HL Deb 21 March 1929 vol 73 cc782-91

Amendments reported (according to Order).

Clause 1:

Power of Board of Trade to make orders increasing authorised amount of share capital or of loans.

1.—(1) Notwithstanding anything in any enactment (including this Act) imposing a limit on the amount of share capital which may be raised or of money which may be borrowed by undertakers, not being a local authority, for the purposes of their undertaking, the Board of Trade may, on the application of any such undertakers and subject to the provisions of this section, by order authorise the undertakers on such conditions as may be specified in the order for the purposes of their undertaking—

  1. (a) to raise, at any time during the period of three years after the date on which the order comes into operation, any such amount of share capital as may be specified in the order; and
  2. (b) to borrow on mortgage of their undertaking or by the creation and issue of debenture stock any amount not exceeding the aggregate amount of the paid up share capital of the undertaking for the time being and of any premiums paid in respect thereof.

LORD BANBURY OF SOUTHAM moved, in subsection (1), after paragraph (b), to insert "Provided that any money so borrowed either on mortgage or by the issue of debenture stock, shall (except in any case in which it has expressly been otherwise provided by a Local or Private Act) rank after any existing mortgage or debenture stock." The noble Lord said: My Lords, Clause 1 of this Bill empowers the Board of Trade to allow a gas company to borrow, on mortgage of their undertaking or by the creation and issue of debenture stock, any amount not exceeding the aggregate amount of the paid-up share capital of the undertaking. That, my Lords, as I presume you all know, is very much in excess of the ordinary power given to companies. Clause 2 of this Bill begins with these words: Notwithstanding anything in any enactment, undertakers, not being a local authority, may borrow for the purposes of their undertaking on mortgage of their undertaking or by the creation and issue of debenture stock any amount not exceeding one half … Your Lordships will see therefore that, while Clause 2 says that an amount not exceeding one half the ordinary capital may be borrowed, Clause 1 says that, notwithstanding anything in any enactment (including this Act) an amount may be borrowed to the extent of the whole of the share capital. That is to say, the amount which may be borrowed is doubled. The object of my Amendment is to make it clear that, if I have borrowed money from my noble friend the Marquess of Salisbury on a certain security, I shall not borrow more money from my noble friend Lord Cushendun on the same security. I think that is a simple proposition, and one which ought to commend itself to your Lordships.

When I moved the Amendment in a different form on the Committee stage my noble friend the Earl of Lucan informed me that there were already in certain Private Acts certain provisions which my Amendment, in the form in which it then was, would alter. That was not my intention in any way, and accordingly I have drawn my Amendment in a different form. On the Committee stage the noble and learned Lord on the Woolsack said that he thought that under two decisions which had been given, and which he quoted—I think I am representing him correctly—my Amendment was unnecessary. He thought so, but he was not sure. My noble and learned friend Lord Danesfort afterwards looked at these decisions—he appeared, it seems, in one of these cases—and he does not quite hold that view. He does not think that they apply. Whether they apply or not, I would ask your Lordships whether it is not far better in the interests, not only of a gas company but of all other undertakings of the kind, that this matter should be quite clear. I think it is evident that if there is any doubt people will not invest their money in the debenture stock of gas undertakings, because they will not be sure whether or not the stock can be watered after they have bought it. It is no use saying that we think that under certain decisions this cannot take place. We all know that, if there is a gentleman learned in the law and he makes an assertion, it is at least a hundred to one that another gentleman learned in the law will say that he is quite wrong and will pronounce a different opinion. I have heard this over and over again.

I cannot see that there is any harm in putting a clause in this Bill to lay down quite clearly an honest provision that, where a person has borrowed money on a certain security, he must not borrow more money on the same security from somebody else. I was thinking of buying a little gas debenture stock, as I happen by frugal living to have a little money to invest, but I certainly shall not do it if there is going to be any doubt. I do not want to have to go to law about the matter. I would far rather buy something else. It is really in the interests of the gas companies themselves that this should be made clear. I should like to add that I have in my pocket a letter from a noble Lord learned in the law, a member of your Lordships' House, who regrets that he cannot be here to-day to support me. I hope that I have made the matter clear, and that my noble friend Lord Lucan will accept this Amendment. I beg to move.

Amendment moved— Page 1, line 25, at end insert the said proviso.—(Lord Banbury of Southam.)

LORD PARMOOR

My Lords, I should like to say just one word in support of the noble Lord opposite. I will not go into the difficult questions of law, for perhaps I may be one of those who are apt to differ from other opinions, but it is certainly advantageous that the matter should be made quite clear, and I think the noble Lord is quite right in wishing to make it clear upon the face of the Bill that these new debentures should rank after any existing mortgage or debenture stock. This will be of advantage not only to investors, but to the gas companies themselves. I hope that the Government will accept this Amendment.

LORD DANESFORT

My Lords, I rise to support as heartily as I can in a very few words the Amendment proposed by my noble friend Lord Banbury of Southam I do so for this reason. The object of the Amendment is to carry out the admitted desire and intention of all parties, and to make the matter clear on the face of the Bill. When this matter was before us in Committee, the noble and learned Lord upon the Woolsack was good enough to refer us to two cases that had been decided, one, I think, in the Court of Appeal, and the other in your Lordships' House. At any rate, they were authoritative decisions. I examined these cases with such care as I could give them, and the conclusion that I drew from them—I hope I shall not be at variance with the Lord Chancellor, whose authority is supreme—was that no principle was laid down in either of them which would govern a case such as this. In both cases the decision of the Court turned upon the language of the particular actions which were under consideration, and certainly I can discover no general principle that would govern a case of this sort. If that be so, or even if there be a doubt about it, is it not far better to put into the Bill words which will make the point quite clear?

As my noble friend Lord Banbury has said, it is in the interest of the companies themselves to know what they are authorised to do. It is in their interest to be able to state, when they publish a prospectus asking for more borrowed capital, exactly what they are allowed to do. If the Bill goes forward in its present form the companies might misconstrue the Act and issue a prospectus saying, on the one hand, that the new borrowed capital ranked pari passu with the old, in which case they would probably have an action for an injunction against them by the holders of the old borrowed capital; while, on the other hand, if they sail in their prospectus that the new borrowed capital ranked pari passu with the old borrowed capital, and it then turned out that it ranked subsequent, the persons who lent the new capital would probably be able to set aside their agreement. People would be able to say: "This is not what we bargained for; we were told that we were going to get security which ranked pari passu with the old mortgage and debenture stock, and we are not getting it." There is, at any rate, a possibility of litigation in this matter unless the point is made clear now. Accordingly I venture to ask the noble Earl in charge of the Bill to accept this Amendment, which can do harm to no one and which will make it clear what, is really authorised by this Bill.

LORD HUNSDON OF HUNSDON

My Lords, I do not like to disagree with my noble friend Lord Banbury on a question of this sort, which is a Stock Exchange matter, but I would suggest to your Lordships and to my noble friend that really the whole thing turns upon the terms of the prospectus. An undertaking can borrow, according to this clause, an amount up to the total paid-up share capital. When it issues a prospectus, it will have to state exactly what the position of the mortgage is, whether it is liable to be watered, as my noble friend said, or whether it is a first charge on the undertaking. I do not think it matters what is in the Bill.

LORD BANBURY OF SOUTHAM

That does not touch the people who have already lent money.

THE LORD CHANCELLOR (LORD HAILSHAM)

My Lords, I have been asked by my noble friend Lord Lucan to deal with this point, which is a matter of law, and simply of law. The noble Lord who moved the Amendment said that the proposition that it embodied was that, when a borrower had borrowed from one person on a security, he must not borrow from another person on the same security. That is a proposition of law which I do not think any one of your Lordships would be disposed to quarrel with, but I should like to assure your Lordships and the noble Lord that it is wholly unnecessary to pass this Amendment in order to produce that effect; and further I hope to be able to satisfy him and your Lordships that this Amendment would go a great deal further than he at present appreciates. I explained the position on the Committee stage, and I will explain it again now, after it has been more carefully examined.

This clause is the clause which deals with the borrowing powers of an undertaking. It has nothing in the wide world to do with the priority of mortgages or of debenture issues inter se. It extends borrowing powers, but it says nothing whatever as to the priority of moneys borrowed. It has been clearly settled by the authority of this House that, when there are successive Acts of Parliament giving borrowing powers one after the other to a public undertaking, the fact that a subsequent Act of Parliament gives further borrowing powers has no effect at all upon the security of those who have lent under the powers first conferred. The case which the noble and learned Lord, Lord Danesfort, referred to last, time was a ease decided in the Court of Appeal by Sir George Jessel and others, which came to this House and was expressly confirmed in this House on the ground laid down in the judgment of Sir George Jessel. I do not agree that there was no principle laid down. The case was one which dealt with the priorities of a series of issues of debentures under a succession of Acts of Parliament and the priorities of the debenture holders inter se, and the principle on which Sir George Jessel decided the case, and on which he said the later Acts of Parliament did not in any way affect the priorities of the earlier debenture holders was this:— The argument appears to me to be without answer that the vested rights of persons acquired before the passing of the Act who either bought debenture stock or lent money on mortgage are not interfered with by the Legislature without compensation, and it requires the strongest and clearest words in an Act of Parliament before you are entitled so to interpret it as to deprive people of their property without compensation. Applying that principle, he held that there was no interference with the priority conferred by the earlier Act.

The only difference in principle between that case and the present one that I can see is that one is a railway company and the other is a gas undertaking and I do not think that that makes any difference at all. That being so the noble Lord said that there might be difficulties if gas companies came to issue a prospectus. My Lords, a gas company could not issue a prospectus which proclaimed that debentures which were issued under an Order made under this Act were to rank pari passu with moneys borrowed under their previous debentures, if their previous powers had allowed them to borrow on such terms as to create a prior charge in favour of the old debenture holders. Supposing a company issued to the public a debenture stock charged upon the same security as their existing debenture stock, nothing in this Bill will allow them to interfere with the rights which they have so conferred upon the earlier debenture holders.

The noble Lord said: "Then why not make it plain and put it in the Bill." In the first place it is plain. I do not think a competent lawyer who studied this could possibly doubt that the law is as I have stated, and is as it is declared to be. But, in fact, the effect of putting in as a substantive enactment something which is perfectly apparent without that enactment is to create confusion in the law, because any Court, trying to construe an Act of Parliament endeavours to arrive at its meaning, and would be likely to arrive at a conclusion that plain words did not mean what they appeared to say, and I can see that if the proviso suggested were put in at the end of Clause 1 the effect would be this: In Clause 2 there is no such proviso, and since in Clause 1 there is power to raise further capital, subject to this proviso, while in Clause 2 you also have power of increased borrowing without such a proviso, the Court would be disposed to hold that in the last case it was intended that you should be able to interfere with the rights of existing debenture holders. That, I am sure, is a right which the noble Lord does not wish to obtain.

There is another difficulty. In the Amendment he has suggested words which, I pointed out, would affect the rights of persons interested under any Local or Private Act. Although I gave that illustration, it was not an exhaustive definition. There are a number of gas companies who act under the Companies Act, and whose powers of borrowing are contained in their Memorandum and Articles of Association. If this proviso were carried in its present form it would interfere with the right which they have of issuing further debentures. I know the noble Lord does not intend to do that, but I mention it to show that his proviso goes further than he intended, and effects an alteration in the law which he does not desire. I hope, in the circumstances, he will realise that the position is, as I have stated, reasonably plain, and that he will not introduce an Amendment which might create confusion and work injustice.

LORD BANBURY OF SOUTHAM

May I ask the noble and learned Lord one question? I understood him to say that in the judgment quoted it was said that the Act was not retrospective, and therefore, as it was not retrospective, no harm could be done. What I want to ask the noble and learned Lord is the meaning of these words: "Notwithstanding anything in any enactment." Is not that retrospective? If those words were not in I should not have had much doubt, but they seem to me to be retrospective, and I would be much obliged if the noble and learned Lord would deal with that matter.

THE LORD CHANCELLOR

I can only speak again with the indulgence of the House. There was nothing in the case that I cited which referred to retrospective legislation or the word "retrospective" at all. The actual words that I read were:— The argument appears to me to be without answer that the vested rights of persons acquired before the passing of the Act who either bought debenture stock or lent money on mortgage are not interfered with by the Legislature without compensation, and it requires the strongest and clearest words in an Act of Parliament before you are entitled so to interpret it as to deprive people of their property without compensation. There is nothing about "retrospective" at all. The point of the judgment was that where you had an Act of Parliament which conferred borrowing powers upon a company, and a subsequent Act which conferred further powers, you were not to read the second Act as conferring rights which interfered with the rights conferred by the previous Act. All this section does is not to interfere with priorities but to increase the amount of borrowing power. It does not affect the rights of a person who has lent money upon a specific security to have that security uninterfered with by borrowing under any subsequent Act.

LORD BANBURY OF SOUTHAM

I think we are agreed upon what ought to be done and are only disagreed upon the method. As the Lord Chancellor's legal experience is very much greater than mine I bow to his superior wisdom and will not press the Amendment.

Amendment, by leave, withdrawn.

THE MARQUESS OF READING, on behalf of Lord Melchett, moved alter Clause 3, to insert the following new clause:—

Extension of powers of purchase of residual products.

" .—(1) Any undertakers may, notwithstanding anything to the contrary contained in any Act or Order relating to them, purchase in such quantities as they think fit from any company, body or person carrying on a gas undertaking (whether with or without statutory authority) or operating coke ovens or carrying on any process of carbonisation or gasification of coal or coke any residuals arising from the manufacture of gas, or the carrying on of any such operation or process and products arising from a primary treatment of those residuals by such company, body or person, and may exercise in relation to residuals or products so purchased the powers which would have been exerciseable by them if such residuals or products had arisen in carrying on their gas undertaking in accordance with their statutory powers.

(2) The powers conferred by this section shall be its addition to and not in derogation of any powers conferred or to be conferred upon the undertakers by any special Act."

The noble Marquess said: My Lords, this Amendment gives rise to no disagreement. All the parties interested are agreed. It provides for the extension of powers of purchase of residual products, and I understand that the Government are prepared to accept the Amendment as it is on the Paper. Therefore, unless your Lordships desire it I will not take up more time.

Amendment moved— Page 3, line 14 at end, insert the said new clause.—(The Marquess of Reading.)

THE EARL OF LUCAN

My Lords, it is as the noble Marquess has said. The Government are prepared to accept this Amendment, which we understand has been reached by agreement between the National Gas Council and the chemical industries. Therefore they will accept it.

On Question, Amendment agreed to.

Clause 4:

Supply of gas by undertakers to premises outside limits of supply.

4.—(1) The Board of Trade, if they are satisfied that the owner or occupier of any premises, not being within a distance of twenty-five yards from any main of the undertakers within whose limits of supply the premises are situate, desires to obtain a supply of gas from other undertakers, may, subject to the provisions of this section, by order authorise the last mentioned undertakers to supply gas to those premises on such conditions as may be specified in the order.

(2) An order under this section may contain such modifications of any enactment applying to the undertakers in respect of whom the order is made as, in the opinion, of the Board, are necessary in order to give full effect to the order.

(3) An order shall not (unless, in the opinion of the Board, consent is unreasonably withheld) be wade except with the consent of the undertakers within whose limits of supply the premises are situate and of the local authority within whose area the premises are situate.

THE EARL OF LUCAN moved to add to the clause the following new subsection— (4) Notwithstanding anything in this section, every order thereunder in respect of any undertakers shall be framed so as to secure that the provisions of the Gasworks Clauses Act, 1847, with respect to the breaking up of streets for the purpose of laying pipes shall apply in relation to pipes for the supply of gas by the undertakers under the order as they apply in relation to pipes for the supply of gas by the undertakers under the enactments applying to them before the making of the order. The noble Earl said: My Lords, this Amendment is brought forward by the Government after negotiation and agreement with the railway companies, who rather feared that the Board of Trade might, under subsection (2) of this clause, modify the usual provisions as to the breaking up of roads. The Government appreciate the point of view of the railway companies and have tabled this Amendment in consequence. I beg to move.

Amendment moved— Page 3, line 33, at end insert the said new subsection.—(The Earl of Lucan.)

On Question, Amendment agreed to.

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