§ [Nos. 100–107]
§ After Clause 30, insert the following new clause—
§ Power of Board of Trade to present winding-up petition or petition under section 210 of the principal Act in consequence of investigation, &c.
§ (".—(1) If, in the case of any body corporate liable to be wound up tinder the principal Act, it appears to the Board of Trade from any report made under section 168 (inspectors' report) of that Act or from any information or document obtained under Part IIA of this Act or section 18 or 19 of the Protection of Depositors Act 1963 that it is expedient in the public interest that the body should be wound up, the Board may, unless the body is already being wound up by the court, present a petition for it to be so wound up if the court thinks it just and equitable for it to be so wound up, and, accordingly, paragraph (d) of the proviso to subsection (1) of section 224 (provisions as to applications for winding-up) of the principal Act shall have effect with the substitution, for the reference to section 169(3) of that Act, of a reference to this subsection.
§ (2) If, in the case of any such body corporate as aforesaid, it appears to the Board of Trade from any report made or information or document obtained as aforesaid that its business is being conducted in a manner oppressive to any part of its members the Board may (in addition to, or instead of, presenting a petition under the foregoing subsection) present a petition for an order under section 210 (alternative remedy to winding up in cases of oppression) of the principal Act, and, accordingly, subsection (1) of that section shall have effect with the substitution, for the reference to section 169(3) of that Act, of a reference to this subsection").
§ After Clause 30 insert the following new clause—
§ Repeal of section 169(1) and (2) of the principal Act, and consequential modification of section 170(1)(a) thereof
§ (". The following provisions of the principal Act shall cease to have effect, namely,—
- (a) subsections (1) and (2) of section 169 (duty of Board of Trade in certain cases after an investigation to refer to the Director of Public Prosecutions or the Lord Advocate, and duty of Director of Public Prosecutions on a reference by the Board of Trade); and
- (b) in section 170(1)(a) (persons liable to repay the Board of Trade expenses of and incidental to an inspection), the words ' by the Director of Public Prosecutions or by or on behalf of the Lord Advocate'.")
§ After Clause 30, insert the following new clause—
§ Fresh powers of Board of Trade to bring civil proceedings on behalf of body corporate
§ (".—(1) If, from any report made under section 168 of the principal Act or from any information or document obtained under Part IIA of this Act or section 18 or 19 of the Protection of Depositors Act 1963 it appears to the Board of Trade that any civil proceedings ought in the public interest to be brought by any body corporate, they may themselves bring such proceedings in the name and on behalf of the body corporate.
§ (2) The Board of Trade shall indemnify the body corporate against any costs or expenses incurred by it in or in connection with any proceedings brought by virtue of the foregoing subsection.
§ (3) Section 170(1)(a) of the principal Act shall have effect as if the reference to any person who is ordered to pay damages or restore any property in proceedings brought by virtue of section 169(4) of that Act included a reference to any person who is ordered to pay the whole or any part of the costs of proceedings brought by virtue of subsection (1) of this section, and section 170(3) of that Act shall have effect as if the references to subsections (4) and (5) of section 169 of that Act included references respectively to subsections (1) and (2) of this section.")
§ After Clause 30, insert the following new clause—
§ Extension of Board of Trade's power of investigation under section 165 of the principal Act
§ (". Sub-paragraph (i) of paragraph (b) of section 165 of the principal Act (by virtue of which paragraph the Board of Trade are empowered to appoint one or more competent persons to investigate the affairs of a company if it appears to them that there are circumstances suggesting, inter alia that its business is being conducted with intent to defraud its creditors or the creditors of any other person or otherwise for a fraudulent or unlawful purpose or in a manner oppressive of any part of its members) shall have effect as if, after the words 'is being', there were inserted the words 'or has been'; and the power of the Board under that paragraph shall be exercisable with respect to a body corporate notwithstanding that it is in course of being voluntarily wound up.")
§ After Clause 30, insert the following new clause—
§ Power of inspectors to secure attendance of persons for purposes of investigation
§ (". Section 167 of the principal Act (which imposes on officers and agents of bodies being investigated the duty to assist inspectors) shall be amended as follows:—
- (a) in subsection (1), after the words 'to produce to the inspectors all books and documents of or relating to the company or, as the case may be, the other body corporate which are in their custody or power', there shall be inserted the words
1216 'to attend before the inspectors when required so to do'; and - (b) in subsection (3), after the words 'refuses to produce to the inspectors any book or document which it is his duty under this section so to produce', there shall be inserted the words 'refuses to attend before the inspectors when required so to do'.")
§ After Clause 30, insert the following new clause—
§ Amendments of provisions as to expenses of investigations
§ (".—(1) Section 170 (expenses of investigation of company's affairs) of the principal Act shall be amended as follows.
§ (2) The word 'and' at the end of paragraph (b) shall be omitted, and for paragraph (c) there shall be substituted the following paragraphs:—
§ (c) any body corporate dealt with by the report, where the inspector was appointed otherwise than of the Board's own motion, shall be liable, except so far as the Board otherwise direct; and
§ d) the applicants for the investigation, where the inspector was appointed under section one hundred and sixty-four of this Act, shall be liable to such extent (if any) as the Board may direct'.
§ (3) In subsection (2), for the words 'paragraph (c)' there shall be substituted the words 'paragraphs (c) and (d)'.
§ (4) In subsection (4)—
- (a) for the words 'paragraph (c)', where first occurring, there shall be substituted the words 'paragraphs (c) and (d)';
- (b) for the words from 'the said paragraph (a) or (b)' to 'as the case may be' there shall be substituted the words 'any of the said paragraphs shall be entitled to contribution from any other person liable under the same paragraph'.")
§ After Clause 30, insert the following new clause—
§ Power of inspector to inform Board of Trade of matters tending to show commission of offence
§ (". An inspector appointed under section 164 or 165 of the principal Act may at any time in the course of his investigation, without the necessity of making an interim report, inform the Board of Trade of matters coming to his knowledge as a result of the investigation tending to show that an offence has been committed.")
§ After Clause 30, insert the following new clause—
§ Extension of Board of Trade's powers of investigation to certain bodies incorporated outside Great Britain
§ (".—(1) Sections 165 to 171 and 175 of the principal Act shall apply to all bodies corporate incorporated outside Great Britain which are carrying on business in Great Britain or have at any time carried on business therein 1217 as if they were companies registered under the principal Act, but subject to such (if any) adaptations and modifications as may be specified by regulations made by the Board of Trade.
§ (2) The power to make regulations conferred by this section shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.")
§ LORD BROWNMy Lords, I beg to move that this House doth agree with the Commons in Amendment No. 100, and I wish also to speak to Amendments Nos.[...] to 107, 118 and 342. Nine of these [...] clauses, and relate to the Companies Act 1948, with regard to the investigation of companies by inspectors appointed by the Board of Trade, and with the new Part IIA conferring powers on the Board of Trade to make investigations themselves. They are intended to speed the handling of suspected fraud.
Amendment No. 100 extends the power of the Board to petition for a winding-up order from companies advertising for deposits for insurance business to any company at all. Amendment 101 leaves the decision whether or not the Board or the Director of Public Prosecutions institutes criminal proceedings to be arranged between the Board of Trade and the Director of Public Prosecutions. Amendment 103 widens the Board's powers to bring civil proceedings on behalf of a body corporate. At present the Board's powers are limited because they can do so only on the basis of an inspector's report, or for the recovery of damages or for misapplied or wrongfully retained property. These conditions are nullified by the Amendment.
Amendment 103 permits the appointment of inspectors when it is felt that a company has been, rather than is being, conducted fraudulently, or when it is in liquidation. Amendment 104 makes it an explicit duty of officers of a company being investigated to attend before inspectors. Amendment 105 makes it possible for the Board to recover the expense of an investigation in wider circumstances than is now the case. Amendment 106 enables inspectors to pass information to the Board more quickly and without observing certain formalities. Amendment 107 enables the Board to appoint inspectors to investigate companies registered overseas and operating in the United Kingdom. Amendment 118 makes clear 1218 that answers given to inspectors appointed by the Board under the several sections of the principal Act may be used in evidence and thus clears up uncertainty on the point. Amendment 342 repeals certain provisions made redundant by the foregoing new clauses. I beg to move.
§ Moved, That this House doth agree with the Commons in the said Amendments.—(Lord Brown.)
§ 4.20 p.m.
§ LORD DRUMALBYNMy Lords, these are important clauses. I have heard two comments on them. The first is whether they are really necessary: they are such small extensions, if they are extensions at all, that they are already covered by existing legislation. The second is that if these clauses can now be put forward, the astonishing thing is that they were not put forward when the Bill first came before your Lordships' House. For my part, I do not object to them—the purposes they have in mind are very necessary—but I should like to raise one or two points about them.
By Amendment No. 104 it is made an offence to refuse to attend before an inspector when required to do so. This can be an important point. I should have thought that the right phrase would have been "failing without reasonable cause to attend". There must be a positive act of refusing to attend before anybody can be said to have refused to attend. In No. 105, so far as I can see, the expression,
for the words from ' the said paragraph (a) and (b)' …means including "from", whereas when we normally say the word "from" we mean the words coming after. This is an Amendment to the principal Act and no doubt it will be correctly read because nothing else could be meant; but it appears to me to be wrong. In my experience it is desirable that an inspector should be able to draw attention to an offence in the course of an inspection, rather than wait until the inspection has been completed. This provision is very useful.I should like to ask the noble Lord about the admissibility of evidence. He has explained it to me, but it would be as well to have it said publicly. Section 167 of the principal Act says that 1219 the answers of a person examined by an inspector may be "used in evidence against him". The usual phrase is "used in evidence". The ordinary lay reader would think that the phrase, "used in evidence against him", would exclude the using of evidence in his favour, should it turn out to be in his favour.
§ LORD CHORLEYMy Lords, may I answer the noble Lord's last point? Every policeman is strongly warned against using that phrase in the way in which it is used in musical comedies and elsewhere. If he were to go into a witness box to give evidence and said that he cautioned a man in that way, he would be rapped over the knuckles by any judge who tried such a case. He must say, "used in evidence", and that is where he has to stop.
I should like to say how much I welcome these clauses, and though I do so with perhaps more enthusiasm than the noble Lord, Lord Drumalbyn, I am dubious whether some of them carry the powers of the Board of Trade much further. The inadequacy of the powers of the Board of Trade in these matters has been known to all company lawyers for a long time and has been commented on in textbooks and articles. We had the impression that for a long time the Board of Trade were not very anxious to increase their powers. I think that goes back to the early days in the development of company law, when the Board of Trade were rather quiescent about these matters and regarded themselves as under no obligation to take an active part and only to come in when pushed to do so. But I think that that attitude has been changing. It has certainly been becoming clear to the business world and to the public that the powers of the Board of Trade in connection with some recent scandals have been altogether lacking. No doubt that is why at this late stage these Amendments have been put in.
During the time this Bill has been going through Parliament, officers of the Board of Trade have been holding discussions with knowledgeable lawyers who have been concerned in some of these investigations as to the direction in which their powers might be improved and strengthened. These discussions have been contemporary—indeed, that is prob 1220 ably the main reason why we have these Amendments now. The important thing is that we have them. I am sure that if they are used by the Board of Trade effectively and with enthusiasm that will make a tremendous amount of difference to the investigations which the Board are bound to be called upon to conduct from time to time.
§ LORD BROWNMy Lords, I am grateful for the support of my noble friend Lord Chorley. May I assure him that the urgency under which we have been proceeding this afternoon must be some evidence of the desire of the Board of Trade to use these powers vigorously. The noble Lord, Lord Drumalbyn, was good enough to give me notice of the points he was going to raise, which has been very helpful, because they are rather technical. I will refer to the notes I have been given, though I am not quite sure that I understand them myself.
The noble Lord is arguing that Amendment No. 104 may be unfair in that it provides for the punishment of persons who refuse to attend before an inspector, when required to do so, whatever the circumstances. This is not the real effect of the clause. A person who refuses to attend is punishable under Section 167 of the Companies Act in like manner as if he had been guilty of contempt of court. The law of contempt of court in relation to the non-attendance of witnesses provides for the case where there is a reasonable excuse for absence. Sickness, inability to travel, the argument that a proper sum was not tendered to the witness for his expenses—all these are examples of excuses recognised as valid excuses for absence.
The second point the noble Lord raised was in connection with the drafting of Amendment No. 105. This is a technical matter very nearly beyond my comprehension. I hope that the noble Lord understands it better than I do. When an Amendment is made in a Bill to a Statute to leave out a phrase in that Statute, it is usual to identify the phrase to be omitted by quoting the opening and closing words of the phrase. This is not the case when an amendment to a Bill itself is proposed in the House leaving out a phrase in the Bill. In that case, the phrase is identified by quoting the 1221 words immediately before and those immediately after the phrase. I hope that the noble Lord will not question me further on that, because I have not grasped its implications, and it needs a good deal of thinking about.
The third point raised by the noble Lord was the question of the Amendments which put those giving answers to questions asked by inspectors in a position where their answers could be used as evidence against them. It is a fact, I am informed, that in English law there is a time-honoured principle that, in general, answers given by people in giving evidence, and in other situations, cannot be used against them unless the law states that they can. Thus, wherever the law tends to be silent on this point it is open to assume that the principle stands, and therefore that their answers cannot be used in evidence against them. If it is intended that the answers may be used against them, it is necessary to state so. In the case of answers that can be used in their favour, there is no law saying that evidence given cannot be used in favour of a witness, and it is never necessary to make comment on this in a Bill. I hope that those answers satisfy the noble Lord.
§ On Question, Motion agreed to.