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No. 22.

UNCLAIMED DIVIDENDS.

MEMORANDUM by Sir F. DILLON BELL, AGENT-GENERAL for NEW ZEALAND.

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Is consequence of the magnitude of the aggregate amount of the Colonial loans, there is gradually growing up a large sum in the shape of unclaimed dividends. lately asked the Bank of England whether there would be any objection to prescribing a time after which unclaimed dividends need not be kept in reserve.

But in the absence of any provision in the Colonial Stock Act, 1877, such as is contained in the National Debt Act, 1870, and the East India Unclaimed Stock Act, 1885, there is at present no limit to the time during which unclaimed Colonial dividends must be held.

The question may be looked at from two points of view: 1st, as between the Colonial Governments and their agents at the domiciles of the loans; and 2nd, as between the Governments and the holders of the debentures or inscribed stock.

With regard to the first point, the Governments are under an engagement to provide at the domicile of the loan the necessary funds for an accruing dividend; and when once these funds are in the hands of the agents for paying the dividend, it may be a question whether a trust is created in favour of the persons entitled to the dividend, or whether the money is simply held by the agents at the pleasure of the Governments. The solicitors to the New Zealand Government pointed out that a similar question was raised quite recently in an action against Messrs. Rothschild in connexion with the Egyptian loans. In that case the Court seemed to incline to the opinion that the money was not imprested in the hands of the agents with any trust for the parties entitled to the dividend. If this was settled, the Governments might prescribe that unclaimed dividends should be returned to them, at any rate after six years; and they might agree with their agents accordingly, without the necessity of an Act of Parlia ment, unless the agents were advised that they were trustees of the money for the stockholders.

But on the second point, as between the Governments and the stockholders, the New Zealand solicitors were of opinion that an Imperial Act would be necessary for enabling the Governments to transfer unclaimed dividends, after a lapse of say ten years, and after adequate notice. Such an Act should be supplementary to the Colonial Stock Act, and contain provisions akin to those of the Indian Stock Act of 1885. Parliament might perhaps require that the stock itself should be retained in this country and transferred to the name of some public officer of the Colonial Govern. ment, against whom proceedings might be taken by a stockholder claiming in respect of any transferred stock. The Act would have to be adopted in the same way as the Colonial Stock Act was, by the respective Colonial Legislatures.

Westminster Chambers,

14th April 1887.

No. 23.

F. D. BELL.

INVESTMENT OF TRUST FUNDS IN COLONIAL STOCKS.

MEMORANDUM by Sir F. DILLON BELL, AGENT-GENERAL for NEW ZEALAND.

THE question of allowing trust monies to be invested in Colonial stocks inscribed under the Colonial Stock Act of 1877, has often been considered.

By the Act 22 and 23 Vict. c. 35, trustees were empowered (unless expressly forbidden by their trusts) to invest their trust funds in Bank of England or freland stock, and India stock. By a subsequent Act (30 and 31 Vict. c. 132) India stock was defined, and trustees were empowered to invest in any securities the interest whereof was or should be guaranteed by Parliament, in the same manner as if these were India stock.

By the Act 23 and 24 Vict. c. 38, the Lord Chancellor was empowered, with the advice of the Master of the Rolls, the Lords Justices, and the Vice-Chancellors (or any three of them), to make General Orders as to the investment of monies under the control of the Court of Chancery, either in consols, reduced, or any other stocks or securities, as he should see fit; and upon such General Order being made, trustees who had authority to invest their funds in Government or Parliamentary securities

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were allowed to invest them in any of the stocks or securities in which, by the General Order, monies under the control of the Court might be invested.

Under this Act a General Order was made in 1861 declaring that monies under the control of the Court might be invested in Bank stock, India stock, Exchequer bills. and 2 per cent. annuities, as well as in consols.

Various Acts have been passed from time to time by which the investments of English trust funds were specially authorised in Municipal Corporation stocks and other securities. The first of these was the Act of 1871, allowing trustees to invest in Metropolitan Board of Works stock. The Court has allowed investment in that stock, but has refused permission to invest in Guaranteed Indian Railway shares, even where the trust deed authorised such an investment to be made.

Practically, the great difficulty which existed prior to the passing of the Colonial Stock Act of 1877 was that until then the Colonial loans were all but entirely repre- sented by bonds payable to bearer, in which, of course, trustees would not invest even if they were allowed; and one of the many great advantages conferred upon the Colonies by that Act was that for the first time the investment of trust funds in Colonial securities was really made possible.

A step in advance was taken in 1884 by the passing of the Trusts (Scotland) Act, whereby Scottish trustees were empowered (unless expressly forbidden by their trusts) to invest their funds in Colonial securities, provided these were not payable to bearer. No Order has, however, been made under that Act by the Court of Session.

The fact is that although a new Act of Parliament is not absolutely necessary to authorise the investment of trust funds in Colonial inscribed stocks, since the Courts in England and Scotland may already allow it to be done, there are two difficulties which have always stood in the way. In the first place, Colonial Governments are not under Imperial control as to the extent of their issues in the same way as India stock and the other securities in which trustees may invest are; and secondly, Colonial Govern- ments cannot at present be brought under the jurisdiction of the British Courts. In the course of careful enquiries by the solicitors of the New Zealand Government Messrs. Mackrell, Matou and Godlee), 'they found that as neither of these difficulties could be removed, there was practically no hope that the Lord Chancellor and the advising Judges would take the responsibility of making a General Order under the, English Act, and it is not known whether the Court of Session would be more willing to allow investments under the Scottish Act.

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The time has, however, come when the Imperial Government may well consider whether an Act should not be passed giving direct authority to invest trust monies in stocks inscribed under the Colonial Stock Act of 1877. In contemplation of such a step, a clause was drawn by Messrs. Mackrell for me in the following torms :-

Money held on any trust may, unless the contrary is specially directed by the terms of the trust, be invested by trustees in the purchase of stocks or other public funds of the Colony of New Zealand: Such investment shall only be made in the Stock for the inscription and transfer whereof a register is kept at the Bank of England under the Colonial Stock Act 1877: The investment shall only be made with such consent (if any) as is required for an investment which is authorised under the trust, or, if no consent be so required, then only with the consent of the person (if any) of full age beneficially entitled in possession to the income arising from the investment when made."

It will be remembered that no notice of the stock being held in trust could appear apon the register, nor would a registrar be bound to regard a notice of a trust; but he would be bound to take notice of a distringas placed upon the stock to prevent its being dealt with by any one claiming to be interested in the fund.

If the Imperial Government would bring in an Act directly authorising the invest- ment of trust monies in Colonial stocks, it might be necessary to provide some simple process for ensuring the payment of interest and principal. At the same time, this might open up the wide question to which I incidentally referred the other day when the Conference was considering the subject of Colonial judgments, as to whether (and if so how) Colonial Governments should be made capable of suing and being sued in England; a step that would require grave consideration. There are no doubt objec- tions to such a step, but these would probably seem trifling when compared with the immense advantage to all the Colonies of a direct Parliamentary sanction to the investment of trust funds in their stocks.

The Colonies may especially ask for the assistance of Her Majesty's Government in this matter on account of the large sum they have contributed to the Imperial Exchequer in the issue of their loans. I annex a statement showing that the amount

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