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THE PUBLIC TRUSTEE
It is reported of Artemus Ward that he announced his intention of bringing up his son as a trustee. If the matter merited research it would, no doubt, be found that at the time the humorist hazarded this solution of the filial problem, breach of trust had become so unduly immune from retribution as to suggest a lucrative profession. It will, perhaps, always be, as Lord Justice Selwyn said, the main duty,' or as Lord Justice Lindley, in our own day, prefers to put it, *the great use of a trustee to commit judicious breaches of trust'; but it certainly should no longer be possible for a trustee ' to live for & quarter of a century in the lap of luxury on misappropriated trustfunds.' It is, unhappily, not too much to say that there is no diminution in the ‘large sums of money' which the Committee on Trusts Administration of 1895 reported as 'annually misappropriated by private trustees.' One recent writer would appear to estimate these losses at some 2,000,0001. in six years, and the human misery that this sum represents is far greater than at first appears. In commercial failures what is lost is mainly the profit anticipated by persons who have other means of livelihood : in the case of fraudulent trustees, on the other hand, what is lost is lost by dependents who lose their very means of subsistence, and that by the entirely inexcusable action of those to whom they are naturally entitled to look for protection. The mischief which arises may be incalculable : careers abandoned or diverted into unsuitable channels; the fortunes of a master-builder dispersed in a day; and that invaluable quality, ability, may find itself limited in opportunity, being, as the young Napoleon said with so much bitterness,hampered by the fetters which want throws upon ambition.'
It is not surprising, then, that the very proper resentment provoked by these continued losses should have stirred men to make changes and to devise some system providing the necessary security ; and, concurrently with such attempted amelioration, it has been found increasingly difficult to induce private persons to undertake the thankless office of executor and trustee. The law as to trusts has not become less intricate, and, while the law has been relaxed in the direction of honest breaches of trust, a higher standard of rectitude than formerly is exacted from all acting in fiduciary capacities. It might now almost be said that few have the ability, and none the time, to sustain the burden of these offices. The remedy has, however, been slow in coming to our shores. As early as 1872 a public trustee was provided in New Zealand ; and companies began to act as trustees and executors in Australia as far back as 1879. From 1886 onward, various companies in this country have held themselves out to act as executors and trustees; but so far as any evidence is available, such business would appear to be a very small part of the general business transacted, and there is no company, at present, in England, relying solely for success upon the profits to be derived from the performance of these duties. It may be that the better opinion in America is shared by persons of fortune in this country, viz. that the assumption of vast risks and commercial adventures is incompatible with the absolute security which is essential to the transaction of legitimate private trust business. No move, however, was made in this country to establish a public trustee until 1886, when the first Bill (No. 121 of 1887) was introduced by Sir Howard Vincent and others. The object of this Bill was ‘ to meet the difficulty which both public bodies and private individuals frequently experience in finding suitable trustees,' and to enable the State under certain reservations to guarantee the fulfilment of all trusts placed in the Public Trust Office.' The Bill failed to secure a second reading, and varying misfortune likewise awaited subsequent attempts in the same direction. It is mainly due, however, to the pertinacity and ability of Sir Howard Vincent, whose name appears on no fewer than twelve of the Bills brought in, that the project was never finally dropped, until it was taken up and passed into law, by the present Government, in December 1906.
During the long period in which the project has been under discussion in this country much criticism, generally of an adverse character, has been aroused. But it is idle to deny that some practical remedy for the proved difficulties and dangers inherent in the private administration of trusts was imperative; and it was not forthcoming. The utmost that was said was that the losses were slight compared with losses in other trades or professions ; but this comparison was no consolation to a ruined beneficiary. He would reflect that, inasmuch as a fraudulent breach of trust at one moment or other of its commission passed across a zone of conscious integrity, it should be preventable if an escape from temptation could be provided. The benevolent settlor, or anxious beneficiary, would know, probably, that in Scotland there was the system of judicial factors ; in Australasia no fewer than fourteen companies ready to act as the permanent and honest executor and trustee, and earning dividends of from 4 to 10 per cent. in carrying out these functions ; in New Zealand two companies similarly working, together with a public trustee, who
is a Government official with a State guarantee behind him. In South Africa, some two or three companies are to be found ; while in America some 1400 companies call themselves trust companies, generally with reference to their duties as trustees and executors. No soulless company can perhaps take the place of the skilled and sympathetic personal trustee ; but how rarely, if indeed at all, can this ideal creature be found. He eludes our acquaintance, and lives
sole-sitting by the shores of old romance, or is still “ to arrive' in later Socialistic days.
It is this elusiveness of the ideal private trustee which is doubtless responsible for the fact that eight-tenths of the large estates in the kingdom are in the hands of solicitor-trustees. Any solicitor of standing will say that he has not the least wish to act as executor or trustee. He does not consider the execution of such offices to be strictly, or desirably, within the proper functions of a solicitor; and doubtless this is the sound view of the best men, as it was the common practice in earlier days. But the difficulty of finding private persons to act in these offices is so great as to render this counsel of perfection difficult of adoption. To that extent, then, the advent of the public trustee as a permanent executor and trustee, always accessible and available, should be cordially welcomed by the legal profession. Indeed it was by the solicitors themselves that the first corporate trustee in this country was founded. Nevertheless, & writer in the leading American magazine devoted to trustee-company interests, has recently criticised the limited success of corporate trustees in England, attri. buting it to their reliance upon the legal profession. Speaking of the early companies, he writes : The whole scheme, however, was vitiated by one small detail, the family-solicitor. In order to have a chance of success the corporations ought to have made war on the family. solicitor from the outset; instead of which they tried to conciliate him,' by employing him. This opinion, however, is entirely unsound, certainly in so far as England is concerned, where the fears expressed at the alleged elimination of the lawyer' are groundless, as they are also in America. In America the numerous trustee companies rely for the best of their business upon prominent law firms; and in Eng. land the greatest measure of success of the public trustee must be in those cases in which he can render the legal profession a real service by his unimpeachable security, his perpetuity, and his economy. Few wills, if any, of rich men are made in this country without the intervention of the family-solicitor; and the home-made settlement is unknown. It is, therefore, not only most unjust to a distinguished profession, but also absurd, to say that the co-operation of the legal profession is immaterial. There is little doubt, however, that this Co-operation will be in the main established, and, when it is realised that the office of the public trustee is co-operative and not competitive, resort to him will become the common practice.
But there is also the spontaneous demand for the public trustee that may be found to exist on the part of the public, which will facili. tate this co-operation, and secure the conversion of solicitors to the conclusion that, so far from diminishing their practice, the businesslike conditions exacted from testators by a public department are destined to increase it. In consonance with this attitude on the part of the new department, it appears that there is to be no official solicitor to the public trustee, and the lay-testator, who, if left to himself, might make a home-made will, may expect to be encouraged to observe true economy by having his dispositions put into proper shape by some legal adviser of his own choosing. The leading solicitors in America will concede to any inquirer that the idea that the corporate trustee takes away a part of the legitimate business of the legal profession is hardly entitled to serious consideration. As new and improved methods and machinery in the manufacturing and mechanical world have been found to increase both business and the demand for labour, so the methodical and accurate transaction of business by & public trustee will be for the benefit of the legal profession. The highest degree of efficiency in the management and settlement of an estate is secured through the association of a public trustee with some good solicitor. The one offers the commonsense advantages of security, perpetuity, and economy; attention to all details, methodical keeping of accounts, and sound knowledge of investments ; and the other rendering such skilled legal opinion as may be required.
Having thus, as we hope, indicated how largely the creation of the office of public trustee will place the administration of trusts in this country in a healthy condition of security, it remains to explain what the public trustee is authorised to do, and to consider how he is likely to do it. As to security, the public trustee has the Consolidated Fund behind him, thus providing the trust estate with the best security that can be given for its proper administration. By the statute the public trustee has exactly the same powers as a private executor and trustee, plus certain exclusive advantages which the necessity of passing a special statute to erect his office enabled him to acquire. Being a creature of statute, and his office therein defined, it comes about that he may be appointed under a will in the simplest way possible, e.g. 'I appoint the public trustee, executor and trustee of this my will '; and in the case of a settlement he can be appointed trustee with even less form than an individual with similar powers. For, although of course he must be in terms duly appointed, no elaborate precedents of appointment and remuneration are required, such as would be necessary for a paid individual, the statute by its direct provisions filling in the otherwise necessary details. His appointment may be sole or joint, original, new, or additional, with this great advantage, that where he is appointed trustee to an existing trust, all the other trustees may retire if they wish to do so. He takes out probate in his own name, and does not have to work through the medium of a syndic with all the attendant legal obscurities and limitations as to delegation. He is also enabled, where there is no executor under the will, or no will at all, to take out letters of administration, equally with the widower, widow, or next of kin, although he is not to be preferred to these persons. This letting-in of a stranger to administer the estate of an intestate is a new departure in our law, and must prove most valuable on the many occasions when those who are ordinarily entitled desire to be relieved of the task for which they feel themselves unfitted. Another valuable power of the public trustee is his authority to accept a transfer of any executorship or administration, notwithstanding that the executor or administrator may have already acted in the matter. Another variety of trusteeship has now received statutory recognition in that the public trustee is enabled to act as custodian-trustee. A trustee to take care of the capital and the due yield of income of a trust is not new to our law; but his creation required special, careful, and elaborate definition whenever one was so appointed. Now, by the setting up of these necessary provisions in permanent form in the statute, further elaborate forms of appointment in the deed itself are avoided. The adoption of these provisions, as to permitting the public trustee to act as caretaker of the capital and income of the trust only, will be watched with interest. In conception it provides for the security of the trust funds in the hands of one trustee, while associated with him are to be personal trustees, in whose hands all powers and discretions of a personal nature are to be vested, these latter persons being called
managing trustees.' By a somewhat remarkable provision in the statute the public trustee may be imported into a trust as custodiantrustee, although there is no vacancy amongst the trustees, and none are desirous of retiring. This system may become a prominent feature of the Public Trustee Office ; on the other hand, it may prove to be the transitional bridge springing from the system of private trusteeships to that of corporation trusteeships in which the personal trustee is almost unknown. In regard to the audit and investigation of trust accounts, the public trustee is armed with a great power. Any trustee or beneficiary, concerned as to the due and honest administration of an estate under a will or settlement, has merely to give notice to the public trustee that he wants an audit and investigation
Having put himself in order by this application, the applicant, if a beneficiary, likewise gives notice to every trustee,
a trustee, then to his co-trustees, as the case may be, of his application to the public trustee, and endeavours to agree with them upon a person to undertake the audit. If the investigation and audit shall not be commenced within three months, then the public trustee may make the audit himself, or appoint some person to do so for him
of the trust.
Vol. LXIII-No. 372