Inheritance and Trustees’ Powers Bill [HL]

Lord Wills Excerpts

Tuesday 22nd October 2013 Grand Committee

[Lord Wills (Lab)]

My Lords, I, too, congratulate the Minister on his magisterial introduction to the Bill, which I welcome. I also congratulate the Law Commission on the quality of its work, which laid the foundations for the Bill. I am delighted to see this procedure in place for ensuring that Law Commission reports do not, as the noble Lord, Lord McNally, said, gather dust on the shelves. As a Minister in the previous Government, I was responsible for putting in place this long-overdue reform of process. It is good to see it working so well and to see all the excellent work that is done by the Law Commission, in this area as in many others, being given practical effect in this way.

The Law Commission’s work in this area set out to ensure that the intestacy rules,

“strive to reflect the needs and expectations of modern families”.

Behind that work and behind the Bill lies the imperative of ensuring an equitable distribution of the estate of the deceased. Underpinning that must be the need for such distribution to reflect, as far as possible, the wishes of the deceased. Society must strive to protect the delivery of such wishes—it is a debt that each generation owes its predecessors.

The changing nature of modern families has created a situation where such protections can be illegitimately thwarted. The Bill offers a rare legislative opportunity to mitigate such mischief. That mischief can arise, in particular, in the case of vulnerable, lonely and elderly people, where an enduring or lasting power of attorney has been granted and the attorney abuses their powers to plunder the assets over which they have power. The official line of defence against such abuse is the Office of the Public Guardian but informal lines of defence are also provided by family and friends and by those who might legitimately expect to be beneficiaries of the estate in due course.

However, these defences can be of little value in the cases—which are, sadly, increasingly common—of vulnerable elderly people without close family or friends to monitor their situation. It is impossible to know how prevalent a problem this is because it is, by its nature, often concealed. However, because it is concealed, the Office of the Public Guardian can often do nothing about such abuse. Even when it does come to light, it is often after the death of the person concerned, and the Office of the Public Guardian has no jurisdiction after death.

The mischief can also arise even when no power of attorney has been granted but when there is a fiduciary relationship. The problems here can extend beyond the obvious one where the person drawing up the will becomes a beneficiary of it.

For example—and I set out this example solely to illustrate the nature of the problem—an elderly person, perhaps in a care home, asks for advice on making a will and the care home refers them to a local solicitor. In drawing up the will, the solicitor and the elderly person strike up a close relationship. The solicitor begins to pay regular visits to discuss the will and other matters. The solicitor might, quite properly, point out that they need to charge for the visit, and the elderly person, glad of the company, is glad to agree. However, the elderly person may not be aware that the solicitor is visiting far more often than could be justified professionally and that, instead of charging a normal hourly fee, they might be charging double that and then paying themselves those fees out of the estate that they are administering.

It might be argued—and I think that the noble Lord, Lord Henley, would agree with me on this given what he has just said—that if an elderly person wishes to spend their money on company from a solicitor or anyone else, the state has no right to interfere with that wish. That is an area where the state should not trespass. However, disproportionate charges for that solicitor’s visits and a disproportionate number of visits might, unknown to that elderly person, exhaust the estate and deprive the beneficiaries, who will often be charities, of the legacy that the testator wished them to have. If that had been fully explained to that elderly person, they might well have decided not to have quite so much company from the solicitor.

If the situation is not made clear and there is a breach of fiduciary duty, there appears to be very little remedy in practice. Again, this is by its nature often a concealed mischief and will rarely come to light. In this situation, the beneficiaries of the will, who might be expected to take a close interest in the administration of their future inheritance, are charities and will not necessarily be aware of the will.

The Solicitors Regulation Authority operates, understandably and prudentially enough, on a risk basis. It investigates only after a number of complaints, and the nature of this mischief means that a significant number of complaints are unlikely to emerge. It therefore seems that professionals—this will usually be solicitors but not necessarily exclusively so; it might involve others such as accountants and doctors—can operate to milk the estates of elderly, lonely and vulnerable people with a high probability of impunity.

This risk has been acknowledged by the Solicitors Regulation Authority, which has said:

“Theft and serious overcharging by solicitors acting in a representative capacity such as executor of an estate (but also under powers of attorney) continue to pose a high risk. The numbers of reports to the SRA of possible irregularity in probate cases increased from 6 in 2004, to 31 in 2005, 52 in 2006 and 65 in 2007. This problem is particularly insidious because it can take place over many years without detection. Beneficiaries, especially charities, are unaware that their money has been stolen. Sometimes solicitors or their employees take a long-term view by drafting wills to enable them to steal money from estates in later years”.

It is therefore clear that this problem has come across the radar of the SRA. The numbers are not great, but they may be only the tip of an iceberg. The problem is compounded by the fact that, as I understand it, if an estate is of nil value, it does not have to be published. A sufficiently calculating solicitor or other person in a position to do so can then time the plundering of the estate to such an extent that it is exhausted by the time of death. Therefore, there is no public record of the depletion of the estate. In the circumstances that I have described, there will be no close family or friends to be beneficiaries who might question the exhaustion of the estate. The charities, which are often the beneficiaries in these circumstances and which, as I understand it, scrutinise published wills to check out their legacies, will have nothing to scrutinise. Such a lack of transparency fosters a culture of impunity which can only encourage the plundering of estates of the elderly and vulnerable by those who are malignly intentioned and are in a position to do so.

There is clearly a problem here, and the Bill offers a rare legislative opportunity to tackle it, although I fully accept that the main thrust of the Bill is in a completely different area from the one that I have just described. Before the Minister decides to tell me that I may be straying too far off course here, I should say that I have sought advice from the clerks on the amendment that I intend to put down and they have advised me that what I have in mind is admissible.

Of course, no legislation can ever guarantee to remove any mischief completely, but it can often mitigate its incidence and its extent. I believe that greater transparency can do just that in this case. I tell the Minister now that I intend to put down an amendment in Committee to promote such transparency. I am very happy to share this with the Minister and his officials in advance in the hope that all their greater experience, wisdom and judgment can improve my amendment and make faster and securer progress towards tackling a problem that I hope we can all agree should be tackled.

--- Later in debate ---

[Lord Lloyd of Berwick (CB)]

My Lords, I am glad to have the opportunity to speak during the gap. I do not intend to deal with any of the provisions of the Bill, which have already been very well covered in the debate but want to say something about the procedure that we are following.

I remember the time not so very long ago when the Law Commission would study an area of the law that was badly in need of reform. Very often it would be doing so at the request of the Government. It would then take all the trouble and all the care to produce a report such as the one we have here—I refer not just to the cover but to the contents, some of which I have read—but nothing would happen. The Government may have accepted all the recommendations of a report and thanked the commission warmly for all its hard work, but still nothing would happen. The reason always given was that there simply was not time for a Second Reading in the Chamber.

Therefore, the matters covered by these reports, urgent though they might be, would accumulate from year to year. It became almost a scandal and must have been extremely frustrating for the Law Commission. Then came the noble Baroness, Lady Ashton, like a sort of deus ex machina. As Leader of the House, she was determined to do something to speed up the process, which is exactly what she did. I remember well the discussions that we had at that time, and I can say that without her we would not be here today in the middle of this Second Reading debate. I hope that the noble Lord, Lord Wills, who spoke on this, can confirm that view.

[Lord Wills]

I am sure that this is not courteous but I should like not only to place on record the work done by my noble friend Lady Ashton but to put the history straight. When I came into position in 2007, this was not a work in progress. The person who deserves most credit is no Minister but the then chair of the Law Commission, Sir Terence Etherton—now, I think, at the Court of Appeal. He was indefatigable in badgering me as the responsible Minister and all the officials to make sure that something happened. I am sure that the Ministry of Justice will remember this. As we are paying tribute, I say with all respect to my noble friend Lady Ashton that if there is one person who really deserves the credit it is Sir Terence Etherton. I hope that the noble and learned Lord will agree with me on his central role in this important reform.

[Lord Lloyd of Berwick]

I entirely agree with the noble Lord—I can remember Lord Etherton badgering me in exactly the same way—but it was the noble Baroness, Lady Ashton, who in the end got it through. It seems to me that we owe a huge debt of gratitude. By “we”, I mean the law and not just us around this Committee.

Perhaps I may couple just one other name: that of the noble Lord, Lord McNally, the Minister in charge of this Bill. I hope that he will not be too surprised by my saying that. As I think I have been involved in all the Law Commission Bills—I was surprised to hear that there were six; can it be as many as that?—I know from my experience that having a Minister who is himself keen on law reform makes all the difference.

Finally, I want to mention Professor Elizabeth Cooke, who has been in charge of work on this Bill from its very inception. In the old days, Acts of Parliament were sometimes named after the person who had drafted them; Lord Tenterden’s Act comes to mind. I would like to think that at some time in the future this Act might become known as Baroness Cooke’s—I say Baroness; she is not a Baroness yet—or Professor Cooke’s Act. This is an admirable report; it is very well set out, very clear and ideally suited for this procedure. I hope that it will find favour with the Committee.