Lords Sitting of 1 April 1941

Preamble
The House met, The LORD CHANCELLOR on the Woolsack.

THE MEDITERRANEAN VICTORY.
THE EARL OF CLANWILLIAM: My Lords, may I ask the noble Lord the Leader of the House if he has any information about the recent naval action in the Mediterranean? Before the noble Lord replies, may I, as a humble member of your Lordships' House, be allowed to say with what pride I have read the communiqués of the Admiralty with reference to this action. I am sure that England, the Empire, and our Allies will have been thrilled by the brilliant seamanship of the gallant Admiral, Sir Andrew Cunningham, who commanded the Fleet, and also by the splendid gunnery and services of the officers and bluejackets of His Majesty's ships who fought in this action, carried out largely under cover of darkness and, as I understand, with the loss of seven enemy vessels and without any casualties to ourselves. It is an outstanding event in our glorious naval history.
THE SECRETARY OF STATE FOR THE COLONIES (LORD MOYNE): My Lords, all the information so far received about this most successful engagement has already been published in the official communiqués or in statements by the naval authorities in the Mediterranean. The Prime Minister announced to-day, in another place, that he intended to make a general review of the war situation one day next week, and it is probable that he will take that opportunity to move a Resolution of thanks to His Majesty's Forces. No doubt your Lordships will wish to take parallel action. Meanwhile the Prime Minister and His Majesty's Government have sent their congratulations to the Commander-in-Chief of the Mediterranean Fleet and to the Air Officer Commanding in the Middle East. I understand from my noble friend that it may be desired, to-day, to say a few words of congratulation and appreciation on one aspect of the very encouraging

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developments that have recently taken place in the Near East on land, in the diplomatic sphere, and on the sea. Today our minds are filled with the gallantry of the Forces engaged at Matapan and the brilliant skill of their leadership. This war has taught us no new lessons as to the courage and brilliancy with which we have maintained our sea power. These qualities are as traditional as the adaptability and originality which our seamen have shown in developing new tactics. The Battle of Cyrenaica was a model of combined operation between land, air, and sea forces, and the Battle of Matapan has offered a perfect example of cooperation between the Fleet, the Fleet Air Arm, and the Royal Air Force, which was based on the island of Crete.
At last the training and efficiency of the Fleet have had their reward. Throughout the war it has faced the devilish methods of submarine warfare by which the Germans applied what was previously looked upon as a system of indiscriminate murder. The Nazis have profited by the bitter experience of the "Graf Spee," with its heavier armament, being driven to destruction by the gallantry and accurate gunnery of the "Exeter," "Achilles" and "Ajax," and have since that experience taken care that Nazi and Italian surface ships never waited to meet their match in size or arms, but made it their practice to run from the smaller units to avoid disaster. The skill of Sir Andrew Cunningham's combined operation has completely defeated this method. Bombing from the air prevented the Italian units profiting as usual by their advantage in speed in flight, and enabled our ships to finish the work. We have become accustomed to such disproportionate casualties in Cyrenaica between victors and vanquished as reminded us of the wars between Persians and Greeks in the classic ground of the Near East, but not even the battle of Salamis, where the Persian losses were five times as great as those of the Greeks, can provide a precedent to the overwhelming disaster sustained by the Italian Fleet at the cost to the victorious of not a single man or a single ship.
THE MARQUESS OF SALISBURY: My Lords, perhaps your Lordships will think
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it not out of place if I were to assure my noble friend the Leader of the House that if next week, or whenever it is, he submits a Resolution to your Lordships expressing the intense appreciation which Parliament and the country have of the courage, resource and success of our Forces, he will receive unanimous support from your Lordships' House. We shall be very glad indeed to welcome such a Resolution and support it to the best of our powers. As regards the week which has just elapsed, no doubt it may seem historically hereafter to be a turning point in the war. There has been not only great diplomatic success in Yugoslavia, but there has been this Battle of Matapan, which has just demonstrated the power of this country in the Mediterranean. None can doubt what that power is, and though there may be other experiences, some not so favourable, before us in the future, yet we may feel well assured that we know now, what indeed we always knew, that we can rely absolutely upon the courage and resource of our Forces on sea, in the air and on land. We are deeply grateful to those of our countrymen who have fought so well for us in this war.
THE MARQUESS OF CREWE: My Lords, I have really nothing to add to what has been said by the Leader of the House and by the noble Marquess opposite in appreciation of the marvellous events of the last few days. It had always appeared that the task of His Majesty's Forces in the Mediterranean would be a very difficult one. Not much was known of the strength of the Italian forces in those waters and on land, but it was certainly supposed that they were exceedingly strong, and that it would be impossible to carry through a victorious campaign there without very heavy loss both on sea and on land. What has, I think, impressed everybody has been the marvellous combination which has been achieved by the Forces, sea, land and air, and I think it is impossible to overstate our appreciation and admiration of the Commands, sea, land and air, and also of all the men in the Forces of all kinds who have taken part in these great events. We shall await with deepest interest further details of the various actions that have taken place.

CARDIGAN AND FISHGUARD GAS ORDER, 1941.
LORD TEMPLEMORE: My Lords, I beg to move the Motion standing in my name on the Order Paper.
Moved, That the Special Order as reported from the Special Orders Committee on Tuesday last, be approved with modifications.—(Lord Templemore.)
On Question, Motion agreed to.

LIABILITIES (WAR-TIME ADJUSTMENT) BILL. [H.L.]
Order of the Day for the House to be put into Committee read.
Moved, That the House do now resolve itself into Committee.—(The Lord Chancellor.)
On Question, Motion agreed to.
House in Committee accordingly:
[The EARL OF ONSLOW in the Chair.]
Clause 1 [Services of liabilities adjustment officers in effecting schemes of arrangement]:
THE LORD CHANCELLOR (VISCOUNT SIMON): Here is an Amendment which is pure drafting in order to make the clause quite clear. I beg to move.
Amendment moved—
Page 2, line 7, leave out (" those ") and insert (" their provable ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 1, as amended, agreed to.
Clause 2 [Appointment, services, salaries and staff of liabilities adjustment officers]:
VISCOUNT MAUGHAM: Will your Lordships allow me to mention one matter which I have been asked to put on behalf of a very numerous body of civil servants—namely, the gentlemen who for a number of years past have been acting as Official Receivers? The position is this. The insolvency work, with which these men are fully acquainted, is already greatly diminishing, and the probability is that it will become almost extinct except in special cases during the continuance of the war. What these gentlemen are very anxious the Lord Chancellor should do is that he should consider, in his appointments under
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Clause 2 of the Bill, what great opportunities these gentlemen have already had for learning all the details of insolvency work, and how anxious they are that they themselves may receive very favourable consideration in the matter of the appointment of the liabilities adjustment officers pursuant to Clause 2. It does not require any amendment, but they will be greatly relieved in their minds if they know that the noble and learned Viscount the Lord Chancellor has this matter thoroughly within his knowledge.
THE LORD CHANCELLOR: I am glad my noble and learned friend has mentioned this matter, if only because the announcement will give some relief in quarters which are naturally anxious. Undoubtedly the training of an Official Receiver is very appropriate to the work which is likely to fall on these liabilities adjustment officers. The Government, I believe, have already secured a promise from the Board of Trade that some of the officials of that Department shall be made available. The suggestion that my noble and learned friend makes is entirely consonant with our intentions, and I hope that I may be able in course of time to issue a list which will show that these very deserving and experienced officials will get an opportunity.
Clause 2 agreed to.
Clause 3:
Application for adjustment of debtor's affairs.
(2) Where it appears to the Court that a prima facie case has been made out as to the matters specified in paragraph (a) or paragraph (b) of the last foregoing subsection, the Court may make an order, to be known as a "protection order," and, while any such order is in force,—

(a) any proceedings against the debtor or his property in respect of any provable debt and any proceedings against the debtor for the recovery of possession of land shall be stayed, and shall not be further prosecuted except with the leave of the Court and subject to such restrictions and conditions as it thinks fit, but the Court before which any such proceedings were pending may allow costs already incurred by the creditor and any such costs may, for the purposes of proceedings under this Part of this Act, be added to the debt;

THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in paragraph (a) of subsection (2), after "land," to insert "or of property let under a hire-purchase agreement." The noble and learned Viscount said: This is

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little more than a drafting Amendment. The protection order was intended to have the effect of staying proceedings against the debtor for the recovery of goods let under a hire-purchase agreement, but some doubt has been expressed as to whether such goods could be described as the property of the debtor. Therefore it is perhaps convenient to insert these additional words which will make the intention quite plain. I beg to move.
Amendment moved—.
Page 5, line 2, after (" land ") insert (" or of goods let under a hire-purchase agreement ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next two Amendments are purely consequential. I beg to move.
Amendments moved—
Page 5, line 13, after (" land ") insert (" or of goods let under a hire-purchase agreement ").
line 14, after (" land ") insert (" or taking possession of goods let under a hire-purchase agreement ").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 3, as amended, agreed to.
Clauses 4 and 5 agreed to.
Clause 6:
Powers of Court with respect to leases and other contracts.
6.—(1) Where the debtor is in possession of any premises held on a lease or tenancy, or is holding over any premises, after the determination of a lease or tenancy, by virtue of the Rent and Mortgage Interest Restrictions Acts, 1920 to 1939, the Courts (Emergency Powers) Acts, 1939 and 1940, or this Act, and the Court proposes to exercise its power so as to allow the debtor to retain possession of the premises, the Court may in the liabilities adjustment order provide that the rent shall, during the period for which the order is in force or any less period, be reduced to such amount as the Court thinks fit, which may, in the case of a dwelling-house to which the Rent and Mortgage Interest Restrictions Acts, 1920 to 1939, apply, be less than the rent permitted under those Acts:
Provided that the rent shall not in any case be reduced unless the lettable value of the premises has fallen as the result of war circumstances, or to an amount less than the lettable value at the date of the order.
(2) Where the debtor is in possession of any property let under a hire-purchase agreement, and any part of the hire-purchase price remains unpaid, the Court may, if it thinks fit to do so having regard to the value of the
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property at the date of the order and the amount already paid by the debtor in respect of the hire-purchase price, vest the property in the debtor, either immediately or after the payment of such further sums (not exceeding the balance of the hire-purchase price) as may be specified in the liabilities adjustment order, and the person who let the property under the agreement shall be entitled to prove for the balance of the hire-purchase price less any sums required to be paid as aforesaid, but shall not have any other remedy against the debtor or the property.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in the proviso in subsection (1), after "unless," to insert "in the opinion of the Court." The noble and learned Viscount said: The object of this Amendment is to prevent litigation on the question whether the Court has made a mistake in its estimate of the lettable value of property. The Court will no doubt have heard the evidence of the parties, including probably information from the assessment committee of the latest valuation of comparable property in the neighbourhood, and it is not thought fair that the Court's decision should be capable of being upset by proceedings in a higher Court. Therefore it is thought right to insert the words "in the opinion of the Court."
Amendment moved—
Page 8, line 21, at beginning insert (" in the opinion of the Court ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to insert after subsection (1):
"(2) For the purpose of determining under subsection (3) of Section nine of the War Damage Act, 1941, the value of the debtor's interest in any premises to which the last foregoing subsection applies, any reduction of rent made under that subsection shall be disregarded. ''
The noble and learned Viscount said: Under Section 9 (3) of the War Damage Act, 1941, the value of a proprietary interest is the amount that it might have been expected to realise on a sale on March 31, 1939, if it had been subsisting on that day with the like incidence in all respects as it had immediately before the occurrence of the damage. If the Adjustment Court reduces the debtor's rent under Clause 6 (1) of the Bill and the premises sbsequently receive war damage for which compensation is ultimately paid under the War Damage Act, the reduced rent will make the debtor's interest more

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valuable than it would otherwise be and consequently the debtor will be able to claim an unfairly large proportion of the compensation. The Amendment is inserted to cure that injustice. I would point out that it was not possible to insert these words earlier—though they had not escaped notice—because that could not be done until the War Damage Act had received the Royal Assent.
Amendment moved—
Page 8, line 23, at end insert the said new subsection.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR had given Notice of Amendments in subsection (2), to alter "property," wherever that word occurs, to "goods." The noble and learned Viscount said: The five Amendments on the Paper to leave out the word "property" and insert "goods" have been put down in view of the fact that it is proposed to introduce a new definition of "hire-purchase agreement." With your Lordships' permission I will move them together.
Amendments moved—
Page 8, line 24, leave out (" property ") and insert (" goods ")
line 27, leave out (" property ") and insert (" goods ")
line 29, leave out (" property ") and insert (" goods ")
line 33, leave out (" property ") and insert (" goods ")
line 36, leave out (" property ") and insert (" goods ").—(The Lord Chancellor.)
On Question, Amendments agreed to.
Clause 6, as amended, agreed to.
Clause 7:
Mortgagees.
(4) In considering under the last foregoing subsection whether the rate of interest payable on the amount secured by the mortgage should be reduced, the Court shall have regard to any reduction in the annual value of the mortgaged property due to war circumstances.
THE LORD CHANCELLOR: The first Amendment to this clause is purely formal. I beg to move.
Amendment moved—
Page 9, line 25, leave out (" the mortgagee of any mortgaged property ") and insert (" any mortgagee ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR THE LORD CHANCELLOR moved to leave out subsection (4) and insert:
"(4) The Court shall not reduce the rate of interest under the last foregoing subsection, unless the annual amount payable by way of interest at the existing rate exceeds the net annual profits which in the opinion of the Court the mortgaged property could at the date of the order reasonably be expected to produce, and any such reduction of the rate of interest shall be limited to the extent of that excess."
The noble and learned Viscount said: As this is a rather more important Amendment, perhaps I might just give a short explanation of it. It is proposed to leave out subsection (4) in the Bill because I think its meaning is obscure. As it stands in the Bill it reads:
"In considering under the last foregoing subsection whether the rate of interest payable on the amount secured by the mortgage should be reduced, the Court shall have regard to any reduction in the annual value of the mortgaged property due to war circumstances."
The direction to "have regard to" does not always indicate what you have to do when you have had regard to it. I think the right form of the subsection is that which I am now proposing to substitute. The true principle must be that the Court should, in reducing the rate of interest on a mortgage, be concerned only with the question whether the mortgagee, while he is being kept out of his security, is getting a fair return on his money in all the circumstances of the case.
It would not be found that the mortgagee necessarily does badly. If the Court were to lift its ban on any dealing by the mortgagee with the property, the mortgagee's rights would be either to realise it immediately or to take possession of it or to appoint a Receiver of the profits. Immediate realisation might be very much against the interests of the mortgagee, but the proceeds could be invested and earn some interest. The value of appointing a Receiver would depend on the profits obtainable at the time, but there might be at least some profits. Under subsection (3) the mortgagee has the advantage of getting some interest on his money without the necessity of realising at what may be a bad moment. The Amendment enables the Court to relate the interest to the profits which the mortgagee would have obtained if he had been allowed to appoint, and had appointed, a Receiver. In other words

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you cannot get more out of the property than the property will yield. The property may, in many ways, have lost a great deal of value, but it is not right to tamper with the rate of interest beyond a point at which it represents what can be got out of the property.
Amendment moved—
Page 9, line 44, leave out subsection (4) and insert the said new subsection.—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 7, as amended, agreed to.
Clause 8 [Provision for securing payment of sums in respect of property or under contracts retained or adopted by the debtor]:
THE LORD CHANCELLOR: There is a drafting Amendment to this clause. I beg to move.
Amendment moved—
Page 10, line 27, leave out (" property ") and insert (" goods ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 8, as amended, agreed to.
Clauses g to 22 agreed to.
Clause 23:
Extent of Part I.
(4) Any reference in this Part of this Act to the Courts (Emergency Powers) Acts, 1939 and 1940, shall include a reference to the Courts (Emergency Powers) (Scotland) Act, 1939, and any reference to Section one of the Courts (Emergency Powers) Act, 1939, and to subsection (5) of that section shall respectively include a reference to Section one of the Courts (Emergency Powers) (Scotland) Act, 1939, and to subsection (4) of that section.
THE LORD CHANCELLOR THE LORD CHANCELLOR had given Notice of two Amendments to subsection (4)—namely, to leave out "Any reference in this Part of this Act to the Courts (Emergency Powers) Acts, 1939 and 1940, shall include a reference to the Courts (Emergency Powers) (Scotland) Act, 1939, and"; and, at the end, to insert "and any reference to a bankruptcy petition shall include a reference to a petition for sequestration." The noble and learned Viscount said: The first Amendment is pure drafting. There was a reference to the Courts (Emergency Powers) Acts which is no longer needed.
Amendment moved—
Page 22, line 21, leave out from beginning to (" any ") in line 23.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The insertion at the end of the subsection is necessary in order to be sure that we have allowed for the Scottish procedure.
Amendment moved—
Page 22, line 27, at end insert (" and any reference to a bankruptcy petition shall include a reference to a petition for sequestration ").'—(The Lord Chancellor.)
VISCOUNT MAUGHAM: May I say one word before we go on to the next clause in the Bill? I do not quite know whether the matter which I am going to mention is one that is quite properly in order, but it is a species of reminder. Some of your Lordships, at any rate, will know that in the Bankruptcy Act which now exists there is, in Section 148, a very important and widely extending clause which makes an exemption in respect of all Stamp Duty for the various documents, deeds, orders and so forth necessary in bankruptcy proceedings, and I am anxious to know that the Government have not omitted a similar clause with suitable modifications from this Bill with the deliberate intention that such stamps should be made payable. The matter is, perhaps, one which could best be left to be dealt with in another place.
THE LORD CHANCELLOR: I am grateful to my noble and learned friend for being good enough to mention this to me privately a day or two ago. I have had communications with the Treasury, and I agree with my noble and learned friend in thinking that if anything can be done it would be, perhaps, more appropriately done by Amendment in the other House. It is true that there is a most valuable concession in respect of Stamp Duty made under a section of the Bankruptcy Act, and if there are going to be a great many cases of conveyances to trustees under this Bill the amount of stamps is going to be quite considerable. As we are dealing with people who, in the main, are very hard pressed, it may be that we shall be able to recognise that to some extent the stamp law should be modified in their favour. I must not say more on this now; I have had no chance yet of seeing the Chancellor of

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the Exchequer. But there is no harm, I think, in my saying that personally I shall be very glad if anything can be done.
On Question, Amendment agreed to.
Clause 23, as amended, agreed to.
Clauses 24 to 26 agreed to.
Clause 27:
Interpretation.
27.—(1) In this Act unless the context otherwise requires the following expressions have the meanings hereby respectively assigned to them:—
"hire-purchase agreement and "hire-purchase price" have the same meanings respectively as in the Hire-Purchase Act, 1938;
THE LORD CHANCELLOR THE LORD CHANCELLOR moved, in subsection (1), to leave out the definition of "hire-purchase agreement" and insert:
"'hire-purchase agreement' means any agreement defined as a hire-purchase agreement by Section twenty-one of the Hire Purchase Act, 1938, and also includes any agreement for the sale of goods under which the price is payable by instalments and the property in the goods remains in the seller, notwithstanding that the buyer is in possession of the goods, until such conditions as to the payment of instalments or otherwise as may be specified in the agreement are fulfilled; and any reference, in relation to a debtor, to goods let under a hire-purchase agreement shall be construed as meaning any goods delivered to the debtor under a hire-purchase agreement and in his possession, being goods the property in which remains in the seller or letter thereof;
'hire-purchase price' means the total sum payable by the hirer or buyer under a hire-purchase agreement in order to complete the purchase of goods to which the agreement relates, exclusive of any sum payable as a penalty or as compensation or damages for a breach of the agreement."
The noble and learned Viscount said: Amidst a bunch of, I am afraid, very uninteresting Amendments, this particular one has a certain flicker of interest. It appears that it is not enough to use the definition of "hire-purchase agreement" which has already been put upon the Statute Book because it is believed in some quarters that there is another arrangement which produces very much the same results but which, none the less, would not be called a "hire-purchase agreement." It is a special arrangement in the nature of conditional sale which, of course, passes the possession, but it is so
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arranged as not to pass the property, and the property does not pass to the purchaser until the final instalment has been paid. We mean our Bill to apply to that just as much as to anything else and I have enlarged the definition so as to produce the result which we intend.
Amendment moved—
Page 25, leave out lines 1 to 3 and insert the said new words.—(The Lord Chancellor.)
On Question, Amendment agreed to.
THE LORD CHANCELLOR: The next Amendment is consequential.
Amendment moved—
Page 25, line 5, leave out (" it is estimated that ") and insert ("in the opinion of the Court ").—(The Lord Chancellor.)
On Question, Amendment agreed to.
Clause 27, as amended, agreed to.
Remaining clause agreed to.

SOLICITORS BILL [H.L.]
Order of the Day for the Second Reading read.
LORD WRIGHT: My Lords, I beg to move that this Bill will now be read a second time. I do not intend on this occasion to detain your Lordships very long in discussing the principles of the Bill, because last year I had the honour of introducing a Bill which, with one exception, is practically identical with the present Bill. The Bill which I introduced last year went through all stages in this House with, I think, general approval, and it had the support of the noble and learned Lord Chancellor. Unfortunately, owing to lack of time, it could not be introduced into the other place by the Attorney-General, who was prepared to do that if there had been time, and it was thought better to reintroduce the Bill here this year.
The Bill may be divided into two parts. One part may be said to deal with larger questions of considerable public interest. The other deals with many matters of detail and administration which in the ordinary professional societies would be dealt with by the societies themselves, but owing to the very close regulation by Parliament which has gradually reduced the power of proceedings by solicitors, recourse must be had to Parliament whenever it is sought to modify the processes

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followed by the Law Society in dealing with professional matters. The second division of the Bill is not a formal division; I merely make it for convenience. It needs, I think, no comment here to-day. All the provisions in that particular part were examined by a Joint Select Committee of both Houses of Parliament which sat upon the earlier edition of this Bill, so that these provisions which are now in the Bill to-day have not merely been approved by this House but have also had the approval of the Joint Select Committee.
The part of the Bill which is of more general interest deals with the question of solicitors' accounts. Although the standard of honesty and honour among solicitors is very high it is, unfortunately, only too familiar that from time to time solicitors are guilty of defalcation, such as taking out and spending and converting to their own use funds of their clients. We have all heard of some very distressing instances. As long ago as 1933 it was sought to deal with that difficulty by giving the Law Society power to make rules requiring solicitors to keep their accounts in a certain way and to keep their money separate from that of their clients. These rules have been made, and there is a general power under the earlier Act for the Council of the Law Society to examine accounts. That was successful to a very considerable extent, but it was not effective enough, and the Joint Select Committee to which I have already referred, and of which I was a member, when considering that question, made, with the support and sympathy of the Law Society, certain recommendations which have been embodied in this Bill.
The first is that every solicitor who obtains what is called the "practising certificate," which is necessary if he is to conduct a practice on his own account, has to produce to the Law Society, to the Registrar of Solicitors, an accountant's certificate for the previous year. The dates, of course, are conveniently fixed, but each year an accountant's certificate must be produced. The Law Society are charged with the duty of determining the precise extent of that certificate. On the last occasion my noble friend Lord Man-croft criticised with very considerable effect the provisions in that respect, because he thought that express provision should be made for a much more stringent
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audit than appeared to be suggested. I can only say that the Law Society considered very carefully what he said, and indeed the Select Committee had had their attention directed to the same question; but the conclusion arrived at was that, as a practical measure and out of fairness to practising solicitors, the requirements as to the audit ought not to be more stringent than had been contemplated in the previous Bill, and as contained in the present Bill.
I may point out, however, that most stringent powers are given to the Council of the Law Society, in any instance where there is a prima facie case of dishonesty made against a solicitor, to call for the closest scrutiny and discovery of documents, papers, accounts and so on. A special clause deals with the position of a solicitor who acts as a trustee—what is called a trustee solicitor. He is not a trustee in his professional capacity, which is a separate capacity, and therefore the matter must be separately provided for. That deals with the question of accounts.
The next main provision carries the matter a stage further. The mere keeping of accounts cannot secure absence of dishonesty or defalcation and, that being so, it was decided, again following the recommendations of the Select Committee, and with the sympathy and support of the Law Society, and indeed at their instigation, to recommend that a fund should be created which would be fed by contributions from the members. Each solicitor obtaining a practising certificate will have to make his contribution, along with the fee which he has to pay. In that way a fund will be created which will be administered by the Law Society, and they will make rules for the due conduct of the matter—the creation of the fund, payment to sufferers and so on.
There is one other thing which I wish to mention to-day, and that is the provision which requires every solicitor who takes out a practising certificate to become a member of the Law Society. The Law Society, when founded a hundred years ago, was in the nature of a club: but it has now grown, and, of the 17,000 practising solicitors, 11,000 are members of the Law Society. The Law Society have very serious duties to perform; and it has

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been felt—and your Lordships approved the suggestion on the last occasion—that all practising solicitors should be members of the society and should have an interest in what is going on and should be able to take part in the proceedings; incidentally, moreover, they should make a small contribution to the expenses of the Society by paying the subscription which every member has to pay. These are the three main provisions to which I wish to refer to-day, and, as I say, they have already received the approval of this House. I beg to move.
Moved, That the Bill be now read 2a.—(Lord Wright.)
LORD MANCROFT: My Lords, I think that I have taken a somewhat active part in nearly every step connected with proposals for legislation of the kind indicated in this Bill since the Solicitors Bill was introduced in the other House in 1929 by Sir A. Somerville, M.P. Now that we have probably come to the end of our journey, at any rate for a few years, I should like to offer my thanks to my noble and learned friend—and the thanks of the public are due to him also—for having given his time and his unrivalled knowledge of the problem to helping forward this legislalation. As he has said, this Bill is substantially the Bill which went through the various stages in your Lordships' House in July, 1940. I supported it then in principle, and ventured to inflict upon your Lordships' House on that occasion a long series of observations of a critical, but not of a hostile nature, in which I pointed out what I considered to be weaknesses in the machinery of the 1940 Bill. My noble and learned friend has referred to my observations. All I desire now is that this Bill's machinery should be strengthened. So, although I wish to speak for a moment now, I do not propose to repeat those criticisms on the 1940 Bill, but merely to ask that they may be accepted as applying to this 1941 Bill, subject to alterations which have been imported into it since I last spoke.
I am more than ever convinced, however, that a great part of the mischief which has affected a body of men who are undoubtedly honourable, conscientious and upright, who have undeservedly suffered from the ill-deeds of a very small number of their body, the
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mischief which has caused much of the loss that has fallen upon the public, has arisen from the way in which sole partnership firms have sometimes been conducted. I myself have noticed how the mischief has developed. I should like to say both to my noble and learned friend and to the Law Society (if my words reach so far) that they must realise that the focus of mischief which has brought discredit upon an honourable body of men and losses to the public, is for the most part to be found in the sole partnership firms. For that reason I will say this. This Bill gives definite powers to the Law Society, particularly the power of requiring accountants' certificates. Is it too harsh for me to say that the Law Society should exercise the powers under this Bill with regard to accountants' certificates more rigidly where there is a sole partnership firm than it would do in the case of a firm which has more than one partner? It seems an illogical thing to say, but there it is. If you look through the convictions in the criminal courts your Lordships will find that unfortunately the majority of the cases refer to sole partnership firms.
My noble and learned friend Lord Wright, referred to the fact that I did not think the accountants' certificates in the form it was proposed to demand them would be strong enough for the purpose. That is my view. Whether it be with regard to a solicitor's firm or with regard to an ordinary manufacturing or trading firm, such as I have been associated with the whole of my life, I do not like the term "as shown by the books." It shirks the task. Books can deceive. For an accountant to be satisfied with what he sees as shown by the books is not enough in many cases. I think there should be no difficulty in constructing a form of book for solicitors, just as banks construct their own form of books, which are examined by visiting inspectors to branch banks to enable the inspectors to find track of every sum of money and every security that passes into the custody of the bank or the solicitor, as the case may be.
The accountant, before he gives a certificate, ought to satisfy himself by his own test that any securities, valuables or money which have passed into the custody of the solicitor are recorded there, so that what he finds recorded in the books

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he knows himself to be true of his own knowledge. Then I think he should demand to be shown by actual exhibit or by vouchers and proper certificates what has become of this money, or what has become of this deed, whether it exists. The whole route of the property must be followed right through the books till it passes out or remains, and its existence shown in the books on which the auditor has to give a certificate. I think that if the accountants and auditors would only get away once and for all from shielding themselves behind the phrase "as shown by the books" of a concern, we should go a long way towards curing this mischief which has brought discredit on an honourable body of men. Well, I wish this Bill well. It has been delayed ten years too long. I support its principles and I hope that, subject to such Amendments as another place may consider it wise to import into it, it will pass into law at the earliest possible moment.
THE LORD CHANCELLOR: My Lords, before I put the Question, perhaps I might be allowed to say in a couple of sentences that I hope this Bill will receive the support of your Lordships' House and will in the course of the Session find its way to the Statute Book. It appears to me that those specially interested are greatly indebted to my noble and learned friend Lord Wright for the endless trouble he has taken in the matter. So far as I can see, the Bill is now in a form which would well justify our giving it a Second Reading, and I hope that without too much change we shall pass it and send it to another place.
On Question, Bill read 2a, and committed to a Committee of the Whole House.

CHARTERED AND OTHER BODIES (TEMPORARY PROVISIONS) BILL. [H.L.]
House in Committee (according to Order): Bill reported without amendment.

PUBLIC WORKS LOANS BILL.
Order of the Day for the Second Reading read.
THE LORD CHANCELLOR: My Lords, I move the Second Reading of the
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Public Works Loans Bill. It is a Bill of five clauses. The first four clauses are in common form and I do not think any description of them will be called for. The fifth clause is of more special interest. Your Lordships will know that since the beginning of the war there has been a ban on the conversion of stocks issued by local authorities. That ban was laid down at the beginning of the war in order to exercise a strict control and to conserve our capital resources. The time has now come when rather more latitude can be given, and in Clause 5 there is a provision that local authorities can be allowed to exercise their options under the plan as therein set out which will still avoid any direct dealings on the market, and thus reduce to a minimum interference with the Government's borrowing operations.
Clause 5 (1) will enable the Treasury to make advances out of the Local Loans Fund to local authorities to enable them to pay off any stock which is not taken up by holders under a conversion scheme, and it is a condition of this assistance that the local authority should exercise this option and hand over new securities in exchange only with the approval of the Treasury. I know from the time when I was at the Treasury how important this is to some local authorities in the country, and I think it will give great satisfaction that we are now able to relieve them, to some extent at any rate, from what they had felt to be a highly inconvenient bar.
Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
LORD MANCROFT: My Lords, we are all very familiar with these Public Works Loans Bills. As a matter of fact, it was my privilege to introduce several of these Bills into another place. I will only refer cursorily to the writings off under the Agricultural Credits Act, 1923, because quite recently the noble and learned Viscount on the Woolsack drew attention to the fact that in the War Damage Act the Board of Trade would have the assistance of the Inland Revenue valuers. That is so, but I am inclined to think that the public, if they have to fall back on that, will not have much confidence in the valuers. If the noble and learned Viscount on the Woolsack will look at the Schedule on page 5 he will see mention of eleven defaulted

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loans. I have gone to some pains to find out from the Bill itself what they were officially valued at, and what these properties realized when the Government foreclosed. I think I shall not be far wrong if I say that the valuers were so correct in their separate valuations that they valued these eleven properties at a total of £76,000 odd and they fetched £38,000—exactly half. Why? It is not encouraging to the public to be told that under this or any other Bill they may look to the guidance of the official valuers, when they see valuations so much out of actuality. It is too late to do anything now, but when we offer our thanks, as no doubt we shall do, to those gentlemen who will give their public-spirited services as members of the Commission, we might ask them to consider for a moment how it is that valuations were so much out of gear when loans of public money had to be made. Is it a normal occurrence?
I pass from that to Clause 5. It is a novel clause. I am in accord with this clause. It is a proper decision that municipalities and public authorities generally should be allowed to pay off their loans bearing high rates of interest, by issuing conversion loans, provided they do not infringe the contractual obligation under which the money was borrowed. If the dates at which they propose to pay off loans which carry a higher rate of interest than is now justifiable, are the contractual dates for repayment, well and good. But there must not be a repetition of the short-sighted policy shown by the Treasury recently in requisitioning securities of a trustee nature with fixed dates and repayable only in sterling. I say under reservation, the currency being only sterling. I may be wrong on that point. I am referring to the India stocks. Apart from the fact that paltering with the sanctity of contract is wrong, such a policy may have expensive and damaging repercussions on future issues by the Treasury of British Government loans, or even on municipal loans, and for this reason. Nervous investors or trustees may say to themselves, "The Treasury, or those acting for the Treasury, or the county councils or municipalities are about to ask for subscriptions to loans with fixed dates of repayment. What is that promise of fixed date worth? We have seen in March, 1941, what hap-
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pened in regard to the fixed dated India loans. Were the contracted terms of issue respected?" They may hesitate, and it may cause the borrowers—that is, the public authorities of Great Britain—to pay a slightly higher price for their money because doubt has been imparted into the mind of the public regarding the ultimate interpretation of the contractual obligation by the borrower as to the date of repayment. This is not the time or place to go into the recent requisitioning of the long-dated India loans, but I put in this caveat so that the Treasury may see that their action in regard to that matter has not passed unnoticed and that even as a war measure it is regarded as imprudent.
I would say this with regard to the municipal loans to be repaid. No doubt many people who hold loans, which are now giving them a higher rate of interest than is at present justified, will be willing to take conversion loans at a lower rate of interest. If steps are taken by the banks to whom dividends are sent, to get into touch with customers who are holders of these municipal stocks, advising them not only that they can be converted but that they should be converted, I do not think much of the loans will go untaken up by the public. I do not think the National Debt Commissioners will be asked to take up much of them. But if any money has to be found the National Debt Commissioners will find it without difficulty. I would put this point to my noble and learned friend on the Woolsack. When conversion loans are issued to the holders, who are probably people of small means and trustees or public institutions, if it were made quite clear that there are to be sinking funds and that the sinking funds for these loans would be applied to the loans either by way of purchase or as cash and later available for repayment purposes, that would give an additional inducement to the public to take up the loans. Indirectly it would keep up the market price of the loans and thus enhance the credit scale of the borrower.
There has crept in of late years the habit on the part of municipalities to use their sinking funds by re-borrowing them. A municipality may have a sinking fund on a loan, and when it requires fresh money, say, for some local improvement in the municipality, it borrows from

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the sinking fund and thus hides from the ratepayers that it is spending money and increasing debt. That is a bad system. A sinking fund should be used for the purpose for which it was intended, not to float loans for the earlier borrower. Subject to these remarks, I feel, speaking for
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myself, that I should be justified in giving my vote in support of this Bill.
On Question, Bill read 2a, and committed to a Committee of the Whole House.
House adjourned.