HC Deb 09 December 1946 vol 431 cc819-25
Mr. J. S. C. Reid (Glasgow, Hillhead)

I beg to move, in page 23, line 12, to leave out Subsection (1).

I move this Amendment for the purpose of obtaining some information, because I find myself in a double difficulty I am not sure that I understand what the Subsection means, and if it means what I think it does, I am at a loss to understand the reason for it. If one is silent on the question of permission or consent from the Treasury before a contract can be fully carried out, and that permission is not given, what happens? I do not know Does the contract fall, or do the other terms of the contract remain in operation, or is it a question of circumstances that must be worked out by the court in every case? Normally, if an important part of a contract is frustrated—and this, I take it, would be a form of frustration—you expect some permission to be given If the permission is not given, if the contract falls by reason of something of that sort, the whole contract comes to an end. I would like to know what the Government think will happen if Treasury permission is not given There is an odd proviso which seems to mean that if the parties appear to have intended deliberately to flout and break the law. the contract becomes legal. It says: Provided that this subsection shall not apply"— That is to say, that the terms shall not be performed— in so far as it is shown to be inconsistent with the intention of the parties that it should apply, whether by reason of their having contemplated the performance of that term in despite of the provisions of this Act or for any other reason. That appears to mean by reason of their having contemplated doing something which is illegal. It might mean that—I hope it does not—but if the Solicitor-General could give us a succinct explanation of what the Subsection means and its purpose, I should be much relieved. I hate to think that we are making a contract valid, where the parties intended to disregard the law, but making it invalid where they intended to obey the law It seems topsy-turvy

The Solicitor-General

The object of this Clause is to facilitate traders, and it works in this way: Supposing two traders enter into a contract which involves payment of money for which Treasury permission would be required, it might be contended—although I think it would be wrong, and I will say why in a moment—that apart from this Clause that contract was invalid, because they had contracted that something should be done for which permission was necessary without providing that that permission should be obtained. If there were no such Clause as this, it might be said that any two traders entering into an agreement which required payment of money would be entering into an unenforceable agreement, because it would be illegal. I think that would be wrong. I think the right hon. and learned Gentleman the Member for Hillhead (Mr. Reid) was right, and if so, this Clause simply declares the law. It makes it possible for traders to enter into contracts or, if that is not necessary, it declares the law to be as it is at present.

Supposing two traders enter into a contract, and they say nothing with regard to the necessity for obtaining permission, it is to be an implied term of the contract that permission shall be obtained, and the contract shall be valid. The traders who want to enter into a contract are not required to go to the Treasury to ask whether they will get permission; it is implied in the contract, and the contract is only binding on the assumption that permission is obtained. Therefore, it is possible for traders to go ahead in the ordinary course of business and make contracts.

Mr. Reid

Line 15 of the Clause says: … that terra shall not be performed. No contract shall be performed. What happens to the other terms of the contract in that event? If permission is refused, that particular term is not to be performed. One would think that the Subsection meant that all other terms are to be performed, but I am not sure.

The Solicitor-General

That would be dependent on the contract. It would be a question of whether the non-performance of the contract was foundational to the contract, so dissolving it entirely. If it was not foundational, the other terms would stand. Perhaps I may put the objects of the Clause in a different form. Two traders want to enter into a contract which involves payment of money. They do not know, when they enter into the contract, whether permission will be given by the Treasury, when the time comes, for the payment of the money. If this Clause is not inserted in the Bill, they are in this position. They say to themselves, "Supposing we enter into a contract which involves the payment of money for which permission will not be given it might be said that the contract is invalid, because it is a contract which is against the law"—that is, to make payment of money for which permission will not be given. If they were left in that position they would be in a difficulty because, under the contract, they would have to go along to the Treasury and get permission to make payment for which the contract will provide. That would mean delay to such an extent that it would be impossible to carry out normal business.

The Clause says that, in any contract of that sort, they can enter into it freely, and it shall be an implied term that the payment of the money is not to be made unless Treasury permission is given. They can go ahead with their contract without making inquiry about whether the Treasury permission will first be given. It is a lawful contract. Otherwise, it might be said that it would not be lawful to enter into a contract of that sort. This Clause is designed to assist traders, and remove what might otherwise be an intolerable obstacle to the carrying out of trade. The right hon. and learned Gentleman thought I was wrong when I said that traders could not do what I have said they could do without the Clause. I think he is right. If there were no such Clause, it would be said that in the case of an ordinary commercial contract, even if the parties used no words dealing with it, it was implied that they did not undertake to do something which would not be subsequently permitted by the Treasury

6.30 p.m.

If that is so, all the Clause does is to declare the law and put beyond doubt what might have been in some doubt. Either it declares the law or, if it does not declare the law, it removes what is an obstacle in the way of the ordinary trader. The right hon. and learned Gentleman said that the proviso brings about a result not intended because it seems to make valid contracts for the performance of something which is forbidden I do not think that is the result of the proviso. The contrary is the result. What the proviso says is that this relief to traders shall not be available if they have entered into a contract which, upon the face of it, makes it clear that they intended to flout the requirement that Treasury permission should be obtained. If it is clear that they do not care one way or the other, and that they mean to go ahead without obtaining Treasury permission, then the assistance which this Clause would otherwise make available to them, shall not be available. There, it has the contrary effect to what the right hon. and learned Gentleman indicated. If they send in the contract in terms which make it perfectly clear that they do not intend to bother about Treasury permission, then that contract will be invalid and illegal. That is what the proviso is designed to do, and I think that if the right hon. and learned Gentleman looks at it a little more carefully, he will see that it does so. The Clause is indispensable for carrying on normal trade. If everyone had to go to the Treasury before entering into a commercial contract, and obtain consent or permission, trade would come to a standstill. It is in order to remove that delay that this Clause is inserted in the Bill, and I ask the Committee to say that it is an absolutely necessary Clause.

Mr. J. Foster

Would the learned Solicitor-General mind telling the Committee, if he thinks that there should not be a Regulation similar to Regulation 9B, which makes it illegal for any person to agree to do, at any future time, any act which at the time of the agreement is unlawful by virtue of any provision of the Regulations? I am not sure that there is any such provision in this Bill. At the moment, his argument, as I understand it, is that the proviso will remove that exemption or statement of law in favour of the trader, and will, presumably, leave the contract to be decided on by the ordinary rules as to illegal contracts. I understand that under the Statutory Rules and Order, 1942, the ordinary law was not too clear about that, and, therefore, a special provision was inserted saying that if any two people agreed to do something forbidden by the intended regulation, it should be wrong. I should have thought that some such provision was necessary in order to supplement what the learned Solicitor-General has just said. Having removed this statement of the law in favour of these two traders, what should be the next step? It may be contemplated to deal with this by Regulation, or it may be that it is provided for in some part of the Bill which I have overlooked. Perhaps the Solicitor-General will help me on that point?

Mr. Turner-Samuels (Gloucester)

Looking at this Subsection, I think it is perfectly clear. What it says is that no contract that has a particular term in it which requires the permission or consent of the Treasury before it can be carried out is to be carried out until that permission or consent is given. If that is right all that it amounts to is this: It merely goes as far as a particular term or terms involved in the consent required. It goes no further. It leaves the rest of the contract intact and there is no prohibition of any sort or kind on carrying out any one of the other terms. It is perfectly clear on that. It still leaves the term or terms in respect of which consent or permission is required subject to that condition, but even that is saved by the proviso. And the machinery of the proviso does this: It says that although there may be a term or terms which require the consent or permission of the Treasury, if in fact it can be shown, either from the terms of the contract or otherwise, that that requirement is inconsistent with the intention of the parties then that permission or consent is not to apply; it is not to be taken into account. The contract is left to be carried out not only as regards the terms which are not subjected to the need for permission or consent but also as to the terms that are. The contract as a whole is left to be performed in the way in which it was originally constituted. To my mind the terms of the Subsection and the proviso to it clearly stipulate that. There is no obscurity or difficulty in the language of the Clause, such as is suggested by the right hon. and learned Gentleman.

The Solicitor-General

I am much obliged to the hon. and learned Member for Gloucester (Mr. Turner-Samuels) for his argument, which stops up some of the gaps in mine. In answer to the question asked by the hon. Member for Northwich (Mr. Foster), I do not think that the additional proviso which he suggested is necessary, because the other terms of the Measure are permanent. That is to say, the other terms require in perpetuity, in particular cases, that permission shall be granted for the performance of certain acts, and if such permission is not granted, it is perfectly clear that implementation of those terms in the contract, pro tanto is unlawful, and the Schedules provide for penalties in relation to doing an act without obtaining the necessary permission. The reason why Regulation 9B was inserted in the Defence Regulations was that those regulations were only temporary, and might expire. For that reason Regulation 9B does provide, as the hon. Gentleman read out, that an agreement to do an act at a future time, which is unlawful at the time of the agreement but which may subsequently become lawful, shall be unenforceable. That necessity does not arise in the case of a permanent Measure such as this.

Mr. J. S. C. Reid

I do not think that anyone can take exception to the reasons and the purposes given by the learned Solicitor-General. The only point between us is whether they are carried out in the words used. The purposes are so straightforward that I cannot believe that the draftsmen, if they had a few moments to think, could not make a better job of it than this. I fully realise that the draftsmen are so pressed just now that they cannot find simple phraseology—because it takes too long—but I hope that the hon. and learned Gentleman will have this examined again before the Report stage. If the first part is only for the removal of doubt, might it not be well to say so, because the ordinary reader will think that it is trying to introduce some new principle of law. In the hope that the matter may be remedied before the Report stage, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clause 34 ordered to stand part of the Bill.