HC Deb 19 July 1974 vol 877 cc865-7
Mr. Geoffrey Dodsworth (Hertfordshire, South-West)

I beg to move Amendment No. 3 in page 7 line 7 at beginning insert: 'having regard to the terms of the agreement as they apply at the time of its making and to the circumstances then prevailing'. The purpose of the amendment is to add an element of certainty in what we recognise may be an improved situation, but it is one which does not yet have the clarity we seek.

The Bill assumes the test of the status of the consumer. It defines by saying that all those who are not bodies corporate are consumers, which brings into the Bill a number of people who carry out normal commercial transactions, such as accountants, solicitors and self-employed businessmen. That seems to be in conflict with some of the considerations in the draft legislation which is being produced in Europe and which in due course we shall have to consider. We shall have to bring some unity to it.

The European legislation assumes a different sort of test—the purpose of the loan test as opposed to the status of the customer. I am an officer of the Equipment Leasing Association, which believes that that would have been a more satisfactory and acceptable way to define commercial transactions. Under the European legislation, it is simple to exempt many transactions which are under the scope of the Bill. We have to deal with the Bill as it is, bearing in mind the future European considerations.

Our amendment is designed to remove from the Bill the uncertainty, particularly in the case of variable rate agreements. They can be illustrated by those which have variation clauses referring to changes in corporation tax. The effect is that if there is a change in corporation tax there is a change in the rate and the rentals which are thereby charged. It is difficult to assess what the total rentals will be and what the amounts payable might be. There can also be provision for changes in the cost of money. That, too, at the outset of the transaction presents an element of doubt.

Such changes are beyond the control of both the lessor and the lessee. They cannot look into the crystal ball and say that they control these factors. If that is the type of transaction being entered into, there will be a doubt whether the amount of the agreement is likely to exceed £5,000. That puts in question whether the agreement will be subject to the Bill.

The doubt can easily be resolved by using what has been termed the outset concept, defining at the beginning whether under the terms of the agreement, at the time it is made, it comes under the Bill. I believe that it has been suggested that the concept is already within the provisions of the Bill. But subsection 1(c) states that the agreement does not require the hirer to make payments exceeding £5,000. If the variation clauses to which I have referred exist, contingencies can occur, dependent upon future events, to vary the total payments and bring about the element of uncertainty to which I refer.

The amendment, by having regard to the time of making the agreement, produces certainty where there is doubt. I understand that in discussions on the matter the view has been expressed that amendments might be contemplated if it were found that there was a need for more legislation after the Bill had been put to the test. I believe that it is better to accept the substance of the amendment and remove the element of doubt now.

Mr. Alan Williams

We have covered the matter in consultation and in discussion in Committee. I fully appreciate the hon. Gentleman's point. I intimated in consultation that if the industry proved to be right, against all the advice we are receiving, we should have to meet the problem at a later stage. However, the balance of advice to us is that the proposition I put to the Committee is correct and that the propositions put forward by the industry are incorrect.

If I accepted the amendment, it would open up a considerable loophole. For example, I have been told that to evade the provisions of the Bill where a hirer wanted to hire for only four years at £1,000 a year, therefore coming within the scope of the Bill, it would be possible for the owner to insist on making an agreement for 10 years at £1,000 a year, but with a term allowing the hirer to terminated the agreement at any time after the first year. That would enable the hirer to turn the agreement into a four-year agreement at any time after the first year, but then there could be a dispute as to whether it was originally within the scope of the legislation.

As our legal advice is that the hazard envisaged by the industry does not exist, but that the hazards I have just suggested of creating loopholes against the interests of the consumer do exist, I am sorry to tell the hon. Gentleman that on balance I must still oppose the amendment.

Mr. Dodsworth

I understand that if it is subsequently found in the courts that the industry's interpretation is correct there is the possibility of amending legislation, and in view of what the Minister has said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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