HL Deb 14 July 1942 vol 123 cc746-57

Order of the Day for the House to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)

On Question, Motion agreed to.

House in Committee accordingly:

[THE LORD STANMORE in the Chair.]

Clause I agreed to.

Clause 2 [Amendment of the principal Act]:

THE LORD CHANCELLOR (VISCOUNT SIMON)

The first Amendment in my name is really a drafting Amendment. There is no need to provide for paragraph 13 of the Second Schedule to have effect as originally included in the Bill. It is right that this change should be made. The matter is formal, and does not need discussion. I beg to move.

Amendment moved— Page 2, line 19, leave out ("and in paragraph 13 of the said Second Schedule").—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 2, as amended, agreed to.

Remaining clauses agreed to.

First Schedule [Amendments relating to the principal Act generally]:

THE LORD CHANCELLOR

The next is a drafting Amendment. It was a mistake to draw the Bill as originally drawn, and I ask that this correction be made.

Amendment moved— Page 6, line 40, leave out from ("Act") to ("to") in line 42.—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment is consequential.

Amendment moved— Page 7, line 23, leave out ("restriction or outgoing") and insert ("or restriction").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved, after paragraph 4, to insert:

" 5. Payments to owners of rentcharges. (1) Where a value payment is to be made in respect of war damage to a hereditament and at the date by reference to which the disposal of the payment is to be regulated (in this para graph referred to as "the material date") there was subsisting a rentcharge created out of a proprietary interest (being either the fee simple or a tenancy granted for a term of a hundred years or more) in any land in the hereditament, or in any such land together with other land, a right to receive a share of the value payment shall vest in the person who was the owner of the rentcharge at that date, if he shows that the following conditions are satisfied, namely—

  1. (a) that the amount of the rentcharge so far as attributable to land in the hereditament then subject thereto (in this paragraph referred to as" the charged land in the hereditament") exceeded the available annual value of that land as depreciated by the war damage; and
  2. (b) that at the time when the question whether this condition is satisfied falls to be determined no building sufficient to make good the excess has been carried out, or, having regard to all the circumstances (including any undertaking required under paragraph (a) of subsection (3) of Section seven), is likely to be carried out within a reasonable period after the time when the discharge of the value payment becomes permissible.
(2) If the said right is exercised—
  1. (a) the amount of the share of the owner of the rentcharge shall be an amount equal to the capital equivalent of the excess mentioned in the preceding sub-paragraph, so however that if the amount of the rentcharge so far as attributable to the charged land in the hereditament was greater by any sum than the available annual value of that land apart from any war damage the amount of the share shall be computed as if the said excess had been reduced by that sum; and
  2. (b) so much of the rentcharge as is equal to the said excess shall be extinguished on the date on which the share is paid, and, as between the persons interested in the charged land in the hereditament on the one hand and in any other land subject to the rent-charge on the other hand, the proper share of the persons interested in the charged land in the hereditament of the liability for the 748 residue of the rentcharge in respect of any period after the extinguishment shall be treated as being an amount per annum equal to the available annual value of the charged land in the hereditament as depreciated by the war damage.
 (3) Any question as to whether the conditions mentioned in sub-paragraph (1) of this paragraph are satisfied, or as to the amount of the said excess or of the share of the owner of a rentcharge, shall be determined by agreement between the owner thereof and of the proprietary interest out of which the rentcharge was created in the charged land in the hereditament, together with any mortgagee of either of those interests, or, in default of agreement, by reference to a referee as provided by subsection (5) of Section nine. (4) Where the said right is exercised effect shall be given thereto out of so much of the value payment as is payable in respect of the proprietary interest out of which the rent-charge was created in the charged land in the hereditament, and—
  1. (a) if apart from this provision any of the value payment would be payable under subsection (4) of Section nine to a mortgagee of that proprietary interest, then, if the mortgage had priority to the rentcharge, it shall be payable to him and effect shall be given to the said right out of any sums to which the owner of that proprietary interest would otherwise have been entitled under the provisions of that subsection as to mortgagees accounting, or, if the rentcharge had priority to the mortgage the sum payable to the mortgagee shall be reduced by the amount required for giving effect to the said right;
  2. (b) if the rentcharge was itself subject to a mortgage at the material date, subsection (4)of Section nine shall have effect in relation to the disposal of the share to be paid in respect of the rentcharge as it has effect in relation to so much of a value payment as is payable in respect of a mortgaged proprietary interest, with the substitution for references therein to such an interest of references to the rentcharge;
  3. (c) subsections (2) and (4) of Section nine, and sub-paragraph (2) of paragraph 6 of this Schedule, shall have effect subject to the provisions of this paragraph.
 (5) Regulations may be made under Section ten (which confers power to make regulations as to claims for payments) as to the exercise of the said right and the manner in which effect is to be given to the said right where exercised, and in particular, but without prejudice to the generality of the power conferred by this subparagraph, regulations so made may make provision as to the matters aforesaid in cases in which the charged land in a hereditament is a part only thereof, or was in divided ownership at the material date, or in which a proprietary interest or rentcharge was subject to a mortgage at that date. (6) In this Act the expression "rentcharge" means a rentcharge (including a fee farm rent) subsisting at law or capable of subsisting at law, and not being an interest or charge arising under a settlement within the meaning of the Settled Land Act, 1925, and means, where an apportionment of a rentcharge binding on the owner thereof has been made, each of the apportioned parts and not the entire rent-charge. (7) For the purpose of this paragraph the "capital equivalent" of the excess referred to in head (a) of sub-paragraph (I) shall be taken to be that excess multiplied by the number of years purchase which the rentcharge might have been expected to realize on a sale thereof in the open market on the thirty-first day of March, nineteen hundred and thirty-nine, if it had been subsisting on that day with the like incidents in all respects as it had at the material date, and the hereditament had been in the state in which it was immediately before the occurrence of the damage thereto, and the annual value of any land outside the hereditament subject to the rentcharge had been its annual value apart from any war damage. (8) For the purposes of this paragraph the "annual value of the charged land in the hereditament as depreciated by the war damage" shall—.
  1. (a) if that land is coterminous with the hereditament, be taken to be five per cent. of the value of the hereditament after the occurrence of the damage as ascertained for the purpose of determining the amount of the value payment;
  2. (b) if that land is a part only of the hereditament, be determined by apportioning an appropriate part of the said percentage of the said value to that land.
 (9)For the purposes of this paragraph the "annual value apart from any war damage" of any land shall, if that land was coterminous with land which constituted a contributory property or two or more contributory properties for the purposes of the instalments 0f contribution for the year in which the war damage to the hereditament occurred (or, if it occurred before the beginning of the year nineteen hundred and forty-one, for that year), be taken to be the contributory value or the sum of the contributory values of the property or properties for that year, and, if it was not, shall be determined by valuation made by reference—
  1. (a) primarily to the contributory value for that year of any such contributory property or properties as aforesaid which that land comprised or of which it formed part; and
  2. (b) subject as aforesaid, to the rent at which that land or any part thereof might have been expected to let from year to year on the thirty-first day of March, nineteen hundred and thirty-nine, if it had been on that day in the state in which it was immediately before the occurrence of the damage to the heredirament, or, in the case of land outside' the hereditament which had then also sustained war damage, immediately before the occurrence of that damage, and the tenant undertook to pay the usual tenant's rates and taxes and the landlord undertook to bear the costs of the repairs and insurance and other expenses, if any, necessary to maintain the land in a state to command that rent.
 (10) For the purposes of this paragraph the "available annual value" of the charged land in the hereditament as depreciated by the war damage, or apart from any war damage, shall be taken to be the annual value thereof as so depreciated, or apart from any war damage, as the case may be, less the amount, so far as attributable to any of the charged land in the hereditament, of—
  1. (a) any rentcharge having priority to the rentcharge in question to which the fee simple in that land was subject at the material date, or, where that tentcharge was created out of a tenancy of that land, to which either the fee simple therein or that tenancy or any superior tenancy thereof was subject at that date; and
  2. (b) where that rentcharge was created out of a tenancy of that land, the rent reserved by the lease for the year in which that date fell.
 (11) For the purposes of this paragraph the "amount attributable" to any land of a rentcharge, or of rent reserved by a lease, shall, where at the material date, that land was the only land subject to the rentcharge, or out of which the rent issued, be taken to be the whole amount of the rentcharge payable, or of the rent reserved, for the year in which that date fell, and, where it was not, shall be determined by apportioning or allocating to that land so much (if any) of that whole amount as may be appropriate, having regard—
  1. (a) primarily, to any apportionment or allocation of that rentcharge or rent which may have been made otherwise than so as to be binding on the owner of that rent-charge or on the landlord, as the case may be, before the occurrence of any war damage to any of the land subject to that rentcharge or rent; and
  2. (b) subject as aforesaid, to the proportion borne by the annual value apart from any war damage of that land to the annual value apart from any war damage of the other land subject to that rentcharge or rent.
 (12) In the application of this paragraph to Northern Ireland there shall be substituted for the reference to the Settled Land Act, 1925, a reference to the Settled Land Acts, 1882 to 1890.

6. Payments to superiors and creditors in ground annuals.

(1) The last preceding paragraph shall extend to Scotland subject to the modifications specified in the following provisions of this paragraph. (2) For any reference to a rentcharge created out of the fee simple in any land there shall be substituted a reference to a feuduty or ground annual payable by the owner of the fee simple in such land; references to the owner of a rentcharge shall be construed accordingly, and references to a rentcharge created out of a tenancy shall not apply. (3). The right conferred by sub-paragraph (1) on a superior or the creditor in a ground annual to receive a share of a value payment shall not be exercisable until—

  1. (a) in the case where the feuduty or ground annual is payable in respect of the charged land in the hereditament and also 751 of other land, the part of such feuduty or ground annual attributable to the charged land in the hereditament has been allocated thereon; and
  2. (b) the feuduty or ground annual or the part thereof so allocated, as the case may be, in so far as it exceeds the annual value of the charged land in the hereditament as depreciated by the war damage, has been discharged.
(4) Where for the purposes of this paragraph a feuduty or a ground annual is required to be allocated or a feuduty or a ground annual or a part thereof so allocated is required to be discharged, the superior or the creditor in the ground annual shall execute and record in the appropriate register of sasines—
  1. (a) a memorandum specifying the sum to be allocated and describing particularly or by reference the land on which it is to be allocated; or, as the case may be,
  2. (b) a discharge of the feuduty or ground annual or part specifying the extent to which the same is discharged and describing particularly or by reference the land so disburdened;
 and any such allocation or discharge shall be binding on all having interest.

The noble and learned Viscount said: This is the first and serious Amendment on which the House will have to spend rather more time. One is usually entitled to assume that as soon as the clauses of a Bill have all been passed what remains is small beer, but in this case the difficult matter arises in the Schedule, and I move, in the First Schedule, on page 7, line 32—that is to say at the end of the paragraph marked 4 on page 7 of the Bill—the insertion of a new paragraph which would be numbered 5 followed by a further paragraph which would be numbered 6. These Amendments are put forward in order to fulfil a promise which was made by the Government in another place to extend the benefit of payments under the War Damage Act to owners of rentcharges. Rentcharges are common as an incident of land development in some parts of the country, especially in Lancashire. Indeed I think it has sometimes been said that wherever a Lancashire builder has been at work you may be sure to find a rentcharge. They also occur very commonly in Bristol, and they are common in the North of Ireland. In Scotland feu duties and ground annuals, which are very similar in their general effect to rentcharges, are also of course most common.

I want to make plain to those who are interested in the subject that the proposal I have to make has nothing to do with that class of rentcharge which is created under family settlements. It is not uncommon under a family settlement to make provision of that kind, but there is no need to bring this into the Amendment I am proposing, because such family charges are adequately provided for under the War Damage Act already by the payment that will be made for damaged settled land to the trustees of a settlement. What this very formidable, complicated Amendment deals with is rent-charge in the other sense. The argument is, and it appears to be a forcible one, that the owners of rentcharges created in the course of land development are exposed to suffer loss in the event of war damage for which at present no provision is made in the war damage legislation. I speak humbly about these high matters, but I think that I am correct when I say that such a rentcharge is real property; it is a legal interest in land which exists independently of the fee simple or any tenancy in the land, and as the Statute Law at present stands we have only provided for payments to the owner of the fee simple or to the owner of a tenancy in the land, so that the owners of rentcharges at present are excluded. The owner of a rentcharge has some effective remedies if he is not paid the half-yearly or yearly payments to which he is entitled. He might distrain, he has a right to take possession, he has a right to create a term of years in the land and to mortgage or sell the term to erase the arrears. There are various remedies with which he is provided if he is not paid what is due to him.

I think the reason why in the first instance the draftsman, and those who advise the Government on this technical matter, did not include rentcharges was that it was assumed that, at any rate in nearly all cases, the value of the rent-charge would not fall below the value of the bare site, and therefore, even though the building was destroyed, there would still be sufficient security for the owner of the rentcharge. That, however, is not always so, and there is this particular difficulty arising from a complication very common in Lancashire, that the owner of the land in the first instance lets the builder have it in return for a rentcharge, and then the builder when he builds a house may sell the property for what is called an improved rentcharge, the amount of which tan only be covered if you include the value of the building. Therefore if the building is destroyed the holder of the rentcharge suffers and is at present without remedy.

At first the idea which was worked out, was quite a simple one, that you should simply say that the owners of rentcharges should be entitled to receive a payment in so far as they could show that the value of their rentcharges had been reduced by impairment of the security due to the damage to the buildings. That sounds very simple. But there are great difficulties here in simplicity, I am sorry to say. In the first place, it is very embarrassing to the substantial landowner if there has to be an endless multiplication of valuations to divide what is received between different claimants, and it is simply not worth doing if the amount is quite trumpery, In the second place, though the owner of the rentcharge may suffer when the house is "blitzed," if the house is going to be rebuilt in a year or two, or in quite a short time, what he suffers is only a loss in the meantime, and he will be right again as soon as there is sufficient security. There is, thirdly, the point that whatever you do you must not give the man who owns a rentcharge both a light to the whole of the rentcharge and also compensation. You have got, therefore, to have some plan which sets one against the other.

That is what this clause, which I must say is very ingeniously drafted, attempts to do. The present proposal is that a rentcharge owner should only come in, first, if his security has depreciated to a point below his rentcharge; secondly, if he can show that re-building is unlikely; and, thirdly, on the terms of giving up a right to so much of his rentcharge as is represented by the payment which he receives. Those principles I think will be recognized everywhere as valid. The draftsman would have been able to put this in a much less elaborate form into the Bill, into a much shorter compass, and in much less technical language, if it was not for a very annoying circumstance, which is that a particular area over which a rentcharge may apply is by no means necessarily the same area which is dealt with as a unit under this Bill. It is extremely common in Lancashire, for example, for the sites of two or three houses to be lumped together and made the source out of which there is one rent-charge, whereas of course, each separate house would be a unit of valuation, and it may be of compensation when you apply the War Damage Act. I will not delay the Committee by expounding the subsidiary clauses of this draft which get over that difficulty. It involves apportionment and a number of difficult things of this kind.

I think your Lordships may take it that, subject to anything that may be said by noble and learned friends of mine who are much more expert in the matter, this very elaborate provision has been well devised. It meets the claim made by all kinds of people in the House of Commons who represent Lancashire and it appears in itself to be quite just. It only remains to entertain your Lordships for a moment by one or two other words of art. Your Lordships will note that the expression "fee farm rent" is also introduced into this paragraph. I will not endeavour to explain it. I think it is enough to say that under the Law of Property Act, 1925, a rentcharge is defined as including "fee farm rent". I think for present purposes we may leave it at that. When it comes to the arrangement for applying the Act to Scotland, that is quite outside any competence of mine, but I have been most carefully advised and indeed coached on the subject, and I am assured that the provisions which we are making to cover feu duties and annuals correspond in substance to what is proposed for England. I regret that I cannot entertain your Lordships at greater length on this most attractive portion of the law of property, but I have no doubt I have whetted your appetite for further information on another occasion. I beg to move.

Amendment moved— Page 7, line 32, at end insert the said new paragraphs.—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment is consequential. I beg to move.

Amendment moved— Page 7, line 38, after ("hereditament") insert ("and of rentcharges (if any) to which it is subject").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment is a verbal Amendment to remove an ambiguity. I beg to move.

Amendment moved— Page S, line 49, leave out ("therein mentioned") and insert ("mentioned in Section sixteen").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR

The next Amendment is consequential. I beg to move.

Amendment moved— Page 10, line 32, at end, insert ("or to any rentcharge").—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved to insert after paragraph 7: 8. Amendment of form of s. 9 (3) as to valuation of a proprietary interest free from certain charges. In subsection (3) of Section nine (which provides for the valuation of a proprietary interest as if free from any charge or lien for securing money or money's worth), for the words 'charge or lien for securing money or money's worth' there shall be substituted the words 'mortgage or floating charge or to any rent-charge.'

The noble and learned Viscount said: This is really identical in object with the earlier Amendments, and the same principle applies. I beg to move.

Amendment moved— Page 11, line 44, at end insert the said new paragraph.—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved to add to paragraph 8 [Amendment of form of s. 9 (4) to make provision for mortgages of disclaimed leasehold interests and for successive mortgages]: (2) In subsection (4) of Section nine, for the words 'exercisable by the mortgagee' there shall be substituted the words 'exercised by the mortgagee on the date by reference to which the disposal of the value payment is to be regulated.'

The noble and learned Viscount said: If your Lordships wish for an explanation of this Amendment, I can give one, but I think it is probably sufficient for me to say that I am satisfied the Amendment is needed at this page.

Amendment moved— Page 12, line 23, at end insert the said new sub-paragraph.—(The Lord Chancellor.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR moved to add to paragraph 18 [Application of Principal Act to elementary schools transferred to local education authority]: (7) In the application of this paragraph to Northern Ireland—

  1. (a) for the references to an elementary school, to transfer under the enactments mentioned in sub-paragraph (1) of this paragraph, to the local education authority for elementary education, and to the Board of Education there shall respectively be substituted references to a public elementary, school, to transfer under Section fourteen of, and the Second Schedule to, the Education Act (Northern Ireland), 1923, to the education authority within the meaning of that Act and to the Ministry of Education for Northern Ireland; and'
  2. (b) the expression ' premises ' in relation to a school includes the teacher's residence (if any) and any land or buildings held in connexion with the school."

The noble and learned Viscount said: This Amendment is an application of the paragraph to Northern Ireland, and ought to be there inserted. I beg to move.

Amendment moved— Page 16, line 45, at end insert the said subparagraph.—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD RANKEILLOUR moved, after paragraph 24, to insert:

Disposal of unclaimed balances of mutual insurance funds.

25.—(1) The Board of Trade may by order provide that where the persons having the control of funds which fall to be distributed by virtue of subsection (2) of Section eighty-seven (which provides for the distribution of funds constituted before the passing of the principal Act for the purpose of providing indemnification against war damage) have been unable to trace the persons entitled to any moneys forming part of such funds, the Board of Trade may, if satisfied that reasonable steps have been taken for the purpose of tracing the persons entitled, authorize the payment of the moneys in question into an account specified in the order; and any payment into such an account authorized by the Board of Trade shall be a good discharge for the amount of the payment. (2) An order made under this paragraph shall provide for the making of payments out of the account, in accordance with the provisions of the order, to persons claiming to be entitled to moneys paid into the account.

The noble Lord said: This Amendment deals with a very small matter, but it is of concern to some hundreds of people. I am rather inclined to follow the example of the noble and learned Viscount, and to say that I can explain this Amendment if requested, but inasmuch as it is of some complexity, and has been agreed to by the Board of Trade, I think probably I shall consult your Lordships' wishes best by formally moving.

Amendment moved— Page 19, line 25, at end insert the said new paragraph.—[Lord Rankeillour.]

THE LORD CHANCELLOR

I shall imitate my noble friend's restraint and merely say that I am glad to accept this Amendment.

On Question, Amendment agreed to.

First Schedule, as amended, agreed to.

Second Schedule: