§ 5.28 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.—(Lord Hughes.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The EARL OF LISTOWEL in the Chair.]
§ Clauses 1 to 10 agreed to.
§ Clause 11 [Power to discontinue, reduce or transfer contributions]:
§ On Question, whether Clause 11 shall stand part of the Bill?
§ LORD DRUMALBYN
I wonder whether I might ask the noble Lord a technical question. In circumstances where houses have been transferred, the Bill does not specifically say that the powers of subsection (3) of this clause will still be applicable to the transferred houses. Can we be quite certain that they will be applicable to them also?
§ THE JOINT PARLIAMENTARY UNDER-SECRETARY OF STATE FOR SCOTLAND (LORD HUGHES)
My noble friend beside me says, "That is a snorter!" It certainly is. Perhaps the noble Lord will give me time to look at this point, and communicate an answer to him in due course?
§ Clause 11 agreed to.
§ Clauses 12 to 17 agreed to.
§ Clause 18:
§ Right of parties to certain agreements secured on, or related to, unfit houses to apply to sheriff for adjustment of the agreements.
§ (3) In determining in any case what order, if any, to make under this section, the sheriff shall have regard to all the circumstances of the case, and in particular —
§ (a) in the case of a heritable security or charge,
§ (i) to whether the heritable creditor or person entitled to the benefit of the charge acted reasonably in advancing the principal sum on the terms of the heritable security or charge; and in relation to this sub-paragraph he shall he deemed to have acted unreasonably if, at the time when the heritable security or charge was created, he knew or ought to have known that in all the circumstances of the case the terms of the heritable security or charge did not afford sufficient security for the principal sum advanced, and
§ LORD DRUMALBYN
had given Notice of two Amendments to subsection (3)(a)(i), the first being to leave out "acted reasonably in" and to insert instead, "when". The noble Lord said: Perhaps it would be for the convenience of the Committee if these two Amendments were taken together, since they relate to the same point. This clause deals with the provisions relating to the assessment of compensation for unfit and certain other houses. Subsection (3) deals with the circumstances to which the sheriff is enjoined to have regard in considering all the circumstances of the case. As I understand it— and I shall be grateful if the noble Lord will confirm this— whatever may be the answers in the particular circumstances to which he is told he must have regard, the sheriff is still left free to make an order with respect to the debt, and can 902 make it modifying or discharging any outstanding liabilities. In other words, he is still left the full discretion. The only discretion he is not left is in deeming:whether the heritable creditor or person entitled to the benefit of the charge… knew or ought to have known that in all the circumstances of the case the terms of the heritable security or charge did not afford sufficient security for the principal sum advanced":and deeming whether, in those circumstances, the heritable creditor or person entitled to the benefit of the charge did not act reasonably in advancing the principal sum.
What I have tried to do in my Amendment is to remove the concept of acting reasonably, because I do not think this concept ought to be an overriding consideration. I do not know whether the noble Lord has ever had his wife say to him: "You are being far too reasonable" This is just the case one has in mind here. We are considering the case of a family who may be without a house at all. They are given the offer of a house. It may be a poor thing, and most inadequate. The price may be excessive, and they cannot get possession of the house unless they pay a sum. They naturally go to someone who is prepared to put up that sum, and they, in turn, are prepared to accept the implications of the debt. It may be quite unreasonable to advance the sum. On the other hand the person who advances it may have to consider the alternative, and the alternative may be that the family has no house at all.
One can see that there are three distinct kinds of case involved. The first, and the one at which the clause is clearly directed, is the case where the person who advances the sum is acting in co-operation with the person who is charging the sum — the person who is letting the property. In a case of that kind, where the sum charged is excessive, one can have no sympathy at all.
Then there is the intermediate case, where the person advancing the sum has some interest in the person having the house. For example, the person who advances the sum may be an employer of the tenant, and he may have an interest in having his tenant settled in accommodation and being able to operate from a 903 secure lease, albeit a poor one. He is advancing the sum for totally different reasons, and it may be quite reasonable, and even prudent, for him to do so in all the circumstances. But I can see that in a case of that sort he has something to gain from it.
Then there is the third case, where the sum is advanced out of pure compassion. It may be quite unreasonable, and totally imprudent, to advance it, but even in that case the sheriff is bound to take the view that the person acted unreasonably if he knew or ought to have known that there was not sufficient security provided by the heritable security. My contention is simply that it is quite unnecessary to fetter the sheriff in this way. All that has to be done is to direct his particular attention to this aspect and say that he shall have him weigh up all the factors together. This is what he is going to do, anyway, regard to this consideration, and then let and I rather regret that violence is being done to the concept of acting reasonably in this case. While, on the one hand, it may be the right criterion to apply, on the other hand, to say that, whether or not a man has acted reasonably, he is to be deemed to have acted unreasonably in all the circumstances seems to me to be quite wrong in principle.
My Amendments are directed purely to removing this concept of reasonability from the provision. If they were accepted the subsection would read:In determining in any case what order, if any, to make under this section, the sheriff shall have regard to all the circumstances of the case, and in particular—(a) in the case of a heritable security or charge.(i) to whether the heritable creditor or person entitled to the benefit of the charge when advancing the principal sum on the terms of the heritable security or charge knew or ought to have known that in all the circumstances of the case the terms of the heritable security or charge did not afford sufficient security for the principal sum advanced …I should have thought that that gave the sheriff a perfectly clear direction as to what he had to take into account. To my mind, at any rate, it is a better criterion to apply than the criterion of acting reasonably and directing the sheriff to deem somebody to have acted unreasonably whether or not in fact the sheriff thinks that in all the circumstances 904 he did act unreasonably. I beg to move the first Amendment.
Page 11, line 17, leave out ("acted reasonably in") and insert ("when").—(Lord Drumalbyn.)
§ LORD HUGHES
Subsection (3) of Clause 18 lists various factors to which the sheriff is to have regard in considering whether he should grant relief of outstanding liabilities relating to a house which is declared unfit and where compensation is therefore regulated by Statute. These liabilities may arise out of obligations secured by a heritable security or charge, or under a hire purchase agreement. The sheriff is to have regard to all the circumstances of the case, but in addition the subsection lists specific matters which he must consider. Sub-paragraph (a)(i) contains two provisions. First, it lays clown that the sheriff must in particular have regard to whether the heritable creditor acted reasonably in lending the amount he advanced on the terms of the heritable security. Secondly, the last eight lines of the sub-paragraph provide that the heritable creditor shall be deemed to have acted unreasonably if he knew, or ought to have known, that there was insufficient security for the sum advanced.
As the noble Lord, Lord Drumalbyn, said, the two Amendments propose to remove both these provisions and to substitute for them a single provision that the sheriff must in particular have regard to whether the heritable creditor knew or ought to have known that there was insufficient security for the sum advanced. The argument in support of the Amendments is that this simpler approach will achieve the same effect as the present subparagraph without involving the sheriff in difficult questions of deciding what constitutes reasonable or unreasonable behaviour. The sheriff, however, will be quite familiar with the problem of deciding the reasonableness of a person's actions having regard to the circumstances of a particular case. The "reasonable man" approach is a perfectly common and perfectly workable legislative and legal formula and should not in practice lead to difficulties. It has not in the past.
The main arguments against the two Amendments are these. The first 905 Amendment removes the general requirement placed on the sheriff to have regard in particular to whether the heritable creditor, et cetera, acted reasonably in advancing the sum involved. It consequently narrows the considerations to which the sheriff's attention is directed, and this is undesirable. The sheriff must consider in each and every case whether the creditor acted reasonably in all his dealings, and not only in relation to the degree of security provided by the property. The setting out of this requirement in the subsection will be of help not only to the sheriff but also to the parties in any case before him.
The second Amendment involves the deletion of the "deemed to have acted unreasonably" provision. This provision is, however, essential to the proper working of the clause as a whole, since it makes clear how the sheriff should deal with cases where the sum advanced by the heritable creditor bears no relation to the security. In certain circumstances it is conceivable that a creditor may have advanced more than the property is worth and yet did not act unreasonably: for example, as the noble Lord cited as a possibility, he may have acted from a personal desire to help a relative or friend to find a house. The result of his action, however, could be that an unreasonable price was paid for a sub-standard house. The Government are determined that the prices of such houses must not be inflated in this way, and this provision guards against it.
I may say that similar Amendments to those moved by the noble Lord, Lord Drumalbyn, were moved in another place—similar but not identical. For instance, the Amendments moved there did not have the effect of the noble Lord's first Amendment, to take out the words that the creditor must be reasonable. They did, however, take out the second part, that he would be deemed to be unreasonable; and they went further and took out the phrase about knowing or being deemed to know, which the noble Lord has left in. But in another place the Amendment was withdrawn on an assurance by my honourable friend the Minister of State that he would look at the matter. He stated that he would not look at it himself but would consult with the Lord Advocate and the Secretary of State for Scotland. The mover of the Amendment, 906 in withdrawing it, said that if the decision was that the Lord Advocate was satisfied that these words were necessary for the proper working of the clause, he, the mover of the Amendment, would be content. Subsequently my honourable friend the Minister of State so wrote to the mover, in detail, and included the assurance that the Lord Advocate required the continuation of these conditions.
I would draw to the attention of noble Lords the fact that in another place there was a great deal of consideration in the Committee of a considerable practice which exists, particularly in the West of Scotland, of getting inflated prices for houses; and it was felt, not that these words are necessary to deal with the kind of helpful friend who would advance money in circumstances in which a building society or more commercially minded organisations would not look at the proposition, but that they are directed rather at those who are seeking every possible way of finding loopholes through the law as it exists. The feeling in another place, which I most definitely share, is that to take these words out would be helping not the kind people, but those who seek every opportunity of turning over an honest or a dishonest penny. I am quite certain that that is not the noble Lord's intention, and he may be reassured to a certain extent if he considers that where the original action of the creditor was of a purely charitable kind, it is very unlikely that this is the kind of case which would ever come before the sheriff in any event. It would be a poor reward if a man did so act towards a relative or friend, if the relative or friend turned on him and attempted to take advantage of his generosity in this way.
However, there is a safeguard even in these conditions, and I would particularly draw the noble Lord's attention to this. The sheriff is not required by the clause to make an order that the creditor has acted unreasonably if in all the circumstances of the case (this is in lines 13 and 14) he does not consider it just to do so. So even where the man is deemed to be acting unreasonably, it does not follow that the sheriff will make an order if, on consideration of all the circumstances, he does not think this is the proper thing to do. For these reasons, I think we have in this clause something which will give 907 protection where protection is needed but will not confer protection on those who are unworthy, whether they come into the category of those who are seeking to do things which the law ought not to permit or of those—and I think this is much more unlikely—who seek to abuse the generosity of a friend or relative.
§ 5.47 p.m.
§ LORD DRUMALBYN
I am grateful to the noble Lord for his explanation and for the ample way in which he has dealt with the Amendment. There is, I think, this one difficult point. He has said that the Government are determined that prices shall not be inflated. The difficulty, of course, lies in the fact that the Bill will be retrospective as well as prospective. I am afraid that I do not share the noble Lord's optimism that none of the worthy cases (if I may put it this way) will be caught. I recognise how very difficult it is to devise a clause which will do perfect justice in a matter of this kind; and, of course, I think we are all anxious to see that there is no profiteering at the expense of people who are in great need of housing, especially where the houses offered are most inadequate. But I wish I could share the noble Lord's optimism that this provision will do justice.
One can only rely on the discretion of the sheriff, as one does with the most complete confidence. But, as the noble Lord agreed, it seemed to me that the whole of his argument was demolished by the fact that at the end of the day the sheriff could make what order he liked. What I rather object to is this introduction of a fixed criterion of reasonableness. How many times in Committees and in the Scottish Grand Committee in another place have we argued this question of reasonableness and always been told, "You must leave it open"? Now the Government come along and put an absolutely fixed determination on it, and the sheriff is in this particular respect and in determining this issue given no discretion at all. I regret that; I do not think it is right. It may be precedented, and perhaps the noble Lord can give me precedents, but even if there are precedents I should not consider them to be good ones.
§ LORD HUGHES
The noble Lord finishes on the note, "Heads I win, tails you lose": no matter what precedents I give, he is not going to be satisfied. However, I will not attempt to give precedents. All I will say is that my experience in the past is that the objection to the use of the words "reasonable" or "unreasonable" relates to the difficulty that anyone has in achieving a standard definition of what is "reasonable" or "unreasonable". I have no doubt that many times in the past that objection has been raised in another place, as it has been here. In this case the Government are attempting to give a definition of what is "unreasonable", and the noble Lord then similarly objects to the action being defined. So, as I have said, it is a case of "Heads I win, tails you lose". If it is left undefined it is objectionable; if it is defined it is objectionable.
All I wish to say in conclusion, and in asking the noble Lord not to press the Amendment, is that the legal advice which we have received is that the Bill is more likely to achieve justice in this form than it would be if it were amended, either along the lines which he has suggested or those which have been suggested in another place. At least there was merit in another place, that the mover of the Amendment was persuaded not to take the matter further because he was convinced on legal grounds, if not on any other grounds.
§ LORD DRUMALBYN
I do not think we need pursue this matter any further. I do not remember ever having tried to define what is "reasonable in the circumstances". What we have tried to do is to narrow down the question of the sphere and the reasonableness of action in particular circumstances, but in view of the assurances given by the noble Lord and the legal advice that he has received, and while thanking him for having considered the matter again, I beg leave to withdraw the Amendment.
§ Amendment, by leave, withdrawn.
§ Clause 18 agreed to.
§ Remaining clauses and Schedules agreed to.
§ House resumed: Bill reported without amendment; Report received.