BUILDING SOCIETIES BILL [H.L.]

HL Deb 10 May 1960 vol 223 cc508-60

2.14 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.—(Viscount Hailsham.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD MERTHYR in the Chair.]

Clause 1:

Restrictions on certain types of advances

1.—(1) In this section the expression "special advance" means an advance made by a building society on the security of freehold or leasehold estate, being—

1. (a) an advance of any amount to a body corporate, or
2. (b) an advance of a sum exceeding five thousand pounds to a person other than a body corporate, or

LORD MILNER OF LEEDS

had given Notice of an Amendment in subsection (1) (b), to leave out "five thousand" and insert "seven thousand five hundred". The noble Lord said: As your Lordships are aware, Clause 1, which is the operative clause of this Bill, restricts advances in certain cases. One of these cases is an advance of a sum exceeding £5,000 to a person other than a body corporate. I wished to propose to your Lordships that that sum be increased to £7,500. I think that all those who have had to do with building societies agree that £5,000 is too small a sum. I gather that the noble Viscount, Lord Hailsham, has put down an Amendment which would give a sort of omnibus power to the Chief Registrar to fix such sum as he thinks proper, and as that would appear to meet the situation, I do not propose to move the first Amendment standing in my name on the Marshalled List.

VISCOUNT HAILSHAM moved in subsection (1) (b), after "pounds" to insert: , or such other sum as may be prescribed under this section, The noble Viscount said: This and the following Amendments are paving Amendments to No. 11, and it might be convenient if I explained the purpose of Amendment No. 11 in moving this first Amendment and we can have the discussion now. As the noble Lord, Lord Milner of Leeds, has said, my Amendment would give the Registrar power to increase the sum of £5,000 in a particular way. I would not accept from the noble Lord that at the present moment £5,000 was in any way an inadequate sum to mark the limit of what constitutes a special advance, but I would concede (and this is the purpose of my Amendments), that in legislation of this character one should not tie oneself for all time to the arbitrary figure of £5,000 without providing any opportunity of changing it further without an Act of Parliament.

The proposed new subsection (Amendment No. 11), for which the Amendment I am now moving is a paving Amendment, accordingly gives the Chief Registrar power to vary the sum of £5,000. That he may do under the Amendment, either upwards or downwards, for the purpose of subsection (1), which defines a special advance, and of subsection (3), which provides for an annual calculation of the proportion of total advances represented by special advances. Under the Amendment such an order can be made only with the consent of the Treasury, and, of course, it thereupon becomes subject to Parliamen- tary criticism and control. Moreover, it is provided that the Order should be subject to Affirmative Resolution, and that means that it will have to be laid before both Houses of Parliament and will be open to debate before it becomes effective. I hope that the Committee will see fit to accept these Amendments. I beg to move the first Amendment.

Amendment moved— Page 1, line 10, at end insert the said words.—(Viscount Hailsham.)

LORD MILNER OF LEEDS

I indicated that I would not move the first Amendment I have down, even though I thought it of advantage to increase the sum of £5,000. I did not move it because of the Amendments about which the noble Viscount the Lord Privy Seal has just spoken. Quite frankly, I should have preferred that the sum of £5,000 should be increased to £7,500 or £10,000, as the case may be, because I think that might avoid repeated applications to the Chief Registrar. But having regard to what the noble Viscount has said, probably the course which he proposes is the better one. It occurs to me, however, that this might be taking a sledgehammer to crack a nut, when the amount which the building societies can advance is increased in this way to require the consent of the Treasury, in the first place, and for the Order then to be subject to an Affirmative Resolution of Parliament. I should have thought that it was unnecessary for the Order, on a comparatively minor matter of this sort, to undergo this process, with the obvious delay that would be involved. I do not know whether the noble Viscount has anything to say on that aspect. Otherwise, we support the Amendment.

LORD ELTON

I should like to thank the noble Viscount for this Amendment, which was, I think, suggested on these lines by some of us in the Second Reading debate. It will be extremely welcome to the representatives of the building societies.

VISCOUNT HAILSHAM

I thank the noble Lord for his comments. It may be that we are guilty of a fault—but, if so, I should have thought that it was a fault on the right side—in submitting this matter for Parliamentary control. It is, after all, a serious matter. It will make an Amendment to an Act of Parliament of quite a serious kind, and it may well be said that the Affirmative Resolution procedure is the right one. I hope that the noble Lord will let it go at that.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Is this to apply collectively to the whole of the building societies in the particular year in which the Order is made, and is this going to be a repetition to be brought up again and again to Parliament? If not, why cannot a reasonable figure be put in the Bill now?

VISCOUNT HAILSHAM

Far be it from me to embark on a long economic discourse, but it is thought that circumstances may alter so as to make it unreasonable to tie the building societies down to £5,000 advances. It may be that the circumstances of building societies alter; or current practice may alter; or the value of money may alter, in either direction. There are advantages on balance, one would have thought, in the flexibility proposed in this procedure, and I hope that, on the whole, the noble Viscount will agree that it is better when dealing with an arbitrary figure, as we are here. It may turn out in practice that the arbitrary figure of £5,000 is the wrong one, but it has been selected after consultation with the interests concerned as being most probably the right one. Nobody could be more aware than I am that at the end of the day this is an exercise in judgment. I should think, and probably the noble Viscount would agree, that a degree of flexibility on a matter which is purely arbitrary, is rightly introduced into the Bill, and the degree of control which is retained is, as I said to the noble Lord, Lord Milner of Leeds, if anything, too much on the right side.

LORD SILKIN

I approve of this Amendment, and I think the Government are right to retain a certain measure of flexibility. My only reason for rising is to inquire on the actual wording of the Amendment whether it will be possible to make adjustments on this amount from time to time. If so, would it not be better to include the words "from time to time" in the Amendment? I have got nothing down on the Marshalled List and I merely put this idea forward as something for consideration. It would then read: or such other sum as may from time to time he prescribed under this section". The same words would be inserted in the other appropriate Amendment. No doubt the noble Viscount will consider whether it is desirable to have these words in, so as to make it quite clear that the Government can, not only on one occasion but as experience determines from time to time, make the necessary alterations. If the noble Viscount thinks that is right it could no doubt be incorporated at a later stage.

VISCOUNT HAILSHAM

I am grateful to the noble Lord. This is a drafting point and I know that those who advise me in such matters will take careful note of what the noble Lord has said. I cannot, of course, give any undertaking about it. My first impression is that it is unnecessary, but I will have it looked at.

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

This Amendment is also a paving Amendment to Amendment No. 11. I beg to move.

Amendment moved— Page 1, line 18, at end insert (", or such other sum as may be prescribed under this section.")—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

I beg to move the next Amendment.

Amendment moved— Page line 6, at end insert (", or such other sum as may be prescribed under this section.")—(Viscount Hailsham.)

On Question, Amendment agreed to.

2.19 p.m.

VISCOUNT HAILSHAM moved, in subsection (4), to leave out ("subsection (8) of this section") and to insert: section (Exemptions from restrictions on special advances) of this Act, The noble Viscount said: This Amendment and Nos. 6, 7 and 8, are paving Amendments to No. 14, which is the new clause standing in my name, and it might be convenient to take them together at this stage. The new clause is not quite so formidable as it looks. It has one new subsection, which is subsection (3). The first two subsections are really replacements and purely drafting Amendments of the existing Clause 1 in the Bill; but with the addition of the new subsection (3) it was thought convenient to split Clause 1 into two substantial clauses, instead of making it one very long clause. Therefore the first two subsections of the new clause contain nothing different from subsections (8) and (9) of the existing draft.

Subsection (3), which is the new part, deals with the case where a building society has a power as mortgagee to sell a freehold or leasehold property as a result of the default of the original borrower. There might be difficulty in such a case in effecting a sale unless the society can at the same time lend the new purchaser a proportion of the purchase price secured on the property. But if the purchaser were a corporate body, or if the advance meant that the purchaser would be indebted to the society for more than the £5,000 we have been discussing, the advance would be caught by the control over special advances provided by Clause 1. In many cases, where the society had no more than a small proportion of large advances, this, of course, would not matter; but if the society were somewhere near the borderline for special advances, the effect might be to prevent the society from making the required advance to the purchaser and thus to frustrate the sale.

This would be an undesirable and, I must add, an unintended result, since it is normally in the interests of a building society to command as good a market for any property that it is selling as possible. The subsection therefore provides that in the circumstances described—and only in those circumstances—the Chief Registrar may waive the limits laid down in Clause 1 in respect of a particular transaction. Paragraph (b) limits the amount of any advance in respect of which such a waiver may be granted to the amount of mortgage debt (including arrears of interest) which is awing to the building society on that property. Subsection (4) provides that the new clause shall, like Clause 1 itself, be subject to Clause 1 (12), which provides that a mortgage transferred from one person to another shall be treated as an advance by the society of the debt outstanding to that other person. I beg to move.

Amendment moved— Page 2, line 7, leave out ("subsections (8) and (9) of this section") and insert the said new words.—(Viscount Hailsham.)

LORD LATHAM

This is a useful addition to Clause 1 as originally drafted in the Bill. But for provisions of this character, unfair and, it may well be, rather difficult restrictions would be imposed upon the building society, to the detriment of the interest of the society. In those circumstances, it is felt that your Lordships will wish to approve this Amendment.

LORD MILNER OF LEEDS

Your Lordships will have noticed that. Amendments Nos. 9 and 10 in my name were designed to amend subsection (8) of Clause 1. The noble Viscount has moved to delete subsections (8) and (9) and, therefore, assuming those Amendments are passed, my Amendments will fall to the ground. I am proposing, with your Lordships' permission, to move those Amendments to the new clause. Amendment No. 14, which is in substantially the same terms as the original subsection (8). Subject to that, I am agreeable to the Amendment.

LORD SILKIN

I approve of this new clause, but I wonder how it is going to work in practice. If every time this has to be put into operation one has to go to the Chief Registrar and get his approval, there may be substantial delay. One knows from practical experience of dealing with the Registrar that often there is a delay of many months in whatever application one has to make, because the officials are simply overwhelmed. I know the noble Viscount cannot say anything about it now, but I hope he will take a note of the fact that if this is to operate successfully the machinery must work smoothly. He will bear in mind that these are applications where one person is disposing of his home and another person is waiting to get in, and a delay of many months can be injurious to both parties. Therefore I hope he will see to it that this provision will be operated with the minimum amount of delay.

VISCOUNT HAILSHAM

I think that is a perfectly legitimate point which I will certainly bring to the notice of those advising me. Of course, ordinarily one hopes that it will not be necessary—I am speaking ex improviso—to invoke the clause, because the building society itself will be well within its limit of advances.

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

I beg to move.

Amendment moved— Page 2, line 15, leave out ("subsections (8) and (9) of this section") and insert ("section (Exemptions from restrictions on special advances) of this Act,")—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

I beg to move.

Amendment moved— Page 2, line 24, at beginning insert ("Subject to the provisions of section (Exemptions from restrictions on special advances) of this Act,")—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

I beg to move.

Amendment moved— Page 2, line 32, leave out subsections (8) and (9).—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

This is the Amendment I have already explained. I beg to move.

Amendment moved—

Page 3, line 23, at end insert— ("() The Chief Registrar may by an order made with the consent of the Treasury and contained in a statutory instrument prescribe that, in relation to advances made by building societies in any financial year beginning on or after the date of the coming into operation of the order, for the references in subsection (1) and subsection (3) of this section to a sum of five thousand pounds there shall be substituted references to such other sum (whether greater or less) as may be specified in the order, and the power of making orders under this subsection shall include power to vary or revoke any previous order. An order shall not be made under this subsection unless a draft of the order has been approved by a resolution of each House of Parliament.")—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

This is purely a drafting Amendment. I beg to move.

Amendment moved— Page 3, line 36, leave out ("so conduct its business as to").—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

This is also purely drafting. I beg to move.

Amendment moved— Page 3, line 43, after ("is") insert (", subject to the mortgage,").—(Viscount Hailsham.)

On Question, Amendment agreed to.

Clause 1, as amended, agreed to.

VISCOUNT HAILSHAM

This is the new clause to which we were referring. I beg to move.

Amendment moved— After Clause 1 to insert the following new clause:

Exemptions from restrictions on special advances

(".—(1) If a building society in any financial year in which it may make special advances up to the limit specified in subsection (4) of section one of this Act, or up to the limit specified in subsection (5) of section one of this Act, makes or proposes to make special advances as defined in that section on the security of freehold or leasehold property which consists wholly or mainly of dwelling-houses or flats which are in course of construction or have recently been constructed and on an application to the Chief Registrar shows to his satisfaction that the dwelling-houses or flats are being or will be made available for renting by tenants, the Chief Registrar may, if he thinks fit, for the purpose of authorising the building society to exceed the said limit by an amount equal to the whole or some proportion of the amount of the advances in respect of which the application is made, grant to the building society permission in writing to make special advances in that financial year in excess of the said limit, but subject to such other limit under the said subsection (4) or the said subsection (5) as may be specified in the permission for that purpose, and section one of this Act shall have effect accordingly.

The limit specified in the permission may be expressed as a percentage of the total of all advances made by the building society in the year, or in any other manner.

(2) Where the proportion ascertained under paragraph (b) of subsection (3) of section one of this Act as at the end of a financial year for a building society exceeds ten per cent. but does not exceed twenty-five per cent. (so that subsection (5) of that section applies in the following financial year) and the building society shows to the satisfaction of the Chief Registrar that that proportion represents in whole or in part advances in respect of which an application has at any time been made under the foregoing subsection and by reference to which permission was granted under that subsection, the Chief Registrar may, if he thinks fit, grant to the building society permission in writing to make special advances in the said following financial year in excess of the limit specified in the said subsection (5), but subject to such other limit under that subsection as may be specified in the permission, and section one of this Act shall have effect accordingly.

The limit specified in the permission may be expressed as a percentage of the total of all advances made by the building society in the year, or in any other manner.

(3) If a building society which proposes to sell any freehold or leasehold estate mortgaged to the building society in exercise of its. Dowers as mortgagee, and to make to the purchaser an advance on the security of that freehold or leasehold estate which will constitute a special advance as defined in section one of this Act on an application to the Chief Registrar shows to his satisfaction—

1. (a) that the person entitled to redeem the mortgage is a body corporate or a person who is indebted to the building society (taking into account the advance secured by the mortgage and all other debts of any description, whether immediately repayable or not) in an amount exceeding five thousand pounds, or such other sum as may be prescribed under section one of this Act for the purposes of subsections (1) and (3) of that section, and
2. (b) that the amount of the mortgage debt which at the time of the application has not been repaid to the building society, together with any arrears of interest in respect of the advance secured by the mortgage, exceeds the amount of the advance which the building society proposes to make to the purchaser of the freehold or leasehold estate,

the Chief Registrar may, if he thinks fit, grant to the building society permission in writing to make the special advance to which the application relates; and for the purposes of subsections (4), (5) and (6) of section one of this Act, any special advance for which permission is granted under this subsection shall be left out of account.

(4) Subsection (12) of section one of this Act shall apply for the purposes of this section as it applies for the purposes of that section."—(Viscount Hailsham.)

LORD MILNER OF LEEDS moved, in the proposed new subsection (1), after the first "flats" to insert, "which it is proposed to construct or". The noble Lord said: I now propose to move the Amendments which were originally Amendments to subsections (8) and (9). The new clause proposed by the noble Viscount is designed to authorise the Chief Registrar, if he thinks fit, to extend the powers of building societies to exceed the limits laid down by Clause 1 for the purpose, according to the clause as drawn, to make advances on the security of freehold or leasehold property which consists wholly or mainly of dwelling houses or flats in the course of construction or recently constructed. The purpose of my first Amendment is to insert "which it is proposed to construct or" before "which are in the course of construction", and so on. In my experience, builders, who presumably will be the people taking advantage of this new clause, make their arrangements with building societies beforehand. The clause as drawn would appear to limit their applications to cases where dwelling houses are in the course of construction or have recently been construc- ted; and, if I am right, it would seem appropriate to insert the words "which it is proposed to construct" in order that the builders may make the appropriate application to the Chief Registrar before entering upon the construction of the house.

The second point is that the new clause limits the power to make these applications to cases where the dwelling-houses or flats are being or will be made available for renting by tenants. The purpose of the second Amendment is to extend that power to cases where builders propose to erect houses for sale to owner-occupiers. It seems to me that houses are required both for renting purposes and for owner-occupation. We know that the Government house-building proposals, if I may call them such, are now very much reduced; they have come down from something like 300,000 a year to something like 120,000 a year; whereas private building has gone up, although I am not sure of the precise figures. In either case, it would seem that both houses and flats for renting and for sale to owner-occupiers are necessary and desirable in present circumstances.

In this matter I look with sympathy on the efforts of small builders. So often one sees large building contractors building huge estates and selling to owner-occupiers, with the result that in many instances the small builder is being pushed out. In the provinces, in particular, the small builder, the practical man, comes along and wishes to build, say, half a dozen or a dozen houses, and applies to a building society for building advances. But he will be prevented by the limits of this Bill from obtaining any advance. In the case of a small limited company it would be prevented altogether. In the second place, I suppose that nowadays £5,000 would not put up more than two or three houses. Therefore it is desirable that the clause which is merely permissive, should be extended to what is called building finance, and thereby enable small builders (large builders can go to insurance companies or banks; or they may already have the funds) to apply to building societies for building finance to enable them to put up houses. The small builder gives his personal attention to the building; he himself is probably a craftsman, and in many instances it is a better job for that reason. In my submission the new clause should be amended to permit applications to be made in cases where it is only proposed to construct dwelling-houses, as well as in cases where the buildings are already in course of construction. By my next Amendment I seek to extend the clause to cases where people wish to build a few houses for sale to owner-occupiers. I beg to move.

Amendment to Amendment moved— Line 7 of subsection (1) of the proposed new clause, after ("flats") insert ("which it is proposed to construct or").—(Lord Milner of Leeds.)

VISCOUNT HAILSHAM

These two Amendments to the new clause are on rather a different footing, and I propose, with the permission of the Committee, to deal with them separately. As regards the first, which is all that has been formally moved by the noble Lord, Amendment No. 9, I am quite prepared to accept it as an Amendment to line 7 of the new clause. The position is that it is intended that societies should apply in respect of advances which they intend to make, and it would seem only reasonable that they should be allowed to apply not only in respect of intended advances but also in respect of intended projects, and this will enable the approval of the Chief Registrar to be obtained before the builder starts work. I therefore accept Amendment No. 9 as an Amendment to line 7 of the new clause.

LORD MILNER OF LEEDS

I am much obliged to the noble Viscount.

On Question, Amendment to Amendment agreed to.

LORD MILNER OF LEEDS

I beg to move the second Amendment to the Amendment.

Amendment to Amendment moved—

In line 10 of subsection (1) of the proposed new clause, after ("tenants") insert ("or for sale to owner-occupiers").—(Lord Milner of Leeds.)

VISCOUNT HAILSHAM

This is, as I indicated, rather a different matter, and as at present advised I do not feel able to accept this Amendment to the Amendment. It is, I think, important to make oneself clear as to exactly what we should be doing if we accepted it. The effect would be to exempt, or to attempt to exempt, what is called "bridging finance" from the operation of the restrictions on special advances. There is, of course, a great deal of common ground here. We all know and accept that bridging finance for builders, which is a form of assisting builders to build residential property, is a perfectly reasonable form of activity for a building society. Nobody would desire to suggest anything to the contrary. I would also concede without difficulty that bridging finance—that is to say, finance of buildings which are being put up—has this merit over some other forms of special advances or what will be special advances if the Bill passes into law: that it is not outstanding for very long, and therefore the society is at risk for a shorter time in respect of such an advance. I think that is a perfectly legitimate point to make.

On the other hand, I think it would have to be conceded that property under construction has a more speculative element in its value than most other property, and a building society could make a substantial loss if it advanced to a builder who, possibly through no fault of his own, but possibly otherwise, failed to sell the house quickly and for the price for which he expected to sell it, and, as a result went bankrupt. The desirability of societies being able to continue to help builders in this way by way of bridging finance was in truth one of the factors which led us to the decision to permit a proportion of special advances and not to prohibit them altogether. But we have no reason to believe that societies will not have ample scope for advances by way of bridging finance to builders within the permitted limit of 10 per cent. and 25 per cent. already allowed for under the clause and our view is that there is therefore no justification for giving advances of this kind and separate treatment from other advances. The Government would feel that a strong justification would be needed to make an exception to the general limit of special advances and thereby to give the Chief Registrar further discretionary powers in that matter. We feel that the existing limits of 10 and 2½ per cent. are sufficient to take care of the case which the noble Lord has quite rightly made, and for that reason we would ourselves resist the Amendment.

LORD LATHAM

This raises a question not of the merits of what the noble Viscount terms "bridging finance", but the measure of it, and I think the Committee would wish to see to it that there was excluded from the Bill any provision which really vitiated the motive (if I may use that word) which has prompted the introduction of the Bill. Could the noble Viscount inform the House what are the views of the building societies upon this particular clause, and whether they regard it as being likely to be restrictive, to the detriment not only of the activities of the building societies bat of the interests and activities of the private builder?

VISCOUNT HAILSHAM

That is a matter upon which, of course, we have taken the views of, among others, the building societies. I do not think I am authorised to say, one way or another, that they have a concerted view in the matter. As I understand it, the noble Lord who moved the Amendment was moving it in his private capacity, and not as representing the building societies. I do not think it would be proper for me to say more than that.

LORD MILNER OF LEEDS

I think the noble Viscount may well agree with me that his argument is rather far-fetched. It is true, as he said, that the purpose of this second Amendment is to bring "bridging finance", as he terms it, outside the special advances limit. But I cannot see the difference between a builder building to rent who may fail to obtain tenants, or who eventually may have to sell, or who may have some other financial difficulty, and the builder who builds to sell to owner occupiers and who the noble Viscount thinks might in certain circumstances go bankrupt. What is the distinction between the two cases? If the noble Viscount had said that: it is more necessary to have houses to let than houses to sell, then I could understand the position; I think it might be so—I do not know. But what he says is that there is more danger in making advances to a builder building houses to sell—where there is a pre-arranged agreement with a building society to take the houses over, or to advance monies on the houses to the eventual purchasers—than to a builder building houses to rent. With respect, I cannot see the difference between the two cases. If it is permissible to obtain an alternative, or at least the possibility, of an advance out of the special advance limit in one case, then in my submission it should be possible to do that in the second case. I do not know whether the noble Viscount can tell me the distinction between the two cases. If so, I should be grateful.

LORD SILKIN

I should have thought that the criterion in this matter should be the interests of the community. Everyone who has any dealings with property of this kind is aware that there is an increasing demand on the part of persons desiring homes to buy their homes rather than to rent them; and I think that we ought to give every possible encouragement, as, ostensibly, the Government have done in the past, to such people. It is worth while considering whether the Bill should not be extended so as to facilitate advances of that kind to the increasing number of people who are acquiring their homes, or more particularly their flats—there is a growing practice to-day for people to buy flats. The case which the noble Viscount made against this, I understand, is that there is a greater risk in the case of dwellings which are being erected for sale. Could that not be one of the matters which the Registrar should take into consideration?

It may be true that there is a certain amount of risk in certain areas at certain times. That, of course, is a matter which the builder himself would have weighed up most carefully before he embarked on the scheme, and which those who are assisting him and financing him would also have weighed up. But there is no reason why the Registrar should not weigh that up for himself and use his discretion, saying, "This is too great a risk", or that the amount which it is proposed to advance is too great. In that case I would ask the noble Viscount to have this matter looked at again. As I said at the outset, I think it really would be in the interests of the community and would encourage the provision of dwellings of that kind which, as things are, is going to be made somewhat more difficult.

VISCOUNT HAILSHAM

The words, "in the interests of the community are, of course, very like "public policy"—sometimes a rather rough horse to ride. Of course this will be looked at again. The mere fact that two noble Lords have pressed it upon me will, I think, ensure that it will be looked at again. But I am bound to tell both noble Lords that at the moment I have no reason to think that when it is looked at again the Government will come to another decision. I think one has to keep quite clearly in one's mind that the purpose of this clause is, in the interests of the community, to prevent a particular abuse of the purposes for which building societies were founded and which I explained in my Second Reading speech. That abuse is the weakening of the hands of investors in the building societies and the surrender of the confidence of the investors in the building societies. This, as I indicated in my Second Reading speech, is a matter which depends upon the prohibition of abuse.

Of course, we all want to encourage owner-occupiers. I had always thought, until I heard the noble Lord, Lord Silkin, that we on this side of the House were even more anxious to do so than Members opposite. I realise that, even on that criterion, the difference between the Parties has now been removed, and that I was wrong in my supposition. But I said, in answering the noble Lord, Lord Milner of Leeds, that so far as we were concerned, we think, on the evidence before us, that the building societies who wish to provide finance of this kind will be amply catered for by the proportions of permitted special advances allowed for by the clause, and that that is really the way out of that; and that one of the reasons why we made the proportions as high as 10 and 25 per cent. respectively was precisely because, up to a point we wished to encourage this type of advance. But there is an element of speculation in it, and we think that they should not be treated as other than what they are—namely, outside the general run of building society activities.

The noble Lord, Lord Milner of Leeds, with great forensic ingenuity, pressed me to say what was the difference between a tenant-occupied and an owner-occupied flat in such circumstances. The noble Lord is most experienced in legal matters and I should be sorry to attack him on his own ground, because this is very much his own ground, but I would, with respect, suggest to him that for once he has allowed the lawyer in him to get the better of the business man, because we all know that in fact the forms of finance for houses to rent are, in practice, quite different from the kinds of finance that we are talking about, which provide a builder with finance to enable him to go on building a house for which he will recoup himself by selling it to an owner. These are quite different business propositions. I will admit that on a technical point the noble Lord, Lord Milner of Leeds, made a very good case, but I would submit to your Lordships that it was really a legalistic and not a business point.

On Question, Amendment to Amendment negatived.

Amendment, as amended, agreed to.

Clauses 2 to 4 agreed to.

Clause 5:

Power to suspend raising of money by building society

5.—

(6) Not less than fourteen days before making an order applying subsection (2) of this section to any building society, the Chief Registrar shall serve on the building society a notice stating that he proposes to make an order, and shall consider any representations with respect to the proposal made to him by the building society within such period (not being less than fourteen days) from the date on which the building society is served with the notice as the Chief Registrar may allow and, if the building society so requests, afford it an opportunity of being heard by him within that period.

(7) Notice of the making of an order under this section shall be published by the Chief Registrar in the London, Edinburgh and Belfast Gazettes and in such other ways as appear to him expedient for informing the public.

2.50 p.m.

LORD MILNER OF LEEDS moved, in subsection (6), after the second "society" to insert: and on each director thereof.

The noble Lord said: Under this clause it will be permissible for the Chief Registrar to make an order whereby building societies are prohibited from taking investments and so forth. The clause provides that before the making of such an order notice shall be given by the Chief Registrar to the society; and later in the same clause there are provisions whereby certain quite heavy penalties might be imposed upon directors if a building society should fail to comply with the order of the Chief Registrar. The penalties for breach of his order are stated as: on conviction on indictment to a fine or to imprisonment for a term not exceeding two years, or to both, and on summary conviction to a fine not exceeding two hundred pounds or to imprisonment for a term not exceeding three months, or to both. Those penalties would be imposed upon the directors of a society, and it is therefore right that the directors themselves should receive notice of the order made, or proposed to be made, by the Chief Registrar. It is not inconceivable that that notice, though it might be received by the building society, might, through failure to take some action, not come to the ears of directors; and in view of the severity of the penalties imposed upon directors personally it appears right that notice, in addition to being served upon the building society, should be served also on the directors of the society. The question of proof of service would arise, but that is quite another matter. In the event of this Amendment being accepted it might be necessary to make some provision whereby an order shall not be invalidated or vitiated in the event of its being impossible to prove service on any particular director. I move this Amendment really for the protection of directors of building societies who, in certain circumstances, might be laid open to very severe penalities. I beg to move.

Amendment moved— Page 7, line 12, after ("society") insert ("and on each director thereof").—(Lord Milner of Leeds.)

VISCOUNT HAILSHAM

Again, one cannot help sympathising, up to a point, with the purpose underlying the noble Lord's Amendment, but I hope that, on reflection, the Committee will not accept it. It is important to realise that this Clause 5 is a vital one in the machinery of the Bill, to enable the Chief Registrar to stop societies which are misconducting their affairs from raising money. The Bill provides that before this drastic action is taken—and, of course, it is drastic action—notice of the intention must be served upon the society to enable the society to make represent- tations of one kind or another. It is common ground between the noble Lord, Lord Milner of Leeds, and myself that the society must be served with the notice. It would be a substantial injustice to allow a power of this kind to be used otherwise. But in our view it is neither reasonable nor possible to do more than serve notice upon the society, because I am advised that otherwise the whole effect of the clause might be invalidated.

I should have thought that it was the business of directors of the building societies to make sure that they know when things have got to such a pass that a notice of this kind has been served on the society of which they are directors and for which they are, in substance, trustees; and that they ought to exercise at least all the care expected of directors of limited companies or trustees in the conduct of a business for which they have made themselves responsible. It IS not unreasonable, therefore, to leave it to the internal machinery of the society—which must, if it is in any way a properly conducted society, include informing the directors when notice of this kind has been served upon the society—to see that the matter is properly brought to the attention of the management.

I am advised that in particular circumstances acceptance of this Amendment might place the Chief Registrar in a quite impossibly difficult position, through failure to serve notice on any one director of whose identity or address the Chief Registrar might in some circumstances be unaware—he might, indeed, be actually seeking to evade service for purposes which could be only too plain. In given circumstances, that might be fatal to the intended exercise of this power. Therefore, although I have a great deal of sympathy with directors who find themselves liable to prosecution for the misconduct of the affairs of a society, I believe that the balance of advantage and of justice lies in the provisions of the clause as drafted and not in the clause as proposed to be amended.

LORD MILNER OF LEEDS

I wonder whether the noble and learned Viscount is right, because, of course, the Chief Registrar must have registered with him the names and addresses of directors of building societies the moment their appointments are made. There is therefore no question of the Chief Registrar being in any doubt about that; or at least he should not be. But in view of what the noble and learned Viscount has said I agree to withdraw my Amendment.

Amendment, by leave, withdrawn.

2.59 p.m.

LORD ELTON moved to leave out subsection (7), and to insert instead:

"(7) The Chief Registrar shall specify in the notice given to the building society under subsection (6) of this section the grounds on which he proposes to make an order and he shall also specify in the order applying subsection (2) of this section to the building society the grounds on which he has made the order, and the grounds specified in such an order may differ from the grounds specified in the notice.

(8) If the Chief Registrar makes an order applying subsection (2) of this section to a building society, the building society may within fourteen days of the making of the order appeal from the order to the High Court in England or to the Court of Session in Scotland and thereupon the Court may, if it thinks it just so to do, set aside the order:

Provided that any such order shall remain operative pending the determination of the appeal by the Court.

(9) If the building society does not appeal within the period specified by the last foregoing subsection or if the Court dismisses the appeal, as the case may be, the Chief Registrar shall then publish a notice of the making of the order under this section in the London, Edinburgh and Belfast Gazettes and in such other ways as appear to him expedient for informing the public."

The noble Lord said: I am not sure whether it is proper to declare this kind of interest, but I want to declare that I am President of the Metropolitan Association of Building Societies and a Vice-President of the Building Societies' Association, of which the noble Duke who has asked me to move this one of our joint Amendments is President. And in fact, I am trying to express in this Amendment the views of the Building Societies' Association. The object of the Amendment is to introduce a right of appeal, because I believe that your Lordships will agree that Clause 5 confers very great powers on an individual—the Chief Registrar. Although the building societies have no objection whatever to his having those powers, they feel that in view of their great extent there should be some right of appeal.

It will be seen that subsection (1) of this clause enacts that, if the Chief Registrar considers it expedient, he may, under subsection (2), in effect, put any building society out of business—because that is what paragraphs (a) and (b) of subsection (2) amount to. He can prevent it from accepting a deposit, et cetera, or from accepting any payments, et cetera, and that, in effect, amounts to putting it out of business altogether. That is, of course, a very great power to confer on an individual. It is perfectly true that he can act only with the consent of the Treasury, and that, as the noble Viscount has already pointed out this afternoon, in an analogous context, that means that the Chancellor of the Exchequer can be questioned. In spite of that fact, the building societies feel very strongly that there should be some right of appeal to the courts.

Perhaps one does not feel that, with the present Chief Registrar and the present Chancellor of the Exchequer, and the present Treasury officials, there should be any need to contemplate such a thing as an appeal. But, after all, we are legislating for the future, and it is conceivable that future Chief Registrars might be perhaps hasty or unwise, or some future Treasury might be perfunctory in its control—or even perhaps somewhat oppressive. This is the age of Crichel Down, and Governments have not always been over-tender to the individual or individual organisation. I think that most of us, looking back, can think of occasions when it might have been a good thing for an individual to have had a right of appeal.

This Amendment is drafted with the intention of requiring the Chief Registrar to specify his reasons in writing—the point of that, of course, being that it is difficult to conceive of an appeal against an act of discretion. But if it is not a mere ipse dixit, if it is not a mere act, if the reasons are wrong, then there is something to appeal against; and the proposal in the Amendment is that there should be an appeal to the High Court, althought the notice given by the Registrar would come into operation while the appeal was going on. So it would not be unduly delayed. I am told that this clause is probably modelled on Section 11 of the Prevention of Fraud (Investments) Act, 1958, which confers similar powers. But in that case all the Registrar is empowered to do is to prevent a company from advertising; here, as I have just told the Committee, he is empowered to put a building society virtually out of business.

I think I may claim that there are precedents of a kind for the appeal proposed in my Amendment. For one thing, Section 6 of the Building Societies Act, 1894, provides that where the Registrar cancels the registration of building societies he must specify his reasons, and the society can appeal to the High Court. That is a good analogy for what we are asking for. The noble Viscount will know better than I do whether this is also an analogy which can be put, but I understand that there has been recently in the courts (I am not sure that it is not still going on in the courts) a case of a building society which has appealed against an action by the Chief Registrar in which the Chief Registrar did, of his own grace and favour, so to speak—he was not compelled by any law so to do but did it of his own volition—specify his reasons, and thereupon the building society appealed to the High Court. The High Court, I am told, was in some doubt whether it was entitled to accept this appeal; but it did so, and I understand that the case is being heard. So I would submit that there is a precedent in what has actually happened and what has in the past been enacted. I very much hope, therefore, that the noble Viscount, who I know is always most sympathetic to the individual and would not wish to see either an individual or an individual society put under too great Governmental or bureaucratic powers, may see fit to make some concession here.

Amendment moved— Page 7, line 20, leave out subsection (7), and insert the said new subsections.—(Lord Elton.)

LORD SILKIN

I should like to support this Amendment. It is, it seems to me, in keeping with the view that this House took some time ago when it considered the recommendations of the Franks Committee. On that occasion we all felt that any action, any decision, by a tribunal or by an authority who had discretion—or by an official, I suppose, other than the Minister himself—should be subject to appeal. It seems to me that this proposal is simply in harmony with the views which the House expressed on that occasion. I very much hope that the noble Viscount will see his way to look at it.

LORD HAWKE

Before my noble friend replies, could he answer a question about this clause? Presumably the Chief Registrar is going to take action in a matter of this kind only if he has good reason to believe that the society is bankrupt. He then gives notice to the society. Then, for fourteen days after that, presumably, the society can go on taking deposits, which stand to be lost in part or in whole. Under my noble friend's Amendment there would be a further long delay, presumably, while the society appealed. Have I misread the clause?

LORD ELTON

I think that the noble Lord is not correct in saying that under my Amendment there would be a further long pause, because it expressly provides that the notice given by the Chief Registrar shall come into force while the appeal is being heard. It is not delayed by the appeal. It holds good; and if the appeal is successful then presumably it is reversed. But it is not delayed.

LORD HAWKE

I thank my noble friend. That puts my mind at rest on the second score. But, on the first score, I am asking the noble Viscount whether he can say what happens to the society during the fourteen days' notice. Does it still go on taking deposits?

VISCOUNT HAILSHAM

I think I am right in saying—although I should have known the answer to my noble friend's question without that qualification—that during the fourteen days it can go on accepting deposits until the order is operative. But if I am wrong about that, no doubt I shall be corrected.

This is not an altogether easy matter, and I do not want in any way, in anything I say, to give the impression that my mind is closed to all proposals for an appeal against the Chief Registrar for this kind of purpose. What I am absolutely certain of is that this particular proposal is wrong. I sympathise very much with all the argumentation in favour of it which my noble friend Lord Elton has given; and I am also, speaking as a member of the profession, very grateful for the trust in the courts as a means of achieving justice which is implicit in the Amendment. But as one who has practised in the courts for 25 years I would say that this is making the wrong use of the courts and would lead to very grave constitutional difficulty.

In order for the courts to work, to do the job which it is the business of the courts to do, there must be a justiciable issue. The courts are not experts in the management of the affairs of a building society or in the multitudinous matters about which they have to pronounce from day to day. Therefore, in order to give the courts anything to try, either the law or Parliament has to create what is called a justiciable issue; that is to say, to give them guidance about the principles upon which they are to proceed. This is precisely what this Amendment does not do. I will come back to that point in a moment, because it seems to me absolutely fatal to this particular type of proposal for an appeal. The decision of the Registrar to suspend the operation of raising money is fundamentally a business decision, arrived at on business grounds, as to the likelihood of depositors losing their money in the building society. Things are going wrong: so wrong that the Registrar feels it his duty—and it will be his responsibility to Parliament in the end—to intervene before things get to the stage where the depositors lose their money. Now that, ultimately, is an administrative and practical decision by an administrative official responsible to Parliament.

Then it is said that the Registrar's view should not be final. As I say, I am not going to pre-judge that question. If we can think of some way, other than the present one, of making it subject to review, I think that there might be something said for it. But I must say that I think there is an insuperable objection to this particular proposal. The courts are not going to make themselves responsible for an administrative act. The whole issue is begged by the last words of the second subsection in the proposed insertion, just before the proviso: … the Court may, if it thinks it just so to do, set aside the order.… Now what, in this context, is justice? The court is given no guidance at all as to the principle on which it should proceed. The Registrar is not a judicial officer: he is an administrative officer, and he is proceeding on the basis of what is administratively necessary if the depositors' money is to be safeguarded. The courts have no such experience, and are given no guidance if this particular method is to Abe adopted.

I think that if the noble Lord, Lord Elton, will look again at the case to which he referred (which is not only before the courts now, but is actually being heard to-day, if my Times Law Report gives me accurate information) it will give him some solace; because, if I have understood it aright, what the courts have decided under the comparable section of the Prevention of Fraud Act, 1958 (it is Section 11) is that in this respect and to this extent the Registrar must act judicially—or, as it is rather inelegantly put, quasi-judicially. If the Registrar does not apply what is called technically "natural justice" (and that is a phrase which lawyers, at any rate, think they understand, although I hope that none of my more pertinacious noble friends will ask me to give a full disquisition of its meaning this afternoon) then the courts have a right of review by a process known as certiorari.

I think this point was argued before the Divisional Court, and it was decided that they had jurisdiction. Although I did not know, when I read my Times this morning, that this point was coming up for me to answer this afternoon, my recollection of the report which I read this morning is that the Court of Appeal had certainly entertained the appeal without suggesting, as a preliminary point, that they had no jurisdiction to hear it; and that it would probably in due course come to be decided one way or another on its merits. But my own feeling is that that is probably the kind of review which already exists: it would exist under the clause as drafted, and would give the most adequate protection to the subject without taking away the administrative responsibility of the official.

It may be that even that is not the last word. I should not like to speculate myself as to the various forms of review which might be discussed as appropriate, partly because my own opinion just comes down on the side of the existing draft; but I should not in any way like noble Lords to feel that we seek to close the door to further discussion. It is only this particular suggestion for an appeal which seems to me to be, for the reasons which I have given, unacceptable. If the noble Lord, or those he represents, will enter into discussions, we will see whether we can think of something which will do, but I do not think I can go further than that.

LORD CITRINE

May I ask the noble Viscount whether, in view of what he has said about the principles of natural justice, it is not obvious that the Registrar should give to the society the grounds upon which he proposes to act? In the clause as it is, there is a provision whereby the society can make representations to the Registrar, and surely those representations would be facilitated if they knew the grounds upon which the order was being made. I put this point—it is contained in the Amendment—so that when the discussion has taken place with the noble Lord the reasons may be further gone into.

LORD LATHAM

I would support this Amendment on the grounds that, whilst it is desirable and essential to protect depositors and shareholders in building societies, it is none the less necessary to be fair and just to the societies. The noble Viscount made great play—interesting play, I think—of the need in his submission for the courts to have a justiciable issue, and no one would dissent from that. But it is the case that a person can present a petition to wind up a company, and, that petition being presented to the courts, the courts not so much have a justicialyle interest as are required to exercise a business judgment and appraisal of the position of the company at that time. Indeed, in this very clause there is a power given to the Registrar to present a petition to the court for the winding up of a society, and that petition which is presented is based almost wholly, unless there has been manifest misfeasance, on business considerations and the condition of the company—its liabilities, its inability to meet them, its inadequacy of assets in relation to its liabilities and matters of that kind.

It seems to me that if the courts are able to deal with issues of this kind— and they have been able to, of course, for many years: since 1864, I believe—they should not find themselves unable to deal with an appeal on a matter concerning the condition and financial circumstances of a building society. As my noble friend Lord Silkin has said, we were not excessively concerned about the need for justiciable issues when we were discussing, first of all, the Report of the Franks Committee, and then the legislation which followed. It seems to me that the Amendment preserves the rights of the building society, however badly it may be conducted; and it is to be hoped that the conversations that the noble Viscount has been good enough to promise to arrange may result in some less draconian method being found in this connection.

LORD ELTON

I should never have the courage to argue in your Lordships' House as to the nature of a justiciable issue; and, if I were going to argue with anyone, I certainly would not choose the noble Viscount as an opponent. I will therefore not go further into that, except to say that I am not entirely clear why a justiciable issue is so indispensable, and why what would arise from the Amendment would not be a justiciable issue. I am not clear why the section which I quoted from the Act of 1894 was committed to the Statute Book and has been applied, because it would seem that there have been appeals of precisely the same nature arising from that Act.

I was a little alarmed when I saw the wording of my own Amendment as drafted by those who advised me, where it says, "if it thinks it just so to do, …" I half expected that some philosophic questions might arise and I would rather have it put in a much less philosophical way and therefore subject to far fewer pitfalls; perhaps "if it thinks it proper to do so". I am grateful to the noble Viscount for saying, with obvious good will towards this Amendment, that he is prepared to consider ways in which, without raising too profound judicial or philosophic issues, we can do what we are trying to do—which is, not to leave too much autocratic power in the hands of one official and to leave to any society, however it may have misconducted its affairs, some loophole for appeal. On the understanding that the noble Viscount is going to be good enough to consult with us, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

VISCOUNT HAILSHAM

This is a drafting Amendment. I beg to move.

Amendment moved— Page 7, line 21, leave out second ("the").—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

I beg to move this Amendment. No. 20 will be consequential to it. Clause 5 authorises the Chief Registrar to make an order prohibiting a building society from accepting further loans, whether by way of deposit or share subscription or by any other way. I am prepared to go into greater detail if the Committee want, but I would say that the protection under subsection (9) of the clause is restricted to shareholders and does not extend to depositors. This is illogical. The protection of this provision ought to extend to depositors and shareholders alike, and the purpose of the Amendment is to extend this protection to depositors as well as shareholders. The rest of the Amendment is drafting.

Amendment moved— Page 7, line 40, lease out ("members who are") and insert ("depositors or").—(Viscount Hailsham.)

On Question, Amendment agreed to.

VISCOUNT HAILSHAM

I beg to move the next Amendment.

Amendment moved— Page 7, line 42, after ("money") insert ("deposited or").—(Viscount Hailsham.)

On Question, Amendment agreed to.

Clause 5, as amended, agreed to.

Clause 6 [Power to control advertising by a building society]:

LORD ELTON

This is the same point as that which your Lordships have just discussed under Clause 5. It is an attempt to assert the right of appeal against the power of the Chief Registrar to take action against building societies in respect of their advertisements. The same arguments apply and I assume that your Lordships will wish to leave this clause in the same state as Clause 5. I beg to move.

Amendment moved—

Page 8, line 26, at end insert—

("(4) The Chief Registrar shall specify in the notice given to the building society under subsection (3) of this section the grounds on which he proposes to give the direction and he shall also specify in the notice given under subsection (1) of this section the grounds on which he has given the direction, and the grounds specified in the notice given under subsection (1) may differ from those specified in the relevant notice under subsection (3).

(5) If the Chief Registrar serves a notice under subsection (1) of this section on a building society, the building society may within fourteen days after the service of the notice appeal from the directions to the High Court in England or to the Court of Session in Scotland and thereupon the Court may, if it thinks it just so to do, set aside the directions:

Provided that any such directions shall remain operative pending the determination of the appeal by the Court.")—(Lord Elton.)

LORD LATHAM

As the noble Lord, Lord Elton, has said this Amendment raises a similar question to that which was raised on Clause 5, except that it has also some other disadvantages, which I might be permitted to indicate. It seems to me that under the clause the Chief Registrar is given not only power to prohibit advertisements which he regards as being objectionable and to insist upon their withdrawal and discontinuance, but also, under subsection (1) (a), the power to draft advertisements. Paragraph (a) says give directions as to the matter which shall or shall not be included in advertisements, and as to the form of any advertisements, I should have thought that that was a most unusual obligation to cast upon the Chief Registrar, on a person who is not personally answerable, except presumably to the Treasury, for what he does. I should have thought that any Chief Registrar would have expressed the desire not to have such wide powers as are proposed to be given him under this clause. Of course, drafting advertisements is an attractive exercise, sometimes, even though they may be called leaflets, but it can lead one into all sorts of difficult byways. It seems to me to be hardly in accordance with constitutional practice and our traditions as regards the Civil Service and those who are in the employ of the State to cast upon them the responsibility or to give them the right we propose to provide in this connection. I hope that the noble Viscount can give attention to this point when consideration is being given to Clause 5, because I think it raises a matter of considerable importance.

VISCOUNT HAILSHAM

I think that the noble Lord, Lord Latham, has somewhat overstated his case. Clause 6 is a more moderate clause because it stops a society only from advertising and not from raising money. As I explained in some detail on Second Reading, it was introduced for the precise reason that Clause 5 procedure, which corresponds to Section 11 of the Prevention of Fraud Act, was considered too drastic for less serious cases. It is true that there is power under Clause 6 to prohibit certain matter appearing in advertisements, but again that is a mitigation of the clause, not an exacerbation. It is thought that in cases not quite so flagrant it would not be necessary to stop a society from advertising altogether, but only to make them discontinue misleading matter in advertisements. For instance, advertisements which have appeared on behalf of some of the perhaps less reputable societies have suggested that they were incorporated so long ago as 1874, by using the phrase, "Incorporated under the Building Societies Act, 1874". This gives the impression of a very long standing, prosperous society. It is thought that the Registrar should have power to prohibit advertisements of that kind.

In a sense, all this is irrelevant to the question of appeal. Obviously, the same kind of argument could be raised on Clause 6 as could be raised on Clause 5, as the noble Lord, Lord Elton, said, and the last thing I desire to do is to suggest that they should be treated differently. I am not sure that they should not be treated exactly the same as regards appeal, one way or the other. But I must tell the noble Lord, Lord Latham, that if he boggles at the Registrar drafting advertisements, as a practising lawyer for twenty-five years I shudder at the idea of the law courts doing so.

LORD LATHAM

I did not intend to overstate the case, but according to the wording of the clause it is the case that the Chief Registrar has the right, and it may well he the obligation, to draft advertisements. The words of the clause are that, with the consent of the Treasury he may: by notice served on the building society give directions controlling the advertisements which the building society may issue or cause to be issued and may in particular—

• (a) give directions as to the matter which shall or shall not be included in advertisements, and as to the form of any advertisements."

It could not be stated more clearly that he has the power and maybe, as I have said, the obligation to draft advertisements. That is entirely different from the protective consequences of his being able to prohibit objectionable advertisements and to insist upon their withdrawal if they are already in currency. That is a fairly wide power, in any case; nevertheless, in the circumstances of the times it is one which can be accepted. However, it seems to me to be an almost indefensible thing to give the right to, and impose the obligation upon, a servant of the State to draft advertisements for a building society or any other business or entity which already is in difficulties and about the conduct of which there are doubts and apprehensions.

THE EARL OF DUDLEY

I have the same interest in this matter as the noble Lord, Lord Elton. The arguments of the noble Viscount, Lord Hailsham, this afternoon have been a trifle legalistic and somewhat over the heads of laymen like myself, and I have had difficulty in comprehending them. What I should like to know is whether the noble Viscount will give an assurance that this matter will be considered carefully between now and the Report stage to see whether some form of appeal may be given to the building societies against the rather Gestapo-like decision by the Chief Registrar, who is given such great powers under this Bill.

VISCOUNT HAILSHAM

I thought that I had already satisfied the noble Lord on Clause 5, and I have already said that Clause 6 stands on the same footing as Clause 5. I hope that that is not too legalistic. I must say that I cannot accept references to the Registrar as being Gestapo-like. They appear to be intemperate and wholly inaccurate.

LORD ELTON

I am grateful to the noble Viscount for classing Clause 6 with Clause 5, which he has already so kindly promised to reconsider, and, in the circumstances, I beg leave to withdraw the Amendment.

LORD CITRINE

I should like the noble Viscount to tell me one thing. In the clause it says: give directions requiring the withdrawal of any advertisements which are on display in public places". Would it be a public withdrawal?

VISCOUNT HAILSHAM

In the sense that that which was previously public ceases to be public, it would be public. I do not think they have to say publicly why they have taken the advertisement down, and it would not in that sense be public. But if the advertisement is published contrary to the order, I should imagine that such an advertisement which contravened the order would have to be removed from the public gaze, and in that sense I suppose the withdrawal is public.

LORD LATHAM

If I may say so—I shall be corrected if I am wrong—the withdrawal is not limited to advertisements which are already out.

VISCOUNT HAILSHAM

I do not think I suggested that it was. I was only answering a question put to me by the noble Lord, Lord Citrine. I was not in the least intending to suggest that that was so, and if I gave that impression I can only apologise; but I cannot think that anything I said did give that impression.

Amendment, by leave, withdrawn.

Clause 6 agreed to.

Clause 7 agreed to.

Clause 8 [Special powers as respects small building societies]:

VISCOUNT HAILSHAM

This Amendment substitutes "require" for "request". I am told that it is a drafting Amendment. I should not have said that the words were precisely synonymous, but I do not think they would improve from any discussion on my part. Therefore I beg to move.

Amendment moved— Page 11, line 38, leave out ("request") and insert ("require").—(Viscount Hailsham.)

On Question, Amendment agreed to.

Clause 8, as amended, agreed to.

Clause 9 agreed to.

Clause 10 [Investment and banking of surplus funds]:

VISCOUNT HAILSHAM

This is little more than a drafting Amendment. It enables the society to borrow from a bank which is a partnership as well as from a bank which is a corporate body. It is thought that there is no reason why it should not. There are a few highly reputable banks which operate still as partnerships, and one of them I think is the well-known House of Rothschild. I beg to move.

Amendment moved— Page 15, line 14, after ("corporate") insert ("or partnership").—(Viscount Hailsham.)

On Question, Amendment agreed to.

On Question, Whether Clause 10 shall be agreed to?

LORD BARNBY

Before Clause 10 is agreed to may I seek an interpretation from the noble Viscount on that part of the clause which gives the Treasury, after request by the Chief Registrar, power to authorise certain banks to hold funds? The earlier part of the clause refers to this matter at great length, and a subsequent clause refers to Northern Ireland. The purpose on which I seek expression from the noble Viscount is: does "bank" necessarily exclude banks in the White Dominions? In asking this, I would draw the attention of the noble Viscount to the widespread feeling that it would be timely that funds of the building societies here should, by the proper means, and possibly some additional legislation, be made available for the purpose of supporting building societies in the White Commonwealth. It is in line with that thinking that, since legislation of this character is now before your Lordships, I am venturing to ask the noble Viscount whether he can give any indication, and if not, whether he will be able to advance that into the proper quarter to see if, at a later stage, the necessary powers can be granted for that purpose.

VISCOUNT HAILSHAM

I can see nothing in the clause to limit the expression "bank", except subsection (8), which does not appear to restrict it in that way. Whether or not the practice would be desirable or what the Chief Registrar would do about it, I cannot say without notice. If I could write to my noble friend as to what the practice may be, I think it would be more convenient; but so far as the interpretation he requires is concerned, I think the clause is plain.

LORD BARNBY

I appreciate the assurance of the noble Viscount. I am sure he has understood my meaning. It would be a pity if the legislation proceeded on this occasion without that matter, which is so important to the future, having been considered during the discussion on the Bill.

LORD MILNER OF LEEDS

I am sure that it was only in error, but the noble Lord, Lord Barnby, referred to the "White Commonwealth". It is a Commonwealth which we hope includes men of many colours. I am sure the noble Lord would wish to withdraw that phrase, which should not go out from this House. On the general question of extending the operation of building societies to the Commonwealth, I have an Amendment down at a later stage, and I should be grateful if the noble Lord could find it possible to support me on that.

LORD BARNBY

On the first part of the noble Lord's remarks, I must admit my ignorance that there were building societies in any other than the white parts of the Dominions.

LORD OGMORE

May I inform the noble Lord that, to my knowledge, there is a building society in Malaya and Borneo, and, indeed, one in Uganda as well.

VISCOUNT HAILSHAM

I hesitate to restrict discussion in any way, but I suggest we are going rather wide.

Clause 10, as amended, agreed to.

Clause 11:

Power to lend money to other building societies

11.—(1) Where it appears to the Chief Registrar that a building society as defined in this Act or a building society of Northern Ireland is in financial difficulties he may, with the consent of the Treasury, authorise any other building society to lend money to that first-mentioned society, and a building society shall have power to act accordingly.

3.42 p.m.

LORD MILNER OF LEEDS moved, in subsection (1) after "lend money to" to insert ", or accept a transfer of engagements from". The noble Lord said: As I understand it, Clause 11 is designed to authorise two things. First, it is designed to authorise loans in Northern Ireland (which hitherto, apparently, have not been authorised) ion the same conditions as in this country; that is to say, loans to assist other building societies who are in financial difficulties. My Amendment is designed to add to the power to lend money both in Northern Ireland and elsewhere in the United Kingdom, and to authorise building societies, on the direction of the Chief Registrar, to take what is known as a transfer of engagements of a building society in financial difficulties.

It would appear to me that it is not sufficient merely to lend money to another building society in financial difficulties. There should be power, on the authority of the Chief Registrar, to take over the engagements of that building society and, in effect, the building society itself. Your Lordships may know of a comparatively recent case where a building society, owing to the depreciation of gilt-edged stock in which that building society had invested its funds, was found to be, in effect, insolvent. In that case it was possible for another building society to take over the engagements and, in fact, the society as a whole, and to put its affairs in order. The purpose of my Amendment is to authorise that transfer of engagements as well as the loaning of money to another society in financial difficulties. I beg to move.

Amendment moved— Page 15, line 19, after ("to") insert (",or accept a transfer of engagements from,").—(Lord Milner of Leeds.)

VISCOUNT HAILSHAM

There is at present a procedure for transfers of engagements from one society to another. It involves the transfer of assets, powers, rights and responsibilities, including membership. The procedure at present in existence is set out in Section 5 of the Building Societies Act, 1874, and Section 5 of the Societies (Miscellaneous Provisions) Act, 1940. It requires for such a transfer the authority of a three-quarters majority of those voting at special meetings of each society, and either the written consent of holders of two-thirds of the shares of each society or the Registrar's agreement to dispense with the requirement, after due public notice and a hearing of those concerned. Clause 50 of this present Bill imposes an additional requirement about the information which has to be sent to members before they are asked to agree to such a transfer.

I was not quite clear whether the noble Lord intended this Amendment to make it possible to by-pass the present procedure. If so, our view is that this would be undesirable. The transfer considerably affects the position of members of both the transferor society and the transferee society, and there would seem to be no justification for dispensing with the present requirements which are intended to give them a proper say in what is proposed. If, on the other hand, the noble Lord desires this procedure to be additional to the existing procedure, then I would say that it is unnecessary. The Registrar, in practice, has to approve all transfers of engagements, since the societies approach him for permission to dispense with the requirement of written consent. On either interpretation of what the noble Lord intends, I would suggest that this is not an Amendment which the Committee would be wise to accept.

There is a second point to which I think the noble Lord adverted. His Amendment would have the incidental effect of authorising a transfer of engagements from a Northern Irish society to a British society, but not vice versa. This is not possible at present because there is no longer any Statute common to both Northern Ireland and Great Britain under which this could be affected. There has been an approach in recent days by the Building Societies' Association to my right honourable friend in the Treasury about this point. I would, however, tell the House that this point requires further consideration, in consultation with the Government of Northern Ireland. If it does prove to be acceptable, it would probably be desirable that such transfers should not be limited to cases where the Northern Irish society is in financial difficulties and that they should be subject to similar conditions to those which already exist for transfers between two British societies. Therefore, the provision, if it is to be made at all, would be more properly made in a new clause later on in the Bill. If the noble Lord will accept this suggestion I would undertake that at any rate before the Bill is considered in another place—I doubt if I could undertake it earlier—the matter will be considered in relation to Northern Ireland, and I would give him that assurance.

LORD MILNER OF LEEDS

I am obliged to the noble Viscount and, of course, I accept his assurance that the matter will be considered before the Bill goes to another place. That is in regard to the first point. In regard to the second point, I am also obliged to the noble Viscount. I had not appreciated that there are existing powers which would permit transfer of engagements in these as in other cases. That being so, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 agreed to.

Clause 12 agreed to.

Clause 13 [Valuation of security]:

3.50 p.m.

VISCOUNT HAILSHAM moved to leave out subsections (1) to (4) and to insert instead:

1. "(1) It shall be the duty of every director of a building society to satisfy himself that the arrangements made for assessing the adequacy of the security to be taken in respect of advances to be made by the society are such as may reasonably be expected to ensure—
1. (a) that the adequacy of any security to be so taken will be assessed either by the directors of the building society or by a director or other officer of the building society who is competent to make the assessment, and
2. (b) that there will be made available to every person who is to assess the adequacy of any security to be so taken a report as to the value of, and any matter likely to affect the value of, any freehold or leasehold estate comprised in the security, being a report prepared by a competent and prudent person who is experienced in the matters relevant to the determination of the value of the estate and who is not disqualified for reporting thereon by virtue of subsection (2) of this section.
2. (2) For the purposes of paragraph (b) of the foregoing subsection,—
1. (a) a person who is a director or the manager or secretary of a building society shall be disqualified for reporting on any freehold or leasehold estate comprised in security to be taken by the building society in respect of any advance;
545
2. (b) a person to whom a building society has made or undertaken to make a payment for introducing to the building society an applicant for an advance shall be disqualified for reporting on any freehold or leasehold estate comprised in security to be taken by the building society in respect of any advance to be made to the applicant on that application; and
3. (c) where an advance is to be made by a building society following a disposition of freehold or leasehold estate which is comprised in security to be taken for the advance, any person having a financial interest in the disposition of that freehold or leasehold estate shall be disqualified for reporting thereon.
3. (3) Every building society shall cause to be kept records showing with respect to every advance made by the building society after the commencement of this Act on the security of freehold or leasehold estate—
   1. (a) the value placed upon the estate in the report thereon under paragraph (b) of subsection (1) of this section, and the name of the person by whom the report was made, and,
   2. (b) particulars of any additional security taken by the building society,
   and such records shall be open to inspection by the auditor, and by any accountant or actuary appointed under section four of the Building Societies Act, 1894.
4. (4) If a director of a building society fails to carry out his duty under subsection (1) of this section, or if any person prepares for the purposes of paragraph (b) of that subsection a report on any estate with respect to which he is disqualified for reporting by virtue of subsection (2) of this section, he will be guilty of, an offence under this Act; and if any building society fails to comply with subsection (3) of this section, the building society and every officer of the building society who is in default shall be guilty of an offence under this Act."

The noble Viscount said: Clause 13 was one of the clauses which excited most discussion during the Second Reading debate on the Bill. Almost at the moment when I was about to reply, my noble friend Lord Saltoun put a dilemma to me which I promised to have looked into. This rather large Amendment is the result of my endeavours to escape from the dilemma which my noble friend presented to me. He pointed out that the Act of 1939 laid on a director a duty which was almost identical with the task which he was forbidden to perform under Clause 13 of this Bill. On reflection, I think that there was something in that dilemma. It was due to the fact, I think, that there was a confusion to some extent in our minds between the obligation to consider the adequacy of a security, which can hardly be divorced from management of a building society, and the obligation to value a property, which is not quite the same thing, and which we consider ought to be done by an independent valuer. It is in an endeavour to rid ourselves of that confusion that we have introduced this Amendment which supersedes the old provision and the provisions of the 1939 Act.

The clause as amended, or as proposed to be amended, distinguishes between two quite separate processes for which responsibility is to lie in different hands. First it proclaims that the duty lies on the directors of the society to ensure that satisfactory arrangements exist to assess the adequacy of the security to be taken in respect of every advance. In the smaller societies this will no doubt be achieved by the directors themselves considering individual cases. In other cases the duty may be discharged by a director or other officer—for instance, a branch manager. Your Lordships will see that in paragraph (a) of the new subsection (1).

But whatever the arrangements may be the directors are still individually responsible to ensure that, so far as possible, the duty of assessment is undertaken by somebody who is competent for the purpose, and that the person making the assessment, whether a director or branch manager, or whoever he may be, is provided with a report on the value of the property prepared by somebody who is competent, prudent, experienced and independent. In other words, the duty of assessing the adequacy of the security remains with the management; but when that is done, the management must be provided with a report, which must be independent, on the value of the property which is the security. The new subsection (2), in effect, defines what is meant by "independent" for this purpose. There it follows the clause as originally drafted by disqualifying from the task of making the Report (although not from the assessment of value of the security) a director, manager or secretary of the society, or anybody financially interested in the sale of the property in question—for instance an estate agent who has introduced the purchase professionally.

Subsection (3) continues the requirement in Section 12 of the 1939 Act for building societies to maintain records in respect of each advance made, showing the value placed on each property by the surveyor reporting on it and particulars of any additional security taken by the society. Such records will be open to auditors and to any accountant carrying out a special inspection. The new subsection (4) is the present subsection (4) with purely consequential and drafting Amendments.

Amendment moved— Page 16, line 28, leave out subsections (1) to (4), and insert the said new subsections.— (Viscount Hailsham.)

THE CHAIRMAN OF COMMITTEES

I have received two manuscript Amendments to be moved by the noble Lord, Lord Saltoun. The first of these Amendments to the Amendment is, in line 17 of the proposed new subsection (1), after "is" insert "not a director, manager or secretary of a building society and is". That is in line 17 of subsection (1) of the Amendment moved as No. 25.

LORD SALTOUN

I cannot help being very gratified by the result of our debate on the Second Reading and that the Government have withdrawn the original subsection and proposed these instead. I am grateful to the noble Viscount in charge of the Bill for the trouble he has taken over this matter. I appreciate that he has gone a long way to meet me. I may be wrong, but I believe that he and I have exactly the same object in view: we have the object of ensuring that the board of any building society have before them when they are assessing a security a valuation by an independent competent person who is not either a director, manager or secretary of a building society.

I am bound to admit that I am not quite satisfied with the clause as now drafted, and I think it still goes a little too far. It is the duty of the directors of any building society to take every measure that they can to ensure the sufficiency of any security on which they are going to advance money, and it is a perfectly reasonable thing to do that any director of a building society should go and, being himself a competent person, examine the house or whatever the subject is upon which the loan is to be advanced. If he does so and if he comes to certain conclusions I submit that it is still his duty to submit those to the board. I am probably assuming an improbable case, but I must perhaps do so to make my point. Suppose the board were to have a valuation by an independent person of a subject on which they were asked to advance money, and suppose one of the directors said, "Well, I think Mr. X must have examined that house in rather a bad light. I was going round the wash-house the other day and I thought the rafters looked bad. I took out my penknife and stuck the blade up to the hilt in one of the rafters". That is one of the first things one does when one examines property—one takes a penknife and tests the rafters and other beams.

It is his duty, I submit, to make a report to the board on that matter, either verbally or by letter—reports are of all kinds. It seems to me that subsection (2) goes rather too far in this way: that the persons comprehended under paragraph (a) are persons already mentioned and have a special relation to the society, whereas the provisos (b) and (c) are universal against all people. I do not expect the noble Viscount to accept my Amendment this afternoon; that would be too much to expect; I think he, and certainly I, only got this draft yesterday and we have not had much time to look at it. I was able to draft my Amendment only this afternoon. What I would propose to the noble Viscount is that paragraph (b) be altered to read that there shall be available to every person who is to assess the adequacy of any security to be so taken a report as to the value of, and any matter likely to affect the value of, any freehold or leasehold estate … being a report prepared by a competent and prudent person who is experienced in the matters relevant to the determination of the value of the estate and who is not a director, manager or secretary of a building society and is not disqualified for reporting thereon by virtue of subsection (2) of this section. I submit that that effects the same purpose that the noble Viscount and we all want to effect, and that it still leaves it open to the elected directors to carry out their duties with the greatest freedom.

Suppose a valuer were to get old and incompetent and gave reports which were rather too favourable. If the clause is left in its present condition a director may well say, "Yes, but I am entirely shielded by a report given by a competent man." Directors are elected by the shareholders of the company from a favourable, preconceived opinion of their competence and their honour. As the clause stands I think it is rather strong against such persons, and that my Amendment puts the duty in its proper relation. I know that elections do not always have the effect that they are supposed to have. I think a Member in another place the other day suggested, whether intentionally or not I do not know, that election to Parliament conferred all the benefits of the highest possible education upon the recipient. I am not sure whether that is true or not. So far as I am concerned, I should like to go back to my original suggestion. I would rather have the limitation in subsection (1), because it is a different kind of limitation to that in subsection (2). As to paragraphs (b) and (c) in subsection (2) I accept them as willingly, as gladly and as easily as Millament accepted for her provisos. I beg to move.

Amendment to Amendment moved— Line 17 of the proposed new subsection (1), after ("is") insert ("not a director, manager or secretary of a building society and is".— (Lord Saltoun.)

4.3 p.m.

LORD MESTON

I think that this is a most important Amendment and that we should be grateful to the Lord Privy Seal for the careful way in which he has explained the provisions of this Bill. I agree that no unqualified or inexperienced man, whether he is a director or otherwise, should ever make a valuation of any property for a building society, and I agree that no director should ever make a valuation for a building society in respect of a property in which he has an interest. Having said that, I am opposed entirely to shutting out directors who are qualified and experienced men from making reports on properties upon which the society eventually makes a loan.

I have down an Amendment which is not yet before the Committee, but it proceeds under a misapprehension, because Clause 13 as originally drafted referred merely to assessing the adequacy of the security. As the noble Viscount has pointed out, there are two quite distinct steps and conceptions: first of all, you make the valuation and, having made the valuation, you then make a report to the building society and the board of directors assess the adequacy of that security. That is the usual procedure. I happen to be a director of quite a respectable building society—it is not respectable because I am a director, but for other reasons—and three of my colleagues are most experienced surveyors and are highly regarded in their own profession. They make most of the reports and valuations for the society. These are then placed before the board of directors who go into all the usual matters—for instance, the status and income of the proposed borrower, the area in which the property is situated and the general financial situation of the building society. Ultimately, they decide how much money it is proposed should be advanced on that security. I quite agree with the noble Viscount that there are two quite distinct steps: first, there is the valuation and the report made thereon; and secondly, the latter is placed before the board of directors who assess the security in the light of all the circumstances.

I think it would be almost disastrous to shut out qualified men who are directors from making these valuations. I have found from a good many years' experience that there is absolutely no conflict of interest in the minds of surveyors who are also directors and who deal with property for the benefit of the society. Not only that, but the noble Viscount must know that the livelihood of certain most experienced and qualified surveyors will go in the night if Clause 13 as now proposed by the Government is passed. The noble Viscount will not think that I am being personal when I say that he is a young man and that if anything terrible were to happen to him he could start life again. But suppose "old boys" like myself who go back to the days of Mr. Gladstone were to be shut out in the night from pursuing their ordinary method of earning a livelihood, what could we do in the future? Therefore, on all grounds, including sentimental grounds, I ask the noble Viscount the Lord Privy Seal not to accept my Amendment or that of anybody else at the moment, but to look at this matter again in order that we can raise it on the Report stage.

LORD ELTON

I should like to say, from the point of view of the building societies, that the importance of this Amendment is that it clearly distinguishes, as both the noble Viscount and the noble Lord, Lord Meston, have so well explained, the two processes of valuation, which is a technical process for experts professionally qualified, and the assessment of the adequacy of a security which covers a good many other considerations besides those technically considered by the valuer. Until this distinction was made a considerable amount of alarm and despondency was spread among the ranks of building society officials. One managing director said to me, "If this clause passes I may as well close down my job." He had read the beginning of Clause 13 and had thought that he would no longer be allowed to satisfy himself in assessing the adequacy of a security—and that he maintained, was one of his principal jobs. This has now been satisfactorily disentangled and the Council of the Building Societies' Association is grateful and views this with every favour. I believe that a minority of the Council still consider that the director who is a professionally qualified valuer is perhaps the best person to value a property, even though he is a director on the board. But that is a minority view and, in general, the representatives of the building societies are grateful to the Government for this clarification.

LORD WISE

I should like to endorse what my noble friend Lord Meston has said. I believe that the noble and learned Viscount has already had representations from the Royal Institution of Chartered Surveyors on this particular point. As an old retired chartered surveyor myself, I feel that under the proposed new clause they are being put in a very difficult position. As my noble friend Lord Meston has said, there are many chartered surveyors, and other professional men of standing, who are also directors of building societies, and I am certain that any one of them would act conscientiously and without any bias at all in making a valuation of property for a particular society. I feel that the Amendment perhaps puts a slur on the professional abilities and honesty of purpose of members of the professional societies dealing with the valuation of property, and I hope that the noble and learned Viscount will think about this particular Amendment and that when it comes up again some alteration may be made.

LORD HAWKE

Before we part from this Amendment proposed by the noble and learned Lord Privy Seal I would ask him to look at the words "a competent and prudent person". The word "prudent" seems to me rather peculiar language to put into an Act of Parliament. I should have thought that that was a quite unprovable stipulation, and that on the Report stage it might be found better to leave it out.

THE DUKE OF DEVONSHIRE

Before the closure is moved I would ask the noble and learned Viscount whether he can answer one or two questions to clarify his new subsections. First, if a director of a building society is in partnership as a valuer with others who are not directors of any society, are those other partners disqualified from making valuations? Following that, if those other partners are not so disqualified, should the report be signed by the partner who has made the valuation or in the name of the firm? Thirdly, where a director is in sole practice as a valuer—that is, without partners—can valuations be made by competent members of his staff? If so, who should sign the report? Finally, where a director is also a director of a limited company which undertakes valuations, who is disqualified from making a valuation, and who should sign the report? On behalf of the Building Societies' Association, of which I have the honour to be President, I should be glad if the noble and learned Viscount could give me some guidance on those points.

LORD OGMORE

I should like to take up the point made by the noble Lord, Lord Elton, who discussed the belief of members of the Building Societies' Association that directors who are also competent persons should not be excluded from valuing properties. I wonder whether the noble and learned Viscount has given any thought to this question. I can see that there are points one way and the other, but I imagine that with smaller societies, where business is not on the scale of the bigger societies, there might occasionally be advantages in having a director who was a valuer and able to speak both as valuer and director, and that he could help his fellow directors in assessment of a particular property or in judging a particular locality.

It must be remembered that in recent years a number of small societies have played a considerable part in the development of the building society movement. For example, just after the war (and perhaps this applies in some cases even to-day) it was practically impossible for a Pole to get an advance from a building society—certainly from any of the bigger societies—though why that should have been I cannot understand, because I believe it has been the experience that Poles are among the best risks that any building society can have. But that was the case. One or two of the smaller societies were responsible for breaking down that situation. Then there was the question of advances on fiats and apartments. That has been frowned upon by the bigger societies but developed by the smaller ones. Here, as in other cases, whether dealing with big industries or trade unions, we must be careful not to shut out small societies, societies which are struggling up, simply in the interests of big societies who naturally will take a rather more bureaucratic line and who always look with some jealousy on their smaller and newer competitors coming into the field. I feel, therefore, that this question should not be decided too hurriedly, for there is more in it than meets the eye.

I have a slight professional connection with a building society, although I am not a director, manager, secretary or prudent person who is experienced in relation to the valuation of estates. I do feel an interest in the small societies, and in my view they should not have their business impeded by what may be largely a doctrinaire point, and not a very serious one. It may be that it will be useful for a society to have on the board a director who knows both the properties and the locality. I am thinking, for example, of my own part of the world, South Wales. A director coming from the district would know all about the people, the locality and the property: he would know that far better than some valuer coming in from outside, perhaps from a distance, or from Cardiff, the capital. He would know far more about the locality and about those to whom loans were to be made, and far more about the prospects of a particular locality than any outside valuer. We must bear that in mind and must not only think of the great building societies like the Halifax but must consider all the smaller concerns which play a very important part in this country, particularly outside London.

LORD SALTOUN

May I beg your Lordships to remember that the Committee are now debating my Manuscript Amendment to Amendment No. 25 and not the Amendment of the noble Lord, Lord Meston, or Amendment No. 25 itself.

VISCOUNT HAILSHAM

I was about to say that from the moment my noble friend referred to Millament this has been a somewhat disorderly discussion. As he has said, it is true that in what Millament called "our odious endeavours" he and I have been labouring under a disadvantage. We have not had much time to get going. If I may first address myself strictly to the matter in order, I will, of course, look again at my noble friend's Manuscript Amendment. Having had it only since this debate began I should not like to pronounce too dogmatically upon it, but my impression is that it makes no difference at all to the construction of this clause and simply re-enacts the clause in another, slightly less eloquent, form. But I see what the noble Lord is trying to say, and I do not think there is any difference at all between us.

I do not think that the clause, as drafted, prevents any directors from issuing reports, but it disqualifies them from being, for the purposes of paragraph (b) of subsection (1), the author of the report which is necessary in order to enable the management to assess the adequacy of the security; and they would not be able to issue such a report whether my noble friend's Manuscript Amendment or the draft on the Order Paper were carried. It is simply a question of whether the disqualifying words are put into the first or second subsection—and they are equally valid in whichever they are put. My own view, therefore, for what it is worth, is that there is no difference between the Amendment of my noble friend and the Amendment on the Paper. I will, however, look at the matter again, before the Report stage, lest I have inadvertently erred.

I do not know whether, as we have discussed the matter broadly, it would now be convenient to take the clause itself. But I must say that there is a difference of opinion between the noble Lord, Lord Meston, and myself which does not derive only from the fact that I am (as he put it) a young man who would not suffer any inconvenience if I had to start again. But I am bound to tell the noble Lord that the view of Her Majesty's Government, like that of the majority of the building societies in this country, is that the proper valuation of property is fundamental to the proper conduct of a building society, and it is of the greatest importance, in the interests of those who invest their money in building societies, that the valuation should be undertaken by somebody who is quite independent in the sense that he has no financial interests in the transaction. The view of the Government is that the board of the society, or whoever else it is who has to take the final decision under paragraph (a) on the adequacy of the security, should not be inhibited in that task by the knowledge that the valuation was carried out by a fellow member on the board; and also that the board of directors should not be embarrassed in their duty to select the most suitable available person to make the valuation or the valuation report for the purposes of the second subsection by the knowledge that one or more of their colleagues were anxious to be appointed to that position.

There have been cases of directors—whether they go back to Mr. Gladstone or not I do not know—continuing to do valuations for a society long after they have retired from their general valuation work and have lost touch with market trends, largely because the board have not had the heart to deprive them of the fees. The Government case is that it is wrong in principle for directors to carry out the valuation of property for this purpose—the purpose of the report under the second subsection—and it is not made any the less improper by passing a special resolution to allow them to do it. That is a matter about which opinions differ. It is a matter upon which the Government are fortified by the majority of the building society movement too, but I recognise that the noble Lord, Lord Meston, takes another view and I am sure that he would not like me either to gloss over or to minimise the difference between us.

Of course, like all the other matters, this Bill is in its early stages, and no doubt this particular issue will be debated again here or elsewhere. The last thing I wish to do is to indicate that we would not welcome further discussion, either public or private, on the matter. But I am bound to tell him flatly that, as at present advised, the view which he has been seeking to put before us is not that which corresponds with our own opinion. With that, I would hope that my own Amendment could be accepted and perhaps my noble friend would withdraw his manuscript Amendment on the understanding that I have made my own position plain, and if I have in fact erred I will write to him and give him another opportunity to raise the subject.

4.23 p.m.

LORD SILKIN

I believe it had been agreed through the usual channels that we should adjourn this debate at 4.15 p.m. and go to the next business. The position is in some state of confusion. We have had before us a new clause; we have had a manuscript Amendment, which I think we have followed but which very few of us have actually seen; and we have had a discussion on an Amendment which has not yet been moved. I think it might be convenient if we adjourned at this stage, because, although there is a good deal to be said for the view of the noble Viscount on the Amendment which has not been moved, there is another view which ought to be discussed more fully. Therefore I hope that the Government will see their way, not to insist upon this clause being accepted at this stage and the Amendment being withdrawn, but to leave the discussion in the state in which it is so that we may continue it when we next come to discuss this matter.

VISCOUNT HAILSHAM

I am entirely in the hands of the Committee on this matter, but it is, I think, factually incorrect to say that I have not moved the Amendment. I do not think that my noble friend's manuscript Amendment to my Amendment would be in order had I not done so. It was, of course, the intention to conclude this discussion at 4.15 p.m., which is only ten minutes ago. I think I was correctly interpreting the wishes of the Committee not to break into the series of speeches which were being made. But I frankly think that, now that we have heard almost everything, and probably everything there is to be said from every Member now present, on this subject, we should be in a position to take a decision on this new clause and the Amendment. Certainly I should be sorry not to do so, and I would ask the Committee whether they would not feel that that was not a more reasonable course to take.

LORD JESSEL

There are several questions which have been asked, notably by the noble Duke, the Duke of Devonshire, on the position of a firm where one of the partners was a director of a building society. I think we should like to know more about them.

VISCOUNT HAILSHAM

That is very reasonable. Unfortunately my attention was taken from the noble Duke, the Duke of Devonshire, by the speech of the noble Lord, Lord Ogmore, which intervened. I think I can give an answer to some, and possibly all, of the questions. They came out rather fast and I am not sure that I got them all or, if I did, that I shall be able to answer them all. The principal question was about the position of a report or valuation by a firm or partnership, one member of which was a director of the building society. This would not be prohibited by the clause, which is dealing with persons who make their report. This implies that the report will be the report of the individual and not of the firm or partnership. The fact that a proportion of the fees received in respect of the report may be payable to another partner or director on the board of the society is not directly relevant in this context. I think that that, by implication, at any rate, answers the principal question, and perhaps all of the questions, which the noble Duke put to me.

LORD MESTON

I suggest that the noble Viscount the Lord Privy Seal should accept the admirable suggestion made by my noble friend Lord Silkin and adjourn this particular matter to another time, because I hope to come here with a regular battalion of supporters on the next occasion.

VISCOUNT HAILSHAM

I think that that reveals the net in the sight of the bird. I do not think it is really proper for the noble Lord to complain, after a very full discussion in the presence of a considerable body of the Committee who have heard the arguments, and to say it will be more convenient to take the decision in the presence of a battalion of supporters whom he has whipped up on the grounds that they have not heard the arguments. I would ask the Committee to take the more sensible and judicial view: that those who have heard the arguments on the case are best qualified to decide it.

LORD SALTOUN

I think I am in order to ask the Committee's leave to accept the suggestion of the noble Viscount in charge of the Bill and to withdraw the Amendment to the Amendment which is before the Committee at the moment. Perhaps the noble Viscount will give me a moment after, and I think I can make the position clear.

THE CHAIRMAN OF COMMITTEES

Is it the Committee's pleasure that the first Amendment to the Amendment be withdrawn?

VISCOUNT HAILSHAM

This is the manuscript Amendment.

LORD SILKIN

No. I think we should have the whole thing before us.

THE CHAIRMAN OF COMMITTEES

The Amendment is not withdrawn and is still before the Committee.

LORD SILKIN

I beg to move that this debate be now adjourned.

THE CHAIRMAN OF COMMITTEES

Might I suggest that it would be preferable, if the noble Lord wishes to move that further consideration of Clause 13 be adjourned, for the noble Lord to move that.

LORD SILKIN

I will accept that.

Moved, That further consideration of Clause 13 be adjourned.—(Lord Silkin.)

THE CHAIRMAN OF COMMITTEES

The question is that further consideration of Clause 13 be adjourned.

LORD SALTOUN

May I ask the Lord Chairman whether my Amendment will fall out in that case?

THE CHAIRMAN OF COMMITTEES

No. The Amendment of the noble Lord, Lord Saltoun, has been moved and the Committee has refused permission for it to be withdrawn. Permission for Amendments to be withdrawn must be unanimous. It has now been

THE CHAIRMAN OF COMMITTEES

The question now is, That the first Amendment to the Amendment be agreed to.

On Question, Amendment to Amendment negatived.

VISCOUNT ALEXANDER OF HILLSBOROUGH

Before the Question That the original Amendment be agreed to is finally put, I should like to say this. I have heard exactly what has happened, and I am exceedingly disappointed at the proceedings this afternoon, after the agreement we made through the usual channels about the time to adjourn, and the insistence on this Amendment being carried without adequate discussion. I think that this is so serious a matter that it had better be referred to the Procedure Committee.

VISCOUNT HAILSHAM

I cannot accept that there has been no adequate

moved that further consideration of Clause 13 be adjourned.

On Question, Whether further consideration of Clause 13 shall be now adjourned?

Their Lordships divided: Contents, 27; Not-Contents, 56.

CONTENTS
Airedale, L.	Hawke, L.	Pethick-Lawrence, L.
Alexander of Hillsborough, V.	Henderson, L.	Rea, L.
Attlee, E.	Jessel, L.	Shepherd, L.
Burden, L. [Teller.]	Latham, L.	Silkin, L.
Citrine, L.	Lucan, E. [Teller.]	Sinha, L.
Devonshire, D.	Macpherson of Drumochter, L.	Stansgate, V.
Dudley, E.	Meston, L.	Uvedale of North End, L.
Grantchester, L.	Milner of Leeds, L.	Williams, L.
Granville-West, L.	Ogmore, L.	Wise, L.

NOT-CONTENTS
Aberdare, L.	Fairfax of Cameron, L.	Milverton, L.
Ailwyn, L.	Fraser of Lonsdale, L.	Newall, L.
Baden-Powell, L.	Fraser of North Cape, L.	Onslow, E. [Teller.]
Balfour of Inchrye, L.	Freyberg, L.	Rathcavan, L.
Bathurst, E.	Goschen, V.	St. Aldwyn, E. [Teller.]
Birdwood, L.	Grenfell, L.	Saltoun, L.
Bossom, L.	Hailsham, V. (L, Privy Seal.)	Somers, L.
Boston, L.	Hampton, L.	Strathclyde, L.
Buckinghamshire, E.	Hastings, L.	Swinton, E.
Cholmondeley, M.	Horsbrugh, B.	Templemore, L.
Clitheroe, L.	Iliffe, L.	Tenby, V.
Colyton, L.	Kilmuir, V. (L. Chancellor.)	Teviot, L.
Conesford, L.	Long, V.	Teynham, L.
Congleton, L.	Lothian, M.	Torrington, V.
Digby, L.	MacAndrew, L.	Tweedsmuir, L.
Dynevor, L.	McCorquodale of Newton, L.	Twining, L.
Ebbisham, L.	Mancroft, L.	Waleran, L.
Elliot of Harwood, B.	Margesson, V.	Winterton, E.
Ennisdale, L.	Merrivale, L.

Resolved in the negative, and Motion disagreed to accordingly.

discussion. Furthermore, I must tell the noble Viscount that if the moment had come at 4.15 and the noble Viscount had wished to terminate the discussion, he could have done so. It was precisely because the discussion had come to an end, and I think that was within the sense of the Committee—of which the noble Viscount was not a participant member—that we went on for another ten minutes; and any time spent after that has been consumed by the noble Viscount's own side.

LORD SILKIN

There are several of my noble friends who would have liked to say something on this clause. They refrained because it was understood that we were finishing at 4.15. If the Government insist on passing this, they must do so; but we feel that we shall have a grievance because it has not been properly or fully discussed.

On Question, Amendment agreed to.

House resumed by the Lord Chancellor.