INSURANCE COMPANIES BILL [H.L.]

HL Deb 12 April 1973 vol 341 cc807-62

4.46 p.m.

THE EARL OF LIMERICK

My Lords, I beg to move that this Bill be now read a third time.

Moved, That the Bill be now read 3ª. —(The Earl of Limerick.)

On Question, Bill read 3ª.

Clause 2 [No authorisation for insurance company under control etc. of unfit persons]:

THE EARL OF LIMERICK moved Amendment No. 1: Page 3, line 1, after ("(4)") insert ("Subject to subsection (5A) below,").

The noble Earl said: My Lords, I think it would be convenient to take Amendments Nos. 1, 2, 22 and 25 together. Their purpose is to rectify an omission resulting from the redefinition in Clause 2 of a person whose fitness is to be considered when an application is made for authorisation. Section 64 of the 1967 Act refers to an officer of the company, which would include a person immediately responsible for the conduct of the insurance business carried on in the United Kingdom of a company incorporated overseas. In the tighter definition to Clause 2 we lost this person. These Amendments make it clear that he is to be treated as if he were a chief executive, or if he is a director as a managing director, for our purposes. This will be the case whether such a chief executive acts under the immediate authority of a director or some other person in the company's head office, such as an overseas or regional manager. As a consequence of that new definition the managers who act under the immediate authority of the United Kingdom managing director or chief executive will also come under consideration as such, whereas without the Amendment they would not have done. The Amendments do not extend the class of people beyond those already covered by the 1967 Act. I beg to move.

THE EARL OF SELKIRK

My Lords, I wonder whether I may ask this question. It is about the meaning of subsection (2) which we are now extending in a manner which has been explained by the noble Earl. There is no reference to an insurance company except in subsection (2)(b). I understand that the managing director of a company which is not an insurance company will none the less be regarded as a controller if, as described in subsection (2)(a), it is an insurance company, whereas a chief executive will not be responsible if he is in a company which is not an insurance company even though, in point of fact, the subsidiary company is an insurance company. The reason I ask that question is that in paragraph (a) there is no reference to insurance at all and in paragraph (b) there is. It therefore supposes that the word "company" in paragraph (a) need not necessarily refer to an insurance company. It is perhaps not as clear a drafting as it might be, but in view of the extension to overseas companies, which might well be rather complicated, I think that it would be just as well to be quite clear whether you are referring exclusively to insurance companies or whether you are referring to a parent company which has an insurance company as a subsidiary. If the noble Earl can clear that point—possibly an Amendment might be required in future—I think it would be desirable.

THE LORD CHANCELLOR

My Lords, this point is of course wholly out of order on the subject of Amendments proposed at Third Reading. If the House will permit me, out of order as it may be, I think the answer is that in paragraph (a) the company referred to exhypothesi has not yet been authorised.

This is not so in paragraph (b). But I will get my noble friend to write to the noble Earl if I am wrong in my first impression.

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, Amendment No. 2 has already been explained to your Lordships. I beg to move.

Amendment moved—

Page 3, line 16, at end insert—

("(5A) In relation to a company incorporated outside Great Britain—

1. (a) the reference in paragraph (a) of subsection (2) above to a managing director of the company includes a reference to a person who is a managing director of that company in respect of so much of its insurance business as is carried on within Great Britain; and
2. (b) the reference in paragraph (b) of that subsection to a chief executive of the company includes a reference to a person employed by the company who, either alone or jointly with one or more other persons, is responsible (whether or not under the immediate authority of the directors) for the conduct of the whole of the insurance business carried on by the company within Great Britain but, if he is responsible also for the conduct of insurance business carried on by it elsewhere, only if there is no other person subordinate to him who is responsible for the conduct of the whole of the insurance business carried on by it within Great Britain.")—(The Earl of Limerick.)

On Question, Amendment agreed to.

4.52 p.m.

LORD ALDINGTON moved Amendment No. 3:

Page 3, line 16, at end insert— ("( ) Any incorporated company to which subsection (1) is applied by the Secretary of State may ask the Secretary of State to receive written or oral representations on its behalf by a Director or by the Controller, and where such representations are requested the Secretary of State shall give the company and the Controller an opportunity of satisfying him that he is mistaken and that the Controller is a fit and proper person to be associated with the company.")

The noble Lord said: My Lords, it occurs to me that we might save ourselves time and have a more useful discussion if, in addition to Amendment No, 3, we cover the points relating to Amendment No. 18 and those relating to Amendment No. 20 at the same time, because I think each Amendment is part of a fairly wide subject upon which we have all waxed quite eloquent on two or three other occasions. I apologise to my noble and learned friend on the Woolsack if I appear to be harassing or being unduly repetitive in what I am saying. What I have tried to do here is to take to heart the words which he used on the Report stage: and I have read carefully several times columns 873 to 876 of our debate on March 22.

As I see it, my Lords, the Government take the position that companies and persons already within the industry, and so far as persons are concerned as controllers and so on already working in the industry, they are entitled to have the grounds of objection to the person explained to them if the Secretary of State is going to use one or other of the powers in this Bill on the ground that the controller is not a fit and proper person: and they have so amended later clauses of the Bill to provide for that. What we are concerned with here in Clause 2 is not only the case of a person who is not in the industry, but of a company, too, that is not in the industry and what we are concerned with in Clause 33 and my noble friend's Amendment No. 17, is the case of a person not yet a controller working for a company which is an authorised company. In both those cases my noble and learned friend the Lord Chancellor tells us that it would not be right or consistent with practice under the Gaming Act, and in many other parts of our life, to require that the Secretary of State should give the ground on which he is about to decide, or in this case has decided, that a person is not a fit and proper person to have that office in the insurance industry.

At the same time as my noble and learned friend said that it would not be right to give the grounds, he quoted to us from a judgment of the noble and learned Lord, Lord Denning, in a Gaming Act case in which I understand my noble and learned friend on the Woolsack was a participant before he was Lord Chancellor.

THE LORD CHANCELLOR

My Lords, as counsel, not as a litigant!

LORD ALDINGTON

My Lords, I accept that from my noble and learned friend. The relevant words in Lord Denning's judgment are these: They must give the applicant an opportunity of satisfying them of the matters (specified in the particular case), but I do not think they need quote chapter and verse against him as if they were dismissing him from an office or depriving him of his property. They are simply enquiring into his capability and diligence, and having regard to his character, reputation and financial standing", and so on. If one accepts that, then one asks oneself: If that is the law, should one, or should one not, put it in a Bill like this? Naturally, one has considered that carefully, and it seems to me that there is a case here for making the position quite clear in this Bill. For one thing has impressed itself upon me, at any rate, and that is that most of your Lordships were not aware that the law was exactly in that form. Indeed, if I may say so to my noble friend on the Government Front Bench, we had reached the Report stage before the Government deployed this as their case. If we are not aware of the law being that, it would seem to me that people working in the insurance industry, or wishing to work in the insurance industry, would likewise not be aware of what the law is.

It is for that reason that I thought it right to put down this Amendment to Clause 2, and another Amendment to the new clause that my noble friend Lord Limerick will be moving later on. I have to admit that in order to be consistent I should have put an Amendment down, but through error have not done so, to the existing Clause 33. The words that I have suggested to your Lordships have to be different in each of the clauses because of the make-up of those clauses. There is nothing said in Clause 2 about making representations, whereas in Lord Limerick's new clause and in Clause 33 I think there is. So I have made it clear that the company (because it is the company to which this clause refers) may ask the Secretary of State to receive written or oral representations on its behalf by a Director or by the Controller, and where such representations are requested the Secretary of State shall give the company and the Controller an opportunity of satisfying him that he is mistaken and that the Controller is a fit and proper person to be associated with the company. I think there is a difference between just providing that someone may make written or oral representations and, on the other hand, going beyond that and requiring that the Secretary of State shall provide an opportunity for the controller or the company to satisfy him that he is mistaken. As I understand it, both the words in Lord Denning's judgment and these words really would require the Secretary of State to make inquiries of the person concerned, which would give the person concerned a chance of answering the charge. Clearly that is likely to be done in an indirect way. Many of your Lordships may have had in one or other of your occupations the task of asking people, as it were, to explain themselves without either wishing to, or being allowed to, disclose the source of the information which has been made available. I certainly have had to do that in my past life. I would guess that this is what the Master of the Rolls meant when he said that they must give the applicant an opportunity of satisfying them en the particular point; that is, I have assumed, the point that would have led the authority to make the decision that the person or persons concerned were not suitable for entering that particular vocation.

That is my explanation. I have had in mind, too, the importance which your Lordships have attached, both in this clause and other clauses of the Bill, to making it clear that your Lordship's House was going to insist that reasonable natural justice was applied by any Government to persons applying to the controller, either under this clause, or under later clauses. It would seem wise for your Lordships' House not to let the Bill go to another place without making it clear that we attach importance to the natural justice requirements about which we have spoken at much length and with great eloquence. I beg to move.

with the noble Lord that it would be for the convenience of the House if in this debate we dealt with Amendments Nos. 3, 18 and 20, so that Amendments Nos. 18 and 20 can be dealt with formally at a later stage. We have discussed this matter at considerable length at each stage of the Bill. Therefore I need only be brief. From discussions it would appear that there are three schools of thought on this issue of a fit and proper person. There is the school of thought that takes the view that the matter should be left entirely with the Secretary of State, that he should say "yea" or "nay" and that is the end of the matter. Secondly, there is the school of thought which believes the person not accepted as fit and proper should have the right of appeal. It believes that following a right of appeal there will be a judicial decision rather than an administrative one. It might be a decision taken after a hearing before a single judge.

There is a third school of thought which believes that the individual, if aggrieved, should have the right of stating his case to somebody who is independent of the Secretary of State and the Civil Service, and that that independent body should make its recommendations to the Secretary of State, but that the decision in the end should be an administrative decision and not a judicial decision; and that the Secretary of State should, after considering the advice given to him, make his final decision. That is what this Amendment is all about. It represents the middle school of thought. It proposes that the body that should hear the representations of the aggrieved persons should be an advisory committee appointed by the Secretary of State, and not more than three of the members of the committee should be drawn from the insurance industry.

All I need say in addition is that the Minister has warned us on more than one occasion that any remedy to this position must fit certain criteria, and he has laid down the criteria which it must fit. He says, first, that any solution must give adequate protection for confidentiality. I submit that this Amendment gives complete protection for confidentiality because the Minister can convey just what he likes to his advisory committee; it is entirely up to him. He is not obliged to convey anything to them if he does not so wish.

The second criteria laid down by the Minister was that the burden of proof must not put the supervisory authority in such a position that it could not give adequate protection to the policy holder. That could have happened if the decision was to be a judicial one, or if the matter was to be placed before a tribunal which, in the end, would probably have a procedure and a burden of proof very similar to that of a court. In the case of an advisory committee that does not arise; the committee would merely hear the representations of the aggrieved person and, having heard them, would presumably question him and would give its advice to the Secretary of State before he took his final decision.

Thirdly, the Minister advised us that any solution of this problem must not cause delay. I submit that to allow the aggrieved person to submit his representations in writing, orally, or both, to an advisory committee would not cause any undue delay. Finally, I submit that it would have a greater appearance of justice being done if it were submitted to an advisory committee which consisted neither of the Executive nor the Civil Service which backs them up. The advisory committee, although appointed by the Secretary of State, would be completely independent of his Department and it would tend to give a greater sense of natural justice being done than the matter being heard merely by a civil servant appointed by the Secretary of State. My Lords, in due course I will move Amendment No. 20.

5.7 p.m.

THE EARL OF LIMERICK

My Lords, it may be for the convenience of the House if I intervene at this stage not in any way to curtail the debate, but to explain how an application for authorisation is dealt with in practice. I should like to thank my noble friend and the noble Lord, Lord Jacques, for the way in which they moved their Amendments and considered points raised in our previous debates. There will be a similar procedure—with some improvements which we already have in mind—applied to the approval of change of control in due course under Clause 33.

Companies applying for authorisation are required to complete a form which, among other things, demands details of the commercial experience and technical qualifications of the people who will occupy key positions. The person also gives personal particulars to minimise the risk of wrong identification, and a statement is required of any convictions or bankruptcies. Two directors and the manager or company secretary are required to sign a certificate that all this information is, to the best of their knowledge and belief, true and correct. We propose in future to require a personal affirmation from the individuals covered by the definitions in Clause 2, and a similar affirmation will be required under Clause 33.

The application form is a fairly substantial affair; it is like a driving licence, if I could so described it, though considerably more so, as is appropriate to the serious business of insurance. It contains 27 questions of which only two refer to the personal details of those to be associated with the company. The remaining questions, apart from the obvious technicalities, relate substantially to capitalisation and availability of funds, business plans and re-insurance arrangements—in fact to those matters which have been considered under Sections 62, 63 and 64 of the 1967 Act before a decision is taken on the totality of the information as to whether the Secretary of State can properly issue an authorisation under Section 61.

The effect of Clause 2 of this Bill is to vary the classes of people to whom those two Questions out of 27 relate. In arriving at the decision they will have taken into account any special features of the business plan put forward by the applicants; an unorthodox approach put forward by highly experienced people, backed by generous capitalisation, will be more readily acceptable than if it were a proposal from persons about whom nothing adverse was known, but whose record does not inspire the same confidence in their technical competence, or whose resources are relatively modest.

The information provided by applicants is carefully checked from appropriate sources. The applicants would be invited to clarify any obscurities which emerged at this stage, and this would inevitably give them some indication of the points which are troubling the Department. It is very rare indeed for an application to reach the decision stage without some correspondence on a number of points of detail. If there are obscurities, or even major problems, which we think could be overcome the Department normally calls the applicants to a meeting and explains its worries or seeks further information. At such meetings we are not backward in suggesting possible ways in which technical problems might be overcome. If the application is then rejected there is nothing to prevent the applicants from putting forward further information or making a revised application which takes account of the evident misgivings of the Department about one aspect or another of the project, including doubts about the competence of the key personnel in that particular context. Indeed, it must evidently be the right of the applicants to do this. It certainly happens at the moment, and it happens sometimes on our advice, and equal consideration is given to further approaches of this kind. It is by no means unknown for a devised application to succeed.

But let us suppose that the Department still rejects the application. The applicants can then make further representations to them at official level or to Ministers. If one of them suspects that there is some incident in his past career which could at least be open to question he can give as full an explanation as he wishes of the circumstances surrounding the incident. The procedure therefore allows many opportunities for the applicants to see that any misunderstandings can be cleared up and to make representations. But suppose further that, even after all this, one of them still believes that he has suffered unfairness. He can then take the matter up with his Member of Parliament, who will doubtless, as is the way of Members of Parliament, probe the matter with Ministers in a thorough and effective way—if necessary, raising it on the Floor of a House of Parliament. If dissatisfied, the Member can put the matter to the Parliamentary Commissioner for Administration, who can decide to review the whole administrative procedure, including the part played by Ministers. Ultimately, the decision and the responsibility lie with the Secretary of State, but if the P.C.A. were unhappy about what had happened he might well ask for a review of the case. Such a request would be treated as a matter of the highest importance and would lead to a reconsideration of what had been done, a reconsideration carried out with the utmost care and attention and paying particular regard to the farm of the criticism. I hope I have shown that applications are never treated lightly or capriciously, but rather with' all the seriousness which is appropriate in discharging the heavy duty of controlling entry into the insurance industry. The words that were quoted from the judgment of Lord Denning are that they must give the applicants—in this case we—"an opportunity of satisfying them"—or us— "on the matter in question". In that procedure there are many opportunities.

I now turn briefly to the Amendments and I would say at once that both my right honourable friend Sir Geoffrey Howe and I have a good deal of sympathy with the purpose behind the Amendments. Our minds are by no means closed to the possibility of improving this very troublesome area of the Bill, but for reasons which I shall briefly state it seems that there are great difficulties in accepting the Amendments which we are discussing. Amendment No. 3, which was tabled by my noble friend Lord Aldington, is unnecessary in that it states what I have explained to be an existing right; namely, the inherent right of an applicant to explain his application or to make a new application, differing in form. The real difficulty with his Amendment is that by confining the right to Clause 2 of the Bill the net effect might be to leave the applicant worse off by curtailing the presumption that such a right extends equally to other matters, such as capitalisation, business plan and reinsurance arrangements, which also stand to be considered before an overall judgment is made on the issuing or withholding of an authorisation under Section 61 of the 1967 Act. It is clearly undesirable to introduce such doubts, just as it would be undesirable to clutter the Bill with an unnecessary provision. With regard to Amendment No. 18, there is a separate difficulty in that the suggested procedure either repeats or conflicts—at least in point of time—with the procedure for making representations which is to be found in subsection (3)(b) of Amendment No. 17.

The Amendment tabled by the noble Lord, Lord Jacques, proposes an advisory committee, and I appreciate the trouble that he went to in order to meet the points that were raised on this at an earlier stage of the Bill. We have of course considered this carefully in the drafting of the Bill and have had occasion to reconsider it more than once since its introduction in this House. But we have failed to find a satisfactory solution and I think this Amendment likewise has difficulties which make it very difficult to accept. For instance, as the noble Lord himself pointed out the advisory committee has no specified powers, no procedure is indicated and there is no right for its members to receive relevant material. I appreciate that it is not essential to spell out all these matters in a Statute, but I think the problem is that any attempt to define them more closely, as to how they work in practice, would lead us right back to the much-discussed practical difficulties which have prevented us thus far 'ram adopting such a mechanism.

As the Bill now stands, except for a redefinition of those persons with whom our supervisory rule is concerned, and the necessary addition of the vetting of the persons proposing to become controllers of established companies, the whole of this area would remain as it has been since 1967. Granted the failures of insurance companies and the anxieties which stimulated the introduction of this Bill, it would, I believe, be an indefensible proposition that we should take any material steps back from procedures, the desirability of which has been established by experience in dealing with applications made in the last six years. The primary purpose of this Bill is consumer protection—in this case the protection of the policy holder. It is also concerned to protect the great name of our industry, and the most effective safeguard must be that its management is in the hands of individuals of integrity and competence. My right honourable friend Sir Geoffrey Howe will be looking again carefully at any points raised in this debate before this Bill is considered in another place, but I do not believe that we could be said to be improving the Bill by accepting any of the Amendments which we are now considering.

VISCOUNT DE L'ISLE

My Lords, to my regret I was unable to be in your Lordships' House for the Report stage as I was abroad, but I have read the debate with great care and I hope I may be allowed shortly to intervene at this stage. I am sure we are all grateful to the noble Earl, Lord Limerick, for his careful and painstaking enunciation of the methods used by his Department of vetting (if I may so call it) applications for the authorisation of insurance companies and I presume for the alteration of control. We are legislating and I think we have a right to expect a very careful system of administration, but that is not the same as legislation. Having read the debates may I say that I am persuaded by the arguments advanced by noble Lords in pursuit of the purpose of giving a person who is considered to be not a fit and proper person some right of redress or appeal. In particular, I was impressed by the arguments adduced by the noble and learned Lord, Lord Stow Hill, who argued with great moderation and very great persuasion. I know the Government hold that it would be wrong to resile from the Act of 1967. I am not persuaded that Parliament should not have a "second think", and I am the more persuaded because of the contents of our debates on this subject. I am sure there is now a much greater awareness in this House of what the 1967 Act means and we are more aware of the edifice which is being built upon that foundation.

If one reads the 1967 Act, particularly Clauses 61, 64, 68 and 82, one sees that although strictly, as the noble and learned Lord the Lord Chancellor said, we are maintaining the status quo, there is no doubt that the position of a controller—or a director, where the word is appropriate—is highlighted to a degree which is not apparent in the earlier Act. It so happens, as I have discovered since I took part in the Committee stage of this Bill, that as a director of a company which acquired a large insurance company I must have had my name before the Board of Trade, or whatever the equivalent is now. I had no idea of the peril I was running at the time. It is a fact—and perhaps my situation might explain it—that in dealing with the acquisition of insurance companies by other businesses we are not dealing with young barristers or aspirant barristers or professionals of any kind; we are often dealing with men of experience in business and with a reputation. The noble Earl, Lord Limerick, is endeavouring to persuade us that no harm could possibly come to them owing to the careful administration by his Department—the care taken to test all these applications and the personal antecedents of the directors or controllers concerned.

I do not know whether he is retracting a little from the speech he made on the Committee stage, but certainly that speech filled me with despondency. I do not think that we should have informers in our system. If we have them, then at least there should be a body which can consider whether the information is genuine and not motivated by the slightest concept of malice. A man who may have a bankruptcy, or even a conviction, early in his career should not necessarily have that conviction or that bankruptcy hanging about his neck for ever, and if he has, he ought at least to be able to appeal to some impartial body to demonstrate that he is no longer not a fit and proper person.

May I argue from my own experience of business over a considerable period? Let us take the case of a refugee from Germany just before the War. Some of us will remember the number who flocked into London, desperate for a living, ingenious very often, and at their wits' end. It is conceivable that some people who may now be well established in business could in those early days have been bankrupted or even convicted; yet they have made for themselves a wholesome, satisfactory career in the business life of this country. It is because there are people like that that Parliament wishes to be assured that what goes on behind closed doors is in no way prejudicial to the individual. I must tell your Lordships, therefore, that I am not persuaded by the Government's arguments. I believe that the protection of liberty is a constant struggle. It is not just one great bang but is a constant attention to vigilance, a constant attention to detail, a constant awareness that liberty can easily leak out by administrative methods or by the lack of vigilance on the part of Parliament. I should not like this House to legislate in the sense that the Government have asked us to do.

THE EARL OF SELKIRK

My Lords, I am grateful, as are others, for the assistance which the noble Earl, Lord Limerick, has always readily given in explaining and helping on any points which may have arisen on this matter. The noble Earl having described the many opportunities which entrants to the insurance industry have of making representation, I cannot understand why he should so firmly resist their incorporation in the Statute. I do not understand these arguments. We have no say as to the administration of Departments. Departments are run according to the methods which those temporarily in charge of them think wise, and they may be changed at any time. If these opportunities exist, there is absolutely no reason why they should not be incorporated somewhere or other in the Statute. I dislike intensely the noble Earl's reference to Parliamentary representation. Of all the subjects in the world, to make an appeal to Parliament on a matter like this is wholly wrong. It is a last resort but it is treating the subject in a completely false way and it would not be fair for a judgment of this kind which may well be taken partly on political grounds. It is a most undesirable thing to do. For that reason too, the Parliamentary Commissioner is the very last resort to which recourse might conceivably be made.

I support strongly what the noble Lord, Lord Jacques, has said regarding the idea of somebody who is independent—confidential, if you like—who can say whether something has gone wholly wrong. Why should there be such anxiety about this matter? One of the things that occurs is the question of identity. That is one of the most difficult things to establish: men of the same name and possibly of the same career. The big difference between this Bill and the 1967 Act is that the 1967 Act—I think I am right—deals exclusively with entrants to the profession. It did not deal with people changing office who were already in the profession and it did not deal with those occupying posts in the insurance profession. May I, with respect, say to the noble and learned Lord the Lord Chancellor, that when he said that Clause 2 applied only to authorising companies, that is not true. The definition of "controller" runs through the Bill from the beginning to the end. It applies to all the definitions which take place the whole way through.

If the objection to the Amendment we are presently discussing is merely that it could extend to other considerations and authorisations instead of purely personnel, I should not be surprised if my noble friend were prepared to alter the Amendment to cover simply the personnel element, so that there was proper representation on that score. This Bill has been well received in all particulars except for the fact that there is a degree of what we have heard before—of hearing cases in camera. I do not want to compare this to other cases elsewhere, but there is no judgment, no appeal, and this may affect a man's whole life. It may be even more important than other things that can happen.

I had great pleasure in reading the speech of the noble and learned Lord the Lord Chancellor to the Pilgrims in New York. It was one of those colourful speeches that he makes about the great traditions we have inherited both on this side and on the other side of the Atlantic: literature, law, religion and freedom. And what was the essence of it? Freedom under the law. We all believe in that. That was the essence of the story which the noble and learned Lord the Lord Chancellor, told the people of New York we regarded as important. I do not think that any country in the world will learn the great principles of the law or freedom from this Bill. It will not go forth as one of the great traditions on how insurance industries should be conducted. I hope that the Government will think again on this matter. I personally prefer the Amendment of the noble Lord, Lord Jacques. It is a good Amendment and goes a long way towards meeting all the points which the noble Earl, Lord Limerick, has repeated in this House, which I know he is worried about and which I know he has given much consideration to. I cannot see that this Amendment will in any way reduce the power of the Secretary of State. It does not reduce it. All it does is to obtain an outside opinion. I hope that the Government will think very seriously before leaving these Amendments out.

LORD HAWKE

My Lords, I do not agree altogether with my noble friends on the right who seem to regard it as a man's essential privilege and right to open up and do insurance business in this country at his will. I regard the privilege of being allowed to conduct insurance business in this country as a great one, open only to people of the most unblemished character. For that reason I do not agree with some of the things that they have said. Nevertheless, I should have thought that the Amendment of my noble friend Lord Aldington was a fairly harmless one to incorporate in the Bill, because it is probably the sort of thing that would happen in any case. I would not support the idea of an outside body which was being argued by the noble Lord, Lord Jacques, because the idea of passing the buck to an advisory committee in the case of protecting the public is wrong. It is the Minister's job and he has got to make a decision, and I do not like his sheltering behind an advisory committee. I do not mind the Minister receiving representations from anybody who thinks he ought to be allowed to set up, and either accept those representations or turn them down. But I would not go further than that.

THE LORD CHANCELLOR

My Lords, I am afraid we have threshed out this argument very fully on, now, a sequence of different occasions. I very much doubt whether there is anything new to be said on my side about it. But I must, I think, especially since my noble friend Lord Limerick is, theoretically at any rate, muzzled in respect of a second speech, comment a little on the speeches which have been made. Of course, we are all concerned with human liberty under the law, and for reasons which I will try to indicate I rather doubt whether my speech to the Pilgrims adds greater light to this particular controversy. It is rather like the case when my noble friend Lord Aldington at an earlier stage was a little sensitive when I suggested that the effect of his then Amendments would be to diminish the protection of the public from the potential crook. He said he was as keen as I was to prevent that from happening, and of course I accept the good intentions of all concerned in that respect. The question is what the effect of the legislation which we are proposing is likely to be, and not what our intentions presently are. It is from that point of view that we have to consider the desirability or otherwise of the Amendments.

We have passed the Third Reading stage, and we are now considering Amendments on Third Reading, which is a privilege which this House has kept for itself, contrary to the procedure of another place. I think it always has peen the case that we keep ourselves rather narrowly to the particular Amendments which are proposed on Third Reading rather than endeavouring to open them up. My noble friend Lord Limerick has given the most ample assurance to both the noble Lord, Lord Jacques, and my noble friends that our right honourable friend Sir Geoffrey Howe will consider very carefully what has been said in these debates. I think that should have persuaded all noble Lords, whether or not they agree in their entirety with the comments of my noble friends, or those of them who were critical of the Government policy, that the particular Amendments are open to quite serious objections. I would, therefore, think that my noble friend Lord Aldington would be fully justified, whatever his convictions might be, in seeking leave to withdraw, if he would be good enough to do so, the Amendment standing in his name, which is the only one presently under consideration precisely in order that effect may be given to the assurance of my right honourable friend Sir Geoffrey Howe, given through my noble friend Lord Limerick.

I must say just this. A great deal has been spoken about natural justice and liberty under the law, but we must be a little more precise and a little careful about what natural justice prescribes and what liberty under the law really means. I endeavoured in my last speech, from which my noble friend Lord Aldington quoted very politely at the Report stage of this Bill, to quote from a judgment of the Master of the Rolls, which was not altogether welcome to me at the time it was delivered, for reasons which I think I need not explain, as to what the law is in relation to matters of this kind. The judgment of the Master of the Rolls in the Benaim case was in fact a rather sophisticated interpretation, and there was a good deal of back history to it. I would remind the House what the back history was, because it is very germane to the speeches of my noble friend Lord De L'Isle and my noble friend Lord Selkirk.

In order to ascertain what natural justice demands, you have first of all got to ask yourself whether the problem which is under discussion is a quasi-judicial function or an administrative function. These phrases are now no longer popular with the Judiciary, as appears from the Master of the Rolls' judgment from which I quoted, but they are none the less essentially alive when one discusses the constitutional issues involved. When something is quasi-judicial in function it is essentially a matter with which Parliament as such wishes third parties, independent in character, to be the judges, whether the formal professional Judiciary is involved or whether some special tribunal or committee is chosen instead. To those matters, the essential of natural justice is that there is a quasi-judicial proceeding in which both sides are heard, and that is what natural justice requires in that class of case. Sometimes questions of policy intervene, in which case a tribunal is normally selected. Sometimes questions of disputed fact or law are the sole questions to be contested, in which case something more like a formal law suit takes place.

So the Master of the Rolls was saying, in his rather more sophisticated language from which I quoted, where administrative problems are involved almost exactly the opposite criteria apply. In that case, liberty under the law and natural justice demand that an administrative decision, taken on grounds of policy, is the ultimate determinative factor. In that case, in order to preserve liberty, you require not a court but a Minister responsible to Parliament. And I must say to my noble friend Lord Selkirk that I think he has wholly misapprehended the constitutional position in that case. It is Parliament which is responsible for the liberty of the individual in matters of policy. It is an independent tribunal of some kind that is responsible for the liberty of the individual where the matter is quasi-judicial in character. And you destroy the liberty of the individual it you depart from this clearly defined distinction and this clearly defined principle.

In the present case the contention of the Government throughout has been that it is the good name of the insurance industry, which is in the main unblemished in the world, one of our great invisible exports, which is ultimately the question of contention between us. The good name of our great insurance institutions is unblemished. Unfortunately, as I have discovered during the course of forty years' experience at the Bar, there are unfortunate people, elderly clergymen, widows, young people, who can ill afford to lose and who do not know the difference between one of the well-known and established insurance institutions and some fly-by-night company; do not know the difference between a reputable member of the Stock Exchange and some bucket shop in a back street in the City, and it is those people whom you must protect.

On my side of the House I think we could agree, although approaching the matter from almost a totally opposite angle from the Party opposite, how we need to look at this matter. The Party opposite has usually started from the proposition that they distrust the capitalist system and need Government intervention in order to prevent its evils. I start from precisely the opposite direction. I trust the capitalist system and want to get the best out of it I possibly can, which involves a certain amount of Government intervention in order to prevent misuse. I do not see necessarily that our destination need be different because the stations from which we take our point of departure are not the same, and in this particular case I feel absolutely convinced that my right honourable friend is right in claiming that this is a question of administration and not a question of a quasi-judicial dispute and that he therefore is acting in the absolutely, consisted tradition of our Constitution and the law in pressing the view upon Parliament which he has done, fortified as he is by the fact that a different Government of an opposite political complexion in 1967 came to precisely the same conclusion.

I do not want to be too disputatious in dealing with my noble friend Lord De L'Isle and my noble friend Lord Selkirk in particular, because I start, I think, from the same premises as they do even if I do not always accept the same conclusions. What I would urge upon them is that they should be prepared to confide in the assurances given by my noble friend on behalf of my right honourable friend who is ultimately in charge of policy here and be prepared, at this stage at any rate, to part with this Bill in the conviction that he will do his best to meet what legitimate points are made in so far as he can.

As regards the two particular Amendments, I do not think it can be said too plainly that that which my noble friend Lord Aldington put forward—which is the only one actually under discussion although I quite agree that the debate has properly referred to Amendment No. 20 in this connection—spells out in relation to one of a number of factors, but only one of a number of factors, that the applicant has a right which he would have whether or not the Amendment was passed; namely, the right to renew his application with fresh representation. It therefore in fact adds nothing to the protection which the applicant has. What is does (and this was a point which I thought my noble friend made with consummate effect) is to cast doubt upon the similar right which equally certainly exists in relation to other factors.

For instance, in the application form the kind of business proposed to be carried on is one of the dominant factors in determining the result of the application. That, again, is a matter upon which the applicant has a right to renew his representation, if he is turned down the first time, and to satisfy the Secretary of State the second time. If this Amendment were carried I cannot but think that the courts would be inclined to apply the principle of expressio unius est exclusio alterius and leave the applicant in a worse position than he was before. If it is desirable to insert something of this kind I doubt whether it would be particularly desirable to insert this, so that there are absolutely honourable reasons, without departing in any way from what he has said, that my honourable friend could possibly agree not to press that Amendment.

With regard to the Amendment proposed by the noble Lord, Lord Jacques, there are many advantages in an advisory committee if and in so far as it could be argued that this was a quasi-judicial and not a political decision. But quite clearly his Amendment as it stands takes away from Parliament the ultimate responsibility for it if and in so far as it is an administrative decision. Let us consider for a moment if a Mr. Savundra— and assuming that Lord Jacques's Amendment were accepted—goes before the Secretary of State who turns him down perhaps relying, contrary to my noble friend Lord De L'Isle, on reputation from Ceylon from where Mr. Savundra came. It then goes to the advisory committee. The advisory committee, with not the same information before it, accepts Mr. Savundra's application, or recommends that Mr. Savundra's application be accepted. That is all it can do if the Amendment is taken literally because it is only advisory in its function. But let us assume that the Secretary of State, hearing perhaps questions in the Commons, and wondering whether he was right in turning Mr. Savundra down, accepts him. Now where does Parliament stand and where does the Secretary of State stand, or his successor, if five years later Mr. Savundra turns out to be a criminal and loses £1 million of the policy holders' money? He can say with perfect strength of mind, "I thought this man was probably a crook, but I was advised by this independent body, not responsible to Parliament, to let him through, so I let him through, and £1 million has gone away from the fatherless children and widows who trusted him because of the advisory committee, not responsible to Parliament."

If it turned out not to be an advisory committee but, as my noble friend Lord De L'Isle suggested, some form of actual independent tribunal, where would Parliament be with the judgment of its executive officer responsible to itself overridden by the independent body with £1 million lost to the children and widows? These are, I suggest, serious considerations. It is not altogether good enough for my noble friend Lord De L'Isle to talk about the refugees from Nazi Germany. What we might have to deal with of course is refugees. We have them now, but should they be encouraged to enter into insurance as their first option when they come here, and if they do enter in should they not enter into the insurance industry at a grade rather lower than that of managing director or controller, so that they can prove in that capacity either their competence or their incompetence? I would seriously suggest to my noble friends that there is a strong case on the other side, but all I am asking them to do is to trust my right honourable friend to take very careful note of what they have said and to leave these matters in that confidence to full discussion in another place.

LORD ALDINGTON

My Lords, I think I am entitled as the mover to speak again. If that is right I am a little uncomfortable and I will explain to your Lordships why I shall, in part at least and in good heart try to follow the advice given by the noble and learned Lord the Lord Chancellor, but I shall do it only after having explained to your Lordships my understanding of what I am doing and after dealing with some of the—if I may say so with respect—blocks which the noble and learned Lord the Lord Chancellor has put upon my Amendment.

The procedure we are in is a little difficult because, as I am the mover, I think I am the only one of your Lordships with the right to reply to the noble and learned Lord but I think I ought to confine myself to the Amendment in front of us and not to the Amendment moved by the noble Lord, Lord Jacques. I hope he will have the opportunity to reply when the time comes to move that Amendment and not now so if I may I will confine my remarks to Amendment No. 3. In the course of his remarks the noble and learned Lord the Lord Chancellor indicated that there were strong objections to the actual form of my Amendment. I have not yet heard one objection to the form of the Amendment. He went on later to support and strengthen the argument put forward by my noble friend Lord Limerick that if we put these words into Clause 2 we might, by implication, be weakening the applicant's right on other things. But that is an abominable argument. This clause refers to one thing and one thing only, and that is a man's personal fitness and properness to be associated with an insurance company. I ask your Lordships how in Heaven's name I can put down an Amendment to this clause which covers those things to which my noble friend has referred. He is quite right in saying that in applying for authorisation the applicant will have to satisfy the Department on all kinds of points and that is under the procedure for authorisation which is laid down not in this Bill but in the original Section 61. This Bill refers solely to the fit and proper criterion, as I understand it.

THE LORD CHANCELLOR

My Lords, I am sure that my noble friend does not wish to make a false point, but he is in fact not understanding it. This clause refers to an application under Section 61 of the principal Act. It is true that the criterion set down in this clause confines itself in subsection (1) to the fit and proper criterion of the controlling person. But once an application is made under the principal section, and this clause relates back to the principal section, it raises all the other criteria, too.

LORD ALDINGTON

My Lords, my noble and learned friend has now explained this point. No doubt if in another place they were to accept an Amendment such as I have now proposed, they could add a further clause to the Bill to deal with the procedure for authorisations. But to accuse me of having put down a wrong Amendment to Clause 2 because it does not cover all the things which Clause 2 does not cover, seems to me not quite usual for a Lord Chancellor and, if I may say so, a little unfair.

The second point I want to make is this, because we must understand ourselves when we say that we shall withdraw the Amendment in the hope that later the point will be satisfied. As I understood my noble friend on the Front Bench, he said that the procedure which he announced to us fits exactly with the form of words in the Amendment, and, because it fits exactly, the form of words in the Amendment is unnecessary. As some of my noble friends have indicated, that is an argument which can be accepted or not accepted. It is an argument which many of us have used when sitting on Front Benches, and it is also an argument which many of us have resisted when not sitting on Front Benches. I think it is slightly illogical to attack an Amendment which seeks to give someone a legal right, which right he has by custom but not by law at present. Another Administration might alter things and I think it is your Lordships' wish that they should not alter things, and the best way of ensuring that they do not do so is to put something in a Statute. So I hope I am right in thinking that, if I now withdraw the Amendment, the right honourable gentleman Sir Geoffrey Howe will not, as it were, be taken to have decided that forms of words which are consistent with present procedure will not, in any case, be inserted into the Bill. I hope he will remain free to adopt this or a similar form of words, if he decides that that is a good thing.

Finally, my noble friend, having told us that the form of words here proposed is not acceptable to him because it merely repeats exactly what is done, then accused me of wishing to take a step backwards. I do not understand that proposition, and I hope that the Government will not be against the idea in this Amendment on the ground that it is a step backwards, because it most certainly is not. It is trying to introduce an amount of certainty into the law which is manifestly not there now, from the point of view of the understanding of the ordinary man. That was my purpose in moving the Amendment, that was the purpose which I emphasised to your Lordships, and I hope I am right in thinking that the Government will be reconsidering the matter, without having made up their minds against me on any of those points. If I am so right—and I see the nod from my noble friend—then I shall beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 5 [Periodic statements by company with prescribed class of business]:

5.55 p.m.

THE EARL OF LIMERICK moved Amendment No. 4: Page 5, line 34, leave out from first ("of") to end of line 35 and insert ("statements under section 7 of the Act of 1958 which are deposited under section 8 of that Act.")

The noble Earl said: My Lords, this technical Amendment is necessary because, as a result of Clause 4(1) and (4), not all the documents deposited under Section 8 of the Act of 1958 will now be signed by the same persons. The effect is that the statements to be made, more frequently than annually, under Clause 5 will be required to be signed by at least two directors and the chief executive, but not by the auditor. My Lords, I beg to move.

On Question, Amendment agreed to.

Clause 10 [Investment by company with long term business in associated companies]:

THE EARL OF LIMERICK moved Amendment No. 5: Page 9, line 17, after ("company") insert ("out of the insurance company's long term funds")

The noble Earl said: My Lords, I think it will be convenient to consider together Amendments Nos. 5, 6 and 7. They rectify an omission in the clause by making clear that the restriction imposed on investment in associated companies is concerned only with investments made from the long-term funds. In moving this simple Amendment, I should recall that some imperfection in the definition of "associated companies" was recognised in our debate at the Report stage. The fact that there is no Amendment down on this point is, however, not an oversight. A Government Amendment was prepared and discussed with the British Insurance Association and the Life Offices Association, but the general feeling was that rather more time is needed to arrive at an agreed decision which achieves what we want without unnecessary inhibitions. I can say that there is no disagreement of principle on this question. It is merely a matter of agreement in detail, and it is envisaged that a suitable Amendment will be brought forward in another place. My Lords, I beg to move.

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, I beg to move Amendment No. 6, which I discussed with Amendment No. 5.

Amendment moved— Page 9, line 42, after ("company") insert ("out of its long term funds")—(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, I beg to move Amendment No. 7, which I discussed with No. 5.

Amendment moved— Page 9, line 45, at end insert ("in a case where the right to receive the money would constitute a long term asset of the insurance company")—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 12 [Grounds on which powers are exercisable]:

6.0 p.m.

THE EARL OF LIMERICK moved Amendment No. 8: Page 11, line 21, leave out paragraph (f).

The noble Earl said: My Lords, I think it will be convenient to consider together Amendments Nos. 8, 11, 14 and 16. There is some presumption on the Marshalled List that Amendment No. 11 stands in the name of my noble friend Lord Aldington, but it is in fact my Amendment. Whatever else we may disagree about, we are in agreement on that point and I should like to take that Amendment in this group.

LORD ALDINGTON

The paternity is good.

THE EARL OF LIMERICK

My Lords, the purpose of these Amendments is to modify, in the light of our previous discussions, the Secretary of State's powers to impose precautionary requirements upon a company which has been newly authorised or one which has come under new control. The key Amendment is No. 11, which recasts subsection (4). As a consequence, subsection (1)(f) can be dispensed with and this is done by Amendment No. 8. Amendment No. 14 is, in turn, consequential upon leaving out subsection (1)(f).

The main Amendment places a maximum limit of ten years upon the operation of requirements imposed in the circumstance specified, instead of leaving the period indefinite. This meets a point which was originally raised by the noble Lord, Lord Jacques. It also introduces 'flexibility by permitting such precautionary requirements to be imposed or tightened up at any time during the first five of those ten years, so that the Department will not feel bound to impose them in the most stringent form at the outset, when the development of the company's affairs—for example, the rate of expansion—cannot be foreseen, as might otherwise be thought prudent. A new company may thus be given the benefit of a reasonable doubt. Any additional requirements so imposed will operate at most for the balance of the ten-year period. Amendment No. 16 makes clear that any variation after the first five years may only be by way of relaxation.

A further minor change is the inclusion of the power under Clause 18 to require actuarial valuations of any long-term business carried on by the company more frequently than the maximum permitted interval of three years as one which may be exercised in these circumstances. A more important variation is that the powers to impose specified forms of requirement may be exercised on the ground of a change of control only in the sense of Clause 2(2)(c), that is to say that they may not now be exercised simply because there has been a change of managing director or chief executive. This meets the point raised by my noble friend Lord Aldington. I beg to move.

LORD ALDINGTON

We should thank my noble friend for this Amendment which we began pressing for some six weeks ago and which has at last arrived. It makes me hope, with reference to the Amendments we have just discussed, that in about six weeks we shall see down similar Amendments that we have been pressing for, and I shall have two more occasions later on to thank my noble friend for adopting the proposals put forward from both sides of the House but strenuously resisted by him on two previous occasions. This is a great improvement and I am very glad to thank him for it.

LORD JACQUES

I should like to join in the thanks, but I will reserve them until Third Reading.

On Question, Amendment agreed to.

THE EARL OF LIMERICK moved Amendment No. 9: Page 11, line 44, leave out ("that section") and insert ("those subsections")

The noble Earl said: My Lords, Amendment No. 9 is consequential upon the Amendment made on Report whereby this subsection was made to refer to subsections (2) and (4) instead of to the whole of Clause 20 as it now is. I think that several noble Lords may have realised that in line 40 the number of that clause has been omitted in error. A correction will be made in the next print without the necessity of a formal Amendment. I beg to move Amendment No. 9.

On Question, Amendment agreed to.

6.4 p.m.

LORD ALDINGTON moved Amendment No. 10:

Page 11, line 47, at end insert— ("Provided that at any time not less than two weeks after the specified books and papers have been produced by the company to the Secretary of State or a person authorised by him the company may request that the said books and papers be returned and if so requested the Secretary of State shall cause them to be returned and the powers conferred on him by subsections (2) to (4) of section 20 shall cease to be exercisable under this section for a period of not less than one year but may continue to be exercisable on any of the grounds set out in subsection (1) above.")

The noble Lord said: My Lords, I rise to move Amendment No. 10. This is to be a further discussion of a point which has been discussed and debated on at least two previous occasions, relating to the power of inspection which is now in Clause 20, subsections (2) to (4), where the powers in those subsections may be used by the Secretary of State, not because he has suspicions about a particular company, but because he considers the exercise of that power to be desirable in the general interests of persons who are or may become policy holders. In other words, he is given the power under this subsection to inspect any or all insurance companies without suspecting them of anything wrong. He told us that he needed that power principally because he wanted it to be understood in the industry that the entry of an inspector into an insurance office did not mean that the company was a bad company just about to go broke. But I think it would as to be true—in the way that Governments are—that they see some advantage in having the power in this form in case they have suspicions that a company is not a good company, but that suspicion is not strong enough to enable them to invoke the aid of Clause 12(1)(a), (b), (c) or (d). That, I think, is why they want this subsection.

But, my Lords, if I am right in saying that as it is at present drawn any Secretary of State who so wished could subject any company to the full rigours of a full inspection, perhaps on the American type, costing an enormous amount of money, involving enormous numbers of men, and lasting for a great many months, I think I am also right in thinking that the present Administration would not propose to use the powers that way. If they do not propose to use the powers that way, they are not sensible in asking for, and we would not be sensible in giving, powers as wide as that.

On the last occasion when we discussed this matter I sought to limit the inspection by defining a purpose. This was found not acceptable to some of your Lordships, and also not acceptable to the Government. After further discussions with various people concerned, I now propose that we should try to limit the duration of the inspection under this subsection. That is what these words propose to do. I should make it plain that it does not affect any inspection which is brought about by reason of the conditions in Clause 12(1)(a), (b), (c) or (d). My proviso refers only to inspections brought about because of the circumstances in subsection (3). Your Lordships will see that what I propose is that there should be a limited period, defined in my Amendment as two weeks from the date when the books and papers become available; and after the expiration of those two weeks if, and only if, the company being inspected so requests, the inspection must stop and cannot be resumed for a year, unless, of course, there is a reason under Clause 12(1)(a), (b), (c) or (d).

I have tried to suggest a period during which the inspection of books would bring to light one or other of those reasons if, in fact, they exist. I have also provided that the period of two weeks does not operate automatically, but only if the company being inspected so requests. That would seem to me a reasonable limitation of this otherwise unbounded power of inspecting companies, acting legitimately, carrying on a legitimate business, acting in a legitimate way, and not known or suspected to be offending in any way against any part of the law or to be conducting their business in an incompetent way which might result in insolvency or threatening the policy holder interests. If, of course, the company is doing any of those things, that will come to light in the course of the inspection.

Now, why do I object to this power of wide inspection? I object to it because of the cost, because of the waste of the time of management and staff, and because of the general distortion of the relationship between Government, on the one hand, and commerce and industry, on the other. As the noble and learned Lord the Lord Chancellor was reminding us, there is a difference in approach between this side of the House and the other side about private industry, but I think most of us would agree that the real safeguard, the best safeguard, that companies will act competently, morally and legally is provided by the terms of the Companies Act and the structure created underneath it, the key element of which is the responsibility of the directors to the shareholders and to the law, and the responsibility of the management to the directors. Anything which weakens this distinct responsibility can weaken the basic safeguard. Of course there have to be exceptions, and of course public considerations may from time to time force Parliament to override those more general considerations which I have just mentioned. But it has been tradition here—and when either Party has been in power these traditions have been carried on—that wide powers will not be granted to Governments in this sphere of relationship between Government and private industry or private commerce. I believe that to be of cardinal importance, and it is for that reason that I have wearied your Lordships with various attempts to improve this subsection by confining it to what is really necessary.

I have little doubt, because this is the way things go these days—and they have gone that way in many other days, too—that the Government Bench will find some reason why this Amendment is not appropriate. I think we have learned to know that you have to go on three or four times before you get it right; but I hope that the House will support my general purpose. I believe that the insurance industry supports the general purpose. My noble friend annoyed me somewhat last time by saying that the British Insurance Association took his view and were opposed to my view. I must tell him that this is not so, as I understand it. I must tell him that the principle on which I am commending this Amendment to the House is not opposed by the insurance industry, whether they be chairmen or members of the British Insurance Association.

May I add one other thing? There have been occasions in this House when some of your Lordships have thought it right to advocate a general inspection of insurance companies. One of my noble friends—I think it was the noble Earl, Lord Onslow—said that it was his view that it would be a good thing to have inspection widely spread, and he indicated that it might be the view of insurance brokers generally. I do not know why it should be the view of insurance brokers generally, and I do not really know why, if the insurance industry generally has to be inspected, insurance brokers generally should not be inspected, too. I should have thought they would have found that what was sauce for the goose was also sauce for the gander. I do not think that, as a nation, we are generally in favour of wide and detailed inspection such as happens in the United States. The inspections to which they subject their insurance companies in the United States are massive. If any of your Lordships has seen their inspection reports, you will know that they are reports compiled in thick volumes which may cost the company as much as three-quarters of a million dollars to obtain—and they come out roughly three years after the year to which they refer. Unhappily, we have just read in the newspapers of an American insurance company, I think called the Equity Fund Insurance Company, stopping business (I will be careful in the use of my words) and being accused of a major fraud—and all this within a system of inspections and controls much more rigorous than those we have here. A massive inspection scheme does not give as good a safeguard as the system we have here of limited powers by the Government supporting boards of directors and management acting within the Companies Act. With those considerations in mind, I beg to move the Amendment on the Order Paper.

6.14 p.m.

THE EARL OF LIMERICK

My Lords, my noble friend Lord Aldington has once again put a prima facie eminently reasonable proposition in this Amendment. In fact, however, I must suggest to him, with the utmost respect, that in the wording of his Amendment he starts from a false premise and goes on to propound an undesirable solution. It would of course be extremely inconvenient—and I am the first one to agree—for any insurance company if some of its current records were removed from its offices for even as long as a fortnight in order that they could be studied at leisure by an inspector, whether the occasion for that inspection was some immediate cause for suspicion of the company's health or what my noble friend has referred to in the past as camouflage but what I prefer to call random inspection. It would be equally inconvenient if the Department exercised the alternative option under Clause 20(2) to require the company to produce specified books and papers at the Department's offices. Retention of these records for any length of time would not only inconvenience the company but might well cause delays in the settlement of policyholders' claims.

Happily, we do not allow that inconvenience to arise. In principle it is held that a power to require production of documents does not extend to their removal from the company's possession otherwise than in the exceptional circumstances envisaged in Section 110 of the 1967 Act, where it has been necessary to obtain a search warrant to ensure the protection of the documents from interference. What happens in practice is that the inspector identifies those documents, or parts of documents, which call for closer study, and asks the company either to provide copies, using their own facilities, or to allow him to borrow them in order that the Department may make copies. Wherever possible this is done overnight so as to minimise inconvenience. Consequently, the first part of the Amendment would achieve nothing because the Secretary of State would not be likely to retain any books or papers relating to a company's daily business for more than a few hours. My noble friend was worried about the rigours of a full inspection, which is the phrase he used. In practice—and I think he recognises this—our inspections are much more likely to last a few days, or even a few hours; that is, random inspections. But the effect of the first part of the Amendment would be to stop those inspections.

The second part of the Amendment raises more complex questions. While admitting the principle of random inspections, it seeks to establish that no company should be subject to further inspection within a twelve-month period unless there is an adequate case to support the intervention on grounds under Clause 12(1), which of course cannot be undertaken lightly. There must be grounds going well beyond mere suspicion, even though it would be in the interests of all that suspicion should be cleared up as quickly as possible. Then, consider the range of companies—approaching 800 of them—which we have to supervise. My noble friend has the honour to preside over a company which must fall into what one might term the top ten—and may all our inspections of that company be random ones! Opinions would vary from month to month as to which companies comprise the bottom ten; but between these two extremes there is a very wide spectrum of companies of different size, different degrees of financial strength, undertaking different types of risk and deploying different standards of competence which it is extremely difficult at any given time to place with any certainty in the league table. So an inspection which starts as a random one may disclose disquieting features.

Many of your Lordships will have read in the past few days—and my noble friend has already referred to it—some very startling things about an American insurance company, Equity Finding, of which it seems likely that we shall continue to hear for years. I understand that the first hint of trouble was discovered in the course of a random inspection. May we never have a similar case here! But it points to a strong justification of the principle of random inspection. The Amendment would not prevent random inspection though it would curtail it. But I do not want to be alarmist and I shall use a less dramatic illustration. Having noted, in passing, that the directors of insurance companies in New York must supply copies of their finger prints to the insurance department, we stand astonished at our moderation.

Suppose that a random inspection reveals some relatively minor incompetence or lack of control in an otherwise sound company, possibly in a large company, and remedial measures are agreed upon. It would be unreasonable that inspectors could not call again—perhaps an hour would be sufficient to check a particular miatter—before a year had elapsed. Yet if the matter was sufficiently serious that grounds had to be justified under Clause 12(1), in the absence of a right to a second visit a few weeks later the effect of the Amendment would be to advertise suspicions, perhaps quite unnecessarily, by the fact of a second call within a year. My noble friend Lord Aldington and I have had more than one discussion on this subject. I think we respect each other's points of view; but for the reasons I have given I cannot accept this Amendment as it stands. I hope that on consideration he will feel able to withdraw it and not to press it to a formal disagreement.

THE EARL OF SELKIRK

My Lords, before my noble friend sits down, may I ask whether he contends that Clause 20 does not authorise him to take possession of the books and papers of any company? Secondly, is it his case that he intends on no occasion to remove them from company premises?

THE EARL OF LIMERICK

My Lords, the answer to the second question is, No. 1 think I made it clear that they would be removed in cases where further investigation is required, but for a minimum period, such as is required for the taking of copies of documents of which further study is required. The answer to the first question is also No. I think it is clear that Clause 20(2) may require the production of books or papers in such places as the Secretary of State may specify. But I did not think that was a point at issue in this debate.

LORD ALDINGTON

My Lords, I think have a right of reply. I shall try not to weary your Lordships for more than a moment. My noble friend is absolutely infuriating. He has masses of people working for him to knock down every conceivable attempt that man can make to try to make sense of this Bill. Eventually we do get their support. We are just coming to one or two Amendments where they have seen the light after knocking them down as roughly as was just done. I could hope that these great men would get busy and try to see a way to limit this power to what is wanted. It is clear that my noble friend does not want the massive power of inspection, continuing for month after month, that is allowed by the present wording of subsection (3) of Clause 20. Equally it is clear that the kind of short random inspection which is allowed for in my proviso would give him all that he does want. Although he quoted the case of the Equity Fund Insurance Company against me, I think it is a very good example of how my clause would work to help him, because it allows him, immediately he finds something wrong, to bring the whole panoply of Clause 12(1) into action. May I hope—and I do not want to press this to a formal disagreement—that my right honourable friends and my honourable friends in another place will force his colleagues to do the work that ought to have been done in the past months and try to legislate on this important power so that the Secretary of State has the power that he wants and not the wider power that he does not want. Having expressed that hope, after this third attempt to improve subsection (3), may I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

THE EARL OF LIMERICK

My Lords we discussed this Amendment with Amendment No. 8. I beg to move.

Amendment moved—

Page 12, line 1, leave out subsection (4) and insert—

("(4) Any power conferred on the Secretary of State by sections 14 to 18, 20(1) or 21 below shall also be exercisable, whether or not any of the grounds specified in subsections (1) to (3) above exists, in relation to—

1. (a) any company, society or body with respect to which the Secretary of State has issued an authorisation under section 61 of the Act of 1967;
2. (b) any insurance company to which the Act of 1958 applies in the case of which a person has become a controller within the meaning of section 2(2)(c) above,

if that power is exercised before the expiration of the period of five years beginning with the date on which the authorisation was issued or that person became such a controller, as the case may be; but no requirement imposed by virtue of this subsection shall continue in force after the expiration of the period of ten years beginning with that date.").—(The Earl of Limerick.)

THE EARL OF SELKIRK moved, as an Amendment to the Amendment, Amendment No. 12: Line 2, leave out from ("exercisable") to ("in") in line 4.

The noble Earl said: My Lords, subsections in Clause 4 give the power on any grounds that the Secretary of State thinks fit for the first five years of certain companies to carry out the powers given in subsections (14) to (18) or (21). I move the deletion of the words referred to in my Amendment because they are not necessary. The Amendment in no way alters the meaning of the clause by taking these words out; and that is quite an adequate reason for taking anything out. There are other grounds. First, the wording is slightly absurd. If you see the application of the words here on the Amendment to the ground shown in various places in Clause 12, you will see that whether or not it is desirable to protect the policy holders of the company, the Secretary of State may take action; or to take it again, whether or not you consider the exercise of that power to be desirable in the general interest of these persons, he may take action. This is rather absurd.

But it is worse than that because the third reason is that it gives the Secretary of State power to use subsections (14) to (18) et cetera when it is not in the interest of the policy holders and not desirable for protecting the policy holders. That power is not needed. It is not in the interest of the policy holders and should not be included in the powers of the Secretary of State. It can be argued that Secretaries of State are reasonable people and would not do stupid things. That I hope is correct. In that case we should not be so foolish as to give them powers which it is clearly not desirable for them to use. I ask that these words be removed, first because they are not necessary; second because they read rather absurdly, and third because they give the Secretary of State powers he does not need and which it would be better not to use. I beg to move.

THE EARL OF LIMERICK

My Lords, I do not believe that this is a point on which we should be in dispute. I think it arises from a misunderstanding of the effect of the clause. The words which the Amendment seeks to remove are there purely for the avoidance of doubt. Their removal might, and I believe would, alter the meaning of the clause. The power to impose precautionary requirements upon the issue of a new authorisation already exists under Section 65 of the 1967 Act and the Government Amendment extends this to the situation in which there has been a change of control. If the Amendment proposed by my noble friend had any practical effect it would seem to be to remove the power to impose any precautionary requirements in the circumstances where they might most be needed, because the Department is dealing with unproven projects and perhaps unproven persons.

I cannot believe this is his intention. If it were, the inevitable consequences must be a much greater reluctance on the Department's part to issue new authorisations or to approve changes of control. That would be a most undesirable change. I hope that I have made the point clear and that my noble friend may agree with me.

THE EARL OF SELKIRK

My Lords, I regret to say I do not think that the noble Earl has made the point clear and I do not agree with what he has said, but I do not force the point. I do not think it important except for this, and I ask him to look at it again. Those words are quite unnecessary because the meaning is absolutely clear. He said it was for the avoidance of doubt that they shall be exercisable in relation to the two companies if their power is exercised before the expiration of five years. That is abundantly clear; there can be no dubiety about it whatsoever. He is saying here specifically that these powers may be used when it is not desirable in the interest of policy holders, and those words should not be there. If the noble Earl cared to say "at the full discretion of the Secretary of State" I would take no exception. I do not think that I am differing with him in principle, but the drafting here is quite wrong.

THE EARL OF LIMERICK

My Lords, I should like to look at that point with care and, if on consideration it seems that an Amendment is needed, I shall not hesitate to recommend that to my right honourable friend at a later stage.

THE EARL OF SELKIRK

My Lords, I thank the noble Earl and I beg leave to withdraw the Amendment.

Amendment to the Amendment, by leave, withdrawn.

On Question, Amendment agreed to.

6.32 p.m.

THE EARL OF LIMERICK moved Amendment No. 13: Page 12, line 13, leave out ("sufficiently") and insert ("appropriately").

The noble Earl said: My Lords, this Amendment meets the criticism that the word "sufficiently" raised some presumption that the use of the residual powers in Clause 21 was intended to be, or could be, more lethal than the imposition of a total restriction under Clause 13, about which my noble friend Lord Aldington and my noble and learned friend the Lord Chancellor have had some debate. The substitution of "appropriately" makes clear, I hope, that it is the suitability to a particular circumstance, the requirement under Clause 21, rather than its severity which is the criterion. I should point out in passing that we should not exclude the concurrent use of the Clause 13 objection, which could relate to the whole or a part only of the business, to some other kind of requirement under Clause 21. It has to be borne in mind that while the restriction protects potential policy holders, by preventing them from becoming policy holders, it does not necessarily give existing policy holders the protection they may need while the remaining period of their policy is being run off, and any unsettled claims are being dealt with.

LORD ALDINGTON

My Lords, I have a feeling that my noble friend has just said something rather important which alters what the noble and learned Lord the Lord Chancellor said earlier in the proceedings about the importance of Clause 21. I should like to have time to consider the effect of what he has said. As to the Amendment itself, I welcome it, not only because of the improvement in the Bill here but also because it is one more sign that what was said to be wrong yesterday becomes right to-day or to-morrow; and so I go forward with the full hope that the Bill will be further improved, and other Amendments which have been so sternly turned down will eventually find acceptability—so long as they are moved by my noble friends on the Government Front Bench.

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, this Amendment was discussed with Amendment No. 8. I beg to move Amendment No. 14.

Amendment moved— Page 12, line 16, leave out ("(f)") and insert ("(e)").—(The Earl of Limerick.)

On Question, Amendment agreed to.

Clause 23 [Notice of proposed exercise of powers on ground of unfitness of director or manager]:

THE EARL OF SELKIRK moved Amendment No. 15: Page 18, line 24, leave out ("or manager").

The noble Earl said: My Lords, at the end of Clause 23 there suddenly appear the words "or manager". I am not clear whether this is a misdrafting or whether there is some explanation which makes the words necessary. May I explain shortly why this is. Clause 22 deals with controllers to which it is necessary or desirable to apply the lethal powers of Section 13. Clause 23 deals with what I call the non-executive directors, and it specifically excludes not being a controller of the company or a manager of the company"; then it gives the procedure to be adopted, which can be used in any clause from Clause 13 to Clause 21, for the purpose of getting rid of a non-executive director. Then suddenly there appear the words "be a director or manager of the company.

So far as I can see, the whole of Clause 23 does not apply to managers, and if it does in what way does it apply? Should the word "manager" come in in the first subsection and refer to persons who are directors or managers but not controllers, or should it possibly come in Clause 22 and say that you should include controllers or managers? As it stands, I do not understand what it means. It does mean, if we are to carry it through, that such protection as exists in respect of controllers under Clause 22 and in respect of non-executive directors under Clause 23 is wholly inapplicable to managers; and if that is so I cannot understand why. If that is to be the policy of the Government I should like to hear an explanation.

THE EARL OF LIMERICK

My Lords, I hope that I may be able to explain this briefly. The distinction we are drawing, and this derives from Clause 2, is between a mere director (that is, not being a managing director or a manager) on the one hand, and a managing director or a chief executive on the other, who fall into the class of controllers as defined. I think that if my noble friend Lord Selkirk will look at Clause 23(1) in lines 25 and 26 on page 17, he will find that it is made clear that we are talking about the person whose fitness is in question as a director not being controller; that is, not a managing director of the company or a manager of the company. So clearly these are the classes of people we are taking together, and this is consistent throughout the Bill. I could offer a fuller explanation of the effect of the Amendment—which I think would be undesirable—but I should not like to weary the House with it. But if it is the wish of my noble friend, I could offer it later on.

THE EARL OF SELKIRK

My Lords, may I say that I accept what the noble Earl said. It is a different interpretation and I do not think that the drafting is very clear. I took the words "or manager" to apply to controllers and I understand that they should apply to directors. In that case I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 24 [Rescission, variation and publication of requirements]:

THE EARL OF LIMERICK

My Lords, we discussed this Amendment with Amendment No. 8, I beg to move Amendment No. 16.

Amendment moved—

Page 18, line 30, at end insert— ("( ) No requirement imposed by virtue of subsection (4) of section 12 above shall be varied after the expiration of the period of five years mentioned in that subsection except in a manner which relaxes that requirement.") —(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK moved Amendment No. 17: After Clause 32, insert the following new clause:

Approval of proposed managing director or chief executive of insurance company

".—(1) No insurance company to which the Act of 1958 applies shall appoint a person as managing director or chief executive of the company unless—

1. (a) the company has served on the Secretary of State a written notice stating that it proposes to appoint that person to that position and containing such particulars as may be prescribed; and
2. (b) either the Secretary of State has, before the expiration of the period of three months beginning with the date of service of that notice, notified the company in writing that there is no objection to that person being appointed to that position or that period has elapsed without the Secretary of State having served on the company a written notice of objection.

(2) A noticed served by a company under subsection (1)(a) above shall contain a statement signed by the person proposed to be appointed that it is served with his knowledge and consent.

(3) The Secretary of State may serve a notice of objection under subsection (1) above on the ground that it appears to him that the person proposed to be appointed is not a fit and proper person to be appointed to the position in question, but before serving such a notice the Secretary of State shall serve on the company and on that person a preliminary written notice stating—

1. (a) that the Secretary of State is considering the service on the company of a notice of objection on that ground; and
2. (b) that the company and that person may, within the period of one month from the date of service of the preliminary notice, make written representations to the Secretary of State and, if the company or that person so requests, oral representations to an officer of the Department of Trade and Industry appointed for the purpose by the Secretary of State.

(4) The Secretary of State shall not be obliged to disclose to the company or to the person proposed to be appointed any particulars of the ground on which he is considering the service on the company of a notice of objection.

(5) Where representations are made in accordance with this section the Secretary of State shall take them into consideration before serving the notice of objection.

(6) Section 22(5) above shall apply also to a notice served under this section by the Secretary of State."

The noble Earl said: My Lords, I think it would be convenient if with this Amendment we discussed Amendments Nos. 19, 23, 24 and 27. These Amendments meet the wish of my noble friend Lord Aldington that the company's primary responsibility for the selection of a suitable managing director or chief executive should be recognised, and also the means by which it is brought about in practice. The procedure for prior approval is not altered so far as the controller in the sense of Clause 2(2)(c) is concerned. This remains in Clause 33. In the case of the managing director or chief executive, the new clause transfers the duty of application to the company subject to its being made with the knowledge and consent of the candidate. Any preliminary notice of objection is to be given both to the company and also to the candidate. Thus the candidate will no longer have the opportunity, which the clause previously gave to him, to dispel the Department's doubts before the company is made aware of them.

On the other hand, this reflects the practicality of the appointment and it 'nay reasonably be maintained that the company are entitled to know at once if cause for doubt exists, so that they may make their own further inquiries. They might conclude when these inquiries had been made that they should not proceed with the appointment; they would withdraw the application, and look for a more satisfactory candidate without further delay. Meanwhile, of course, the candidate could seek to convince either or both the company or the Department that their doubts are groundless. In certain circumstances he might well enlist the help of the company to persuade the Department. The Amendment therefore draws a reasonable balance between right and duty, and I hope it will commend itself to the House.

LORD ALDINGTON had given Notice of his intention to move Amendment No. 18 as an Amendment to the Amendment: Subsection (5), at end insert (" and shall ensure that he gives the company and the person proposed to be appointed an opportunity of satisfying him on the matters relevant to his notice of objection.")

The noble Lord said: My Lords, perhaps I may speak to this Amendment without moving it. First of all, I should like to say that I welcome my noble friend's change of mind on this important matter, and I welcome this new clause. Earlier on this afternoon we referred to the Amendment to Clause 2, and this Amendment No. 18 is a similar Amendment to this new clause. In commenting on it in our earlier debate, my noble friend indicated that there was a general objection to it, but that the principal detailed objection was that if there were further references to "representations" in this clause there would be confusion with subsection (3). I really cannot accept that, and I hope I may take it that he will look again at that objection. It cannot be sensible to say that adding words that deal with representations to subsection (5), which is solely concerned with Where representations are made in accordance with this section", makes subsection (5) any more confusing with subsection (3) than it was before. If it is found desirable eventually to have this idea incorporated in the Bill, I hope that the rather slim reason given against my draft will not prejudice reconsideration of the matter. With that explanation, I do not propose to move this Amendment to the Amendment.

LORD HAWKE

My Lords, with regard to Amendment No. 17, I do not much like this period of three months. I think it puts an unconscionable burden on some unfortunate person whose fate is hanging in the balance that he has to sit around for three months before be knows whether the Secretary of State will allow him to be appointed. I hope that in the next stages of the Bill this point may be looked into. I do not think it is necessary to have three months to look up the antecedents of a person who wishes to control an insurance company.

On Question, Amendment agreed to.

Clause 33 [Documents deposited with Secretary of State]:

6.45 p.m.

THE EARL OF LIMERICK

My Lords, Amendment No. 19, was discussed with Amendment No. 17. I now beg to move Amendment No. 19.

Amendment moved— Page 27, line 7, after ("applies") insert ("otherwise than by virtue of an appointment in relation to which section (Approval of proposed managing director or chief executive of insurance company) above has effect").—(The Earl of Limerick.)

On Question, Amendment agreed to.

LORD JACQUES moved Amendment No. 20: After Clause 33 insert the following new clause:

Advisory Committees

".—(1) The Secretary of State shall appoint an Advisory Committee to whom any person aggrieved by a decision of the Secretary of State under section 2 or 33 of this Act shall have the right to submit written and oral statements.

(2) The Advisory Committee shall consist of five persons, not more than three of whom shall be actively concerned in the insurance industry.

(3) The Committee shall make recommendations to the Secretary of State arising out of the submissions referred to in subsection (1) and thereafter the Secretary of State shall communicate his final decision to the aggrieved person."

The noble Lord said: My Lords, I am pleased to see the noble and learned Lord back on the Woolsack, because I wish to reply to his comments on this Amendment. I have never heard him go round in circles before in the way that he has on this occassion. Let us look at the Amendment. It calls for the appointment by the Secretary of State of an advisory committee—and I emphasise the word "advisory". The function of the advisory committee is such that, if there is a person who is not accepted by the Secretary of State as a fit and proper person, and he is aggrieved, he shall have the opportunity of making submissions to the advisory committee. The advisory committee, in turn, will make recommendations to the Secretary of State. But the Secretary of State will take into account all factors, come to his own conclusions and then make his final decision known. At one stage the noble and learned Lord said that the appointment of an advisory committee was designed to take this matter right out of the hands of Parliament. Then, at a later stage, he said that the advisory committee might make a recommendation to the Secretary of State which was a little different from the information that he received from elsewhere, but the Secretary of State might be concerned with what noise might be created in Parliament if he ignored the advisory committee. If the matter had already been taken out of the hands of Parliament by the appointment of an advisory committee, why does the Secretary of State need to be concerned about what is said in Parliament? This is no argument to the Amendment, and I invite the noble and learned Lord to give a real reply to it. I beg to move.

THE LORD CHANCELLOR

My Lords, I will respond to the noble Lord's invitation, because he has shown by what he has said that I utterly failed to make myself intelligible to him when I spoke first, and whether the fault be his or mine, it is evident that a second attempt is incumbent upon me. What I think the noble Lord has failed to appreciate is that I was not simply replying to his Amendment. I was replying to a series of speeches by my three noble friends two gangways from me, and one of those speeches at least, that of my noble friend Lord De L'Isle, certainly was not content with an advisory committee. What he wanted was an appeal body. I dealt, in the alternative, with two successive possibilities. One was that my noble friend's suggestion was taken, and that the appeal body was set up, which would take the matter entirely from the Secretary of State and therefore from Parliament to whom the Secretary of State is responsible; and the other was that the noble Lord's Amendment was accepted in its present form. I pointed out that there were objections to that: that it was a half-way house; it was neither the one thing nor the other—neither an appeal body nor a body with any ascertainable functions which could protect the individual. I think we all agreed when we discussed the matter that we were grateful to the noble Lord for the extent to which he had taken into account the difficulties with which the Government are faced. But what he has come up with is a suggestion that a committee which is not allowed to know some, at any rate, of the relevant facts, and perhaps the decisive ones, should give advice to the Secretary of State, which he is not bound to take, and should then be discharged from its obligation.

My Lords, what I fail to see about the Amendment in its present form is how it fails to fall between three quite different stools. It can serve no useful purpose to protect the individual if it does not consider the same set of facts as those which are before the Secretary of State; it cannot protect him if its functions are purely advisory and not appellate. On the other hand, if it was given the relevant, and perhaps decisive, material before the Secretary of State, it would breach the principle of confidentiality to which the noble Lord referred in his original speech. If, on the other hand, it was made appellate it would destroy the functions of Parliament. Therefore, my conclusion—and I am sorry that I did not make it plain—was that the noble Lord's suggestion was a compromise between inconsistent principles. What one has to do in relation to anything affecting the rights of an individual is make up one's mind whether the particular process which may operate contrary to the interests of the individual is an administrative function or a quasi-judicial one. If it is a quasi-judicial one then the set of arguments put forward by my noble friend Lord De L'Isle is obviously the right set of arguments; if it is an administrative one, it is probable that the arguments put forward by my noble friend Lord Limerick are the right arguments and they should prevail. What is not possible is to combine the two by an uneasy compromise.

I am not in any way going back on what I said in reply to the debate on Amendment No. 3. My right honourable friend Sir Geoffrey Howe will take all these arguments into account. If there be a way through the maze, if there be a compromise which is acceptable to all, he will seek to find it after debate in another place, or perhaps before debate. I must apologise to the noble Load that by the time I was turning to the particular suggestions that he was making I was conscious of the fact that I had detained the House too long, and I may have telescoped my argument a little. If I misled anybody—and I certainly did not mislead myself—I can only apologise.

THE EARL OF SELKIRK

My Lords, my noble and learned friend the Lord Chancellor said something I found surprising. He said that the appointment of private capital insurance company directors is an administrative matter. This seems to me an extraordinary extension of anything that I have ever thought of. This is an entirely new line; it means, in effect, that insurance companies, so to speak, come within the administration of the Department. I would not have thought the Department care for that. If the Department makes a mistake, surely it is liable financially for the mistake.

THE LORD CHANCELLOR

My Lords, I hope that my noble friend will forgive me interrupting. I never said that the appointment of such an official was an administrative act. I said the conclusion formed by the Secretary of State about an application under Section 61 of the principal Act could be regarded as either administrative or as quasi-judicial. If it was regarded as quasi-judicial the set of arguments put forward by my noble friend Lord De L'Isle would be applicable. But, on the other hand, if my noble friend Lord Limerick was right in regarding that as administrative, then his arguments were properly applicable, not what the noble Earl has imputed to me.

THE EARL OF SELKIRK

My Lords, the noble and learned Lord has said this is an administrative decision of the Department. That is what I understand him to say, and that is what seems to flow from that decision. They take administrative responsibility and, accordingly, they may have to meet the financial consequences. That is all I am saying. I have no doubt that the Amendment of the noble Lord, Lord Jacques, is a compromise. To say that it is lacking in principle seems strange in a Bill which seems wholly lacking in principle from beginning to end. However, the Government are reluctant to give way and I do not propose to press this matter further, except to say that Lord Jacques has a most ingenious Amendment in which he has some elements of an outside opinion; it may not be wholly effective, but I regard it as of some value.

VISCOUNT DE L'ISLE

My Lords, I thank my noble and learned friend the Lord Chancellor for paying attention to my speech, which is always gratifying. I am not sure that noble Lords who have apprehensions about the content of the Bill in respect of what we are now discussing will find their fears quieted by what my noble and learned friend has said. I should hate to think that in insurance, or any other field of business, the decision of the Secretary of State affecting the fortunes, careers and reputations of individuals established in business, or wishing to be established in business, was an administrative matter. That would be an unfortunate precedent. I should not like to accept that as going out from this House. We have now reached a stage in our affairs where a Minister of the Crown can decide the fortunes of an individual merely by administrative acts and without any reference to a third body.

If this matter were to be taken to a Division I should support the Amendment of the noble Lord, Lord Jacques. I would prefer to have a body of that sort rather than no body at all. If the noble Lord does not press his Amendment I hope that the Government will think carefully, because what we are dealing with to-day in this House is not merely the Insurance Companies Bill; we are creating important precedents, possibly for the future, possibly for another Government. We must distinguish carefully between administrative powers and the judicial powers, which ought to reside outside the Government, to deal with people's lives and fortunes.

LORD ALDINGTON

My Lords, may I try to make what I hope will be two helpful observations? I was attracted by this proposal, and although some of your Lordships thought two earlier Amendments of mine were alternatives to this Amendment, those Amendments were drafted to fit in with this one. I think this point has some merit to it. May I suggest to my noble and learned friend the Lord Chancellor, and your Lordships, that there may be something to be learned from the way in which security is dealt with by the Government in so far as security considerations affect appointments of persons, or the fitness of persons for appointments.

When I first read the proposal of the advisory committee it seemed to me that it had some similarity with what was a practice several years ago—whether it is a practice now, I do not know. Where the Secretary of State has to make up his mind whether somebody is a fit and proper person to be appointed for some purpose—whether because of security considerations or because of fitness and properness for the insurance industry—it would help to have some advisers or wise men to which the matter could be referred. This procedure seems to me to be helpful.

I understand the arguments of my noble and learned friend about the difference between administrative decisions and quasi-judicial decisions. The word "administrative", when taken out of context, raises in people's minds matters which I am sure my noble and learned friend does not wish to be in people's minds. It is not necessary to decide whether this is administrative in that sense or quasi-judicial. There are grounds for saying that any Secretary of State would be helped in difficult cases like these if he had advisers to whom he might be able to refer a doubtful case. That was done in security matters and I do not see why it should not be done in insurance matters.

LORD JACQUES

My Lords, I thank the noble and learned Lord for his assurance that the idea contained in this Amendment will receive further consideration. Because of that, I beg leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

6.59 p.m.

LORD JACQUES moved Amendment No. 21:

After Clause 43 insert the following new clause:

Standard forms for certain policies Regulations may be made after consultation prescribing such standard forms of policy as the Secretary of State may consider convenient.

The noble Lord said: My Lords, the idea behind this Amendment was argued at length during the moving of a more detailed Amendment on the Committee stage and I do not need to put forward all the arguments again. This is a purely enabling Amendment to enable the Minister to consult with the insurance industry with a view to forming a number of standard policies for such things as household risks and motor risks. These policies should be in addition to any other policies which the companies may wish to issue. It is not proposed that there should be a standard premium. Each company would fix its own premium.

There are really two purposes behind the idea. First, it would be hoped that a standard policy would minimise the amount of small print, and that would mean that fewer people would find themselves not covered because they had not read the small print or because they had read it and did not understand it. Secondly, we would hope that standard policies would encourage competition in premiums in addition to competition in services. Simplification is not new in consumer protection. We have already to simplify on a considerable scale for the benefit of the consumer. For example, many goods can only be sold in units of certain weight so that the consumer can make comparison between one package and another and therefore can make an assessment of what she is going to get for the price that she pays. Comparisons between insurance policies are much more subtle and it would be helpful to the consumer if, in addition to any other policies they might have, there was a standard policy for different risks throughout the insurance industry.

At the Committee Stage the Minister expressed considerable sympathy with the idea of experiment in standard policies. We feel that he should show that he really means business by accepting this enabling clause. He may feel that he can achieve his objective on a voluntary basis. If so, well and good, but if he is armed with the powers of making regulations he is then more likely to achieve the objective on a voluntary basis. I beg to move.

THE EARL OF LIMERICK

My Lords, when we discussed the progress which could be made towards the introduction of standard policies my noble friend Lord Colville of Culross indicated the complexities which might arise, even in a comparatively simple case, in setting out the conditions of a policy. He also suggested that the points then made by the noble Lord, Lord Jacques, should be met by consultations with the industry without the need for anything in this Bill or for any regulations. Since then I have had some discussions with the noble Lord, Lord Jacques, and have indicated what is going on in this field, and I think I should refer to it now.

Since our previous consideration in Committee we have had some further discussions with the industry. They are of course aware that some criticisms have been levelled at them in recent years, and they themselves have been looking in the direction of simplicity and voluntary standardisation, because this is the road to economy and to ease of marketing. Standard forms already exist in several classes of insurance business; for example, marine business, where the forms and clauses are produced jointly by Lloyds underwriters and the Institute of London Underwriters. So far as personal insurance is concerned, Lloyds Non-Marine Association have produced standardised policy forms of comprehensive insurance for private houses; variable items are relegated to a schedule and increasing use is being made of the standard form of policy, drafted to provide the widest coverage and from which inapplicable sections can be deleted. Less progress has perhaps been made in relation to motor business, but motor policy forms follow a fairly basic pattern and the ways are not generally difficult for the motorist to comprehend.

If a standard form had to be made available in addition to the individual forms of policy it would be bound to have more limited coverage of risk. Since any differences in premium between the standard coverage and the wider coverage of any particular insurance would in all probability be small, most policy holders would probably elect to purchase the more comprehensive type of coverage and the chances are, therefore, that there would be little or no demand for the standard policies. But I do not think we should let matters rest entirely, and I am proposing to pursue discussions with the industry and to give what assistance can be given from our Department towards further simplication and standardisation, where this seems both relevant and appropriate.

I am not convinced of the need for legislation and I am advised that the Amendment would be rather undesirably vague. For instance, it does not specify with whom the consultations should take place. But I will review the progress of the consultations during the further passage of the Bill now in another place so that a provision can be introduced if, after all, it appears to be desirable; but on this matter I should not like to be thought to be giving any undertaking. I hope with that explanation I may ask whether the noble Lord will be content to let the matter rest.

LORD JACQUES

My Lords, I thank the noble Lord for that assurance and on the basis of it I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 48 [Interpretation]:

7.6 p.m.

THE EARL OF LIMERICK

My Lords, this Amendment was discussed with Amendment No. 1. I beg to move Amendment No. 22.

Amendment moved— Page 36, line 15, after ("(4)") insert (", (5A)"). —(The Earl of Limerick. )

On Question, Amendment agreed to.

Clause 50 [Short title, citation and commencement]:

THE EARL OF LIMERICK

My Lords, this Amendment was discussed with Amendment No. 17. I beg to move Amendment No. 23.

Amendment moved— Page 37, line 4, after ("Sections") insert ("(Approval of proposed managing director or chief executive of insurance company),"). —(The Earl of Limerick.)

On Question, Amendment agreed to.

THE EARL OF LIMERICK

My Lords, this Amendment was also discussed with Amendment No. 17. I beg to move Amendment No. 24.

Amendment moved— Page 37, line 6, at end insert ("(Approval of proposed managing director or chief executive of insurance company),"). —(The Earl of Limerick.)

On Question, Amendment agreed to.

Schedule 3 [Application to Northern Ireland]:

THE EARL OF LIMERICK

My Lords, this Amendment was discussed with Amendment No. 1. I beg to move Amendment No. 25.

Amendment moved— Page 42, line 8, leave out ("subsection (3)") and insert ("subsections (3) and (5A)").— (The Earl of Limerick.)

On Question, Amendment agreed to.

7.8 p.m.

THE EARL OF LIMERICK

My Lords, I think it might be convenient, if it is in order, that we should move the Amendments numbered 26, 27, 28, 29 and 30 en bloc. Amendment No. 27 has already been referred to in connection with Amendment No. 17. These Amendments relate to Northern Ireland legislation. They correct and modify references in the light of Amendments made to the Bill. I beg to move.

Amendments moved—

Page 42, leave out line 22 and insert ("and for "7" and "8" there shall be substituted respectively "18" and "19"").

Page 44, line 48, leave out ("section") and insert ("sections (Approval of proposed managing director or chief executive of insurance company) (3)(b ) and").

Page 45, line 16, leave out ("Section 42") and insert ("Sections 39, 42 and 44").

Page 45,line 48, leave out second ("and").

Page 45,line 49, at end insert (";subsection (8) shall be omitted; and in subsection (9) for "38" and "1889" there shall be respectively substituted "28" and "(Northern Ireland) 1954"."). —(The Earl of Limerick.)

On Question, Amendments agreed to.

Clause 50 [Short title, citation and commencement]:

THE EARL OF LIMERICK

My Lords, I beg to move the Privilege Amendment.

Privilege Amendment moved—

Page 37, line 9, at end insert— ("(7) Nothing in this Act shall impose any charge on the people or on public funds, or vary the amount or incidence of or otherwise alter any such charge in any manner, or affect the assessment, levying, administration or application of any money raised by any such charge."). —(The Earl of Limerick.)

On Question, Privilege Amendment agreed to.

7.9 p.m.

THE EARL OF LIMERICK

My Lords, I beg to move that this Bill do now pass. In doing so I should like to refer with appreciation to the constructive part that many Members of this House have played in our debates throughout the four stages of the Bill. We started with a general welcome, which I confess became a little less warm in certain quarters in respect of a very few questions. We have had debates which entirely transcend Party, and over many questions we have been able to alter the Bill to meet points put to the Government.

In opening the Second Reading debate I said—if I may quote very briefly— there exists among our membership a very wide experience in many areas of the great insurance industry. We have the capacity to make a major contribution to the discussion of this important question, and I have no doubt that this is just what your Lordships will do."—[OFFICIAL REPORT; 8/2/73, col. 1155] As a result of our proceedings since then, I am a somewhat wiser man, but I do not think that I would change a single word of what I said on Second Reading. I am grateful to all those who have contributed to our discussions. My Lords, I beg to move that the Bill do now pass.

Moved, That the Bill do now pass.— (The Earl of Limerick.)

7.10 p.m.

LORD JACQUES

My Lords, on the Second Reading debate we welcomed this Bill as a measure on consumer protection. We said at that time that we would conscientiously try to improve it and we hoped that we should have the co-operation of the Government Front Bench. We have had that co-operation in very large measure and we are grateful for the tolerance of the Minister in dealing with the points we raised. We believe that as a result of this joint effort this is a better Bill than it was when it first came to this House.

LORD ALDINGTON

My Lords, may I express my own thanks to the noble Earl, Lord Limerick, for the way in which he has piloted the Bill and stood up against buffetings from a number of places. Perhaps I might also express my thanks to, and admiration of, the noble Lord, Lord Jacques, and the noble Lord, Lord Diamond (who is away to-day) for the way in which they have looked at the Bill and, not infrequently, helped my noble friends and myself in our aims to improve it. I hope it is now common ground that every Member of your Lordships' House who has spoken in the debate was as keen as any other to protect the policy holder. We may have differed on how best to do it, but, with the possible exception of one Member of your Lordships' House who is not here, my friend if I may say so (although I am not allowed to say so politically), the noble Lord, Lord Brown, it is generally agreed, I think, that we were trying, any one as hard as the other, to improve the protection to the policy holder. I happen to think that the basic protection for the consumer and the policy holder lies in the strength of the board and the management of any company and I feel that the law must help that but not hinder it. That has been the main difference we have had throughout, but I welcome the changes that have been made in the Bill and I welcome the experience that we have had in the last two Sessions or so while we have watched the Government change their minds. I look forward to reading the debates in another place when we shall see the ideas that we have put forward accepted as wonderful ideas even though to-day they may have struck some of your Lordships as not wholly agreeable.

On Question, Bill passed, and sent to the Commons.