§ 2.50 p.m.
§ 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 Munster.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The EARL OF BUCKINGHAMSHIRE in the Chair]
§ Clause 1 [Payments in respect of unfit houses occupied by owners]:
§ On Question: Whether Clause 1 shall stand part of the Bill?
§ LORD SILKIN
There are one or two things I should like to say on this clause, 1048 and particularly on that part of the clause which deals with the question of mortgagees. On Second Reading I explained my position, but since then I have been informed that the building societies, in particular, are apprehensive about this provision. I have no predisposition in favour of building societies, nor have I anything against them: they are doing a valuable piece of work. The building societies are concerned that this Bill creates a precedent, and feel that in certain circumstances, although there may be money outstanding on a mortgage, it will be possible for the mortgagor to go to the court and ask for the court's discretion to wipe out the balance of any money so outstanding. In my Second Reading speech I took the view that I could not foresee any circumstances, except where the mortgagee had behaved improperly, in which a court would exercise its discretion and cancel the balance outstanding. Therefore, I thought that this provision was illusory and was not going to help the owner-occupier at all. On the other hand, there it is, a provision in what will be an Act of Parliament stating that people who have lent their money in good faith, where there is an amount outstanding, do run the risk of forfeiting whatever is outstanding.
I should be grateful, first of all, if the noble and learned Viscount the Lord Chancellor could tell me whether there is any precedent for such a provision. It seems to me to create an extraordinary precedent. If, after an advance has been made in good faith, it is possible that any balance outstanding may be in jeopardy, it may give rise to an entirely new outlook on the part of building societies and others lending money. A building society and the ordinary lender of money will have to be exceedingly careful in case hereafter a court should hold that, on some grounds of equity, the lenders will have to lose the balance of their money, and are not to be entitled to rely on the personal covenant of the borrower.
Moreover, there is the position of trustees who may have advanced money, again in good faith, on property which in 1939 seemed to them perfectly sound property but which since then has deteriorated and may have become represented as a slum property. Finally, there is the 1049 case of the person who, out of the goodness of heart, wanting to help another person desperately in need of a house to buy one, advances money and knows that the amount advanced is possibly in excess of what may have been advanced on a purely business footing. That person is specifically singled out in the Bill as a person who advanced money knowing that the security was not there: the attention of the judge is directed to him, and he is a person who may definitely lose his money.
I would ask the Lord Chancellor to consider all these cases, and particularly the point that we are here creating a precedent which may hereafter be found to be most undesirable. This Bill is designed to help the owner-occupier, and the last thing I want to do is to put forward any proposal which will make his position worse than it is under the Bill. My own feeling is that the right way of dealing with this problem is to go all out and really help the owner-occupier by relieving him of any obligation that may exist in respect of his house. If the Government tell a person actually living in a house that it is insanitary, and he has incurred obligations in respect of that house, then it is for the local authority who require the house to see that he goes cut free of any debt. There are only a limited number of these cases, and I cannot for the life of me see why it should not be possible to provide that the local authority should take the house as it stands, with all liabilities. If there is a mortgage outstanding, I cannot see why they should not pay the balance, and be given a discretion to go to court if they feel that either party has acted improperly.
I agree that if the owner-occupier has deliberately allowed his house to go into disrepair, and has not spent a penny on the house for the last ten years, and thereby has caused the house to become a slum house by his own inaction, he should not get the benefit of a provision of the kind I have in mind. But that is not the normal case: most people who own a house look after it to the best of their ability. I should have thought that, in those circumstances, the right way to deal with it would be as I suggest: that the local authority should have a discretion to pay to the owner-occupier the full value of the house, in- 1050 cluding any amount that may be outstanding on mortgage, with the proviso that in a particular case they might plead that the state of affairs had been brought about by the owner-occupier himself. This Bill is limited in its period by definition. There will be few cases of this kind, and I cannot think that it will impose any great burden on any local authority. In this way, I am sure that justice would be done, and the Government would not be in any danger of creating difficult precedents. If the noble and learned Viscount, the Lord Chancellor, thinks there is anything in this suggestion, it would be possible to do something about it on the next stage of the Bill. I hope that he, and the Government, will see their way to giving this favourable consideration.
§ LORD MILNER OF LEEDS
The primary object of this Bill, as set out in Clause 1, is obviously wholly desirable. It is right that full compensation should be paid to an owner-occupier in circumstances envisaged by the Bill. It would obviously be quite iniquitous to have a case—and we have had one or two which have had serious consequences—where the property of an owner-occupier was taken for public purposes, or for public reasons, yet the compensation paid was not sufficient to discharge the liability of a mortgage, with the consequence that the owner-occupier was left bearing a heavy burden. I think that was the Pilgrim case. But is not the remedy set out in the Bill quite misconceived? As I understand it, where the compensation is not sufficient to discharge the mortgage, either the owner-occupier himself, as is the case at present, or the lender will have to lose the amount due on the mortgage which was not satisfied by the compensation payable. Surely, when a property is taken for a public purpose, or for public reasons, that is quite wrong.
Reference has been made to building societies. They may be the principal lenders concerned, but one has to remember that there are trustees administering trusts for the benefit of beneficiaries who themselves are no better off—and sometimes are worse off—than those who occupy the premises on which the money has been advanced. Friendly societies are also mortgagees, as, indeed, are trade unions. There is also the individual 1051 lender who, for one reason or another, may have lent money. In present circumstances, when the interest on mortgages ranges from 5½ per cent. upwards, I imagine the great majority of mortgages which are likely to come within the purview of this Bill, would carry low interest—perhaps 4 per cent. or 4½ per cent., or something of that sort—whilst the value of money has, of course, depreciated considerably. All those lenders have lent in good faith, frequently at low interest, and almost invariably at less interest than that at which they would lend to-day.
This clause creates an undesirable precedent. It means that in this case, and, it may be, in other cases affecting properties, mortgages and so forth, the Legislature provides that the sanctity of the contract may be destroyed and no lender will know where he or she is. That seems to me quite wrong. It is not the fault, presumably, of either the owner-occupier or the mortgagee that the property should come within a slum clearance area and should eventually be taken over by a local authority. It is quite right that the full compensation should be paid to the owner-occupier, but it seems to me quite wrong that, in those circumstances, any portion of the burden should be borne by the owner-occupier, on the one hand, or by a lender in good faith, on the other.
I venture to suggest to the noble and learned Viscount that the proper answer is that in all cases compensation should be adequate to discharge the mortgage. I do not quite like Lord Silkin's suggestion about leaving it at large to the local authority. That is possibly better than the course envisaged in the Bill, but I should prefer to see in the Bill a clause whereby the sum paid, in the limited class of cases to which this clause would apply, should be adequate to discharge any existing mortgage on the property. In that way there would be no hardship on the owner-occupier and no hardship on the lender, whether a trustee, an individual or a building society and all parties would be satisfied. The liability cannot be a serious one. The limitations of the Bill, as it stands at present, reduce the number of cases to a very small number indeed. The liability as between the compensation paid under the -present provisions of the Bill and the compensation 1052 which would be required if the amount had to be sufficient to pay off the mortgage, would arise in only a few cases, and would be very small. In those circumstances, I hope the noble and learned Viscount will consider that matter with his colleagues and perhaps let us know before the Report stage whether that or some other suggestion commends itself to him, so that neither party shall suffer when they have acted in good faith.
§ VISCOUNT WAVERLEY
This is a highly complex matter, and I do not myself feel competent to enter into the merits. But it seems to me that the noble Lord, Lord Silkin, has shown good cause for asking the Government to reconsider the position between now and the Report stage of the Bill. There is one further point to which I should like to allude. In certain circumstances, it seems to me that, as the Bill now stands, a mortgagee might have an onus thrown upon him which he would find it difficult to discharge, in having to show, perhaps after the lapse of many years, that the sum of money he lent was prudently lent in all the circumstances obtaining at the time. For that reason, among others, I venture to support the plea which the noble Lord, Lord Silkin, has put forward.
§ 3.7 p.m.
§ THE LORD CHANCELLOR (VISCOUNT KILMUIR)
I agree with my noble friend Lord Waverley that this is a complex matter, and I hope that all your Lordships will agree with me that it is also a matter where it is desirable to do justice between the parties involved because of the circumstances that are well known to your Lordships. The complexity of the matter is shown by the different suggestions that were put forward in successive speeches by the noble Lord, Lord Silkin, and the noble Lord, Lord Milner of Leeds. Therefore, at the risk of trespassing upon your Lordships' time, I wish to point out how this matter arose.
The two subsections of Clause 1 which we are discussing, subsections (4) and (5), were not included in the Bill when it was introduced, but were moved on Report stage in another place in a Government Amendment. That Amendment was designed to meet, so far as possible, the point raised from the Opposition Benches on the Committee stage by the honourable and learned Member, Mr. Mitchison. 1053 It is important to consider the grounds for that Amendment which motivated the Party opposite when they were considering this point in another place. The plight of the owner-occupier, whose payment under Clause 1 might, as a result of changes in the market value of slum houses, be insufficient to meet his outstanding mortgage liabilities, has been in everyone's mind—it has certainly been in my right honourable friend's mind, and in mine—ever since we had to consider the Housing Subsidies Bill in which we thought of dealing with the matter. But when the Opposition raised the matter on the Committee stage in another place, my right honourable friend felt sympathy with the grounds of the Amendment, although he was not prepared to go as far as the sweeping suggestion then made.
I think it is right that your Lordships should have in mind what was suggested at that stage. The suggestion would have had the effect of enabling any mortgagor or tenant purchaser, in the case of a contract to purchase by instalments, to obtain a complete discharge of any outstanding liabilities, provided that he assigned to the mortgagee or the landlord vendor, as the case may be, the whole of any payment due to him by way of compensation for the unfit house. That provision took no account of the circumstances of the original transaction, and it might well have inflicted great hardship on some mortgagees—for example, the category which the noble Lord, Lord Silkin, mentioned, of family friends, or people of that kind, who advanced the money to meet the housing difficulties of the mortgagor or the tenant. It was in consequence of that fact that my right honourable friend decided that the best course was to leave the matter to the discretion of the county court, who would examine all the circumstances.
Noble Lords have referred to various people or companies who lend money; and the noble Lord, Lord Silkin, mentioned particularly building societies. In general, building societies take the most careful steps, by survey and whatever else is necessary, to examine the property on which they lend their money. Very few building societies would enter into transactions of the type that is really dealt with here. But that is only one side of the matter. The other side is the great 1054 housing shortage which people have had to face since the war. This goes far beyond any Party difference. We have all seen it. Those of us who have been in another place have had literally thousands of constituents coming to us with true and agonising stories in the matter. Therefore, one has to consider the position that the mortgagor or the tenant might well be driven by the extreme scarcity of housing to enter into a contract into which, without that abnormal and unfair pressure, he would not have entered. The noble Lord, Lord Silkin, asked me whether there was a precedent for this provision. There is not an exact precedent, but there are plenty of precedents, going back to the very beginning of the Court of Equity, for harsh and unconscionable bargains being reopened. Even if it did not go so far as that, in these circumstances when we have this housing scarcity and this abnormal position of extreme pressure on families to find a roof over their own heads and those of their children, I should have thought one was entitled to say: "These are circumstances in which we will have the matter examined again." That is our approach to the matter.
On Second Reading, the noble Lord, Lord Silkin, developed another line which he mentioned to-day and incorporated in his speech. Then he was concerned with the efficacy of the remedy and whether the courts would find something on which to work. If the noble Lord will look again at the provisions in the Bill he will see in subsection (4) these words:…either party to the mortgage, charge or agreement may apply the county court who, after giving to the other party to the mortgage…an opportunity of being heard, may, if the court thinks tit, make an order—and so on,
- a) in the case of a house which has been purchased compulsorily, discharging or modifying any outstanding liabilities of the person aforesaid by virtue of any bond",orThen subsection (5) lays down the circumstances which shall be taken into account by the court in determining in any case 1055 what order may be made. The court is to have regard to all the circumstances and in particular, on the one side,
and in either case either unconditionally or subject to such terms and conditions, including conditions with respect to the payment of moneys, as the court may think just and equitable to impose.
- (b) in the case of a house vacated in pursuance of a clearance order…discharging or modifying the terms of the mortgage, charge or agreement,to whether the mortgagee or person entitled to the benefit of the charge acted reasonably in advancing the principal sum on the security of the house.Reasonability is the foundation of the Civil Law of this country, and all the difficult circumstances which the noble Lord, Lord Silkin, put to your Lordships may be, and I am sure will be, taken into account in deciding whether there should be a modification.
On Second Reading the noble Lord said—I will refer to his words, which I have in front of me, without quoting them: "Well, if the money is owing, why is it not reasonable?" I do not think that is the whole story. For example, if there is a purchase by instalments, which is already provided for, where the house is sold to the tenant at an excessive price, then I do not think it would be difficult for a county court to arrive at a reasonable price. Again, if the mortgagee, not foreseeing the compulsory acquisition but foreseeing the intense desire of the tenant to retain the roof over his head, had advanced too large a sum, clearly knowing it was too large a sum, then again it would be reasonable for the court to say, "Well, you knew very well that that sum was out of all proportion to the security. You were really taking into account the position of the defendant, and that will be modified."
If I may take the cognate problem of the Moneylenders Act, all these circumstances were taken into account by innumerable courts in deciding what was right and just in the alterations which they made in contracts in order to provide reasonably and fairly for the situation which they found. We feel that an examination of the circumstances of each case is a reasonable way of approaching the matter. The noble Lord, Lord Silkin, suggested that the local authority might pay the balance that was outstanding. The noble Lord, who is one of the most distinguished products, if I may put it that way, of local government in this country, with his vast experience, said to me: "But be careful about precedents." But the precedent that he suggests, I should have thought, was a more dangerous one from the point of view of the local authority. The interesting point 1056 is this—and this shows the difficulty of the matter. The noble Lord, who is one of the clearest thinkers and expositors in this House, suggested in his speech that the local authority in these circumstances should have the right of going to the court to have determined exactly the same question which he submits would be difficult to determine if it is originated by the tenant. It is a rare occasion when one can, if I may be colloquial (and I think the noble Lord knows me well enough to know that, as a rule, I am not a logic chopper), demonstrate the difficulty of one part of the noble Lord's argument by the very argument which he himself advances a short time later. The noble Lord, Lord Milner of Leeds, put the matter slightly differently. As I understood his argument, he would desire that the payment should be added, so to speak, to the value of the house—the noble Lord is good enough to nod assent. There again, the precedent that would then be adopted would be of giving an entirely artificial value to the house.
My Lords, all I would say about the intervention of Lord Waverley, is to repeat that he agreed that this was a difficult problem. I do not think he intended to identify himself with the distribution of public funds suggested by the two previous noble Lords who spoke, and therefore Lord Waverley has really pinpointed the difficulty of the matter. As I say, I myself have given this matter thought ever since we started on consideration of this form of legislation. I had to consider it when we were dealing with the Housing Subsidies Bill, and I have confidence in the county courts in these matters. Most of the judges of Her Majesty's county courts have had years of experience in dealing with Rent Act cases. They have seen before them exactly the types of person who are faced with the difficulty here, and I believe they will be able to do justice and do what is right and fair.
If I may put it the other way—if I may remind your Lordships again of what was advanced by the Labour Party in another place, namely, that the whole of the balance should be allowed to go—then I would say that we have struck a fair balance between that suggestion and the suggestion advanced to-day, that we are doing harm to the sanctity of contract by I the provision contained in the Bill. What 1057 we are doing is to follow a well-trodden path—namely, when people in extreme difficulties make a contract which may operate with extreme harshness, then we leave it to the courts to give the help of equity. I am most moved by the suggestion by your Lordships that I should consider the matter. Of course I will do so, but I do not want to buy peace at this stage by holding out hopes which I know are illusory. I should be less than frank if I were to raise hopes in the matter, because we have considered it and that is as far as I can go. That is why I have, I am afraid, taken up a lot of your Lordships' time in dealing with the matter.
§ 3.24 p.m.
§ EARL JOWITT
I knew nothing about this matter at all until I came into the House and heard the speeches which have been made. I stand, therefore, in a position of considerable advantage. I do not know which Party moved the Amendment in another place. It may be that I am sinning against the observations of my own Party—I do not know and I do not very much care; I am concerned merely to consider the matter as I understand it. I speak from a position of comparative irresponsibility, but I give your Lordships the benefit of my impressions on this argument, such as they are worth, if anything.
Frankly, I say that I am rather disturbed. Of course, it is the case that for many years the Court of Equity has taken steps to deal with "harsh and unconscionable contracts"—that was a phrase used in the Moneylenders Act—but the court could act on the conscious wrong before that period of time. As we all know, it became rather an extended and not altogether approved doctrine. It used to be said that "Equity is a roguish thing, as variable as the Chancellor's foot", because any particular Chancellor could consider the matter not on settled principles but on what is called ex aequo et bono—as to what he thinks is desirable and right. One man's judgment will differ from that of another, and therefore many years ago it became desirable that the principles of equity should be settled.
I do not hesitate to accept the doctrine that any court ought to interfere and intervene in any case where what has been done is harsh and unconscionable. But if a contract has been entered into, unless there are grounds for saying that it is 1058 harsh and unconscionable, then the contract must be carried out. I am not in the least concerned about the owner of what we call an unfit property—I never have desired that he should get much money for his unfit property. But consider this position, which I understand is the position here raised. He may have borrowed money on the strength of a mortgage, and the man who lends him the money—I am assuming a case where he is neither harsh nor unconscionable—has two rights. In the first place, he has what we call the personal covenant—a man who borrows money gives his personal covenant to repay the money. Secondly, the man who lends the money has the security of the property; if necessary he can foreclose and have the property sold.
There may be a case where the property itself has gone down in value—where there is little value, but where the mortgagor, the man who borrowed the money, is a wealthy man and has a lot of other property. What I would ask the Lord Chancellor to consider is this. I say frankly that I am rather shocked at this proposal, as interfering with the sanctity of contract. As I understand the proposal which the Government are now putting forward, if the property goes down in value and becomes unfit, so that the mortgagor who has borrowed the, money receives only a very small sum for it insufficient to discharge the mortgage debt the amount the mortgagee is going to be paid is left to the hazard of the opinion of the county court judge. Why? Why should the mortgagor be relieved of his personal covenant? I am always assuming that this is a bargain where there is nothing harsh and unconscionable. I could predicate that if there is harshness and anything unconscionable, then by all means let him be relieved. But if there is none, why should we say to the mortgagor, "You have got very little money for your house; that being so, we relieve you of the solemn obligation which you have entered into to pay this sum of money to the mortgagee"?
I cannot think that that is right. I cannot think that, if it were stripped of all the trimmings, the Government, on reflection, would think it right. I would ask the Government to look into this matter rather carefully. I believe that there is a question of principle here. I think that one of the most important 1059 principles we have to bear in mind is that we must not lightly interfere with the freedom of private contract. If two people have acted together in working out a contract, then we ought to be careful to see that that contract is carried out. If a man has borrowed money on the security of a house or houses, and if he has entered into a convenant to repay the money so borrowed, then, unless there has been something harsh and unconscionable or improper on the part of the lender of the money, we ought to see that the lender is repaid his money according to the convenant which he has. I am sure that that is a principle which Her Majesty's Government must accept. I ask them to look at this matter again before the next stage of the Bill, to see whether they ought not to do something about making it plain that if they are going to give relief against the mortgagee who has lent the money, that can be done only on the ground that the mortgagee has done something improper, that there has been some over-reaching or unfair dealing or something of that sort which alone should justify any court in interfering with a private bargain.
Though I have read this Bill only in the last few minutes, so far as I can see there is nothing which makes the jurisdiction of a county court judge in any way dependent upon his finding that there has been any such over-reaching or unfair dealing, and I am sure Her Majesty's Government must intend that that alone can be the basis of such action. I should like Her Majesty's Government to look again at this clause to see whether it cannot be re-drafted to make it perfectly plain that a man is not to be relieved from a contract into which he has entered, and which he may have ample means to fulfil, or from a personal convenant, unless it is found that there has been, in the conduct of the lender of the money, something in the nature of harsh, unconscionable or over-reaching action which makes it right and proper for the court to interfere. It is wrong and unfair on an unfortunate county judge simply to throw this action and tell him to do the best he can to apply some equitable doctrine, ex aequo et bono. I very much hope that Her Majesty's Government will take this clause back and see whether they cannot re-draft it on the lines that I have indicated.
§ LORD CONESFORD
Like the noble and learned Earl who has just spoken, I came quite fresh to this clause and feel some of the doubts which he has so ably expressed; therefore, I do not wish to repeat any of his arguments. I fully sympathise, of course, with all the arguments put forward by my noble and learned friend the Lord Chancellor, but I find difficulty in seeing that what he wishes to do is satisfactorily done by the clause as it stands. In support of the argument of the noble and learned Earl who has just spoken, I would particularly invite the attention of my noble and learned friend, the Lord Chancellor, to such little guidance as is, in fact, given to the county court in subsection (5). It is perfectly true that the subsection says:…the court shall have regard to all the circumstances of the case, and in particular, in the case of a mortgage or charge—But the mortgagee did not, of course, advance the money only on the security of the house. As has been pointed out by the noble and learned Earl, he advanced it also on the terms of the personal covenant, among other things. I wonder whether among the Amendments which my right honourable and learned friend might consider for the next stage, he could not at least alter the wording of Clause 1 (5, a) by adding after the words "on the security of the house" some such words as "and the remaining terms of the contract" in order to bring in the whole transaction for consideration and not merely the valuation of the house.
- (a) to whether the mortgagee or person entitled to the benefit of the charge acted reasonably in advancing the principal sum on the security of the house…"
§ LORD SILKIN
Before the noble and learned Viscount replies, I should like to bring the Committee back to the Bill which we are discussing, which is primarily a Bill for the relief of the unfortunate owner-occupier whose house has been condemned. The particular parts of the Bill we are now discussing are those where such an owner-occupier has a mortgage. The purpose of this Bill is not to impose greater burdens on the mortgagor but rather to see how we can ease his burden. I quite agree with my noble friend Lord Jowitt that, from a legal point of view, it is most undesirable that we should in any way seek to interfere with the sanctity of contracts. I agree with him and with the noble 1061 Lord who has just spoken as to the distinction between interfering with a contract which is harsh and unconscionable and interfering with one which is held to be unreasonable, particularly when such contract might have been entered into as far back as 1939, when a judge would have to look at the circumstances as they were in 1939. I wish to preserve the sanctity of contracts and I do not want it left to a county court judge to say that a contract made twenty years ago was unreasonable.
It may be that a purchaser paid too high a price for his house, but, nevertheless, I want to get back to the purpose of the Bill which is to relieve the owner-occupier, so far as possible, of his burden of having his house taken away and then finding that, though he has lost his house, he still has a liability to the mortgagee under his personal covenant. That seems like adding insult to injury. That is the position to which should like the noble and learned Viscount to direct his mind, and I believe that that is really what Her Majesty's Government have been seeking to do under this clause. My criticism of the clause is, first, that it breaks a principle which I believe those of us who are lawyers ought to hold as sacred—that when people enter freely into a bargain they should keep to it. The mere fact that the bargain turns out to be unreasonable, in the light of later circumstances, is not a reason for interfering with it. I want to adhere to that most strongly. At the same time I want to see that the person who is the victim of unfortunate circumstances, whose house has been taken away, is relieved of the obligation to spend possibly the rest of his life not only paying rent for his new dwelling but also paying back the instalments on his old mortgage.
How can we do that? I made a suggestion. The noble and learned Viscount kindly told me, with those very friendly words which I always assume may possibly be followed by words which are less friendly, that I was inconsistent or illogical. I do not think that I was; but supposing I were: we must find a remedy and this Bill does not provide the answer. My remedy is that there should be a prima facie obligation on the local authority to discharge the mortgage, but that in certain circumstances—not the circumstances set out in this Bill, 1062 where the transaction may be unreasonable, but the circumstances which the noble and learned Viscount himself visualises: that the bargain was harsh and unconscionable—the local authority should have the right to refuse to pay and leave it to the county court. I have no feeling against the county court. I have earned some part of my living by going to the county courts and have found them friendly and competent bodies. I would as soon rely on the discretion of a county court judge as I would on that of anybody else, but I feel, however, that we are putting an unreasonable burden on the county court here by asking it to say, possibly after many years, that a transaction was unreasonable.
So my solution is—the noble and learned Viscount can "go for it" again if he wishes, and it is possible that he can suggest something better—that prima facie local authorities should be under an obligation. I do not link that this would be entirely unpopular with the local authorities themselves. I think they want to act reasonably. I do not think they want to benefit by the oppression of persons such as those of whom we are thinking. They would pay, but if they felt that there was anything about the transaction which would justify their not paying, then they should have the right to go to the county court. I realise that the noble and learned Viscount has given a promise that the matter will be reconsidered. I rely on him. I know that if he thinks a thing is right he will fight for it and see that it really is seriously considered; and I am content myself to accept his assurance that, in the light of everything that has been said, he will reconsider this point.
§ 3.42 p.m.
§ LORD MILNER OF LEEDS
May I advance one additional point which has not so far been put forward? If this Bill goes through in its present form, the result will be that lenders will not consider, as they do at present, both the personal responsibility of the borrower and the value of the property put forward as security; they will consider the value of the property alone and disregard altogether the personal obligation of the borrower—at least they will do that if they are careful with their funds, and most building societies and other bodies of that type are. At present it is frequently the 1063 case that an additional proportion of the purchase price of a property is advanced because of the responsibility of the borrower. If he is a civil servant or occupies a special position, frequently a larger advance is made than would be justified in the normal course on the bare security of the property offered for mortgage. If the Bill goes through in its present form building societies and insurance companies will pay no regard to the personal position of the borrower; the whole consideration will be the value of the property, because there is always the possibility that the property will be taken over for slum clearance and only hare value paid by way of compensation. No regard will be paid to the amount actually lent on the property. I hope that the noble and learned Viscount will give that point his consideration.
May I ask a question arising out of what Lord Silkin has said? If the mortgage, as he suggests may sometimes be the case, is an old one which was properly made on the value of the house, and the house is to-day condemned by the local authority, does it not rather suggest that the owner-occupier has not kept the house up in accordance with his duty as a borrower? I do not see in that case why he should be assisted to the detriment of the mortgagee.
§ 3.45 p.m.
§ THE LORD CHANCELLOR
If I may. I will deal first with the point made by my noble friend Lord Saltoun, because it is rather outside the main stream of the debate. That point is covered by subsection (5) (b). That subsection states that:the court shall have regard to all the circumstances of the case, and in particular, in the case of a mortgage or charge—in the terms of paragraph (b):to the extent to which the house may have become unfit for human habitation owing to any default on the part of the mortgagor or person entitled to the interest charged in carrying out any obligation under the terms of the mortgage or charge with respect to the repair of the house.On the general point, I will certainly consider carefully everything that has been said in this debate. I am grateful to the noble Lord, Lord Silkin, for his last speech, because he brought us back to the actual point we are considering 1064 here—and this is important—that this is a slum clearance compensation Bill. The main object of the Bill is to provide for the case where someone is living in a house which he had bought between September 1, 1939, and December 13, 1955, and which within the next ten years is purchased compulsorily as being an unfit house. The object is to see that he receives as compensation the amount that he would have received had the house not been declared unfit. We start in the Bill with an effort to help the owner-occupier whose house has become unfit and has been compulsorily acquired, by giving more than he would get under the ordinary law of compulsory acquisition. And to that extent I think everyone would agree, the public purse comes in to help the house owner.
Then one has to deal with this situation—I am sorry to emphasise my personal experience to your Lordships, because it is an irritating form of argument, but my personal experience is that people went into a house and made contracts under great stress of mind and great difficulty of human circumstances. And that is a position which has always appealed to my right honourable friend the Minister and to me. In these circumstances, we thought that there ought to be the possibility of having, and, indeed, the right to have, the matter reconsidered. The noble and learned Earl said that the Bill did not provide for the position of the lender. I ask him to have another look at it—I know that he will do so just as he knows that I, too, will have another look at it. Subsection (5) (a) provides that:the court shall have regard to all the circumstances of the case, and in particular, in the case of a mortgage or charge—The question there is, is our test of "acting reasonably" right: and I am still, as I said to your Lordships, disposed to think that it is. You have to consider the position of the mortgagee as to whether what was done was a reasonable thing to do or whether the transaction took place with an inflated price because of the circumstances of the case.
- (a) to whether the mortgagee or person entitled to the benefit of the charge acted reasonably in advancing the principal sum on the security of the house;"
I shall certainly look at the point which Lord Conesford suggested. I must say that the question of the personal 1065 covenant, as distinguished from the security of the house, had not seemed to me as of great importance, because the same document would include the personal covenant. The ordinary mortgage includes the personal covenant as well as indicating the security. I should have thought that that would certainly come into the circumstances of the case and into the reasonability of the mortgagee's action. But I am more than ready to consider that point, and I shall consider it with all those involved.
If your Lordships disagree with me on this matter I would rather divide and have done with it, because I feel so strongly about it. I want to go away from your Lordships' House knowing that your Lordships agree with me that there can be circumstances in which, where someone bought a house and entered into a mortgage in those years, whether after the bombing, during the war or in the housing shortage after the war, it is right that we should ask: was it reasonable to have advanced that money at the time? Was it reasonable to have made these instalment terms of purchase? Was the rate of interest reasonable? Were the whole circumstances of the case reasonable? I think that that is due to a person who ex hypothesi is being helped by the State. On the matter of principle, that he should be entitled to have the position reconsidered, I would not compromise; but I am prepared to look again at the method by which it should be done. I think that that is the most forthright way I can put it to your Lordships, and on that I hope the noble Lord will not press the matter today.
§ On Question, Clause 1 agreed to.
§ Clauses 2 and 3 agreed to.
§ Clause 4 [Interpretation]:
§ THE MINISTER WITHOUT PORTFOLIO (THE EARL OF MUNSTER)
This Amendment and the one that follows it can be linked together and I need not detain your Lordships more than a few moments in explaining them. Their object is to place a house which is subject to an undertaking for its demolition in exactly the same position for the purposes of the Bill as a house which is subject to a demolition order. I think is need say no more. It will be clear to your Lordships. I think it is an Amendment which should be inserted, and accordingly I beg to move.
Page 6, line 3, leave out from ("been") to ("given") in line 4 and insert ("vacated and demolished in pursuance of an undertaking for its demolition").—(The Earl of Munster.)
§ On Question, Amendment agreed to.
Page 6, line 5, leave out ("at the date of its demolition").—(The Earl of Munster.)
§ On Question, Amendment agreed to.
§ Clause 4, as amended, agreed to.
§ Remaining clauses agreed to.
§ House resumed.