EFFECT OF TRANSFER SCHEMES (Hansard, 16 June 1976)

§ Mr. Guy Barnett
I beg to move Amendment No. 10, in page 8, line 18, after 'obligation,', insert 'then— (a)'.

§ Mr. Deputy Speaker
With this we may take Government Amendment No. 11.

§ Mr. Barnett
These amendments deal with the situation which arises where a development corporation whose houses and other land are the subject of a management scheme has reserved to itself under Clause 5(7)(c) certain powers in respect of the property and the district council has entered into a transaction with a third party outside its management powers. At present, Clause 5(8) provides that the new town corporation is bound by the transaction as though it had been entered into by the council as its agent. These amendments provide that the corporation shall be entitled to be indemnified by the district council in respect of any loss incurred by reason of the corporations's being so bound by a transaction entered into by the district council outside its powers.
We have been considering further the effect of Clause 5(8), which provides that where a new town corporation's property is managed by a district council under management arrangements in a transfer scheme and a person enters into a transaction with the district council relating to a power, right, liability or obligation reserved to the new town corporation under Clause 5(7)(c), if that person believes with reasonable cause that the district council has such a power or right the council shall be taken to have entered 622 into the transaction as the corporation's agent. The effect of this provision is that a third party who does not know about the reservation will not suffer any detrimental effect from the unlawful action by the council: the contract will have effect as though it had been entered into by the council acting as agents, and the corporation will be bound by it. Accordingly, any innocent third party will be looked after if a district council should inadvertently exceed its management powers.
However, it has been represented to us by the new towns that it is only right that there should be some kind of statutory protection for the corporations also in these circumstances. This is a reasonable point, and these amendments accordingly provide that a corporation shall be entitled to be indemnified by the district council in respect of any loss incurred by reason of the corporation's being bound by a transaction entered into by the district council outside its powers.

§ Mr. Michael Morris
I listened carefully to what the Minister said. This is a technical amendment which seems to be primarily concerned with safeguarding the position of third parties and the resultant safeguarding also of the development corporations over actions of district councils. Insofar as that is the position, clearly the change is to be welcomed because safeguards are needed. Will a district auditor be involved in a situation where the provisions would have to be invoked, because it appears that that could happen in respect of actions of a district council? I raise that matter for the record now rather than in the hope of getting an immediate answer from the Minister. Perhaps he will clarify the rôle of the district auditor by writing to me afterwards. Presumably the auditor would be involved at some stage.

§ Mr. Guy Barnett
It is difficult to describe the situation in which the clause would have to be invoked, but I think that it would soon become clear to a new town corporation it such a situation arose. So often in these circumstances one is legislating for some future eventuality that it may he difficult to describe precisely. I shall be glad to write to the hon. Member on the point that he has raised and give him any information I can.