HC Deb 15 February 1972 vol 831 cc377-88

10.0 p.m.

Mr. Harold Walker (Doncaster)

It is usual for a Member who has the good fortune to secure an Adjournment debate to express gratitude for the opportunity thus presented to him. Tonight, however, I can only express regret at the necessity to take up the time of the House to try to secure redress of a deep and serious grievance of one of my constituents. It is a necessity which arises because of the refusal of the Under-Secretary of State for Trade and Industry to discuss with me, in the privacy of his office, the matters which I now want to lay before the House, concerning which I have been in regular correspondence with the Under-Secretary, his colleagues and, indeed, Ministers of the previous Administration over a considerable time.

Roofseal Limited of Doncaster is a small company which was created 11 or 12 years ago—

Sir Harmar Nicholls (Peterborough)

On a point of order, Mr. Deputy Speaker. I apologise to the hon. Gentleman but, in the interests of the House and its conventions, is it usual for an Adjournment debate to be initiated from the Dispatch Box, which gives it an authority which an Adjournment debate ought not to have? I make this point in the friendliest way. I have known Ministers move to the back benches, as a former Member for Luton did on one occasion, to show that it was not an official matter. It may be unkind of me to say this, but in the interests of the House it is a point which I think should be on record.

Mr. Deputy Speaker (Sir Robert Grant-Ferris)

This is a convention of which the Chair is really not particularly cognisant. As far as the Chair is concerned, the Dispatch Box does not exist.

Mr. Walker

I am rather pleased that the hon. Member for Peterborough (Sir Harmar Nicholls) has raised this matter. It is not the first time, and I hope it will not be the last, that I have had the good fortune to secure an Adjournment debate and address the House from the Dispatch Box. The hon. Gentleman knows as well as I that no seats in the House are privileged and preserved for individual Members. If I seek the advantage of the Dispatch Box, it is only to establish a degree of parity between the Minister and myself.

Whatever the convention—and conventions are not perpetual and binding—I was saying that Roofseal Limited is a small company which was created 11 or 12 years ago by my constituent Mr. Ronald Clark, who is the major shareholder. The basis of the undertaking was to weatherproof roofs. By his skill, toil and business acumen, Mr. Clark built the company into a very successful and profitable organisation.

During the mid-1960s the company was diversifying into property development and dealings. The financial arrangements of the company were always with Lloyds Bank Ltd. and at some stage debentures were created in favour of that bank and Royal Exchange Assurance to secure a total sum of £22,000.

During the spring of 1968 certain events occurred which sowed the seeds of Mr. Clark's subsequent misfortunes. The first of these arose from major roadworks which were being carried out during the widening of Balby Road, Doncaster, in my constituency, where the company's offices were situated. Those works, which were being carried out by Doncaster Corporation on behalf of the Ministry of Transport, led to my constituent eventually being in dispute with the corporation about damage to the foundations of his offices which had been exposed by excavatory work. Whether wisely or not I will not judge, but Mr. Clark withheld payment of rates on his premises pending settlement of his claim. At about the same time my constituent found himself involved in court proceedings which arose from the disordered state of his matrimonial life.

It was apparently because of those events that, in about May, 1968, Lloyds Bank restricted the company's overdraft facilities. In November of the same year, with no warning whatever according to my constituent, the bank appointed a receiver of the company, a Mr. Hellyer of Leeds, who took over control of the affairs of the company on the same day that Mr. Clark was informed by letter of his appointment.

I understand that at that time the capital assets of the company were valued in excess of £100,000 and there was no question of insolvency. Furthermore the company was making a substantial profit—£20,000 in the preceding 20 months of trading.

It was from that moment, according to my constituent, that the destruction commenced of the viable and flourishing undertaking he had so painstakingly built up. According to him, the receiver proceeded to sell off the assets, which had previously been valued, at sums very much less than their market price in order to pay off the debenture holders. It is the main complaint of my constituent that those sales occurred as private transactions. There is no evidence whatever that property sold to meet the debentures was sold by public auction or publicly. This contention is supported by Mr. Clark's solicitor.

Among the assets sold in that way were the company's offices and an adjoining petrol filling station at Balby, Doncaster. I understand that these together were sold for £25,000, but the offices alone had been valued three or four years earlier at £30,000 and the petrol filling station had been valued at £60,000. The sale of this property was never publicly advertised, nor was there any public auction, according to my constituent's solicitors.

I should say that while this was going on my constituent was serving a prison sentence consequent upon the court proceedings to which I have referred—not for any offence connected with the company but on a charge arising out of his matrimonial affairs. It was at his request that I visited my constituent during that period at Armley Prison, Leeds. I well recall his anguish in his belief that his business was being pillaged while he was powerless to take action.

Of course this is not something on which I would expect the Minister to comment tonight, but I had occasion at the time to complain to the Home Office about the almost complete denial to my constituent of facilities to enable him to safeguard his business interests while he was in prison.

Because the obstacles presented by his personal circumstances prevented him from adequately defending his business interests, it was about this time that I sought to discuss my constituent's affairs directly with the private receiver, Mr. Hellyer. All I got was a brush-off. I was as good as told to mind my own business, although I was speaking on behalf and with the full authority of my constituent.

In reply to my letter of 23rd November last year the Under-Secretary of State—I believe it was the colleague of the Minister who is attending tonight—reminded me that Mr. Hellyer was acting on behalf of the debenture holder. He said: He is primarily concerned with the interests of the debenture holder. The debenture was discharged with full payment on 21st September, 1969, well over three years ago. In spite of that, the receiver is still in charge of the company and is still selling its assets.

Another petrol filling station belonging to the company was put up for sale towards the end of last year. This time the property was proposed to be sold by public auction and was thus advertised, but not before Mr. Clark had learned that the receiver had let it be known that offers of £5,000 or £6,000 were acceptable. Yet Mr. Clark had previously been offered in writing—the written offer is lodged with his solicitor—£12,000 for this property from an international oil company. The property was withdrawn on the day of the sale.

In his letter of 10th December last year, the Under-Secretary said that the receiver, Mr. Hellyer, was not subject to the control of the Department of Trade and Industry. I have a growing conviction that he is not subject to any kind of control whatsoever. Indeed, he appears to possess unbridled power. It may well be that when the Under-Secretary replies he will say that my constituent can seek redress in the courts for any grievance he may have when the receiver finally withdraws from his handling of the company's affairs. On present form, however, it looks hardly likely that there will be sufficient money left in the kitty to pay even the bus fare to the solicitor's office.

That brings me to another immediate problem. I understand that the major impediment now to Mr. Hellyer, the receiver, concluding his activities is the failure of Mr. Clark to submit the necessary statement of affairs. The Under-Secretary knows that it is on this point that I have been in correspondence with him recently. As he knows, Mr. Clark has refused to sign the statement that has been drawn up because he says it is at fault in several important respects. In effect, the Under-Secretary says in his letter, "What is Mr. Clark complaining of on that score?" He suggests that the statement is prepared by Mr. Clark's accountant and that in any case, if he disagrees with it, it is up to him to make such alterations as he thinks necessary to put it right.

I understand, first, that the statement was prepared not by an accountant appointed by Mr. Clark but by one appointed to act on his behalf during the period when he was in prison. What is more important than that, however, is Mr. Clark cannot submit a corrected statement without access to the necessary documents, and he says that these documents are distributed among different hands. Some were lodged with a Doncaster solicitor who formerly acted on his behalf and who now says that they have been lost. Some are lodged with a Leeds solicitor who acted on Mr. Clark's behalf when he was in prison and who now refuses to surrender them, apparently, because he has not been paid for his services. But the essential documents are apparently with the receiver himself and he ignores any request for information. He ignores requests by Mr. Clark, by Mr. Clark's accountant and by Mr. Clark's solicitors. Nor will the receiver's solicitors respond to any requests for help from Mr. Clark's solicitors. Indeed, I have a letter from Messrs. Saffman and Co., Solicitors acting on behalf of Mr. Hellyer, the private receiver, addressed to my constituent's solicitors, which states: We are advising the Receiver to refuse to have further communication and not to reply to any further request or query from Clark. Although the Under-Secretary says that he has no control over the receiver—and that seems fairly obvious—it is none the less the Department of Trade and Industry which has issued a threat to my constituent that he is liable to a fine of £10 per day until he signs the statement of affairs. No one is more anxious than Mr. Clark to see the statement of affairs completed and filed. He is desperately anxious to try to put back together the fragments of his business left behind after the shattering impact of the receiver, but he cannot understand why not only is every impediment placed in the way of his doing so properly and honestly, but he is being bludgeoned by the Department to acquiesce in something that is false. Nor can he understand why the Department, which disclaims any responsibility for the actions of the receiver, should none the less provide the sanction on which the receiver relies.

I give one example of the kind of fault that my constituent picks on in the statement as it stands. Although it shows the company's former secretary as a creditor in the sum of £3,000, nowhere is there shown the company's counterclaim, made before the company went into receivership, for a sum of £9,000. It is not good enough merely to suggest that Mr. Clark make a corrective entry. Clearly he must have the necessary documentation to support that entry.

I have by no means exhausted Mr. Clark's catalogue of complaints and, indeed, serious charges against the conduct of the receiver. They are many and they are interwoven into a situation far too complex and tangled for me lucidly and adequately to present in the course of an Adjournment debate, and I would not pretend to have the expertise that is needed to do so.

It is a situation with which I have been dealing, seeking to assist my constituent, for more than three years. Because my remarks must inevitably reflect unfavourably upon the professional conduct of the receiver, I have been most reluctant over that period to bring these matters before the House and hence into the public view. But I have been left with no alternative if I am not to fail in my duty as a Member towards my constituent. The receiver's refusal to supply information to Mr. Clark or his solicitor or to answer their queries; the refusal of the receiver's solicitors, Messrs. Saffman and Company, to be other than obstructive; the refusal of Mr. Hellyer to discuss Mr. Clark's affairs with me, and the Minister's refusal to accept any responsibility or even to discuss with me the imposition by his Department of a fine, which contradicts completely the long-standing, traditional relationship between Members and Ministers—all of these matters leave Parliament as the only immediate means by which my constituent may be set on the road towards redress and justice.

The behaviour of companies and those who handle their affairs is regulated in the main by the framework of law provided by the Companies Acts. I also understand it to be the task of the Department of Trade and Industry as well as of the courts to secure observance of those Acts. Where there are allegations of misbehaviour in the handling of a company's affairs, the Minister can instruct an inspector acting on his behalf to make such inquiries as he deems to be necessary.

The Minister has the power and responsibility to do that, and that is the action I ask of him tonight. I am asking him not to do that which he has done previously in our correspondence, which is to ask Mr. Hellyer or his representatives whether Mr. Clark's allegations are true and then present the reply as the Minister's answer. That is not the Minister's rôle. It is his job not to align himself with one of the parties, as he has done, but to stand in the middle and ascertain the truth. That is what my constituent asks. I do not ask the Minister to accept unquestioningly and uncritically what I have put to him, nor does Mr. Clark, although in the three years I have been aware of his difficulties I have never found reason to doubt the truth of what he has told me.

What my constituent asks is that an inspector be appointed to put his allegations to the test. That in itself says much for Mr. Clark's sincerity. Unless and until this or similar action is taken, nothing will shake Mr. Clark's conviction that he has been the victim of ruthless and high-handed action by the private receiver, pursued mainly at a time when Mr. Clark was unable to defend himself or his company's affairs. What seems beyond doubt is that the intrusion of the private receiver into the affairs of Roofseal Limited, Doncaster, marks the moment in time when a flourishing and prosperous business rapidly degenerated first into moribund inactivity and now into virtual ruin. It was a business which, furthermore, offered employment to a small but, in an area where male unemployment is running at over 9 per cent., significant number of people. Over the same period, and he believes for the same reason, my constituent has seen his assets disappear and his former wealth melt away until now he is reduced to near-penury.

It is not for me to judge the truth of all the allegations made, nor can the Minister do so tonight. But they are so serious that if they are only fractionally true they reveal a state of affairs requiring thorough investigation. The first step ought to be to appoint an inspector, as the Minister is empowered to do by the Companies Act, to look at the receiver's handling of the affairs of the company.

10.20 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)

I would not for one moment question the right of the hon. Member for Doncaster (Mr. Harold Walker) to raise the grievances of his constituents nor the importance of the matters which he has brought before the House tonight. I would, however, remind him at the outset of the constitutional position. Though I and others of my colleagues in the Department of Trade and Industry try, and have tried, to assist hon. Members with information about receiverships, it is not the responsibility of the Government to control, police or arbitrate in disputes of the sort which the hon. Gentleman has raised.

I have always been careful in letters which I have sent on matters concerning receiverships to make it clear that I am merely trying to help hon. Members by presenting the facts to them. I point out that I am not trying to decide who is right or to take one side or the other or in any way lend the authority of Government to one of the parties in a dispute about a receivership. This is because it would be entirely wrong for the Government to attempt to do that. Receiverships of this sort arise out of contracts between debenture holders and those to whom they lend money, and the interpretation of those contracts is entirely a matter for the civil law save in so far as there are a few areas where company law impinges on the situation.

I wish to make it clear at the outset that most of the matters which the hon. Gentleman has raised are not matters in which the Government have or should have responsibility but are matters of dispute which can be sorted out at civil law between the two parties, the receiver and the hon. Gentleman's constituent.

I wish to correct one point of fact. The hon. Gentleman said that the debenture had been discharged. So it has, but the preferential creditors have not been paid off and part of the terms of the debenture is that the preferential creditors' claims should be met. In addition, I believe that there is a judgment debt owing to the company by Mr. Clark. Until those obligations have been discharged the receiver is not clear of his responsibilities in the matter.

There are no provisions whatever in the Companies Acts for the Department of Trade and Industry and Ministers therein to supervise the activities of receivers. There are, however, certain areas where we could intervene, and it is right that I should make it clear what those areas are.

It is the duty under the law of the Registrar of Companies to see that directors supply the receiver with a statement of affairs. This duty arises under Section 372 of the Companies Act, 1948. The hon. Gentleman mentioned this and talked at some length about the difficulty that his constituent had had in completing and signing his statement of affairs. I do not know what his difficulties were. Nor is it my task to help him or interpret his duties under the law. I am merely responsible under Statute for making sure that where a statement of affairs has not been given to the receiver, the due penalties are exacted. It is for the hon. Gentleman's constituent to make sure that he is not in breach of this part of the Companies Acts. No amount of excuses or pleading is acceptable to me because I have merely to see that this part of the law is enforced. I therefore urge him to comply with the law in this respect.

Next, it is part of my duties to see that the receiver files a statement of affairs, when he has received it, together with his comments thereon, with the Registrar of Companies. That has not been done, but it is not the receiver's fault because he has not received the statement of affairs from the hon. Gentleman's constituent. It is my duty to see that the receiver files with the registrar his receipts and payments under Sections 372 and 374. So far as the Companies Acts go, it is the sole duty of the Department of Trade and Industry to discharge these functions.

It is possible, as the hon. Gentleman suggested, that there could be an investigation under Section 109 of the Companies Act, 1967, into the conduct of the receiver. A receiver in a case like this is acting in order to promote the company for the purpose of receiving moneys which the debenture holder is owed, and he has a duty to run the company in the interim. If in his capacity of managing the company he were to contravene any of the provisions of the Companies Acts, or if we had a suspicion that he was not conducting the affairs of the company properly, we would have power under Section 109 to make an investigation and under Section 165 of the 1948 Act to take further action. I want to make it abundantly clear, however, that it is not right, nor is it our intention, to investigate under Section 109 every case in which there is a conflict of opinion between receivers and those who are subject to these proceedings.

It would only be on suspicion on grounds of criminal action, or of a compound between a receiver and a potential purchaser of assets, or of some form of fraud, that the Department would feel it right to investigate the conduct of a receiver. There are no such grounds in the case the hon. Gentleman has raised. Therefore, I want to reiterate that it is wrong, and it is not our intention, to arbitrate between receivers and directors of companies on the question of who is responsible or who is right or who is wrong in any case such as this where there is dispute.

There are some guidelines which might help the hon. Gentleman. There have been judgments whereby receivers have been exonerated for not obtaining the higher price. I refer to the dicta of Lord Justice Jenkins in the case of B. Johnson & Co. (Builders) Ltd. (1955). In this case the debenture holders claimed that the receiver had not obtained the higher price he might have been able to obtain and the receiver was found to have discharged his duty although he had not obtained the higher price. In another case, however, that of Cuckmere Brick Co. Ltd. v. Mutual Finance Ltd., the court upheld an appeal where a mortgagee was thought to have owed a duty to the mortgagor to take reasonable care to obtain a proper price for the mortgaged property. In fact, he did not declare the fact that the property had planning permission, which would have increased its value.

I say again that if the hon. Gentleman's constituent feels that he has a case at civil law against the receiver, he has every opportunity so to pursue it. He could take an action for misfeasance, not because the receiver has exercised a lack of judgment but because there has been either a breach of the contract or negligence or recklessness on the part of the receiver. To interpret in this case whether there has been such a breach is clearly far beyond my responsibility and is a matter entirely for the courts.

I suggest, therefore, that if the hon. Gentleman's constituent feels he has been wrongly treated in this instance, his proper redress is to the courts. I emphasise that it is not the responsibility of Ministers to interpret the law of contract as between the debenture holder and someone who has suffered as the hon. Gentleman's constituent has done in this case. The hon. Gentleman seems to claim, both in his letters and in what he has said tonight, that in some way this is a matter for the Government. I think I have made it clear that it is not so and that it is wrong to evade one's remedy at law by coming to this House and trying to make the Government intervene in a situation which arose out of a private contract between one who lends and one who borrows.

I express, of course, all sympathy with the hon. Gentleman's constituent, but I think it is wrong that this matter should be treated as a political matter when it is a purely legal matter between the receiver and the hon. Gentleman's constituent.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Ten o'clock.