HC Deb 19 January 1994 vol 235 cc1012-20

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

11.46 pm
Mr. William Powell (Corby)

The House will recall that, on 6 May 1992, the hon. Member for Stockton, North (Mr. Cook), who I am delighted to see in the House tonight and who will endeavour, with my encouragement, to catch the Chair's eye before the Minister replies, in Hansard at columns 113–16, raised the disturbing case of Mr. Joseph. At the time, I knew nothing about the matter, but was naturally interested in what the hon. Gentleman had to say. I was lucky enough to catch your eye, Mr. Deputy Speaker, and followed the hon. Gentleman in that debate, which was on the Loyal Address. I started my remarks by expressing the hope that matters raised by the hon. Gentleman would be thoroughly investigated.

In the circumstances, I had expected that Barclays bank, conscious of my remarks and those of the hon. Gentleman, would have sought to reassure me almost at once. In fact, no notice whatsoever was taken of what the hon. Gentleman had to say. I am old-fashioned enough to believe that what is said in this House should be taken very seriously—not only by Ministers of the Crown, but by other relevant bodies affected or involved in parliamentary observations.

Accordingly, with no sign at all that Barclays was intending to take the hon. Gentleman's remarks seriously —save that it took the ruthless action of seeking summary judgment against Mr. Joseph on the very next day—I wrote to the then Chancellor of the Exchequer, the President of the Board of Trade, the then Governor of the Bank of England, and others implicated in the hon. Gentleman's remarks, seeking assurances that appropriate action was in fact being taken.

The Governor replied on 25 June 1992. The banking ombudsman sent me a typically unhelpful reply on 11 June 1992. The then Chancellor of the Exchequer wrote to me personally on 28 July 1992, and the noble Baroness, the Under-Secretary of State for Trade and Industry, on 27 June 1992. I understand that Mr. Joseph, concerned at the cavalier way in which the serious—and as we now know, restrained and understated—remarks by the hon. Member for Stockton, North, had been ignored, also wrote to my right hon. Friend the Prime Minister.

I am quite satisfied that all the replies received were drafted and signed in good faith. Information had been sought—ultimately from Barclays bank—and I was to be reassured by the fact that judgment had been obtained against Mr. Joseph. Unofficial word was also passed to me that nobody was to take seriously what the hon. Member for Stockton, North had said, because he was a person of no importance. I could be satisfied, therefore, that matters were properly under control.

In the light of subsequent developments, those replies to which I have referred are completely ludicrous. The observations about the hon. Gentleman could have been flippant, or arrogant, but they were certainly inappropriate. What is said in this House by any Member deserves far greater responsible consideration than that given to the speech of the hon. Gentleman on 6 May 1992. Indeed, he had been brushed aside in a wholly insulting way—a matter which I regard as disgraceful.

I say "ludicrous", because subsequent court decisions have all, including in the Court of Appeal, been in favour of Mr. Joseph, and judicial observations about the conduct of Barclays bank have been most unflattering. Nevertheless, no effort has been made by any of those to whom I wrote to correct the situation or to look at it again. In particular, the Bank of England, with its statutory responsibility for the supervision of this country's banking system, could and should have re-approached me to assure me that, in the changed situation that was unfolding, neither it nor I could rely on the then Governor's letter of 25 June 1992; that it was now reviewing the situation and would be in touch again when appropriate.

The Bank was first made aware of what I can only describe as a very considerable scandal in September 1991. The speech of the hon. Member for Stockton North, plus my letter, together with many articles in the financial and other press, should have made it alert to allegations of serious wrongdoing, including breach of trust, deception, blackmail, and the theft of intellectual property.

During my years in the House, I have devoted considerable time and energy to fighting the pirates and thieves of intellectual property, most particularly in computer software. I declare an interest as a determined opponent of all who steal the intellectual property of others. Not the least of the reasons why I have followed up the remarks of the hon. Member for Stockton, North is that I am confident that Barclays bank appropriated the property of Mr. Joseph—the rabbit logo—and that that constitutes as serious a breach of copyright law, so extensive has it been, as has occurred in this country during the 20th century.

I am conscious of the seriousness of what I have just asserted, but I have considerable experience in the field, and it is for that reason that I am so disturbed—as should be the Bank of England, together with the shareholders and depositors of Barclays bank. Subsequently, Barclays tried to cover up the serious illegality and applied grossly improper pressure to hide the truth. In short, the bank tried to crush Mr. Joseph to ensure that he could not recover his position.

In this unworthy campaign, leading officials of Barclays bank and of its solicitors, Slaughter and May, have played their role to the hilt by preventing any investigation of the substantial claims made in the hon. Gentleman's speech of 6 May 1992, and by trying to strangle Mr. Joseph in a series of tangles of preliminary matters. A combination of futile legal actions—all doomed to failure—together with messages to me that Mr. Joseph was a vexatious litigant, that he is a maverick, that he is not to be trusted and, indeed, not quite straight, have all the hallmarks of a most discreditable campaign.

For completeness, may I say that the hon. Member for Stockton, North also raised the matter in the House during the debate on the Loyal Address in November 1993. As a result, the Bank of England was sufficiently interested to convene a meeting with Mr. Joseph on 11 November 1993. The meeting was attended by Carol Sergeant, deputy head of supervision of the high street banks; Kevin Ryan, deputy head of the supervision department in charge of Barclays bank; an analyst, two lawyers and Mr. Ian Watt, the head of the serious investigation unit of the Bank of England. I have no information about the investigations of Mr. Joseph's complaints, but Mr. Ryan asked at the meeting for extra evidence so that he could add it, as he put it, to the "mounting pile" on his desk.

In the circumstances, I had expected the Bank of England to be more concerned. The allegations, clear enough, related to one of the major British banks, the reputation of which is of the greatest importance to this country. It could not be in the nation's interests, or that of Barclays—both shareholders and depositors—that the claims remain unresolved for any period, yet a smoking gun has now been active for two years.

The Bank of England chooses to exercise its responsibilities under the law in relation to the banking system by what can be described only as informal nods and winks. No doubt there are some advantages in such an approach. However, it means that rarely, if ever, are statutory powers invoked, and the true meaning and scope of the Banking Supervision Act is untested in the courts.

Whatever may or may not have been done by the Bank of England remains a secret and whatever intervention it may have made to resolve a most unsatisfactory situation have undoubtedly been ineffective. As I have already made clear, I regard its slackness in handling complaints by me as particularly unfortunate.

The House will have noted the recent observation by the Governor about the need for an ombudsman. Apart from the fact that there is already such an official, the new initiative will rightly draw public interest. I praise the Governor's initiative. Having started his career and been in the position for some months, he has made a promising start to his duties as Governor and is securing a wide degree of confidence across the system.

I am sure that my hon. Friend will draw to the attention of the Governor the fact that what is really required is a conciliation service, so that disputes can be resolved early and quickly without unnecessary recourse to law.

No doubt the whole case has already earned lawyers —I am a lawyer, although I have not practised for nearly eight years—a handsome sum, and they view the prospect of further litigation with financial enthusiasm. However, there are better uses for their talents and the public interest would be better served by procedures designed to resolve complaints of substance, rather than by the casual manipulation of endless preliminary points. Such tactics reflect little credit on those who instruct or those who pursue such instructions. I hope that Mr. George's new ideas will be given a fair wind and that he will seek a wide range of comment and consideration.

Over the past couple of years or so, I have wondered whether either the Bank of England or Barclays bank has been capable of coming to grips with the situation. Mr. Joseph has been derided as cheeky, a mischievous gadfly, fundamentally unserious and deserving of little attention or significance. Slowly, it has dawned on those who have wronged him that their preconceived prejudices may have considerably underestimated his talents.

In recent weeks, an immense amount of management time in Barclays bank has been spent in trying to resolve the position. The former chief executive, Mr. Andrew Buxton, had two private meetings with Mr. Joseph, and his successor, Mr. Martin Taylor, had two meetings with Mr. Joseph before taking his present position, and one since.

One offer of settlement from Barclays bank was made, the main motive of which was to try to undermine the legal aid order which exists in Mr. Joseph's favour. In no other sense did it address the real issues at stake.

The real reason that Mr. Joseph has pursued his rights is not because he is a maverick or mischievous or any other impertinent suggestions that have been made about his character. It is because he burns with indignation at the manner in which he has been treated.

As those who act on behalf of the bank have observed, the bank does not owe to its customers any duty not to seek to take undue advantage of its economic strength. It has no duty not to exercise economic duress or not to intimidate, propositions of law which are widely rejected in the courts and elsewhere. It is because the House would reject such appalling arrogance that I raise the matter with my hon. Friend.

11.58 pm
Mr. Frank Cook (Stockton, North)

I apologise to the House for not having been present at the start of the speech of the hon. Member for Corby (Mr. Powell) this evening. I was delayed between the Division and start of the debate by other more pressing matters and I deeply regret that.

I am grateful to the hon. Gentleman for the fulsome praise that I managed to catch when I entered the Chamber and for affording me the opportunity to pursue again matters that I raised in the House in the spring of 1992 and the autumn of 1993.

Any study of the relevant Hansards would have made it clear that I was most concerned about serious matters which I regarded as outrageous and deserving of the most urgent Government attention. The case is unquestionably a scandal of historic proportions. The Bank of England was put on notice and, given its unique position, I contend that it was under an obligation to pursue with rigour the matters that I raised on the two occasions to which I have referred.

Lest anyone be in doubt, I remind the House that I referred to events that could legitimately be entitled a "Barclaygate". The central issue of that affair is that Barclays bank, in its position as both client and banker to Mr. Joseph's company Hook Advertising Ltd., took advantage of its dual role for the bank's own financial gain, to the serious detriment of Mr. Joseph and his company.

In its role as client, Barclays bank delayed, for many weeks, the payment to Mr. Joseph's company of more than £500,000 in fees due to that company. Not unnaturally, that caused Mr. Joseph's company severe financial problems. Then, without Mr. Joseph's knowledge, Barclays secretly handed Mr. Joseph's property—the rabbit logo, which is well known to everyone in this country—over to Hutchison Telecom as part and parcel of a secret deal with Hutchison for which Barclays undoubtedly received substantial financial reward.

As a result of that deal, Hutchison Telecom acted as though it owned the rabbit logo and then abruptly ended the advertising contract with Mr. Joseph's company which it had inherited via Barclays. That advertising contract would have provided income to Mr. Joseph's company of possibly up to £6 million had it been allowed to run its full term.

Meanwhile, in its role as banker to Mr. Joseph, Barclays took advantage of that role knowing every particular of Mr. Joseph's predicament, to exert financial pressure on Mr. Joseph and his company by using the stick of threatening the immediate withdrawal of banking facilities if Mr. Joseph and his company did not execute a secret agreement with the bank. That agreement would have exonerated Barclays from all claims that Mr. Joseph and his company had against the bank. Barclays would re-establish banking facilities provided that the agreement was not disclosed to other parties.

When Mr. Joseph refused to sign that secret gagging agreement, Barclays terminated the banking facilities and sued Mr. Joseph and his company for the overdraft—the extent of which was the result of Barclays' own doing, due to the delay in the payment of fees and the secret deal with Hutchinson Telecom. Barclays had plunged Hook into debt by non-payment of fees. It then claimed finance charges for servicing the debt that it had caused.

Barclays bank then vigorously pursued Mr. Joseph and his company through the courts for payment of the overdraft, in the full knowledge that Mr. Joseph and his company were now, as a result of Barclays' actions, destitute. To cap it all, Barclays also fails to pay £43,000 of interest due to Mr. Joseph's company while it displays Mr. Joseph's rabbit logo on all its branches throughout the United Kingdom, again for financial reward. That is incredible.

The bank is penalising Mr. Joseph for a debt that the bank incurred and it is still making a profit from his intellectual property. It is unbelievable.

The time has now come for the bank and the Treasury to pursue those matters. As the hon. Member for Corby has said, Mr. Joseph is not a maverick, he is not a vexatious litigant, and he is not eccentric, dishonest or shady. The only thing bent about Chris Joseph is the implement he wears where his right arm should be—his hook.

The best form of redress, not merely the settlement of that personal dispute, is the establishment of a genuinely independent banking dispute resolution procedure which could help to resolve the many dozens of cases that have come to light through an organisation called SAFE—the Struggle Against Financial Exploitation—which Mr. Joseph and others formed to help settle the many disagreements which bankers generally, not just Barclays, pitch straight into court, effectively clogging the litigation procedure for months or even years.

This afternoon, Barclays offered Mr. Joseph a settlement—of a kind. It told him that it is withdrawing all actions against him and is offering to pay his costs. It has not given an indication of what those costs might be. It is my firm belief and that of Mr. Joseph that that action is taken not to settle the case but simply as a means of trying to counter a counter-claim that Mr. Joseph has against the bank. That is yet another example of how the bank is using the litigation procedure to its advantage, because it holds all the cards in its hands; it has unlimited resources. That is an abuse of the system.

Mr. Joseph has presented the Economic Secretary to the Treasury with an opportunity to help to resolve not only his case but all such outstanding cases which are clogging the litigation procedures. I hope that the hon. Gentleman will offer Mr. Joseph not only his support but his gratitude by helping to establish a resolution procedure.

12.6 am

The Economic Secretary to the Treasury (Mr. Anthony Nelson)

My hon. Friend the Member for Corby (Mr. Powell) and the hon. Member for Stockton, North (Mr. Cook) have raised serious issues of banking principle and practice. I congratulate my hon. Friend on seeking and obtaining the Adjournment debate to champion once more a cause and a case for which he is well known in the House.

Indeed, the hon. Gentleman was very lucky, on 6 May 1992, that my hon. Friend spoke immediately after his speech.

The lesson is this: if hon. Members want a case to be pursued in the House, they should see whether my hon. Friend will speak in the debate, and they can be sure that it will be a runner. I therefore make no complaint about the privilege of the House being used by my hon. Friend and the hon. Gentleman to raise an issue and a case that is a matter of concern to them and, undoubtedly, to the principals involved.

I am sure that Mr. Joseph in particular will be grateful for the committed and conscientious way in which my hon. Friend has pursued the case over many months. FIe will know that I have been involved in the case, as he wrote to the former Chancellor of the Exchequer, my right hon. Friend the Member for Kingston upon Thames (Mr. Lamont), who charged me with the responsibility of making inquiries with Barclays bank, and I did so with the chairman. My right hon. Friend replied to my hon. Friend the Member for Corby.

I hope that my hon. Friend and others will understand that it is difficult and, indeed, improper for the Government to become involved in matters which are sub judice or might be potentially subject to litigation. I hope that my hon. Friend and the hon. Gentleman will appreciate at the outset that I cannot comment tonight on the specific dispute between Mr. Joseph and Barclays bank. It would not be right for the Government to attempt to intervene in an individual dispute, and, as my right hon. Friend the previous Chancellor of the Exchequer and my officials have made clear in previous correspondence, especially when matters are before the courts, as my hon. Friend has explained is the situation in this case.

However, it is proper for me to discuss the Bank of England's role in supervising banks—which is relevant to this and many other cases—the steps that have been taken to improve relations between the banks and with their business customers, and the recourse that is available if those relations break down. I am grateful for the opportunity to do so. As hon. Members will know, that was one issue covered by the Governor in his speech to the Scottish CBI and Scottish Enterprise on Monday evening; he spoke of the need for greater understanding on the part of both borrowers and lenders of each other's concerns and points of view.

Let me begin by explaining the legislative background. Parliament has given the Bank of England responsibility for authorising banks, under the Banking Act 1987. The legislation sets out specific criteria for authorisation, which include capital adequacy, and the need to ensure that a bank is run prudently and is controlled and managed by fit and proper persons. The Bank's two main supervisory concerns are to safeguard the interests of depositors, and to maintain the stability and soundness of the United Kingdom banking system. But—and the qualification is an important one—the Bank's responsibility for ensuring that those concerns are met does not extend to the monitoring of individual commercial decisions, or to involving itself in the day-to-day services that banks provide.

In passing the legislation, Parliament acknowledged the principle that commercial banks—we should never forget that banks are commercial institutions—must be left free to make their own business decisions. The Act does not give the Bank the power to intervene in individual cases, or to question commercial decisions that banks make in their normal dealings with their customers.

As a number of commentators have observed, the Bank's traditional techniques of supervision have served the country well. The continuing success of London as a leading international centre for financial services testifies that lenders and borrowers from many parts of the world consider the supervisory regime that we operate here to be conducive to the development of lasting and mutually beneficial banking relationships. In particular, I do not think that the case has been made for the Bank, or any other statutory body, to move into the area of hands on regulation of banking services.

That does not, of course, mean that the Government are indifferent to the way in which banks treat their customers; quite the reverse. Relations between banks and their customers—not least small business customers such as Mr. Joseph—have been the subject of a good deal of public debate and interest in the past two or three years. That interest twice led my right hon. Friend the Member for Kingston upon Thames, when he was Chancellor of the Exchequer, to ask the Bank of England to investigate the banks' treatment of their business customers—once in 1991, and again at the end of 1992.

Those inquiries led, in the first instance, to the major banks introducing codes of practice governing their relationships with their business customers and, in the other, to the banks extending the banking ombudsman scheme to small business customers with an annual turnover of less than £1 million. I think that these measures represent a public recognition by the banks not only that fair and reasonable treatment of customers is importantt in itself, but that it helps them to build up and maintain mutually profitable business relationships.

The reaction by small business representatives to the Governor's speech on Monday night has given further support to the view that relations are continuing to improve —although I acknowledge that there is still more to be done, and that more lessons must be learnt on both sides.

The banks' codes also make specific reference to the complaints procedure available to customers when things go wrong. The bank chairmen have made it clear that they take complaints from customers very seriously. Many have established special complaints units, and the chairmen and their chief executives review a large number of cases personally. When these procedures do not resolve a problem, customers have recourse to the banking ombudsman—for issues within his range of competence—or to the courts.

However, with the best will in the world, problems will remain. I hope that nothing that I have said tonight implies that the banks or the representatives of business are at all complacent about these issues, or that I am. As I go about the country—part of the industrial finance initiative involves me in examining, specifically and regionally, relationships between small businesses and banks throughout the country—I am very conscious of the problems that recur from time to time. I receive representations about those problems, and occasionally exhort commercial banks to do something about them; I hope and believe that those exhortations have some effect.

The work of the Governor of the Bank of England is taking forward in this area and the further meetings between the banks and representative bodies which he mentioned in his speech will no doubt help. I have no doubt that that theme will continue to feature heavily in the initiative, and the Government's officials as well as those in the Bank will continue to look for ways in which communications and education can be made more effective.

The basis of an effective and enduring relationship between banks and their business customers is, I believe, beginning to emerge. It is based on transparency and on a mutual understanding of the constraints on both sides, features which my hon. Friend was good enough to refer to in his speech. However, that relationship is a dynamic one and, of course, there is still room for improvement by both borrowers and lenders.

It is not for the Government to tell commercial undertakings how to run their businesses, but I believe that there is scope for the banks to build on the steps outlined in their codes and to be more open about what they expect of their customers and what their customers can expect of them. I think that more and more bankers believe that, too, but businesses themselves, particularly smaller ones, also have a role to play. They must be more willing to discuss with their banks, well in advance and in terms which can be clearly understood, the problems and opportunities that they foresee. Together, they can build a relationship that will bring benefits, not only to banks and small businesses but to the wider economy on which they, and all of us, depend.

If tonight's debate on a specific case is successful in moving towards that objective, I think that the cause will have been well served by my hon. Friend the Member for Corby and the hon. Member for Stockton, North, who have spoken with such distinction tonight.

Question put and agreed to.

Adjourned accordingly at sixteen minutes past twelve o'clock.