HL Deb 28 June 1956 vol 198 cc135-40

3.34 p.m.

Amendments reported (according to Order).

Clause 1 [Payments in respect of unfit houses occupied by owners]:

THE LORD CHANCELLOR (VISCOUNT KILMUIR) moved, in subsection (5) (a) to leave out "security of the house" and insert "terms of the mortgage or charge;". The noble and learned Viscount said: My Lords, with your Lordships' consent I shall go a little outside the scope of this Amendment in moving it, because certain points were raised on the Committee stage with regard to subsections (4) and (5) of Clause 1, to which we have given consideration. The first was a point made by the noble Lord, Lord Silkin, that the compensation to be paid to the owner-occupier by the local authority should cover all his outstanding liabilities, including any mortgage debt over and above the payment prescribed by Clause 1; and the noble Lord further suggested that the local authority should have the right to apply to the county court for an order varying or discharging any mortgage agreement.

The second point was made by the noble and learned Earl, Lord Jowitt, that the discretion of the court to relieve the mortgagor in whole or in part of his outstanding liability, should be limited to cases where there was something harsh and unconscionable in the original bargain. The third point, which was made by my noble friend Lord Conesford, and I think supported by the noble and learned Earl, was that subsection (5) should be amended to put it beyond doubt that the county court should be able to take the circumstances of the whole transaction into consideration, and should not necessarily be obliged to regard a friendly mortgagee as having acted unreasonably if he relied on the mortgagor's personal covenant, although he knew the house did not afford full security for the sum advanced.

I ought to tell your Lordships that, having given the best consideration I could to these three suggestions, I felt bound to find that that made by the noble Lord. Lord Silkin—that the local authority should have to shoulder the burden of all outstanding liabilities over and above the provisions of Clause 1—was not acceptable. If it were accepted it would entail an entirely new approach to Clause I. since all question of a payment related to the market value of the house would have been lost sight of. From the point of view of the purchase of land for public purposes it would create a dangerous precedent, since, whenever land is acquired at a price related to current market values, there is a risk of the compensation payable not being sufficient to meet a mortgage debt. I must remind your Lordships that the basic principle is that unfit houses are worth nothing. Clause 1 already makes a substantial concession to the exceptional hardship suffered by the class of owner-occupiers whom it is designed to benefit, and, having made that concession. I do not think that it is reasonably possible for us to go further and make the very full concession that the noble Lord desires.

Now I come to the suggestion of the noble and learned Earl, Lord Jowitt. My own belief is that in the vast majority of cases where the applications to the court will be made under subsections (4) and (5) for a discharge of liabilities, there will be something harsh or unconscionable in the original bargain. As I said on the Committee stage, it follows from the nature of the case that the purchaser must have been constrained by his circumstances into giving an inflated price for the outworn house, and often the case will be that of the vendor taking advantage of scarcity prices, perhaps aware of the threat of slum clearance, and leaving the bulk of that inflated purchase price on mortgage. The position of building societies was mentioned, but on reflection, and having had the best information I can, my view is confirmed that in the ordinary case no reputable building society advances money on a house without an adequate survey to ensure that its security is good.

I would remind your Lordships of what the noble Lord, Lord Silkin, said on Second Reading of this Bill in your Lordships' House. He said that even on the present words—that is, on the test of reasonableness—a county court judge might be reluctant to exercise his equitable discretion except in cases where it is proved beyond doubt that the mortgagee acted improperly. The noble Lord's view of a matter like that is, of course, entitled to great respect; and if that is his view of the word "reasonable" then I think if the test were substituted of "harsh and unconscionable" it would mean that there is little likelihood that the courts would intervene at all, and the provision would be likely to fail in its purpose. Therefore, while I always pay great attention to what the noble and learned Earl suggests, I feel that this would not meet the circumstances of the case.

With regard to the suggestion of my noble friend Lord Conesford, the main purpose of the subsection is to provide the means of possible relief to the owner-occupier for his outstanding liabilities, while at the same time ensuring that the balance is maintained between the conflicting rights of mortgagor and mortgagee, and that any hardship likely to be suffered by either party is taken into account. It was realised from the beginning that there might be cases where a friendly mortgagee advances money primarily on the personal bond of the mortgagor, knowing that the house itself afforded insufficient security. We thought originally that the words "taking into account all the circumstances of the case" in lines 12 to 13, page 3, would be sufficient to protect the mortgagee's interest in such a case, but the concluding limb of subsection (5) had not been given sufficient consideration. I am grateful to my noble friend and the noble and learned Earl for urging further consideration, and as a consequence we have put down the Amendments that appear on the Order Paper. In order to carry out what is suggested by my noble friend I beg to move the first Amendment.

Amendment moved— Page 3, line 17, leave out ("security of the house") and insert ("terms of the mortgage or charge;").—(The Lord Chancellor.)


My Lords, I am sure the House will give me the same indulgence to go a little wide of the Amendment which the noble and learned Viscount assumed, quite rightly, the House would give him. When the noble and learned Viscount undertakes to examine a question, the whole House has learned to appreciate that he really does examine it conscientiously and with care; and when he says that he cannot accept a particular proposal, whether one agrees with his conclusion or not, one is quite satisfied that he has gone into it thoroughly and has satisfied himself that there are good reasons for not accepting it. So I must leave the proposal that I myself put forward. I am not in a position to carry it any further, although I still think that if the Government really desire to benefit the owner-occupier whose house has been unfortunately condemned, the only way to benefit him is not only to pay him a reasonable value for his house but to relieve him of any obligation. I would just repeat that his position is that he is losing his house and may be left with a liability which he will find it difficult to discharge.

The noble and learned Viscount says that he is unable to do anything about it, and I take it that what he really means is that the local authorities are not prepared to shoulder this additional burden. I am not impressed with the suggestion of creating a precedent, because he himself is creating a precedent under this Bill. It is a precedent that I am sure he will not want to follow in the future, because I imagine that owner-occupiers of the future will get merely site value For their houses. This is a precedent which will come to an end in ten years, and I can see no great harm in doing an act of generosity to the owner-occupiers of slum houses which this Bill is intended to do. However, I do not propose to carry the point any further May I say also that I agree with this Amendment. I think it makes the position clearer. Nobody wants to penalise a person who has loaned money not entirely on the security of the house but also, perhaps, in order to help out a friend; and I am satisfied, as the noble Lard, Lord Conesford, was satisfied, that in the Bill as it stood the position was, or might have been, that a person would be penalised for an act of kindness.

I still feel that the Bill does hot entirely carry out the purpose that the Government have in mind. Their purpose is that where a mortgage has been granted on a house unreasonably, or using any other terms you like, the owner-occupier shall have the right to go to the county court. Except in one kind of case that I can visualise, I still find it difficult to visualise circumstances in which the county court will say to the owner-occupier "You are discharged of the mortgage; you need not pay". The exception is where, as I know has been the case quite frequently, people who are owners of a number of houses have gone round to the tenants, knowing that the houses were likely to be condemned in the near future, and have persuaded them to buy. And they have held out the inducement that they would grant a substantial mortgage on the property. I think that is the kind of case where a county court judge might say that the owner-occupier ought to be relieved of the mortgage, but I cannot see any other kind of case where that would be the position, and I think it is putting into the Bill a remedy which is quite illusory. Therefore, I feel that it really is not very much comfort to an owner-occupier.

In the general case, I think there should be justice as between the owner-occupier and the mortgagee, and I cannot see that, except for the case where the mortgagee has acted improperly, there would be justice in discharging the liability for the mortgage as between the two parties. In general, I cannot see that the county court judge will have any option but to refuse to discharge the mortgage. That is the reason that led me to feel that the right course in these special circumstances was to place the obligation on the local authority. However, there it is. I think that owner-occupiers will be extremely disappointed when they find, as I believe they will, that not only will they not get compensation for their house but if there is a mortgage they will be left to foot the bill themselves. However, on this particular Amendment, I have no objection to raise. I think it clarifies the position, and is an improvement. Therefore, I support it.


My Lords, this Government Amendment entirely meets the point which I ventured to put to the noble and learned Viscount the Lord Chancellor when the Bill was in Committee, and I would thank him for making it.

On Question, Amendment agreed to.


My Lords, I beg to move this Amendment which deals with the same point. I should like also to take the opportunity of thanking Lord Silkin for what he was good enough to say at the beginning of his speech. I beg to move.

Amendment moved— Page 3, line 33, leave out ("the house") and insert ("in all the circumstances of the case the terms of the mortgage or charge").—(The Lord Chancellor.)

On Question, Amendment agreed to.