HC Deb 08 May 1941 vol 371 cc1007-15
Mr. Douglas

I beg to move, in page 4, line 19, to leave out "and," and to insert "or."

This Clause gives jurisdiction to the courts to deal with applications. It not only gives jurisdiction to courts in a very important class of case, but also gives jurisdiction to the liability adjustment officers in those cases where all the creditors do not agree—that is under Clause I, Sub-section 2 (b). The object of the Amendment is in one sense to widen, and in another sense to try and simplify, the conditions under which applications may be made to the courts, and the treatment of cases which are dealt with by the liabilities adjustment officers, in the cases where all the creditors do not agree. As the Clause stands at the present moment, a double condition has to be satisfied. Firstly, the debtor has to satisfy the condition that he is unable to pay his debts, which I understand to mean that he is unable to pay his debts immediately, and not necessarily unable to pay them if the whole of his assets can be liquidated, and, secondly, he has to satisfy the condition that he is unable to meet any future liability in respect of which obligation has already been incurred. But it is quite conceivable that the debtor may be able to meet his future obligations because some asset may become available to him in the future which is not available to him at the present time. If that were his state of affairs, it would be impossible for him to make any application to the courts and to have the services of the liabilities adjustment officer under Clause I if any one of his creditors objected. Moreover, it is very difficult to decide whether a man will or will not be able to meet future liabilities, in view of the difficult conditions under which we are living at the present time. It might depend, for instance, on how long the war lasted. If the war ended this year, his position with regard to liabilities which might accrue next year might be quite easy. Therefore, I submit that under the Clause, as it stands at present, it may be possible that many deserving cases may be deprived of the procedure which this Bill seeks to introduce.

Mr. Woodburn

I should like to support my hon. Friend the Member for North Battersea (Mr. Douglas) in the Amendment which he has moved. I must confess that I was unable to understand what other kind of liabilities could fall due except future liabilities. The word "future" seems to be unnecessary. With regard to the other point that my hon. Friend has made, of course, if a man is unable to pay his debts, and that is left as a general term, it would certainly cover the whole question of bankruptcy. Therefore, with my hon. Friend, I think that there should be some provision made here to cover a man who may be unable to meet his liabilities as they fall due, but who may be able to meet them after they fall due. In such cases the liabilities adjustment officer might be able to make some arrangement with the creditors whereby the debtor could pay his debts six or nine months hence. Some accommodation should be given, which, after all, is the whole purpose of this Bill, instead of making a man bankrupt when he can show he is willing to meet his debts.

The Attorney-General

The question is whether the word "or" or the word "and" is right in a case of this kind. It is very nearly as difficult to decide, as it is for me to decide whether one puts the clock on or back when Summer-time starts. We think we have got the right word and that the Amendment is wrong. The problem can be stated quite shortly. Let us assume the present debts of a man are £3. If he has less than £3, he is unable to meet his present obligations. Happily, that will be the majority of the cases, and we hope that such cases, will benefit by the Bill. But let us suppose that a man's present debts are £3, that he has £5 in his pocket, and that he will owe £3 rent in a fortnight's time. We drafted this Clause with a view to bringing that man in, namely, the man who can say that he has not got enough to pay his immediate liabilities. A man might say that if he waited until the end of the month, he would have a future obligation to pay £3, and that in the meantime he would have nothing coming in. He might say that if he paid his butcher and baker, he would be left with only £2. That is the case we wanted to bring in under the Bill—it is a case of a man who is not insolvent at the moment.

Major Milner (Leeds, South East)

That is not what the hon. Member for North Battersea (Mr. Douglas) stated.

The Attorney-General

It is a question of whether the word "and" or the word "or" covers it. We think the word "and" does it. It means that anyone can apply who is unable to pay his debts and meet them as they fall due—that is, future liabilities if any. Therefore, a man could be covered if he could show that he was unable to meet his present debts. If he cannot meet his present debts, he will not be able to meet his future debts.

Mr. Douglas

That does not follow.

The Attorney-General

The hon. Member thinks there is a possibility of a man being unable to meet his present debts, but who will be able to meet his future debts. I do not think that is a likely case, but it is a possibility. However, I am certain that the word "or" will not meet it, because it would exclude the man with £5 who has to pay £3 to-day and £3 liability in the future. That man could not show that he was unable to meet his present debts, because they are only £3 and he has £5. I will consider an amplified and clearer form of words. It is plain that we desire the same result, and I will put it down for the Report stage.

Mr. Woodburn

Would it not help if both words were put in—"and" and "or"?

The Attorney-General

You cannot do that in an Act of Parliament.

Amendment, by leave, withdrawn.

Mr. Moelwyn Hughes

I beg to move, in page 4, line 24, after "be," to insert "in serious financial difficulties or."

Paragraph (b), as I read it, extends the benefit under these proceedings to those who have certain assets but who, if they were deprived of those assets for the immediate benefit of their creditors, would find themselves in, so to speak, a future difficulty. They would be unable to carry on business and would be deprived of the means of livelihood. In other words, in respect of businesses the Bill recognises the desirability in certain circumstances of retaining available assets in the possession of the debtor. My Amendment is designed to extend the benefit of that provision in proper cases to individuals not necessarily engaged in business. I have in mind an individual who has an insurance which has an immediate cash value, or one who would have a little money put by for contingencies, not much, but some asset which could be realised. I have sought to do this by using the phraseology of Clause I. As the Attorney-General has said, the sphere of operations of the Bill before the courts is more limited than that of the liabilities adjustment officer, because his duties extend to all persons who are in serious financial difficulties. But the Bill does not give to everyone in serious financial difficulties the power to come to the court seeking an adjustment order. It limits it to the category that we discussed in the previous paragraph and those in the paragraph that we are now considering. It may be that the term is too wide to be included in paragraph (b) and that it needs to be further hedged, but I would press the right hon. and learned Gentleman to extend the provision which he is now going to make with regard to businesses to private individuals, so that they need not necessarily be deprived of all their available cash assets, or immediately realisable assets, before they can have the advantage of adjustment proceedings.

The Attorney-General

I thought, when I saw this Amendment on the Paper in the place where it was, that it was directed to the category of persons dealt with in paragraph (b) but, having heard the hon. Gentleman, I think he is really wanting to extend the class of case which in the Bill is dealt with under paragraph (a), because his words would cover all the people whom we have already defined, and to some extent limited, under that paragraph (a). They would all be in serious financial difficulties. I quite agree that you must decide in a Bill of this kind where to draw the line, and, wherever you draw it, some people will say, "Could you not go a little further?" We felt that the proper place to draw the line in this general class of case is where it is drawn in paragraph (a). We used the most general words when setting up the liabilities adjustment officer in Clause 1, because really we wanted to leave him with the door open. We did not want him to say, "I have no jurisdiction to look into your case unless you satisfy certain specific conditions." But, when you are coming to the court procedure, which one has to look at from the point of view of creditors as well as debtors—and not all creditors are rich people—you have to be specific.

The first suggestion that occurs to one would be to take the normal insolvency case and ask, "Can you meet your liabilities? If you can, you had better go ahead. Something might turn up." But we thought that would be rather too rigid with this exceptional and unanticipated type of circumstances. It was right, we felt, to give a man the benefit of these proceedings if, although he had assets to meet his present liabilities, he could see what was coming in the future and would not be able also to discharge those obligations. That is where we thought it right to draw the line in ordinary cases. I think one has to distinguish and apply special treatment to businesses, particularly small businesses, which in some ways are the hardest hit of all and which it is most desirable in everyone's interest to preserve, and therefore paragraph (b) went rather further than (a) and said, "You may get a man who can pay his debts—cannot say he cannot meet his future liabilities—but he may say, If I exhaust my resources, I shall soon be unable to carry on my business.' "It would be because he was trying to keep his business that there would be a drain on his reserves, which would not arise in non-business cases. He would have his business premises to keep and might have other outgoings. Therefore, we thought that in the case of a business it would be right to look a little further into the future.

The point which I thought my hon. Friend was going to make—and although he has not made it, I will make it—is that the words "he would be unable to carry on his business" are a little too flat a test and that we ought to make the words a little vaguer by saying that he would be unlikely to be able to carry on his business. I think that a little further elasticity in this paragraph in that direction might be advisable, but we cannot accept the words "in serious financial difficulties" in the general form in which my hon. Friend has proposed. We think that in paragraph (a) in the general sense in which it is drawn we have gone as far as we can reasonably go.

Mr. Moelwyn Hughes

Is my right hon. and learned Friend prepared to insert something in paragraph (b) that would extend this benefit to others than those who are possessed of businesses? I agree that there must be a definite line of demarcation, but I do not think it is right that only in the case of businesses anybody is to be allowed to retain money which could be available to pay debts with. If he is prepared to extend the paragraph beyond pure businesses I should be glad to ask leave to withdraw the Amendment.

Major Milner

If I applied under paragraph (a), a scheme might be approved by the liabilities adjustment officer whereby I paid 10s. in the £ and I should be left with assets. My hon. Friend seems to be under the impression that I should necessarily have to hand over to my creditors everything I have got. I take it that that will not necessarily be so, whether I am in business or not, for I would have to have a little left to live on. I should like to ask whether it is intended that in all cases where application is made under paragraph (a) the debtor would have to hand over to his creditors all that he has.

The Attorney-General

That comes under Clause 4, under which the court has power, in settling the terms of a liability adjustments order, to secure the maintenance of the debtor and his family and for excepting from the property to be realised his home and business premises. On the point that my hon. Friend raised, I would draw his attention to the last words of paragraph (b), "or would otherwise lose his means of livelihood." It is not confined to businesses and the rentier, the man who has not a business or means of livelihood, comes within paragraph (a). In that case it would be difficult to go beyond what we are doing in the Bill.

Amendment negatived.

The Attorney-General

I beg to move, in page 5, line 13, after "agreement," to insert: being land or goods in the debtor's possession at the date of the order. This and the four following Amendments are little more than drafting Amendments. It was pointed out that the Bill was a little obscure on the question whether a protection order operated, as, of course, it must, on the property as at the date of the Order. These Amendments prevent any argument arising on that point.

Amendment agreed to.

Further Amendments made:

In page 5, line 14, after "upon," insert "any such."

In line 15, leave out from "of," to end of line, and insert "any such goods."

In line 28, at the beginning, insert "The Court may in."

In line 28, leave out "may."—[The Attorney-General.]

Major Milner

I beg to move, in page 6, line 11, at the end, to insert: and a copy of any such report shall be available for inspection by the debtor or any creditor. It is obviously desirable that all proceedings under this Bill should be open and above board, and it seems to be right and proper that a copy of any report made by the liabilities adjustment officer to the court should be available for inspection by the debtor or any creditor. It is a practice in bankruptcy for the official receiver to make a report upon the conduct of the debtor. It is a public report and is read in open court. One wants to avoid the liabilities adjustment officer putting into a report anything which the debtor or any creditor should not have the opportunity of controverting, correcting, or acquiescing in, as the case may be. It may be more appropriate to deal with this point in the rules, and if the provision is made there, I shall be content.

Sir A. Maitland

Will the Attorney-General consider extending the Amendment so as to make the report available not only to the debtor, but to creditors as well, if necessary on payment of a small charge?

The Attorney-General

I agree that this report should be available to the debtor and creditors, but it would be better to deal with the matter by rules. We have to provide for times of inspection and the payment of some fee. I will give an undertaking that it is our intention to provide for this in the rules.

Amendment, by leave, withdrawn.

Major Milner

I beg to move, in page 6, line 12, after "debtor," to insert: and after hearing the debtor or any creditor. Sub-section (6) provides that if the court is satisfied in the case of any debtor that the matters set out in Sub-section (1) are correct they may make a protection order. The object of this Amendment is to provide that notice shall be given to all concerned. Presumably in the majority of cases it will be the debtor who makes application, and ex hypothesi he will, of course, have an opportunity of coming before the court. Presumably, also, where the petitioning creditor, as he is called, makes application, notice will be given to the debtor, but what will be the position of the other creditors in such a case? It may be that they would take exception to an order being made, and there ought to be provision for other creditors to be given notice at some stage of the proceedings. It may be that this is not the appropriate place at which to introduce such an Amendment or, again, the point may be provided for in the rules, but if some provision is made for the contingencies I have referred to I shall be satisfied.

The Attorney-General

The appropriate place for dealing with this point will be in the rules. In this form of procedure steps are taken to see that not only are the parties heard but that notice is given to other creditors; for example, provision would be made to give notice to a landlord's mortgagee. In any case we shall take steps to see that all persons concerned receive notice of what is happening.

Major Milner

On that assurance, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause, as amended, ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.