SECURITIES (VALIDATION) BILL [Lords]. (Hansard, 12 November 1940)

§ The Solicitor-General (Sir William Jowitt)
I beg to move, "That the Bill be now read a Second time."
I believe this to be a completely non-controversial Bill and not very difficult to explain. The matter arises in this way. By Regulation 6 of the Defence (Finance) Regulations, 1939, promulgated on 3rd September, 1939, it was declared as follows: It shall not be lawful, except with the consent of the Treasury, to make an issue of capital in the United Kingdom. and the phrase "issue of capital" was defined so as to include the issue of any securities. It was never intended that that Regulation should apply to the ordinary case of a mortgage as, for instance, where a man mortgages his house, and has a charge placed on his property. It is difficult, I think, to suppose that any construction could possibly treat that as being an issue of capital. None the less, early in November some very ingenious and very learned person published an article in one of the legal magazines suggesting that the ordinary mortgage might be an issue of capital within the meaning of the Regulation. He pointed out the very serious consequences which might ensue, for, if the Regulation made the transaction illegal, it did not mean merely that the parties to the transaction made themselves liable to a small fine but that the whole transaction would be unlawful, and the money which had been lent on mortgage would be irrecoverable.
Accordingly, the matter having come up in those circumstances, a further Regulation was issued on 23rd November, by which it was enacted that, as from that date, the reference to securities should include mortgages and it was further provided that a security of any nature issued without Treasury consent should not be 1624 invalid as between the parties but that the sanction should simply be the penalty provided by the Regulation. It was hoped that that Regulation, which included mortgages in the term "securities", from and after 23rd November would make it plain that mortgages were not included in the Regulations before 23rd November. But doubt still persisted and it was pointed out, quite rightly, that Defence Regulations could not be made to have retrospective effect. The Council of the Law Society therefore requested that the matter might be referred to the opinion of the then Law Officers. I was not one of them. The Law Officers advised that the Regulation of 3rd September did not extend to mortgages, but they said there was some element of doubt and they agreed with the Law Society that that element of doubt should be cleared up.
I am asking the House to pass the Bill in all its stages here and now. It applies only to the period from 3rd September to 23rd November, and, in regard to that period, it makes it plain that ordinary mortgages or charges were never to be taken to be subject to the Regulation of 3rd September at all, that is to say, they are not to be treated as though they were issues of securities. Secondly, it makes it plain that, in regard to that period, any issue of securities, of whatever nature, is not to be avoided as being invalid as between the parties but that parties who have taken it upon themselves improperly to issue securities shall, of course, remain subject to the pains and penalties laid down by the Regulations, but the securities themselves shall not be avoided. It puts the pre-23rd November securities in exactly the same position as the post-23rd November securities, they being regulated by the later Regulation. I do not anticipate that there will be any difficulty in the House conceding the fact that we are right in clearing up this doubt and in putting the position before and after 23rd November on exactly the same footing.

§ Mr. Rhys Davies (Westhoughton)
I am authorised by my hon. Friends behind me to say that we have no objection to passing the Bill through all its stages. There is only one observation that I wish to make on the right hon. and learned Gentleman's speech. It has always appeared to me a very strange thing that 1625 the State chooses very eminent legal gentlemen, like the right hon. and learned Gentleman, to see that Bills are in proper order before we pass them through the House, then through Committee, then down to the House again, and every comma and semi-colon and full stop have been examined, and when we have done all that someone writes an article in a leading journal and upsets the whole business. I have come across that sort of thing on many occasions. I hope that, after passing this Bill, someone will not come along and write another article to a legal journal to say that the whole thing is wrong once again.

§ Mr. Bellenger (Bassetlaw)
In justice to the right hon. and learned Gentleman, I ought to say that it is not entirely the fault of those who have the privilege of serving as Law Officers that these mistakes occur. The whole of our Rent Act legislation has been severely criticised in the courts, but the fact remains that the matter has now been put right. I want to ask my right hon. and learned Friend whether the Government have any policy on the question of private mortgages. I understand that at present the banks are not prepared to advance any moneys on mortgage, as it is against the policy of the Government to permit mortgages, because they want the banks to lend money for purposes other than private mortgages, which are all part of the business of the nation which provides taxes for the Government to carry on. Will the right hon. and learned Gentleman say whether the Government are exercising any authority over the banks to prevent private mortgages being carried out?

§ The Solicitor-General
With regard to the last point, I cannot embark upon it. It would be the cobbler leaving his last if I did. I have not received any instructions on the point from the Chancellor of the Exchequer, nor do I know what his views are, not having discussed it with him. I suggest that the hon. Member might put down a Question to my right hon. Friend. With regard to the first speech, the trouble arose not from a Bill carefully considered in Committee but from a Defence Regulation, and if only the skill and cunning of the hon. Gentleman had been let loose on the Regulation, I am sure we would have saved all this trouble. I admit that lawyers do not infrequently err. and I am afraid that for 1626 the rest of time they will go on occasionally erring. All that we can do is to err as little as possible.