry by putting the land to the best possible use. It is in the national interest the land should be productive. But this section goes pretty far. It is good if the tenant for life who borrows on the security of his limited interest in the land uses the money he borrows to improve the land and hands on the land so improved to his successor.

As Deputy Dillon used to say, it is the duty of every man to hand on the land a little better than he gets it. That is a very laudable principle. However, if the tenant for life who borrows the money does not use it to improve the land but takes himself and the money off to Cheltenham or to some other race meeting where he gambles it—this is an age of gambling nationally and individually—and the bet does not come off, then the money is gone and the remainder man will have to pay. He has to take the land subject to the charge in favour of the ACC without any benefit whatever. That is the position and, so long as the House appreciates that that is the position, it is entering into a commitment with its eyes open.

I trust that when the ACC are making loans of this nature they will exercise great care and discretion and vet, so to speak, the applicants on past performance as well as future promise. I would go so far as to say that the money should be given for permanent improvements of the land and permanent improvements, as we now know, have got a new definition under the Bill as we are amending it. Permanent improvements are something other than what the average man would regard as permanent improvements. I say the money should be advanced only in respect of old-fashioned permanent improvements so that the land will be improved and handed on so improved. I would even go further and say that the ACC might consider making advances under this section—I am not speaking about other sections—in instalments and, if a man borrows £20,000 to drain land, erect fences, manure it and so on, he should get £5,000 when he has so much work done, another £5,000 when further work has been done and so on. In that way the ACC would ensure that the tenant for life, who has a very limited interest in the land and whose interest can be extinguished in a breath, would be compelled to use the money borrowed in a way which would be beneficial to the land and to the remainder man. The situation is different where the tenant owns the land absolutely. If he does not use the borrowed money wisely that is his own responsibility and it is his own money, so to speak, he is wasting. In that case the ACC can sell the land and get their money back.

I am concerned about the tenant for life who has a very limited interest. I am concerned that he should not be able to mortgage his very limited interest up to the hilt and not make good use of the money borrowed to make permanent improvements to the land, handing on the land to the remainder man ultimately mortgaged to the hilt and only worth a fraction of what it should be worth. I hope I can rely on the ACC to use this section very carefully and to take every step open to them to ensure that money advanced for permanent improvements is used for permanent improvements.

Deputy Fitzpatrick has explained in detail the points that were raised and covered last week. I must repeat what I said then, that the definition of "permanent improvements" has been expanded and the ACC can give a loan for livestock to a tenant for life.

I would agree with the points made by Deputy Fitzpatrick and in passing those views to the ACC I would say that all the points raised are a matter for the ACC's discretion in their relationship and contact with the applicant, the tenant for life. I am quite sure that the very valid points he has made will be taken into account by the ACC before giving any loans to a tenant for life for any purpose, including permanent improvements.

I should like Deputy Fitzpatrick to clarify a point for me. Could he explain the difference between the absolute owner and the tenant for life? The ACC are more than capable of making sure that the borrower will use the money for the purpose for which it was borrowed. In regard to instalments, in my area you can borrow £20,000 and use £5,000 this year and so on. What difference is there to the ACC between the registered owner and a tenant for life? If your last breath is drawn it does not matter whether you are a tenant for life or the absolute registered owner.

(Cavan-Monaghan): Suppose that John Smith is the owner of a farm and land and he leaves the land to his brother James Smith for life and after the death of James Smith to James Smith's son Willie Smith. In that case John Smith's interest in the land goes to his brother James for his life, and after his life his son Willie becomes the absolute owner. Under this section we are giving the ACC authority which they had before but with the new definition of permanent improvements it is more forage. We are giving the ACC the right to advance to James Smith, the man who only has it for his life, £20,000 and that £2,000 will be charged on the land, not on James Smith's interest in the land. If James Smith spends that £20,000 in clearing ditches, making drains, putting up gates and on other useful improvements to the land, that is all right. His son Willie will take the land subject to the mortgage if it is not repaid but with the benefit of the work which his father has done on the land. But if James Smith, the tenant for life, is a speculative sort of fellow and decides to invest the money in stocks and shares, not to use an absurd example, or, more absurd, if he got what he considered to be a good tip for a horse, put the money on the horse and the horse crashed or the stocks and shares depreciated to the extent where they were no good and did not improve the land, his son Willie would take the land subject to the mortgage of £20,000 but with no advantage whatever. You may say that that is a family matter, and it is, but the intention of the father was to give the land to his brother for life and that the son would then take it. Were it not for this section, James the brother could only charge his limited interest in the land which would be of little value.

The example I have given is the case of a family, but it could be that Willie might not be related to the tenant for life. Other difficult situations could arise. If the tenant for life was a bad manager or foolish, or if there was a crash in cattle prices or some other disaster, he might put the money to bad use and hand over the land to Willie without any benefit. You could have a worse case where the tenant for life really thought that he should have got the land and begrudged it bitterly to the man coming after him. Instead of having good intentions he could borrow this money with the alleged intention of improving the land when he might have no intention whatever of spending it on the land. He might be using this device to defeat the intention of the original grantor who was giving him the land for life and then passing it to somebody else.

I regard those cases as real possibilities. I do not regard any of the cases that I have put forward as fantasy. At the same time I can see that it is a good thing to have machinery in the Bill under which the ACC can advance money to the tenant for life who might not live for a short time but for 25 years, to enable him to use the farm well. When giving that authority and those powers to the ACC and those benefits to the tenant for life, there is an obligation on us to have regard to the interests of the remainder man.

Lawyers and people of practical experience know that land is often given to a man for life just because the man who is giving the land does not trust him sufficiently to give it to him absolutely, because he thinks he will gamble it or that it will go out of the family. In other words, he does not believe he is a sensible person, and he uses the device of giving him the land for life only and then to his son, but I often think the son could be a lot worse than him. Anyway, he is keeping it in the family for one generation longer. He knows he cannot trust A and is hopeful that he may be able to trust B. The reason we have a tenant for life is that he is often an unreliable person. Therefore, we should try to ensure that the ACC will not lightly use this section, that they will use it in a fatherly way to ensure that the tenant for life does not squander the borrowed money and hand on the land heavily burdened and mortgaged to his successor.

The difference is that John knew that James was going to get it after his death and if he was the type that he begrudged James getting it he might squander it. My argument is that things would be very difficult for the ACC unless they were the last. If they were the first company he sought to borrow from with the intention of squandering the money it would be very difficult to guard against such squandering. With the first £5,000 he would get from the company he might back a horse and not care about the outcome, but the situation would be different if he did not know who was getting the farm. The one big safety valve in being the tenant for life is that such a person could not sell the farm but he could mortgage it as far as he wished.

(Cavan-Monaghan): If this section was not in the Bill he could only mortgage his own interest and the amount of money he would get on that sort of a security would be very little. By virtue of this section he can mortgage his own interest and his successor's interest and he gets the money into his claw.

Is the Deputy saying that if I have a life interest in a place and it is going to my son after my death I cannot put a permanent mortgage on that place?

One can now.

Does this section give me the authority to put a permanent mortgage on a place?

(Cavan-Monaghan): Exactly.

Up to now one could only mortgage one's place for one's lifetime, but under this section even though a person has only a life interest in a place he can mortgage it for those coming after him. I can assure the House that officials of the ACC are careful, and they judge each applicant on how he is using his farm, but I accept that they may not be able to judge a farmer fully.

The points raised by the Deputies are valid ones. I should like to state that the ACC use their discretion in regard to such loans. This section provides that where the ACC give a loan the money be paid to trustees if they are there, and if they are not there there is provision for appointing them in subsections (2) (3). Many of the fears and doubts raised by Deputy Fitzpatrick are covered. It is, finally, a matter for the ACC and their discretion.

(Cavan-Monaghan): There are trustees in the case of minors and there must be trustees in the case of incapacitated people, but one cannot take the cases where there are no trustees. In many of these transactions of tenant for life there are no trustees. I do not think it is correct that there must be trustees in all cases.

They have to be appointed under this section.

(Cavan-Monaghan): Would the Minister point that out to me, because that was not my reading of the section?

Subsection (2).

(Cavan-Monaghan): That subsection states:

(2) Money borrowed under this section shall be paid by the Corporation to the trustees for the purposes of the Settled Land Acts, 1882 to 1890, of the settlement under which the borrower is tenant for life or has the powers of a tenant for life or to persons appointed under this section to receive the money, and the money shall be capital money arising under the said settlement within the meaning of the said Acts, and the purpose for which the money is borrowed under this section shall be a purpose for which capital money may be applied under the said Acts, and the said Acts shall apply to the said money accordingly.

That would be all very well if we did not amend the definition of "permanent improvements", because the term "permanent improvements", as amended, can mean the improvement of the business carried out on the land, the putting of more cattle on it and so on. I am satisfied that it is our duty to ventilate points like this and to pass on to the ACC our views. It is my view that when money is advanced under this section every reasonable step should be taken to protect the remainder money.

Question put and agreed to.
Question proposed: "That section 48 stand part of the Bill."

(Cavan-Monaghan): I should like to ask the Minister if the limit of £25,000 is a new limit?

It has been done throughout the Bill. The limit has been raised from £10,000 to £25,000 because of the change in money values.

(Cavan-Monaghan): This section enables the corporation to advance money to an administrator for the purposes as stated in it. An administrator can be a widow with a young family, and until that young family reaches the age of 21 she cannot deal with the land absolutely and, therefore, must borrow as administrator. She must give a bond to the High Court when taking out administration for her faithful administration of the estate, and the amount of the bond must be double the amount of the gross assets. If she is guilty of default in the administration the people who are entitled to the property can claim against her, against the insurance company or the people who have given the bond. Therefore, I wonder if £25,000 in 1978 is a sufficiently high ceiling. One could have £25,000 in stock or machinery. It is not all that great an amount of money. I doubt if the ceiling is high enough in a genuine case, and I suggest that the Minister have a look at the figure between now and Report Stage.

Would the Minister specify those who come under this section, other than those mentioned by Deputy Fitzpatrick?

Personal representatives.

It is wider than that.

That is what the section says.

Would the Minister give the House some idea, because a personal representative could mean so much?

It is a person who has obtained a grant of administration or a grant of probate.

(Cavan-Monaghan): What does the Minister think of my suggestion that the ceiling of £25,000 be raised?

The position is that the ACC are not debarred from giving more money, but that is as high as they can go and have a priority charge. If the Deputy thinks the figure is not high enough we have no objection to increasing it.

(Cavan-Monaghan): I suggest that the Minister seek the advice of the corporation and think about it.

I agree with the Deputy, because in today's terms £25,000 is very small.

It is relevant to other sections also.

Question put and agreed to.
Question proposed: "That section 49 stand part of the Bill."

(Cavan-Monaghan): This is the section that is copper-fastening or implementing the previous sections which give the corporation the right to take priority over the outstanding interest in the land. The corporation, notwithstanding that relatives or other people may have valid charges which are not registered, may take a charge which gives them priority over it. This particular section deals with machinery available to the corporation for selling land subject to priority charges. I believe it is very far going. One subsection of it gives the court the right to make orders even though all people who have not an interest in the land are not before it.

I do not intend to repeat the arguments I made on a previous section even though they could be made here. The effect of this section and the previous sections is to give the applicant for the loan and the corporation the right to ignore outstanding claims. Some effort should be made to ascertain the outstanding claims and pay them. If we are ignoring them we should give the owners of those outstanding claims the benefit of an insurance fund which should be established under the Act.

With regard to the general question of priority charges the ACC are not ignoring the cautions of any type of charge on the land.

(Cavan-Monaghan): They have not the right to do it. I am concerned about the person who is registered as owner of land subject to equity. In ordinary circumstances that note could be protecting the rights of people with substantial interests in the land. We are giving the corporation priority over those.

It is in the old Acts and has never caused any problem.

(Cavan-Monaghan): I doubt if this would stand up if somebody questioned it on the constitutional issue. It is confiscating property. I know the Constitution has been bandied around by this, that and the other thing, but this is taking away a person's legal rights, his ownership in property, without compensation and without hearing. I doubt if this would stand up if it were questioned in the superior courts of the country.

All powers given to the mortgagee could be said to be the same. I want, before any discussion develops too far on it, to explain that this is a fall back position. It is a situation which has never been used by the ACC. It is a provision which is there in the event of it ever being used as a last resort.

(Cavan-Monaghan): It will be used as a nasty precedent for some other bright boys.

They usually get an order for possession from the courts.

I agree with Deputy Fitzpatrick that if this was contested in the court it would be contrary to the Constitution to mortgage somebody who has equities which are not discharged. There are hundreds of farmers in the west of Ireland who need development and who need the ACC loan who have not proper owner-ship. There are a lot of farms which are subject to equity. I am sure the position is the same in Cavan and that Deputy Fitzpatrick knows this from his practice as a solicitor. I believe if it was contested in court that I would not have the right to mortgage somebody who had a charge against my holding. The Minister has said that the ACC will be very careful not to use this power. If they have not the power to give loans I am afraid that quite a number of people will not get them, because in the west of Ireland a lot of people have not got absolute owner-ship of their holdings. I would like to give the ACC as much power as possible to loan money to those people who want to improve their farms.

(Cavan-Monaghan): I agree with Deputy Callanan's views. I agree fully that land should not be unreasonably starved of capital through red tape and through complicated legal enactments, but I do not believe that I should be able to borrow £25,000 from the ACC on the security of a farm one-third of which is owned by Deputy Callanan just because he happens to be out of the country or does not happen to be knocking on the door, and if I do not pay the ACC that the land can be sold and Deputy Callanan can be robbed of his one-third share in the land. I do not agree with that. I do not believe that is constitutional, but that is what we are doing here.

The equity note covers a lot of possible claims, but there is machinery in the Land Registry for cancelling the equity note and the owners then become absolute. If, in cancelling the equity note, a mistake is made in the Land Registry and Deputy Callanan is deprived of land he is entitled to I believe he has a right there against the insurance fund. This is shortcutting all that, and without cancelling the equity note at all I can borrow the money because I am the registered owner subject to equities, on the security of land, a third of which is owned by Deputy Callanan and he can be robbed of that. I do not agree with that. I believe it is unconstitutional and I believe it will be challenged some day.

If it is owned by Deputy Callanan then the situation would not even arise. If the Deputy can say it is owned by him then he must have some charge levelled somewhere against it and that could not be overridden by the ACC.

(Cavan-Monaghan): That is what the section is about. It is to abolish unregistered charges, to give the ACC priority over unregistered charges.

Question put and agreed to.
Sections 50 to 61, inclusive, agreed to.

I move amendment No. 7 :

In page 35, in the third column, opposite the mention of the Agricultural Co-operative Societies (Debentures) Act, 1934, to add "and ‘capital sum of'" after "and with such consent of the Minister as is mentioned in this Act".

(Cavan-Monaghan): Could the Minister of State tell us briefly what is the effect of this?

The 1934 Act relates to the issue of debentures by agricultural co-operative societies. Under section 5 such societies require the prior consent of the Minister for Agriculture to the issue of debentures. It is proposed to dispense with this requirement and it will no longer be necessary to have his consent. The intervention of the Minister for Agriculture is no longer considered necessary and before taking debentures the lending agencies themselves investigate the affairs of the society offering a debenture in order to check on their credit-worthiness.

(Cavan-Monaghan): In other words it is extending the discretion of the corporation to take debentures without the consent of the Minister for Agriculture.

That is right, and banks as well.

It is a good thing.

Was this used widely in the ACC where debentures were sought when they had to get the authority of the Minister for Agriculture?

They had to get the Minister's authority beforehand.

Was it being used at the time?

Whenever debentures came up.

We are making progress in removing it. It is only red tape.

Amendment agreed to.
Schedule, as amended, agreed to.
Title agreed to.
Bill reported with amendments.

When is it intended to take Report Stage?

(Cavan-Monaghan): I understand that Deputy Bruton, who has charge of the Bill for us, has amendments to put down on Report Stage. Accordingly, I regret that I cannot agree that Report Stage be taken now. When would the Minister of State suggest?

Very soon. Next Tuesday.

(Cavan-Monaghan): I suggest this day week, subject to agreement between the Whips.

Is Deputy Bruton not available today?

(Cavan-Monaghan): It is not a question of Deputy Bruton not being available at this stage; it is a question of his wanting to put down amendments on Report Stage.

Is it intended to take Report Stage on Tuesday?

(Cavan-Monaghan): On Tuesday next, subject to agreement between the Whips.

Report Stage ordered for Tuesday, 14 February 1978.