LIABILITY OF CONTRACTS (Hansard, 21 March 1994)

§ Mr. Malcolm Bruce
I beg to move, That the clause be read a Second time.
The new clause is couched in exactly the terms of the Bill and has a simple but important purpose—to extend the terms of the Bill to receiverships and the terms of the Law of Property Act 1925. I would not describe this as a probing amendment and I hope that the Minister will accept it, or at least accept that it deals with an omission which can and should be readily dealt with.
As I understand it, the Government's current thinking is that property receiverships of this kind do not require the legislation. However, I have been told in the past few days that they do require it, and that if they are excluded the problems applying to general receiverships and administrations will also apply to them. That will leave not just a gap, but a gap to which attention has been specifically drawn.
We are talking of receiverships in which the issue in question is a single piece of property. I suppose that it might be argued that a single piece of property is not a business, but it does not take much reflection for hon. Members to recognise that if that single piece of property is a hotel, a block of flats or an office block, its subsequent valuation in any sale will depend on its continuing to function as such a building. That continued function will require the retention of staff. Selling a hotel that is closed, 49 vacant and empty of staff will clearly lower its valuation; the same applies to an office block which requires servicing and management, a block of flats, or similar properties.
This morning, I trawled around a number of receiverships dealing in property. I was told that all respondents claimed to have at least two cases currently on their books which would fall foul of the law if the new clause was not accepted. The Paramount ruling would apply and the net effect would be that what is currently operated as a receivership to rescue not just a building, but a building to which a business is attached, could fail. That would lead to an accelerated liquidation, and the loss of jobs, assets and a continuing business.
On Second Reading, I told the Minister that I appreciated the speed with which the Government had acted and we accept that, as a consequence, it has not been possible to consult as widely as might otherwise have been possible. I am assured that the new clause is sought by specialist practitioners—including the Royal Institution of Chartered Surveyors, which is extremely concerned about the omission of such a measure, which it assumed was simply a technical oversight caused by the pressure to get the Bill through.
The new clause has been carefully drafted to accord with the Bill's current form, and I hope that it is therefore technically acceptable. Its acceptance would resolve the current problem. If the Minister does not wish to accept it, however, I hope that he will not slam the door, but will recognise the genuine lacuna which exists and could widen. I am led to believe that the matter will be raised in another place; I hope that that is so.
I ask the Minister to recognise that the new clause has been tabled in good faith—not by me as an expert, but on behalf of people who know more about the matter, and who have explained clearly to me that the consequences of its omission could be serious for a significant number of active current receiverships. If the Minister cannot accept the new clause, I hope that he will at least indicate his willingness to examine it again. Perhaps the Government will consider retabling it in their own terms.
I do not wish to detain the Committee any longer. This is a simple, direct matter: the Bill contains an omission that can be readily remedied and the new clause will achieve that.

§ Mr. Bell
I support what has been said by the hon. Member for Gordon (Mr. Bruce). The Minister likes flexibility. Here we are dealing with property—hotels, for instance—lumps of bricks and mortar, but nevertheless important. Work forces may be involved, or may be required to be involved; they may find themselves in the same situation as others, with contracts of employment that may or may not be adopted.
I shall listen with interest to what the Minister has to say.

§ Mr. Neil Hamilton
As the hon. Member for Gordon (Mr. Bruce) recognised, the Bill was introduced quickly to remove any impediment to the rescue of businesses by administrative receivers and administrators. There is a difference between the capacities of such people and those of receivers or managers, to whom section 37 of the 1986 Act applies.
An administrative receiver is a receiver or manager of the whole, or substantially the whole, of a company's 50 property, appointed by the holder of a charge which, as created, was a floating charge. A receiver or manager includes receiverships over part of the assets: that can include those appointed under the Law of Property Act 1925, to which the hon. Member for Gordon referred. But it is not simply a question of Law of Property Act receiverships; it goes much wider. Law of Property Act receiverships can involve the giving of a power to manage in the mortgage document, but will not necessarily control all the assets of a company. That situation is substantially different from that which is the subject of the Bill.
The Committee ought to be aware of a number of important distinctions. In particular, a receiver or manager does not have to be a licensed insolvency practitioner or to have any qualifications, so receivers and managers do not have the same powers and duties as administrative receivers. Extending the wide range of circumstances in which receivers or managers can be appointed needs careful consideration. Before opening a Pandora's box, we ought to be fully aware of the consequences of such a significant change.
5.30 pm
I shall be happy to consider the arguments for the provision that the hon. Member for Gordon advocates, but that would be better done in a wider review of the law relating to company rescues. The Bill is not the appropriate place to consider the wider change that the hon. Gentleman proposes. His proposal goes far beyond the Bill's narrow purpose. It would be better to consider the arguments for such a change in a more reflective mood than the time available today makes possible. If the hon. Members for Gordon and for Middlesbrough (Mr. Bell), and any other hon. Member who feels that such a change would improve the Bill, would like to pursue the matter with me, I shall be happy to discuss the issues. However, in the context of the Bill, I am not disposed to accept a change of which the ramifications may be far greater than hon. Members suspect.

§ Mr. Malcolm Bruce
I thank the Minister for his constructive reply. When legislation of a specialised nature is rushed through the House, hon. Members are somewhat dependent on outside advice. I appreciate the Minister's concern that the new clause could have wider ramifications, but his reply indicated that he acknowledges the genuine worry among surveyors that they have in effect been left exposed by the Bill. The Minister's perhaps justifiable non-acceptance of the new clause may create for surveyors a problem that requires urgent if not immediate attention.
I did not expect the Minister to accept the new clause. In fact, it was indicated that the Government would resist it. I am glad, however, that the Minister will consider the matter further. We are dealing with legislation that is moving fast and counter arguments may be presented to the Government, if not to the Minister, within 24 hours. It may be possible to consider the point further in another place. I am not qualified to take issue with the Minister's explanation—he probably hoped that I would say that—but I am concerned that the exclusion from this legislation of a significant group of people could leave them severely exposed.
I am grateful for the Minister's assurance that he will consider the matter further, if not in the context of the Bill 51 then as part of a wider review. I hope that the Government will keep an open mind so long as the Bill is on the Table in either House. To that extent, I will not press the matter.
I beg to ask leave to withdraw the motion.

§ Mr. Bell
It is of the utmost importance that there be certainty in the law in relation to employers, employees, receivers and administrative receivers. In the public interest, we co-operated fully with the Government, with a view to rectifying what may have been a doubtful and uncertain position. I am grateful to the Minister for his co-operation and for the full explanations of matters raised on Second Reading and in Committee. We have no reason to detain the House further.