CONDUCT OF DIRECTORS OF COMPANIES

HC Deb 27 February 1980 vol 979 cc1425-49

'(1) A director of a company shall observe the utmost good faith towards the company in any transaction with in or on its behalf and shall act honestly in the exercise of the powers and the discharge of the duties of his office.

(2) A director of a company shall not make use of any money or other property of the company, or of any information acquired by him by virtue of his position as a director or other officer of the company, to gain directly or indirectly an improper advantage for himself at the expense of the company.

(3) A director of a company who, by any breach of subsections (1) and (2) above, makes a profit or inflicts any damage on the company shall be liable to account to the company for the profit or to compensate it for the damage.

(4) This section is without prejudice to any other provision of the Companies Acts and to any rule of law with respect to the duties or liabilities of directors.'.—[Mr. Archer.]

Brought up, and read the First time.

Mr. Archer

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

This new clause is about the duties that directors owe to the company. It is not the first time during the passage of the Bill that we have discussed the subject. Lest it should be said "We discussed this in Committee and it was rejected" I shall give the House a little of the legislative history of the matter.

It is true that in Committee we debated an Opposition new clause on this subject. It is also true that the Government opposed it. Perhaps predictably, when the Committee voted it voted for the view of the Government and rejected the view of the Opposition. We were not wholly shattered by that.

What is at issue today is not what we discussed in Committee. In Committee we sought to codify the duties of directors to the company. That debate was largely about the merits of the codification as such.

If I may be permitted to paraphrase their argument, the Government asked, since we cannot completely summarise the duties of directors and can never totally eliminate the necessity to refer to case law, why we should attempt to codify these duties. If one cannot replace case law, why not forget the whole exercise? The House will not be surprised to hear that there are a number of answers to that argument. We attempted to ventilate them in Committee, but I apprehend that I would probably be out of order if I attempted to do that now, because those arguments are not part of this debate.

What happened in the course of debate in Committee was that I ventured to tease the Minister of State. I said that his party, when in Government in 1973, had introduced something similar in a Bill which never reached the statute book. He replied that that was different, that it was not an attempt at codification. He said: we set out a statement of principles, which was different from the attempt in clause 44 actually to codify."—[Official Report, Standing Committee A, 11 December 1979; c. 651.] Therefore, according to the Minister, what the Conservatives did in 1973 was an attempt to summarise the existing law in principle, leaving those who wished to look up the law to refer to case law as well. We went back to the Bill of 1973 and our new clause—I make no apology for plagiarism—is simply a restatement, word for word, of the Conservatives' attempt.

I hate to spring this on the Under-Secretary if he has not been forewarned, but if he intends to use the same arguments as the Minister used in Committee I must tell him that they will not apply, because, on the Minister's own argument, what we were trying to do in Committee was quite different. What we are trying to do now is to set out a statement of the principles.

This is not an attempt to deal with the duties which a director may owe to a company in relation to reasonable skill and care. I cannot help feeling that that is a pity, although this clause represents my draftsmanship. In Committee we had a new clause on this subject. It became submerged in the debate about our other new clause relating to fiduciary obligation, but possibly that was my fault. Perhaps at some later time we shall return to the debate on the duty of care and skill and how it can be defined. I commend to the House an excellent article on this subject in the Law Society's Gazette of 9 January 1980. I give notice to the Under-Secretary that when we debate this matter at some future date I shall draw on that article.

However, that is not the subject of the new clause. This clause relates not to care and skill and professional qualifications, but to honesty. In a recent article in The Times Miss Clare Watson drew a distinction between the duties of directors in relation to care and skill in management and fiduciary duties. She said: It has long been felt that a statement of the basic principles underlying the relationship between a company and its directors would be useful both to members' company boards and others concerned with business management. Such general statements of principle appear in several Commonwealth and American Acts, and it was recommended by the Jenkins committee that such a formula be incorporated into English law. For the benefit of the Under-Secretary, that was properly pointed out to me in Committee by the Minister of State. When I drew on Jenkins, he said "But Jenkins did not argue for a code. Jenkins argued for a statement of principle". Tonight we are debating a statement of principle.

The new clause deals with the fiduciary duties of trustees. It may be that I shall be held to blame if, at the outset, I use a number of technical terms. Lawyers are bound to do so in debates of this kind, particularly on company law. However, I hope that we shall not get bogged down, as we have done in some debates, purely on the vocabulary, although that is one of the snares.

Professor Gower thinks that the description of directors as trustees is misleading, so I would not want to use the expression "trustees". In Committee on the Companies Bill 1978, Conservative Members objected to the word "fiduciary". They said that it was borrowed from insurance law; that it entailed a duty of complete disclosure; that when talking about the duties of a director to a company, questions arise about those to whom he has to make his disclosure and about what he has to disclose; and was it not therefore misleading to use the word "fiduciary"? We would not go to the stake on that. However, courts in the United States have not shrunk from the use of that word or concept. They have glossed the Securities Exchange Act 1934 and said that directors owe a ficudiary duty to their companies. That there is a duty of this kind is, I should think, generally agreed. I cannot believe that will be between us.

We all know that the Jenkins committee objected to the narrowness of the duty. It underlined that it was owed to the company—cases such as Percival v Wright underline that again—not to the shareholders, and that shareholders and other individuals have no opportunity of enforcing it. That is a different matter, and it would be a pity if that were confused with the other issues in the debate.

The Government have belatedly, but happily, made some inroads into that problem, because we have the insider provisions, which we shall debate in due course. The Jenkins committee said that, given that there is this duty of honesty and that it is owed to the company, it would be helpful if we could extract the basic principles from the case law and embody them in legislation.

I turn to Profesor Gower's work on the subject. Any praise from me would be superfluous and perhaps an impertinence, because it is the work to which we almost all automatically turn. He said that in this area there were basically four duties which the courts had spelt out in the case law. First, there is the duty of good faith. Not only must there be no conscious dishonesty, but the director must not use his position to take some kind of advantage for himself, even if he does so without consciously turning his mind to any dishonest intention at the time. I shall return to that matter later.

Secondly, the director must exercise his powers for the purpose for which they were conferred. We dealt with that in Committee. We have not attempted to set out that duty in the clause, and I shall not take up more time with it now. Thirdly, the director must ensure that there is no conflict between his duty and his interest. Fourthly, the director must exercise his discretion for the purpose for which it was conferred.

For the purpose of the new clause we have concentrated only on the first of those duties—the duty to act bona fide. That duty seems to go wider than the duty not to act dishonestly. The case quoted by Professor Gower—I am sure the Under-Secretary will be familiar with it—is in re W & M Roith Ltd., reported in Weekly Law Reports 1967. That was a case where a director, in order to protect his widow after his death, entered into a service agreement with the company, an agreement which was somewhat advantageous to him and to those who would be left behind on his death. It was found as a fact that he did that without any conscious attempt to be dishonest, but the court said that he was in breach of his duty because he was using his position as a director to obtain a benefit for himself which, I suppose I could say, pace Professor Gower, is the kind of duty that a trustee owes to his beneficiaries.

6.45 pm

That is all that we are trying to spell out in the new clause. It is a modest proposal. It is an attempt to restate the existing law. If the Government take the view that it does not accurately restate the existing law, we are prepared to listen to them. But if it is an accurate restatement of the law, is it not helpful to find the essentials of the law—not all the details, not all the nuances, but the essential principles—in one place rather than in a multiplicity of precedents? Would not that be helpful to those who have to work with the law, to those who have to advise on the law and to company secretaries and others who have to operate the law?

In the lectures on jurisprudence to which we listened as students—and which some of us inflicted on students at later stages in our careers—we asked how far the law should be flexible and how far it should be predictable. In so far as it is one, it cannot easily be the other. If it can adapt itself to particular problems as they arise, to that extent it is not predictable. We have had examples recently —I shall not name names—of judicial decisions which were somewhat unpredictable because the judges were attempting, as they saw it, to be flexible. I say no more than that. As long as these matters are enshrined in case law it is possible for some court at some stage, taking into account the facts of a particular case, to overrule the precedents. If it is enshrined in statute law, that cannot happen. We take the view that that degree of predictability in company law is a blessing and a help to all those who have to operate it.

We believe, with Jenkins, that it is better for everyone if directors know what their obligations are, and if company secretaries, shareholders, creditors and all those who have to deal with directors know what they are entitled to expect from directors. We are comforted with the thought that the Government, in a previous incarnation, took that view, because it was incorporated in their 1978 Bill. If they have undergone a subsequent change of heart, may we at least be privy to their mental processes so that we know how that change of heart came about? If they were persuaded by it, perhaps we shall be persuaded, too.

In Committee, in another context, I said that directors were essentially professional people. In other professions it is accepted that there are standards of care, skill and professional probity. I am not suggesting that company directors, as a group, are less careful, less skilful or less honest than other groups. But, if so, why not recognise it, so that those directors who practise these standards will be able to see that others do not fall short of them and that they are not taken for a ride? Those who deal with directors should have a simple, concise statement of principle on what they are entitled to expect. This is only the beginning, because it relates only to duties in one area. Essentially, that is what the clause is about.

The Under-Secretary of State for Trade (Mr. Reginald Eyre)

The feature that I find attractive about the right hon. and learned Member for Warley, West (Mr. Archer) is that he demonstrates a quality which I think is prevailent in the West Midlands. It is a quality that I like to think I share, although perhaps to a lesser degree—namely, a preparedness to learn from past mistakes. The right hon. and learned Gentleman set out rather strongly—perhaps a little proudly—the simple fact that he acknowledged the fault of striving for impossible success with codification. He was prepared to move on—perhaps a little too triumphantly—having produced a statement of basic principles.

Mr. Archer

I thank the hon. Gentleman for his opening words. However, I must correct him in one respect. The Opposition are not acknowledging any fault on this occasion. We are merely recognising the realities of the vote.

Mr. Eyre

I thought that intellectually the right hon. and learned Gentleman indicated a degree of reservation about the possibility of achieving codification in the full and intellectually satisfying sense.

The right hon. and learned Gentleman was rather pleased that he had produced a statement of basic principles. There are severe difficulties and drawbacks in what he has proposed, which I shall seek to explain.

The new clause appears to have the effect of setting duties on a director in terms of conflict of interest in a concise form. The formulation was first presented to the House in the previous Conservative Administration's Companies Bill, which came before the House in 1973. I do not dissent from the history that the right hon. and learned Gentleman described. As he said, the formulation flowed directly from the Jenkins report of 1962, which suggested that statute law should state what it saw to be two primary obligations on directors: that a company director should observe the utmost good faith towards the company in any transaction, and that he should not use company property or information gained by virtue of his office to gain an improper advantage for himself at the company's expense.

The clause, which I have considered as favourably as possible, represents a change of tack on the Opposition's part. I hope that the right hon. and learned Gentleman will forgive me if I review his party's record in the same way as he reviewed the Conservative Party's record. When in power, and during the consideration of the Bill in Committee, the Opposition proposed the codification of directors' duties. Their proposal achieved neither a comprehensive statement nor clarification of the continuing role of case law. We are now being asked to consider a partial listing of duties. The clause appears to be intended as a general provision rather than an amendment of the existing law, but it seems to add something, because the two duties in subsections (1) and (2) are stated not to delegate from any existing duties.

I address my observations to the right hon. and learned Gentleman and the hon. Member for Hackney, Central (Mr. Davis)—they are both lawyers—with great respect and great seriousness, because I know that they wish to act responsibly. We cannot be sure of the effect in law of the clause until it is tested in the courts. I cannot see any merit in creating uncertainty. It would not be sufficient for a director to abide by the terms of the new clause—I am sure that the right hon. and learned Gentleman will agree with this—as there are other common law duties that he might break. For example, the clause has nothing to say—the right hon. and learned Gentleman acknowledged this—about directors' duties of care and skill.

Mr. John Smith

So what?

Mr. Eyre

The right hon. Member for Lanarkshire, North (Mr. Smith) says "So what?". That is an important issue in approaching the concept of directors' duties.

The right hon. and learned Gentleman made a fair debating point when he argued that the Government should find no difficulty in supporting what was originally a Conservative proposal. I am happy to say that I was not personally involved in the earlier debates. I have brought an uncommitted mind to bear upon the subject.

On further examination, I find that the effect of the clause on directors' duties is doubtful. We take the view that it is unlikely to be possible, as the Law Society said last year, to find words that define in advance the circumstances in which the duties are to apply without a serious risk that they will be found to impose a duty when it should not be imposed, or to relax a duty when it should not be relaxed.

When the Bill is enacted, the law on conflicts of interest in part IV and on insider dealing by directors in part V will have been tightened considerably. The clauses on those subjects leave little doubt about the high standards that are expected of directors in their dealings with their companies.

Mr. Clinton Davis

The hon. Gentleman has said that the clause would have to be tested in the courts. I thought that he found that a useful argument to adduce when we debated clause 26 in Committee. He said: We shall have to see how it works in practice and to see whether a case can then be established for the wider operation of the clause or, perhaps, for its improvement in some material respect. Does the hon. Gentleman recall the words of the right hon. Member for Crosby (Sir G. Page), who paraphrased his argument by saying: What he is really saying is 'Let us legislate by litigation and not by Act of Parliament. Leave it to the litigants, prosecutors and directors to write the law for us in front of the judges'".—[Official Report, Standing Committee A, 15 November 1979; c. 215.] How does the hon. Gentleman equate the two postures he has adopted?

Mr. Eyre

The hon. Gentleman has to set my argument in the context of the general principle advanced by the right hon. and learned Gentleman when introducing the clause. The right hon. and learned Gentleman said that he was trying to help directors—an agreeable aim—by setting out a simple statement of an aspect of their duties. I must emphasise that the clause does not do that. Indeed, it could end up by being misleading. In trying to make such a statement the right hon. and learned Gentleman will appreciate that there is a great deal of common law governing these matters that is not included. Therefore, there are many other factors that could apply that govern the duties of directors. Those factors are not included in this statement and, therefore, it would not be helpful in the way that is desired.

I was referring to the very high standard that is expected of directors in their dealings with their companies, as exemplified by the changes that we are making in the law in the Bill.

Mr. Clinton Davis

I did not ask the hon. Gentleman about that. He has answered a totally different question. I asked him how he justified the assertion that he made not long ago that there must be objection to the clause because it would have to be tested in the courts, when that is precisely what he was arguing should be done in relation to clause 26.

Mr. Eyre

At various stages in legislation all law that is established may necessarily and eventually have to be tested in the courts. However, the purpose of the new clause is to obtain simplification and to assist directors by explaining them what their duties are. I emphasise that that purpose cannot be effected by the clause. I have tried to emphasise that, with the improvements brought about in the Bill, the Government prefer the approach of setting out specific rules in particular areas rather than floating vague general statements which may or may not be declaratory of the underlying provisions of the common law, which are already complete and operative.

7 pm

There are two particular defects in the new clause to which I should like to refer. They illustrate the strength of the practical reservations that I have expressed. First, subsection (3) does not go as far as the common law, because it restricts itself to the restitution of profits—I hope that the right hon. and learned Member for Warley, West will pay attention to that matter, as I should like to know how it helps to simplify the explanation that is to be given to directors, which is one of the virtues that he claimed for the clause—made or damages incurred at the expense of the company. The case of Phipps v. Boardman in 1966 showed that the company could lawfully claim the profits made by directors abusing their position, even if such profits could not have been made by the company. I hope that the right hon. and learned Gentleman will consider that matter.

Therefore, the effect of the clause is unclear. It could be intended to reverse or qualify the ruling in Phipps v. Boardman or it might be taken to be still valid. The right hon. and learned Gentleman referred to the case of W. & M. Roith Ltd., in which the director, with the aim or protecting a widow's interest, entered into a service agreement which was in breach of his duty. However, if we look at the provisions of the Bill and the duty of disclosure about agreements, we see that that sort of possible abuse becomes much less likely.

I turn to a point which relates to the right hon. and learned Gentleman's exhortation to observe the utmost good faith towards the company. That expression is well understood in insurance law, where it implies a duty to disclose material facts. Although the phrase has a certain literary appeal as a general expression—it was obviously attractive to the right hon. and learned Gentleman—I emphasise that its effect in company law is much less well known. To the Government's knowledge, the phrase is unheard of, and therefore its legal meaning in this context is unknown. Therefore, it establishes an element of further doubt.

For those practical reasons, I advise the House that the clause—the right hon. and learned Gentleman did not remind the House that it was rejected by the Opposition last year—is misguided. I recognise at once the good purpose of the right hon. and learned Gentleman in trying to achieve simple and clear terms for the benefit and guidance of directors on the principles with which they should discharge their duties. However, for the practical reasons that I have tried to explain, the clause would have a misleading effect and it would not be beneficial. I advise the House to reject the clause.

Mr. Bob Cryer (Keighley)

I have listened to the Minister with a good deal of interest. I thought that he wriggled a good deal during the course of his remarks. We legislate to prevent abuse and the Minister may well argue that there is only a tiny minority involved in that abuse. I should like to draw the Minister's attention to an area where I believe that the new clause would materially assist.

As he says, clause 4 of the Bill will improve matters—I hope that that is the case. On the other hand, I see everything in favour of a general statement of the position and the Minister has not persuaded me that that would be otiose or redundant if it were added to the Bill. Indeed, the notion that the phrase "utmost good faith" is unknown in company law is at complete variance with his suggestion that law has to be clarified in the courts. We know that, and we know that if new law is passed which has no precedent, there may come a time when it will be tried in courts. On the other hand, we also know that, when legislation is passed by the Palace of Westminster, that law is frequently followed for many years without challenge in the courts by virtue of the fact that it puts something in writing which people believe should be followed.

This sort of clause would be a helpful guide to directors. Many directors carry out such ideas anyway, but we are talking—hopefully—about a minority who do not. I should like to draw attention to some of the examples that have been brought forward to the House by the Department of Trade, in which the duty of good faith and the duty to disclose material facts have not always been upper- most in directors' minds. The new clause might not have dissuaded those directors but I should have thought that it would have been a factor that might well have inhibited certain actions and have caused a different form of action to be taken.

I refer particularly to the Lonrho report which was carried out at great expense by the Department of Trade. It is interesting that the new clause was included in the then Conservative Government's Companies Bill 1973. At that period of time, the Lonrho affair was being brought to public attention and was a focus of action in the courts. I shall refer to two or three persons but, first, I should like to refer to Mr. Butcher, the finance director, about whom the report said: A Board of directors looks to its finance director to inform it fully and fairly upon the financial aspect of the matters upon which it must reach a decision and upon the group's position generally. It is apparent from much of the evidence set out in our report that Mr. Butcher failed to discharge his duty to the Board in this respect. In relation to Nyaschere, the Duncan Sandys' consultancy agreement and Wankel he either withheld information from the Board or allowed the Board to be misled. These were not casual acts of omission but deliberate decisions to withhold information or mislead and we condemn his conduct in this respect. That is a clear condemnation. Incidentally, nothing has happened to compensate the company for any damage that it suffered or any action that was taken. It may well be that Mr. Butcher, when faced with an explicit statement of his position such as that contained in the new clause, would not have embarked upon his course of conduct.

Paragraphs 12.109 and 12.110 of the report stated: As director responsible for the financial administration of the group it was Mr. Butcher's duty to bring these matters to the attention of the Lonrho Board. He did not do so and without any such disclosure he acquiesced in the use of the group's funds in Rhodesia for the development of the Shamrocke mine partly for the benefit of Mr. Rowland and the family trusts established for Mr. Ball and Mr. Ogilvy. He allowed the group's funds to be used for this purpose on a basis that in our view was unduly favourable to Mr. Rowland and to the family trusts established for Mr. Ball and Mr. Ogilvy. It is our view that in relation to Nyaschere Mr. Butcher put his loyalty to Mr. Rowland above his responsibility to the company, its shareholders and its Board of directors and that he failed to fulfil his duty to them. The Minister has said that there is a clear common law duty on directors. However, that duty was not upheld by Mr. Butcher in his activities as financial director. He was not concerned in a lowly back-street company that was struggling to keep its head above water. He was the financial director of a massive international conglomerate that had household names on the board of directors. The company was regarded as gilt-edged, if not touched by Royal blessing. Indeed, Mr. Ogilvy quickly disappeared from the board once these issues had become public knowledge.

The Government say that directors are busy people. They cannot necessarily find time to look up common law provisions to see whether their judgment on a conflict of interest is in conformity with a particular judicial decision. They do not know about the ratio decidendi. They cannot distinguish the ratio decidendi from the biter dicta. They cannot, therefore, decide about fine points of law. That is the advantage of statute law. It is enshrined in only two or three volumes. Hopefully, it may be enshrined in only one volume.

The new clause gives a summary of the position. The director can readily turn to it for guidance. The Department of Trade's report on the Lonrho incident is interesting. Several non-executive directors are praised. Those directors put forward their views. They drew attention to some of the actions that the inspectors held had been wrongly carried out by the majority on the board of directors. That board was led by "Tiny" Rowland.

Surely this new clause would help directors. It ensures that other directors do not carry the board through force of personality. The Department of Trade had reported other cases. If the Minister looks at the Peachey report, he will find that the inspectors repeatedly point out that the board had been carried along by the strong personality of Eric Miller. I shall point out later how strong the views of "Tiny" Rowland were. It would be quite handy if directors could say that the position is set down in several Acts of Parliament. It would be helpful if they had a conduct guide and a summary of the position. Such a summary would help directors to assess their judgments.

7.15 pm

The report refers to Mr. Sandys, now Lord Duncan-Sandys. The Minister must realise that the Lonrho affair is now gathering dust on the shelves. People's memories do not store such nuggets of information for ever. No doubt, several people are happy that the mists of time have gathered round those activities. However, there will be more scandals. No doubt the Department of Trade has reports in the pipeline. The ordinary person in the street feels that there is one standard of conduct for him, and another for directors. They cannot quibble about a standard of care or a standard of duty. They have to perform their functions with the devotion and diligence that is expected. Why should that not apply to directors? The Lonrho affair is an example of such dual standards.

In paragraph 7.68, the report states: On the evidence set out above, we believe that Mr Sandys was offered £130,000 compensation because that was the sum that Mr. Sandys indicated to Mr. Butcher he would require to tempt him to accepting the Chairmanship; we believe that Mr. Rowland together with Mr. Ball and Mr. Butcher concealed the matter from the remainder of the Board because they believed that the Board would not accept Mr. Sandys as Chairman if they knew about the arrangement to pay him £130,000. A group of people were, therefore, busy lining their pockets with vast sums of money. The current headline concerning the man who won £960,000 on the pools looks rather insignificant when compared with the vast sums that were involved in Lonrho. The directors plotted together to ensure that others in the company did not discover that Duncan Sandys would become chairman only if he received £130,000.

In paragraph 774 the inspectors made that clear. It states: It is manifest from the evidence that we have set out above that one section of the Board deliberately withheld information about Mr. Sandys' compensation payment from the rest of the Board because they knew that Mr. Sandys would not be appointed Chairman if the information were disclosed. Mr. Rowland, Mr. Ball and Mr. Butcher were responsible for this policy of concealment. During the course of 1972 Mr. Sandys came to know that Sir Basil Smallpeice and Mr. du Cann were unaware of the compensation arrangement. He was happy that Mr. du Cann should know about the compensation arrangement but not that Sir Basil should know about it. Thus during 1972 five directors became aware of the arrangement, Mr. Rowland, Mr. Ball, Mr. Butcher, Mr. du Cann and, of course, Mr. Sandys himself. These five directors together with two of the executive directors appointed in May 1972 were the seven directors who supported Mr. Rowland during the course of the Boardroom dispute. They were involved in a conspiracy. According to that statement, they were not loyal to the company, but to the board. They conspired to gain supremacy in an internal struggle.

It was not disclosed that significant sums of money were being spent on "Tiny" Rowland's house. The sum of £75,000 was spent. The cost of furnishings amounted to £225,000. That was a financial duty not to the company, but to "Tiny" Rowland. They worked together for their own improvement. They did not work for the improvement of the company. During the squabble, few directors were prepared to criticise such action. Indeed, this unseemly squabble only came into the public eye by chance. The new clause sets out some idea of a set of rules. The new clause states: A director of a company shall observe the utmost good faith towards the company in any transaction with in or on its behalf and shall act honestly in the exercise of the powers and the discharge of the duties of his office. If any of those five directors had read that, they could not have made a serious claim to honesty. They had concealed information and payments of massive sums. They had made personal payments and had provided perquisites.

About £320,000 was turned into a loan, when "Tiny" Rowland overdrew his expenses. The clause is a useful guide for directors, to try to avoid the unseemly and degenerate squabble that took place on the Lonrho board.

Mr. Clinton Davis

I believe that my hon. Friend will agree that virtually all these personalities who appear in the reports—Dowgate, Ashbourne, Lonhro and Peachey—could hardly have advanced the entirety of their cause had they not been able to rely on acquiescent, compliant professional advisers and secondary advisers.

Mr. Cryer

That is right, and they come in for their fair share of criticism. Whenever I could, I introduced debates on the various companies. We had a useful and informative debate on Lonrho, to which my hon. Friend replied, and such criticisms were made then.

If anyone has the guts to stand up to these people and say that they are wrong, it will help them to have a piece of paper —an Act of Parliament—with a rough statement of the duties that they have towards the company and shareholders rather than to their own pockets. We are talking of controlling the greed of certain people who run companies, which they turn into a Santa Claus for lining their pockets. It would be a great help to everyone to see that the Government are taking action. However, since the Minister rejects the clause, I doubt whether we shall have action.

Mr. Parkinson

Perhaps the hon. Gentleman would not like the Bill to get in the way of a speech that he has made about three times. However, if he looks at part IV of the Bill, he will see carefully defined a series of crimes and offences against these companies, which covers many of the problems that he mentions. We believe that that is a much better way to deal with the problem than by general declarations set out in the new clause.

Mr. Cryer

I do not believe that the Minister was here when I specifically referred to part IV. I said that some of the problems would unquestionably be covered, but that it was no bad thing to have a general declaration. It was the Conservative Party that introduced such a clause in the 1973 Bill. Perhaps the Minister should consider whether he has heard the entire speech before intervening.

All the reports that my hon. Friend mentions refer to strong personalities. It would not be a bad idea to have a rough guide, without the complications of part IV, which could be placed above the board room table on a little revolving pedestal to remind people what they are about.

I wish to demonstrate the kind of person whom we are dealing with. On page 655 of the Lonrho report Mr. Rowland is asked about shares by an inspector, who is an impartial, objective person carrying out a difficult task. He replies: You see, Mr. Heyman, the past, and I have got an idea what the future could be depending on whether you want to kill it. But, by God, it has got one thing, and that is it has got a protector and that is me. In other words, anybody who want to kill that company has got to have a sub-machine gun, mortars, guns all sort of ammunition, because I am going to protect it to the bitter end. Believe me, Mr. Heyman, in me you have got somebody you have got to fight when it comes to Lonrho. That is an extraordinary collection of words from a senior director of an international conglomerate. He refers to submachine guns and ammunition. That reflects the nature of a man with a fiery temper, who doubtless tried to obstruct and demean anyone who tried to stand in his way. He is not alone.

It would he useful for directors to have a rough guide, as Mr Rowland reaches for a sub-machine gun from under the table. They could then remind him, before he starts pressing the trigger, of the limitation in the clause. [Interruption.]

Hon. Members are laughing at the imagery. It was not conjured up by me but by "Tiny" Rowland when speaking to an inspector, instructed by the Secretary of State for Trade, investigating the company. That inspector had the hallmark of Parliament, through the Secretary of State being accountable to this House. It is an outlandish image, but was said seriously and incorporated in the report.

In companies there are people with varying degrees of power who, with varying degrees of force, might use it wrongly, mischieviously, badly or greedily. They may only be a minority. Hopefully, the majority act in utmost good faith. We should not need legislation if everyone acted in good faith, but we have legislation because of the danger of the minority acting badly and without good faith. The clause would be a useful guide to encourage those people to act in good faith.

Mr. Nicholas Baker (Dorset, North)

I apologise for not being present at the beginning of the debate. I had not intended to speak in the debate, but having heard the hon. Member for Keighley (Mr. Cryer), for whose talents, particularly in looking at legal documents, I have the greatest respect, I feel that he has gone astray a little and that I must take up what he said. The hon. Gentleman said that the clause would be a helpful guide to directors in their conduct. In Committee I strongly maintained that it was not the job of company law to try to tell directors how to manage a company, and the clause does no such thing. It is not a guide, and I do not believe that it should be. It purports to lay down legal principles, responsibilities and duties for directors. The hon. Gentleman gave away his argument by saying that the clause would not have persuaded directors not to do that which they should not have done, and I agree.

Mr. Cryer

I said that it might not have persuaded them. I did not say that it would not. We simply do not know. I argued that it was a useful guide which might have prevented the events in Lonrho.

Mr. Baker

It might or might not. We have legal principles which set out standards, duties and responsibilities for directors. The clause covers little that does not already exist in law. At one time I was sympathetic to a clause of this type. It seems, however, to have one fundamental flaw, on which my hon. Friend may have touched in his comments at the opening of the debate. That flaw is to require the standard of "utmost good faith". That would make it very difficult for anyone to act as a director of more than one company. It would be very difficult for anyone to act as a director for a company at all.

7.30 pm

The phrase "utmost good faith" comes from insurance law. It requires a complete disclosure of every possible conceivable fact. It is based on the principle that there is only one insurance contract between the insurer and the insurance company, but that is not necessarily the case. Many directors are directors of many companies. Some people believe that that is undesirable in itself, but I understand that that does not include the hon. Member for Keighley, who believes, as I do, that non-executive directors have a role to play. In their conduct of the management of companies they often bring an objective standard into play. In the case to which the hon. Gentleman referred, there is some evidence that the non-executive directors did just that.

Acceptance of the clause would probably not add anything to the law, but it would certainly discourage non-executive directors. Fundamentally, what the hon. Gentleman is getting at is how to dissuade directors from wrong-doing. I believe that the only way to do that is to provide penalties which are clearly laid down and which do not prevent necessary, perfectly trustworthy and respectable directors from doing their duty. That, to a large extent, is what is done by the later clauses.

Mr. John Smith

I shall not pursue at this moment some of the remarks made by the hon. Member for Dorset, North (Mr. Baker). I shall, however, return to them, because I disagree fundamentally with what he has stated as being the duties of directors under the present law and his surprising redefinition of them.

The House will be grateful to my hon. Friend the Member for Keighley (Mr. Cryer) for bringing some practical argument to what might otherwise have been an arid debate on certain aspects of a technical Bill. My hon. Friend, as he often does, brought a touch of Technicolor and a feeling of reality to our discussions. He rightly reminded us of some of the problems in this area. It is too easy for hon. Members, particularly those on the Government Benches, to laugh at these matters and to say that they are best forgotten. Their former leader described the ugly and unacceptable face of capitalism. I do not know whether there is still the same concern in the Conservative Party about having an acceptable face of capitalism.

I do not dispute that part IV contains some improvements. By pressure, inside and outside the House, we have gently pushed the Conservative Party towards a better sense of its responsibility. If one is to run a capitalist system, one has to clean out the stables from time to time. That is what successive Companies Bills have been about.

I found the Under-Secretary of State's reply unconvincing. He had a difficulty. He could not say that what was contained in the new clause was not a proper statement of a director's duties. He did not attempt that. He conceded that it was a proper statement of those duties. But the hon. Gentleman was in the difficulty, as my right hon. and learned Friend the Member for Warley, West (Mr. Archer), who so competently introduced the new clause, said, that the 1973 Bill of the then Conservative Government contained these very words—not an adaptation of them, or an amendment or reference to them but the same words which, on that occasion, purported to be a statement of law. They are now used in this new clause.

The Under-Secretary had the option of saying that the Government in 1973 had wrongly stated the law. He found difficulty, I believe, in coming to that conclusion. Those advising him were probably advising the relevant Minister in 1973 and perhaps experienced equal difficulty. I am sure that they advised myself and Labour Ministers on the same matter.

Some of the difficulties supposed to exist about codification did not appear to exist at the time when the former Government introduced codification of the duties of directors. There did not seem to be all these technical difficulties that have been found in the course of preparing the brief for the Minister's speech today. Let us accept that it accurately states the law.

I was worried about one point raised by the Under-Secretary. He said that there was the difficult case of Phipps v. Boardman in 1966. I thought that it might be a problem if the law has changed and that it might be better to withdraw the new clause and think again. But if the 1966 case affects the statement of the law here, it was signally forgotten in 1973 when the then Conservative Government drafted their statement of what they thought the law was.

I cannot see the 1966 case as a discouragement to myself or to my right hon. and learned Friend. In that situation, the Under-Secretary of State must accept that it is a proper statement of the law as it stands.

I was further alarmed when the hon. Member for Dorset, North (Mr. Baker) said "What is all this nonsense about utmost good faith? That is just a concept that applies to the law of insurance and the contract uberrima fidei appertaining to insurance." I am surprised that the hon. Gentleman should take that view. I understand that he is a solicitor specialising in commercial and company law. He will no doubt be familiar with Gower's book "The Principles of Modern Company Law", which, on page 575, says: Directors, once their appointments take effect, are fiduciaries and must therefore display the utmost good faith towards the company in their dealings with it or on its behalf". I had thought that to be the law, and it is confirmed by Gower to be the law. It is a little surprising that a solicitor specialising in commercial and company law is not aware of it. It is a little surprising if he is advising his clients in that regard. There is all the more need for a clear statement of the law, because one cannot rely on solicitors to advise people on it.

Mr. Nicholas Baker

The debate has become a little personal. I hesitate to do this when the Minister, I know, is taking advice from Professor Gower. I believe that that statement is not generally accepted as a complete and accurate statement of company law.

Mr. Smith

The hon. Gentleman is a bold man to make such statements in the face of convincing evidence. There are others, apart from myself, who have been aware for years that this was one of the duties of directors under company law. It is so axiomatic that when it is challenged it takes my breath away. It underlines the point that solicitors from time to time should perhaps read the text books on company law. Some of them might obtain advantage by being asked for assertions about what the law is in Acts of Parliament. It is alarming that such misconceptions exist. I believe that the hon. Gentleman is wrong. It does accurately state the law. Why on earth should it not be put in the Bill?

The Under-Secretary of State points to the problem of codification. The Labour Government tried to codify all the duties of directors. There might be argument over whether there should be codification. I am personally in favour of codifying the law as much as possible. I believe that Acts of Parliament should not be quarries delved into by lawyers but clear statements of the law that can be understood by everyone in the community. There is a great deal to be said for codification from that point of view. But that argument is not very useful to the Secretary of State on this occasion, because we are not attempting to codify in that way. The Opposition have accepted that we lost that battle in Committee, and we see little point in rehearsing it here. We are now on a different tack. The Under-Secretary must find an argument to show why a clear statement of the principal and simple duties of a director should not appear in an Act of Parliament.

Our proposal does not involve difficulties about care, skill or anything like that. It simply seeks to state what the law is and to stress the honesty that is required of directors of companies and the obligation of utmost good faith. I should have thought that that was the paramount duty of directors, and that must be so since they are entrusted with handling other people's money and with responsibilities to the whole community. That should be at the forefront of their attention, and I see every good reason for this provision being written into the Bill.

The Under-Secretary said repeatedly that it would not be helpful to make the change, and that it might in some way be misleading. I cannot see how it would be misleading to have the law stated clearly in the relevant Act of Parliament. He asked why we did not seek to state all the other duties. That is another Aunt Sally. Everyone who makes one good proposal is asked why he did not make five others. We are being modest on this occasion in putting fiduciary duties first. We can write other duties in on other occasions.

I got the impression from the Under-Secretary's speech that a great deal of thought had gone into the preparation of his brief. No doubt he gave it a great deal of thought himself, because he had the unenviable task of trying to argue against a compelling and convincing case, trapped as he was by the precedents of a previous Conservative Government. He was therefore unable to pick over the drafting with the arguments that are available to all Ministers. No legislation is ever drafted perfectly. If it were, the courts would not now be so busily engaged in interpreting the products of this place.

It must surely be conceded that of all the duties of directors, the one concerned in the clause is paramount. I therefore hope that the House will agree to the clause. If the Government seek to resist it, we think that it is sufficiently important to force to a vote.

Question put, That the clause be read a Second time:—

The House divided: Ayes 132,Noes 178.

Division No. 199]	AYES	[6.20 pm
Anderson, Donald	Flannery, Martin	Marshall, David (Gl'sgow,Shettles'n)
Archer, Rt Hon Peter	Fletcher, L. R. (Ilkeston)	Marshall, Dr Edmund (Goole)
Armstrong, Rt Hon Ernest	Fletcher, Ted (Darlington)	Mason, Rt Hon Roy
Ashley, Rt Hon Jack	Ford, Ben	Maxton, John
Atkinson, Norman (H'gey, Tott'ham)	Forrester, John	Maynard, Miss Joan
Beith, A. J.	Foulkes, George	Mikardo Ian
Bidwell, Sydney	Freud, Clement	Miller, Dr M. S. (East Kilbride)
Booth, Rt Hon Albert	Garrett, John (Norwich S)	Morris, Rt Hon Alfred (Wythenshawe)
Boothroyd, Miss Betty	Garrett, W. E. (Wallsend)	Morris, Rt Hon Charles (Openshaw)
Bottomley, Rt Hon Arthur (M'brough)	Golding, John	Morris, Rt Hon John (Aberavon)
Bradley, Tom	Gourlay, Harry	Morton, George
Bray, Dr Jeremy	Graham, Ted	Newens, Stanley
Brown, Hugh D. (Provan)	Grant, John (Islington C)	Oakes, Rt Hon Gordon
Buchan, Norman	Grimond, Rt Hon J.	O'Halloran, Michael
Callaghan, Rt Hon J. (Cardiff SE)	Hamilton, James (Bothwell)	O'Neill, Martin
Callaghan, Jim (Middleton & P)	Hamilton, W. W. (Central Fife)	Orme, Rt Hon Stanley
Campbell-Savours, Dale	Harrison, Rt Hon Walter	Owen, Rt Hon Dr David
Carmichael, Neil	Hart, Rt Hon Dame Judith	Palmer, Arthur
Cartwright, John	Haynes, Frank	Parry, Robert
Clark, Dr David (South Shields)	Healey, Rt Hon Denis	Powell, Raymond (Ogmore)
Cocks, Rt Hon Michael (Bristol S)	Hogg, Norman (E Dunbartonshire)	Prescott, John
Coleman, Donald	Holland, Stuart (L'beth, Vauxhall)	Price, Christopher (Lewlsham West)
Craigen, J. M. (Glasgow, Maryhill)	Home Robertson, John	Radice, Giles
Crowther, J. S.	Hooley, Frank	Roberts, Albert (Normanton)
Cryer, Bob	Howell, Rt Hon Denis (B'ham, Sm H)	Roberts, Ernest (Hackney North)
Cunningham, Dr John (Whitehaven)	Howells, Geraint	Rodgers, Rt Hon William
Dalyell, Tam	Hughes, Robert (Aberdeen North)	Rooker, J. W.
Davis, Clinton (Hackney Central)	Jay, Rt Hon Douglas	Ross, Stephen (Isle of Wight)
Dean, Joseph (Leeds West)	John, Brynmor	Sandelson, Neville
Dempsey, James	Jones, Rt Hon Alec (Rhondda)	Sever, John
Dixon, Donald	Jones, Barry (East Flint)	Sheerman, Barry
Dobson, Frank	Kinnock, Neil	Smith, Rt Hon J. (North Lanarkshire)
Dormand, Jack	Lamond, James	Soley, Clive
Douglas, Dick	Leadbitter, Ted	Stailard, A. W.
Dubs, Alfred	Lewis, Ron (Carlisle)	Steel, Rt Hon David
Duffy, A. E. P.	Litherland, Robert	Stewart, Rt Hon Donald (W IsIes)
Dunn, James A. (Liverpool, Kirkdale)	Lofthouse, Geoffrey	Stott, Roger
Dunwoody, Mrs Gwyneth	Lyons, Edward (Bradford West)	Strang, Gavin
Eadie, Alex	McDonald, Dr Oonagh	Taylor, Mrs Ann (Bolton West)
Eastham, Ken	McElhone, Frank	Thomas, Dafydd (Merioneth)
Edwards, Robert (Wolv SE)	McKay, Allen (Penistone)	Thomas, Mike (Newcastle East)
Ellis, Raymond (NE Derbyshire)	McKelvey, William	Thome, Stan (Preston South)
English, Michael	Maclennan, Robert	Tinn, James
Evans, John (Newton)	McMillan, Tom (Glasgow, Central)	Torney, Tom
Faulds, Andrew	McNamara, Kevin	Wainwright, Edwin (Dearne Valley)
Field, Frank	Marks, Kenneth	Wainwright, Richard (Colne Valley)
Fitch, Alan
Watkins, David	Whitlock, William	Young, David (Bolton East)
Weetch, Ken	Willey, Rt Hon Frederick
Welsh, Michael	Wilson, William (Coventry SE)	TELLERS FOR THE AYES:
White, Frank R. (Bury & Radcliffe)	Woolmer, Kenneth	Mr. Terry Davis and
White, James (Glasgow, Pollok)	Wrigglesworth, Ian	Mr. Hugh McCartney.
NOES
Alexander, Richard	Grieve, Percy	Page, John (Harrow, West)
Ancram, Michael	Griffiths, Peter (Portsmouth N)	Page, Rt Hon Sir R. Graham
Arnold, Tom	Grist, Ian	Page, Richard (SW Hertfordshire)
Aspinwall, Jack	Grylls, Michael	Parkinson, Cecil
Atkins, Robert (Preston North)	Gummer, John Selwyn	Parris, Matthew
Atkinson, David (B'mouth, East)	Hamilton, Hon Archie (Eps'm&Ew'll)	Patten, Christopher (Bath)
Baker, Nicholas (North Dorset)	Hannam, John	Patten, John (Oxford)
Bell, Sir Ronald	Haselhurst, Alan	Porter, George
Bendall, Vivian	Hawkins, Paul	Powell, Rt Hon J. Enoch (S Down)
Benyon, Thomas (Abingdon)	Hayhoe, Barney	Prentice, Rt Hon Reg
Benyon, W. (Buckingham)	Henderson, Barry	Price, David (Eastleigh)
Berry, Hon Anthony	Heseltine, Rt Hon Michael	Raison, Timothy
Best, Keith	Hicks, Robert	Rathbone, Tim
Bevan, David Gilroy	Hill, James	Rees-Davies, W. R.
Biffen, Rt Hon John	Holland, Philip (Carlton)	Renton, Tim
Biggs-Davison, John	Hunt, David (Wirral)	Rhodes James, Robert
Blackburn, John	Irving, Charles (Cheltenham)	Rhys Williams, Sir Brandon
Boscawon, Hon Robert	Jenkin, Rt Hon Patrick	Ross, Wm. (Londonderry)
Braine, Sir Bernard	Jessel, Toby	Royle, Sir Anthony
Bright, Graham	Jopling, Rt Hon Michael	Sainsbury, Hon Timothy
Brinton, Tim	Kaberry, Sir Donald	St. John-Stevas, Rt Hon Norman
Brocklebank-Fowler, Christopher	Kellett-Bowman, Mrs Elaine	Scott, Nicholas
Brotherton, Michael	Kitson, Sir Timothy	Shelton, William (Streatham)
Brown, Michael (Brigg & Sc'thorpe)	Knox, David	Shepherd, Colin (Hereford)
Browne, John (Winchester)	Lang,Ian	Sims, Roger
Bryan, Sir Paul	Latham, Michael	Skeet, T. H. H.
Lawrence, Ivan	Speed, Keith
Buchanan-Smith, Hon Alick	Lee, John	Speller, Tony
Buck, Antony	Le Marchant, Spencer	Spence, John
Bulmer, Esmond	Lennox-Boyd, Hon Mark	Spicer, Jim (West Dorset)
Burden, F. A.	Lester, Jim (Beeston)	Squire, Robin
Butcher, John	Lewis, Kenneth (Rutland)	Stainton, Keith
Cadbury, Jocelyn	Lloyd, Ian (Havant & Waterloo)	Steen, Anthony
Carlisle, John (Luton West)	Lloyd, Peter (Fareham)	Stevens, Martin
Carlisle, Kenneth (Lincoln)	Loveridge, John	Stewart, Ian (Hitchin)
Chalker, Mrs Lynda	Luce, Richard	Stewart, John (East Renfrewshire)
Chapman, Sydney	Lyell, Nicholas	Stradling Thomas, J.
Clark, Hon Alan (Plymouth, Sutton)	McCusker, H.	Tapsell, Peter
Clark, Sir William (Croydon South)	Macfarlane, Neil	Thomas, Rt Hon Peter (Hendon S)
Clarke, Kenneth (Rushcliffe)	MacGregor, John	Thompson, Donald
Clegg, Sir Walter	MacKay, John (Argyll)	Thorne, Neil (llford South)
Cockeram, Eric	McNair-Wilson, Michael (Newbury)	Thornton, Malcolm
Cranborne, Viscount	McQuarrie, Albert	Townend, John (Bridlington)
Critchley, Julian	Major, John	Townsend, Cyril D. (Bexleyheath)
Crouch, David	Marlow, Tony	Waddington, David
Dickens, Geoffrey	Mates, Michael	Wakeham, John
Dorrell, Stephen	Mather, Carol	Waldegrave, Hon William
Douglas-Hamilton, Lord James	Maude, Rt Hon Angus	Walker, Rt Hon Peter (Worcester)
Dover, Denshore	Mawby, Ray	Walker-Smith, Rt Hon Sir Derek
Dunn, Robert (Dartford)	Mawhinney, Dr Brian	Waller, Gary
Dykes, Hugh	Meyer, Sir Anthony	Ward, John
Elliott, Sir William	Mills, Iain (Meriden)	Watson, John
Eyre, Reginald	Mills, Peter (West Devon)	Wells, John (Maidstone)
Fairgrieve, Russell	Mlscampbell, Norman	Wells, Bowen (Hert'rd & Stev'nage)
Fisher, Sir Nigel	Moate, Roger	Wheeler, John
Fletcher, Alexander (Edinburgh N)	Molyneaux, James	Wickenden, Keith
Fletcher-Cooke, Charles	Morrison, Hon Peter (City of Chester)	Wiggin, Jerry
Forman, Nigel	Murphy, Christopher	Wilkinson, John
Fowler, Rt Hon Norman	Myles, David	Williams, Delwyn (Montgomery)
Fox, Marcus	Neale, Gerrard	Winterton, Nicholas
Galbraith, Hon T. G. D.	Needham, Richard	Wolfson, Mark
Garel-Jones, Tristan	Nelson, Anthony	Young, Sir George (Acton)
Goodlad, Alastalr	Neubert, Michael
Gorst, John	Newton, Tony	TELLERS FOR THE NOES:
Gower, Sir Raymond	Nott, Rt Hon John	Mr. John Cope and
Gray, Hamish	Osborn, John	Mr. Peter Brooke.
Question accordingly negatived.

Division No. 200]	AYES	[7.42 pm
Alton, David	Fletcher, Ted (Darlington)	Morton, George
Anderson, Donald	Ford, Ben	Newens, Stanley
Archer, Rt Hon Peter	Forrester, John	O'Halloran, Michael
Armstrong, Rt Hon Ernest	Foulkes, George	O'Neill, Martin
Ashley, Rt Hon Jack	Freud, Clement	Owen, Rt Hon Dr David
Ashton, Joe	Garrett, John (Norwich S)	Palmer, Arthur
Bidwell, Sydney	Garrett, W. E. (Wallsend)	Parry, Robert
Booth, Rt Hon Albert	Golding, John	Powell, Raymond (Ogmore)
Boothroyd, Miss Betty	Gourlay, Harry	Prescott, John
Bray, Dr Jeremy	Graham, Ted	Price, Christopher (Lewisham West)
Brown, Hugh D. (Provan)	Grant, John (Islington C)	Radice, Giles
Brown, Ronald W. (Hackney S)	Grimond, Rt Hon J.	Roberts, Albert (Normanton)
Callaghan, Jim (Middleton & P)	Hamilton, W. W. (Central Fife)	Roberts, Ernest (Hackney North)
Campbell-Savours, Dale	Harrison, Rt Hon Walter	Rodgers, Rt Hon William
Carmichael, Neil	Hart, Rt Hon Dame Judith	Rooker, J. W.
Cartwright, John	Haynes, Frank	Sever, John
Clark, Dr David (South Shields)	Hogg, Norman (E Dunbartonshire)	Sheerman, Barry
Cocks, Rt Hon Michael (Bristol S)	Home Robertson, John	Soley, Clive
Coleman, Donald	Hooley, Frank	Stallard, A. W.
Conlan, Bernard	Howell, Rt Hon Denis (B'ham, Sm H)	Stewart, Rt Hon Donald (W Isles)
Craigen, J. M. (Glasgow, Maryhill)	Hughes, Robert (Aberdeen North)	Stolt, Roger
Crowther, J. S.	Jay, Rt Hon Douglas	Strang, Gavin
Cryer, Bob	John, Brynmor	Taylor, Mrs Ann (Bolton West)
Cunningham, Dr John (Whitehaven)	Jones, Rt Hon Alec (Rhondda)	Thomas, Dafydd (Merioneth)
Dalyell, Tarn	Jones, Barry (East Flint)	Thomas, Mike (Newcastle East)
Davis, Clinton (Hackney Central)	Lamond, James	Thorne, Stan (Preston South)
Davis, Terry (B'rm'ham, Stechford)	Leadbitter, Ted	Tinn, James
Dean, Joseph (Leeds West)	Lewis, Ron (Carlisle)	Torney, Tom
Dempsey, James	Litherland, Robert	Wainwright, Edwin (Dearne Valley)
Dixon, Donald	Lofthouse, Geoffrey	Watkins, David
Dormand,jack	Lyon, Alexander (York)	Weetch, Ken
Douglas, Dick	McDonald, Dr Oonagh	Welsh, Michael
Dubs, Alfred	McElhone, Frank	White, Frank R. (Bury & Radcliffe)
Duffy, A. E. P.	McKay, Allen (Penistone)	White, James (Glasgow, pollok)
Dunn, James A. (Liverpool, Kirkdale)	McKelvey, William	Whitlock, William
Eadie, Alex	Maclennan, Robert	Willey, Rt Hon Frederick
Eastham, Ken	McMillan, Tom (Glasgow, Central)	Williams, Sir Thomas (Warrington)
Edwards, Robert (Wolv SE)	Marks, Kenneth	Wilson, William (Coventry SE)
Ellis, Raymond (NE Derbyshire)	Marshall, David (Gl'sgow.Shettles'n)	Woolmer, Kenneth
English, Michael	Marshall, Dr Edmund (Goole)	Wrigglesworth, Ian
Faulds, Andrew	Maxton, John	Young, David (Bolton East)
Field, Frank	Maynard, Miss Joan
Fitch, Alan	Morris, Rt Hon Alfred (Wythenshawe)	TELLERS FOR THE AYES:
Fitt, Gerard	Morris, Rt Hon Charles (Openshaw)	Mr. James Hamilton and
Flannery, Martin	Morris, Rt Hon John (Aberavon)	Mr. Hugh McCartney.
Fletcher, L. R. (Ilkeston)

NOES
Alexander, Richard	Clark, Sir William (Croydon South)	Grylls, Michael
Ancram, Michael	Clarke, Kenneth (Rushcliffe)	Gummer, John Selwyn
Arnold, Tom	Clegg, Sir Walter	Hamilton, Hon Archie (Eps'm&Ew'll)
Aspinwall, Jack	Cockeram, Eric	Hannam, John
Atkins, Robert (Preston North)	Cope, John	Haselhurst, Alan
Atkinson, David (B'mouth, East)	Critchley, Julian	Hawkins, Paul
Baker, Nicholas (North Dorset)	Crouch, David	Hayhoe, Barney
Bell, Sir Ronald	Dickens, Geoffrey	Heddle, John
Bendall, Vivian	Dorrell, Stephen	Henderson, Barry
Benyon, Thomas (Abingdon)	Dover, Denshore	Hicks, Robert
Benyon, W. (Buckingham)	Dunn, Robert (Dartford)	Holland, Philip (Carlton)
Berry, Hon Anthony	Dykes, Hugh	Hunt, David (Wirral)
Best, Keith	Elliott, Sir William	Jenkin, Rt Hon Patrick
Biggs-Davison, John	Eyre, Reginald	Jessel, Toby
Blackburn, John	Fairgrieve, Russell	Jopling, Rt Hon Michael
Boscawen, Hon Robert	Fisher, Sir Nigel	Kaberry, Sir Donald
Boyson, Dr Rhodes	Fletcher, Alexander (Edinburgh N)	Kitson, Sir Timothy
Braine, Sir Bernard	Fletcher-Cooke, Charles	Knight, Mrs Jill
Bright, Graham	Fookes, Miss Janet	Knox, David
Brinton, Tim	Forman, Nigel	Lang, Ian
Brocklebank-Fowler, Christopher	Fowler, Rt Hon Norman	Latham, Michael
Brown, Michael (Brigg & Sc'thorpe)	Fox, Marcus	Lawrence, Ivan
Buchanan-Smith, Hon Alick	Galbraith, Hon T. G. D.	Lawson, Nigel
Burden, F. A.	Gardiner, George (Reigate)	Lee, John
Butcher, John	Garel-Jones, Tristan	Le Marchant, Spencer
Carlisle, John (Luton West)	Goodlad, Alastair	Lennox-Boyd, Hon Mark
Carlisle, Kenneth (Lincoln)	Gorst, John	Lester, Jim (Beeston)
Carlisle, Rt Hon Mark (Runcorn)	Gray, Hamish	Lloyd, Ian (Havant & Waterloo)
Chalker, Mrs Lynda	Grieve, Percy	Lloyd, Peter (Fareham)
Chapman, Sydney	Griffiths, Peter (Portsmouth N)	Loveridge, John
Clark, Hon Alan (Plymouth, Sutton)	Grist, Ian	Luce, Richard

Lyell, Nicholas	Parris, Matthew	Tapsell, Peter
Macfarlane, Neil	Patten, Christopher (Bath)	Thomas, Rt Hon Peter (Hendon S)
MacGregor, John	Patten, John (Oxford)	Thompson, Donald
MacKay, John (Argyll)	Pattie, Geoffrey	Thorne, Neil (llford South)
McNair-Wilson, Michael (Newbury)	Porter, George	Thornton, Malcolm
McQuarrie, Albert	Price, David (Eastleigh)	Townend, John (Bridlington)
Major, John	Raison, Timothy	Townsend, Cyril D. (Bexleyheath)
Marlow, Tony	Rathbone, Tim	Trippier, David
Mates, Michael	Rees-Davies, W. R.	Trotter, Neville
Mather, Carol	Ronton, Tim	Waddington, David
Maude, Rt Hon Angus	Rhodes James, Robert	Wakeham, John
Mawby, Ray	Rhys Williams, Sir Brandon	Waldegrave, Hon William
Mawhinney, Dr Brian	Ross, Wm. (Londonderry)	Walker-Smith, Rt Hon Sir Derek
Meyer, Sir Anthony	Royle, Sir Anthony	Waller, Gary
Miller, Hal (Bromsgrove & Redditch)	Sainsbury, Hon Timothy	Ward, John
Mills, Iain (Meriden)	St. John-Stevas, Rt Hon Norman	Watson, John
Moate, Roger	Scott, Nicholas	Wells, John (Maidstone)
Morrison, Hon Peter (City of Chester)	Shepherd, Colin (Hereford)	Wells, Bowen (Hert'rd & Stev'nage)
Murphy, Christopher Myles, David	Sims, Roger	Wheeler, John
Neale, Gerrard	Skeet, T. H. H.	Wickenden, Keith
Needham, Richard	Speed, Keith	Wiggin, Jerry
Nelson, Anthony	Speller, Tony	Williams, Delwyn (Montgomery)
Neubert, Michael	Spence, John	Winterton, Nicholas
Newton, Tony	Spicer, Jim (West Dorset)	Wolfson, Mark
Nott, Rt Hon John	Stainton, Keith	Young, Sir George (Acton)
Osborn, John	Steen, Anthony
Page, John (Harrow, West)	Stevens, Martin	TELLERS FOR THE NOES:
Page, Rt Hon Sir R. Graham	Stewart, John (East Renfrewshire)	Mr. Peter Brooke and
Page, Richard (SW Hertfordshire)	Stradling Thomas, J.	Lord James Douglas-Hamilton.
Parkinson, Cecil

Question accordingly negatived.