POWER TO DISPENSE WITH PUBLIC EXAMINATION OF DEBTORS (Hansard, 26 October 1976)

§ Mr. Clinton Davis
I beg to move Amendment No. 4, in page 4, line 26, leave out from 'particular' to end of line 30 and insert—

'(a) whether the debtor has made a full disclosure of his affairs;

(b) whether he has been adjudged bankrupt on a previous occasion;

(c) the number and nature of his debts;

(d) whether his bankruptcy would for any reason be a matter of public concern; and

(e) such other matters as may be prescribed for the purposes of this subsection by rules made under section 132 of the said Act of 1914.'.
The effect of the amendment is to provide specifically for any additional criteria, if needed, by which the court will determine whether to make an order dispensing with the public examination to be prescribed by the rules. The format of the provision has also been altered to make reference easier. That alteration has been made following the point made by the hon. Member for Worthing (Mr. Higgins). We have come to an accommodation and I think that we have succeeded in making reference easier.

§ Mr. Higgins
The format is a great deal better. We now have the advantage of paragraph (e), but other than that I think that all the provisions are the same. I am not clear what the hon. Gentleman feels might conceivably be covered by the paragraph. Perhaps he will give us some indication. However, I do not wish to dissent from the views he has put forward.

§ Mr. Clinton Davis
It was to provide a residual discretion in the court after it was thought that the other matters were not sufficiently full. I think that they were sufficient but this puts the matter beyond reasonable doubt.

§ Mr. Leslie Spriggs (St. Helens)
I rise briefly to ask my hon. Friend to explain the full meaning of paragraph (a), which states: whether the debtor has made a full disclosure of his affairs". Does that include the directors' fees in a firm where the receiver has been brought in?
My hon. Friend may be aware of a firm in my constituency where the directors had been helping themselves to the till. They paid themselves fees well in excess of what were thought to be reasonable by the creditors. It was thought that those directors had to a certain degree created a financial situation in their own firm—it was a family firm—whereby the business had to be passed to the official receiver for his attention.
Paragraph (b) states: whether he has been adjudged bankrupt on a previous occasion". These cases come to the attention of a number of people who watch the Press very carefully. However, there must be millions of people who do not observe the notices of bankruptcy or of bankruptcy proceedings. To my knowledge there are many decent business men and business women who operate on a small scale, selling their services to other firms and paying wages and salaries, income tax and other matters on behalf of their staff. They then find that a firm with which they have been dealing has gone into liquidation. What worries them is that a member of the firm or family may open up in business under another name to carry on what appears to be the same business that has gone into liquidation.
Will my hon. Friend explain how we can rid ourselves of what I call business pirates? Clearly they are pirating. They are doing something that is detestable. They know that they are trading at the expense of honest business men who are paying their way. At the end of the day there appears to be no protection against the vandals who lurch from one business 316 to another, robbing other business men time after time. Sometimes the robbery takes place in their own names and on other occasions in the names of other people or other members of the family.
Surely the House and the country are entitled to know what the Government are prepared to do by way of legislation to protect the good business interests. These questions need answering and I hope that my hon. Friend will be able to give some indication of what is intended in this part of the Bill.

§ Mr. Ian Percival (Southport)
Perhaps the Minister will be good enough to say a little more about paragraph (e). I appreciate that generally speaking there is an advantage in retaining some sort of elasticity, but this is a bit more than that.
In Committee we discussed the desirability of having the criteria set out by Parliament in the statute, and that is what was done. The first part of the amendment is putting into tabular form the criteria laid down by Parliament. However, paragraph (e) is introducing something quite different. This is not some flexibility which can be exercised by Statutory Instrument laid by the Minister and either negatived or made subject to the affirmative procedure. In fact, the paragraph is providing for an extra parliamentary alteration of the criteria.
Has the hon. Gentleman a specific matter in mind that he hopes will be dealt with fairly soon? Is it for that reason that he thought some elastic and simple procedure such as this should be introduced? We are not against the provision, but we are a little concerned because it appears to be a rather different way of introducing elasticity from that which is usually employed.

§ Mr. Clinton Davis
I shall try to deal briefly with the point raised by my hon. Friend the Member for St. Helens (Mr. Spriggs). If he examines the clause he will see that we are dealing with the power to dispense with public examinations and the duty imposed on the court in that respect. Therefore, the point he raised is not wholly germane.
My hon. Friend said that we should seek to rid ourselves of pirates in business. 317 I agree with that concept, and I ask him to reflect on Clause 9 relating to the disqualification of directors. He should also reflect on a provision which we inserted in the Companies (No. 2) Bill only last week providing for a register of disqualified directors. All these matters go some way, imperfectly though it may be, towards the achievement of a noble aim which I hope the House will find unexceptionable.
The hon. and learned Member for Southport (Mr. Percival) invited me to give reasons why we thought it right to import paragraph (e). We thought it right that the criteria to which courts should have regard when deciding whether to dispense with public examination should be introduced into the Bill rather than that they should simply be laid down in the bankruptcy rules. The hon. and learned Gentleman dealt with that point in Committee.
We have to reflect on the rôle of the official receiver and on when he should make an application for an order to dispense. We take the view that he should be under a duty to apply for an order to dispense where he considers that these criteria are met in a particular case. Therefore, we intend to seek amendment to the rules to that effect and to provide for a report to be submitted by the official receiver in support of his application drawing attention to relevant matters and to any objection to the order to dispense about which a creditor might notify him. That again was a point raised in Committee.
The application would be made ex parte by the official receiver, but only by him. I do not need to rehearse this matter further because we debated whether the right of application should be made by people other than official receivers. It was the Government's view that it would not be right for that to be done.
It is not intended to provide in the rules for notice of the application to be given to creditors or debtors. Amendments to the rules will be sought to provide for a copy of the order dispensing with the public examination to be served on the debtor and notice of the order given to creditors not less than seven days before the date fixed for examination.
In bankruptcy the permutation of circumstances which a court may be asked to 318 consider in determining whether to dispense with a public examination is very difficult to forecast. We have tried to set out certain criteria, but there may be additional ones. It would not be appropriate now to try to identify more closely the circumstances in which to act or not to act in a particular context. Therefore, this amendment provides some degree of flexibility, and I regard it as the right way in which to proceed.