HC Deb 26 June 1968 vol 767 cc728-35


6.30 a.m.

Mr. Kenneth Lewis

I beg to move Amendment No. 74, in page 7, line 25, leave out subsections (2) and (3).

Mr. Deputy Speaker

I suggest that it would be convenient for the House at the same time to discuss the following Amendments: No. 75, in line 38, leave out 'person' and insert 'company'.

No. 76, in line 42, leave out from 'which' to end of line 44 and insert: 'shall not exceed the amount by which the dividend paid exceeds the amount authorised under the provisions of this Part of this Act.' No. 77, in line 44, at end insert: 'or if a body corporate shall not exceed two thousand pounds'.

Mr. Lewis

I confess that I can think of other, more pleasant, scenes to be surveying at half-past six in the morning than Members of the Treasury Bench sitting amid the debris of yesterday, which looks like a mixture of dividend stubs and Green Shield stamps. It is particularly depressing to be sitting here for all these hours debating only the restrictions imposed by the Bill. Our efforts would have made some sense had we been talking about increasing dividends, since if they increase it means that industry is doing well, and if industry is doing well it means that the country must be doing well, too.

We are debating a penal Clause. Although I will not make the speech that I had prepared—although I would feel justified in keeping hon. Members for a considerable time on this important issue —it is worth considering the genesis of the Clause. It was mentioned in the Civil Defence Act, 1939, but I am not sure whether it appeared in earlier legislation. From one's experience of Committee work in the House, one sees various provisions cropping up from time to time in later Acts. It is as though the Parliamentary draftsmen say, "We need a Clause to deal with this matter. Let us pull a Section out of that Act and use it in this. Bill." The whole thing is rather like a jigsaw puzzle. That has obviously happened in this case. The Clause appeared as a Section of a previous Measure, and it was lifted.

That being the genesis of the Clause— the provision was no doubt necessary just before the outbreak of war—we must consider whether it is applicable today. At the time of the 1939 Act people had to be told to do the things that the members of the Armed Forces were expected to do, anyway. I doubt whether this type of provision, and certainly subsection (3), is justified in a Bill of this kind. Although it may have been used in other Measures passed since the war, to include it in this Bill is giving a double ducking to directors, managers and secretaries of companies.

No similar penalty appears in the 1956 Act. It goes much further than the penalty imposed on trade union officials, who are not really penalised at all. The 1966 and 1967 Acts impose penalties on unions, but union officials are excluded. Is this provision, and particularly subsection (3), necessary in view of the present company law. The Companies Act and Palmer's Company Law state clearly the well-known principle that …a principal answers for the act of his agent in the course of his master's business. As things stand, directors and company secretaries are covered in that when they are prosecuted, they are prosecuted for their companies. The Clause goes further and says that not only the representative of the company shall be prosecuted, but that "…the company shall be guilty of the offence" as well.

That is what we object to. We think that it goes too far and is not justified. At a different time of day I could argue this much more forcefully. We are inclined to think that it is partial because it is vindictive. To get co-operation from companies, and I have no doubt that the Treasury will get co-operation—there is every indication that it is doing so—it is not very helpful to have Clauses of this kind. To act against a company is one thing, but to act against individuals is quite another thing.

The Financial Secretary will know that this does not apply to close companies. In theory it probably does, but it cannot apply to them in practice because they are directed to pay dividends. The Bill does not restrict them in the dividends they pay. The Clause cannot, therefore, be directed at directors of private companies. It is aimed at directors, company secretaries and managers of public concerns.

Do the Government imagine that directors of large public corporations, some of which now have Government investment and all or most of which have investment by large insurance companies, unit trusts and even trade unions, will connive and attempt to hoodwink the Treasury and act in such a criminal way as to make them, under the Clause, liable for prosecution, as well as their companies?

That is our case. The Government should make a concession. They have not made many concessions to this side of the House. As this provision has not appeared in any previous Bill, I hope that the Financial Secretary will say that if he cannot do something today, he will reconsider it. The prices and incomes policy would not lose by taking at least part of this penal Clause out of the Bill.

Amendments No. 76 and No. 77 are probing Amendments. I gather that, in Committee, the Minister said that there was a limit to the fine on companies. There is no indication of any limit to the fine when one reads Clause 8. We are against an unlimited fine. We therefore seek to limit it. My Amendment would limit it on the basis of the dividend which has been paid, so that no firm should be liable to a fine greater than the amount paid which should not have been paid. Amendment No. 77 would impose a limitation of £2,000. We would like to know from the Financial Secretary whether there is a restriction in the Clause and that, if there is a limitation, this will be clear to the courts, in which event I have no doubt that Amendments No. 76 and No. 77 will be unnecessary.

Mr. Harold Lever

I can set the hon. Gentleman's mind at rest. It is not thought likely that a significant number of directors or officers of companies will infringe these provisions in a manner that will render them liable to criminal proceedings.

Mr. Lewis

In that case, why bother to have them in?

Mr. Lever

A great deal of our criminal law is intended only to deter a tiny minority of malefactors and, if necessary, to punish them. It does not by any means imply, because we have punishments for drunken motorists, that this is a slur on all motorists. The punishment is intended to take effect only on the drunken. This punishment is directed only against those directors who connive at, neglect, or consent to the supplying of false information. Even there, the protection is inserted that no prosecution can take place without the consent of the appropriate Law Officer.

It is not at all unusual in legislation of this kind to make provision that, where an offence can be committed by a company and where a director or officer of the company is proved to have connived at, consented to or been a party to the offence, the onus of proof is on the prosecution, not merely to show that the company committed the offence, but that the director or officer participated in this way in connection with the offence. This is not unusual, nor specially punitive, nor penal. It is appropriate, as it is an offence qua the company, that any of its officers should be personally liable if they are participating in committing the offence and are proven so to have been in circumstances which would persuade the appropriate Law Officer to give permission for a prosecution to be brought.

The hon. Gentleman must not make heavy weather of this. There is no penal intent. There is no great suspicion. On the contrary, we are quite satisfied that the overwhelming majority of company directors will be scrupulously honest in the supplying of information. I am not revealing any Treasury secret when I say that we almost never make any kind of investigatory check to see whether we have been told the truth: it is so taken for granted in general that it is so.

Mr. Lewis

I hope the Financial Secretary notices that under subsection (3) an officer of a company is guilty of an offence if he neglects to do something. He does not have to do something positively. He can be liable if he is merely neglectful.

Mr. Lever

He could be liable if he was guilty of neglect which procured a false statement. This simply means that he must take responsibility for the company's act in these terms. Without this provision, any company director would be entirely free of responsibility if he merely said, "I did not trouble myself at all to see whether the information was false or true". This simply imposes upon him an obligation well recognised at common law that, when a statement is being issued on which people are being invited to rely, an indifference to whether it be true or false is fraud. The hon. Gentleman will agree that it can be said of almost all company directors that they would not issue a statement on which they know the Treasury will act and be indifferent to whether it was true or false. It is that sort of matter that is dealt with in the Clause.

I urge the hon. Gentleman to believe that nobody is seeking any kind of penal distrust of company directors. These are the kind of provisions which have been incorporated in legislation passed by other Governments in very similar wording in relation to the supply of information, such as in the Depositors Protection Act. The additional safeguard here against any foolish plunging into prosecutions is provided for, in that the Law Officer must give his consent before a prosecution can be brought. I should be very surprised if any such prosecutions took place. It is a normal safeguard for protecting the character of the information that is supplied.

6.45 a.m.

It has been suggested that we ought to limit the power of the court to fine limited companies by laying down a maximum. Again, it is not uncommon in matters possibly involving sums of great magnitude to leave it to the court to fix the fine on a body corporate. The Government will not fix the fine. The court will do it. One could not accept as suitable a fine of, say, £2,000 when the dividend in question might involve several millions of pounds. It is not in the interests of either party or of industry itself to fix the penalty at a low level and so invite anyone to think it expedient to defy the law. I emphasise that it is not the Government who will fix the fine; it is the court. The hon. Gentleman need not fear that excessive penalties will be inflicted in the unlikely event of prosecutions of this kind. In any event, all the usual processes of appeal and the rest would be available.

I invite the House to say that it is not wrong to provide that company directors should take responsibility for the truth of statements which are made, and it is not wrong that the court should have discretion to make the fine fit the offence in the case of corporate bodies, though not in the case of individuals. There is no intention of a penal or suspicious nature here. Rather the reverse. We wish to continue accepting at face value statements made on these complex matters with the minimum of check, and it is right that there should be this provision as a sort of long-stop to fall back on, to encourage the Government to continue to accept confidently, and rightly so, the statements supplied by our limited companies.

Mr. Ridley

I was not satisfied by the hon. Gentleman's treatment of Amendment No. 76, which would set a maximum to fines and make them correspond to the amount of the excess dividend paid. The Amendment embodies a good principle. These are not offences for which unlimited sentences are appropriate. They are not crimes. There is no logic in the offences created. They are not offences against society, and they are not offences which half the people of this country regard as wrongdoing.

Mr. Harold Lever

Over half the Members of the House of Commons do.

Mr. Ridley

Over half the Members of the House of Commons are not representative of the people of this country.

There should be automatic penalties. These are offences like leaving one's car not at a parking meter, for which there is an automatic fine £2, or more if it is left longer than so many hours. The amount of the excess dividend paid should govern the amount of the fine. It would then be clear what the consequences would be. It might in some cases be worth paying the amount of the dividend. Again, it becomes a commercial consideration: one can go on if one thinks it worth while. That is a much better basis for the penal Clauses under the dividend control.

The Financial Secretary seemed to think that we should leave the penalty to the courts' discretion. I wonder whether we should be pleased if a court levied a crippling fine on a company— there is no limit under the Bill—and virtually sent it into liquidation. That might be not at all what the Government intended or anybody in the House envisaged or wished.

I am not sure that we should not think in terms of trying to make some sort of automatic sanctions in the sense I have described. I do not see why the hon. Gentleman cannot accept the principle of the Amendment for such offences, which are not crimes. Nobody feels any moral shame about increasing dividends just because there is an incompetent Labour Government mishandling our affairs. I am sure that even the Secretary of State for Wales, whom I see on the Front Bench, would not blanch at doing such a thing if he had the opportunity. It is just that he would be caught out, and it would be tedious, rather like having one's car towed away. It is a nuisance, but nothing more. Criminal sanctions of this sort are totally wrong in such a Bill, and I hope that the hon. Gentleman will reconsider the matter.

Amendment negatived.

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