§ (1) Nothing in Part III of this Act shall compel the production by a solicitor of a document containing a privileged communication made by or to him in that capacity or authorise the taking of possession of any such document which is in his possession.
§ (3) The Board of Trade shall not, tinder section 105 of this Act, require, or authorise an officer of theirs to require, the production by a person carrying on the business of banking of a document relating to the affairs of a customer of his unless either it appears to them that it is necessary so to do for the purpose of investigating the affairs of the first-mentioned person or the customer is a person on whom a requirement has been imposed by virtue of that section.—[Mr. Jay.]
§ Brought up, and read the First time.
§ Mr. Deputy Speaker
I think that it would be for the convenience of the House if the following four Amendments were discussed at the same time: Amendment No. 119, in Clause 105, page 82, line 12, at the beginning insert:'Subject to the provisions of section 175 of the principal Act'.Amendment No. 120, in page 82, line 12, at the beginning insert:'Subject to the provisions of the next following subsectio'.Amendment No. 123, in page 82, line 38, at the end insert:(2) The powers conferred upon the Board of Trade by the foregoing subsection shall not be exercisable in relation to any body which is, for the time being, exempted from the operation of the Moneylenders Act 1900 to 1927 under section 117 of this Act.Amendment No. 126, in page 83, line 28, at the end insert:(5) Notwithstanding the foregoing provisions of this section the powers of the Board of Trade so conferred shall not include power to require a solicitor to produce any books or papers held on behalf of a client or to make any explanation or statement prejudicial to the interests of such client.
§ Mr. Jay
A little earlier, the hon. Member for Gloucestershire, South (Mr. Corfield) complained that several new Clauses were being added to the Bill at this stage. This was a little unfair, because many of them have been added in order to meet points made by hon. and right hon. Members opposite and 855 others in Committee, and I am sure that the hon. Gentleman would not wish us to disregard everything said by anyone other than the Government in Committee. This new Clause is an example of a provision proposed to meet a point made by the Opposition, in this case primarily by the hon. Member for Crosby (Mr. Graham Page).
In Committee, the hon. Member for Crosby pointed out that there are provisions in the Companies Act, 1948, which exempt solicitors from certain obligations when investigations are being made into the affairs of a company. At present, under Clause 105(2) of this Bill, any person who appears to the Board of Trade or an officer of the Department to be in possession of a body corporate's books or papers can be required to produce them. Such a person might be a solicitor. Subsection (1) of the new Clause ensures that, under Clause 105, a solicitor cannot be compelled to produce a document, and, under Clause 106, possession cannot be taken of a document in the possession of a solicitor if the document contains a privileged communication made by or to the solicitor in that capacity. That is the point which we were asked to meet. It seems to us to be a substantial one, and that is the purpose of the new Clause. I am sorry that the hon. Member for Yeovil (Mr. Peyton) is not here now to see that we still do not weary in well doing.
Subsection (2) of the new Clause gives a corresponding saving to banks except in two circumstances, either that the bank itself is being investigated—in which case one would not wish to provide a saving of this kind—or when it is not right to give a saving where a bank is being required to produce papers relating to the company which is under investigation, because to do so would frustrate the purpose of the investigation.
§ Mr. Graham Page (Crosby)
The new Clause fulfils an undertaking given in Committee, and to that extent I am grateful, but my gratitude is for only half a loaf, not for the whole, because the Clause does not go far enough. It does not go as far as the principal Act goes.
We are talking here about what is frequently called the privilege of solicitors or the privilege of bankers. It is wrongly 856 so called because it is the privilege of clients of solicitors and of customers of bankers not to have their affairs disclosed. To that extent, it is the privilege of the public, that is, the public when consulting a solicitor or when having an account at a bank.
This was clearly recognised under Section 175 of the Companies Act, 1948:Nothing in the foregoing provisions of this Part of this Act shall require disclosure to the Board of Trade or to an inspector appointed by them"—and then there follow two paragraphs, one relating to solicitors and the other to bankers—
The reference there is, in the first case, to communications and, in the second case, to information. It is not restricted to documents. The new Clause, on the other hand, is restricted to the production of documents. To that extent, it is less advantageous to the public than was their privilege recognised under the 1948 Act.
- "(a) by a solicitor of any privileged communication made to him in that capacity, except as respects the name and address of his client; or
- (b) by a company's bankers as such of any information as to the affairs of any of their customers other than the company."
Subsection (1) of the new Clause refers toa document containing a privileged communication".Therefore, any statement required of a solicitor concerning his client's affairs would not be privileged under the Clause. The same applies to bankers, the reference in subsection (2) being entirely to documentsrelating to the affairs of a customer.There is this grave difference between the privilege recognised under the 1948 Act and the privilege purported to be given under the new Clause.
I turn now to Amendment No. 126, an Amendment to Clause 105, the Clause under which the Board of Trade may require the production of documents. Under Clause 105(3) the inspector may require not only the production of documents and the production of copies or extracts from them, but he may require any person or body having possession of the books to provide an explanation, which, of course, may be in writing or an oral statement. Therefore, as I understand Clause 105, the inspector could call 857 upon a solicitor and say, "Here are some books of this company. I want an explanation. It need not be in writing."
Under Clause 105 the solicitor is under a duty by law to give that explanation. It is a duty of which he is not relieved under the new Clause, because it refers only to his production of documents. It does not refer to his duty to give an explanation under Clause 105(3). To that extent the new Clause is inefficient and ieffective, whereas our Amendment No. 126, which would be added at the end of Clause 105, would be effective. It says:(5) Notwithstanding the foregoing provisions of this section the powers of the Board of Trade so conferred shall not include power to require a solicitor to produce any books or papers held on behalf of a client or to make any explanation or statement prejudicial to the interests of such client.That shows that the Opposition have read the Government's Bill a little better than they have. We have spotted the subsection and paragraph in Clause 105 which were apparently overlooked when the Government drafted the new Clause.
Concerning bankers, I wish to refer again to Section 175 of the 1948 Act, under which a very wide privilege is Oven to bankers' customers. A company's bankers are not required to produce…any information as to the affairs of any of their customers other than the company.The new Clause merely says that the banker shall not be required to produce a document relating to the affairs of a customer. Therefore, he may be questioned by an inspector orally and, since he is under a duty under Clause 105, he could not refuse to answer those questions orally and disclose his customers' affairs.
There are two further severe and substantial qualifications to the privilege under subsection (2) of the new Clause. The banker is not required to produce…a document relating to the affairs of a customer of his unless either it appears to them"—the Board of Trade—that is necessary so to do for the purpose of investigating the affairs of the first-mentioned person…But, surely, the Board of Trade would not ask for the production of the document unless it was satisfied that it was 858 necessary? This seems to nullify the whole Clause. The inspector would have no purpose unless he thought that the production of the documents were necessary.
The last phrase in subsection (2) of the new Clause is:…or the customer is a person on whom a requirement has been imposed by virtue of that section.In order to have the documents produced, or to force production, the inspector has only to impose a requirement under Clause 105 for the person concerned to produce the books and papers. Therefore, the new Clause does not go far enough concerning the privilege of a solicitor's client, and its effect is absolutely minimal concerning a banker's customer.
We are also able to discuss Amendment No. 123. It too attempts to obtain some exemption from production of documents and giving information under Clause 105, although it is quite different from Amendment No. 126. It would remove from duties under Clause 105 the banker who has received a certificate from the Board of Trade that he is a banker and carrying on a banking business. I should have thought that it is merely a matter of convenience in the administration to include him. By making a banker who has such a certificate subject to the Clause there is a sort of double form of parental control. But one assumes that there must have been a good investigation before the certificate was granted. The Board of Trade has power to revoke the certificate, and I should not have thought that it needed more powers under Clause 105 against a banker with a certificate. That is a separate point from that of privilege and merely concerns administrative convenience.
I urge the President of the Board of Trade, if there is time at this stage, to put down more Amendments to look again at the new Clause to see where it is deficient and to accept our Amendments, particularly Amendment No. 126.
§ 5.15 p.m.
§ Mr. Jay
I am sorry that the gratitude of the hon. Member for Crosby (Mr. Graham Page) is a little qualified, but I think that he will agree that we have come a considerable way to meet him. I shall certainly consider his points, so far 859 as it is now possible to do so. An argument can be advanced that we must protect a client of a solicitor, or customer, or client—whichever is the right word—of a bank. But we are also protecting the public in the sense of those who may be injured by some of the practices that a very small minority of companies have carried on. We are trying to strike a balance between these arguments.
I agree that from the point of view simply of the client of a solicitor or a banker the hon. Gentleman can advance quite a cogent argument, as he has done. He can show that the provision we have introduced is not identical to that in the principal Companies Act. However, we have not attempted throughout the Bill, and particularly in the anti-fraud provisions, precisely to follow the 1948 Act. The purpose of quite a number of provisions in the Bill is to vary that Act so as to tilt the balance a little in giving more power to the Board of Trade's inspectors and rather less power of delay to those who are inspected, or investigated.
We hope that we have drawn the balance correctly, and we consider that we have. I know that the hon. Gentleman does not wholly agree, and so far as possible I am glad to examine his points.
§ Mr. John Nott (St. Ives)
The new Clause is a great disappointment to me. It does not go nearly as far as we were led to expect in Committee.
I initially raised the point about bankers and my hon. Friend the Member for Crosby (Mr. Graham Page) initially raised the point about solicitors. I was particularly concerned with the general question of banking secrecy as it effects our overseas customers, and that non-residents of this country would fear that their affairs could be investigated here in a way that could not happen in Switzerland, Germany, France and a whole host of other countries.
In moving an Amendment, my fears were that this could cause some slight damage—I would not exaggerate it—to the overseas business which the banking community carries on. In support of my Amendment I mentioned, as reported in c. 1174 of the OFFICIAL REPORT, Standing Committee E, of 8th June, 1967, 860 that Section 49 of the Finance Act, 1966, recognised this very point. It allowed banks carrying on overseas business to apply for exemption from the provision which would allow tax inspectors to examine their books. I understand that application has been made by the clearing banks for such a certificate of exemption.
I am therefore disappointed that although the President of the Board of Trade has gone some way to meet the point, he has not gone as far as we would have hoped, because the Clause will not allay the fears of those overseas who wish to deposit money with British banks—fears that their affairs may not be completely secret and private from the prying eyes of the Government. We all know that in this country it is accepted that the Government should be allowed to investigate books in certain cases.
I regard that as an unfortunate fact, nevertheless, it seems to be widely accepted in this country, but it would not be accepted by a Swiss, German, or French customer of a British bank. The right hon. Gentleman should look at his Clause again. I hope that he will do so.
§ Mr Corfield
I find the argument of the President of the Board of Trade a little less than conclusive. What I do not understand in the first place is his reluctance to incorporate Section 175 of the Companies Act, 1948. By far the simplest way of doing what my hon. Friend the Member for Crosby (Mr. Graham Page) wished to be done in Committee and what my hon. Friend the Member for St. Ives (Mr. Nott) wishes to be done in relation to banks would be to incorporate Section 175 of the principal Act in the Bill.
The right hon. Gentleman suggests that he wants tougher powers in relation to these documents and papers under Clause 105, and that he is, therefore, not prepared to have fairly tight restrictions in respect of solicitors and bankers such as those that exist in the 1948 Act. But in the next new Clause we are to write in that all references to books and papers in the Bill shall be construed as if they were contained in the 1948 Act.
We are to have the curious situation whereby under the 1948 Act all the Sections in relation to inspection, which I 861 think start at Section 164, are subject o Section 175, but a statement which s extracted from somebody by an inspector in explanation of a book or paper under Section 105(3) will be subject to a different safeguarding provision, namely, that of being included in new Clause 17.
If ever there were an argument for saying that a major change of this sort should be postponed to the next Bill—which is the argument that we have heard ill the time—it is to be found here Surely this is a complete departure from the provisions in the 1948 Act and in no way tied up with Jenkins. The President of the Board of Trade is a little disappointed when I say that he puts forward too many new Clauses. I welcome those which meet points that we raised in Committee, but I dislike very much being told that he thought of something yesterday and put it into the Bill, having refused to take cognisance of many of the arguments that we put forward—while accepting the validity of the points which we put forward to improve the Bill—although he has had weeks to think about them.
If we are to make progress we must get out of the habit of his saying that he has gone some way to meet us. We are all here to improve the Bill, not o play 15-love or 30-love as the Leader of the House plays it in the middle of the night when he enters the Chamber on other matters.
§ Mr. Corfield
There may be something in that intervention.
But I press the right hon. Member to bear in mind that Section 75 of the original Act does this adequately. He has not told us why it is not effective. He has not said that as a result of experience it should not be applied. What he should do is to drop new Clause 17 and to accept Amendments 123 and 126 n my name and that of my hon. Friends, or possibly even Amendment 119, which brings in Section 175.
Mr. J. T. Price
I will not detain the Rouse for more than a few minutes, because I know that my right hon. Friend wants to make progress with subsequent parts of the Report stage. But I must 862 express some surprise at the rather tendentious attitude of some hon. Members opposite this afternoon. I went through the Committee stage, and I look back on that period as one when we were a harmonious Committee. Some of us, including myself on a number of occasions, expressed our doubts about anything which tended to infringe personal liberty or to give greater powers of investigation to the Government to pry into what should be private, confidential affairs.
But all the criticism this afternoon fails to appreciate the purpose of this new legislation, which seeks to strengthen the Government's hands against fraud. To limit ourselves to legalistic argument about the niceties, and how far we should be able to give the Government power to investigate fraud, is rather beside the point.
It might be useful for me to point out that I have been a supporter of the Government on general lines—although occasionally not a supporter. I should like to treat myself to the luxury of being able to say that on this occasion I think that my right hon. Friend is right and that his critics are wrong. It gives me some satisfaction to be able to say that sincerely.
The hon. Member for St. Ives (Mr. Nott), who has great knowledge of banking, knows that he has been talking rather at variance with some of the things that he said in Committee. In matters of this kind where the ultimate ability of the Government to investigate fraud is a matter of public interest, we cannot create an area of sacred ground, where documents can be shifted into an area of sanctum sanctorum. It cannot say that these must be protected from the prying Government inspectors.
I do not want to be acrimonious or tendentious about this point, but we cannot put into the Bill a Clause which would automatically seal off a little protected area of sacred ground, possibly with an ancient house, which the priests or the bishops could use as a sanctuary for people trying to get away from justice. If we establish that, there will be very clever people in this and other countries who do all kinds of fraudulent things and who would be aware of the fact that they had only to take the incriminating evidence to a certain office, 863 which might be some client or associate of the company—
§ Mr. Nott rose—
If I am provoked, Mr. Speaker, I can elaborate the case much more. But I sincerely ask my right hon. and hon. Friends and hon. Members opposite, who for many months have co-operated in trying to make this a good Bill, not to be too niggling or to have too parsimonious an attitude to some of these matters.
§ 5.30 p.m.
§ Mr. Nott
We agree that it is purely a question of balance. We fully understand that the objective is to prevent fraud, but we do not want the Minister destroying existing, well-run businesses. The only comment made by my hon. Friend and myself was that we feel that the balance is still set too much on one side.
§ Mr. W. O. J. Robinson (Walthamstow, East)
I acknowledge that I am interested in the necessity and desirability of solicitors and their clients being protected. Possibly it is my fault, but I have found difficulty in following the arguments being advanced that the Clause does not give that security and that the provisions of Section 175 ought to be substituted for it.
I have endeavoured to examine the Clause, and I wish solely to deal with subsection (1). The differences are these. The Clause prevents a solicitor from being compelled to produce not a privileged communication, as Section 175 says, but a document containing a privileged communication. I should have thought that that afforded greater protection because, as I see it, a solicitor could say that he would not produce a document because it contained a privileged communication.
Is it seriously argued that the privileged communication itself could be required to be produced because it was not incorporated in a document? If that were the case, I am sure that a solicitor would have sufficient ingenuity to put the privileged communication in a file, with or without other papers, at which time it would constitute a document containing a privileged communication and would be protected from production.
864 I see, also, that the Clause prevents his being required to produce a privileged communication not only given to him, as Section 175 requires, but made by him. That, again, is an additional protection afforded by the Clause.
Section 175 is silent on the point, but the Clause also prevents an inspector taking possession of a document containing a privileged communication. With respect to the argument advanced by the hon. Member for Crosby (Mr. Graham Page), the Clause gives far greater protection than the existing provision in Section 175.
§ Sir J. Foster
I must answer that. As I understood my hon. Friend, he said, first of all, that the Clause is not as wide as Section 175, and the hon. Gentleman would know, if he had read Clause 105 of the Bill, that it enables the Board of Trade to ask for an explanation. Therefore, it enables the inspector to ask the solicitor for an explanation about a privileged communication, and that is not covered. The reason why Section 175 did not cover that was because there was no power to ask for explanations.
That is why there is this gap. I think that the hon. Gentleman is bound to agree that the gap exists, that Clause 105 is the occasion for the creation of the gap, and that Section 175 of the principal Act gives no protection.
§ Mr. Robinson
Would a solicitor not be entitled under the law as it stands, if asked for an explanation, to say that an explanation would require him to produce or give evidence to the contents of the privileged communication, and refuse to do it?
§ Sir J. Foster
One answer to that is that, possibly, it is not in a document at all. It is possible that the client has made a communication to him and has alluded to it in a document which is in the possession of the inspector. It may be that he has written to a friend saying that he has told the solicitor all about the money which he obtained from X. In that event, the inspector goes to the solicitor and asks if his client told him about the money which he obtained from X, whereupon the solicitor has to say that he did. Then the inspector asks for an explanation of what he said.
However, that is not contained in the document in the possession of the 865 solicitor but, in another document. The person being investigated may have been asked by the inspector if he had told his solicitor about it, in which case he would say that he made a communication to his solicitor which is privileged, whereupon the inspector would go along to the solicitor and ask him.
I think that the hon. Gentleman is mistaken in saying that the Clause goes further than the Section in the principal Act. It is necessary to include a protection on this score. He is right that "made by or to him" is an extension of Section 175. The point made by my hon. Friend the Member for St. Ives (Mr. Nott) is that Section 175 protects the affairs of customers, while the Clause does nothing of the sort.
One other point is that it would not be possible for a solicitor, asked about a verbal communication before he is asked to put it in a document, then to be asked to disclose something which is in a document.
§ Mr. Jay
I am encouraged to think that when we have the support of my hon. Friend the Member for Westhoughton (Mr. J. T. Price), we must be right in what we are doing, even though he has lot sought for an answer on this occasion.
Out of courtesy to the hon. Member for Gloucestershire, South (Mr. Corfield), I would say that an additional reason why we have introduced a slightly different provision from that contained in Section 175 of the principal Act is that Section 167 of the principal Act goes wider than the powers which we are giving ourselves here. Under Section 167 of the 1948 Act, a solicitor may be required to give explanations about any matter, whereas here we are dealing with explanations about the papers which he is asked to produce.
I would make this comment on what the hon. Member for St. Ives (Mr. Nott) said. He had anxieties about documents being required from banks. He exaggerates the difficulty if he thinks that British banks would be put at a disadvantage as compared with overseas banks. In the first place, we are dealing happily with by no means a normal sort of procedure, but with investigations into occasional cases of suspected fraud. After all, they are very few, and I do not think that this could possibly have the sort of 866 wide repercussions which the hon. Gentleman fears.
Secondly, in all this, we must leave some reasonable discretion to the inspectors to determine what sort of information it is necessary and judicious to ask for. We cannot wholly lay it down in advance by way of legislation. Though it is a perfectly legitimate point to raise, his anxieties were rather exaggerated.
§ Mr. Graham Page
On a point of order, Mr. Deputy Speaker. You said, very kindly, that we could discuss Amendment No. 126 with the new Clause. Having regard to the way in which the debate has developed and the issue which has appeared, would you consider allowing that Amendment to be called for a Division when we reach it?
§ Mr. Deputy Speaker
I must inform the hon. Gentleman that Mr. Speaker has not taken that view. He allowed Amendment No. 126 to be discussed, but he is not permitting a Division on it.
§ Question put and agreed to.
§ Clause read a Second time, and added to the Bill.