§ Mr. Millan
I beg to move amendment No. 3, in page 8, line 13, leave out from 'due' to end of line 27.
§ Mr. Deputy Speaker
With this it will be convenient to discuss Government amendments Nos. 4, 5, 6 and 7 and the following amendments: No. 8, in page 8, line 17, leave out '3' and insert '4'.
§ No. 9, in page 8, line 31, leave out '(c) or (d)' and insert 'or (c)'.
§ Mr. Millan
This amendment deals with a matter raised by the Scottish Consumer Council, unfortunately after the Committee stage of the Bill. The matter was not discussed in Committee, but, having considered it with Scottish Members, I believe that the Scottish Consumer Council has a valid point. It is worried about paragraph (d) of clause 7(1), and the first of my amendments would simply eliminate that paragraph. Amendment No. 8 would extend the period of notice from three to four weeks.
If the Government do not accept that we should reconsider this entire matter, I hope that they will at least accept that we should give a debtor a longer period of notice than three weeks. One week is a modest increase. I hope that the Solicitor-General will not tell me that a clause in the Insolvency Bill—I believe that it is clause 113—provides only three weeks' notice in cases of personal bankruptcy in England and Wales. On this matter there is no virtue in consistency, and it is wrong to have only three weeks in the English Bill. The period of notice should be longer than three weeks.
The merits of the matter rest on the procedure which allows a creditor simply to serve a notice—a demand for payment—on a debtor. If the debtor does not pay within three weeks, under the terms of the Bill, he will be treated as apparently insolvent. That brings in all the other provisions, including petitions for sequestration, provided in the Bill.
That is a fairly stringent provision, because in other circumstances, before one can say that a debtor is apparently insolvent, other conditions have to be fulfilled, and they are outlined in the earlier part of the clause. In many cases they involve some sort of preliminary court action, but here there need be no court action at all; simply a notice in a prescribed form by a creditor to a debtor. If, on the basis of that, the debtor does not pay, the whole process of sequestration can follow.
I am not as worried about this situation as the Scottish Consumer Council appears to be, because in most circumstances the creditor would find the initiation of the whole procedure of sequestration an elaborate way of obtaining payment when, by taking appropriate court action, he could obtain payment of his debt in some other way. Thus the procedure would not be used frequently, certainly not by a creditor as a matter of course. Nevertheless, the Bill says that lodging a demand for payment and not being paid within three weeks is an indication of an apparent insolvency and everything else can follow from that. That worries me considerably.
It may be that part of the answer lies in the phrase "in the prescribed form". Perhaps the Solicitor-General can let us know what will be included in the prescribed form. 774 Presumably, it will include a warning to the debtor about the dire consequences which may follow if he does not pay within three weeks. We do not know whether that is the case, because we have not seen the prescribed form and have not been given any indication of what might be in it.
Having looked at the provision, I am not at all convinced that it is necessary to have it in the Bill as one of the indications of an apparent insolvency. No creditor will be put to any disadvantage if we simply take it out. If a creditor goes through the courts and obtains a successful decree against the debtor, and the debtor does not pay, then, as I understand the rest of this clause, that by itself is sufficient for him to be able to petition for sequestration. I do not see why the creditor should not be able to go through the court. A simple solution to the problem would be to remove the paragraph altogether.
The second of my amendments, which would simply extend the period of notice from three to four weeks. is second best. It is not an appropriate way of amending the provision, but the very least we ought to do is to give rather more notice to the debtor. To be frank with the Solicitor-General, when I first looked at the representations of the Scottish Consumer Council I was a bit sceptical. However, having considered them more carefully, I consider that there are strong grounds for being concerned about this paragraph. As I say, I do not believe it will be used as frequently or in the sorts of circumstances about which the Scottish Consumer Council is anxious. The way to deal with those anxieties is to remove the paragraph, and that is the purpose of amendment No. 3.
§ The Solicitor-General for Scotland
Clause 7(1)(d) was introduced to provide a relatively uncomplicated means of access to the sequestration process where there is no dispute that a debt equal to or exceeding the relevant amount is payable. For that reason, it also provides a straightforward method for a debtor to avoid being prejudiced by the procedure. He can achieve that by a straightforward denial that a sum of £750 or more is payable. The provision is designed to cover situations where the debtor has not acknowledged that he has ceased to pay his debts but where he is, none the less, prepared to accept, if it is put to him, that he is unable to pay that debt. In those circumstances, it may be in his best interests to have his estate sequestrated.
The hon. Gentleman will appreciate that if the only way in which that can be done is by having the debt judicially constituted, that procedure involves additional expense. It is not a particularly large sum, but at a time when we are constantly trying to ensure that administrative costs are kept to a minimum, if the opportunity is given to the debtor in terms of a letter in a prescribed form and he does not deny the debt, it is a key-in to the sequestration procedure and obviates an unnecessary action for debt which could cost money.
§ Mr. Millan
The trouble with that argument is that whatever is in the prescribed form, and whatever is in the paragraph, there will be circumstances where the debtor does not understand the full significance of what is being said to him. Ordinary people understand that if they are taken to court it is a serious matter, but unfortunately quite a number of people get letters asking them to pay bills and pay little attention to them. That applies whether or not the letters are sent by recorded delivery, for which the amendment provides. Many debtors should be paying their 775 bills and perhaps are perfectly able to pay them, but they will not realise the full significance of this simply because it does not involve court action.
§ The Solicitor-General for Scotland
I understand the point made by the right hon. Gentleman, but he pre-empts the argument that he knows I am about to make. This is not just a little brown envelope coming through the door. As the right hon. Gentleman is aware, when it comes in the prescribed form it will be by recorded delivery. He is correct in that we have not yet decided what the prescribed form will be, but it is expected that the form will spell out clearly that if the debt is in any way disputed a simple denial of the debt will be sufficient to stop a sequestration procedure.
The right hon. Gentleman and I could go on endlessly disputing whether the form could be set out in a style appropriate enough to make the point clear to every debtor who receives it. Recently we have had cause to be proud of the forms that we have set up, and the Scottish Consumer Council has complimented us in the last two years on a form which was provided.
§ The Solicitor-General for Scotland
The hon. Gentleman says that I am positively smiling, and he is correct. Those compliments were in relation to the form prescribed for the simplified method of divorce. I recognise the anxieties of the right hon. Gentleman, but this provides a simple, cheap and desirable technique.
The right hon. Gentleman's first amendment seeks to exclude the paragraph altogether, but coupled with it are a number of Government amendments. As he may recall, he was concerned in Committee that a series of debts amounting to £750 might be prescribed as well as a single debt of not less than that amount, and this would entitle a creditor to use clause 7(1)(d). I am grateful to the right hon. Gentleman for raising that point and I hope that the Government amendments make the point clear. Amendment No. 5 provides that a demand under clause 7 must be served on the debtor by recorded delivery. That is to avoid the possibility of the debtor not being aware of the letter because he is on holiday, for example.
I deal finally with the right hon. Gentleman's amendment changing the period from three weeks to four weeks. With some perception, the right hon. Gentleman anticipated my argument. It is not just an illogical difference between English and Scottish personal bankruptcy provisions. Once again it is the difference in Scotland between personal bankruptcy and corporate insolvency procedures. The Bankruptcy (Scotland) Bill, as well as relating to individual insolvency, deals with the insolvency of such entities as partnerships and bodies corporate as well as registered companies. I see that as an anomaly, and accordingly there is no great value in the right hon. Gentleman's proposal.
More importantly, because we recognise that there must be some anxiety that too short a period might mean that inadvertently or without the knowledge of the debtor this procedure got under way, we inserted the provision that such a letter had to be served by recorded delivery. That seems to me to be a greater safeguard than three, four or even five weeks. It might be anticipated that ordinary 776 people went on holiday for a fortnight, but there could be any one of a variety of reasons which took someone away from home for a longer period and simply having a letter popping through the letter box could create problems. Because we intend to require such a letter to be served by recorded delivery, I suggest to the right hon. Gentleman that the problem that he sees arising is better dealt with in that way than by moving the period from three weeks to four weeks.
§ Mr. Donald Stewart (Western Isles)
I hope that the hon. and learned Gentleman can enlighten me about one matter raised by the Scottish Consumer Council. The hon. and learned Gentleman spoke of the debt being accepted by the debtor or repudiated, in which case the procedure would follow. What happens if the debtor offers to pay in part? I gather from the council that that would not be acceptable—it has to be all or nothing.
§ Mr. Dewar
I share a good deal of the concern expressed by my right hon. Friend the Member for Glasgow, Govan (Mr. Millan). He said, quite properly, that for most of us the starting point was the briefing from the Scottish Consumer Council. There is nothing wrong in that. It is one of the most valuable roles of informed groups, such as the council, that they alert hon. Members to matters giving rise to anxiety in lengthy, complicated and highly technical legislation. My attention having been drawn to it, I concluded that there was cause for the concern which the Scottish Consumer Council expressed, and that has not been removed by the Minister.
I accept that the Government amendment which says that the notice under clause 7(1)(d) has to be sent by recorded delivery is a useful minor improvement, but it seems to me to be a little bit of conscience money and does not strike at the heart of what was canvassed by the Scottish Consumer Council.
We are dealing here with any sum of more than £750. Although that might once have been a large sum, it is no longer so. As the council points out, it might well cover a wide range of consumer debts, and it is below the summary cause limit, for example, which puts it in some perspective. Furniture or a motor car—even an elderly, decrepit secondhand one—will cross the mark, allowing the purchaser to fall within the procedure envisaged in the clause.
I have a great deal of sympathy with the argument that the simplest way would not be to improve with minor changes such as the introduction of recorded delivery letters but to excise the subsection from the Bill. The reason is one based upon the psychology of the people likely to be involved. I am especially unsympathetic to the argument of the Solicitor-General for Scotland that we could not, for example, extend the period to four weeks because that would take us out of line with similar provisions which apply to companies.
There is a world of difference between the approach of a company, even a small closed company, and that of the kind of person who might find himself in difficulty as a debtor under this provision. I accept that companies have to be on the same basis north and south of the border. It might be inconvenient if they were not, and company law has always been on a United Kingdom basis, but I see no reason why in Scotland we should not have a different approach to the individual debtor from that applied to a company.
777 Very often there are circumstances in which letters are winging out. many of them by recorded delivery no doubt, saying "Pay up. or else." There are people who are used to getting them and used to turning up at court, once they are summonsed, to minute their views on instalment payments or dissent. Even if a form is very carefully drafted, an enormous number of people who fortunately do not know what insolvency, liquidation or bankruptcy is will be asked to understand that they are about to be plunged into a legal process the consequences of which are very serious.
Sequestration means that assets are taken over by a trustee. The debtor has to reveal all sorts of information about his personal and financial affairs to the trustee administering his assets. If he continues to work, there are implications about paying a proportion of his income to the trustees. It is quite out of the ordinary and very different from the action for debt which may be pursued under a summary cause. It is a difference of degree, and I do not believe that even a form drafted with personal care by the Solicitor-General for Scotland is likely to ensure that people know exactly what is happening and what the significance may be.
I fear that in many cases a recorded delivery letter will be seen by the recipient as another attempt to recover money which he owes. He may not owe it, and he may not even realise the significance of having to dispute the debt at that stage. Thinking that he can deal with it as he would deal with a summary cause action for the normal form of recovering debt, he may find that he has given up the right to dispute the debt, and he is then on the slippery slope towards sequestration and in a difficult legal position with which he is not well qualified to deal.
The fact that the letter has to be sent in the prescribed form—I am not sure how it is prescribed—
§ Mr. Dewar
I am grateful to my right hon. Friend. However carefully it is prescribed, we are in that difficult position. There is a point of principle here because, as the Scottish Consumer Council pointed out, we are initiating a sequestration without a court decree stating that the debt is owed. That is dangerous. If the Solicitor-General for Scotland received a letter saying, "We shall sequestrate you and an apparent insolvency will be established if you do not within the specified period write and deny the debt," I have no doubt that he would know what to do. After all, he is a man of the law. But I can think of constituents of mine who would not understand. In the unlikely event of this machinery being used, they would find themselves slipping into a very hazardous position.
The second line of argument which has been properly advanced by my hon. Friend the Member for Govan is that it is unlikely in the event that this machinery will be used very often. If it is, the consequences could be unfortunate. However, an important point is that it is in no way illogical to argue that it is unnecessary to have this provision if it is unlikely to be used very often. There are all kinds of other ways in which a creditor could proceed against a debtor. It would in no way be a substantial infringement of the rights of a creditor to excise paragraph (d) from the Bill. It would remove the fears to which we have referred; fears which in a small number of cases could become very real.
In an earlier debate the Solicitor-General for Scotland referred to the fact that the Scottish Law Commission was 778 carrying out a number of general reviews. One relates to the system of debt enforcement and diligence. If it decided to introduce changes which made the law of diligence in Scotland a little more humane and sensible, it would seem to be unwise to put paragraph (d) of clause 7(1) on the statute book. It might stand out as an unsatisfactory procedure which ran counter to the general reform which we hope will emerge from the lengthy review of the law of diligence which is being carried out by the Scottish Law Commission.
This provision would endanger individual liberties and might be misunderstood. Therefore, I urge the Solicitor-General for Scotland to accept the admirably clear amendment of my right hon. Friend the Member for Govan. There is nothing wrong with its drafting; it merely asks for this provision to be deleted. In no sense would it prejudice the creditor, and in a small number of important cases the debtor would be protected if this provision were removed from the Bill.
§ Mr. Millan
By leave of the House, Mr. Deputy Speaker, may I say that if this provision is left in the Bill. we shall ultimately regret it. Eventually it will have to be removed from the legislation. The arguments advanced by the Solicitor-General for Scotland were singularly unpersuasive. He made it sound as though it was for the good of the debtor that there should be a simplified procedure. He has completely misunderstood its effect. Recorded delivery is useful, but this paragraph means that the debtor is already under an obligation to give his denial by recorded delivery. It is astonishing that recorded delivery was never applied in the first instance to the demand. It puts the debtor on the same basis as the creditor in terms of recorded delivery.
The right hon. Member for Western Isles (Mr. Stewart) raised an interesting point on denial—that even an offer to pay is not a denial if the money is owing and that under this paragraph it has no effect. There may be many occasions when there is no dispute that the money is owed, although the debtor may have difficulty in paying the money within the stated time. But that does not help him. Unless he says that the money is not owed, sequestration will be enforced. If I were advising a constituent who received a recorded delivery letter, I would say that he ought to tell a lie and write back saying, "I deny that the money is immediately payable." That would afford protection under this clause. That is absurd, but it is his only protection. He does not have to demonstrate that the debt is not immediately payable he merely has to say that it is not immediately payable, even if, when he says that, he knows that he is telling a lie. That cannot be right.
As for the parallel with companies, that again is absurd. A trading company employs solicitors, accountants and other professional advisers. The Solicitor-General for Scotland looks sceptical, but a company will certainly employ accountants, because there is a statutory obligation to have an audit. Solicitors would also have been involved, when the company was set up, to draw up the articles of association. A trading company presumably takes matters of this kind seriously and would understand the implications, whereas an individual debtor may not fully understand them.
In certain trades and businesses one finds that there are notoriously bad payers, in the sense that they do not pay their debts frequently. Farmers are a good example. Many perfectly reputable farmers who have been farming for 779 many years do not pay their debts within three weeks. However, if they do not pay their debts within three weeks their assets can be sequestrated. Either this paragraph will not be used, in which case it is unnecessary, or its use will mean that a number of farmers will suddenly find that their assets have been sequestrated. If their farms are in the constituencies of Conservative Members, this provision will have to be deleted. The Solicitor-General for Scotland smiles, but this is a serious point. If this provision were enforced against farmers, we would be unable to retain this provision in the law of Scotland.
This point was not raised in Committee. Most hon. Members did not understand its full import. My original scepticism about the point made by the Scottish Consumer Council has given way on my part, and on the part of my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) and the right hon. Member for Western Isles, to real anxiety. I believe that if it should be used Ministers will regret having retained this paragraph.
§ The Solicitor-General for Scotland
I believe that this is a valuable way to constitute insolvency. I am at one with the right hon. Member for Glasgow, Govan (Mr. Millan) in believing that this provision will be used infrequently. It will not frighten farmers or anybody else into paying their bills if they are insolvent. All one is doing is setting up an elaborate procedure for sequestration. If that is what one wants to do, the simplest way to set about it is to take action to have the debt judicially constituted.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) said that his constituents who might have small, outstanding debts would have recorded delivery letters suddenly popping through their letter boxes which would cause confusion. To that extent, it is important that there should be a lower limit of £750. Even in 1985 that is a very considerable sum of money to owe either to a group or to an individual, so the lower limit is important.
I would point out to the right hon. Member for Western Isles (Mr. Stewart) that if one was in this position one could not offer to pay the debt by instalments. Either the debt is owed, or it is not. That is the point that would be followed through if such an action were to be pursued, as the right hon. Member for Govan suggested that it should be pursued by taking it to the courts. A debtor might say, "I accept that I owe Mr. X £100, but I deny that I owe him £750." In that case, the process leading to sequestration would not be set in motion.
We are introducing a novelty, but I do not share the anxieties expressed in the debate. Given our fruitful cooperation with the Scottish Consumer Council in the past, I hope that we shall be able to draw up a letter, in a prescribed form, leaving people in no doubt about what steps they should take if they accept that they owe a sum in excess of £750 or, if they deny that they owe the money, what steps they should take to avoid the prospect of sequestration.
§ Amendment negatived.
Amendments made: No. 4, in page 8, line 14, after third of', insert
'(or debts the aggregate of which is)'.
§ No. 5, in page 8, line 15, after 'debtor', insert by recorded delivery,'.780
§ No. 6, in page 8, line 16, after 'debt'. insert '(or debts)'.
§ No. 7, in page 8, line 17, after 'its', insert '(or their)'.—[The Solicitor-General for Scotland.]