PREVENTION OF CORRUPTION BILL [H.L.] (Hansard, 10 March 1903)

§ THE LORD CHANCELLOR (The Earl of HALSBURY)
My Lords, the practice against which this Bill is directed, of giving secret commissions, is, I regret to believe, very much on the increase. Indeed, few people realise the extent with 238 which it has spread and is spreading. Your Lordships will remember that the late Lord Russell of Killowen, then Lord Chief Justice of England, himself introduced a Bill on this subject, which was received with sympathy in this House, but which contained one or two defects that prevented its being very enthusiastically received in the other House. In the first place, it was too wide. It is not an uncommon thing, when one discovers a great system of fraud, to attempt drastic remedies, and it is sometimes forgotten that the effect of attempting with great violence to alter any course of events is that your measure has little chance of passing into law, and that, if it passes, the very violence of it prevents its being put into operation. The Bill now before your Lordships does not possess these defects. Before I explain the provisions of the Bill I should like to quote one or two of the conclusions of the Special Committee of the Chambers of Commerce on the system with which this measure attempts to deal— Your Committee conclude from the evidence before them that secret commissions in various forms are prevalent in almost all trades and professions to a great extent, and that in some trades the practice has increased, and is increasing, and they are of opinion that the practice is producing great evil, alike to the morals of the commercial community and to the profits of honest traders. Bribes in all forms, including secret commissions, owe their existence sometimes to the desire of the donor to obtain the assistance of the donee; sometimes to the demand expressed or implied of the donee that the bribe shall be given. In the first class of cases your Committee have reason to believe that the bribe is often given unwillingly and wish a pang of conscience, as the result of the keen competition in trade, and in the fear, too often well founded, that unless given, other less scrupulous rivals will obtain an advantage; many cases have come before your Committee in which traders have believed (often, though not perhaps always, without reason) that their entire failure to obtain orders has been due to the want of a bribe. The second class of cases are those in which the recipient extorts the bribe from those who have established business relations with his principal. This practice is rendered more effective and oppressive by a combination between the blackmailers. The servant or agent who demands a commission, and fails to receive it, not infrequently warns his fellows in the same position in the trade against the honest trader, who thus finds himself shut out from dealings with a whole circle of firms. The Report of the Committee dealt with a great variety of offences—it even gave 239 instances of medical men receiving commissions from undertakers—and, without going through that list, I think it can be stated broadly that there is hardly a form of industry in which there is not a practice existing of doing that which, not always perhaps intentionally, but certainly in effect, does betray the principal to the profit of the agent. I would call your Lordships' attention to a letter which appeared in The Times on the 2nd instant, giving an example of a system which is being carried on among horticulturists. The letter is as follows:— Sir,—I hope you will consider the enclosed letter of sufficient interest to justify me in asking you to print it. It comes from a leading firm of horticulturists which is in the habit of allowing 5 per cent. discount on all orders to customers, at the same time giving a commission of 5 per cent. to their gardeners. I have lately got a new man who will not accept commissions. I therefore wrote to the firm saying that I proposed in future to deduct 10 per cent. from their account. This, their answer, speaks for itself, and may, I think, revive the interest of the public in the Bill of the late Lord Russell of Killowen concerning secret commissions. Yours, ERNEST DE LA RUE. 26, Belgrave-square, S. W., February 13. February 16, 1903. Sir,—We have your letter, and are very sorry indeed you did not mention the matter to which it refers to our Mr.—when you were here. He would have been, and now is, quite prepared to speak quite frankly on this deplorable custom, to which we are forced to submit, and on the rights of which we think every right-minded person can have but one opinion. We must, however, say there are many gardeners to whom we do not give presents, sometimes in obedience to the men themselves, more often in obedience to the wish of the employer. Prices are fixed by competition and by the quality of the stock supplied, and these 'presents' in no way affect such. We have always, and always do, decline orders when we are asked for a 'present,' which our published and fixed prices do not allow us to pay. The tone of your letter leads us to think you may not realise how ingrained this custom is or to what lengths it is notorious some firms go to seduce the loyalty of private servants, and if you would care to talk over the point, our Mr.—will be only too glad. In the meantime, we beg you will believe we never have paid an improper commission, nor improperly attempted to obtain an order, and that there are gardeners who do not accept any present and employers who do not permit presents in money to be made, though, on the other hand, there are employers who have no objection. 240 We cannot allow you more than 5 per cent. for cash payments, and will not send your gardener presents, and beg before you take away your custom, which Mr.—will he sorry indeed to lose, you will look at this question in all its hearings. We are, Sir, your obedient servants, Among the communications I have received on the subject is one from the Chamber of Commerce of Manchester, dated yesterday, in which they state the deep interest they take in this legislation, and express the earnest hope that there will be an early enactment of the measure. The latest development of this evil is in the motor car industry. Motor cars are very complicated pieces of machinery, and require great care on the part of those who manage them; and the form of secret commission adopted in this case consists in a payment to the person who is responsible to his employer for the care of the machine on the annual bill for repairs. Under such circumstances nobody would suppose that the motor would be very well cared for.
I will explain to your Lordships the form in which this Bill endeavours to put an end to the practice. It is proposed to enact that if any agent corruptly, and without the knowledge of his principal, accepts or obtains, or agrees to accept, or attempts to obtain, from any person for himself or for any other person, any gift or consideration as an inducement or reward for doing or forbearing to do any act in relation to his principal's business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal's business; or if any person corruptly gives or offers any gift or consideration to any agent as an inducement or reward; for doing or forbearing to do any act in relation to his principal's business, or for showing or forbearing to show favour or disfavour to any person in relation to his principal's business; or if any person knowingly gives to any agent any receipt, account, or other document in respect of which the principal is interested, and which contains any statement which is false or erroneous, or defective in any important particular, and which to his knowledge is intended to mislead the principal, he shall be guilty of a misdemeanour, and shall be liable on conviction or indictment to imprisonment with or without 241 hard labour, for a term not exceeding one year, or to a fine not exceeding £500, or on summary conviction to imprisonment, with or without hard labour, for a term not exceeding four months, or to a fine not exceeding £50. I anticipate that such an enactment would have an indirect as well as a direct effect. No doubt there are many people who submit to this evil with great reluctance, but who may feel at the same time that in the keen competition of trade they have no alternative. But if the thing was made a misdemeanour, and if the person who was sought to be induced to do it could say, "I must be guilty of an indictable offence in order to obtain your favour," the indirect effect of such an enactment would be even greater than the actual putting of it in force. I hope your Lordships will facilitate the passage of the Bill, in order that this great blot on our mercantile system may be removed.

§ LORD BURGHCLERE
I should like to ask the noble and learned Lord on the Woolsack one question with regard to this Bill. As I understand it, what is proposed is, that no agent shall be able to take a fee or gratuity from any one without the knowledge of his employer. The Clause, however, which enacts this is governed by the word "corruptly." and I should like to ask the Lord Chancellor whether the Act is to come into operation only in the cases of commissions which are given corruptly.

§ THE LORD CHANCELLOR
The word "corruptly" governs the whole matter, and I think that without it there is not the smallest chance of passing the Bill into law. No jury would convict, and indeed ought not to convict, unless they came to the conclusion that the money passed corruptly for the purpose of influencing business.

§ LORD TWEEDMOUTH
It seems to me that the noble and learned Lord's interpretation knocks the bottom out of the Bill. I should have thought that if it could be shown that these gratuities 242 were given without the knowledge of the principal, the Act would then come into force; but if a corrupt intention has to be proved in order to secure a conviction, it certainly does seem to me that the Act will be rendered nugatory. I hope that when we come to consider the Bill in Committee the Government will not look unfavourably on an Amendment to omit the word "corruptly."

*LORD ALVERSTONE
I wish to say a word or two with regard to the point that has been raised by the noble Lord opposite. I desire, in the first place, to congratulate the noble and learned Lord on the Woolsack on having again brought in this Bill. It is quite unnecessary to go over ground with which your Lordships are already familiar, but I can assure your Lordships that the evidence showing the necessity for this Bill is growing day by day. The practice of secret commissions not only affects the relations between employer and employed, but leads to the goods being quoted at more than their fair value in the market, as the commissions have to be provided for by additions to the price. Many people think that the Bill strikes at the payment of commissions under any circumstances. But there are many trades in which the remuneration is solely by commission, and therefore it is absolutely necessary to retain the word "corruptly" so that the Bill may affect only the agent who secretly pays commissions for the purpose of influencing persons to buy his master's goods. One of the elements in considering the question of corruption would be whether or not it was known to the person by whom the agent or servant was being employed. Without expressing a final opinion as to the desirability of inserting some explanation or definition of the word "corruptly"—as it may be better, perhaps, to leave the interpretation to the Courts—I would point out that if we attempt to include within the scope of the Bill commissions which are not dishonourable or secret, and not in that way corrupt, we should be defeating the object of the measure and spreading the net far too wide. In my opinion it is wiser to lay down a broad principle 243 and then see whether or not the Bill is sufficient to meet the real evil, and, if not, to amend it by subsequent legislation. There is one point in regard to which I think the Bill needs amendment. I do not think it sufficiently deals with commissions paid for past services. It often happens that corrupt commissions are not paid at the time of the business transaction, but after the order is completed some method is found of remunerating the agent. These, however, are points more properly considered when we go into Committee on the Bill.