AGREEMENTS MADE BY OR THROUGH UNAUTHORISED PERSONS (Hansard, 30 October 1986)

§ Mr. Howard
I beg to move, That this House doth agree with the Lords in the said amendment.

§ Mr. Deputy Speaker (Sir Paul Dean)
With this it will be convenient to take the following Lords amendments: No. 7, in page 3, line 34, leave out interest on any such money and insert compensation for any loss sustained by him as a result of having parted with it. No. 8, in page 3, line 36, leave out "interest" and insert "compensation".
No. 9, in page 3, line 42, leave out from beginning to end of line 13 on page 4 and insert—

(a) in a case within paragraph (a) of that subsection, that the person mentioned in that paragraph reasonably believed that his entering into the agreement did not constitute a contravention of section 3 above;

(b) in a case within paragraph (b) of that subsection, that the person mentioned in sub-paragraph (i) of that paragraph did not know that the agreement was entered into as mentioned in sub-paragraph (ii) of that paragraph; and
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(c) in either case, that is just and equitable for the agreement to be enforced or, as the case may be, for the money or property paid or transferred under it to be retained."

No. 10, in page 4, line 28, leave out from "(7)" to constitutes" in line 29 and insert Subsection (1) above applies to any agreement the making or performance of which by the person seeking to enforce it or from whom money or other property is recoverable under this section". No. 11, in page 4, line 31, at end insert and is not excluded by Part III or IV of that Schedule. No. 76, in clause 51, page 37, line 3, leave out interest on any such money and insert compensation for any loss sustained by him as a result of having parted with it. No. 86, in page 39, line 20, leave out interest on any such money and insert compensation for any loss sustained by him as a result of having parted with it. No. 77, in page 37, line 4, leave out "interest" and insert "compensation".
No. 85, in clause 52, page 39, line 8, leave out interest on any such money and insert compensation for any loss sustained by him as a result of having parted with it. No. 87, in page 39, line 22, leave out "interest" and insert "compensation".
No. 202, in clause 112, page 90, line 35, leave out interest on any such money and insert compensation for any loss sustained by him as a result of having parted with it. No. 203, in page 90, line 36, leave out "interest" and insert "compensation".
No. 204, in clause 113, page 91, line 40, leave out "an investment agreement" and insert an agreement to which section 5(1) above applies". No. 205, in page 91, line 45, leave out interest on any such money and insert compensation for any loss sustained by him as a result of having parted with it. No. 206, in page 92, line 1, leave out "interest" and insert "compensation".
No. 207, in page 92, line 10, leave out from "1982" to end of line 24 and insert ;and (b) that it is just and equitable for the contract to be enforced or, as the case may be, for the money or property paid or transferred under it to be retained.

§ Mr. Howard
These amendments reflect debates, both here and in another place. They concern what happens where an unenforceable investment agreement is entered into. An investor who enters into such an agreement shall be entitled, not simply to interest on money handed over but to such compensation as a court may determine or the parties agree. So, if an investor who hands over shares under such an agreement loses out on a rights or bonus issue, this can be taken into account in determining the level of compensation These amendments also enable a court to allow an otherwise unenforceable investment agreement to be enforced, if it considers this to be just and equitable in the circumstances of the case. The court will have to be satisfied that a person who entered into the agreement in the course of carrying on investment business in 505 contravention of clause 3 reasonably believed that his entering into the agreement did not breach the requirements of clause 3. If the agreement was with an authorised person but in consequence of the involvement of an unauthorised person, then the court will have to be satisfied that the authorised person did not know of the unauthorised person's involvement.
These amendments will substantially reduce the risk of a person, in a sector other than investment business, inadvertently crossing the boundary line and finding his contracts to be held unenforceable. The criminal and negligent will continue to have this sanction applied.