CLAUSE 1.—(Provisions as to Mortgagees in Possession.) (Hansard, 21 July 1915)

§ Mr. WATT
I understand that the original Act applies to Scotland. Perhaps the Lord Advocate will explain why the amending Act should not also apply.

§ Mr. MUNRO
As I understand, the purpose of this Bill is to limit the operation of the original Act to persons who have mortgages over heritable property, as it is termed in Scotland—that is to say, landed property. In the original Act the word "mortgagee in possession" was defined as "heritable creditor in possession," and as heritable creditor only applies to a creditor of land, the purpose of this amending Bill has already been achieved in Scotland.

§ Sir F. BANBURY
What is the actual effect of this Clause? When the original Act was passed the idea was that a person owning a house should not be turned out because he had mortgaged it and the mortgagee desired to foreclose. This has been held to extend to people who lent money on negotiable securities. For instance, if a banker had lent money on bearer securities, some people claimed that he could not realise his securities if the person to whom he lent the money was unable to pay, notwithstanding the fact that an agreement had been entered into between them that in such an event the securities could be realised by the banker. What does this Clause do? Does it release the banker from any doubt as to his being able to realise the securities, or does it enact that he is to be in the same position as a person who has advanced money on real property?

§ Sir F. E. SMITH
I think the matter is quite simple. The original Act preserves the power of a mortgagee in possession to realise his security by sale without applying to the Court. That was one of the principal provisions of the original Act. We need not go into the policy of it now, but it was considered at the time that, in spite of the special powers which, having regard to the War, were conferred by the Act, a mortgagee in possession should nevertheless be able to realise his security by sale without applying to the Court. It was undoubtedly the intention of the legislature, or at any rate of the Government, that the expression "mortgagee in possession" should apply only to real property. There are obvious reasons why the exemption should apply to the one case and not to the other. But in the case of Ziman v. Komata Reefs Gold Mining Company, the Court of Appeal held that the provision in the original Act preserving the powers of a mortgagee in possession extended to banks and others with whom securities had been deposited to cover loans. That was not the policy of the Act at all, and the object of this Clause is to make it quite clear that the preservation of the rights of mortgagees in possession is limited to real property.

§ Sir F. BANBURY
What is the effect of that? Let me take an illustration. Suppose I am a banker and I lend the right hon. Gentleman £1,000 on the security of £15,000 of Consols, and the right hon. Gentleman agrees that if he cannot pay I shall be able to realise Does this Bill prevent me from realising?

§ Sir F. E. SMITH
Without applying to the Court.

§ Sir F. BANBURY
That is so?

§ Sir F. E. SMITH
Yes.

§ Sir F. BANBURY
I object to that. I can see no reason why it should have that effect, or why this Bill should be brought in. I can quite conceive that there was some reason why the owner of a house should not be turned out capriciously when perhaps the market for the sale of houses or land was not very active. I really cannot see why a person who has lent money on ordinary Stock Exchange securities should not be able to realise those securities without the consent of the Court. I really do not see what the Court has to do with it. It is going to strike a very serious blow at the bankers. A great deal of the business in the City is done in this way. It has always been understood that if you entered into an agreement with a person to whom you lent money, that in the event of his not being able to repay the loan at the expiration of a certain date, you should have the power of realising the securities. It is quite true that since the War the bankers in London have entered into an agreement with most of the people to whom they have lent money, that they will not realise the securities until after two years, or one year after the War, whichever is the sooner, but that is a voluntary arrangement. I had no idea that the proposal put forward was of the nature that it is. I really must ask the right hon. Gentleman to postpone the Committee stage of this Bill until I have had some opportunity of consulting people in the City about it. It is news altogether to me I really do not think that such far-reaching legislation as this should be brought in as this was quite late last night; and I again ask the right hon. Gentleman kindly to postpone this until to-morrow, and I will see what is the opinion of the City upon the matter—which is really most important. In order to put myself in order, I beg formally to move, Mr. Maclean, "That the Chairman do report Progress, and ask leave to sit again."

§ Mr. ELLIS DAVIES
I should like to ask the Attorney-General whether the permission here refers to loans made since the beginning of the War or to those made before the War, because it appears to me that if it refers to loans made since the beginning of the War the inevitable result of this Clause will be to put an end to all 1622 banking business? Obviously, while mortgagees ought to be protected against realising securities in a depressed market, it is obvious that that course cannot be allowed in regard to securities on money advanced for short periods of time, as is the case with bankers. I take it if bankers are now to be prevented from realising their securities, the obvious result would be to put an end to all loan transactions.

§ Mr. CAVE
The answer to that query is to be found in the original Act, which does not apply to any sum of money due and payable in pursuance of a contract made after the War has begun.

§ Sir F. E. SMITH
In regard to the point raised by the hon. Baronet opposite, I confess I think he has not shown his usual quickness in grasping the purport of this Bill. I took the opportunity of asking him yesterday afternoon his opinion on it; and he said in the House itself that he thought it was a very good Bill, and he thoroughly approved of it.

§ Sir F. BANBURY
May I explain? I asked for this Bill when I came down to the House about 3.30 yesterday afternoon. It was not printed. I told the hon. Gentleman who is Chief Whip that the Bill was not printed, and that I knew nothing whatever about it, and I understood that it would not be taken. About six o'clock I went into the Vote Office, and found that the Bill had been printed. I immediately acquainted the Chief Whip with the fact that my objection, so far as taking the Second Reading of the Bill was concerned, was removed, because the Bill had been printed. My right hon. Friend afterwards spoke to me, and I told him that my objection to the Bill had been removed now that it was printed, and that I had no further objection to it. But I looked at the Bill after that, and I at once admit quite freely that I did not really understand it. I thought it exempted persons from the provisions of the original Act. I know there was a great deal of discussion about that.

§ Sir F. E. SMITH
(indistinctly heard): It is really not worth pursuing, but the hon. Baronet did state in the course of debate last night that he thought it was a very good Bill. If I do not persuade the hon. Baronet that this Clause is one in respect of which he might withdraw his objection, I tell him frankly I shall agree to postpone it. It is perfectly true that in respect of the securities held on the outbreak of 1623 the War it was contemplated at the time of the original Bill that the mortgagee in possession of personal estate should not enjoy the benefit of this, and I anticipate that this provision is one which to some extent may be injurious. But there is not a single Clause in the Bill that is not injurious to somebody. What the legislator had to do was to weigh the advantages and disadvantages of giving relief to certain sections of the community at the expense of other sections of the community. I can assure the hon. Baronet it is within my knowledge that there are creditors in every conceivable quarter of the commercial world to-day who are unable to get their debts paid. The only case here is whether a banker who, on the outbreak of war, had securities deposited with him with the power of realising those, should go to the Court and get them. Having regard to the fact we are living in a time of war, bankers are not placed even in as bad a position as many other classes of the community.

§ Sir F. BANBURY
I am much obliged to my right hon. Friend. I would like to point out that the bankers entered into an arrangement with the Clearing House of London and with people on the Stock Exchange, and they said to them, "We will not call in your loans, and they can go on for a year after the War or a certain period." But they said that under certain circumstances, supposing the securities touched a certain price, they should be allowed to realise. As I understand this Bill, supposing I, as a banker, lent money on certain securities before the War, I could not call upon the people to realise their securities under a voluntary agreement unless I went to the Court. The Court, I am sure, would be perfectly just and wise, and no doubt, under the circumstances, they would give the power. But is it not a little hard that people should be put to the expense of employing lawyers? It seems a little hard that we should, after having entered voluntarily into a very advantageous agreement, be put to the trouble and expense of going to the Court. It may be that my ideas are not quite right, and there may be cases of hardships, but I hope the right hon. Gentleman will allow me to go into this matter to-morrow.