HL Deb 01 August 1944 vol 133 cc15-23

Order of the Day for the Second Reading read.


My Lords, I move the Second Reading of this Bill, which amends the principal measure, the Liabilities (War-time Adjustment) Act, 1941. Under the principal Act, adjustment officers were appointed in various parts of the country to advise and assist persons who were in serious financial difficulties owing to war circumstances. There is no doubt that the service of these adjustment officers has proved very useful, and in quite a large number of cases has led to agreement between landlord and tenant or the like, which is all to the good. The adjustment officers also have power to draw up schemes of arrangement for the affairs of an individual who is in difficulty owing to war circumstances. The matter may he carried even further, and recourse may be had to the courts; and the courts will if necessary grant to an embarrassed debtor what is called a Protection Order, which will protect him from legal proceedings in respect of his debt.

The new Bill consists mainly of Amendments of the principal Act. Experience has shown that on a number of points, somewhat unimportant in themselves, Amendments are desirable, and these have been carefully drawn to make the necessary changes. I shall not delay the House by describing them, except in the case of the amendment in Section 8. Clauses 1, 2 and 3 of this Bill, however, deal with rather different and I think more interesting matters. Your Lordships probably know that there are areas on the East Coast and the South Coast of this island which have been specially dealt with under the Defence (Evacuated Areas) Regulations, 1940. We call them evacuation areas. They are areas from which a great part of the population has gone, and to a large extent has been encouraged to go, but these people have left behind them empty houses, or, it may be, houses with furniture. They have the obligations which arise from their leases and mortgages and so forth, and it is a matter of great difficulty to know how to deal with them.

The position at present is that where there is an evacuation area of this sort certain obligations cannot be enforced. You cannot force the tenant to pay his rent or the mortgagee to pay off his mortgagee, and so forth, and naturally so, because these people have left the place in which they were living and are often without resources, so that in many cases they cannot meet these obligations. That is all very well, but it has the serious disadvantage that as time goes on and the months and the years go by there is piling up an immense debt owed by each of these people under a sort of moratorium, because although they are protected against demands for payment they are not in any way being relieved of their obligations.

When we come to the time when these people go home again—and to some extent in some areas that is beginning to happen—it is most undesirable that they should come back and find that there is a large lump of debt on their shoulders with which they cannot deal. We therefore propose, in Clauses 1 and 2 of this new Bill, to provide that these adjustment officers may also deal with matters of that sort and endeavour to negotiate reasonable terms between landlord and tenant and other creditors and debtors. If the landlord's house has not been occupied and the tenant has not been able to enjoy it, it is manifestly a case in which there ought to be a reasonable adjustment reached, and it has been found by experience that the use of adjustment officers has been very helpful in that regard. Under the present arrangements for evacuated areas no rent and no rates are payable, but they go on piling up, and it is very important that these people, when they return to their homes, should be able to get rid of their past liabilities on reasonable terms, and be able to start life anew in a reasonable way. As it is, that is not what happens; the evacuated tenant is not obliged to pay, but at the same time his debts are piling up.

Clause 1 of this Bill, therefore, secures that these adjustment officers may endeavour to settle moratorium debts and liabilities. This is a provision to which I attach a great deal of importance. These officers have secured a good reputation where they have worked, and have shown themselves to be very sensible people. They are largely connected with the County Courts, and undoubtedly a great deal of good can be done by their use. If they fail in a case where they think they ought to succeed in getting a settlement of moratorium debts and liabilities, the Court may be invoked and will endeavour to secure an arrangement by which these people will not be left with too heavy a burden placed on their backs.

The areas which are called evacuation areas look very odd on the map; they are a series of selected areas, sometimes not touching one another, running from Great Yarmouth to Shoreham. Clause 3, therefore, puts upon the unfortunate Lord Chancellor a duty which he will endeavour to discharge, by providing that: Where it appears to the Lord Chancellor, as respects any area which has not been declared an evacuation area for the purposes of the Defence (Evacuated Areas) Regulations, 1940, that extensive and prolonged evacuation has taken place in the area as a result of war circumstances, and that it is expedient that the foregoing sections of this Act should apply in relation to that area, he may by order provide for the application of the said sections to debts and liabilities to which they would apply if the area had been declared as evacuation area. … This is a duty which someone has to discharge, and nobody else seems willing to do it, so that, being myself in some sense responsible for the adjustment officers, it seemed not altogether unnatural that this task should be added to the multifarious and interesting occupations attached to my office. So much for those three clauses.

I should like to make a brief reference to Clause 8, which provides that: When the court is of opinion that, for the purpose of arriving at an adjustment and settlement of the debtor's affairs that will afford to him a reasonable prospect of preserving or recovering his business or other means of livelihood, it is necessary to relieve him wholly or partly from liability in respect of rates, the court may provide in the liabilities adjustment order for remitting or reducing any sum which he is or will become liable to pay in respect of rates. That is really a necessary provision, because these people have been absent from their proper area for years on end, with no obligation to pay rates half-year by half-year, and many of them have by this time become liable for larger sums in respect of rates than they can pay.

In that connexion there is an announcement which I should like to make which should be of interest at any rate to those concerned. As your Lordships know very well, the fixing of the figure for Schedule A under Income Tax is closely connected with the figure for rates and rent; it is an annual value. The Commissioners of Inland Revenue, who are responsible for Schedule A assessments—or perhaps I had better say the Treasury—authorize the statement that this will be the probable effect of Clause 8 on Schedule A tax: that is to say, that in considering any application for the remission of Income Tax, Schedule A in a case in which the court has allowed a remission or reduction of rates under this clause, due regard will he paid by the Commissioners of Inland Revenue to what has been done in respect of rates. This involves very welcome relief to those persons who are feeling the heavy burden of Schedule A in these areas.

Moved, That the Bill be now read 2a.—(The Lord Chancellor.)


My Lords, the noble and learned Viscount on the Woolsack over a long period of years and in a great variety of circumstances has so often been told that he has given a clear and lucid explanation that I think he must be thoroughly sick and tired of the phrase. But to-day his task has been somewhat simpler than has on occasions been the case. Speaking on behalf of my noble friends on these Benches in 1941, on the Second Reading of what was then the Bill of which this present Bill is an extension and an amendment, I drew attention to the fact of the exceptional clarity and lucidity, as it seemed to me, with which the Bill had been drafted, and that comment, which I ventured to make in terms of commendation on that occasion, I would wish fully to repeat again to-day in regard to this Bill. It seems to me as a sheer piece of drafting to be quite admirable, as was its immediate predecessor, and a model of legislation in this respect.

I should like to draw the attention of your Lordships to something in this Bill in the nature of drafting which, as far as my knowledge goes, is quite exceptional, and which I think might, with great advantage to the public interest, be followed in legislation over a far more widely extended field. If your Lordships will refer to the Bill it will be observed that there are a number of clauses which import amendment of the principal Act. It is very difficult, either for the legal practitioner or for the ordinary business man affected by a Bill of this kind, or indeed for the Judiciary, to follow detailed Amendments when made merely by reference. The Lord Chancellor—I think it is worth while commenting on—has done in this Bill what I do not remember ever to have seen before. While setting out, necessarily as he has done, in Clauses 4 and 5 certain detailed Amendments to the earlier Act, he has added to the Bill a Schedule, the First Schedule, in which the provisions of the earlier Act are set out at length as amended by this present Bill; so that anyone seeking to know the purpose and import of the Amendments made in this Bill would not have to look back to the earlier Bill and go through the process of collation for himself, but would find the work done for him in the First Schedule of this Bill. That seems to me to be wholly admirable and, as far as I know, it is a precedent—a precedent that I should like to see followed. If I have a comment to make it is that I rather regret that the same procedure was not followed in relation to the Amendments in Clauses 6 and 7, though I appreciate that the reason may be that those Amendments are of a more substantial nature and easier to follow by collation with the original Act. The point which I have made as to the value of this First Schedule is one of which I should like to think some note might be taken for adoption in some future cases of legislation by reference.

So much for the Bill as a document. I have very little to say of the document as a piece of legislation beyond what has been said, adequately if I may respectfully say so, by the Lord Chancellor. I would repeat what I said on the earlier occasion in respect of the principal Act, that this Bill extends an important new principle whereby substantial justice, in the extraordinary circumstances created by war, may be done between creditor and debtor, giving the creditor what he may reasonably expect in such circumstances to obtain from his debtor, and allowing the debtor to become discharged of his liabilities without the social ignominy or the practical business disadvantages of bankruptcy. There are one or two new points in this Bill to which I would draw attention, because I think they are of some importance. The Lord Chancellor has already pointed out that under this Bill an adjustment may be made in regard to rates. I believe it is the first time that such a provision has been inserted with regard to overdue rates. It is important and it is valuable. I rather thought—but I may be mistaken—that the Lord Chancellor indicated that this Clause 8, with its provision as to an adjustment of rates, was limited in its application to those persons in evacuation areas to whom the first three clauses of this Bill relate, but I am inclined to the view that that would be to put too narrow a construction upon Clause 8, and that it is of general application, whether a debtor is in the evacuation areas or not. I think that is borne out by the provisions of subsection (5) of Clause 8. But I may have very well misunderstood what the Lord Chancellor said on that particular point.

There is a matter arising on Clause 11 to which I thought the Lord Chancellor would refer because this again, as far as I am aware, is something entirely novel in our legislation. In bankruptcy, on the marshalling of liabilities for payment, Crown debts take precedence. If a bankrupt debtor should be so unfortunate—he very often is—as to owe large sums to the Crown by way of taxation, the Crown ranks first, and if the estate is small and the liability for tax large, the Crown may take the whole, to the detriment of the creditors at large. If I understand aright the intention, and indeed the wording of the Amendment to Clause 11, it provides for the first time in matters of this kind that in regard to liabilities on the part of the debtor for debt for taxes the Crown will take its place on the same footing as other creditors, and will be content for the purpose of these provisions to rank equally with other creditors. That is a most valuable Amendment and one which will be fruitful of good and be highly welcome to the commercial community.

Then there is an Amendment which is made in Clause 4 (2), but which is shown much more clearly in the First Schedule in paragraph 3 (b). This provides that, in making adjustments for a debtor unable to meet his liabilities as they fall due, regard may be bad to the requirement that he shall not be denuded of so much of his resources as not to leave him sufficient to preserve or recover his business or other means of livelihood. That means that he is to have a chance, a hope, in future, and that again seems highly desirable. It means a spreading of the sacrifice and the misfortunes which war has brought upon some unfortunate debtor unable to control the situation, that he will not be completely ruined, but will have held out to him the possibility of starting again when the war is at an end. For these reasons, on behalf of my noble friends I commend—indeed I warmly commend—the Bill as a useful, clear piece of legislation highly welcome to the Commercial community.


My Lords, perhaps the House will allow me to say a word or two before I ask for the Second Reading. I am very grateful to my noble friend Lord Nathan for the generous things he has said about the form of the Bill, all the mare so because the form of the Bill is far more the result of the draftsman's efforts than of any effort of mine. It is not entirely new to print part of a Bill as this First Schedule has been printed. It has been done in a few cases in the last few years—in a recent Workmen's Compensation Bill for instance—but it has certainly not been common, and I agree that it is a very convenient thing to do. It is a very good halfway house between two difficulties. Many people demand that new Bills should not contain any legislation by reference. There are plenty of Bills which would horrify the House if they were drawn without any such reference. Everything would have to be written out again with all sorts of definitions, and it would not be at all convenient. On the other hand, you can have a Bill drawn so cryptically that unless you have access to a large library containing all the Statutes you really cannot make out what it means.

This First Schedule is drawn on an ingenious principle. Noble Lords who are interested will see that it is brought in in the words used in Clause 4, which says: The amendments specified in the following provisions of this section shall be made in subsections (1) and (6) of Section three of the principal Act (which relates to an application for the adjustment of a debtor's affairs), and accordingly the said subsections shall have effect as set out in the First Schedule to this Act. It is really stated twice over—first in the body of the Bill, and then those who think it is not too clear can turn to the Schedule and see how it works out from one end to the other. I agree with my noble friend that it is a very good change. That is one provision for which I ought not to claim any particular credit, except that when I saw it used before I loudly declared that it was very good.

I agree with my noble friend that Clause it is a very significant clause. As he says, when you get people who are in bankruptcy, there are certain kinds of debt which have to be paid in priority to other debts. Generally speaking, they have to pay their debts to the Crown up to twenty shillings in the pound before they can begin to think of paying anything to their tradesmen. In Clause 11 we deliberately alter all that. We say: "Here is a man who is struggling to get on his feet again. He will probably be very short of cash. If we keep the law as it is he must pay the whole of the King's taxes and the whole of his rates and every other preferred debt first. He will have absolutely nothing with which to pay his trading debts or start himself in business. Therefore, let us, keep the Crown debts perfectly level with all other debts and claim no other priority." That has been done, and it is a very good thing indeed to do.

An observation that might have been made is that we have taken upon ourselves here to claim power to modify the rate charge. That sounds very alarming, because what are the rate authorities going to say? The real answer is that in these areas, at any rate, the rating authorities have to be assisted by very substantial subventions. Their own receipts have dwindled owing to the fact that so many people have gone away and are not living in their houses. On the whole you may regard that as being in the nature of a provision that the Crown must not claim in advance of other people. I shall not repeat what has been said already, and shall only thank my noble friend for what he has been good enough to say. I had better stop because if I do not I can see that this Bill will become the most popular Bill of the Session!

On Question, Bill read 2a, and committed to a Committee of the Whole House.