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Seanad Éireann debate -
Wednesday, 11 Jul 1973

Vol. 75 No. 5

Private Business. - Charities Bill, 1971 [Seanad Bill Amended by Dáil]: Report and Final Stages.

This Bill is a Seanad Bill which has been amended by the Dáil. In accordance, therefore, with Standing Order No. 75 it is deemed to have passed its First, Second and Third Stages in the Seanad and is placed on the Order Paper for Report Stage. On the question that the Bill be received for final consideration, the Minister may explain the purport of the amendments made by the Dáil and this is looked upon as the report of the Dáil amendments to the Seanad. The only matters, therefore, that may be discussed are the amendments made by the Dáil.

The first five amendments are drafting amendments which arose from comments made by Senator Alexis FitzGerald and Senator O'Higgins during the Committee Stage in the Seanad.

The purpose of the first amendment is to make it clear that the vesting of charity property in a body corporate established under section 2 shall be on the trusts which apply to the charity.

The object of the second and third amendments is to ensure that, on the framing of a scheme of incorporation under section 2, the only debts and liabilities incurred by the trustees prior to incorporation that will be automatically transferred to the body corporate are those properly incurred.

In the case of amendment No. 4 the purpose is to ensure that, on the framing of a scheme of incorporation, the automatic substitution of the body corporate for the trustees will not affect proceedings against the trustees, where such proceedings are for a breach of trust or a criminal offence. In the case of all other proceedings, the body corporate will, of course, take the place of the trustees.

Amendment No. 5 is designed to remove doubt as to the liability of the members of a body corporate established under section 2 for their acts, omissions, et cetera, in relation to the charity property. It will ensure that persons who are appointed members of the body corporate will be liable in the same manner as if they had been appointed trustees of the charity.

As amendments Nos. 6 and 8 are related I will deal with them together. The purpose of subsection (2) (a) of section 4 of the Bill is to enable the Charity Commissioners to authorise the application or investment of moneys arising from the sale, mortgage, charge or leasing of the charity property for the benefit of the charity or for such other charitable purpose as the commissioners shall think proper. In practice, if the charity funds cannot be applied etc. for the benefit of the charity, the commissioners will only authorise their application for a charitable purpose similar to that of the charity concerned. It was considered that, in all the circumstances, the specific restriction in relation to educational trusts was unnecessary for ordinary cases, and that it could limit the powers of the commissioners in special cases. Similar considerations applied in the case of subsection (2) of section 6.

Amendment No. 7 is merely a drafting amendment and was introduced in response to a suggestion made by Senator O'Higgins during the Committee Stage in the Seanad.

Amendment No. 9 was suggested by the Charity Commissioners and it follows a similar provision in section 43—power of board to appoint new trustees of charity—of the Charities Act, 1961. This provision will enable the commissioners to order that costs and expenses incurred by trustees in connection with applications made by them under section 2—dealing with incorporation schemes for charity trustees; section 4 dealing with schemes in relation to charities established or regulated by statute or by charter; section 5 dealing with transfer of churches vested in the Charity Commissioners under the 1844 Act; or section 6 dealing with vesting orders in relation to charity leases, be paid out of the charity funds.

As amendments Nos. 10 and 11 are related I will deal with them together.

These amendments were introduced in response to a suggestion by Senator Alexis FitzGerald during the Second and Committee Stages in the Seanad that the Charities Act, 1961, should be amended to allow for a more liberal investment of charity funds.

Senator FitzGerald argued that, by virtue of the investment provisions of the Act, charities are denied access to opportunities for enrichment of the objects of the charity. Under the existing law, unless there is a free power of investment, charity trustees must invest their funds in a limited range of Irish securities. The same is more or less true in respect of ordinary trust funds. Section 32 (3) of the Charities Act, 1961, allows investment of charity funds in (a) investments authorised by law, that is, by the Trustee (Authorised Investments) Act, 1958, (b) Irish securities, such securities being (i) stocks or shares in any industrial or commercial company incorporated in the State or maintaining in the State a register of its shareholders resident in the State or (ii) freehold or leasehold land in the State. The 1958 Act and the 1961 Act affect only trusts that contain no specific power of investment. In practice, anybody establishing a trust, whether charitable or non-charitable, would avoid the restrictions of these Acts and give the trustees a wide power of investment.

Section 32 and section 33 of the 1961 Act made a substantial change in the law as it then existed. Prior to 1961, the High Court had a wide inherent jurisdiction over charities. "In the case of a public charitable trust the court have a power and discretion which does not belong to them in the case of a private trust. The rule is this, that while the court cannot alter the object of the trust, they may, according to the circumstances of each case, vary the mode of its attainment although differing from the directions of the trustee"—per Lord Watson in Andrews v. M'Guffog (1886) cited with approval by Vaisey J. in Re Royal Society's Charitable Trusts [1956] Chancery 92.

Our High Court in the case of charitable trusts could authorise changes in the trusts, including changes of investment, by way of a scheme. A scheme could provide for investment outside the range authorised by law or by the trust instrument, but the jurisdiction to frame a scheme had to be exercised sparingly and not indiscriminately. An example of the exercise of this jurisdiction by the High Court will be found in the case of W.J. Sweeney Trusts. This case which occurred in 1960 is unreported but is referred to in the Irish Law Times and Solicitors' Journal of 23rd April, 1960. The effect of section 32 of the 1961 Act was to take away from the High Court the general power in charity cases to vary investments, including the power to permit investment in non-Irish securities.

The Trustee (Authorised Investments) Act, 1958, does not prevent the High Court in the case of an ordinary or private trust from permitting the investment of the trust funds in non-authorised securities. If all the beneficiaries are of full age they may alter the trust in any way they like. If infants or unborn persons are concerned the trust may only be altered by the High Court. The jurisdiction of the court is an administrative jurisdiction to be exercised where a situation has arisen in regard to the property creating what might fairly be called an "emergency"—and under the heading of administration comes the investment of the trust funds. However, under section 3 of the 1958 Act, money under the control or subject to an order of the court—for example damages awarded to a minor—must be invested in authorised securities.

The present position in regard to the variation of trusts is anomalous. Persons of full age who are the sole beneficiaries of an ordinary private trust may alter the trust in any way they like. On the other hand, although the trustees of a charitable trust have power to have the trust varied for the benefit of the objects thereof, the variation may not involve a change to investments not authorised by section 32 of the 1961 Act, and the investments restriction applies even if the beneficiaries of the charitable trust are of full age.

The Government consider that, in the interests of charities, section 32 of the Charities Act, 1961, should be amended in order to restore to the High Court the inherent power which it had prior to the 1961 Act to authorise changes in investments of charity funds. In other words, we are satisfied that the court should have discretion to authorise the investment of charity funds in any securities, including non-Irish securities. We are also satisfied that the Charity Commissioners should be given powers similar to those of the court in the case of charity funds. It need hardly be said that the court and the board will be bound to exercise their discretion carefully in choosing the investments. In any event, in the not too distant future the investment provisions of the 1961 Act and the Trustee (Authorised Investments) Act, 1958, will have to be considered in the light of Article 67 (1) of the Treaty of Rome and the directives that may be issued thereunder. This article provides for the free movement of capital within the Common Market.

Moreover, in England and Northern Ireland, although there are provisions in regard to authorised investments in the case of ordinary trusts the trustees may nevertheless apply to the High Court for authority to vary their investments and also to vary the trust itself. I hope when time is available to examine these matters in the context of a revision of the whole law as to trusts and trustees.

Amendments Nos. 12, 13, 14 and 15 are amendments of a similar type and I shall deal with them together.

These are merely drafting amendments. They provide for the restatement of sections 35, 37, 43 and 52 of the Charities Act, 1961, incorporating the amendments thereto contained in sections 9, 10, 11 and 13, respectively, of the Bill and the repeals contained in paragraphs (b), (c) and (d) of section 14. The purpose of the amendments is to make the law easier for the reader to comprehend and to avoid legislation by reference. Amendment No. 16 is purely a drafting amendment.

I will be very brief. The amendments to the Bill are acceptable. I have one query, which arises out of the amendments to the Principal Act envisaged now in amendments Nos. 10 and 11 and the new departure here in giving greater freedom for investing in non-Irish securities. I should like to know if the Minister is satisfied that traditional charitable funds which have been invested in Irish securities over the years will in any way be prejudiced in the future. Investment in our securities may be prejudiced. There are safeguards written in but giving this wider range of opportunity to the board may lead to a diminution in the investment of charity funds in Irish securities. Under the EEC this type of freedom of investment is written into the regulations under the Treaty of Rome. It is something we are giving away and I should like to know if the Minister has investigated this aspect fully. This question arose in the other House too.

Like Senator Lenihan, I do not want to delay the House on this. I should like to pick out what the Minister described as merely drafting amendments and to draw the attention of everyone to the importance of the innovation which is represented by these drafting amendments.

Anyone who has the opportunity may look at and compare the proposed amendments to the law which were contained in the Bill when it left the Seanad and the same amendments to the law effecting the same purposes contained in these amendments. In the first case it demanded an exercise of intelligence which one would not wish to engage in unnecessarily and the investment of time which was painful to give.

Now we have a new subsection in each of these cases to look at it in its entirety. This is a most important development. I sincerely trust the Minister's example will be followed by himself in other cases and will be followed by his colleagues in other cases. I regret to have to observe certain Bills going through Dáil Éireann at the moment where the same principle is not being applied and where we will have just as much difficulty in trying to understand what the blasted thing means as we had when we were faced with this Bill in the Seanad originally. Now it is perfectly clear to understand. It realises in a very lucid way what is the intention of the Oireachtas and this is so important it ought not to go by without commendation. If Senator Lenihan looks at the old Seanad Bill, takes any one of those sections and compares the language in them with this, he will see what a much easier task it will be for everyone who has the job of trying to apply the law and understand their rights under it.

I should like to thank the Minister for having paid attention to what Senator O'Higgins and myself had to say in making the amendments which are contained in particular in the first five amendments effected in Dáil Éireann to this Bill. Some of the points we made with regard to sections 2 and 3 have been examined and some have been found wanting and some have not been followed by appropriate amendments. I am satisfied they have all been considered.

With regard to what may perhaps be the important change in the Bill in its present state from the Bill which left the Seanad, which arise under amendments Nos. 10 and 11, I should like to link up my remarks with what the Minister stated in his introduction of this Bill today with such matters as the general power concerning the investment of trust funds. I had, in fact, drafted a Bill proposing a general amendment with regard to the trust law, the law regarding the investment of trust funds, and have on a number of occasions mentioned the point which the Minister has indicated is now under consideration in regard to the variation of trusts. I am very glad that this step has been taken.

It is right that I should make a certain declaration of interest with regard to this matter. I do not hope to be a beneficiary of the charities in question, but I am concerned, as both this and the previous administration know, with the administration of charities and, the particular problems associated with them. I should like to refer to the point Senator Lenihan made, which was considered in Dáil Éireann before.

The rate problem about investment in the Dublin market arises if the fund invested is in a particular security and of a particular size. If it is desirable, because of the nature of the investor's needs, to realise the investment quickly, then there may be a situation in which the interest of the persons concerned is quite severely damaged on realisation. If you get beyond a particular size of order for sale in the Dublin market at the moment, you probably will not be able to carry out that order through the market at all. You would have to hawk around your offer or the security in question to different institutions and sell it to them at a discount.

This is particularly punishing and damaging if there is a situation in which a charity needs its money, in a hurry a charity participating in a large invested fund. Unless the trustees have freedom to invest of a kind which they did have, as the Minister has reminded us, but which was taken from them in 1961, then the losers will be the charities and the beneficiaries of the charities in question. There are still limitations in the sense that the matter has to get the approval of the court or the Commissioners of Charitable Donations and Bequests, as the case may be.

I should like to thank the Minister in particular for having recommended the Bill to the Government and having got approval for this particular amendment which will be of general benefit to people who are very much in need of obtaining assistance and benefit. I should also like to say that we pressed for a number of points when this Charities Bill was on Committee Stage in the Seanad previously, but because of the particular circumstances at the time the then Minister asked us to take the Report Stage straightaway. He said he would have these points considered before the matter was dealt with in the Dáil. There is evidence from the treatment which is shown in this Bill that that undertaking from the Minister, as well as the efforts of the present Minister, needs to be recognised.

Two points were raised. I will deal first with the point raised by Senator Lenihan. He was anxious for an assurance that the change of power of investment would not in any way prejudice the charities concerned. When I remind him that the bodies who will be authorising the investment, and who might in the circumstances of a particular case feel a need to invest outside the country, will be either the High Court or the Commissioners of Charitable Donations and Bequests, the question of any further assurance hardly arises. These bodies have a very long tradition of the careful management of charitable funds. There is no reason to think that that tradition will suddenly change because the power which the Court had up to 1961 is now restored and extended to the Commissioners. The type of investments authorised and the place of investment will be available on record in the commissioners' annual report. The amount of investment which in the past was effected outside the country was very small. There is no reason to think that that pattern will change. As the scope of investment widens in this country it will be availed of by the Court and the commissioners. But, as Senator FitzGerald pointed out, due to the size of the Dublin market there may be circumstances which may make it advantageous to invest outside the country in a particular case. It is to enable that advantage to be taken for the benefit of the charity that this amendment is being introduced. The House can rely completely on the experience and wisdom of both the commissioners and the court.

I am obliged to Senator FitzGerald for his commendation of the principle of restating an entire section instead of merely presenting the particular amendment by itself and asking people to read it back into the section. I was conscious of this problem when the Committee Stage was being prepared. It is something which I agree should find its way into all legislation. It is not always possible to do this. The Senator probably has the Finance Act in mind, but it would be a very large Finance Act if every amendment in each current Finance Act required the reprinting of the original section. It would be a massive volume.

You would be able to read it.

It would take you a long time to find it. But it is difficult to know where to draw the line.

In conclusion, I should like to thank the Members of the Seanad for their contributions on this and earlier Stages. If a student were doing a study on the necessity or desirability of having an Upper House, he would need to go no further for arguments in favour of that thesis than to read the debate on this Bill.

Question put and agreed to.
Question—"That the Bill do now pass"—put and agreed to.
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