HC Deb 16 November 2000 vol 356 cc1148-55
Mr. Page

I beg to move amendment No. 28, in page 7, line 32, at end insert— 'who has died after the commencement of this section'.

The amendment appears to be relatively simple and straightforward and I hope that the Minister sees it that way as well. It is highly important as it deals with a problem on which Ministers here and in another place have failed to satisfy right hon. and hon. Members and experts in insolvency law outside the House.

It is clear that the provision will have serious consequences for debtors who die before it comes into operation. I am advised that if the provision is enacted in its present form it will have retrospective effects. I am always reminded of a story about Winston Churchill. Someone told him that the first day of a child's life is one of the most dangerous, and Winston Churchill replied that the last is not without its hazards as well. Leaving that aside, I dread to think of the position of people who have arranged their affairs on the basis of what they understood the law to be.

Widows who may be living on restricted means in modest accommodation may find themselves faced with debts equal to the value of the interest in their homes held by their dead husbands. It is obvious that they will not be able to pay, or if they do they will be eligible for a much greater degree of support from the social security system. I believe many things about the Government, but I do not believe that they intend or want such an effect, since ruining widows or families through retrospective changes in insolvency law would not win the votes or the popularity that all Governments seek.

5.45 pm

Far be it from me to try to help the Government to avoid the pitfalls of unpopularity, but the safeguard in the amendment would help them to avoid an unnecessary trap. I hope that that is a compelling argument for the Minister to accept it, especially bearing in mind the fact that he is one of the self-confessed architects of new Labour.

Mr. Butterfill

I strongly support the amendment. It is a general principle of English law that legislation should not act retrospectively. It is not unknown for the House to pass retrospective legislation, but in general all Governments—and all hon. Members—have sought not to enact it, because it makes it difficult for people to plan their lives, creating unnecessary uncertainty and possibly affecting existing contractual arrangements.

There has long been a principle in English law that joint tenants own both absolutely and jointly, and that when one dies, the whole reverts to the other—or others, as there may be more than one. If the Government feel that that is no longer a form of ownership that should be protected, the answer is surely to amend the law on joint tenancies rather than to single out that area in the Bill.

Anomalies will be created. Building societies and others who have charges over property, in the expectation that they will achieve a charge over the whole in the case of a joint tenant, could have difficulties. The Bill is profoundly flawed on this matter, and that is compounded by the retrospective nature of clause 12.

This is not a new issue. It was considered by the Trade and Industry Committee, which said: There is a genuine policy question as to whether the interests of a deceased debtor in property held jointly should be treated as forming part of his estate for the purpose of its administration in bankruptcy. This deserves to be addressed explicitly rather than by merely referring back to…the 1986 Act; it remains for Ministers to make a positive case for any such change.

Clause 12 does precisely what the Trade and Industry Committee said that we should not do: it refers back to the 1986 Act. Frankly, that will not do. It is an abuse of the House and an affront to the Committee's recommendations. Another of its specific recommendations was: It would be useful if the explanatory notes could confirm that no retrospective effect is intended… The Bill does precisely the opposite. Neither the clause nor the retrospective effect should be allowed to survive.

Mr. Chope

My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) makes a powerful point that I wish to build on. When the Select Committee made the recommendation to which he referred, the Government responded in paragraph 20 of the fourth special report of the Trade and Industry Committee, issued on 8 February. They said that the Committee's comments had been noted, and that it would be made clear that the provisions would not have retrospective effect. Therefore the Government have already committed themselves to ensuring that the provision does not have retrospective effect, yet unless the amendment is accepted, clause 12 will have retrospective effect.

In a short debate on my amendment (a) in Standing Committee, I found it hard to follow the Minister's argument as to why the provision would not be retrospective. Having looked at his argument again, I am convinced that the Bill is retrospective, and that if the Government stick to it they will be contradicting their undertaking to the Select Committee.

The Minister told the Standing Committee: Hon. Members will appreciate that we must strike a balance between the interests of creditors who have not been paid by a deceased insolvent and a survivor who has become sole owner of what he or she formerly owned jointly with a deceased insolvent.—[Official Report, Standing Committee B, Tuesday 7 November; c. 130.]

That would be fine if the Bill applies only to people who die after it attains Royal Assent. However, what happens to such a survivor who finds, after the Bill is enacted, that the provision is used to alter the position that he or she was in before the legislation was implemented?

Mr. Butterfill

I have an example in which my hon. Friend may be interested. In it, a woman who knows that her husband is terminally ill goes to a building society for a loan. It is granted on the basis that there is a joint tenancy and that, if the husband dies fairly quickly as is expected, she will own the whole property. Does my hon. Friend agree that the Bill would mean that the building society's security would be halved?

Mr. Chope

My hon. Friend is right, and I do not doubt that many other examples of that effect could be devised. However, that is the problem of retrospective legislation, as the Trade and Industry Committee recognised. The Government undertook that the provision would not have retrospective effect, but the Bill as it stands would have just that effect. I hope that the Government will accept the amendment.

Mr. Burnett

Clause 12 is designed to deal with a well known mischief. It is manifestly unfair that a deceased insolvent's interest in joint property escapes the creditor's net, but it is also unfair to make the change retrospectively. Retrospective law is bad law and contrary to the House's traditions. The hon. Member for Bournemouth, West (Mr. Butterfill) gave the example of a woman whose only asset, after she is widowed, might be the property in which she lives and which she will inherit from her insolvent husband when he dies.

Another problem appears in clause 12(3), which states that the court must have regard to all the circumstances of the case, including the interests of the deceased's creditors and of the survivor. However, the subsection continues: but, unless the circumstances are exceptional— and we do not know what is meant by "exceptional; that will be for the courts to decide in due course— the court must assume that the interests of the deceased's creditors outweigh all other considerations. That is pretty draconian and unfair.

In reply to a point I made in Committee about how long this liability was to last, the Minister referred me to the Limitation Act 1980—that is, six years. An order might be made or applied for under this measure in respect of events that occurred five years ago. That is a bit tough, and I hope that the Minister reconsiders. I support the amendment.

Dr. Howells

By way of clarification, the Select Committee did not consider this version of the clause. We have moved away from revesting a property in a trustee. I do not know whether the hon. Member for South-West Hertfordshire (Mr. Page) has looked at what is, in effect, new clause 12, but as the hon. Member for Torridge and West Devon (Mr. Burnett) has just pointed out, the court can only make a monetary order and it will apply only when a petition is presented after the new section comes into force.

I hope that the hon. Member for Bournemouth, West (Mr. Butterfill) will look at subsection (3), which was referred to by the hon. Member for Torridge and West Devon. The court can do justice, having regard to all the interests concerned, which includes the interests of the former wife. I thought that the hon. Member for Bournemouth, West gave a good example. It is entirely reasonable to assume that there will be such cases.

Mr. Butterfill

I am grateful to the Minister for giving way, but that is not what subsection (3) actually says. It makes it clear that only in exceptional circumstances will anybody other than the creditors of the deceased be taken into account. I am by no means convinced that the circumstances that I have described—which I think are deserving, and would be accepted as such by any reasonable person—are what a court might consider, strictly speaking, as exceptional circumstances.

Dr. Howells

It is a statement of faith—obviously I have more faith in the courts than the hon. Gentleman in that respect. [Interruption.] I will be steady. I think that what I said in Committee still holds true: we need to strike a balance between the interests of creditors who have not been paid by a deceased insolvent and the survivor, who is the sole owner of what he or she formerly owned jointly with the deceased insolvent.

We are not convinced that the creditors of an insolvent should be in a worse position if the debtor has died than if he or she were living. We think that limiting the application of the new provision so that it will apply only in those cases where the petition for the insolvency administration order is presented after the new provision comes into force strikes the appropriate balance.

It must be remembered that prior to the Palmer case, it was understood that the survivor would automatically have been deprived of the deceased's interest and the creditors would have got the debtor's entire share. On that basis, no thought would have been given to the survivor's situation or interests.

Clause 12 certainly does not treat the survivor as harshly as that. Indeed, it provides for the court to have a discretion to make a monetary order against the survivor, which is very important. It provides that the order will concern only so much of the value lost to the estate as is needed to meet the debts and other liabilities to which his estate is subject. In addition, the court will make such an order only after it has weighed the interests of both the survivor and the deceased's creditors; and in the balancing exercise, the court must assume that the interests of the deceased's creditors will outweigh all other considerations, unless the circumstances are exceptional.

6 pm

Mr. Chope

Is the Minister telling us that the measure may not prove retrospective in practice because one may be able to get the indulgence of the court not to apply it retrospectively? Nevertheless, the legislation will apply retrospectively and will put in jeopardy women whose husbands have died and who have relied upon having absolute entitlement to the formerly joint estate.

Dr. Howells

It is a question of balance. The hon. Gentleman is right: a judgment has to be made. As I have tried to explain, the provision will apply only in those cases in which a petition has been presented after the measure comes into force. We think that that is right and I hope that the hon. Member for South-West Hertfordshire will withdraw the amendment.

Mr. Page

On Second Reading in another place, the noble Lord McIntosh said that he understood the need to be satisfied there is no retrospective aspect involved.—[Official Report, House of Lords, 4 April 2000; Vol. 611, c. 1272.] In Committee, my hon. Friend the Member for Christchurch (Mr. Chope) said that he remained to be convinced that the Government's amendment would not have a retrospective effect. My hon. Friend the Member for Bournemouth, West (Mr. Butterfill) referred to the Select Committee report and touched on the matter yet again. My hon. Friend the Member for Christchurch referred the Minister to paragraph 20 of the Government's response to the Trade and Industry Committee, to the effect that the new provisions would not have a retrospective effect. My hon. Friend repeated that today.

Mr. Chope

It is important that the words be on the record. They are: It will be made clear that provisions will not have retrospective effect. That is what the Government said.

Mr. Page

I am always grateful to my hon. Friend for taking my next line away from me. which he did a number of times in Committee. My opportunity will come, however, as the wheel turns.

Despite all those Government statements and despite what the Minister has said, there has been no move. In its present form, the Bill has a retrospective effect in relation to those debtors who die before the commencement of this section.

As I said, and it bears repeating, there will be widows who live in modest accommodation on a modest pension, who have ordered their affairs with regard to the law, and who, if the Bill is enacted in its present form, will find that their affairs are no longer valid.

Mr. Butterfill

Does my hon. Friend agree that the plight of such a widow is compounded by the fact that, under (b), the petition for the order can be presented within five years of the day her husband died? That means that she may have to wait five years to find out whether the provision will descend upon her. That is the most appalling uncertainty in which to place her.

Mr. Page

My hon. Friend makes his point. It is a fact of life that elderly people worry more than young people about security. I know of several of my elderly constituents who are desperately worried about accommodation and living in a secure environment. The risk of that environment being upset is exceedingly worrying.

The provision will put widows under pressure and at risk. The Minister says that he has faith in the courts and so do I—particularly if one has a lot of money. My faith in the courts is such that, as I read the section, it clearly directs the courts that unless there are exceptional circumstances they must assume that the interests of the deceased's creditors outweigh all other considerations.

The operative word is "exceptional". The Minister is therefore being disingenuous in his response. I do not believe that the effect that he described will be the effect in practice. The courts will, in practice, go for the extra money and those widows will be at risk, but—

Mr. Chope

I hope that my hon. Friend is not going to seek to withdraw the amendment. Surely, this is a constitutional outrage. Why should not this House deal with the matter rather than leaving it to the other place? Their Lordships were very concerned about any retrospective provisions. Will my hon. Friend join me to divide the House on this important issue?

Mr. Page

This is what friends are for. I have to tell my hon. Friend, having considered the Minister's answer, that I believe that although the thrust and tone of my amendment are right, the drafting is neither specific nor accurate enough to deal with the matter. The Minister has shown himself in his true colours by his answer. I will seek leave to withdraw the amendment, but I hope that it can be produced in another place and that the Government can find it in their heart to look at the matter once again. I beg to ask leave to withdraw the amendment.

Hon. Members

No.

Question put, That the amendment be made:—

The House divided: Ayes 34, Noes 210.

Division No. 339] [6.5 pm
AYES
Atkinson, Peter (Hexham) Kennedy, Rt Hon Charles (Ross Skye & Inverness W)
Beggs, Roy
Beith, Rt Hon A J Lewis, Dr Julian (New Forest E)
Boswell, Tim Lidington, David
Bottomley, Peter (Worthing W) Lilley, Rt Hon Peter
Bottomley, Rt Hon Mrs Virginia McIntosh, Miss Anne
Burnett, John Maclean, Rt Hon David
Butterfill, John Major, Rt Hon John
Campbell, Rt Hon Menzies (NE Fife) Öpik, Lembit
Page, Richard
Chapman, Sir Sydney (Chipping Barnet) Pickles, Eric
Rendel, David
Clifton-Brown, Geoffrey Russell, Bob (Colchester)
Spring, Richard
Cotter, Brian Stanley, Rt Hon Sir John
Davis, Rt Hon David (Haltemprice) Syms, Robert
Fearn, Ronnie Winterton, Mrs Ann (Congleton)
Gray, James
Harris, Dr Evan Tellers for the Ayes:
Harvey, Nick Mr. Christopher Chope and
Heathcoat-Amory, Rt Hon David Mr. David Heath.
NOES
Adams, Mrs Irene (Paisley N) Banks, Tony
Ainger, Nick Barnes, Harry
Ainsworth, Robert (Cov'try NE) Barron, Kevin
Anderson, Donald (Swansea E) Battle, John
Atkins, Charlotte Bayley, Hugh
Austin, John Beard, Nigel
Beckett, Rt Hon Mrs Margaret Howells, Dr Kim
Begg, Miss Anne Hurst, Alan
Bell, Martin (Tatton) Hutton, John
Bell, Stuart (Middlesbrough) Illsley, Eric
Bennett, Andrew F Jackson, Helen (Hillsborough)
Bermingham, Gerald Jenkins, Brian
Berry, Roger Jones, Ms Jenny (Wolverh'ton SW)
Blackman, Liz
Bradley, Keith (Withington) Jones, Dr Lynne (Selly Oak)
Bradshaw, Ben Jones, Martyn (Clwyd S)
Brinton, Mrs Helen Keeble, Ms Sally
Browne, Desmond Keen, Alan (Feltham & Heston)
Buck, Ms Karen Keen, Ann (Brentford & Isleworth)
Burden, Richard Kemp, Fraser
Butler, Mrs Christine Kennedy, Jane (Wavertree)
Caplin, Ivor Khabra, Piara S
Casale, Roger King, Ms Oona (Bethnal Green)
Caton, Martin Ladyman, Dr Stephen
Cawsey, Ian Lawrence, Mrs Jackie
Clapham, Michael Laxton, Bob
Clark, Rt Hon Dr David (S Shields) Leslie, Christopher
Clarke, Eric (Midlothian) Levitt, Tom
Clelland, David Lewis, Ivan (Bury S)
Coaker, Vernon Linton, Martin
Coleman, Iain Lloyd, Tony (Manchester C)
Colman, Tony Llwyd, Elfyn
Connarty, Michael McAvoy, Thomas
Cook, Frank (Stockton N) McCafferty, Ms Chris
Cooper, Yvette McDonagh, Siobhain
Corbyn, Jeremy Macdonald, Calum
Cousins, Jim McGuire, Mrs Anne
Cox, Tom McIsaac, Shona
Cryer, John (Hornchurch) Mackinlay, Andrew
Cunningham, Jim (Cov'try S) McNulty, Tony
Darling, Rt Hon Alistair MacShane, Denis
Davey, Valerie (Bristol W) Mactaggart, Fiona
Davies, Rt Hon Denzil (Llanelli) McWalter, Tony
Davis, Rt Hon Terry (B'ham Hodge H) McWilliam, John
Mahon, Mrs Alice
Dawson, Hilton Marsden, Gordon (Blackpool S)
Dismore, Andrew Marsden, Paul (Shrewsbury)
Dobson, Rt Hon Frank Marshall, David (Shettleston)
Dowd, Jim Marshall-Andrews, Robert
Drown, Ms Julia Martlew, Eric
Eagle, Angela (Wallasey) Maxton, John
Eagle, Maria (L'pool Garston) Meacher, Rt Hon Michael
Ennis, Jeff Meale, Alan
Etherington, Bill Merron, Gillian
Field, Rt Hon Frank Michael, Rt Hon Alun
Fitzpatrick, Jim Michie, Bill (Shef'ld Heeley)
Flint, Caroline Miller, Andrew
Flynn, Paul Mitchell, Austin
Foster, Michael Jabez (Hastings) Moffatt, Laura
Foulkes, George Moran, Ms Margaret
Galloway, George Morris, Rt Hon Sir John (Aberavon)
Gapes, Mike
Gardiner, Barry Mountford, Kali
Gerrard, Neil Murphy, Jim (Eastwood)
Gibson, Dr Ian Naysmith, Dr Doug
Godman, Dr Norman A O'Brien, Bill (Normanton)
Golding, Mrs Llin O'Hara, Eddie
Gordon, Mrs Eileen Olner, Bill
Griffiths, Jane (Reading E) Osborne, Ms Sandra
Griffiths, Nigel (Edinburgh S) Palmer, Dr Nick
Grogan, John Pearson, Ian
Hall, Patrick (Bedford) Perham, Ms Linda
Hamilton, Fabian (Leeds NE) Pike, Peter L
Hanson, David Plaskitt, James
Healey, John Pollard, Kerry
Henderson, Ivan (Harwich) Pope, Greg
Heppell, John Pound, Stephen
Hesford, Stephen Prentice, Ms Bridget (Lewisham E)
Hewitt, Ms Patricia Prentice, Gordon (Pendle)
Hinchliffe, David Quinn, Lawrie
Hodge, Ms Margaret Radice, Rt Hon Giles
Hope, Phil Rammell, Bill
Reed, Andrew (Loughborough) Taylor, David (NW Leics)
Reid, Rt Hon Dr John (Hamilton N) Temple-Morris, Peter
Roche, Mrs Barbara Thomas, Gareth R (Harrow W)
Rogers, Allan Timms, Stephen
Rooker, Rt Hon Jeff Touhig, Don
Rowlands, Ted Trickett, Jon
Roy, Frank Twigg, Derek (Halton)
Ruane, Chris Tynan, Bill
Ruddock, Joan Vis, Dr Rudi
Salter, Martin Walley, Ms Joan
Sarwar, Mohammad Ward, Ms Claire
Sedgemore, Brian Wareing, Robert N
Skinner, Dennis White, Brian
Smith, Jacqui (Redditch) Whitehead, Dr Alan
Smith, John (Glamorgan) Williams, Rt Hon Alan (Swansea W)
Smith, Llew (Blaenau Gwent) Williams, Alan W (E Carmarthen)
Soley, Clive Wills, Michael
Southworth, Ms Helen Winnick, David
Spellar, John Winterton, Ms Rosie (Doncaster C)
Squire, Ms Rachel Wood, Mike
Starkey, Dr Phyllis Wright, Anthony D (Gt Yarmouth)
Stevenson, George Wright, Tony (Cannock)
Stoate, Dr Howard Wyatt, Derek
Strang, Rt Hon Dr Gavin
Sutcliffe, Gerry Tellers for the Noes:
Taylor, Rt Hon Mrs Ann (Dewsbury) Mr. Graham Allen and
Mr. Kevin Hughes.

Question accordingly negatived.

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