§ Mr. BellI beg to move amendment No. 1, in page 2, line 26, leave our '15th March 1994' and insert '31st December 1986'.
§ The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse)With this, it will be convenient to discuss the following amendments: No. 2, in clause 2, page 3, line 16, leave out '15th March 1994' and insert '31st December 1986'.
No. 3, in clause 3, page 4, line 11, leave out '15th March 1994' and insert '31st December 1986'.
No. 4, in schedule 1, page 6, line 31, leave out '15th March 1994 and insert '31st December 1986'.
§ Mr. BellThese are probing amendments. We wish to elicit from the Minister a further and more detailed response based upon the statement made by the President of the Board of Trade on 14 March, which set out his own concern, and the concerns set out today by the Minister. We have had some clarification of the Minister's thinking. My understanding of what he told the House is that there is no wish on the part of the Executive to overturn the decision of the Law Lords—a matter to which I have referred briefly. At present, there is no provision to allow an appeal against a decision of the Court of Appeal to be sent to the Law Lords.
It emerged from a short exchange with the hon. Member for Tynemouth (Mr. Trotter) during the Select Committee's transactions that there was some concern among Committee members as to the wording—which ended up being included in the Bill—of contracts of employment. The Minister—quite rightly, in his view—took me to task slightly on the question of whether the Government had known about this interpretation difficulty. In the analysis contained in "Halsbury's Laws of England" the interpretive note contains this clear statement:
There is room for some legislative revision here.The point is that it was clear to practitioners and to lawyers that there was something askance in that interpretation. The hon. Member for Tynemouth, with his knowledge of the specific subject, seemed to confirm that if there were a weakness that could lead to difficulties in a court of law, that fact would be sufficient to justify making the clause retrospective to 31 December 1986. We have shown the mischief of the law. It is not a question of interpretation of judgments from either the High Court or the Court of Appeal, which, in my view, delivered sound judgments on the facts before them. The misfortune arises in the terms of the law.That was pointed out to the Government when they were looking at the decision in the case of Nicoll v. Cutts, concerning payment of workers by the administrative receiver. Section 44(1)(b) of the Insolvency Act 1986 was then proposed. The petitioners tried to persuade the Government not to go along that line as it was clearly a case of taking a cannon to shoot a mouse. It was not necessary to modify the entire law of the land on the basis of one judgment.
As to Mr. Justice Harman's interpretive decision concerning the meaning of the law, administrative 42 receivers took the matter to him. For an analysis under section 35 of the Insolvency Act 1986, they went to court and asked for clarification. It is clear that at that time the law required clarification. It is clear that the intention of the legislation had not been realised. It was argued that, whatever may or may not have been the intention of the legislator, the wording in the Insolvency Act 1986 constituted no change in the existing law. Therefore, it was clear to the practitioners that the 1986 Act was supposed simply to embody what had already come about in the practice of the profession. Since the passage of the 1986 Act, we have seen the receivers' letter—approved by Mr. Justice Harman—to the work force simply washing their hands of the employment contract and not adopting it.
In an entirely non-partisan spirit, we say that the law contained something that needed to be rectified. We are simply trying to amend the law in the light of decisions by the High Court and of the Court of Appeal. Our view is that the defect lies at the heart of the 1986 Act and that there should therefore be retrospection. The power that makes the House of Commons sovereign is its ability to pass retrospective legislation. It would certainly be wrong to pass retrospective legislation of a political nature, but this is not a political matter. That being the case, I submit that the Government should accept the amendment.
§ Mr. Malcolm BruceI was moved to table the amendment in conjunction with the hon. Members for Middlesbrough (Mr. Bell) and for Tynemouth (Mr. Trotter) partly by something that I read in The Independent this morning and a consequential telephone call I made to the Confederation of British Industry. I was also prompted by a question that the hon. Member for Elmet (Mr. Batiste) put to the President of the Board of Trade following the right hon. Gentleman's statement last Monday. The relevant remarks may be found in column 618 of Hansard. The President referred to the clear problem that the Paramount Airways decision raised in relation to all the cases of the past seven years. The amendment would eliminate that problem by making it clear from the outset that the practice established in the Specialised Mouldings case was the intention of the law and that that was the practice that would be the test of any disputes that might subsequently arise.
As the situation stands at the moment, there is clear concern. Howard Davies of the Confederation of British Industry says that, in his view, accountancy firms could face claims of up to £1 billion, even allowing for the Bill going through all its stages in both Houses of Parliament within the next two days. That is a substantial figure for claims for which, as things stand, the legislation does not appear to provide a solution. It is not surprising that Mr. Davies says that amendments such as the one that we are proposing would deal with the problem in a fairly straightforward way.
I should like to make it clear that we are all gravely concerned about retrospective legislation. Other members of my party and I have often railed against Governments who have attempted such legislation. It is not something to be done lightly. The hon. Member for Middlesbrough said that this was a probing amendment, but I hope that the Minister realises that an important point is at issue here, and one that needs dealing with.
The difference between the Bill and contentious retrospective legislation is that this does not present us with serious practical problems. If the amendment were 43 incorporated, that would be as much as to say that the practice adopted by the professionals as a result of the Specialised Mouldings ruling has in effect been the state of the law since that case—in which case, all claims that might arise as a result of the Paramount Airways decision would fall, and no one would waste time making them.
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The hon. Member for Middlesbrough, who knows more about these matters than I do, has already said that the avenue of going to the House of Lords may not be open in this case, although it is being referred to as a possibility. Even if it is opened up, it may not solve the problem. It will leave great uncertainty lingering over the profession for many months to come.
The problem cannot be shrugged off. Although the Minister has been clearly told that we do not intend to push the amendment, I hope that he will recognise that the issue is a live one. I am reliably advised that it will also be raised in another place, probably by Lord Reay. Everyone dealing with the matter is looking for a clear statement.
One of the problems appears to be that the Paramount Airways ruling, relating as it did to what seemed an acceptable practice, has been deemed a sham: it is being ignored. Unless an administrator or receiver dismisses the work force and then re-employs them on new contracts within 14 days, he can be held liable for all previous contractual commitments, and 14 days is often far too short a time to make such a decision.
If the Court of Appeal ruling in the case of Paramount Airways is correct, that implies that there was something wrong with the law in the first place. An amendment such as this would effectively deal with that problem by admitting that the law was badly drafted, but that the intention and practice have been clear until the latest ruling. We should now be able to put that to rest. The House has now made it abundantly clear how it wants such matters to be conducted in future and how they should have been conducted in the past. Thereupon £1 billion in claims, and all the uncertainty and threats of liquidation that go with them, can be put to one side.
I do not envy the Minister his task. I know that any statement that he may make in response to a debate such as this cannot of itself resolve the issue. Nevertheless, I hope that he will recognise the fact that people want clear guidance.
§ Mr. Neil HamiltonIt is true that the Court of Appeal, in the case of Paramount Airways, has refused leave to appeal to the House of Lords, but it is always possible for the House of Lords, of its own motion, to allow an appeal. I have no idea whether there will be an appeal in, this case; it therefore remains possible that the House of Lords will take a view different from the Court of Appeal's. It would be wrong to speculate on the outcome, and I do not propose to do so.
I understand that these are serious issues, and I assure Opposition Members who have spoken that I appreciate their arguments. I have not yet had the chance to read the article in The Independent to which the hon. Member for Gordon (Mr. Bruce) referred, as I have been working all day and have had little chance to catch up with the news—but I shall certainly read it and give more thought to the arguments in it.
44 I have always been a strident critic of retrospective legislation. On more than one occasion, in fact, I have made common cause with the Liberal party in this respect, not least in Finance Bill Committees, where the hon. Member for Middlesbrough (Mr. Bell) may even have supported me once in opposing retrospective tax legislation—before I joined the Government, of course.
This argument has always interested me. As hon. Members have said, the point came up during questions following the statement by my right hon. Friend the President last Monday. The hon. Member for Gordon referred to a question by my hon. Friend the Member for Elmet (Mr. Batiste). There is a distinction that can be drawn between retrospective legislation and the impact of decisions in the courts. My hon. Friend the Member for Elmet asked my right hon. Friend whether he agreed that one of the problems with judge-made law was that it is retrospective. Now, constitutional purists will say that judge-made law is not retrospective because judges are only declaring a position as it has always been, even though the question has not been tested before.
In a sense, that is what we are dealing with today. It is likely that, following the Specialised Mouldings case of seven years ago, matters remained open to argument. The fact is that that case was on application for directions from the courts, so it was not speculating on the legal position in a way that could give rise to a precedent on which practitioners could then rely. Consequently, if there has been any doubt in the minds of practitioners, it has been because the law has not been authoritatively declared before. That in turn is qualitatively different from changing the law to give it an effect different from the one it has always been held to have.
In this legislation we are asked—I invite the House—to change the law for the future from that which the judges have now declared it to be, subject to an appeal to the House of Lords. My right hon. Friend clearly said, in answer to a number of interrogators last Monday, that we were not seeking to change the law retrospectively.
To the best of my recollection, when the hon. Member for Livingston (Mr. Cook) spoke on Monday, he implied that he would oppose the retrospective application of this Bill, because he raised the case of the Paramount workers themselves. Although he did not explicitly state why he had done so, I took his meaning to be that he did not want us to change the law retrospectively in such a way as to disadvantage those who might otherwise have claims. I may have misunderstood him; perhaps this is another ambiguity which has been introduced into our proceedings and which needs to be resolved. Perhaps the hon. Member for Middlesbrough can resolve it.
We must recognise the fact that if we change the law with retrospective effect, we will change the rights and obligations of certain individuals. Some will benefit, others will be disadvantaged. It is a difficult balance to strike. My own prejudice is against retrospection in legislation on constitutional grounds, which, I am sure, will appeal to the hon. Member for Gordon.
In general, I do not think it would be right retrospectively to affect entitlements acquired before 15 March, the day after the President's statement last week, so each case will have to be considered by receivers on the facts. That is not to say that I do not recognise the genuine fears expressed by Opposition Members in respect of claims that might arise for closures during the period 1986 to 1994. It is obvious that there must be some risk of 45 claims, although it is difficult to say how many, and for how much. But we must recognise that many businesses were saved, with the result that employees continued with re-emerging businesses. It is unlikely that claims will arise from those cases, although there are some spectacular claims in this morning's newspapers, as the hon. Member for Gordon said. Those cases will have to be dealt with on the facts, and it would be wrong of me to speculate about them.
One always has to walk a tightrope in such cases. One appreciates that those who might be disadvantaged as a result of changing the law with retrospective effect will be just as loud in their protestations as those inviting, us to make the retrospective changes. One cannot decide what is the right thing to do simply by counting how much money is involved on each side and favouring those who have the greater claim. No one would accept that that would be a sensible way to proceed. All I can do this afternoon is to seek refuge in the forceful argument that every time we introduce retrospective legislation, and therefore disturb the relationship that the courts have declared exists between parties, we make it easier the next time that we are invited or tempted to introduce it. But we should do it sparingly.
The hon. Member for Middlesbrough (Mr. Bell) referred to the Burmah Oil case. I well remember it from my constitutional law lectures many years ago. It resulted in the War Damage Act 1965. To its shame, the Conservative party, which was then in opposition, did not vote against or oppose the Act, although some hon. Members—among whom I would have been counted had I been here in those days—voted against the Bill, which was a pernicious measure. It disturbed the rights of individuals as declared, not by the Court of Appeal, but by the House of Lords, so there was no prospect of appeal. I imagine that the Act was passed principally at the behest of the Treasury, which otherwise would have had substantial claims laid at its door.
Although I am a great believer in constraining public expenditure, such constraint is not tolerable if it causes injustice to individuals, particularly if that injustice arises in circumstances that could not be foreseen.
The Burmah Oil case is not an inspiring example to justify retrospective legislation. I recognise that there is an argument for retrospection. I do not claim that there is is an open-and-shut or a black-and-white case. Ultimately, we should decide on the basis of the balance of advantage. So far, I am not persuaded that the arguments are overwhelming. It is always easy, on the basis of speculative articles in newspapers, to conjure demons that are not there or to exaggerate their importance.
Inevitably, as no one can be sure what the position is, we are dealing with speculative matters. If it appears that there is a serious problem, in this case or any other, the Government—being flexible and open to reasoned argument, as I am in particular—are prepared to consider it. I am not yet persuaded that there is a case to answer, but I shall always listen to those who feel that I am wrong.
As the hon. Member for Gordon said, the matter may be discussed again in another place. I have not yet been translated to that place, so I shall not participate in that debate. I am grateful for the presence of my right hon. Friend the President of the Board of Trade, although it is intimidating to have noticed him only at this stage. I am sure that all hon. Members present would like to congratulate him on the celebration of his birthday today.
46 I hope that I have said enough to convince hon. Members that it would not be right at this moment to apply the Bill's provision retrospectively because we could not be certain who might benefit and who might be disadvantaged. Unless we could decide that with some precision, it would not be correct for us to apply the legislation retrospectively.
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§ Mr. BellI am grateful to the Minister for giving us a greater in-depth insight into the thinking of the Ministry than we had during the Second Reading debate. That is understandable because he knew that the Bill would be going into Committee.
I am grateful to him for reminding me of the words of my hon. Friend the Member for Livingston (Mr. Cook) on 14 March, in column 616 of Hansard. He was putting a specific question to the President of the Board of Trade on the legal rights of Paramount Airways employees, who were the subject of the Court of Appeal decision. He sought an assurance that others who had benefited from receivership would not see those benefits diminish. That clarifies my hon. Friend's position. We tabled a probing amendment to elicit a response from the Minister, which we have had.
In his comments on Burmah Oil, the Minister showed his free-market thinking. As he and I know, since we were probably studying at the same time, in 1964 the Government had a majority of four. Notwithstanding that majority, the House reversed the Law Lords decision on Burmah Oil. That decision shows that the House felt that a clear public interest was involved, but things have moved on since then.
The Minister told us—this is my interpretation—that the Court of Appeal decision is not a retrospective judgment, but one that is effective from the time that it was made. It is not retrospective or retroactive. Therefore, the size of claims that are being touted—I say that in the friendliest sense—in today's newspapers are not likely to occur. In any event, the decision in each case will depend on the facts of that case and on the statute of limitations' tolling. Dean Inge said many years ago:
I have had a great many problems, most of which never happened".With that in mind, I shall not move amendments Nos. 2, 3 and 4 and I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.