HC Deb 09 December 1986 vol 107 cc313-22

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Lightbown]

12.38 am
Mr. Paddy Ashdown (Yeovil)

I am grateful for the opportunity to raise this matter on the Adjournment and to the Under-Secretary of State for Trade and Industry for appearing at such a late hour to answer the debate.

I raise this matter tonight because it must be one of the last chances to right a 40-year-old wrong suffered by a citizen of our nation at the hands of the British Government. I raise it here because I believe that one cannot eradicate an injustice through the passage of time. I raise it because, no matter how long after the event, it is the function of the House to ensure that that wrong is righted.

This is not just a story about the abuse of power. It is also the story of a British citizen who has been brave enough to pursue an issue, not just for himself or his companies, but as a matter of principle for the rest of us. Once wealthy, he is now a ruined man.

In 1944, there was a group of five interlinked steel companies known as the Wolverhampton group. They were independent steel producers and were both profitable and vital to the war effort. Their managing director was Mr. Simon Peel Fletcher. Within a year, both he and the group would be ruined and the Government, far from aiding the war effort, would lose a useful source of supply.

The start of that ruin came on 6 November 1943 when Mr. Fletcher's reserved occupation status was abruptly cancelled and he was called up to the army. Four months later, on 24 February 1944, under the Emergency Powers (Defence) Act 1939, the Government took control of Mr. Fletcher's group and installed their own agent to run the business.

Before the war, steel making in Britain had been controlled by a powerful cartel known as "Big Steel". During the war, with steel a vital product, the Government placed the Ministry of Supply in overall charge of steel production into which cartel members from Big Steel had been conveniently co-opted. The Minister at the time, the Right Hon. Sir Andrew Duncan, was formerly the chairman of the cartel's trade body, the British Iron and Steel Federation. His subordinates included Mr. Spens, accountant general to the Ministry of Supply, who was himself a director of one of the big steel companies.

Mr. Spens had the power to recommend the controlling agent to run Mr. Fletcher's companies. The man he chose was Mr. John Adamson whose name will crop up again during the story and who was another former director of one of the big steel companies. All three men had conflicting interests which should have barred them from becoming involved, but it did not. Given the events that were to follow, we must ask why, four years into the war, it suddenly became imperative that the Government should take control of Mr. Fletcher's operation.

The answer to that may lie in the fact that Mr. Fletcher had just received official permission to install a continuous steel rolling mill—then only the second such mill in the United Kingdom. That would cut his costs dramatically and, come the end of the war, put him in a strong position to undercut the cartel prices. He was doing, in effect, what this Government profess to believe in—making his plant leaner and more efficient. However, that efficiency posed a threat to the cartel—a cartel that was of course protected by its own members in the Government.

Within three months of one arm of the Ministry of Supply agreeing to the continuous steel rolling mill, its other arm—controlled by Mr. Fletcher's rivals—had snatched control of the business that would have run the mill. The Ministry and Mr. John Adamson took over the Wolverhampton group under the emergency powers at the time. That legislation allowed them to control the undertaking, that is to say, to control the day-to-day business of the group. It did not allow them either to pledge the company's credit or to take its stocks without paying for them. Yet that was precisely what Mr. Adamson and his masters proceeded to do.

Within just nine months, the Wolverhampton group had been run into the ground. Its stocks, including £90,000 worth of steel from one company alone, had been entirely consumed but never paid for. The group's credit had been cancelled, its bank balances destroyed and the continuous mill was never built. Worse still, Mr. Adamson ordered the wrong type of steel—incidentally, conveniently offloaded from the Big Steel cartel—and made sure that the Wolverhampton group was stuck with it even though it was useless to the group.

Having created that chaos, what did the Ministry do? It set about burying its own mistakes. First, the Ministry loaded the companies in the group with debts that were not really their own and then bought one of the bogus debts, quickly pulled out its agents and sued for the money. Not surprisingly, given the Ministry's appalling stewardship, the companies had no cash to meet the claim. The Ministry had sold the stocks, kept the money and destroyed the credit.

Of course, the Ministry had totally exceeded its powers. From that day onward, compensation was owed for the stocks and for damage to the companies, their shareholders and the directors. That compensation is still owing today. Mr. Fletcher then applied for leave of absence from the Army to rescue the group's finances. He was refused. Next, the Ministry encouraged suppliers to sue the now rudderless companies for debts which the Ministry's agent had run up. Many were reluctant to do that. Others, including the British Iron and Steel Corporation, were only too keen. Such indecent haste is perhaps not altogether surprising, bearing in mind that the company's political wing was the British Iron and Steel Federation. The former chairman of the federation was the Rt. Hon. Sir Andrew Duncan, the then Minister of Supply.

On 13 December 1944, only 13 days after the Ministry withdrew its controlling agent, the first salvo was fired in the final stage of the campaign to destroy the Wolverhampton group. The British Iron and Steel Company sued one of Mr. Fletcher's companies for payment for steel supplied to, but never paid for by, the Ministry's agent. It demanded the winding up of that company.

Three weeks later, on 9 January 1945, the Ministry itself sued for the £29,000 worth of debts that it had bought. These were debts of its own creation. Captain Fletcher, as a result of excellent service, responded. He was still in the Army, where he refused leave of absence. He filed affidavits opposing the winding-up petition, and claiming —understandably, in my view—a conspiracy between the Minister of Supply and Messrs. Spens, Adamson and the cartel "Big Steel".

The Iron and Steel Corporation winding-up petition came before Mr. Justice Vaisey on 26 January 1945. He granted it, but fiercely attacked the Ministry's controller, John Adamson, for passing on the confidential information of the Fletcher group to the Iron and Steel Company, which used it to crucify Mr. Fletcher's companies. Mr. Justice Vaisey said—I use his words precisely— I do not like the look of it. Nor should he have, for within the space of one year the directors and allies of a powerful cartel had used and abused the Government's emergency powers to take over a man's business, pay him no compensation, appropriate its assets, run it into the ground and then wind it up for debts that they had created, some would say for their own benefit. All five companies in the Wolverhampton group were involved in the liquidation, but let us remember that their insolvency had been brought about by Adamson and the Ministryof Supply. Before the Government stepped in, all five companies had shown healthy profits. In the 10 months prior to its demise, for example, one company in the group had shown a clear profit of £56,000. At today's prices, that would be a six or seven figure sum.

By the end of 1944, all of Mr. Fletcher's steel companies were in the hands of the official receiver. What did the official receiver do with them? First, he appointed a special manager to run the companies in the interim and prepare them for sale. The man he chose, Mr. Deputy Speaker—and you may find this as hard to believe as I do—was once again Mr. John Adamson, the very man who had destroyed the companies by his actions as controller. It was probably the first time in history anywhere that a man who wielded the knife was appointed as the official undertaker. He was shortly to add to his interest by taking on the role of body snatcher.

Perhaps not surprisingly, Mr. Fletcher was beginning to smell a rat. He therefore awaited Adamson's first report and accounts with some interest. It was a long, long wait. John Adamson, chartered accountant and Government appointee, failed to file any reports or accounts for any of the five steel companies for 12 years. Let me repeat that to ensure that it is understood. For 12 years, Mr. Fletcher, his fellow directors and shareholders were deliberately denied information about their former companies. For 12 years the requirements of various Companies Acts were not complied with by an experienced chartered accountant and Government appointed specialist. It is scarcely credible.

So why did it happen? It was not until much later, in circumstances which we shall come to shortly, that it was made clear that a special dispensation had been given by the then President of the Board of Trade for no accounts or reports to be filed. I must ask the Minister, if he does nothing else, for an account of how such a dispensation —a suspension of company law, as I understand it—came to be made. Was it asked for by Mr. Adamson? Or was it offered by the Board of Trade to the official receiver? Will the Government place in the Library all papers relating to the dispensation?

Mr. Fletcher knew by now that some of his companies' assets had been sold—almost instantly—to members of the steel cartel or to agents of the Minister of Supply. What he could not know, because he was denied the accounts of his own companies, was for how much, or rather, as we shall see, for how little. He knew also that his own career was in ruins. Not content with stealing his steel companies, the Government had, in 1948, contrived the winding-up of Carlton Greig Ltd., his merchant bank that had been linked to the steel group. Nor did it stop there. In December 1950, the official receiver issued summonses alleging misfeasance by Mr. Fletcher and another director of one of his steel companies. It was a hopeless action and was subsequently dismissed. But within a year a new way had been found to get rid of the troublesome Mr. Fletcher. He was adjudicated bankrupt, and once again the circumstances were suspicious in the extreme. He was declared bankrupt on the basis of a two-year-old assessment by the Inland Revenue that he owed more than £250,000 in tax.

A bankrupt cannot go to court. That was useful, as Mr. Fletcher had previously instituted a misfeasance action of his own against John Adamson. That action was therefore promptly struck out, and yet, by the time that he obtained his release from bankruptcy, the Revenue admitted that he owed only £1,978—one 200th part of the sum that it originally claimed and a sum that he would easily have been able to pay to start with. This makes a mockery of the grounds for the official receiver's application for his bankruptcy, which were those of general desirability and public policy", unless the "general desirability" was that of covering Mr. Adamson's tracks and "public money" had become merely a vehicle for the official suspension of the law.

What of the official receiver and the accounts and reports that he was so anxious not to file? When Mr. Fletcher finally forced their publication, they showed fraud on a grand scale. I shall detail but one of the rip-offs. One of the Wolverhampton group of companies was sold in 1945 to the big steel cartel for £38,881—a fraction of its operating worth, to say nothing of its substantial assets, and an auditor's report shows how gross was the fraud. This was indeed the sale of the century, and the man who auctioned it was, once again, John Adamson.

The Government have made great play of their desire to stamp out fraudulent liquidations, and yet they have refused even to examine the books of this fraud—a crime for which, as with the original abuse of power, compensation is still owing. Mr. John Adamson was released from his duties as liquidator of the Wolverhampton group in 1957. From that day onwards, Mr. Fletcher has attempted to bring this issue before the courts. In each of his scores of appearances, he has been opposed by the Attorney-General of the day or by a representative of the Board of Trade. It is incredible that, on each and every occasion, our judges have been prepared to strike out his action without hearing any of the evidence. It has been enough for the Government counsel simply to ask that the case be dismissed for the courts to close their doors to Mr. Fletcher.

I should like to drive home that astounding fact by reading the words of Mr. Justice Nourse in 1981. Of Mr. Fletcher he said:

He has never succeeded in getting those allegations tried. On every occasion his proceedings have been dismissed or struck out before trial … Mr. Fletcher says that the very important evidence which he filed, exhibiting accounts and so forth, was never read or considered by any of the courts. I accept that as being correct. The Government claim that they have been consistent. They say that it was all a long time ago and that they have no responsibility for the actions of John Adamson and his masters. Compensation is still due and owed by the Crown to Mr. Fletcher's companies for the theft of their assets and for the fraud of their liquidations. Of course, Mr. Fletcher has been, in a sense, an easy target. He has fought the case alone as a litigant in person, as he has no money to instruct counsel. It is a situation of which the present Government, in particular, have taken grateful advantage. Successive governments, including the present one, have acted to perpetuate the abuse of power and to cover up the sordid history of governmental conspiracy and fraud.

I remind the Minister that, in 1983, the Attorney-General applied for an order which declared Mr. Fletcher a vexatious litigant—which effectively slammed the doors of the courts on his pleas. The order was subsequently overturned. I remind him that, after a BBC radio investigation in 1984, the hon. Member for Calder Valley (Mr. Thompson) who I see in his place and who is Mr. Fletcher's Member of Parliament, began negotiations about compensation with the Attorney-General and the Department of Trade and Industry. I remind him that, according to the hon. Member for Calder Valley, the Department of Trade and Industry and the Attorney-General refused to have anything to do with Mr. Fletcher, except shortly afterwards to have reinstated the vexatious litigant order. I remind him that compensation for the damage suffered is an obligation required by the Emergency Powers (Defence) Act 1939, which is not statute barred because its terms prevent it from being so. It is still due and owing now. If the Government refuse to meet their debt, and if this House allow them to do so, the country will say, with justification, that we no longer care to implement our laws when we find them inconvenient.

I ask the Minister to give two assurances: first, that he will place before this House a copy of Mr. Adamson's original and still secret report that led to the control orders being made, together with all the papers relating to his stewardship; secondly, that at the very least, he will order a full and searching inquiry to be conducted with a view to determining how much and how quickly compensation should be paid to the directors and members of the Wolverhampton group and Carlton Greig.

Throughout the past 43 years, successive Governments have either ignored Mr. Fletcher or abused the law of the land. Parliament has refused to help him and the courts have refused to hear him. Yet he has been right throughout. There has been a monstrous abuse of executive power. It is time for that abuse to be put right and for Mr. Peel Fletcher to receive the justice which he has been so long denied.

12.55 am
The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Michael Howard)

The matter which has been raised by the hon. Member for Yeovil (Mr. Ashdown) has, over the years, attracted the interest of a number of other hon. Members. I shall have a little more to say about that in due course, but I believe that it is right that I should give the House a detailed account of the events surrounding the failure of the Wolverhampton Group of Steel Companies and the subsequent consideration given to Mr. Fletcher's claims by the courts and others.

In December 1943, the Ministry of Supply became concerned with the low output of steel by a group of five companies—Wolverhampton Rolling Mills Ltd., Shropshire Iron Company Ltd., Monmore Green Rolling Mills Company (1924) Ltd., Wolverhampton Steel and Iron Company Ltd. and Haybridge Steel Works Ltd.

They were known as the Wolverhampton Group, and were under the control of Mr. Fletcher. Production of the group was affected by the shortage of raw materials which suppliers were threatening to withhold through non-payment of accounts. Output, especially by Wolverhampton Steel and Iron Co. Ltd., was urgently needed for the war effort. In January 1944, the Ministry of Supply (Iron and Steel Control) appointed Mr. John Adamson—a well-known chartered accountant with experience of the steel industry—to investigate the financial affairs of the group. In February 1944 he reported an unsatisfactory state of affairs and a shortage of working capital. Moreover, when the companies knew that the Ministry of Supply was considering placing nominees on the hoards of the operating companies, funds of the companies held with a finance house controlled by Mr. Fletcher were put on deposit for a fixed term of 12 months, which exacerbated their liquidity position.

Following the liquidation of the finance house it was found that the major part of the funds deposited with it had been invested in the purchase of shares in the various steel companies. Mr. Adamson also ascertained that Mr. Fletcher had arranged finance for the companies in the group by the creation of a revolving credit. This was granted by merchant bankers in favour of Wolverhampton Rolling Mills with an upper limit of £80,000 and was guaranteed by the other four companies in the group. The security for the credit was the earmarking of steel billets held under letters of trust at the four producing works.

In the light of the report received from Mr. Adamson, the Ministry of Supply made control orders in February 1944 in respect of all the companies in the Wolverhampton group under regulation 55(4) of the Defence Regulations 1939. The orders were deemed necessary for the efficient prosecution of the war and the maintenance of supplies. Mr. Adamson was appointed controller of each of the companies. Immediately afterwards, a demand was made by Mr. Adamson on the finance house for repayment of all the moneys on deposit with them, but there was no compliance with this demand. Mr. Adamson found that no system of earmarking the billets held as security was being carried out at the producing works; in fact, he regarded such an operation as impracticable. Furthermore, stocks had fallen sharply and were of less value than the amount due to the merchant bankers. Mr. Adamson therefore regarded the security which was intended to be provided to them as illusory and he notified them accordingly. After discussions, the Ministry of Supply paid the debt of some £80,000 due to the merchant bankers and the guarantees were assigned to the Crown. Late in 1944 Iron and Steel Control decided that it no longer needed production from the Wolverhampton group and accordingly the control orders were withdrawn.

Following this, things happened very quickly. The British Iron and Steel Corporation, on an unsatisfied judgment obtained by it, petitioned for the winding-up of Wolverhampton Steel and Iron and a winding-up order was made in March 1945. In the course of these proceedings serious allegations of conspiracy and dishonesty were made against Mr. Adamson and others, including Ministry of Supply officials. It is these allegations that have since been repeated over the years by Mr. Fletcher. That court hearing was the appropriate time for the allegations to have been ventilated and, if appropriate, substantiated, but, far from seeking to substantiate them at that time, they were in fact unreservedly withdrawn in open court on behalf of the company and Mr. Fletcher, at whose instigation they were originally made.

Shortly after that, the Attorney-General, on behalf of the Ministry of Supply, obtained judgment against the remaining companies in the Wolverhampton group for the sum of £80,000 and in July 1945 these companies were wound up on the petition of the Crown.

In February 1948, the finance house was wound up on the petition of the official receiver as liquidator of Wolverhampton Steel and Monmore Green whose claims with two other unsecured creditors amounted to £248,000. In October 1954, a receiving order in bankruptcy was made against Mr. Fletcher on the petition of a bank for £13,000. His appeal against the order of adjudication on the ground that the bankruptcy rule under which the application for adjudication had been made was ultra vires was dismissed.

Prior thereto, Mr. Fletcher and his late father had started misfeasance proceedings against Mr. Adamson. But as a result of the death of Mr. Fletcher's father and the adjudication of Mr. Fletcher no order was made except as to costs.

In July 1959, Mr. Fletcher's application to be discharged from his bankruptcy was granted, subject to a 12 months suspension, but his request for a certificate of misfortune was refused. The liabilities to unsecured creditors exceeded £85,000, to whom no dividend was paid.

The main complaints which Mr. Fletcher has made over the many years may be summarised as follows. First, the controller's powers were limited to acting on behalf of the Crown and in contracting on behalf of the companies he acted without authority. Secondly, the controller neglected to claim from the Ministry of Supply funds to enable him to discharge the liabilities of the companies arising from the contracts he had made. Thirdly, the judgments obtained against the companies by the Attorney-General for the Ministry were, in such circumstances, oppressive. Fourthly, the billets held under letters of trust were used in the business of the companies whilst under the control of Mr. Adamson without payment therefore by the Crown and the £80,000 paid to the merchant bankers to discharge their claim was wrongly treated as a loan. Fifthly, the liquidator of the Wolverhampton group of companies was wrong in admitting a proof by the Ministry for £80,000 against any of the companies. Sixthly, there was undue influence in the choice of Mr. Adamson as special manager of Shropshire Iron Company to assist the liquidator. Seventhly, the assets of the companies were sold for totally inadequate considerations. These allegations have been the subject of persistent complaints by Mr. Fletcher which have been ventilated in various quarters and in the courts.

The courts have consistently held that there was no evidence that anyone in the Ministry of Supply or the Board of Trade during or since the war was actuated by improper motives and that there was no evidence to support the claims of Mr. Fletcher—claims which the courts held were without justification and an abuse of the process of the courts.

Mr. Ashdown

Will the Minister give way?

Mr. Howard

The hon. Gentleman took far more than his time and I have a good deal of material to get through.

In 1962, the Master of the Rolls, Lord Denning, said there was no evidence of a prima facie case and that the allegation that the controller had acted in excess of authority could not be substantiated.

In 1964, Lord Justice Sellers remarked that Mr. Fletcher's claim was without justification and that there was no evidence of intention on the part of the defendants to injure Mr. Fletcher. The defendants in this action included Mr. Adamson and officials of the Ministry of Supply, the official receiver's department and the Treasury Solicitor's department, all of whom were accused by Mr. Fletcher of conspiracy. Lord Justice Davies in the same case said that the case was a hopeless one and an abuse of the process of the courts.

In 1966, Mr. Fletcher presented a petition to the European Commission for the Protection of Human Rights which, too, was not accepted. Mr. Fletcher has sought to have the Parliamentary Commissioner inquire into alleged maladministration. The Parliamentary Commissioner declined to exercise his jurisdiction and the matter was taken to the House of Lords. That application was refused by the House of Lords.

In all, 20 actions have been launched by Mr. Fletcher between 1955 and 1982 in relation to the companies and his related bankruptcy. Those matters have been considered in the greatest detail over the whole range of issues raised by him—by the courts of first instance and on appeal to the Court of Appeal and the House of Lords. He has had some limited success on points of law, but at the end of the day, the courts have not been persuaded that he has a claim for compensation.

The hon. Gentleman quoted from the judgment of Mr. Justice Nourse in 1981. I am bound to say that his method of doing so was quite extraordinary. He sought to combine in his quotation two quite separate paragraphs in the judgment, separated indeed by some three pages of transcript. He ended his quotation in the middle of a sentence, not only without saying that he was doing so, but suggesting that the learned judge had concluded that passage at that point.

After accepting that Mr. Fletcher's evidence had not been considered, Mr. Justice Nourse went on to say:

But I cannot see that it helps Mr. Fletcher. All courts right up to the House of Lords dismissed his application saying (in effect) that the proceedings, whatever their merits might once have been, would not succeed and could not then be instituted. In more recent judicial proceedings Lord Justice Lawton is on record as saying:

whatever the rights or wrongs of Mr. Fletcher's many claims arising out of events which happened as long ago as 1944, they have been investigated by the court on a number of occasions and the court has decided against him. Mr. Fletcher has also sought the support of hon. Members. In 1955 he petitioned through the Home Office for the recall of the Great Seal. No commands were issued.

In 1965 a petition was presented to this House on his behalf to which the then Minister of Power replied that all the matters raised in this petition were properly considered by the courts, and it appeared that all the matters had already been before the courts.

Over the years there have been exchanges with several hon. Members who have expressed concern. I believe that those concerns were satisfied. I should just like particularly to draw to the attention of the House the efforts made by Mr. Fletcher's own Member of Parliament, my hon. Friend the Member for Calder Valley (Mr. Thompson). To say that my hon. Friend was assiduous in this matter would be a gross understatement. He has taken the matter up with Ministers in the Treasury, with my right hon. and learned Friend the Attorney-General, my right hon. Friend the Chancellor of the Duchy of Lancaster, who was at that time Secretary of State for Trade and Industry, and with my predecessor, my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher).

My hon. Friend the Member for Calder Valley was entitled to assume that everything that could have been done for his constituent had been done. By contrast, the hon. Member for Yeovil has asked one written question on the matter. But has never written to the Department, and has never sought an interview with me or any other Minister in the Department. In those circumstances, it would be unwise of me to express any confidence that what I have said during the debate would meet the concern of the hon. Gentleman.

Nevertheless, I hope that what I have said will have reassured the House tonight that the matter has been fully and carefully considered on many previous occasions—by the courts, by Ministers in this and other administrations and by others who have an interest in seeing that justice, not only has been done, but is seen to be done. Mr. Fletcher has argued his case with great skill, eloquence and commitment in the courts and elsewhere, but that cannot be a substitute for a well-founded case. On that, the courts have not been persuaded of its merits,nor have my predecessors, and I have not heard anything in the House this evening to suggest that I should take a different view of this matter.

Question put and agreed to.

Adjourned accordingly at eight minutes past One o'clock.