§ Order for Second Reading read.9.40 am
§ Mr. James Pawsey (Rugby and Kenilworth)
I beg to move, That the Bill be now read a Second time.
At the outset of the debate, I freely acknowledge the help and support that I have received from the Consumers Association. In particular, I refer to its legal officer, Mr. David Tench, who has, indeed, been the proverbial tower of strength. I also acknowledge — this may be more unexpected—the help and support that was given to me by my hon. Friends the Members for Hertfordshire, South-West (Mr. Page) and for Dulwich (Mr. Bowden). They have been must supportive, and I am particularly grateful to them.
The Bill represents a further step forward in increasing consumer protection. Currently, it is possible for a consumer to enter into an arrangement with, for example, a remover or a builder for certain works and services, and it is quite possible for an agreement to be drawn up between the two parties. Frequently, there will be a clause in that agreement, usually in small print and on the back of the agreement, that states that, in the event of any dispute arising between the parties, such dispute will automatically be referred to and settled by arbitration. The compulsory arbitration clause, as it is generally known, is unfair to the consumer as it removes certain important opportunities to obtain redress via the courts. My Bill—specifically clause 1 — will have the effect of drawing teeth. In gives the consumer additional rights to decide how best he should proceed against a supplier. I stress that the Bill provides additional choice and should not be seen in any way as an anti-arbitration measure. It is simply a move that will enable cases that are currently not resolved to have recourse to law. If a consumer wishes to use arbitration—clearly, there will be occasions on which he would be wise to do so; for example, cases involving technical points, particularly in respect of building—he will have the right to continue to do so.
It will be helpful for the House to know that, in Committee — that is, on the assumption that the Bill receives a Second Reading — I shall move certain amendments. Most amendments will be of a strictly technical nature and will tidy up drafting in the Bill. However, one amendment will be material to the content of the Bill. It follows discussions that I have had with my hon. Friend the Under-Secretary of State for Corporate and Consumer Affairs. That amendment will result in cases, where a claim is for less than £500, being referred by the consumer, at his discretion, to the small claims procedure in the county court. Hon. Members will recall that the current limit for small claims is £500. For claims between £500 and £5,000, a consumer will have the right to take his case to the county court, with a discretion for the court to enforce the arbitration clause. That will allow courts to enforce arbitration in cases in which it is in a consumer's interest so to do. For claims over £5,000, any arbitration clause written into a contract would stand and be legally enforceable, which is, of course, the current position.
§ Mr. Donald Anderson (Swansea, East)
Will there be guidelines to assist a registrar or judge of the county court? For example, will it be clear that such discretion can be exercised only when it is specifically and clearly in the interests of a consumer to do so? To what extent will a registrar or judge of the county court be guided on the criteria to be applied?
§ Mr. Pawsey
I assure the hon. Gentleman that that matter will be written into the amendment and, therefore, will appear on the face of the Bill. Appropriate guidance will exist for the court to observe.
The costs of arbitration can sometimes be prohibitive, compared with the amount in dispute. The British Association of Removers helpfully sends out a leaflet about arbitration and the costs of arbitration in cases in which it is being considered. I use the word "helpfully" quite deliberately. I am not trying to be ironic or sarcastic in any way. Under the section headed "Costs", the leaflet states:Arbitration is a legal process and as such is not free. The costs are not borne by the British Association of Removers. Since the president of the BAR almost always appoints a barrister the fees will be in accordance with a barrister's usual scales.The leaflet then sets out what such costs may be. For example:Fee on appointment £5Fee on summons for directions £25Fee for sitting as arbitrator per day or part thereof whilst engaged on the arbitration £200.Therefore, it will be appreciated that when a fairly small sum—let us say about £100—is involved in a dispute, it is clearly not worth a consumer's while to take his case to arbitration. But the matter would be different if the consumer were able to use the small claims procedure in the county court. There the maximum fee for the issue of a summons in respect of a claim of not more than £500 is £37. If the matter is contested and goes to a hearing by the registrar, nothing further has to be paid to the court for the form of justice that is readily available there.
It is reasonable to assume that the overwhelming majority of disputes will not take more than one day to dispose of. That applies to arbitration or, indeed county court claims. Therefore, the comparative costs are £230 for arbitration, on the one hand, and £37 for the small claims procedure, on the other hand. It will be further appreciated that legal aid is not available for cases involving arbitration. However, a consumer might be entitled to legal aid if he proceeds against a supplier through the courts. That is an important consideration.
§ Mr. Ivor Stanbrook (Orpington)
Does my hon. Friend say that in all cases the costs of the arbitrator are £200, or does he refer only to the specific agreement of the trade association that he quoted?
§ Mr. Pawsey
I refer to the case of which I have specific knowledge, the British Association of Removers. My hon. Friend will note that a barrister is appointed. I suspect that he will know better than I the costs involved in appointing a barrister. [Interruption.] I hear a voice gently saying that my hon. Friend the Member for Orpington (Mr. Stanbrook) is a solicitor, not a barrister.
§ Mr. Stanbrook
I have the great advantage of being a barrister. But I was suggesting that sometimes solicitors act as arbitrators. They could be even more expensive.
§ Mr. Pawsey
I would be wise to let the matter lie where it is.
In any contract between a supplier and a consumer, the consumer is invariably the weaker party. In all fairness, the choice of which path to pursue — arbitration or the courts—should lie firmly with the consumer.
§ Mr. Anderson
I am inclined to accept the hon. Gentleman's view that this is an appropriate matter for the small claims court, given the limit involved. But can he give some indication some revelation — of the Government's motive in seeking to persuade him that that limit is appropriate? Was it related to the likely costs on the legal aid fund, or were there other and perhaps more worthy motives?
§ Mr. Pawsey
The hon. Gentleman seeks to draw me on a matter involving legal aid, on which I suspect that I should not say too much. I note, however, that my hon. Friend the Minister will be responding to the debate, and he may well choose to make some passing reference which may satisfy the hon. Gentleman.
Let me return to my theme. The consumer is involved in legal activity as a once-in-a-lifetime experience. He is therefore the classic one-shotter, often against a repeat player who will be more powerful, and certainly more experienced at litigation.
It has been argued that, once a consumer has entered into and signed an agreement, he should be bound by the terms of the contract into which he has freely entered. However, hon. Members will know probably better than most, through their constituency and surgery experiences, that the small-print clauses are seldom read and even more seldom understood. In any case, the Unfair Contract Terms Act 1977 has breached that principle, and enables one party to set aside an unfair condition.
In my view, the compulsory arbitration clause is unfair to the consumer. The business man supplying the service usually has behind him a trade association, legal expertise and, above all, the day-to-day experience that he has gained from the running of his business, and from being in his particular industry. The consumer has one of those advantages.
Again, it has been argued by certain trade bodies that the legislation is unnecessary, for two reasons—first, that the number of cases taken to arbitration is small, and, secondly, that arbitration is in any case a fair and reasonable method of resolving the difficulties. Let me deal with the first objection. The reason that the number of cases is relatively small is the high cost that may be involved in pursuing a case to arbitration. Secondly, if the suppliers are as professional and good as is sometimes claimed, what can be their objections to the consumer having the right to defend himself in the nation's courts? I do not believe that they can have it both ways. The Bill simply gives the consumer additional protection. That is its raison d'etre. It enhances the consumer's choice, and, as such, it should commend itself to the House.
Older, or perhaps I should say more senior, hon. Members will recall that in 1977 the Unfair Contract Terms Bill was introduced. During its passage, an amendment was moved the effect of which was to remove from the Bill clauses broadly similar to those that I am introducing today. I must make it clear at this point that this Bill is not opposed by my hon. Friend the Minister.
Hon. Members will recall the old adage that the principal duty of an Opposition is to oppose. Clearly, the 614 Opposition between 1974 and 1979 were particularly successful in that duty, which no doubt had something to do with the very small majority of the Government of the day. They were therefore able to impede the progress of legislation that the Government were trying to get through. Hansard refers to one successful operation mounted by the then Opposition:"Question put, That this House doth agree with the Lords in the said amendment:—The House proceeded to a Division, but no Member being willing to act as Teller for the Ayes, MR. DEPUTY SPEAKER declared that the Noes had it.Question accordingly negatived." — [Official Report, 22 July 1977; Vol. 953–2, c. 2202.]Hon. Members will note that the Government did not put in Tellers, which suggests to me—perhaps I am cynical—that an understanding had been reached through the usual channels: a quid pro quo had been struck. The price for getting the major part of the legislation through the House was the dropping of one relatively minor part. My case is that the part that was dropped was very similar to the legislation that I am introducing this morning.
§ Mr. Stanbrook
Surely my hon. Friend is discounting completely—indeed, ignoring—the furious and sustained attack made in another place by a very distinguished former Lord Chancellor, leading for the Opposition, who mounted his attack on the basis that the legislation was an interference with the general principle of English law that a man should be kept to his bargain. That, surely, was the real reason for the 1977 Government's acceptance that there were strong arguments against that clause.
§ Mr. Pawsey
I am obliged to my hon. Friend for that interesting intervention, and I have heard what he has had to say about what happened in the other place. I must repeat, however, that the general principle of a man having to be kept to the bargain that he has struck was breached by the Unfair Contract Terms Act 1977. The Bill enjoys support from a wide range of bodies, and it is worth reminding the House that my hon. Friend the Minister will not be opposing it either. Circumstances change, and so do views. I put it to my hon. Friend the Member for Orpington that that may well be the case in this instance.
§ Mr. Bob Cryer (Bradford, South)
Does the hon. Gentleman accept that, as John Stonehouse had supposedly swum off a beach in Australia, the then Labour Government were in the minority? As a consequence, the scenario that the hon. Gentleman has outlined, in which a quid pro quo was reached, is much more likely than the fierce confrontation on principle suggested by his hon. Friend the Member for Orpington (Mr. Stanbrook). The reality of the Labour Government's latter years was that they lived virtually from week to week.
§ Mr. Pawsey
I am obliged to the hon. Gentleman for an extraordinarily helpful intervention. I do not think that I have ever made such a comment to him before, and I may not have the opportunity to do so in the future, but he has summed up the matter extraordinarily well. The legislation that was lost in 1977 now has an opportunity of being put back in place.
The Bill does not touch commercial arbitration agreements, as is made clear by clause 1. If it receives a Second Reading as I hope it will today—arbitration agreements that emanate from abroad, as well as those between companies and businesses, will continue to 615 operate in precisely the same way as at present. The clauses in such contracts that require participants to go to arbitration will therefore continue to be upheld. It is only where a consumer is a party to the contract, and it is a contract to which United Kingdom law wholly applies, that the Bill will change existing law. Clause 1 refers, and clause 3 defines.
I have pointed out that a consumer is in a different position from a business man. A business man makes a commercial judgment about any transaction into which he enters. His commercial judgment is applied to that transaction and to what may be in prospect. As a business man, I am expected to understand, adopt, and apply the criteria of a particular market place. As a business man, I am expected to be able to understand and, if necessary, take advice on any contract into which I am likely to enter. That is why I make a distinction between commercial contracts and those involving consumers.
The Bill enjoys the support not only of the Consumers Association but of the Institute of Trading Standards Administration and the Office of Fair Trading. It will be helpful if I quote from a letter of 16 December 1987 from Sir Gordon Borrie, the Director General of Fair Trading, to Lord Justice Mustill, who chairs the departmental advisory committee on arbitration at the Department of Trade and Industry. Sir Gordon said:I see an advantage in the consumer being able to choose between binding arbitration or the court and would not wish to see any inadvertent restriction of this choice.Sir Gordon continued:I am aware that some contracts … may contain a compulsory arbitration clause. This practice I oppose because I do not think it desirable for consumers to be deprived of their right of access to the court. In my view the effect of the Consumer Arbitration Agreements Bill would be that consumers would not have to submit their disputes to arbitration unless they had given their agreement to do so in writing after the dispute had arisen or they had themselves embarked upon arbitration proceedings. As such, the Bill, if enacted, would go some considerable way towards assisting my policy goal.Sir Gordon's comments are extremely important and pertinent to the debate.
§ Mr. Roy Beggs (Antrim, East)
As many of the bodies to which the hon. Gentleman has referred influence affairs in Northern Ireland, does he intend that the Bill should apply to Northern Ireland? For my guidance, will he consider at a later stage giving protection to consumers who are tenants of properties formerly owned by the Northern Ireland Housing Executive? The executive is escaping responsibility under the phrase caveat emptor.
These first-home buyers, with no previous experience of contract, duly signed their names on cheques concluding a purchase deal. They did so with no advice, placing full faith in the Government and a Northern Ireland quango. Subsequently, they found that the property was dangerous to their health. The Housing Executive is spending up to £600 on all other properties, yet these first-time owner-occupiers can get no support, not even a grant, to reline flues emitting dangerous fumes. I trust that the hon. Gentleman will enlighten me as to whether my constituents will be able to use his Bill to enable them to seek justice at reasonable cost, either through the arbitration process or through the small claims court.
§ Mr. Pawsey
I listened with interest to the hon. Gentleman. I assure him that the Bill will apply to Northern Ireland in precisely the same way as it applies to the rest of the United Kingdom. I hope that that answers the hon. Gentleman's point. As for the Housing Executive, if I may take refuge in that time-honoured method. I shall write to the hon. Gentleman.
§ Mr. James Molyneaux (Lagan Valley)
Can the hon. Gentleman explain why he has included clause 3(3):This Act shall not apply to Northern Ireland"?I am not arguing against its application. I suggest that it should be applied to Northern Ireland.
§ Mr. Pawsey
I am sorry, but I cannot quite make out what the right hon. Gentleman is talking about.
§ Mr. Anderson
The hon. Member for Rugby and Kenilworth (Mr. Pawsey) has referred to Sir Gordon Borrie's letter of 16 December. If the hon. Gentleman has a copy to hand, may I refer him to the last paragraph and ask to what extent he will be willing in Committee to amend the Bill in the light of Sir Gordon's comments. Sir Gordon says that a consumer may look at a contract and assume that he is compelled to go to arbitration. Sir Gordon say that if this contract contains a compulsory arbitration clause, the consumerwill think he has to go to arbitration despite the new law unless advised to the contrary. This problem could be avoided if arbitration agreements had to apprise consumers of the non-obligatory nature of arbitration clauses in much the same way that the Consumer Credit Act requires credit or hire agreements to contain certain information about legal rights.I hope that the hon. Gentleman agrees that that is an important point. If he accepts its validity, will he reveal what steps he will take during the Bill's passage to ensure that the consumer, when faced with a contract which, on the face of it, contains a compulsory arbitration clause, is made aware of his rights?
§ Mr. Pawsey
The hon. Gentleman raises an important and interesting point. I shall seriously consider it. On the assumption that the Bill is given a Second Reading and is considered in Committee, we shall thrash out that point. I am sure that the hon. Gentleman will wish to serve on the Committee, and I look forward to his comments.
I have referred to the fruitful discussions between me and my hon. Friend the Parliamentary Under-Secretary of State for Corporate and Consumer Affairs, and, therefore, I am happy to assure the House that the Department does not oppose the Bill.
The House is concerned about people's rights. We take pride in being regarded as the defenders of the rights of people. It is no accident that the badge of the House is the portcullis—a symbol of defiance and defence. My Bill extends the principle of fairness. It extends choice and reduces the imbalance between the consumer and the supplier. It does not take away anyone's rights, for the right to arbitration remains, albeit in a permissive rather than obligatory form. The Bill extends choice and consumer rights. I commend it to the House.
§ 10.9 am
§ The Parliamentary Under-Secretary of State for Corporate and Consumer Affairs (Mr. Francis Maude)
It may be for the convenience of the House if, at this early stage, I outline the Government's position. May I tender 617 my apologies to the House for having to leave the Chamber for a short period not very long after I resume my seat.
§ Mr. Maude
Applause is unlikely to delay me for very long, unless the hon. Gentleman is feeling particularly enthusiastic. I have a meeting that I must attend, but I aim to be back in the Chamber as soon as I can. I hope that the House will forgive any discourtesy.
May I too, tender my congratulations to my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey), not only on bringing forward the Bill and his excellent good fortune in drawing such a good slot in the ballot, but on proposing the Bill in such a temperate and well-argued way. In common with my hon. Friend, I congratulate the Consumers Association, which has also pursued this matter in a moderate and rational way. I suspect that the general inclination, in common with mine, is that the best protection for consumers is for them to be able to make well-informed and responsible decisions on their own behalf. I know that it will have been with reluctance that the Consumers Association felt it necessary to bring forward a Bill of this kind, which interferes with rights of contract. However, my hon. Friend and the Consumers Association have made a good case and the Government are not unsympathetic to it.
The Bill advances the proposition that an agreement to refer future differences to arbitration should not be enforceable against the consumer, unless the consumer gives his consent after a dispute has arisen. It is a short Bill, but it raises some important points of principle.
My hon. Friend the Member for Rugby and Kenilworth has argued that, as a matter of principle, consumers should not have their right of redress before the law effectively restricted by small print in contracts that they sign, but which they do not necessarily understand, even if they have read them. I appreciate the force of that argument. However, the Bill erodes the principle that an agreement to resolve future differences by arbitration should be binding. This is an important principle of arbitration law. Although section 4 of the Arbitration Act 1950 gives the court discretion to allow court proceedings to continue, notwithstanding an arbitration clause, the grounds for exercising the discretion are very restrictively applied.
As my hon. Friend said, the Bill also erodes the principle of sanctity of contract. It would allow a consumer to revoke an arbitration clause in a contract, even if he signs the contract knowing full well the implications of the clause. The Bill does not give the trader an equivalent right. I tend to the old-fashioned view that when someone signs an agreement he or she should be committed to its terms. My hon. Friend has said, quite fairly, that that principle has already been breached. However, the fact that it has been breached does not mean that one should erode it further. It does not mean that one should allow unrestricted powers to the courts to interfere with the terms of the contract freely agreed. One should be extremely chary about extending that breach, and with that approach in mind I have formulated my view on the Bill.
§ Mr. Cryer
Will the Minister accept that for many years Parliament has been modifying contracts freely entered 618 into, and not necessarily in connection with arbitration? The Sale of Goods Act 1893 gives implied terms to the sale of goods, and those goods should be, "of merchantable quality" and fit for such purpose. Even though the contract itself may make no reference to those requirements they become, by virtue of an Act of Parliament, terms of the contract whether people know it or not.
§ Mr. Maude
I accept the hon. Gentleman's argument, but, without becoming too legalistic, there is a difference. Acts such as the Sale of Goods Act imply an additional term into the contracts so that at the outset of the contract it becomes a term of it. The principle contained in the Bill means that the court can come along and overset an explicit term to which both parties have freely given their consent. That is a difficult principle and one which the House, with its concern for the respect in which the law is held, should be reluctant to consider. None the less, if the case has been made, one cannot say that the principle is unbreached, but we should be reluctant to take the matter further. Before we do so we must make sure that there is a specific mischief that needs to be met and can be met.
It is clear that the Bill raises difficult issues of law and principle that require to be reconciled. Therefore, last November, I referred the Bill to my Department's advisory committee on arbitration law, chaired by Lord Justice Mustill. I did so with the agreement of my hon. Friend who is promoting the Bill.
I should like to put on record my thanks to the chairman and members of the committee for the thoroughness with which they examined the issues and the speed with which they produced their report. A copy is available in the Library. The committee took evidence from interested parties on 5 January, and I am grateful to my hon. Friend, to the Consumers Association and to many others, for their contribution to the committee's deliberations.
There are four aspects of the committee's conclusions to which I should now like to refer. First, the committee agrees that the Bill does address an unfairness, at least in theory. The unfairness is essentially concerned with the comparative costs of resolving a dispute through the small claims procedure in the county court, and through private arbitration. The small claims procedure is automatic for defended county court claims for less than £500. No legal costs are awarded and the consumer risks no more than the cost of issuing proceedings, a maximum of £43. In private arbitration, on the other hand, costs do have to be borne and it is the loser who bears them. I understand that £200 is the daily rate for an arbitrator hearing a dispute under a removal contract. It may be that that is also the daily rate for a barrister arbitrator, but the costs for a solicitor to provide the same service are likely to be considerably higher. The House is aware that the Bar provides an excellent economic service to the community.
It is clear that a consumer with a disputed claim against a trader for, say, £200 or £300 may judge it worth while to risk £43 in pursuing a claim before the small claims court, but not to risk £200 or more if the only route open to him is comparatively expensive private arbitration. Therefore, I can see the potential scope for using arbitration clauses as an unfair means of discouraging consumers from pursuing disputes in cases where the sums of money are of this order of magnitude.
619 That brings me on to a second aspect of the committee's findings, the extent to which there is evidence that arbitration clauses are actually in practice, operated unfairly against the consumer. It appeared from the evidence to the committee that such clauses are presently confined principally to contracts in two industries, building and household removals. I understand that no examples were put to the committee of arbitration clauses giving rise to unfairness in building contracts, but that a small number of cases concerning household removals were presented as evidence. In those cases it was alleged that consumers who were bound by arbitration clauses were deterred by the high costs involved from pursuing claims for damage to property during household removals.
The conclusion that I draw is that although, in theory, there is potential for mischief, there is little evidence in practice of a large-scale problem.
§ Mr. Pawsey
I have a number of papers with me that give examples of unfairness. Indeed, I received a letter only yesterday from someone from Hertfordshire—it was not from a constituent—who said:We now find ourselves in a ridiculous situation whereby we cannot go to court, cannot get our money back and the manufacturers are ignoring us.The whole burden of the letter is that it is not worth the consumer's while to pursue a case through arbitration once he discovers the cost of arbitration. This case was a complaint not about removals, but about another industry. As soon as that person received advice about the cost of arbitration, he had to withdraw.
My hon. Friend is a barrister, and he has a legal mind. He puts matters to the House, quite properly, within a legal framework. However, at the same time he is also a constituency Member of Parliament and, as I do, he sees many people at his surgery who come to complain. The saddest phrase that I hear is, "I thought that it would be all right." We have a duty to defend those people, and I believe that the Bill does just that.
§ Mr. Maude
I accept my hon. Friend's point. Indeed, the next sentence of my speech reads:It is possible that more cases will come to light.My hon. Friend proves the prescience of that sentence by bringing another case to light while I am on my feet.
My hon. Friend gently chides me for dealing with this matter in a legal context, but I must remind him that this is a legislative Chamber. We are in the business of making law. As a result of today's debate we shall create new law. We must consider that, without being unduly legalistic, on a legal basis. I take my hon. Friend's point that we must bear in mind that unfairness can arise in practice as well as in theory. The evidence suggests that the unfairnesses that arise in practice are not widespread. This is not a major problem, although it is a real one.
I also take my hon. Friend's point about the people who say, "We thought it would be all right." Every time Parliament goes down the route of allowing the courts to intrude in a freely agreed contract there is a danger that we encourage people not to look at the fine print. My hon. Friend claimed that we may he dealing with people who do not read the fine print, but we should not allow a message to go out from this debate that there is a reduced need for people to read the fine print. People should read what they are agreeing to. We will do our constituents and 620 the public a disservice if we allow them to think that every time possible unfairness arises Parliament will leap in to deal with it. People should read what they are agreeing to and accept that they should be bound by it.
§ Mr. Austin Mitchell
Does the Minister accept that that is a counsel of perfection? Even if people read the small print—and most of them, including myself, do not—they would not know the costs of arbitration. It sounds like a perfectly fair procedure, but when barristers are paid £200 a day on job training schemes, it is unfair and exorbitant. People do not know that.
§ Mr. Maude
I take the hon. Gentleman's point. It is perfectly fair, but the House must endorse the principle that people should read what they are signing and be bound by it. We must accept any dilution of that principle reluctantly and only in the face of a perceived and proven problem. I accept that in this case there is a proven problem, albeit of a relatively minor nature, but relatively few cases involving such a problem have come to light. I am sure that the hon. Gentleman agrees that we should convey the message that the best protection for the consumer is to protect himself by reading what he is signing, and by enforcing the terms of the agreement, which are often in his favour.
§ Mr. Beggs
Surely the Minister agrees that, the Government, or an agency acting on behalf of the Government should protect tenants of 13 years' standing who, in good faith, purchase property, believing that the Housing Executive, representing the Government, would not be out to do them down in an underhand deed. Subsequently, when things go wrong, there should be protection for those parties to the contract who have erred unwittingly and have little, if any, previous experience of entering into any contract.
§ Mr. Maude
The hon. Gentleman certainly takes me well beyond my brief. I do not mind that, but he also takes me well beyond my responsibilities. I do not think that he would want me to produce an off-the-cuff reaction to his point. I shall consider his comments and ensure that they are dealt with satisfactorily.
I now turn with the third aspect of the Mustill committee report that I want to highlight. The committee took the view that the Bill, as presently drafted, is drawn too widely because it would affect all consumer contracts, not simply those where there is perceived to be a scope for mischief. I accept that there are good grounds for this point of view. Private arbitration is not a means of resolving disputes that the Government would wish to discourage. On the contrary, the Government would wish to give it every encouragement because it provides an efficient dispute resolution procedure that is an alternative to the courts and helps to reduce ther work load. It would be undesirable to allow a consumer to insist on litigation in the court in a case where arbitration did not involve him in any financial penalty, and where arbitration was clearly more convenient and sensible, perhaps because of the technical nature of the dispute.
Fourthly, I should note that the committee examined the question primarily in relation to the position in English law, but it noted that adaptations would be necessary in relation to the law of Scotland. This applies in particular to the drafting of limitations on the scope of the Bill.
The Government have no reason to dissent from the four aspects of the committee's findings that I have 621 described. The Government take the view that there is little evidence of a problem in practice, but we accept that in theory, it would be possible in certain circumstances to use arbitration clauses as an unfair means of discouraging consumers from pursuing disputes. The Government will not therefore oppose the Bill, provided that it is narrowed to disputes of a size where the scope for mischief has been identified.
The committee concluded that the only practical way of narrowing the Bill would be by a monetary limit, and it identified two possible options. The first is the limit of the small claims jurisdiction, which is £500. The second is the limit of the county court's jurisdiction, which is £5,000. In this latter case the committee proposed a discretion for the courts to enforce the arbitration clause in cases where it would be in the consumer's interest to do so. Thus, the court should have a discretion to insist on arbitration in cases where there would be no disadvantage to the consumer in arbitration proceedings as opposed to court litigation, and where the case was better suited to arbitration, perhaps because of technical complexity.
§ Mr. Anderson
One of the findings of the Mustill committee referred to the costs to the legal aid fund. Has the Minister made any attempt to estimate such costs?
§ Mr. Maude
The committee was not particularly concerned with the effects on the legal aid fund. It agreed that there would be an effect on the fund, but the committee's remit is to advise me on the legal implications for arbitration law. The committee addressed that matter and the Government must address it too. The main reason for seeking a limitation of the Bill is not financial, but because any incursion into the freedom of individuals to enter binding contracts should be limited to matters in which scope for mischief has been identifed.
§ Mr. Anderson
In paragraph 8 of its conclusions the committee refers specifically to the effect on the legal aid fund. It states:where the parties might be eligible for legal aid,this could leadto an increase in the burden on the legal aid fund.That is one of the committee's key conclusions and may have been a motivating factor.
§ Mr. Stanbrook
The Conservative position has changed since it was established by Lord Hailsham of St. Marylebone in 1977, when he vigorously defended the principle against such a Bill. My hon. Friend the Minister says that we are now agreeable to a breach of the principle, provided it is very small and related to the mischief that he has identified. Perhaps he will confirm whether such a measure may be used to deter the consumer from taking up any sort of complaint?
§ Mr. Maude
This is my position, as contrasted with that of my noble Friend Lord Hailsham. That debate took place on what is now the Unfair Contract Terms Act 1977. That Act breached the principle of contract and gave the courts power to intervene in a contract between two parties. My noble Friend was, in those circumstances, properly concerned that that interference should be limited as much as possible. It is the same principle that guides me 622 today in saying that only where a specific problem is identified should we take this breach of the principle any further. Further evidence may have come to light of possible abuses, but we do riot say that there is a major problem now, and if a problem has been identified and a case has been made out, I shall respond to it.
The hon. Member for Great Grimsby (Mr. Mitchell) should not press me too far on this. I have made it clear that my position is that while I am not opposing the Bill in the form into which my hon. Friend has proposed it be amended, I am an agnostic, and this is not a measure that commands my whole-hearted enthusiasm. I accept the case that my hon. Friend has made so persuasively, and that has caused me not to invite the House to oppose it.
§ Mr. Gerald Bowden (Dulwich)
While recognising that it is a fundamental principle of English law that there should be a sanctity of contract, will my hon. Friend also recognise that there is an even greater fundamental principle, which is access to justice? Those who have sustained injustice should go to the court. That is something that supersedes the sanctity of the contract.
§ Mr. Maude
My hon. Friend puts his point in a vigorous way, but part of justice is requiring people to keep to their word, which has been freely entered into. As a general rule, people ought to know what it is they are signing, and the House should be reluctant to endorse the principle that it is all right for people to sign contracts without reading them. It is not, and it never has been. We may be addressing a limited area, but there may be many other factors in contracts that people may not like when they find out about them. People should read the fine print, and there is nothing that the House and the courts can do in the generality of contracts to protect people from the consequences of agreements that they have signed. We should reassert that today.
My hon. Friend the Member for Rugby and Kenilworth has said that he is willing to accept amendments that combine the two options that the Mustill committee proposed. In other words, he is prepared to narrow the scope of the Bill to the limit of the county courts' jurisdiction of £5,000, with the courts retaining a discretion to enforce the arbitration clause in disputes above £500 where it would be in the consumer's interests to do so. On this understanding, the Government will not oppose the Bill. As my hon. Friend knows, the Government stand ready to provide drafting assistance to him in formulating suitable amendments for this purpose.
§ Mr. Donald Anderson (Swansea, East)
I congratulate the hon. Member for Rugby and Kenilworth (Mr. Pawsey) on the reasoned and reasonable way in which he introduced his Bill. I am a little jealous of his good fortune in coming fourth in the ballot. It has been the story of my life to come, if I feature in it at all, way down at 18th 19th or 20th, as I did on this occasion. I wonder what I might have done had I been in his position.
I apologise because I will have to leave the debate before the end, for a reason which I hope he will understand. I am going to a funeral and will have to leave the Chamber in half and hour or so.
I was interested in the position taken by the Minister, in which he himself described as agnostic. I believe that he was not in the House in 1977 when we discussed the Unfair 623 Contract Terms Act. A very proper question was posed by the hon. Member for Orpington (Mr. Stanbrook), who asked what had happened over the 10 years which has persuaded the Government to alter their position on this fundamental issue. All that the Minister could say was that it was a modest change which could be justified on its own terms. Like the housemaid's baby, it was only little.
I suggest that there is another difference. At that time, the hon. Gentleman's party happened to be in opposition, and, as the records show, was adopting a rather partisan view towards the Act, but the world looks mildly different when one is in Government. I have not spoken to my hon. Friend the Member for Great Grimsby (Mr. Mitchell), who leads for the Opposition on this matter, but I understand that we shall adopt our normal position on consumer matters, and not harry the Government or seek to delay the proceedings on the Bill.
The Tory party in opposition espoused a number of causes. The name of the former Lord Chancellor, Lord Hailsham, was mentioned, and he made a number of eloquent speeches in favour of a Bill of Rights which would protect fundamental freedoms. Where are all those in the Conservative party who were rushing to defend a Bill of Rights and writing learned articles about it? What is the change? The only change that I can see is that those who were so eloquent in the past in favour of a Bill of Rights are now in Government, and their perspective is mildly different.
Let us come to the Bill. The Government's position on such legislation has changed since 1979. It was passed over then, but I shall not delay the House by going over its history. The Bill is described in the summary of the conclusions of the Mustill departmental committee report in this way:the Bill does address a problem though not a great one".The hon. Member for Rugby and Kenilworth stated that this was a modest Bill. I make only this general, and non-partisan point as to what we have learned about private Members' Bills from our experience over the past few years. It is quite clear that, however high in the ballot one comes, and the hon. Member for Rugby and Kenilworth had the good fortune to come fourth, it is impossible to make any progress with a private Member's Bill unless it has the approval of the Government. There is a point at which almost all our constitutional textbooks have to be re-written. Any Member can choose to promote a modest, technical Bill, and if he goes to the Government and says, "Look, this is a modest, technical Bill, will you please agree to it?", the Government, while they may extract some of the substance from the Bill, will allow it to go through.
However, any other Bill will make no progress. I say that with a certain amount of feeling because a Bill which I am promoting, which I believe addresses a social evil and will lead to a modest social advantage, will be blocked by the Government Whips later today. Contrary to what all the textbook writers tell us, the business of the House, whether it be Government business or so-called private Members' business, is dominated by the Government of the day, who can turn on the tap or not, who can smile or frown on a Bill. The role of the private Member as opposed to the Executive has been marginalised almost out of existence.
§ Mr. Cryer
On a point of order, Madam Deputy Speaker. I want to raise a point of order that is entirely relevant to the point that my hon. Friend the Member for Swansea, East (Mr. Anderson) was making with regard to the Government's position.
At the beginning of the sitting, Mr. Speaker was asked whether he had received any request by the Government to make a statement on the Birmingham bombers' trial which has just ended involving a very serious and important decision and, in my view, a very serious and grave miscarriage of justice. At that time, Mr. Speaker said that he had not received any request for permission to make a statement, but that a request could be made prior to 10 am. In view of the very important and grave nature of the decision and the fact that Mr. Speaker made it clear that, because the decision had been taken, the matter was no longer sub judice, will you advise the House, Madam Deputy Speaker, whether any request for permission to make a statement has been made?
This is a relevant point of order because the Government have a responsibility, when a trial of this magnitude and seriousness is involved, to come to the House at the first opportunity to make a statement on how they propose to redress this enormous injustice.
§ Madam Deputy Speaker (Miss Betty Boothroyd)
Mr. Speaker has not received an application from any Minister to make a statement on this matter to the House today. Perhaps I may refer the hon. Gentleman and other hon. Members to the written question that appears on the Order Paper today relating to this matter.
§ Sir John Farr (Harborough)
Further to that point of order, Madam Deputy Speaker. In view of the public concern about the announcement that has just been made and the fact that this is the earliest parliamentary opportunity for hon. Members to raise questions about the decision taken last night, would it be in order for a message to be sent by you, asking my right hon. Friend the Home Secretary to present himself at the Dispatch Box some time today in view of the wide and deeply felt concern on both sides of the House about what happened at the Old Bailey last night?
§ Madam Deputy Speaker
I appreciate the concern that hon. Members have expressed. It would not be in order for me to send the message requested by the hon. Gentleman. Ministers are present on the Treasury Bench and they will no doubt have heard the request.
§ Mr. Anderson
Further to that point of order, Madam Deputy Speaker. I want to stress the immediacy of this issue. There is no doubt that this is a matter of profound public interest. The matter vitally affects the relationship between this country and the Republic of Ireland, which is a friendly country.
We heard a ruling this morning that this matter would not now be sub judice in the House. However, the lawyers representing the appellants have made it clear that they are considering appeals urgently. I assume that if they decide to appeal—I confess that I have no knowledge about this, but as a lawyer I know that they may consider the position over the weekend—there may be a danger, if the appeal was to be launched, for example, in the early part of next week, that it would pre-empt any discussion in the House if the Chair were to rule that the matter was sub judice as a result of the appeal. I need not rehearse the 625 points about the public interest and its importance, but I submit that there is an immediacy about this matter. It would be wrong of the Government and Ministers to seek the cover of sub judice, having delayed the matter until after an appeal is launched.
§ Mr. Chris Mullin (Sunderland, South)
Further to that point of order, Madam Deputy Speaker. I want to remind you that when the Home Secretary announced in January 1987 that he was referring the case to the Court of Appeal, he made a statement to the House and answered questions covering a range of issues relating to the case. He thereby acknowledged the great public importance of the matter, which, as you can see, Madam Deputy Speaker, is shared by hon. Members on both sides of the House. Because of Mr. Speaker's correct ruling we have been unable to discuss this matter in the House for 13 months, until yesterday when the ruling was suspended. As my hon. Friend the Member for Swansea, East (Mr. Anderson) has said, if this little window opens to allow us to discuss real public concern on this issue, it would be wrong to allow the window to close again because of a reimposition of the sub judice rule. I hope that you will convey our great concern to Home Office Ministers and say that we would like to hear from them on this matter.
§ Mr. Tony Baldry (Banbury)
Further to that point of order, Madam Deputy Speaker. Is it not correct that my right hon. Friend the Home Secretary made his statement because he had a responsibility under the Criminal Appeal Act 1968 to consider whether to refer the matter to the Court of Appeal? He did that in accordance with his powers under that Act. Thereafter, it was an appeal like any other appeal to the Court of Appeal. It would be an extraordinary precedent if the Home Secretary was expected to make a statement in the House every time that the Court of Appeal made a ruling. That is a matter for the judiciary. One of the basic principles of our constitution is a separation of the powers of the judiciary. The judiciary is independent and it has painstakingly listened to the appeal and reached the decision that the convictions were safe.
§ Mr. Stanbrook
Further to that point of order, Madam Deputy Speaker. I intervene on this point only to state that if these points are to be considered elsewhere, we should remember that in the early 1970s, when a Conservative Government were in office, the Standing Orders of the House had to take account of a revised ruling about sub judice matters. I believe that we took a fairly tolerant view of the rule which elsewhere, in the courts and for the media, is absolute. We must accept in the House that the purpose of the sub judice rule is to ensure that a jury in any particular case, or the court in the first instance in the case of a civil dispute, should not be influenced by extraneous or extramural considerations through pressure from the press. I believe that the House recognises that such pressure is not necessarily so sensitive when it is applied to the Court of Appeal or to the House of Lords.
§ Mr. Stanbrook
I am just finishing. It may not be necessary to apply the effect of a sub judice rule in the House between a hearing in the Court of Appeal and a hearing by the House of Lords.
§ Madam Deputy Speaker
The hon. Gentleman's comments are somewhat hypothetical. I am sure that he will not expect me to respond to them. However, I cannot and will not allow points of order to develop into a debate. That is outside our Standing Orders. I can only repeat that Mr. Speaker has not received any application from a Minister to come to the House to make such a statement. No such request has been made. I repeat that Ministers on the Treasury Bench are aware of the very deep and understandable concern that has been expressed on both sides of the House about this matter. We can take it no further now.
§ Mr. Cryer
On a different point of order, Madam Deputy Speaker. You are right to state that Mr. Speaker has no power to request or order a Minister to this place. However, in view of the wholly exceptional nature of this case and the fact that it is causing international repercussions, through very severe criticisms from the Irish Government and enormous strains on the Anglo-Irish Agreement, as the Leader of the House occupies a special position in relation to the operation of this place and the position of the Speaker, could we, through you, Madam Deputy Speaker, prevail on the Whips to ask the Leader of the House to tell us when the Home Secretary will be available to make a statement to the House? The Leader of the House has a particular and distinct duty in such a case. This case involves one of the most serious miscarriages of justice ever in the history of British criminal jurisdiction.
§ Madam Deputy Speaker
Order. I cannot allow the hon. Gentleman to express an opinion during a point of order. I am sure that the earlier part of his comments will have been noted. We must proceed with today's business. I call Mr. Anderson.
§ Sir John Farr
Further to that point of order, Madam Deputy Speaker. Hon. Members on both sides of the House will rest happy in your totally impartial judgment in these matters and will accept what you say with great respect and alacrity. However, will you at least assure the House that the Home Secretary and the Leader of the House will be made aware of the unease manifested on both sides of the House, with very good reason, on a special morning after a very tragic event last night? Will you, Madam Deputy Speaker, with your renowned sense of fair play, ensure that Ministers are notified in the usual manner?
§ Madam Deputy Speaker
If can give the hon. Member and the House the assurance that their concern about this matter will be passed on to the appropriate quarters mentioned.
§ Mr. Anderson
Earlier exchanges revealed a fundamental divide on key principles. The Minister properly drew attention to the rule of caveat emptor, under which contracts freely entered into should be honoured, and to the danger that once a breach has been made and a point of principle has been yielded there is no easy stopping point. That is an important consideration, but my hon. Friend the Member for Bradford, South (Mr. Cryer) dealt with it. For many years, through the Sale of Goods Act 1893 and through other consumer legislation, we have accepted a breach in the principle of caveat emptor, under which contracts freely entered into should in all cases be 627 honoured. We accept that such contracts, by definition, are not really freely entered into because of the inequality of bargaining.
§ Mr. Cryer
Does my hon. Friend agree that the Sale of Goods Act arose from that problem? With the development of an industrialised nation, the principle of caveat emptor was not always applicable. Machinery became so complicated that people were not able, simply on the basis of a contract freely entered into under the principle of caveat emptor, to decide whether a machine was of sufficient quality to do the job. The House passed the Sale of Goods Act so as to include in contracts terms to ensure that machinery was of a merchantable quality and fit for its purpose. It set aside the principle of caveat emptor, which had been invaluable until that time.
§ Mr. Anderson
I agree with my hon. Friend that that was the genesis of the breach in the traditional principle. I should be out of order if I were to pursue that point, save only to summarise it by saying that it was accepted then and that it has been increasingly accepted in our consumer legislation.
The opposite point was put dramatically by the hon. Member for Dulwich (Mr. Bowden) who said that, as Members of Parliament, we have a duty to defend people. If we are doing our jobs properly, we know from the people we meet in our surgeries and elsewhere that the terms of contracts with which they are presented often baffle and confuse them. They cannot take a second opinion. Even those of us who are literate, and those of us who have legal training are sometimes confused by the nature of the clauses and can easily be bowled over by commercial pressures. That is another factor — in addition to the point made by my hon. Friend the Member for Bradford, South—that makes us ready to defend the little people who are unable to defend themselves and who are vulnerable to big business interests.
That is a proper view of justice. The House would not be doing its duty if it allowed a free rein and did not seek to balance the position between those who appear to hold all the power and influence and those who can be deterred from seeking justice by the fear of the costs and the inconvenience which they could incur under the present system. It is a proper approach, and I congratulate the hon. Member for Rugby and Kenilworth on his introduction of the Bill.
I raised a number of points during interventions. I shall not repeat them, but I stress that our historic role as parliamentarians, on behalf of the little man should apply throughout legislation. It is accepted in our landlord and tenant legislation, and elsewhere. I certainly put myself squarely in the school of the hon. Member for Dulwich in terms of our duty as parliamentarians.
To allow other hon. Members to speak, I shall not go over the history of the legislation and what happened in 1977, and I shall not spell out, as has the Consumers' Association in its excellent briefing, examples of the problems that the hon. Member for Rugby and Kenilworth tries to address, such as the contracts which Pickfords and other removal firms put out. If I were encouraged by the hon. Member for Crawley (Mr. Soames), I might be tempted to read out some clauses in 628 the contracts of some of those removal firms, but the House can do its own homework and see what was set out in the briefing from the Consumers' Association.
The Government accept that there is a problem. The Mustill committee recommended one way of proceeding — persuading relevant trade associations to make arbitration optional. The Government rejected that and considered that it was more appropriate for legislation, but they suggested that the scope of the Bill should be limited in the way that the hon. Member for Rugby and Kenilworth now accepts, according to the limits of the small claims jurisdiction. Perhaps the hon. Member for Rugby and Kenilworth will concur that since he has tied the present limits to the small claims limits, as the small claims limits rise, perhaps the ceiling within the Bill will rise correspondingly. I note that the hon. Member for Rugby and Kenilworth agrees on that point. It was certainly accepted by the Minister, and I share his explanation of the relevance of the legal aid fund to that.
Finally, I refer to the very wise and helpful observations of Sir Gordon Borrie, the Director General of Fair Trading, which is available in the Library. In his letter of 16 December 1987 he sets out the general position of the Office of Fair Trading. He states:My philosophy is that arbitration should, as far as the consumer is concerned, be a simple, low-cost alternative to going to court. It should not be a barrier to redress or in effect deny anyone their normal legal rights. This policy was outlined in a debate on the Unfair Contract Terms Bill on 22 July 1977. It was then said that I believed that in many cases arbitration was preferable to going to law but that within the OFT codes of practice the consumer always has the choice. I see an advantage in the consumer being able to choose between binding arbitration or the court and would not wish to see any inadvertent restriction of this choice.Understandably, in the light of those principles the Director General is in favour of the Bill. The letter goes on to say:I am aware that some contracts (rather than codes) may contain a compulsory arbitration clause. This practice I oppose because I do not think it desirable for consumers to be deprived of their right of access to the court.It is clear, therefore, that under the current system, albeit it in restricted cases — removal firms have been mentioned — consumers, because of the costs they are likely to incur if they fail, not least because of the inconvenience of hearings by an arbitrator being in a town some distance from where they live—
§ Mr. Frank Dobson (Holborn and St. Pancras)
On a point of order, Madam Deputy Speaker. I apologise to my hon. Friend the Member for Swansea, East (Mr. Anderson) for interrupting his speech, but can you, Madam Deputy Speaker, tell us whether you have received any representations from the Secretary of State for Education and Science about whether he intends to come to the House today to confirm or deny the rumours that he himself peddled yesterday that he is to announce the abolition of the Inner London education authority? It is quite unsatisfactory that rumours about the education of more than 250,000 of the capital's children, and more than 500,000 people in inner London, are being peddled when the Secretary of State has not come here to announce whether he proposes to abolish the ILEA. The action of the right hon. Gentleman in not doing so is an insult to the House and a further sign of the extent to which the Government are ruling by whim and fancy and, in this case, on a totally malignant whim against the ILEA—behaviour which seems to many of us to show that the 629 future of inner London's education system is just the plaything of leading Tories who wish to succeed the Prime Minister.
§ Madam Deputy Speaker
I have to tell the hon. Gentleman and the House that Mr. Speaker has not recieved a request from the Secretary of State to make any statement today. The hon. Gentleman will be aware that we have a major debate on this matter on Monday, and I believe that the issue will have to rest until that time.
§ Mr. Dobson
Further to that point of order, Madam Deputy Speaker. I am not disputing your ruling, but Monday's debate is about a timetable motion for a Bill which, for the ILEA, proposes putting into law the commitment, which appeared in the Conservative election manifesto, to enable boroughs in London to opt out of the ILEA. There are many people who would think it quite unsatisfactory for ILEA, which has existed in some form and served inner London's children for the whole of the century, to be wiped out by a sideshow announcement in the middle of a guillotine debate or, for that matter, for it to be abolished by amendments to a Bill that has been before the House and approved on Second Reading on the basis of there being some changes to ILEA.
§ Madam Deputy Speaker
We cannot have a debate on this matter now. I am not making any ruling—I am merely responding to the hon. Gentleman's point of order by saying that Mr. Speaker has not received a request from the Secretary of State to make a statement to the House this morning.
§ Mr. Anderson
A consumer who signs a contract which purports to lay down compulsory arbitration may be unaware that. as a result of the Bill becoming law, as we hope it will, he has another option. I hope that the hon. member for Rugby and Kenilworth will give some thought to how he proposes to inform consumers of their rights and, by the time we reach Committee, will say how he proposes to ensure, by "health warning" or otherwise, that consumers are aware of their rights.
The Bill has substantial support. As far as I am aware, the only body which is firmly opposed to it is the British Association of Removers. It seems that the Bill is a consensus measure. It is certainly modest, and I wish it a fair wind.
§ 11.4 am
§ Mr. Richard Page (Hertfordshire, South-West)
I congratulate my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey) on three counts. First, I congratulate him on having the luck to come fourth in the ballot. It was with a slightly wry smile that I listened to the hon. Member for Swansea, East (Mr. Anderson) bemoaning the fact that he could do no better than 20th as, in nearly 10 years, I have not got anywhere near that. Maybe next year will produce a better result.
Secondly, I thank my hon. Friend for choosing this issue because his Bill will give consumers some choice when there is a dispute with a supplier. Thirdly, I thank my hon. Friend for inviting me to be a sponsor and having the courage and kindness to do so.
The object of the Bill is to offer consumers the choice of going to court or arbitration when they are in dispute with a trader whose contract includes a compulsory arbitration clause. The vast majority of consumer contracts which refer to arbitration already allow the 630 consumer a choice between going to court or to arbitration. A small number rule out the option of going to court to obtain redress. A customer who signs a standard contract such as that often finds out too late that he does not have a choice arid has to go to arbitration to settle his dispute. That is not fair. Consumers' choice should not be removed in this way.
My hon. Friend has done a great deal of delving and research to produce the Bill. I should like to follow the hon. Member for Swansea, East who quoted various letters from the Director-General of Fair Trading—Sir Gordon Borrie. One paragraph in his letter to my hon. Friend encapsulates the view of the Office of Fair Trading. He wrote:I should say that I have not endorsed any Code which included an arbitration scheme that excluded a consumer's right to seek redress in the Courts. The arbitration schemes available are intended to be an attractive option available to consumers wishing to pursue disputes and not to replace other forms of redress available, such as access to the Courts.I should like to underline the phrase, "attractive option". It is not intended to exclude going to court.
Concern has been expressed about breaking a contract that has been freely entered into. The argument sounds logical, but all of us have experienced the mass of small print on the back of a contract which refers to this or that Act of Parliament. Unless the client has a legal training, there is little chance of his understanding the full ramifications of the contract.
Moreover, it is doubtful whether, if the consumer asked the trader to explain what any of the Acts meant, the trader would be able to give a full explanation. It is only when a dispute arises and the legal profession enters the scene to shed some light on the matter that the full consequences of the contract become clear. The Bill would give consumers rights and the fair play to which they are entitled.
As I have said, the Bill is sensible. It removes an unfair condition and it is unlikely that a long speech from me will sway the House to an even more favourable position than the one it has already adopted. I feel the vibrations from all sides that there will be—
§ Mr. Stanbrook
My hon. Friend seems to be inviting those of us who have reservations about the Bill to put them to him. I am particularly anxious that he, as a sponsor of the Bill, should deal with this point. By itself, an arbitration clause is not unfair. But my hon. Friend is saying that we should remove this unfairness. An arbitration clause is found in a freely undertaken contract. Both sides have the option of signing or not signing. One side, the consumer, may accept or reject it. If he wishes to reject it he has two options: he may delete it and let the other side proceed without it, or he may opt for not proceeding with the contract and go elsewhere. That is essentially a fair process; how can my hon. Friend say that it is, in itself, an unfair one?
§ Mr. Pawsey
Would my hon. Friend agree that if the consumer struck out the compulsory arbitration clause from the agreement that he was being invited to sign, the supplier would not pursue the provision of the service any further? I have letters from consumers who have tried to 631 strike out the compulsory arbitration clause, but who, sadly, were unable to do so because the work that they wanted done would not have been done. So merely striking out the clause is not, perhaps, quite as easy as my hon. Friend has said.
§ Mr. Page
My hon. Friend has made a powerful point. As I said earlier, there is a confusion of small print on the back of these consumer documents and the consumer looks to us in the House to provide fair play in the area of consumer rights.
To conclude my remarks in support of the Bill, I reiterate that it is fair and gives the consumer choice. I hope the House will give it a smooth and speedy passage.
§ Mr. Bob Cryer (Bradford, South)
I congratulate the hon. Member for Rugby and Kenilworth (Mr. Pawsey) on his good fortune in drawing a high place in the private Members' ballot and on presenting this modest piece of legislation. On winning the ballot, the private Member always has the problem of choosing either to pursue a controversial piece of legislation—such as the Bill dealt with last week—that attracts huge numbers of people and will certainly be ferociously fought in Committee and argued over for many weeks, probably to the exclusion of other private Members' Bills or, more sensibly, he can produce a piece of modest legislaton about which there may be nuances of difference but which, most people would agree, remedies a relatively minor wrong. Adopting the latter position, which is much nearer consensus, is a proper use of private Members' legislation. A hugely controversial Bill will no doubt be accompanied by a great deal of publicity, television appearances and newspaper articles, but it often puts the rest of the private Members' legislation, which seeks to remedy minor matters that are not in the spotlight of television and the media, off course. It seems to me that the course adopted by the hon. Member for Rugby and Kenilworth is much the preferable of the two. So some words of commendation are worthwhile.
One of the problems of controversial private Members' legislation is that it often tackles subjects that are not suitable for private Members' legislation because they are complicated and involve wide-ranging matters of conscience. So it is useful to be able to draw the House's attention, as has already been done, to the work of the Mustill committee. Even on such a slight piece of legislation as this, background work has already been carried out by the Department of Trade and Industry, and the report has been placed in the Library for the guidance of hon. Members. I shall come to the work of that committee in a moment.
I notice that the hon. Member for Gatwick airport, the hon. Member for Crawley (Mr. Soames), keeps trying to attract my attention. I hope that he will not succeed in that, because I shall be diverted from my carefully prepared and brief notes, and I may well take much longer that I would otherwise have done. So I hope that he will behave himself. He has been, I thought, rather sullen this morning: perhaps he has some notion that his Bill may not be reached, but that is not in my mind.
I want to concentrate on the issue raised by the hon. Member for Rugby and Kenilworth — the cost of 632 arbitration, towards which people who are subject to these contracts in the building and removals industry are inevitably propelled if a dispute arises. There have been some pleasant jokes about the £230 a day for barristers, which is the pay for chairing these arbitration panels, but for people outside that is an enormous sum. I have cases at my advice surgery, to which, no doubt, people will roll up at city hall tomorrow, of people who are facing electricity cut-offs. I remember one case that demonstrates just how much £230 a day is. It concerns a lady whose electricity has been cut off. It was restored, together with a load limiter. The deductions by the DHSS go to current debt and towards paying off previous debt. She can use only a single ring of the electric stove, and has to use a Dutch oven to cook with—a sort of container placed on that single electric ring. If she puts on a light or a fire in any other room the load limiter is brought into play. Her husband, like many of us, is in his fifties, although he does not have a grand job in the House of Commons or a merchant bank. In fact, he does not have a job at all, and at the age of 52 he does not think he will have much chance of finding another one. That family is not unique; thousands of people are similarly affected.
I know another woman, the head of a single-parent family, who has to work an extra five hours a week merely to keep pace with the wage that she earned when the cleaning work that she did was in the public sector. When privatisation occurs, the profits of contractors are created from cuts in the wages of the people who work in a concern. The Government have removed the fair wages resolution, to prevent public authorities from requiring private contractors to observe the standards of wages and terms and conditions of employment that operate in the public sector—an example of how the Government are trying to force down wages.
That is the context in which we are talking about £230 a day. The cost of £33 a day for a court case is outlandishly high for millions of people. They cannot put their hands in their pockets for 30 or 40 quid to pay those costs. Millions of people are struggling from one week to the next, not knowing where they will get an extra five quid from if they need it. That is the grim reality. If we are given the choice of £230 a day or £35 a day, the £35 is preferable.
The chatter and light laughs that went round the Chamber at people earning £230 a day is ironically cruel for the vast majority of people who do not earn anywhere near £230 a week, let alone a day. We had better put that in context and acknowledge that access to justice is important. As the hon. Member for Dulwich (Mr. Bowden) said, there is a greater principle involved than interfering in a contract, which is what we are in effect doing today, and that is access to justice. Free access to justice is an important principle and many people do not believe that they have it, particularly when they hear of the sort of fees that lawyers receive.
Quite honestly, I sometimes wonder how solicitors and, particularly barristers, can justify the enormous sums that they receive in daily refresher fees and drink in so deeply. The cost of court cases which run for several days and, indeed, weeks about which one reads in the newspapers sometimes amount to sums in excess of £100,000. That is frightening. Those costs are a diminution of justice and mean that in certain cases, for example libel cases, only the wealthy can go to court. In that context the Bill is a useful bit of legislation, providing the £35 a day access.
633 The way in which the arbitration clause can be used to deter people from access to arbitration has not been touched on. If one must pay £230 a day, one had better not pursue the issue. For many people that would be sufficient deterrence. One may not use the removal firm, the building contractor or whoever again, but the matter is done and dusted and one must accept that, whatever the damage or dispute about payment, it has gone by the board. One must accept the position because the arbitration clause can be used as a lever.
It is not beyond the bounds of possibility that that sort of economic leverage may be used against people. Recently I had a minor job done by Rentokil. Although the firm had not finished the job, it threatened me that if I did not pay, it would ensure that my credit standing was diminished throughout the length and breadth of the country. I wrote to Rentokil and settled all my outstanding debts, as hon. Members would expect me to do, and asked what the explanation was for the threat. I have been waiting for more than two months for a response; no doubt it will come soon.
That is the sort of threat that can be used. I can well imagine that people will use the arbitration clause—not everybody because many will try to be as fair as possible, but the unscrupulous will try to use every lever, including this one.
The hon. Member for Rugby and Kenilworth mentioned the Unfair Contract Terms Act 1977. There was some dispute whether the sections of that Act which are repeated in this Bill were removed under duress from the Conservative Opposition, because there were voting difficulties, or because of the stand on principle of the hon. and learned Gentleman who became Lord Hailsham and the Lord Chancellor. I intervened in the hon. Gentleman's speech to point out that the Labour Government were in some difficulty and prone to compromise through the usual channels if they could possibly avoid a vote where there was a threat of defeat.
My hon. Friend the Member for Great Grimsby (Mr. Mitchell) said that we were in a majority at the time, but I must correct him as we were in a minority. My hon. Friend had just about been elected in 1977 to replace another distinguished Member, Tony Crosland, whom we miss to this day for his contributions in this House and other places. My hon. Friend will remember that we lost Ashfield, so we were even fewer on that distinguished day when my hon. Friend arrived. The plaque is not yet on the wall, but no doubt in time it will be. Indeed, the plinth is empty, waiting for a likeness of my hon. Friend to be installed. So the Labour Government were having a thin time and I regret that that sort of compromise had to be made.
I well recall Lord Hailsham's attacks on the Labour Government—and they have not been repeated since. He attacked the minority Labour Government as an elected dictatorship I have never heard him produce that argument in relation to subsequent Conservative Governments with a majority of about 100. He was deeply concerned about the principle of interference in contracts. I regard that with a certain cynicism because if Lord Hailsham could get hold of any stick with which to beat the Labour Government, he would do so. He would fervently grip a principle simply to defeat the Government.
For the benefit of Conservative Members present, I might say that when commentators ask me about the behaviour of the House of Commons and whether it has 634 worsened, I always refer them to the two years from 1977 to 1979 when the Conservative Opposition had regained their confidence and used to hiss regularly for sustained periods at Labour Ministers. They were led by the present Secretary of State for the Environment, the hon. Member for Eastbourne, (Mr. Gow) and others, and they used every possible device to harry and defeat the Labour Government. I make no complaint about that because I try to do the same from these Benches.
§ Mr. Cryer
My hon. Friend is right. Our standards are higher than those of the Conservative Opposition in the 1970s. There are a few leaves that we could take from their book. When people ask about behaviour in the House I point out that the way in which the Tory Opposition harried us in the 1970s is an object lesson for this place.
It was not so much the principle of interference with the hallowed sanctity of contract that motivated the removal of those clauses, as the difficulties that the Labour Government faced, and they felt that the clauses were relatively minor which, indeed, they are.
Interference with contract is not new. During the development of the industrial revolution the Sale of Goods Act 1893 came about because people recognised that the old rule of caveat emptor, meaning let the buyer beware, which had held from the middle ages, simply was riot adequate. By the end of the 19th century, the complicated machinery on which the industrial revolution was based — steam engines, looms arid spinning machines — was becoming far too sophisticated to enable a buyer to say, "This machinery is satisfactory. I have examined it and I take full responsibility."
A substantial body of opinion grew up which said that "let the buyer beware" was not a satisfactory basis for contract law and that there should be a provision to allow the buyer to say, "This is a complicated and sophisticated machine. It will cost a lot of money to repair and I want some sort of term to give me security. I want to be sure that it will be fit for purpose and that if it is not fit for purpose and of merchantable quality"—of a quality acceptable to the buyer—"I want the assurance that it will be held that there has been a breach of contract."
Many vendors were not producing decent machinery of good quality and in good working order. They tried to pass off as good machines inferior quality machines and shoddy workmanship because they wanted to increase their profits. The Victorian value of increased profits—an obsession of the present Prime Minister — was prevalent at the time. The buyer had no rights when it came to breach of contract, and in 1893, Parliament passed the Sale of Goods Act, which said that whatever the arrangement or understanding—whether the buyer had read the fine print or not—two terms were implicit in a contract for the sale of goods. First, the goods should be fit for purpose—which speaks for itself—and, secondly, they should be of merchantable quality. Those two principles held good unchanged until 1965, when they were further enlarged. The principles laid down by Parliament became accepted, although no doubt at the time it was argued that the legislation interfered in a scheme of things that had held sway in our courts since the middle ages — as if, because someone had done something unsatisfactorily over the years it should prevail for all time. 635 That is an erroneous argument. Parliament made the correct decision, as is shown by the fact that the Sale of Goods Act 1893 has not been challenged since.
When I raised that point with the Minister, he said that arbitration legislation seeks to set aside components of a contract once the contract has been agreed rather than change the nature of the contract so that people understand at the outset that they are entering into a contract qualified by legislation. That is not quite accurate. The setting to one side of the understood term of the contract— caveat emptor—was much the same as this Bill, which says that an arbitration clause will be qualified by the contract entered into, irrespective of whether the parties understand it. Several hon Members have suggested that we should dwell on that point. We want members of the public who enter into contracts to understand that any arbitration clause is superseded by the Bill.
The hon. Member for Rugby and Kenilworth said that in Committee he would introduce changes to ensure that contracts refer to the legislation. That would mean altering the Bill to include a clause to say that all contracts that have hitherto contained arbitration clauses must contain a reference to the Act. That is a very reasonable requirement. Otherwise, if a dispute requiring arbitration arose over a contract, with, for example, a removal firm, the aggrieved person might never have realised that he had the option of going to court. If the information is not contained in the contract, we might lose much of the value of the Bill.
The hon. Member for Rugby and Kenilworth may say that the aggrieved party can get legal advice, and so he can, but that is often difficult. As everyone agrees that we want to encourage people to read contracts carefully before entering into them, it would be much better if the information about their rights was contained in the contract. They should not have to depend on seeking the advice of a solicitor, a citizens advice bureau or their local Member of Parliament. I strongly suggest that the promoter of the Bill considers that as a possibility for the Committee stage, because it would be a very useful device.
Another Act was passed in 1963. A number of people had been sold encyclopedias on the doorstep. They discovered that when they had paid a deposit for the first volume—perhaps £5—they had entered into a contract to buy a range of encyclopedias from A to Z, costing perhaps £250, which is the equivalent of about £1,250 today. Parliament therefore decided that there should be a cooling-off period with the right to cancel the contract. People were thus given a number of days to reflect on the glib salesman who knocked at their door and said, "You can buy all this knowledge with only £5 to pay. If your children are to get through the school certificate or GCE, you must have these encyclopedias." Parliament made it a requirement that there should be a cooling-off period and, more important, that that cooling-off period should be notified to the purchaser so that his rights were enshrined and made clear to him at the point of sale. Such a principle—again the result of Parliament interfering in a contractual arrangement — should be applied in this valuable Bill.
May I refer to the Mustill report. Unlike many private Members' Bills, this Bill has had the benefit of being scrutinised by the Department of Trade and Industry. As 636 the Minister said, the Mustill Committee, chaired by Lord Justice Mustill, examined evidence from a number of sources, listed in the report, which incidentally, is available in the Library. It received oral and written submissions from the hon. Member for Rugby and Kenilworth, the Consumers' Association the Director General of Fair Trading, the Chartered Institute of Arbitrators, the Federation of Master Builders and the British Association of Removers. Written submissions were provided by the National Association of Retail Furnishers, the Royal Institution of Chartered Surveyors, the Direct Selling Associaton and the Building Employers Confederation.
The committee heard a fair cross-section of opinion, including critical opinion, and at page 7 of the report it said:The committee has concluded: That the Bill does address a problem though not a great one, the problem being essentially one of cost and its deterrent effect.That is a useful definition of private Members' legislation. It addresses a problem, although not a great one. The hon. Member for Rugby and Kenilworth wishes to remedy a problem and provide people with some security. It is hard to say what the problem is, but most people move at least once in their lives and, unless they hire a van and do it themselves, they will have to use a firm of removers. Several million people may be involved, a proportion of whom will get into dispute. The problem may be greater than we think.
The committee continued:There are at least two ways of addressing the problem, either by persuading the relevant trade associations to make arbitration optional or by legislation. If both approaches were considered equally practicable the committee would favour the first option"—which is persuasion. So would we all. It would be nice if we lived in a society where we did not need legislation or the problems of administering it and we did not need to go to court when disputes occurred. If people were of uniform good will, we would have no disputes. But the reality of human existence is that some people are unscrupulous, some are well-meaning, some are kindly and some are mean-minded. Those disparities in attitude mean that disputes arise. We have developed a system of rules for the guidance of our conduct which we call legislation, and people who are not of good will and are not kindly disposed must follow those rules whether they like it or not. The notion that we can do everything by persuasion is not borne out by experience.
Sometimes we think that there is too much legislation. For example, each year we get 500 pieces of paper from the Common Market that I suspect we could do without. They may relate to the harmonisation of noise levels for lawnmowers or to narrow-wheeled tractors, which are used only in vineyards in Italy. Some of the legislation is not directly relevant to the needs and problems of Britain, but we must accept the principle of using legislation, not a set of guidelines or persuasion. Legislation is the best way of ensuring the standards of conduct which we expect from our fellow human beings. The committee referred to that principle and opted for legislation, thus supporting the hon. Member for Rugby and Kenilworth.
In health and safety at work, codes of conduct have been used instead of legislation. But in many injury cases those codes have been shown to be less than satisfactory. The best way of reducing the enormous number of working hours lost in our factories, offices and shops is to lay down standards in legislation which can be enforced 637 by factory inspectors, with the possibility of prosecution. Of course, that is the criminal law, and we are dealing here with civil law, but the principle is still important.
The committee says that the Bill presents no insuperable technical problems. Indeed, it is a short, straightforward Bill. Paragraph 6 of the committee's conclusions states:Since the logic of the Bill is directed towards the disparity in costs between the Small Claims procedure and private arbitration, the conflict between the principles in 3 and 4 above"—that is persuasion or legislation—might best be resolved by limiting the scope of the Bill to disputes of a size which are automatically referred to arbitration under the Small Claims procedure.That is a reasonable proposition. People entering into building or removal contracts for much larger sums than £5,000 may receive legal advice before entering into the contract.
§ Mr. Pawsey
The hon. Gentleman will probably be aware that the limit is likely to be increased to about £10,000, which gives even more emphasis to his point.
§ Mr. Cryer
I am grateful to the hon. Gentleman. The limits under which courts operate are always being reviewed, and I have no doubt that the Minister involved will wish to introduce a statutory instrument to increase the limits. As a member of the Joint Committee on Statutory Instruments, I know that we discuss many orders reviewing the procedures of courts and their areas of jurisdiction. The hon. Gentleman's remarks do not surprise me. He is saying that the Bill will automatically have wider application. A good way of ensuring that its provisions are widened is to link it to the limits under which the small claims court and the county court may deal with the matter.
I take it from what he said in his introduction that the hon. Member for Rugby and Kenilworth will accept the comments of the committee and that he will table amendments to accommodate them. That would be a prudent course to follow.
How will people be affected by the legislation? I can imagine a time when a couple who live in tied housing are thrown out. Fortunately, they have put together a few bob and they have bought a house in, let us say, Dulwich. It was built by a major firm of builders which has not done the job well enough. The white-haired old lady, who is retiring down there, gets past the guards and turns round and says, "Denis, there is a big crack in the wall and if we are not careful it will fall down and break the drinks cabinet."
§ Mr. Gerald Bowden
Does the hon. Gentleman have a particular hon. Member in mind? Is he referring to one of my constituents who has recently moved in—I refer, of course, to the hon. Member for Peckham (Ms. Harman)?
§ Mr. Cryer
I did not have that case in mind. My example was purely hypothetical.
The lady might say to Denis that the crack in the wall is such that the wall will break and fall on the drinks cabinet. Having spent all their savings on the house, the couple are then inexorably propelled to arbitration involving the builder and face the cost of £230 per day. Although it is pleasing to think of that lady's departure from the tied accommodation at Number 10, the reality is that she has a few bob put to one side to deal with such matters. However, the vast majority of people have not.
638 I have come across cases—as I am sure have all hon. Members—where people have entered into contractual arrangements, especially with builders, but find themselves unable to deal with the problems that arise and have to accept the difficulties because of the cost of going to court. Arbitration means so much more leverage. People simply give up because they cannot get a satisfactory settlement other than by going to arbitration.
I recall that in a former constituency of mine Barratt built an estate which had a whole host of defects, and which was subject to exactly those circumstances. The people who bought their homes in the belief that they would improve their environment and house found that the mortar of their houses was affected by the rain which combined to produce an acidic attack on the brickwork. Quite literally, sections of those houses were crumbling within months. Entire gable ends had to be replaced. Indeed, they were subsequently replaced by the building firm of Barratt, but not with out a great deal of argument and difficulty. People took me round the estate and told me that although the firm had replaced a section of the gables, the brickwork was crumbling under the windows. They said that they had begged Barratt to carry out: the work round the windows but that they were unable to persuade the firm to do so.
That is a classic example of where, if there is an arbitration clause in a contract, people are deterred by the cost from taking real action against the builder. As I have said, I am talking about people who use hire purchase to buy their furnishings and carpets, and who have high mortgage payments. Such people saw their move to that Barratt estate as an improvement in their environmental circumstances. For many, it was their aspiration. I suppose that they were carrying out the Prime Minister's notion in working for their own improvement. However, they did so on such a margin of expenditure that they could not possibly hope to pay £230 for the day's arbitration that might be involved.
I recall the hon. Member for Orpington (Mr. Stanbrook) intervening in the speech of the promoter of the Bill to ask whether that £230 per day was a general fee or was confined to the costs of the removal arbitration. The hon. Member for Rugby and Kenilworth did not know, so £230 may be a minimum fee. The fee could be higher for other areas of activity and could escalate to £250 or £300 per day. If any hon. Member has ny evidence of higher fees, I shall be extremely interested to hear about them.
§ Mr. Cryer
I entirely agree with the hon. Gentleman. The difficulties that he has described in earlier interventions have my sympathy because they have strong similarities to the difficulties that I faced on behalf of constituents in a previous constituency.
I should add that most of the people on the estate that I have described did not share the Victorian values and aspirations of the Prime Minister. They were good Labour party supporters, but that is another matter.
§ The Minister of State, Home Office (Mr. John Patten)
Well, they did not vote Labour, and the hon. Gentleman lost his seat.
§ Mr. Cryer
I was drawn by the sedentary comments of the Minister. I do not want to be drawn down any side avenues. I have seen the sullen looks of the hon. Member for Crawly. He is anxious that we should get around to the bookies' Bill. Therefore, I do not want to detain the House for any great length of time on this useful piece legislation.
I am constrained to extend my remarks a little, but I do not wish to do so. The Bill is a useful addition to private Members' legislation. I hope that it sees its way on to the statute book.
Here is a perfectly good piece of legislation. It is short. It will be altered. I hope that, in addition to the county court small claims matter, the hon. Member for Rugby and Kenilworth will consider altering it to ensure that, subject to arbitration, contracts contain information about what I hope will be an Act, but that is another thing.
The Abortion (Amendment) Bill, which we discussed last week, is in line with the Scotch Whisky Bill and several other Bills. If the Abortion (Amendment) Bill spends a great deal of time in Committee, as is possible, a small Bill such as the one that we are discussing may not see the light of legislative day. That would be a great pity.
Because of time limits on drafting and on the examination of the background to a Bill—in this case, it has been remedied by the Mustill committee—it behoves an hon. Member to say, "Here is a minor matter that can be remedied. Should I go for something minor, or should I seek the bright glare of publicity for a Bill that has little chance of getting through?" That is a reality. He may further ask, "Should I spend time on television and writing newspaper articles, or should I devote my time to the detailed work of legislation, which will benefit a handful of people, perhaps, but will remedy what seems to be an injustice?"
The hon. Member for Rugby and Kenilworth has taken the latter course. The Bill has my support. In spite of that, I am sure that he will pilot the Bill to its conclusion. I hope that the Bill will become legislation. When it does, I shall reflect on its value and the suggestions that have been made. I shall look forward to the outcome of the Committee's deliberations. I hope that the Bill gets to Committee, but I fear that its chances may not be too high because of the attraction of a Bill on a controversial subject, which tactic is too often used as an abuse of the private Members' Bill procedure.
§ Mr. Stanbrook
Is the hon. Gentleman aware that, at the moment, there is a queue of private Members' Bills to get into Committee? One Bill in particular is being held up by what some people call a filibuster. That may well protract consideration of the Bill and following Bills. If we get some co-operation from the Opposition, we may be able to get more private Members' legislation through. While such delaying tactics are used in regard to all legislation, it is not possible to do so.
§ Mr. Cryer
I am astonished that the hon. Gentleman should suggest for a moment that a Bill should be delayed in the queue because the Bill behind it is less desirable than that currently being examined, for instance, in Committee. However, I dare say that it happens.
What I was referring to was not the business of delaying legislation to defeat a Bill that is of value. I was suggesting that, if a controversial Bill such as the Abortion (Amendment) Bill—which many people regard as highly desirable, and many others see as reactionary legislation which would take away women's hard-won rights — is detained in Committee, it will be because of genuinely held views which will be passionately argued. The argument will not be simply used as a means of delay; it will take place because the issue is so important. That is why, if there is to be a change in legislation, or a reconsideration, it should be dealt with by a Government Bill. The other side of the argument is that it is a matter of private conscience, and that the Government must therefore ensure a single-line Whip. We know what the process is like, because we have experienced the White, Corrie and Benyon Bills.
Legislation such as this is in difficulties, but it follows what I consider the proper path of a Private Member's Bill, on the ballot system. The Bill's provisions are modest. It will remedy injustice, and provide more of a defence for consumers. Moreover—the hon. Member for Orpington may not agree with this — it may take us out of the clutches of barristers charging £230 a day. If we can do that, we shall have achieved something worthwhile.
§ Mr. Stanbrook
The hon. Gentleman obviously has not read into the Bill the implication that I have read, which is that the activities of barristers and courts will be encouraged, because arbitration will be transferred to the normal courts in the normal way. There will be more work for barristers as a result of the Bill's passage. That cannot be desirable, can it?
§ Mr. Cryer
I do not agree with the hon. Gentleman's conclusion. Barristers—one hopes are—unlikely to make an appearance in the small claims courts. People may well appear by themselves in those courts, which I hope will be the basic area of activity in disputes over the Bill. However, I know that appearing before even half a dozen people is very intimidating for the vast majority of our fellow human beings. Hon. Members happen to have acquired a certain immunity to the difficulties, but some people have not, and even some of us may feel a bit intimidated in the Chamber on occasion.
People who go to the small claims courts are likely to be represented, but they certainly will not be represented by barristers. Barristers appear in the county courts, but solicitors have the right to appear. My guess is that, because local parochial cases would be involved, people going along to their local firm of solicitors would accept that those would be the appropriate people to deal with their case. Therefore, my original statement that the legislation might get us out of the clutches of barristers at £230 a day is more likely to be true than not.
Barristers, of course, play a useful part: I do not deny their value in our society. However, I must point out to the hon. Member for Orpington that they seem to many people to receive extraordinarily lavish fees for doing very little. The problem is that we cannot sue barristers if they are negligent, whereas we can sue those who do humdrum 641 tasks, such as plumbers and painters, and workmen who connect the electrical circuit to the toilet. They get only a few quid a day. Why can we not sue barristers who get these extortionate sums? We should eradicate this disparity and injustice. The barristers, who are supposed to apply justice, apply these rules to keep themselves immune from prosecution. The arbitration costs of £230 a day seem to be largely taken up by the costs of the chair, the barrister or the solicitor. This measure gives people greater access to the courts.
The arbitration procedure may be all very well, but it is not well known. People know about courts. They read about them every day. Newspapers are bound to refer to a court case —perhaps a civil case but, more likely, a criminal case. Many civil cases are reported — for example, the findings of small claims courts are reported in local weekly and evening newspapers, and county court cases are certainly reported. People are more familiar with courts that with arbitration. Those aspects with which people are not familiar are much more forbidding than those with which they are familiar. This legislation puts people in contact with an option with which they are familiar, and it is desirable on that basis alone. Of course, because of the great disparity in costs, it will be an enormous help.
The hon Member for Rugby and Kenilworth said that legal aid might be available. I should have thought that advice would be available under the legal aid scheme. I hope that legal aid will be available for the reasons I have mentioned. Those people who are struggling and find the building work undertaken for them unsatisfactory often have had to borrow the money for that work, and to ask them to face the extra task of having to be represented, because they feel unable to make their own case in unfamiliar circumstances, would be asking a little too much.
The hon. Member for Dulwich made a striking point, which is rather surprising, coming from the Conservative Benches, but we are grateful to him for making it. He said that access to the law is an important underlying principle, and I hope that we all share that view. I hope that legal aid will be available for those who wish to go to the county court to ensure that they have the right to justice. That alone will provide pressure for a more equitable settlement to be made without the need to go to court. The fact that two parties are acting on the basis of equality is an important means of ensuring that they bend their minds to achieving a settlement. We do not want people to have to go to court. Court means confrontation. We want people to be able to settle their disputes outside court—two people of good will making a decision that is fair and equitable. The fact that both have equal access to court will encourage moves in that direction.
This useful legislation has my support. I hope that amendments will be dealt with in Committee so that on Report we see improved legislation. I hope that this will be an example of the way in which private Members' legislation has followed the course which we all accept, of dealing with minor matters in detail to the benefit of the community at large.
§ 12.9 pm
§ Mr. Gerald Bowden (Dulwich)
May I add my congratulations to my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey), not only on his good fortune in being drawn so high in the ballot, but also on 642 his good judgment in choosing to deal with consumer arbitration in a private Member's Bill. I also thank him for inviting me to be associated with this issue.
I believe that I first became aware of the matters that the Bill seeks to address some 30 years ago when I was a law student taking part in a moot which Lord Denning was to judge. I forget the issue of the moot, and I forget the main part of Lord Denning's judgment, but, as is the custom of judges, he digressed slightly, and it is that digression that I remember.
Lord Denning told us about a recent holiday that he and his family had taken. They had travelled by car and ferry across the Channel to Brittany. During the journey he sat on the boat with nothing to do but watch the sea. He took out of his pocket the standard contract for the carriage of his family and car. I do not know whether at that time Lord Denning was a judge or a practising barrister, but he told us that he had entered into a contract for the carriage of his family and car without reading the contract. He was an expert, advising others every day of his professional life, but on holiday he had not taken the trouble to look at the contract until he had entered into it. He discovered that he had no rights for his car or his family to be conveyed to Brittany, and that if the boat sank or his car was thrown overboard as a result of the crew's frolics, he had no redress.
Lord Denning's contribution to contract law and the operation of exemption clauses is well known. Perhaps it was an accident that drew his attention to that area of the law. His speech made a profound impression on those of us who listened. The main issue of the moot was forgotten, but the main point of his speech was not.
Over the years, consumer legislation and the protection of the individual against a large monopoly has been one of the greatest aspects of judge-made law. Such judge-made law is often derided or held in contempt, but it has led the way for this House to legislate on this matter. I am pleased that today we are, I hope, taking a step further on this unfinished business.
Ten years ago, before I entered the House, my Friday occupation was to lecture on the law of contract. Today is almost like going back to that earlier activity. Indeed, for nostalgia's sake, I picked up a textbook used by my students, which I am sure is well-known bedside reading to most in the House. That book is entitled, "An introduction to the law of contract and tort" by Bowden and Morris. With regard to exemption, exclusion and limitation clauses it says:The court will take into account the relative bargaining strengths of the parties, whether the parties are contracting as equals, or whether one party is in a stronger negotiating position than the other, perhaps as a monopolistic supplier of services.That is the view taken by the courts, and it is also the view that has directed this House to make good some of the injustices that exist in contract law and redress the balance between the monopolistic supplier and the person who has no opportunity to assess and agree the terms of a contract before entering into it.
I note that the various pieces of legislation, including the Unfair Contract Terms Act 1977, which was cited earlier, do not cover this point. The reasons for that omission were given by earlier speakers from both sides of the House. The reasons were roughly in the same direction, but on a different basis, from both sides of the House, why this provision, which seeks to oust the jurisdication of the 643 courts and to impose arbitration in certain circumstances, has remained an anomaly in our law for so long. Neither I nor my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey) or the other sponsors of the Bill, wish to devalue the contribution of arbitration in settling a dispute.
I have a case before me at present, involving a constituent who, in 1973, entered into a small building contract, following a specification, for some minor rebuilding work to his home. The total cost was about £1,500, but the work was inadequately done. I am not able to judge exactly how inadequate it was, but my constituent decided that he would not make final payment to the builder, and he consulted a solicitor about what redress he might have. The solicitor did not deal with the matter as speedily as a member of the senior branch of the profession might handle papers, and he found that the building contractor's solicitor had served notice on him to pay and proceedings had been instituted in court.
I shall not detain the House with the details of this case, but, if I simply say that for 15 years my constituent, Mr. Z, has had six solicitors and is at present pursuing a case of negligence against five of them, one can understand how litigation can take control. If an arbitration clause had been offered in my constituent's original building contract, he would have been spared the agony of the past 15 years. Indeed, the case has become his life. It is an obsession. It is the main motivating force in what he does.
I do not deny the value of arbitration clauses. I received a letter, in connection with the Bill, from my good friend Mr. Ray Baker, who is secretary for parliamentary and public affairs at the Royal Institution of Chartered Surveyors. He writes regularly to hon. Members about matters which concern his organisation and which hon. Members might be considering. Over the years I have valued the thoughts that he has put to me and to other hon. Members, and this is the first time that I must disagree with him. In his letter he says that the institution believes thatthis Bill undermines a fundamental principle of our highly successful system of arbitration.The sponsors of the Bill do not believe that that is the case. Arbitration or litigation should be available where appropriate, but somebody who is not accustomed to being in dispute with a professional organisation should have access to the small claims procedure. I support the Bill on this basis.
The supremacy of the law is important. Arbitration is part of the law of contract, and therefore falls within that law. The hon. Member for Swansea, East (Mr. Anderson), who told us that he would not be present for the whole debate, hinted that a health warning might be put to those who are not accustomed to entering into formal contracts. I could not agree with him more. It would be a good idea, when a standard form contract is issued and one is invited to sign at the bottom of the form to indicate assent, to print at the top, "The large print giveth and the small print taketh away." That would be a way of directing people's attention to the fact that there was something in that contract that should alert them.
As has been said, this is modest legislation. It is modest in the sense that it deals with small, individual claims. It does not deal with the big issues of state, but it is the small individual injuries and claims, such as that affecting my 644 constituent whose litigation has taken over his life, that are the concern of us here today. For this reason, the Bill should go on to the statute book, and I commend it to the House.
§ Mr. Clifford Forsythe (Antrim, South)
I welcome the fact that the Bill, if passed, will apply to Northern Ireland, because we have problems along the lines of those mentioned by hon. Members. The hon. Member for Bradford, South (Mr. Cryer) mentioned the problems of one of his constituents who had had a load limiter fitted to her electricity supply. In Northern Ireland, we do not have load limiters on the electricity supply because of various complaints that have been made. That means that if one of my constituents, receiving a social security benefit or a low wage, is behind with his electricity payment, and the electricity supply company says that unless he pays the bill or reaches an agreement the electricity will be cut off, he will usually immediately sign the agreement or contract. Later on, he will find that he is unable to buy his food or maintain even a basic standard of living. Unfortunately, the position is even worse in my part of the country.
I support the Bill. However, although it has been said that it would be better to go to court, there are times when arbitrators are more competent to make a decision on a defect. Such cases often arise in the building trade, as other hon. Members have said. My hon. Friend the Member for Antrim, East (Mr. Beggs) mentioned flues. A court would not be competent to deal with the merits or otherwise of a defective flue. In those circumstances, one wonders whether the court is the best place to go to. The basis of the whole operation is that it gives the person signing the contract the choice of going either to arbitration or to court, and I support that.
One can quote many cases of housing defects, particularly in Northern Ireland, many of which are not apparent when the house is first bought or when the contract is signed, but appear later. In such circumstances, it is essential that, in the case of a dispute, house purchasers are able to go to court or to arbitration, whichever they prefer.
I support the Bill. I am grateful to the hon. Member for Rugby and Kenilworth (Mr. Pawsey) for ensuring that the Bill applies to Northern Ireland and so includes the whole of the United Kingdom.
§ Mr. Den Dover (Chorley)
It gives me great pleasure to speak on behalf of the poor individual who is often forced into an impossible situation by Big Brother business. I very much welcome the Bill introduced by my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey). I believe that it is up to hon. Members to ensure that the rights of individuals are protected and supported against businesses.
Businesses of course, have big budgets and expense accounts. They can corner an individual who has very little or no redress if he is the victim of an agreement in which an arbitration procedure is outlined and he has no redress through the courts. That is completely inequitable. I have experience of so many cases in my constituency in which individuals, even where no compulsory arbitration procedure applies, are unaware of their rights. They do not know which way to turn. They visit the citizens' advice bureau in the local town—if they are lucky enough to 645 have one there —and they stutter and splutter between friends and relatives giving advice or advice from a solicitor or lawyer whom they know in some shape or form. However, they do not really know where to go.
I support the Bill so readily today because it is a move to support the individual and strengthen the rights of the consumer who, after all, is responsible for so much trade and business activity in the United Kingdom. My hon. Friend the Member for Rugby and Kenilworth should be commended and applauded for his efforts. I wish the Bill well in Committee and I hope that as hon. Members representing our constituents, we can rest assured that the hopes and aspirations of our constituents will be helped by the Bill.
It is no good us expecting those individuals to take on arbitration. They cannot afford the worry or the hundreds of pounds to start a case when they barely have any pounds to rustle together. The small courts procedure over the past few years has been a major advance. Surely it is right and proper that that channel should be used to resolve so many of those disputes? Often we are not talking about large sums of money. However, it is not the scale of the problem, but the principle which matters.
The Bill is a major step forward. It is only a minor private Member's Bill and it is being debated on a Friday when the House is not well attended. However, that does not mean that there is no massive groundswell of support in its favour. Therefore, I wish it well and a speedy passage through the House, and I congratulate my hon. Friend the Member for Rugby and Kenilworth.
§ Mr. Austin Mitchell (Great Grimsby)
I join hon. Members in congratulating the hon. Member for Rugby and Kenilworth (Mr. Pawsey) on choosing this Bill, on his speech and on coming fourth in the ballot. It is possible to be a Member of this House for more than two decades and not win the ballot. However, it is also possible to win the ballot and then use the opportunity for curious purposes, as happened last Friday. This Bill is a triumph. It is a great thing to win the ballot, and the hon. Member for Rugby and Kenilworth has seized his opportunity well.
It is right to do something which is too small for the Government to do, but something which needs doing. It is right to do something to help the small person, the consumer. The Bill helps the consumer against the big battalions. This Bill is a lucky opportunity and the hon. Gentleman has made a wise choice. That is crucial. A private Member's Bill may be either so controversial that it simply makes a gesture and does not reach the statute book, or it is so unimportant that it is frankly not worth bothering about. Today's Bill is worth bothering about. It is certainly not uncontroversial judging from the degree of discussion that we have had about it today.
I congratulate the hon. Member on working with the Consumers' Association and taking its trenchant advice. It is difficult for an hon. Member to do the job of a lobbyist, to consult interests, to follow his own cause and to do all the work necessary for a private Member's Bill while carrying on his normal existence as a Back Bencher. The hon. Gentleman had the backing of the Consumers' Association, and that was essential. I am happy to support the Bill.
For the Opposition, it is unfinished business. It is left over from 1977 when we passed the Unfair Contract Terms Act 1977. The first draft of that Bill said that 646 arbitration clauses such as those in the contracts with which we are dealing today would not be subject to the legislation, if they were deemed to be reasonable. That provision was challenged by my hon. Friend the Member for Birmingham, Erdington (Mr. Corbett) who introduced an amendment similar to the provisions of today's Bill. The Minister at the time agreed to take up the principle of the amendment. Amendments were tabled in the other place where, at that time, Lord Hailsham was opposing everything put forward by the Labour Government on convenient grounds of high principle that he seemed to pluck out of the air when in Opposition, but that he never invoked when a Conservative Government were in power. He criticised the amendment as a breach of principle.
§ Mr. Cryer
Does my hon. Friend agree that that point is best encapsulated by Lord Hailsham's accusation that the Labour Government, in a minority and with people such as John Stonehouse disappearing all the time, was an elective dictatorship? That phrase has never escaped his lips under a real elective dictatorship— under a Prime Minister who has a political drive and a dictatorial and authoritarian attitude such as we have never seen since 1945.
§ Mr. Mitchell
My hon. Friend is over-critical. The Government are not an elective dictatorship. They are a spontaneous generation of joy, led by a Prime Minister who speaks in dulcet tones, who is keen to consult and who has the willing co-operation of a team of Ministers who think of nothing else but following willingly and enthusiastically wherever she leads. Lord Hailsham would have been totally out of character to describe such a system as an elective dictatorship, but Opposition Members are not privileged to participate in the explosion of joy on Conservative Benches.
Lord Hailsham's opposition in the other place was for nothing, because the clause introduced by the Government was carried without a Division in the other place. On 22 July 1977 the Bill returned to the House of Commons. As my hon. Friend the Member for Bradford, South (Mr. Cryer) pointed out, at that time there was an obscurantist, bitter and hectoring Opposition, and the official Opposition spokesman on consumer affairs spoke strongly against the new clause.
A Government who faced daily dangers of defeat, were clearly about to be defeated on what was for them a min or concern, compared with their survival. They were the last barrier against the onrush of alien hordes who threatened to come to power and turn the country into an economic disaster, which is what they did. That Government had to give way. The clause was dropped. I am glad that my hon. Friend the Member for Erdington has come to the Chamber because he raised this matter in 1977. It is a national tragedy that legislative processes mean that we have had to wait 11 years to get back to a principle which is so important and beneficial to consumers.
That, however, was the playway politics that the then Conservative Opposition were indulging in. It is good to see a Conservative Back Bencher making amends and admitting that what the Conservatives did was public school fun politics and utterly irresponsible. It is good to have that admission. The Department of Prices and Consumer Protection, as it then was, was enormously strengthened after the defeat because I became a Parliamentary Private Secretary — so we never faced such humiliation again.
647 I can give the Minister some advice on the basis of my long years of experience in Government. I was a PPS for a full seven months before the Labour Government were defeated. It is on the strength of that meteoric rise that I should like to give him some serious advice. I am glad that he has come back from the Franglais summit. I heard that he could not understand what was going on. As he said, there has been an agreement that the Bill should be modified in Committee.
I do not blame the hon. Member for Rugby and Kenilworth for agreeing to that change. A private Member's Bill is vulnerable. It is like an infant fresh into the world. It can be slaughtered or trampled on by brutal alien hordes. There is no alternative but to compromise. When the Government say compromise, you compromise. The compromise dilutes the Bill's intentions, however. Cases involving less than £500 are to go to the small claims court. I assume that when the limit for cases that go before the small claims court is raised to £1,000, it will, pari passu, increase at the same time.
Cases which involve between £500 and £3,000 will go to the county court, which can decide whether it is in the interests of the consumer to pursue the case through the courts. I think that that modification is unnecessary. The Bill gives the consumer freedom of choice. The consumer is free to pursue a case through arbitration, as on the contract, or through the courts. Surely we should give the consumer that choice because, once again, we are considering the plight of the small consumer challenging the big battalions.
§ Mr. Stanbrook
The hon. Gentleman seems to be taking it for granted that there is a choice, but if the consumer, after the execution of the contract, is entitled to say that he will no longer agree to a clause which he agreed to before, there is an inherent unfairness. How does one justify that ex post facto choice?
§ Mr. Mitchell
By definition, nothing which is unfair to barristers and solicitors is unfair. Surely the principle that we should apply is that of strengthening the minor figure in the relationship and giving him advantage of choice. We are trying to serve the consumer. Why should he not have the choice?
Why are a Government who are so keen on freedom of choice trying to restrict it in this instance by modifying the Bill in this way? If they want arbitration they can have it. The consumer is in a position of force majeure. I accept the Minister's point that people should read contracts; that is always a counsel of perfection. People should read them. I do not always read them; when I do, I do not always understand them. I put myself in the position of the layman. Even if the consumer read, learned and thoroughly digested and understood the contract he would not always know what was implied in it. The consumer does not know that the costs of arbitration—it sounds like a marvellous procedure, invoked out of the sky to decide between right and wrong and administer British justice—will amount to £5 for an initial fee, £25 when the papers come through and £200 a day for the arbitration itself. That is not specified in the contract.
§ Mr. Maude
I take the hon. Gentleman's point, which is why the Government have been so accommodating to the way in which my hon. Friend the Member for Rugby 648 and Kenilworth (Mr. Pawsey) proposes to restrict the Bill. Does the hon. Gentleman suggest that if people enter contracts for a value of £5,000 or more they should be entitled to go back on their terms? Of course, not all of us read the fine print on contracts all the time, but the greater the value of the contract and the more there is at stake, the greater the onus on people to ensure that they read what they are letting themselves in for.
§ Mr. Mitchell
The Minister should not congratulate himself on being accommodating towards the Bill; he should embrace it with enthusiasm. He should clutch it and say that it is right and that the Government want to do something about it. There is surely an essential distinction between two firms entering into a contract and the consumer, as an individual, entering into one. The individual is far more vulnerable than business, which can be expected to have the backing and access to the advice that the consumer does not have. The odds are unequal in such a contractual relationship. It is wrong to say that the contract is binding in this harsh, unforgiving fashion. The principle of contract has been breached in other areas, so why not in this? That merely provides a choice.
I want to give a couple of examples—provided by the Consumers' Association—of people to whom this choice has not applied. A Mr. John Forrest of Hampstead moved house. I shall give the name of the removers because it deserves to be given—W. Freeborn and Son. A valuable breakfast table was damaged in the move, and the estimate for repairs was £200. Freeborns told Mr. Forrest to get the money from the insurance company. He consulted that company, which would offer him only £100. That is typical of the small person against the big battalion. The damage had been notified too late because of the procedures of going to Freeborns, who referred Mr. Forrest back to the insurance company, and so on. He refused to accept the £100 and threatened legal action. The insurance company refused to increase its offer, and Mr. Forrest then gave Freeborns 14 days' notice of a county court summons unless he received £230. So the company invoked the arbitration clause. As that was going to cost, as he then found out, £200 a day, he not unnaturally decided to take the £100. That shows the unequal relationship that can occur when larger sums are involved— they should be covered.
Some of the removers' provisions are quite draconian; I quote from Pickfords' provisions:If there is disagreement on the appointment of an arbitrator the President of the British Association of Removers at the time of the dispute will upon application by you appoint an arbitrator who shall have been a barrister for not less than ten years … The arbitrator who will decide who pays the cost of the arbitration".That sounds intimidating enough.
You may not take legal proceedings against us in a court of law over any matter arising from this agreement until the arbitrator has made his award.What right has Pickfords to say that? People should have the right to go to law, and all that the Bill seeks to do is to give it to them.
§ Mrs. Audrey Wise (Preston)
I was most interested in the important passage that my hon. Friend quoted, but I found it difficult to follow. If he has any more information of this nature to give to the House today, could he do it a little more slowly? It is important that we are informed, so that we can advise our constituents on these matters.
§ Mr. Mitchell
I apologise for that. I feel a certain sense of nervousness in speaking at the Dispatch Box for the first time. [HON. MEMBERS: "The hon. Gentleman is doing well."] It is a terrifying ordeal, particularly being barracked by the brigades of buckies on the other side. [Interruption.]I apologise, but hon. Gentlemen look like a brigade. Perhaps it is the spread. It is appropriate that I am talking about Pickfords and heavy removals when I mention the hon. Member for Crawley (Mr. Soames).
I was about to give the Minister advice from my position of enormous experience on a point of principle. In this issue we have one principle set against another: the principle of choice versus the principle of the sanctity of contract. I would have thought that the Conservative Government would have erred on the side of choice and the small man.
§ Mr. Maude
The consumer's choice is whether to enter into a contract in the first place. We cannot extend the principle of choice beyond areas such as we have identified, where there is an identified need to allow the consumer or any party to a contract the choice later on to abandon his role in the contract.
§ Mr. Mitchell
As the Minister is providing choice for cases under £500 and in a modified degree for cases between £500 and £5,000, why does he not go the whole hog and say that in consumer relationships, not business relationships, the consumer should have the choice? His seems an unnecessary restriction.
The Official Referees Bar Association, which I gather comprises barristers dealing with construction cases —it is surprising to see barristers abdicating fees in this fashion, but they are — recommended the extension of this provision to housing problems, which can involve sums much bigger than £500 and sometimes bigger than £5,000. Those cases are particularly difficult. Why should consumers not have the choice? It is an unequal relationship.
My advice to the Minister is to seize the opportunity, to take a bold stand and to embrace the Bill, not to quibble and hide behind the skirts of lawyers or high principle. Let the Bill through as it is. What is the enormous harm that will ensue, what collapse of civilisation or collapse of the Bar will ensue, if the Bill is passed as it stands? Why should it be subject to this niggling restriction?
§ Mrs. Wise
Does my hon. Friend agree that the companies to which he referred engage heavily in advertising to persuade people to enter into contracts with them, but do not feature this particular matter in advertisements? Does he further agree that unless people are trained to scrutinise with a legal as well as an eagle eye the terms of a contract, they will probably not realise the implications until those implications hit them?
§ Mr. Mitchell
I agree with my hon. Friend. This is an unequal relationship. If all organisations in one line of business, whether removals or whatever, include this arbitration clause in their contract, what escape is there for the average consumer from the position that I have outlined? Consumers cannot be expected to know the legal niceties. The advantage for the removers, for example, is that as soon as it is revealed to a consumer anxious to pursue a case against them that the costs involved will be £200 a day, large numbers of cases are withdrawn. 650 Companies are using the clause unjustifiably as a defence for themselves, for the strong against the weak and further to load the odds.
Let me offer the Minister some career advice; think big. I am not urging him to avoid the Jenkins, Joseph and Moore syndrome but merely to establish his independence at the Department. He should not accept the heavy grey departmental imperatives that are always urged on Ministers when something revolutionary like a private Member's Bill is proposed. Departments say, "Shocking!" and recoil in horror. They say, "Compromise. Tone it down. Get it modified. Cover it with gobbledegook " That is the advice that the Minister seems to be taking. He would do better to rush forward and not be weighed down by gobbledegook.
Why should this extension of consumer rights be curtailed? Here is an opportunity for the Minister to assert himself in his Department against all those grey men who want to do down this Back Bencher with his radical, daring proposal. My advice to the Minister is, "Embrace it. Go forward for the purposes of the people." The removers' advice to the Committee, which he cited today, may have been deeply moving. However, official committees always want to split the difference, compromise and tone things down. The civil servant's doormat always says, "Not unwelcome." That generous spirit characterises official bodies. The Minister should show a generous spirit to the people and to good sense. I hope that he will not pursue his earlier inclination to tone down the Bill.
Opposition Members support this very welcome proposal. We have supported it since the debacle of 1977, and it is nice to be able to make some kind of atonement today. In our handling of consumer matters it is essential to support the small against large — the individual against the organisation — because consumers are very much at risk and they need whatever protection can be provided. It is by small but worthwhile advances such as this that we defend and advance the cause of the consumer, and I congratulate the hon. Member for Rugby arid Kenilworth.
§ Sir John Farr (Harborough)
I join hon. Members on both sides of the House in congratulating my hon. Friend the Member for Rugby and Kenilworth (Mr. Pawsey). I congratulate him, first on his choice of subject, which has received widespread acclaim; secondly, on the mariner of his presentation; and thirdly, I do so with a tinge of envy on his good luck in coming so high in the ballot. It must be pretty obvious from that that I think that this is a good Bill. I want it to reach the statute book, and I do not think there is any reason why we should impede its progress.
The Minister has implied that the Government will grudgingly support the Bill if amendments are made to it. Those of us who are friends of my hon. Friend the Member for Rugby and Kenilworth in more than the formal sense of the word will be consulting him in due course to see whether the amendments do not destroy the impact and content of the Bill. While it is not exactly a politic edifice of great importance, the Bill is, nevertheless, a significant measure, and it is typical of the good that my hon. Friend the Member for Rugby and Kenilworth seeks to do for his constituents regardless of the political consequences.
Having ingratiated myself with my hon. Friend, I shall deal with one or two aspects of the Bill with which I am 651 not altogether happy. I congratulate my hon. Friend on his choice of sponsors, although I do not see the name of the hon. Member for Bradford, South (Mr. Cryer), who spoke at length this morning. The hon. Gentleman is in some danger of becoming known as a lawyers' friend. I hesitate to make such a remark in his absence, because he would be livid to hear an hon. Member being so rude to him. But he is a good parliamentarian, and I am sure that he will take it in good spirit. My hon. Friend has attracted a strong all-party team to sponsor the Bill, and many of those hon. Members are in the Chamber today.
§ Mrs. Wise
Does the hon. Gentleman share my regret that it is an all-male team? I notice that my hon. Friend the Member for Great Grimsby (Mr. Mitchell) had a tendency to talk about defending the small man, and I almost intervened to correct him. It should be made clear that many women, as consumers, will be protected by the Bill, and I wish that that had been reflected in the choice of sponsors.
§ Mr. Pawsey
I know that my hon. Friend is keenly interested in the sponsors, so I should tell him that I approached an Opposition lady Member who, sadly, declined to be a sponsor. It is not for want of trying that no lady is listed among the sponsors.
§ Sir John Farr
I will not attempt to speak on behalf of members of the other sex because I learned long ago not to do that. Indeed, I mention them with trepidation inside and outside the House. But I know that one lady, who is at the top of the tree—my right hon. Friend the Prime Minister — is keenly and favourably interested in the Bill. I hope that that will help the hon. Member for Preston (Mrs. Wise) to support it. If she does not support it, she may have the opportunity to serve on the Standing Committee and table amendments to the Bill then.
§ Mrs. Wise
I make it clear to the hon. Gentleman that I am here for the express purpose of supporting the Bill. I want to make it clear that women will benefit from the Bill. Despite the all-male sponsor team—I accept what the hon. Member for Rugby and Kenilworth (Mr. Pawsey) said about that — and the constant references to the small man as the consumer, on behalf of women, I join hon. Members in supporting the Bill.
§ Sir John Farr
It would be tedious and time-wasting if I asked my hon. Friend the Member for Rugby and Kenilworth to explain that curious lapse, but, knowing his courtesy and instinctive reaction, I am sure that he has taken on board the hon. Lady's points and recognises the defect—although not fatal—in the Bill. I hope that the regrettable absence of lady Members will be corrected in the Standing Committee that discusses the Bill. Ladies, females or women — whatever one calls them today—must know more about being consumers than men, and my hon. Friend's Bill has been introduced largely because of concern among female consumers. Indeed, females are the key to the Bill's success and I hope that we can put that attitude right in Standing Committee.
The Bill hinges on the need to give consumers more rights. I underline—I do not attempt to initiate—what my hon. Friend the Member for Rugby said about the 652 magazine "Which?" in his admirable speech. Consumers have a doughty champion in "Which?". Like most hon. Members of all parties, I read that magazine avidly every month. It is not true to say, as did my hon. Friend the Minister, to those of us who are students of "Which?" that there is a occasionally an odd example of a consumer being held to ransom. That happens frequently. I shall not detain the House by giving examples of the many cases that have come to the attention of "Which?" — some cases have come to my attention also — which show not only a positive need for the Bill, but a crying need. It is wrong of my hon. Friend on the Front Bench to recommend that the Government should stand aside. My hon. Friend the Member for Rugby and Kenilworth is doing a good thing, which is much needed.
Although I shall not go into detail, there are many examples. My hon. Friend the Member for Rugby and Kenilworth mentioned the case of Mrs. Lynn Thompson. One could say that she was held to ransom by Pickfords, which said, "Right, you have a claim but read our small print. You can go to arbitration but you cannot go to court." Mrs. Lynn Thompson asked about the cost of arbitration and Pickfords said that it could be as much as £200. How can that attitude be justified on the part of any company when dealing with a customer? The sum of £200 is quite sufficient to deter ordinary people from going to arbitration. I should add that I bet that it could be more. My hon. Friend will sweep that attitude away in his Bill.
§ Sir John Farr
I note the hon. Gentleman's point, in which there is a great deal of strength. No doubt the House will be able to consider that later. I do not want to dwell on the hon. Gentleman's remarks because it is important that we approach the conclusion of this important Bill. I do not want to do anything to prejudice its success.
A moment ago I pointed out the example of Mrs. Lynn Thompson and there are many other examples including that of Mr. Forrest. It is important that we recognise that this little Bill seeks to achieve for the consumer the choice of going to court or to arbitration. As I have said, the Bill seeks to correct a situation in which the law needs changing. Several examples from my constituency highlight that, such as that of Mrs. Lynn Thompson and Pickfords, Mr. Forrest, Mr. Flint and many others.
I congratulate my hon. Friend the Member for Rugby and Kenilworth on consulting the Director General of Fair Trading about the purpose of his Bill. I have several cases before the Director General at present. He is absolutely scrupulous in dealing with complaints from Members of Parliament. It would be out of order for me to dwell upon one or two cases that I have before the Director General. Elderly tenants have had service charges foisted upon them by landlords in a manner that is quite contrary to the service agreements that were entered into. That demonstrates the Director General's wide responsibility. He deals adequately with such matters. In response to a letter from my hon. Friend the Member for Rugby and Kenilworth, the Director General stated that he has not:endorsed any Code which included an arbitration scheme that excluded a consumer's right to seek redress in the Courts.653 That is what the Bill is about. Access to the courts is not only important but vital. The small claims procedure in the county court was introduced in 1973 by my right hon. and learned Friend the present Foreign Secretary. If that procedure were not to be used, it would be a disservice to the country. It has proved to be an outstanding success. It gives consumers access to justice in disputes involving claims of no more than £500.
"Which?" has pointed out to me that arbitration and the small print on many would-be contracts are unsatisfactory to many consumers. The "Which?" personal service has dealt with many cases—not one or two, as my hon. Friend the Under-Secretary of State seemed to suggest — in which individuals have had difficulty in being compensated for loss or damage because they were bound by contract to go to arbitration.
The aim of the Bill is not to take away a consumer's right to go to arbitration but to ensure that there is an alternative, the right, for which many hon. Members have fought, to seek redress through the courts. For those few reasons, I congratulate my hon. Friend. He has done a first-class job. I wish the Bill bon voyage.
§ 1.8 pm
§ Mr. Ivor Stanbrook (Orpington)
I am grateful to you for calling me, Mr. Deputy Speaker. However, I must say that I wish that you had called me before you called my hon. Friend the Member for Harborough (Sir J. Farr), because I wanted an opportunity to do my duty in the House and congratulate the hon. Member for Great Grimsby (Mr. Mitchell) on his maiden speech from the Opposition Front Bench. That it is a significant occasion in the lives of all of us who are so favoured, and I am sure that the whole House will look forward with interest, gratification and not a little amusement to the hon. Gentleman's future contributions. Indeed, we all hope that his natural ebullience and irreverence will not be diminished by the acquisition of his new responsibility, because we all enjoy his contributions — although we may not always agree with them.
The subject of the Bill is interesting, but I am afraid that I cannot congratulate my hon. Friend the member for Rugby and Kenilworth (Mr. Pawsey) too warmly on its introduction, because I wish that he had taken the opportunity to introduce legislation on a more important matter. We all congratulate him on his high place in the ballot—No. 4—which entitled him to first place on a Friday, but I wish that he had tried to serve a greater need and deal with a greater mischief.
Although the name of the Bill is the Consumer Arbitration Agreements Bill, it could with equal justice be called the Lawyers Benefit Bill. In effect, it returns certain contracts to the sphere of the courts and the hands of the lawyers — contracts that are at present out of their grasp. Far be it from me, as a practising barrister, to object to that on professional grounds. However, we as politicians owe it to the general public to explain the significance of measures of this kind, which sound so desirable, but, which in practice militate against the public interest.
The Bill proposes that a consumer should not lose his right to go to court to obtain legal redress in the event of a dispute with a supplier merely because the firm with which he dealt included in the contract a clause providing that the case could go only to arbitration. At common law, a buyer of goods had no warranty of their quality, fitness 654 or condition. He had to take the risk, and he had no remedy if the goods turned out to be below the quality that he had expected, unless he could show fraud. That rule of caveat emptor, or buyer beware, has been watered down by statute to correspond with modern conditions, when a buyer often has no opportunity to exercise his judgment before the purchase. Some people say that this process has gone so far—
§ Mr. Denis Howell (Birmingham, Small Heath)
rose in his place and claimed to mole, That the Question be now put.
§ Mr. Stanbrook
I am most grateful to you, Mr. Deputy Speaker, because I have been sitting here since half past nine waiting to make this contribution.
§ Mr. Howell
I do not in any way impugn the hon. Gentleman's motives, but most of us had assumed that he had been waiting to oppose the next Bill, as, presumably, have some of the previous speakers.
§ Mr. Stanbrook
I have already declared an interest as a practising lawyer, and, if the right hon. Gentleman will allow me, I propose to make what I hope will be a constructive criticism of the Bill.
Some people feel that the process of watering down the natural rule of caveat emptor has gone so far that nowadays it is a case of caveat venditor, or seller beware. The conditions now imposed by statute on the sale of goods are increasingly weighted against the seller.
§ Mr. Gerald Bowden
Does my hon. Friend accept that under many contracts there is an equal bargaining position between the parties, and that in many cases a professional business organisation offers a standard form of contract? If my hon. Friend were stranded on a motorway in a snowstorm because his car had broken down and he rang the emergency services, which then came out, would he look at the small print? Would he not accept that he wanted his car moved and that he wanted to be helped out of his difficulty? In such a case the supplier is in a monopolistic position and my hon. Friend is in no position to bargain. That is what the Bill seeks to redress.
§ Mr. Stanbrook
My hon. Friend has expressed the focus of the Bill well. The legislation takes it for granted that the idea that anything that protects the consumer against the supplier must make life fairer. The relationship is riot that fair when one side has the option, after the performance of the contract, of saying, "I shall cross out that clause now because it does not suit me; I want something else," which is what the Bill provides. There is an inherent unfairness about that provision. I accept what my hon. Friend says about being caught in a storm and being in a difficult situation. If I may revert to Conservative philosophy, it is not desirable that the duty of individual responsibility should be continuously diminished. Every man must take responsibility for his actions
A person chooses to sign an agreement. We all know about small print. It is there for all to see. A person knows that there is small print. I see no reason why, if he chooses to sign an agreement that includes a clause that limits his future action, we should say, "No, we must protect him from folly." Protecting people from the consequences of their folly is inherently a bad thing to do in legislation.
§ Sir John Farr
I have listened carefully to my hon. Friend and heard his reservations about the Bill. Because of the way in which the legislation has been emaciated, as my hon. Friend the Under-Secretary of State implied, does my hon. Friend not feel that the fears that he has expressed in detail have been allayed to a certain extent?
§ Mr. Stanbrook
We are dealing with the Bill as it stands. Promises of this kind have not always been honoured.
§ Sir John Farr
Is my hon. Friend suggesting that my hon. Friend the Minister has not always kept his promise?
§ Mr. Stanbrook
The best hopes and the best laid plans of business managers, whether private or Government, "gang aft a-gley", as they say north of the border. My hon. Friend refers to occasions when Ministers of this Government—
§ Mr. Stanbrook
No, I must make my point. My hon. Friend refers to occasions when Ministers of this Government have put themselves in a position in which they can be trusted. That is perfectly true normally, but there have been many occasions in the House when the Government have been unable to secure a majority for their business. Should we not exult in that and in the fact that, in the end, it is the Back Benchers who rule the Government? It is a case of "caveat government" in terms of Back Benchers, especially on Fridays, when the Government reveal the policy that they have in mind.
However able my hon. Friend the Member for Rugby and Kenilworth—I admit his ability and perspicacity— he cannot guarantee to deliver the goods. Although we have been told that there may be certain amendments here, there and everywhere.
§ Mr. Stanbrook
My hon. Friend confidently asserts that there will be. I reserve my judgment.
The Bill deals with the clause in any contract for the supply of goods and services that, at present, any supplier is perfectly entitled to impose. That clause provides that any dispute arising out of the contract should be submitted to arbitration. The arbitrator is often named, or there is provision for him to be nominated by the president of the Chartered Institute of Arbitrators or the head of some other worthy institution. Anybody who wishes to do business must either accept that clause and thus rule himself out of the chance of going to court, through lawyers, over the contract, or he may delete it and force the supplier to decide whether he shall continue with the contract.
§ Mrs. Wise
I will not labour the point that the hon. Member for Orpington (Mr. Stanbrook) will keep insisting that all consumers are men. That is not the point on which I rise. Among the examples given by my hon. Friend the Member for Great Grimsby was that of the large removal company. Will the hon. Gentleman accept that the ordinary person—man or woman—in the street who is arranging a house removal is looking to a company that they feel they can trust? They may be led into thinking that a large company, by virtue of its size, is more trustworthy than a smaller one. Such people are concerned about their 656 day-to-day affairs and house removal is a stressful occurrence. It is not reasonable to expect them to devote as much care to the perusal of the small print as would the hon. Gentleman, with all his professional experience. Surely we should think about the real world rather than ideal considerations.
§ Mr. Stanbrook
I am glad that the hon. Member for Preston (Mrs. Wise) puts it that way because if we are considering the real world we should beware of situations arising in which the Government legislate for the choice and actions of the individual. We are on a slippery slope. We are fettering the hands of individuals with regard to contract law. Indeed, my hon. Friend the Member for Dulwich (Mr. Bowden), the author of a book on contract law, has admitted that the Bill would do that. I am trying to warn against the continuation of that tendency.
Before signing any contract an individual would be wise to read the small print. If the person does not, it is for him or her to face the consequences. However, the consequences will not necessarily be as bad as my hon. Friends have made out. The Bill makes unnecessary such a choice on the part of the consumer because the customer, with minor exceptions, would not be bound to go to arbitration, even after the performance of the contract.
My hon. Friend the Minister has told us that we should be careful about a change in the law that allows a breach of the contract, given that previous legislation that intervened in contract law inserted an implied term into contracts. That is an important and significant distinction and one that I wholeheartedly accept. That is the nub of the objection that was made in the other place by Lord Hailsham to which I shall refer later.
It is not surprising that many professional arbitrators are unhappy about the Bill. After all, arbitration as a means of settling disputes has an honourable and important place in our lives. Most people are afraid of courts. Speaking as a Member of the House who holds weekly advice bureaux, like other hon. Members, I have particular reason to advise people to avoid going to court, and to expensive solicitors or barristers. If they can avoid doing that, nine times out of 10 it is far less painful and less expensive for them to resolve their dispute in the long run. I do not say that to them as a professional lawyer, but experience of life suggests that.
The fear of many people of the courts, the rigour of the law, the laws of evidence, and the ensnarement by the legal profession of individuals in trouble cause many people to see arbitration—the adjudication of a dispute between the parties by a knowledgeable and wise judge and, if the subject is a technical matter, a judge who is technically qualified, untrammelled by the suffocating rules of law and evidence—as the best, cheapest, quickest and most efficient way of settling a dispute fairly.
There is an important role for arbitration in domestic, national and international affairs. Some of my best friends are arbitrators in the professional sense. Some hon. Members are distinguished international arbitrators. The world respects British arbitrators for that combination of common sense and logic which characterises our national character and helps to smoothe the wheels of trade, industry and international relations.
However, professional arbitrators are not too keen on this Bill. They would like the courts to decide whether a compulsory arbitration clause should apply. If it is already in the contract, should it be upheld? There is no provision 657 in the Bill for it to be upheld rather than invalidated altogether. Rather than stating the circumstances in which an arbitration agreement cannot be enforced, the Bill should specify a form of arbitration agreement that would be enforceable. Arbitration agreements — independent agreements which may be separate from the terms of the contract—should not be prescribed by the Bill.
It is a fundamental rule of arbitration law, dating back to the decisions of English courts in the 17th century that, unless they have agreed otherwise, neither party should be able unilaterally to withdraw from an arbitration agreement without the leave of the court. The Bill ought to recognise and allow such a provision, rather than cutting out compulsory arbitration altogether, with no right of either party to insist on the provisions of the agreement.
The consumer contracts covered by the Bill would then be in the same position as many specific contracts at present, which provide that differences may be settled by litigation or arbitration at the option of the consumer when first entering into the contract. There are many such contracts, sponsored by trade associations with codes of practice approved by the Department of Trade and Industry.
One of the undesirable consequences of the Bill would be to deprive suppliers of the option to offer arbitration at all. It would be better to leave it as an option. We should question whether it is right to breach the general principle that compulsory arbitration clauses should be invalidated only by the decision of a court able to look at each case on its merits. This Bill suggests that we abolish them altogether by statute. The possibility ought to be left to a supplier or a consumer entering into an agreement at arm's length to make a binding agreement for the reference of any future dispute through arbitration.
§ Sir John Farr
On a point of order, Mr. Deputy Speaker. I hope you do not mind me intervening at this time, but a little while ago, a number of us asked, through your predecessor in the Chair, for a sign from my right hon. Friends the Home Secretary and the Leader of the House. She fairly undertook to give the House a response, preferably during the debate today, as to what sort of reaction we are likely to receive from my right hon. Friends to the wish, expressed earlier, that as early as possible there should be a debate on the findings at the Old Bailey yesterday.
§ Mr. Deputy Speaker
Order. I have the hon. Gentleman's point. I am aware that points of order were raised earlier in the day, and that rulings were given from the Chair. There is nothing to add to what was said at that time. I know that there are genuine feelings, but these are not genuine points of order and I deprecate them being raised during valuable private Members' time.
§ Sir John Farr
Further to that point of order, Mr. Deputy Speaker. I point out that I am not seeking to make a bogus point of order. If you had let me finish, I was going to convey to the House what I have received from my right hon. Friend the Home Secretary since I raised my point of order. This information should be made available to the House today because it—
§ Mr. Deputy Speaker
Order. Not at this particular moment. I realise that the hon. Gentleman feels strongly about this matter. It was raised earlier and he heard what 658 was said from the Chair then. There is nothing that I can add, and he must find other opportunities to raise what he obviously regards as an important matter.
§ Mr. Cryer
Further to that point of order, Mr. Deputy Speaker. If you are arguing the case, very reasonably, that this matter should not be raised in private Members' time, which, as you say, is limited and valuable, is not the point that it can be raised at 2.30? This is an important and new issue and relates to a previous ruling made earlier, and 2.30 will be a completely separate time from the time of these Bills.
§ Mr. Deputy Speaker
Order. The time of 2.30 has not yet arrived and I will have to deal at 2.30 with anything that happens at 2.30.
§ Mr. Stanbrook
The view of the Chartered Institute of Arbitrators of the Bill ought to be stated, published, and considered by the House before the Bill goes through. As I understand it, and I have the benefit of the institute's communications with me, it is that the problem which the Bill aims to deal with occurs rarely, and the Bill will tip the balance in favour of the consumer and against the small business man, that is the one or two-men or women businesses, for two reasons. First, the contract without a requirement for arbitration will lack certainty when it comes to resolving disputes with the small business man's customers. Secondly, if he wishes to bring a claim against his customer, for example for non-payment where the customer may dispute the value of the work done or services performed, he is barred from using arbitration unless he can obtain the customer's agreement.
To solve the problem, the institute has suggested that legal aid should be available for arbitration. That aspiration is shared by many people, but we all know that the extension of legal aid is highly unlikely in that area as it is in other areas which nowadays have been suggested as fit subjects for legal aid. Alternatively, the institute suggests amending section 4 of the Arbitration Act 1950 to permit the courts to stay arbitration in favour of litigation in certain circumstances, for example, where it is desirable that one or other of the parties should be legally aided.
The institute also states that the Bill changes the law of arbitration fundamentally. Therefore it should be considered in the wider context of arbitration law reform as a whole which is currently under review by the interdepartmental committee led by Lord Justice Mustill.
The chartered institute administers several small claims schemes that have been approved by the Office of Fair Trading. It administers those most successfully on behalf of various trade associations. Most of the horror stones that have been published concern the furniture removing trade. Those firms are not covered by the chartered institute scheme at present, but no doubt they might be. Many trades are covered by the scheme.
I want to consider Lord Justice Mustill's interdepartmental committee report about the Bill. The Minister and my hon. Friend the Member for Rugby and Kenilworth have already referred to that. The report is certainly useful. It narrows the definition of the problem 659 —such as it is—to the effect of binding agreements to arbitrate under the contract. That is seen as a problem. There is inadequate scope in section 4 of the Arbitration Act 1950 for the courts' discretion to allow for proceedings in such cases. The committee referred to the fact that that is not a large scale problem when we are dealing with larger sums and larger subjects. Where the problem exists it is more acute because of the extra cost of private arbitration compared with the small claims court.
§ Mr. Denis Howell
I refer to clause 3(1)(a) of the Bill which states:A person deals as a consumer in relation to another party if—(a) he neither makes the contract in the course of a business nor holds himself out as doing so:If a person wants to place a bet with a bookmaker on a Sunday—which some of us would like to permit if we can progress to the next Bill—would he be covered by clause 3(1)(a) of the Consumer Arbitration Agreements Bill?
§ Mr. Stanbrook
The right hon. Gentleman is concerned about another Bill. I am referring to the Consumer Arbitration Agreements Bill. It is my duty to do that, otherwise Mr. Deputy Speaker would rule me out of order.
§ Mr. Stanbrook
I am grateful to the hon. Gentleman for raising that point. I will try to cover that point later. The significance of the Bill with regard to our duties under the treaty of Rome and to the whole policy of the European Community has not been appreciated adequately by the Bill's sponsors. I shall come to that later. There seems to be little choice between the two systems in regard to speed and to other aspects. The sponsors of the Bill are more concerned about costs, although a successful consumer in a private arbitration case usually gets his costs. The committee pointed out that under the Fair Trading Act 1973 the Director General of Fair Trading can stimulate codes of practice in any particular trade to safeguard the consumer.
It has been pointed out that the Director General does not endorse any code of practice that includes an arbitration clause that does not give the consumer the option of going to court. That suggests that it would be better not to put any legislative ban on it. The British Association of Removers and the Federation of Master Builders—the two trades most involved in that aspect of the Bill—are currently discussing their codes of practice with the Director of Fair Trading.
The committee noted:The Bill, as presently drafted, would affect contracts outside the mischief at which the Bill is aimed. This is because the scope of the Bill is determined, by the definition (taken from the Unfair Contract Terms Act 1977) of consumer. The proponents of the Bill say that this is consonant with their philosophy that arbitration clauses should be regarded in exactly the same way as clauses limiting or excluding liability covered by the 1977 Act.My hon. Friend the Member for Rugby and Kenilworth sees the Bill as completing the gap in the 660 consumer protection legislation that was left by the 1977 Act. The hon. Member for Great Grimsby made that point in his speech.
The committee report states thatthere is an important distinction between what this Bill seeks to do and what the 1977 Act does. Whilst it is recognised that the 1977 Act is concerned principally with the exclusion or restriction of substantive rights, there is considerable disagreement as to whether arbitration clauses can properly be said to be clauses excluding or restricting liability.The committee, in its submission to the House, makes an interesting point thatIt was felt to be unnecessary for the Bill to extend to all consumer contracts because … the unfairness appears only by comparison with the Small Claims procedure where disputes are arbitrated at less expense and without the consumer being at risk as to costs. Cases over £500 in the County Court are not subject to the 'no costs' rule.but cases below £500 are subject to that rule. The bigger the sum involved, the more likely it is that the consumer will pay for legal representation and the less significant will be the arbitrator's fees.
§ Sir John Farr
My hon. Friend surely misleads the House, when most members of the public will do anything to avoid the ever-rising expense of legal advice which is well beyond the average person. If my hon. Friend had listened more carefully to the initial speech of my hon. Friend the Member for Rugby and Kenilworth, he would have appreciated that point.
§ Mr. Stanbrook
I am not suggesting any change—I suggest that we should not change.
The bigger the contract, the more likely it is that the consumer will have considered its terms carefully before entering into it. It is not surprising that the departmental committee thought there might be a monetary limit on the application of the Bill. It could be £500. I understand that that figure might be extended to £1,000 if and when the small claims court procedure enables that upper limit to be realised.
The higher the figure, the more necessary will be a discretion on the part of the court to stay proceedings and allow arbitration to proceed. I am thinking of when, for example, there is a perfectly valid case for a matter to go to arbitration rather than to be continued in the court, such as when matters of technical complexity are involved and require a legally qualified person and someone who knows professionally about the product or problem about which there is a dispute.
We should bear in mind the opinions of another body which is interested in the Bill—the Official Referees Bar Association. It is the association of barristers who practise before the Official Referee. Its point of view is relevant and it makes an interesting point in the memorandum that it has submitted when it says:The principal purpose of the Bill is to enable consumer disputes that would be eligible for legal aid support to receive that support where such disputes would otherwise have to be arbitrated.The association is asking for business and sees the Bill in that light. There will be more work in the courts of the Official Referee if people are prevented from proceeding to arbitration. That is a legitimate point of view although it is not one that many of us will share.
I have much else to say, but in deference to others who wish to speak, I shall abbreviate my speech. In most industries nowadays, there is a code of practice which is sponsored by the Office of Fair Trading and which 661 incorporates an arbitration scheme. They cover cars, motor cycles, holidays, household electrical appliances and much else. Progress along these lines, using arbitration when it is fair and convenient, seems to be the best hope for the future, but one must ask how the Bill squares with the law of the European Community.
We are almost alone in limiting the right of arbitration to such an extent. Most European states give greater effect to arbitration clauses and exclude the jurisdiction of the courts. That may be something to do with the difference between the common law system as we know it and the civil law system on the continent. We would be wise not to take a retrogressive line as regards arbitration as an alternative to litigation. We might be going in completely the wrong direction and suffer for it by, once again, being out of step with our neighbours and partners in the EC. The report of the departmental committee does not appear to take that factor into account, yet the Commission of the European Community was able to publish in 1985 a document entitled "Ten Years of Community Consumer Policy: A contribution to a People's Europe" — No. 339/24. It reveals that a consumer protection and information policy has been implemented and consistently applied in Europe and among the states of the European Community. One of its chief features is the encouragement of arbitration for the settlement of disputes. It starts with a Council resolution, dated 14 April 1975, onthe preliminary programme of the European Economic Community for consumer information and protection",and it goes on to embrace methods of enforcement of standards, and all the problems across which the Bill unilaterally cuts.
I could say many more things about the Bill; I have made a few valid criticisms of it. I conclude, like the departmental committee, that it is better to deal with the mischief to which the Bill is directed by getting the relevant trade associations to make arbitration optional in their trading and consumer agreements rather than to legislate against arbitration clauses. Arbitration is a consensual process, as the committee points out, and interfering with it, especially in relation to developments in Europe, is contrary to the current trend of arbitration law.
§ Mr. Stanbrook
I do not have the time. I am sure my hon. Friends who are still waiting to speak will not thank me if I spend any more time on this.
The Bill, unusually for one brought in by a Conservative Member, is a product of the nanny state and based on the assumption that private individuals are incapable of protecting their own interests, making their own bargains and living their own lives without tie state legislating for every eventuality. It is therefore retrogressive and un-Conservative, and I for one do not support it.
§ Mr. Pawsey
I shall be brief, as my hon. Friend the Member for Crawley (Mr. Soames) wants to address the House on an important matter.
My hon. Friend the Member for Orpington (Mr. Stanbrook) is very much his own man, never afraid to pursue an unpopular cause. It seemed that he was arguing that the pendulum had swung too far in favour of the consumer. That was a minority view in the House today.
I was pleased to hear the hon. Member for Great Grimsby (Mr. Mitchell) say that the Opposition support the Bill. He spoke in his own inimitable way, and we look forward to further contributions from him in due course.
My hon. Friend the Member for Dulwich (Mr. Bowden) made a remarkable speech. He was informed and helpful, and I was not surprised to discover, in the course of his remarks, that he is a lecturer in the law of contract —and, more than that, he is the distinguished author of "Bowden on Contracts". I am certain that we shall find that book in the House of Commons Library in the riot too distant future.
I am pleased to confirm to my hon. Friend the Minister that I shall be moving amendments with certain provisos, as he mentioned.
Question put and agreed to.
Bill accordingly read a Second time.
Ordered, That the Bill be committed to a Committee of the whole House.—[Mr. Pawsey.]
Committee Friday 12 February.