HC Deb 26 October 1976 vol 918 cc287-98

(1) There shall be a committee appointed by the Lord Chancellor to keep under review the rules for the time being in force under—

  1. (a) section 132 of the Bankruptcy Act 1914 (bankruptcy rules); and
  2. (b) section 365 of the Companies Act 1948 (winding up rules);
and to make recommendations to the Lord Chancellor as to any changes in the rules that may from time to time appear to the committee to be desirable.

(2) The Lord Chancellor may consult the committee before making any rules under the provisions mentioned in subsection (1) above.

(3) Subject to subsection (4) below, the committee shall consist of—

  1. (a) a judge of the High Court attached to the Chancery Division;
  2. (b) a circuit judge;
  3. (c) a registrar in bankruptcy of the High Court;
  4. (d) a registrar of a county court;
  5. (e) a practising barrister;
  6. (f) a practising solicitor; and
  7. (g) a practising accountant.

(4) The Lord Chancellor may appoint as additional members of the committee any persons appearing to him to have qualifications or experience that would be of value to the committee in considering any matter with which it is concerned.—[Mr. Clinton Davis.]

Brought up, and read the First time.

4.2 p.m.

The Under-Secretary of State for Trade (Mr. Clinton Davis)

I beg to move, That the clause be read a Second time.

The purpose of the clause is to establish a committee which will be under a statutory duty to keep the bankruptcy and winding-up rules under review and to make recommendations to the Lord Chancellor about any changes in the rules which the committee deems it to be desirable. In addition, the Lord Chancellor will be obliged to consult the committee before exercising his existing powers to make bankruptcy or winding-up rules.

The committee will comprise four members of the judiciary, two members of the legal profession and an accountant, all of whom are to be appointed by the Lord Chancellor, and such additional members as the Lord Chancellor might appoint.

Power to make general rules for carrying into effect the objects of the Bankruptcy Act 1914 and the Companies Act 1948, so far as it relates to the winding-up of companies in England, is given to the Lord Chancellor with the concurrence of the Secretary of State under Section 132 of the 1914 Act and Section 365 of the 1948 Act respectively. This power is exercisable by Statutory Instrument which is required to be laid before Parliament after being made.

In Committee, the Opposition moved New Clause 6, which was designed to do very much the same as we are achieving here. The arguments adduced by the Opposition reflected the then view of the Law Society and Bar Council Joint Working Party which at that time was pressing for a rule-making committee similar to those concerned with the Supreme Court and County Court Rules.

The main objection, which I stated in Committee, to the establishment of a rule-making committee as opposed to an advisory committee is that bankruptcy and companies winding-up rules are not exclusively concerned with court procedure, as are the Supreme Court and County Court Rules. Many of them deal with matters of an administrative nature in regard to the duty of official receivers and the exercise by the Secretary of State of his powers under the Acts and the two kinds of rules tend to be intermixed. Whilst, therefore, the advisory committee will be consulted even on rules dealing only with administrative matters, it is desirable for the Lord Chancellor, with the concurrence of the Secretary of State, to retain the power to make the rules, as opposed to having merely a power of veto.

The proposed advisory committee will be composed of members of similar status and profession to those who would be members of a rule-making committee so that their advice would have strong persuasive authority.

The functions of the proposed committee will relate only to bankruptcy and winding-up rules in England and Wales. No arrangements require to be made for Scotland, where the practice is governed by Rules of Court.

As on a variety of other matters concerning the Bill, as will be evidenced by some of the amendments that I shall be moving later, I have had the happy experience of entering into very full personal consultations with the professional bodies concerned in these matters. The new clause reflects an accommodation between the Department and the views of the professional bodies which I think is a happy one. I feel confident that the hon. Member for Worthing (Mr. Higgins) will support me, and I know that it has the support of those professional bodies with whom I have engaged in these fruitful discussions.

Mr. Terence Higgins (Worthing)

As the Under-Secretary of State has pointed out, this matter was debated at length in Committee and is reported in the Official Report of Standing Committee C proceedings on 17th June 1976 at c. 509–517. The point was raised by my hon. and learned Friend the Member for Southport (Mr. Percival), who unfortunately is unable to be with us immediately but hopes to join us a little later in our proceedings.

As this is the first new clause and the first matter that we are debating today, perhaps I might say that I think that the changes which the Government have put forward on the Order Paper by way of amendment will, if carried, represent a significant improvement in the Bill. This is something of a triumph for a sensible approach by the Opposition and a sensible and responsible approach by the Government. Would that it were always so. I hope that as a result of this sensible approach we shall make reasonably rapid progress.

My only regret is that I was unable to persuade the Under-Secretary of State and the Chief Whip a few nights ago to transfer some of the business on the Companies (No. 2) Bill to today, when we could have debated it at a more reasonable hour than we did then, having continued on that occasion until after 6 o'clock in the morning. It is important that these technical matters, which are not controversial—there is no question of marching troops through the Lobby—should be debated at a reasonable time of day, because one needs to be conversant with the content and also aware of what the Government are doing.

I would not wish to object to the proposal which the Government have now put forward for a committee. There is, I think, perhaps some difference of opinion—indeed, one of my hon. Friends may wish to stress this—on the extent to which we want to proliferate committees of this kind. The precise status of this particular body is of interest, as was brought out by my hon. and learned Friend the Member for Southport in Committee, reported at c. 510. He questioned precisely whether the Lord Chancellor should retain a veto and whether the body set up should be an advisory body.

I understand from the Under-Secretary of State—I think I quote him correctly—that the committee will be such that the Lord Chancellor will be obliged to consult it. That is an important point. It will not be simply a body which may or may not be consulted. It will be a matter of obligation. That is important and it is consistent with the view that we have previously put forward.

The Under-Secretary of State emphasised the fact that the Rules Committee is not exclusively concerned with court procedure and that it therefore presented some problems to him initially. He went on to say that it would have persuasive authority. I think that that is perhaps a little dangerous and may be a contradiction in terms, but at all events I do not doubt that the Lord Chancellor's Department will take account of the view which such a committee, if we agree to its establishment, will express.

As to the importance of consultation, had there been adequate consultation on the Bill at the outset both with the Bar Council and the Law Society, a great many of the amendments which have now been accepted would have been incorporated in the original Bill. But this is a matter with which we are rightly concerned here. We put forward the argument and seem on this occasion to have persuaded the Under-Secretary of State to accept the view which we put forward.

The Government have now announced—although I am doubtful whether it is really new or a repetition of what was said in Committee—a more wide-ranging review of the insolvency laws. It may be that in the light of experience we shall need to look at this aspect of the question again, but for the moment I am content not to dissent from the new clause. It should fulfil a useful purpose. We should let it go at this stage, and hope that in practice it turns out to be an effective way of achieving our objectives, namely, an insolvency law for this country and a procedure in court on insolvency law which are satisfactory both to creditors and to debtors.

4.15 p.m.

Mr. John Cope (Gloucestershire, South)

I shall not detain the House very long, sparsely attended as it is. The obvious lack of interest by the House in this measure does not, nevertheless, deter me from registering one point to which my hon. Friend the Member for Worthing (Mr. Higgins) referred briefly in passing.

My heart grows heavy every time we set up a new committee in this House. I am not clear why it is necessary that the committee to be set up under the new clause should be written into law. I think it could have been set up even outside the law. I realise that my hon. Friends on the Front Bench support the new clause, and I have read the debates which took place about it in Committee upstairs, and in the Second Reading Committee, which was also upstairs. Nevertheless, here it is, going forward into law.

It is not with this proposed committee only that I am concerned. Hon. Members will be aware, from the Written Answers yesterday, and from a reference that my hon. Friend made, that there is to be in effect a new Blagden Committee set up under Mr. Kenneth Cork, than whom nobody knows more about this matter or is more competent to review it. But this is, nevertheless, all part of the over-elaborate process of consultation which we are setting up today in all kinds of fields.

The insolvency law is, of course, important, and never more than today, when so many people, unfortunately, are coming in touch with this part of the law because of the way their own affairs have turned out. Nevertheless, to have two new committees set up, to postpone the major decisions again, and to have constant review and constant change as the only prospect for the law on insolvency for another few years, is depressing to me.

In the Second Reading Committee, brushing against this point, the Under-Secretary of State said: I should inform the Committee that the Department has started on a review". This was in effect, not a review of the matters concerned in this clause but a review being set up under Mr. Cork. The Under-Secretary of State went on to say that this was a major and daunting task."—[Official Report, Second Reading Committee, 3rd March 1976; c. 1460.] It does not seem to have taken long to daunt the Government, because they have now handed it on to somebody else—in fact, to Mr. Cork. Certainly those words have proved true in the six months since the Second Reading Committee.

It is a depressing prospect for practitioners. I am a chartered accountant but have never been active in this part of my profession's activities. It is a daunting prospect for practitioners to think that not only do we have this Bill, which itself changes the law, but also two committees which will make future reviews.

For these reasons, therefore, although I shall not oppose the new clause, I shall see it go through with a heavy heart.

Mr. Clinton Davis

I feel that I ought to reply briefly to the points which have been made primarily by the hon. Member for Gloucestershire, South (Mr. Cope), because I take a wholly different view of the value of consultation—perhaps as a result of experience on this Bill, but certainly for wider reasons than that—than that which he takes. I wish to make it quite clear that this rule-making advisory body is wholly distinct from the Cork Committee, the setting up of which was announced on 25th October.

We are seeking to accommodate views which have been expressed to us very forcibly by the profession, which is very much concerned with the administration of these rules. This point was very well articulated by the hon. and learned Member for Southport (Mr. Percival) during the Committee stage, and I need not rehearse those arguments.

It is quite clear from the contribution of the hon. Member for Worthing (Mr. Higgins) that certainly the two Front Benches at least are now ad idem on this. I am sorry that we cannot carry the hon. Member for Gloucestershire, South with us. He will not go as far as to take this matter to a Division, but he is not with us in his heart.

I do not think that either the Cork Committee or the committee which we are now discussing represent an overelaborate process of consultation. Insolvency law affects practitioners. They are the experts. I have experts in my Department, but I am not sure that they, having considered the response to letters sent out to about 40 professional and commercial bodies in January, would regard themselves as the right people to carry out this wide-ranging review. This matter is not party-politically contentious, but it could become contentious—as I have learned—if we did not consult in the right way at the right time.

We have to take into account the dramatic effects of EEC legislation upon our insolvency law and we have to try to deal with the deep and difficult problems posed in Committee. I am convinced that the right way to go about this is to consult widely and to try to reach agreement. If that is not possible, it is for the Government to make their judgment on the matter. I do not agree with the philosophy of the hon. Member for Gloucestershire, South.

Mr. Dennis Skinner (Bolsover)

I wish to intervene briefly because I was involved on the edge of bankruptcy proceedings only a short time ago. I disagreed with my hon. Friend the Under-Secretary when he said this was not a party political question. It may not be party political in the sense that the two Front Benches seem to be able to get together on matters of this kind, but I take the view, based on my limited experience, that, in practice, the attitude and disposition of those who carry out bankruptcy proceedings leans towards those in business and leans upon those such as my brothers and their nine colleagues in the Clay Cross bankruptcy proceedings.

I know that you may take the view, Mr. Speaker, that mention of Clay Cross is alien to the proceedings of this House and that we should not be debating it, but as far as I am concerned they are the 11 people most recently made bankrupt and I wish to compare their bankruptcy proceedings and the way in which they were pushed around with the way in which some business men have been dealt with.

Kenneth Cork provides a wonderful comparison with the way in which the honourable people at Clay Cross were dealt with. I want the Minister to bear in mind the case of 65-year old caretaker George Goodfellow, who was retiring from work after a lifetime of clocking-on and clocking-off—unlike many bankrupt business men. George had days, months and years of slogging away at his job and when, following legislation in this House, he received a cheque for £174 after the Court Line disaster, in which he lost his holiday and his money, along came the Official Receiver, acting in a political fashion, and said to little old George, an ex-Clay Cross councillor who had retired and was living on a paltry pension, that he was going to twist and squeeze every possible penny out of George because he had been made bankrupt.

Not only did the Official Receiver take that £174 cheque, but he also took old George's car, which was several years old and not worth a tremendous amount. It was offered back to George at a certain price.

This is one side of the coin—a 65-year old man who had slogged hard all his life, worked honourably on behalf of his party and, in my opinion, done nothing wrong, but attempted only to serve his fellow men. Now that he has retired and paid over what few assets he had to the Official Receiver, he has been asked to pay back £112 in income tax. This is a scandal.

I have no doubt that these matters were not discussed in Committee. As far as the elitists in this House are concerned, bankruptcy proceedings relate only to those in business. I have no doubt that the people who were trampled on at Clay Cross were given no consideration.

I want the Under-Secretary to bear in mind what I have told him about little George Goodfellow, an honourable man who, at the age of 65, is being tackled in a ferocious manner and asked to payback £112 in income tax despite the fact that he has already handed over his car, a cheque for £174 and other belongings. It is a disgrace.

On the other side of the coin we have Kenneth Cork, who is in charge of this important committee. Have his credentials been fully examined? I saw him on television the other night when he was supposed to be looking into Great Britain's accounts in a half-hour programme on ITV. Let us examine what this so-called great expert has been up to.

Acting as Official Receiver in the £110 million Nation Life bankruptcy disaster, this same Kenneth Cork of W. H. Cork, Gully and Company recommended to the creditors that because William Stern had so few assets in comparison to the £110 million which went down the drain in this property scandal arising out of the Barber boom, the property chief should not be made bankrupt but should be allowed £20,000 a year to live on because he had been used to a life of grandeur. Cork made this astounding proposition and also recommended that should Stern earn or pick up any money above the £20,000 a year, two-thirds of it should go to the shareholders.

Mr. Tim Renton (Mid-Sussex)

On a point of order, Mr. Deputy Speaker. If the hon. Member for Bolsover (Mr. Skinner) had read our Committee proceedings, he would know that, contrary to what he has just said, we spent a considerable time considering the problems of the small man who went into bankruptcy. We discussed this problem on a number of occasions. What the hon. Member is saying has nothing to do with the new clause under discussion.

Mr. Skinner

It is not my job to tell you how to conduct the affairs of the House, Mr. Deputy Speaker, but the remarks of the hon. Member for Mid-Sussex (Mr. Renton) were not a point of order but a matter of argument.

I am trying to bring to the notice of the House something of great importance. The hon. Member may be right and discussions may have taken place in Committee, but no doubt they were about small business men. That is precisely my point. There may have been discussions about those who go bankrupt. I am talking about a special set of circumstances that involves 11 people and has resulted in hardship for several of them. I am trying to counterpose the alternative suggestions made by the so-called expert, Kenneth Cork, who has been promoted as one of the most important accountants in the land. I want to remind the House of what this man has been up to.

4.30 p.m.

Mr. Higgins

I am still not clear about what this has to do with the new clause.

Mr. Skinner

I appreciate the point already made by my hon. Friend the Under-Secretary, when he made it clear to the hon. Gentleman that the Cork Committee was a different thing from the Standing Committee. However, I must remind the hon. Gentleman that this is a debate and not a series of statements. People do not rise in this Chamber and trot out a statement, to be followed by someone else trotting out another statement. I am attempting to bring to the notice of the House, and to anyone else who cares to listen to me or to read my remarks, the fact that arising out of references to the Cork Committee, perhaps it would be a good idea for someone else to remind the House of what Mr. Kenneth Cork has been dealing with recently.

Mr. Cork was the man who made the preposterous suggestion that William Stern, who had been in charge of a company that lost £110 million in the property boom, should have £20,000 a year on which to live because he had been used to a life of grandeur. It was Kenneth Cork who was making that recommendation to the creditors. That should be considered in relation to the way in which the 11 Clay Cross councillors were dealt with in bankruptcy proceedings.

My hon. Friend the Under-Secretary should bear in mind that bankruptcy proceedings are not merely about big business men or small business men who go bankrupt. They are about other people, as well. In this case, they are about principled people. When these recommendations are looked at in future, the House should not be leaning upon those involved in bankruptcy proceedings, such as the 11 Clay Cross councillors. I want my hon. Friend—if it is possible, through his officials—to look at the way in which some of these councillors are being dealt with at present and to see that they are not leaned on any more. That is the reason for my intervention, and I think that it is worth while.

Mr. Clinton Davis

I understand the sentiments of my hon. Friend the Member for Bolsover (Mr. Skinner). He was intimately connected with those involved in the recent bankruptcy arising out of the Clay Cross episode. However, what he has said does not represent, unfortunately, anything but the most unfair attack upon officials in my Department, trustees and liquidators, who must carry out their job acording to the law. I ask my hon. Friend to understand that they do not inspire bankruptcy proceedings. Bankruptcy proceedings occur because there is a judgment that must be enforced, and it is their job to enforce it. It is not for them to enter into the merits or demerits of the situation that led to the bankruptcy.

Mr. Alan Clark (Plymouth, Sutton)

Does it not remain true that there is something here of considerable public concern? That is that where prominent people become insolvent, for reasons that may or may not be disreputable, they appear to be given preferential treatment in certain circumstances. There appears to be some kind of general consensus that they should be allowed to preserve vestiges of the way of life that they formerly enjoyed.

Mr. Davis

There is absolutely no merit in pursuing this argument at this stage. We should be going on for a long time, and anyway, it has no relevance to the subject matter of the debate. I do not agree with the hon. Gentleman.

Be that as it may, if the official receiver, the liquidator or the trustee fail to carry out the responsibilities imposed upon them by law, or if they act over-zealously in the implementation of those duties, there is a recourse to the courts. That is something that is available to the creditors. That is the safety net. It is no use my hon. Friend the Member for Bolsover ignoring that fact. If he feels that a particular debtor or group of debtors has been dealt with unfairly by the official receiver or someone else, there is always the availability of a recourse to the courts. That is something that my hon. Friend, in alliance with the hon. Member for Plymouth, Sutton (Mr. Clark)—a somewhat strange alliance—must not overlook, and it would be quite wrong for the House to overlook that point.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

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