HL Deb 24 July 1928 vol 71 cc1281-304

Order of the Day for the house to be put into Committee read.

Moved, That the House do now resolve itself into Committee.—(The Earl of Stradbroke.)

House in Committee accordingly:

[The EARL OF DONOUGHMORE in the Chair.]

Clause 1:

Power to make advances, etc., to agricultural mortgage loan company.

(2) The Treasury may agree to procure the underwriting of debentures to be issued by

Their Lordships divided:—Contents, 80; Not-Contents, 15.

Hailsham, L. (L. Chancellor.) Bertie of Thame, V. Dunmore, L. (E. Dunmore.)
Chaplin, V. Ernle, L.
Churchill, V. Fairfax of Cameron, L.
Salisbury, M. (L. Privy Seal.) Elibank, V. Faringdon, L.
FitzAlan of Derwent, V. Forester, L.
Northumberland, D. Hutchinson, V. (E. Donoughmore.) Gage, L. (V. Gage.)
Sutherland, D. Glenarthur, L.
Wellington, D. Novar, V. Greenway, L.
Peel, V. Hanworth, L.
Bath, M. Ullswater, V. Hindlip, L.
Winchester, M. Younger of Leckie, V. Howard of Glossop, L.
Hunsdon of Hunsdon, L.
Birkenhead, E. Askwith, L. Islington, L.
Bradford, E. Banbury of Southam, L. Jessel, L.
Cawdor, E. Biddulph, L. Knaresborough, L.
Denbigh, E. Bledisloe, L. Kylsant, L.
Derby, E. Clanwilliam, L. (E. Clanwilliam.) Lawrence, L.
Grey, E. Merrivale, L.
Howe, E. Cornwallis, L. Monkswell, L.
Lucan, E. [Teller.] Cottesloe, L. Newton, L.
Mar and Kellie, E. Cranworth, L. Queenborough, L.
Midleton, E. Cushendun, L. Redesdale, L.
Morton, E. Danesfort, L. Saltoun, L.
Northbrook, E. Darling, L. Strachie, L.
Onslow, E. Dawnay, L. (V. Downe.) Templemore, L.
Plymouth, E. [Teller.] de Clifford, L. Teynham, L.
Stanhope, E. de Mauley, L. Treowen, L.
Stradbroke, E. Dewar, L. Wigan, L. (E. Crawford.)
Vane, E. (M. Londonderry.) Dynevor, L. Wynford, L.
Westmeath, E.
Reading, M. Arnold, L. Muir Mackenzie, L.
Ashton of Hyde, L. Olivier, L.
Beauchamp, E. Bethell, L. Parmoor, L. [Teller.]
Clwyd, L. Stanmore, L. [Teller.]
Allendale, V. Hemphill, L. Thomson, L.
St. Davids, V. Illingworth, L.

On Question, Motion agreed to.

the company as hereinafter mentioned to such aggregate amount as may be necessary to raise a sum not exceeding five million pounds.

LORD PARMOOR moved to leave out subsection (2). The noble and learned Lord said: I placed this Amendment on the Paper in order that I might ask the noble Earl a question. I discussed Part I thoroughly, I think, on the Second Reading, and I do not wish to raise the matter again. But this, I think, is an important point and I want to understand what it means. Subsection (2) of Clause 1 states that— The Treasury may agree to procure the underwriting of debentures … I want to know what the Treasury are doing in regard to underwriting those debentures, whether there is any limit to the amount they can underwrite, whether they will become underwriters in the ordinary acceptation of the term "underwriters" or whether they will be in any special position. I do not think this matter is included in the other financial provisions of the Bill, though I may be wrong about that. At any rate, I am sure that the noble Earl will give me what assistance he can in the way of explaining the meaning of subsection (2) of Clause 1. I beg to move.

Amendment moved— Page 2, line 27, leave out subsection (2).—(Lord Parmoor.)


With regard to the question asked by the noble and learned Lord, I would say that the maximum liability under this clause is estimated at £62,500—that is, if the Treasury assumes its powers to underwrite the full amount permitted by this clause. The amount which may be underwritten is £5,000,000.


I understand that underwriting may be done up to £5,000,000, and that the cost of it is estimated at £62,000.


That is the maximum estimate.


I do not wish to press my Amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2:

Provisions as to company.

(3) The Memorandum or Articles of the company shall make provision— (c) for regulating the loans to be made by the company on mortgage, so that a loan shall in no case exceed two-thirds of the estimated value of the mortgaged property at the time of the loan, and that the loans shall be repayable by equal yearly or half-yearly instalments of capital and interest spread over a period not exceeding sixty years, or repayable on such other terms as may be authorised by the said Memorandum or Articles;

LORD STRACHIE moved, in paragraph (c) of subsection (3), to substitute "three-fourths" for "two-thirds." The noble Lord said: I submit that unless this Amendment is accepted this Bill will be of little value to those who mostly need benefit, for the hands of the banks will be tied, and they will only be able to lend money under conditions which will be more onerous than those which would be imposed on a borrower by an insurance company, or by a bank under ordinary conditions, or by an ordinary individual. To my mind this limit of two-thirds entirely destroys the value of Part 1 of the Bill. What does this subsection say? It lays down this hard-and-fast rule that a loan shall in no case exceed two-thirds of the estimated value of the mortgaged property at the time of the loan, that is to say, the banks are not to be allowed under any conditions to make an advance on more than two-thirds of the property. And I would point out that that is the maximum they are to advance.

I should like to draw the attention of the Government to this fact. They have stated that they have the support of the National Farmers' Union and the Central Chamber of Agriculture, and of other agricultural bodies. I am sure the noble Earl, the Parliamentary Secretary, will not contradict me when I say that the National Farmers' Union do not look with favour on this Bill and have passed resolutions to the effect that no help would go to the men who most want it—namely, the men who have not very good security. Those people will get very little advantage, if any at all, from the Bill. The Central Chamber of Agriculture have gone further than I go in this Amendment. They have suggested that the maximum amount allowed to be advanced should be 80 per cent. whereas I am suggesting that it should be only 75 per cent. I hope I have made quite clear that the effect of my Amendment is to take out two-thirds and put in three-quarters, and that that does not mean that the banks must necessarily advance up to three-quarters of the value of the property. I would give them a free hand. They may come to the conclusion that only two-thirds or even one-half is enough to advance. I think they should be trusted to use their own discretion and be left free to advance up to three-quarters. It is certain that their valuers, whom they will instruct to give an estimate of the value of the property on which money is to be advanced, will give a very conservative estimate of the value. It is not at all likely that the valuers will over-estimate the value of a farm on which money is going to be advanced by the bank.

Then take the question of security. The banks will have much greater security than would the ordinary man who lent money to farmers. I know I shall be met by the noble Earl saying that the whole idea is that it should be regarded as a trustee security. Trustees, we know, may not advance more than two-thirds of the value of any property mortgaged, but trustees have not the security which the banks will get in this instance. The banks have behind them the Government guarantee of £750,000. They also have the Government undertaking to underwrite the debentures. In addition, they have the Government subscription up to £1,500,000, and last, but not least, a payment of £10,000 a year for ten years by the Government to help the banks to carry on this business. That puts the banks in a very good position in comparison with the ordinary lender of money, and in those circumstances I think they ought to be allowed to advance up to three-quarters of the value. Moreover, there is the sinking fund. I would point out that I am not asking that the bankers should be compelled to advance up to three-quarters. All I suggest is that you should remove the prohibition which fetters the banks and allow them in their own discretion to lend up to three-quarters instead of two-thirds, if they think well to do so.

The noble Earl said that the local banks would know about a man who asked to be lent money on mortgage and would use their discretion. That is so. What reason is there then for tying the hands of the bank? Why not give them discretion to treat their customers in accordance with circumstances? If they know a man is reliable and dependable they would advance more to him than they would to another man in whom they had not so much confidence. All I am asking is that discretion should be left entirely with the banks. I expect the noble Earl will say, as was said in another place, that the Ministry of Agriculture was very anxious to do this, but that the banks did not want more than this two-thirds margin. That does seem extraordinary. If the banks really want to make this Bill successful why should they want their hands to be tied and make it impossible for the men who want this help most to get it? If the desire of the Government is to help the man who most needs help, they should not do anything to put obstacles in the way of banks who desire to give credit to the fullest possible extent. Instead of the banks being hampered they should be left entirely to their own discretion. I beg to move.

Amendment moved— Page 3, line 31, leave out ("two-thirds") and insert ("three-fourths").—(Lord Strachie.)


As a member of the Public Works Loan Board which is charged with the administration of the present Agricultural Credits Act, I think I can give your Lordships some information which may help your decision on this very important Amendment. The Act came into force on July 31, 1923, and was to operate for five years. We were authorised to expend £5,000,000 in advances to farmers who had bought their farms. No doubt your Lordships have read the valuable and informative Report of the Public Works Loan Board on their operations up to March 31 last. You will have seen from that that under the Act we have made a total number of advances of 1,179 and of those advances at that date 121 were in arrear for principal and interest. I may add that if it had been a private concern that we were managing we should have made a provision for loss on those 121 loans and also provision for possible loss on the remainder. I would like to remind your Lordships that when, because of financial difficulties or for other reasons, a farmer neglects the cultivation of his farm the land deteriorates in value. I would also like to point out that if and when this new Agricultural Credits Company had to foreclose, it would be faced with two alternatives. Either it would have to farm the land itself, which I suppose none of your Lordships would recommend, or it would have to make a forced sale—that is to say, it would have to sell with the knowledge on the part of the prospective buyer that practically almost any offer must be accepted.

That, of course, is not a strong position. The Public Works Loan Board has, in fact, foreclosed and sold in thirteen cases under the Act and in eight of those cases it has made a loss. This tale of woe which I am unfolding before your Lordships is due entirely to the fact that we are compelled by what is known, I believe, technically, as the wisdom of Parliament to advance 75 per cent. on the estimated value of the farm. Of course it is no part of the duty of the Public Works Loan Board to offer advice to His Majesty's Government or to your Lordships unasked, but I may say that it is the greatest relief to me as Chairman of the Board to know that the Act expires at the end of this month and that we shall not have to advance 75 per cent. any longer on agricultural land.


My noble friend who moved this Amendment touched on a delicate part of the machinery of the Bill. Even in England there was not complete unanimity amongst the banks, and in Scotland the measure necessitates a change in the law, since there we can only lend on possession. There has to be a change in the, law to make the provisions operative there. Banks are certainly not entitled to gamble with the money of their shareholders, and after what the noble Lord, Lord Hunsdon, has just said they may be less inclined to do so than ever. To diminish their security will make it more difficult at any rate in Scotland for the banks to come in and help, which, I fear, is unlikely to be considered advisable in any case.


As an ardent supporter of the Bill I venture to hope that the noble Earl will be able to accept the Amendment moved by the noble Lord, Lord Strachie. It seems to me that His Majesty's Government have spent a great deal of time and exercised a lot of care and are now prepared to expend very considerable sums of money on certain objects. Those objects, as they have quite plainly indicated, are intended to place upon the land an influx of farmer-owners and to build up a fresh bulwark against nationalisation. It does seem to me that this clause with its two-thirds limit would, to all intents and purposes, nullify the intention they have in view. The Party to which noble Lords on the other side belong have indicated that they see great advantages in nationalisation. They think it an admirable system and the noble Lord, Lord Parmoor, explained to us its merits, although I myself fail to see the advantages which would accrue. But we on this side do not take that line. I am fully convinced that a less margin than 75 per cent. may prevent a loan being accepted. I feel that every one who has the interest of agriculture at heart, who believes in the avowed object of this Bill and who is firmly opposed to nationalisation, would receive with wholehearted welcome the announcement that the Amendment is accepted.


I think the answer of the noble Lord, Lord Hunsdon, is really a sufficient reply to the Amendment. The matter has been discussed at great length and in another place two Amendments were moved, one identical with that moved by the noble Lord, Lord Strachie, and the other removing all restrictions entirely. I think it is clear from what was said by the noble Lord, Lord Hunsdon, that that policy would not be sound. It would make, I think, very little difference if the figure two-thirds were taken out altogether and unrestricted power given or if, as Lord Strachie proposes, three-fourths were inserted instead of two-thirds. In either case the value of the security would be diminished. I am sorry I cannot agree with the noble Lord, Lord Cranworth, who speaks with such authority on agricultural matters. This matter has been fully discussed and it is the object of His Majesty's Government in bringing forward this Bill to try to form an investment which will be attractive to trustee investors. It has been pointed out already this evening that if you reduce the security you will run great risk of frightening away would-be investors. Our object is to tempt trustee investors with a perfectly sound investment and the Government feel that by altering in any way the security, which is put in the Bill at two-thirds, you will run a great risk. Another point is that if you reduce the value of the security a higher rate of interest will inevitably have to be paid. Our great object is that the money should be lent at small interest. Therefore for these two reasons, the risk of whittling down the security and increasing the interest, the Government cannot see their way to accept the Amendment.


Apparently from what the noble Lord, Lord Hunsdon, said, the Public Works Loan Board advance money in such a reckless way that they have lost a very large amount. My object in moving this Amendment was to enable bankers to exercise discretion. I should be sorry if I thought they were going to lend money in the way in which apparently the Public Works Loan Board lends money and advance 75 per cent. on a security which is not worth even that. No doubt this is a very good argument against the Government interfering, and perhaps that is why they did not adopt the proposal of having a Government bank instead of calling in private banks. But it does not seem to be a very good argument against my Amendment, thought it recognises the unfortunate fact that the Board were so unbusinesslike as to have made this very heavy loss.

On Question, Amendment negatived.

Clause 2 agreed to.

Clauses 3 and 4 agreed to.

Clause 5:

Agricultural charges on farming stock and assets..

(7) For the purposes of this Part of this Act— Other agricultural assets" means a tenant's right to compensation under the Agricultural Holdings Act, 1923, for improvements, damage by game, disturbance or otherwise, and any other tenant right.

LORD STRACHIE moved to add to the definition of "other agricultural assets"—"subject to the deduction therefrom of any sums due from the farmer in respect of compensation for dilapidations or for the deterioration of the holding or damages for breach of any covenant or condition in the contract of tenancy." The noble Lord said: I should like at once to say that I move this Amendment on behalf of the Parliamentary Committee of the Central Landowners' Association. No doubt those of your Lordships who are members of that body know that the Parliamentary Committee, which is composed of members of this House and the other House, met yesterday and unanimously decided that this Amendment should be moved. Why is it necessary to move any Amendment? In order to make it perfectly clear that dilapidations due to the landlord should come before the charge to the bank. It is provided by this paragraph that the tenant right and the damage done by game and disturbance are to be prior charges in favour of the bank.

In Clause 8, subsection (6), there is a provision which sets out that the landlord's rent and rates and taxes come before any charge to the bank. The Central Landowners' Association desire to give the same protection with regard to any claim for breach of covenant or dilapidation. It seems to me that, if it is necessary to make it quite clear with regard to rates and taxes—though I should have thought that it would not be necessary in the case of taxes that come before the bank charge—the landlord's dilapidations should also be protected. I am sure your Lordships will know that it is the common practice when a tenant leaves a farm for the ingoing and outgoing tenants to agree upon the amount to be paid to the outgoing tenant, and the landlord does not come into the matter at all. It is quite common in agreements to say that the tenant right valuation shall be paid by the landlord or incoming tenant to the outgoing tenant, and the common practice is to allow the two tenants to settle that matter between them and for the landlord's agent to make a claim only for dilapidations or for breach of covenants directly to the outgoing tenant, not mixing it up with the tenant right at all.

On the other hand I may be told by the noble Earl that the landlord ought to say to the outgoing tenant that he will not receive anything from the incoming tenant, and that the incoming tenant must first of all pay all that is due to him. I imagine that the claim that the noble Earl is going to make is that it is the intention of the Government that the landlord's claim for dilapidations or breach of covenants should come before any charge which the bank may receive. If he tells us that that is so, I cannot understand why he should not be prepared to accept my Amendment and put the matter quite clearly in the Bill as an indication that the bank's charge does not take priority before the landlord's claim for dilapidations. I think there is no doubt that this would be fair to the landlord and also to the bank, and that the latter, when they are lending money, should do so with their eyes open. It should be made clear that the bank cannot claim any part of the tenant right against which the landlord has a claim, just as rent, rates and taxes are protected. I beg to move.

Amendment moved— Page 7, line 5, at end insert the said words.—(Lord Strachie.)


The insertion of the words which the noble Lord suggests seems to me rather misleading, coming as they do after the definition of "other agricultural assets." They seem to throw doubt on the ordinary meaning of tenant right. Perhaps I should try to make this matter clear, as a similar point was raised in Committee in another place. The noble Lord is referring to what takes place when tenancies are exchanged between outgoing and incoming tenants. Under the Agricultural Holdings Act, 1923, an outgoing tenant, as we all know, is entitled to claim from his landlord for improvements and so on, and the landlord is entitled to claim for dilapidations, breaches of covenant and the like. What really happens in these cases is that each party calls in a valuer to assess the claims. The tenant, let us say, claims £x and the landlord is entitled to receive £y, and accordingly the outgoing tenant will be entitled to receive £x—y, that is to say, his own claims with the landlord's claims deducted from them. I think that is quite clear. If, however, the valuers do not agree, then under another section of the Act an arbitrator is called in, the same course is adopted and the money is paid in accordance with his decision.

The Bill provides, in Clause 6 (2) (b), that in respect of a fixed charge there shall be an obligation on the farmer, whenever he receives any money in respect of other agricultural assets comprised in the charge, forthwith to pay to the bank the amount of the money so received, and there is a similar obligation in respect of a floating charge in Clause 7 (1) (b). "Other agricultural assets" are defined in Clause 5 (7), as including tenant right. The result is, therefore, that it is only the net amount which the farmer will have to pay over to the bank. If the landlord does not elect to avail himself of the Agricultural Holdings Act it is true, as the noble Lord pointed out, that the outgoing and incoming tenants make their own arrangements and the landlord may receive nothing for dilapidations, but in that case he gets something out of it, because the ingoing tenant takes over the farm with the dilapidations, whatever they may be, and the landlord will naturally look to him to set these matters right in the same way as the outgoing tenant should have done. It seems to me that it is not necessary to insert these words, and I hope that the matter will not be pressed, for the Government do not think the Amendment should be accented. We think that the clause is quite clear without the Amendment.


The noble Earl has not made it clear whether or not the bank charge will take precedence. He has merely told us that the landlord ought to see, before anything is paid by the incoming tenant to the outgoing tenant, that he himself is safeguarded, but that does not get rid of the difficulty where that cannot be done or where there has been some neglect. He does not contradict that it is the common practice for two farmers to settle between themselves, and for the landlord only to come in afterwards, and I should like to know definitely whether the landlord's claim would override any charge given to the bank if he has not taken the precaution to get the money from the incoming tenant.


Perhaps I can help on this point. I have followed the argument of the noble Lord. If it was a matter of doubt as to what is the meaning of "other agricultural assets," I think there would be good reason for clearing it up by adding the words proposed, but the matter stands really in this way. If there is no difficulty between the landlord and the tenant, and they both agree to appoint valuers in order to reach a conclusion of what are their rights inter se, then it is quite obvious that there is to be a set off between them; and inasmuch as they are reaching a result by agreement, if it is £x-y or £y-x, the amount which will be paid will be only such sum as that by which £x exceeds £y or £y exceeds £x. Supposing there is difficulty and the matter cannot be settled by agreement, then there is already provision in the Agricultural Holdings Act (Section 16 I think) whereby the matter goes to arbitration. When is goes to arbitration the arbitrator is charged with finding out what is £x and what is £y, and is also charged with making his award only in favour of that party who is entitled to receive the overplus, and to award the net amount only after the figures are ascertained on the one side and on the other.

Therefore when you are dealing with "other agricultural assets," it means the tenant's right to compensation under the Agricultural Holdings Act. That means such a sum as would be reached by two parties taking their balance sheet, so to speak, ascertaining on one side what is due, and on the other side what is payable, and dealing only with the overplus after a set-off; or if it is to be dealt with under the Agricultural Holdings Act and there is an award, that award will only deal with the amount which remains, the balance due on the one side or the other. Hence by reference to these words:— a tenant's right to compensation under the Agricultural Holdings Act, 1923, for improvements, damage by game, disturbance or otherwise, and any other tenant right— there is intended and there is included such sum as means the net amount after both sides have put their claims before the arbitrator and both accounts have been taken into consideration.


The noble and learned Lord has expressed my own view of this matter, but even assuming that it is right, why should not these words be put in? They make the thing clear. I think the noble Lord who has moved the Amendment is mistaken, but if these words make it clear why not put them in instead of leaving the matter in doubt? The people who will have to deal with this matter are not versed in the law, and may misunderstand, and it is always advisable to make an Act of Parliament clear. What is the objection to putting in these words?


The objection is that the Amendment throws a doubt, which at present does not exist in the mind of anybody who knows the law, as to the exact nature of the tenant right, and as to the rights of tenant and landlord inter see in the assessment of compensation under the Agricultural Holdings Act, 1923. It is very undesirable to create a doubt where none exists at all.


After the explanation of Lord Hanworth and what the Lord Chancellor has just said, I ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

Clause 6:

Effect of fixed charge.

6.—(1) A fixed charge shall, so long as the charge continues in force, confer on the bank the following rights and impose upon the bank the following obligations, that is to say:— (b) where possession of any property has been so taken, a right, after an interval of five clear days or such less time as may be allowed by the charge, to sell the property either by auction or, if the charge so provides, by private treaty, and either for a lump sum payment or payment by instalments;

(4) Where any proceeds of sale which in pursuance of such obligation as aforesaid ought to be paid to the bank are paid to some other person, nothing in this Act shall confer on the bank a right to recover such proceeds from that other person unless the bank proves that such other person knew that the proceeds were paid to him in breach of such obligation as aforesaid.

LORD STRACHIE moved, in paragraph (b) of subsection (1), to leave out "or such less time as may be allowed by the charge." The noble Lord said: My Amendment is proposed because it seems rather hard that only five days interval may be allowed, or even less time, for a sale by the bank. There might be some very onerous condition in the charge, and the bank might proceed to sell at once. It seems to me that five days is the shortest time that should be allowed.

Amendment moved— Page 7, line 17, leave out from ("days") to ("to") in line 18.—(Lord Strachie.)


This clause has been drawn in an elastic form, because it is thought to be of benefit to both parties. It sets out the powers of sale of a bank, but enables the general powers stated in the paragraph to be varied by agreement between the farmer and the bank in a manner to be stated in the charge. The Amendment takes out this power of agreement between the banker and the farmer as to the time during which the bank is required to hold the property subject to the charge before it can sell. It seems very much better, having imposed a minimum period during which the bank must retain the property, to allow this minimum period to be varied at the option of both parties. It may be that when the bank takes over there are some fat cattle or pigs or even fruit that should be sold almost immediately, and if they are kept for five days it might mean a great loss to either the farmer or the bank. It therefore seems desirable that the matter should be left open, so that the banker and the farmer can come to terms if they think fit.


I cannot help thinking that the noble Earl is always on the side of the banker, and that the banker is always put in a privileged position. I am moving this Amendment in the interests of the tenant farmer, and I am asking that he shall have at least five days before the bank can sell. The noble Earl says that the bank might be advancing money on some kind of property which it might be desirable to sell. I see that the noble Earl is quite unwilling to do anything to help the farmer; he is always on the side of the bank, so I will withdraw my Amendment.


The noble Lord is not quite fair. It is only done by voluntary agreement between the parties.

Amendment, by leave, withdrawn.

LORD STRACHIE moved, in paragraph (b) of subsection (1), to leave out "by private treaty." The noble Lord said: Here again, it seems to me that the Government are anxious to help the banks at the expense of the farmers. The sale might be made in some hole-and-corner way or in great haste, and it might all be arranged. The noble Earl may tell me that there might be some contract; for instance, the farmer might be under contract to sell sugar beet, and therefore it is desirable to sell the property privately, but I do not think that is any reason. I should like to know why the Government are so anxious to allow the sale by private treaty instead of by auction. Auction seems to be the fairest way. Everybody has notice of it, and the best possible price is obtained in the market. If the bank has the right to sell the property they might sell at a price that was no adequate return to the farmer.

Amendment moved— Page 7, line 19, leave out ("by private treaty").—(Lord Strachie.)


I think the answer to the noble Lord is that if the farmer does not wish to agree to the bank selling by private treaty he would refuse his permission. It has to appear in the charge, and the farmer has the right to refuse permission to sell by private treaty when the charge is drawn up. The noble Lord has referred to the fact that the farmer might have made arrangements to sell his crop to somebody else. That is often done, not only in regard to sugar beet but in regard to mustard and seed corn, and it would obviously be to the advantage of the farmer that the corn or crop should be sold under those conditions, as he would get a much better price in that way than in any other way. By this arrangement for sale by private treaty terms can be arrived at suitable to both parties.


I accept what the noble Earl says. As the arrangement is, he says, entirely in the interests of the farmer, I shall, of course, withdraw the Amendment.

Amendment, by leave, withdrawn.

THE LORD CHANCELLOR moved to add to subsection (4): "but such other person shall not be deemed to have such knowledge by reason only that he has notice of the charge." The noble and learned Lord said: This clause imposes on the farmer the obligation, when he sells property covered by a charge, to pay the proceeds to the holder of the charge. There was some danger, we thought, that the effect of that might be to enable the bank to follow the proceeds which were in the hands of an innocent receiver, which was obviously not intended, and subsection (4) was inserted in order to prevent that. In another place the Bill was subsequently amended and in Clause 9 (8) provision was made that the registration of a charge should operate as notice to the world of its existence. We then thought that there might be a risk that it might be held that the fact that a charge was registered operated as notice that the property was charged and thereby imposed upon any innocent receiver of the proceeds of a property subject to the charge the obligation to hand them back to the bank. That was not the intention and it is in order to prevent that that I move this Amendment.

Amendment moved— Page 8, line 29, after ("aforesaid") insert the said words.—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 6, as amended, agreed to.

Clause 7:

Effect of floating charge.

7.—(1) An agricultural charge creating a floating charge shall have the like effect as if the charge had been created by a duly registered debenture issued by a company:

Provided that— (b) the farmer, whilst the charge remains a floating charge, shall be subject to the like obligation as in the case of a fixed charge to pay over to the bank the amount received by him by way of proceeds of sale, in respect of other agricultural assets, under policies of insurance, or by way of compensation: Provided that it shall not be necessary for a farmer to comply with such obligations if and so far as the amount so received is expended by him in the purchase of farming stock which on purchase becomes subject to the charge.

(2) Where a petition in bankruptcy is presented against a farmer, an agricultural charge on any of the farming stock or other agricultural assets belonging to him created in favour of a bank within three months of the date of the presentation of the petition shall, unless it is proved that the farmer immediately after the execution of the charge was solvent, be invalid except so far as the sums secured by the charge represent cash paid to him at the time of, or subsequently to the creation of, and in consideration for, the charge, together with interest thereon.

THE EARL OF STRADBROKE moved, in subsection (1) (b), immediately before the proviso, to insert "and the last foregoing section shall apply accordingly." The noble Earl said: This is a drafting Amendment. It is simply to make it quite clear that subsections (3) and (4) of Clause 6 shall apply to a floating charge in like manner as to a fixed charge.

Amendment moved— Page 9, line 15, after ("compensation") insert the said words.—(The Earl of Stradbroke.)

On Question, Amendment agreed to.

THE LORD CHANCELLOR, moved to leave out subsection (2). The noble and learned Lord said: I am moving to omit this subsection in order to insert a similar subsection in the next clause. The reason is that the provision applies both to fixed and to floating charges, and therefore more appropriately appears in the next clause. I might at the same time explain, with your Lordships' permission, that we are slightly altering the words, so as to make it quite clear that the effect, as well as the intention, of the modified words is that, where money is advanced by some one who has already a debt owing to him from the farmer, and then there is a bankruptcy, the charge shall then only operate in respect of the net sum remaining of the moneys advanced on the creation of the charge.

Amendment moved— Page 9, line 22, leave out subsection (2).—(The Lord Chancellor.)

On Question, Amendment agreed to.

Clause 7, as amended, agreed to.

Clause 8:

Supplemental provisions as to agricultural charges.

(5) Where after the passing of this Act the farmer has mortgaged his interest in the land comprised in the holding, then, if growing crops are included in an agricultural charge, the rights of the bank under the charge in respect of the crops shall have priority to those of the mortgagee, whether in possession or not, and irrespective of the dates of the mortgage and charge.

(6) An agricultural charge shall be no protection in respect of property included in the charge which but for the charge would have been liable to distress for rent, taxes, or rates.

Amendment moved— Page 10, line 11, at end, insert as a new subsection:— (5) Where a farmer who is adjudged bankrupt has created in favour of a bank an agricultural charge on any of the farming stock or other agricultural assets belonging to him, and the charge was created within three months of the date of the presentation of the bankruptcy petition and operated to secure any sum owing to the bank immediately prior to the giving of the charge, then, unless it is proved that the farmer immediately after the execution of the charge was solvent, the amount which but for this provision world have been secured by the charge shall be reduced by the amount of the sum so owing to the bank immediately prior to the giving of the charge, but without prejudice to the bank's right to enforce any other security for that sum or to claim payment thereof as an unsecured debt"—(The Lord Chancellor.)

On Question, Amendment agreed to.

LORD STRACHIE moved to leave out subsection (5). The noble Lord said: I move this Amendment because I want an explanation from the noble Earl as regards the position of a man who has advanced money on mortgage after the passing of this measure. It is, I understand, a very common practice in East Anglia, where crops are very much more valuable than they are in pasture country, to include in the mortgage the growing crops. An East Anglian farmer told me it would be a hardship to the farmer if this subsection were passed, because what would happen would be that the mortgagee would be in a worse position in future than he is at present. Supposing a farmer, after the passing of the Bill, has mortgaged his farm for a sum of money, and, in order to give additional security, has included the growing crops upon the farm, then he has also given a charge to the bank upon the growing crops. When the mortgage is called in the bank would have the right to step in and say to the man holding the mortgage: "You can sell the land, it is true, but as regards the crops included in your mortgage you have no right to them, because I have a prior claim as provided under the Act." That is to say, the bankers will be put into a preferential position, as they always seem to be. I am aware that this applies only to mortgages made after the passing of the Bill. I move the Amendment standing in my name in order to get some explanation because the clause is not very clear as it now stands.

Amendment moved— Page 10, line 12, leave out subsection (5).—(Lord Strachie.)


The noble Lord in moving his Amendment pointed out that this only applies to mortgages made after the Bill comes into effect. I do not think there will be any hardship because those who make mortgages will make them with their eyes open to the condition of affairs. The noble Lord makes the point that the land will be less valuable if the crops are not included in the mortgage; but I do not think that is generally done now. As the noble Lord knows, if there had to be a foreclosure it would depend entirely as to what crops were on the land whether there was any value in it or not. When the crops are once cut and severed from the land the mortgage has no charge upon them. Therefore, it would be only in the case of growing crops that the mortgage would have any effect. I do not think that anybody taking up a mortgage would take the crops into consideration at all. The ordinary course, I think, is that those concerned either estimate the value themselves or call in a valuer, who will estimate the letting value of the land and arrive at its capital value upon that basis, and then they effect a mortgage accordingly. I cannot think there will be any hardship under the Bill as it now stands, because, as I say, people taking out mortgages will have their eyes open and will see perfectly clearly that the growing crops cannot be included in the mortgage in the case of farmers having given charges on the growing crops under Part II of the Bill.


Surely this clause strikes at the very root of the law of mortgage. If people are allowed to do this trustees will be disinclined to lend money on mortgage. As my noble friend Lord Bledisloe complained, there are only £14,000,000 available for the purpose. On reference to Coote on Mortgages I find this:— A mortgagor cannot cut or remove growing crops after the mortgagee has demanded possession. So a mortgagee who had taken possession after the bankruptcy of the mortgagor was held to be entitled to an injunction to restrain the bankruptcy trustee from cutting and removing growing crops from the mortgaged lands. So it will be found that it is not a very unusual thing to include these crops, and if the noble Lord goes to a Division I shall certainly support him.

On Question, Amendment negatived.

LORD STRACHIE moved, in subsection (6), after "of," to insert "wages due to men or women employed on the farm or of." The noble Lord said: Up to now I have been moving Amendments with the object of protecting the owner-occupier, the landlord, or the tenant farmer. This, the last Amendment I have to move, is based on the idea that something ought to be done to protect the wages of the agricultural labourer. Subsection (6) says that an agricultural charge shall be no protection in respect of property included in the charge which, but for the charge, would have been liable to distress for rent, taxes, or rates. By moving into the subsection the words of my Amendment I am trying to see that the protection given to the landlord in respect of his rent and to the authorities concerned in respect of taxes or rates, shall be given to the agricultural labourer and to the men and women employed on the farm. I do not know whether the noble Earl will tell me that the Amendment is entirely unnecessary, but there certainly might be cases. Supposing a farmer owes a good deal of money and has to go to the bank. There might be considerable arrears of wages due to his labourers or to other people working on his farm, and I am sure it would not be the wish of your Lordships that in such a case the hard-working men and women should suffer by the bank coming in and having a first charge on the property of the farmer. I am sure the noble Lord will see the point I am making, and if it is not perfectly clear that the agricultural labourer is protected and that the bank will not be able to come between him and his wages, I hope it will be made clear. I only hope that the noble Earl will be able to give me such a definite reply as will make it unnecessary for me to go to a Division. I beg to move.

Amendment moved— Page 10, line 20, after ("of") insert ("wages due to men or women employed on the farm or of").—(Lord Strachie.)


The noble Lord has told us what his object is in moving the Amendment. He will forgive me for saying that his Amendment would be quite ineffective to produce that end. If his words were inserted subsection (6) would read— An agricultural charge shall be no protection in respect of wages due to men or women employed on the farm or of property included in the charge … and so on. Of course an agricultural charge is no protection in respect of wages. An agricultural charge is not given on wages; it is given on property. Therefore, the words would be quite meaningless, if the noble Lord will forgive me for saying so. Further, I think his words are unnecessary for this reason. There are two kinds of agricultural charges which are there dealt with. One is the floating charge and the other is the fixed charge. So far as the floating charge is concerned, by Clause 7, subsection (1), it is to have the like effect as if it had been created by a duly registered debenture, and if the noble Lord will look at the Companies Act he will find that under Section 107 and (I think) Section 209 wages have priority over debenture charges. Therefore, so far as floating charges are concerned wages have priority without the words which the noble Lord proposes to put into the subsection.

So far as the fixed charge is concerned, that has priority over wages just as a bill of sale has to-day, and no alteration is made in that respect. At the moment if there is a bill of sale on a specific property that property is covered by the bill of sale and nothing comes in between the chargee and the property. That position will still remain so far as fixed charges are concerned. But so far as floating charges are concerned—the charges which, probably, the noble Lord had in mind because they are the ones which would mostly effect the hardship of which he complains—the position is amply protected by reason of the clause to which I have called his attention.


Am I to understand that the position of mortgages under this Act so far as they compete with wages will be exactly the same as that of ordinary mortgages at the present time?


I am not quite sure that that is an accurate way of stating it. The position of floating charges under this Bill will be exactly the same as the position a debenture has at the present time. A debenture at this time ranks behind wages and wages have priority over a debenture.


So I understood, but I thought the noble Lord said as regards charges on the land that they would have a priority over wages.


The fixed charges.


The fixed charges. That is the case to-day?




This does not alter the law?




I am very much obliged for the Lord Chancellor's reply, and I am quite satisfied as regards the floating charge. But I should like to have some sort of assurance from him that as regards the fixed charge the labourer will not be put in a worse position than he now occupies in regard to his wages. Have I that assurance from him?


That is the effect.


Having received that assurance from the Lord Chancellor, I ask leave to withdraw my Amendment.

Amendment, by leave, withdrawn.

Clause 8, as amended, agreed to.

Clause 9 agreed to.

Clause 10:

Restriction on publication of agricultural charges.

(4) For the purpose of this section, "publication" means the issue of copies to the public, and "publish" has a corresponding meaning.

THE EARL OF STRADBROKE moved to add to subsection (4) "and without prejudice to the generality of the foregoing definition the issue by an association representative of a particular trade of a circular to its members shall not be deemed to be publication for the purposes of this section." The noble Earl said: When this clause was under discussion in another place it was thought that as the clause stood it was not clear that there would be no objection to a trade association circularising its members with a list of farmers who had given the banks a charge. Although it was felt that there was no doubt that the clause as drafted would enable this to be done, an undertaking was given in another place that words should be inserted to make this quite clear. Therefore this Amendment has been placed on the Paper. I think it meets the point raised. I beg to move.

Amendment moved— Page 12, line 19, after ("meaning") insert the said new words.—(The Earl of Stradbroke.)

On Question, Amendment agreed to.

Clause 10, as amended, agreed to.

Remaining clauses agreed to.