§ 6.39 p.m.
§ LORD SHEPHERDMy Lords, I beg to move that the House do again resolve itself into Committee on this Bill.
§ Moved, that the House do now again resolve itself into Committee.—(Lord Shepherd.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The Lord Nugent of Guildford in the Chair.]
§ Clause 127 [Jurisdiction and parties]:
§ On Question, Whether Clause 127 shall stand part of the Bill?
VISCOUNT COLVILLE OF CULROSSMay I preface the introduction of Part IX by saying two things to the noble Lord, Lord Shepherd? First of all, I should like to thank him very much for the discussions that I have had with him and his advisers about this Part, which I think will greatly shorten what we have to talk about this evening, to the benefit of all those—particularly the noble Lord, Lord Merthyr, and others—interested in Easter. We shall finish what we have to say before Easter next year. Secondly, perhaps I may say that I am a little sorry that both yesterday and to-day we should not have had the advice of the noble and learned Lord the Lord Chancellor. I entirely understand why, but this is a fairly difficult area. We are innovating to 445 some extent, and building on the experience of Common Law and Statute Law; and if the noble Lord, Lord Shepherd, cannot provide me with all the answers I shall, of course, readily forgive him. Equally I hope there will be no doubt at all that the noble and learned Lord the Lord Chancellor will be here at Report stage, if we then have further queries and if there are Amendments put down by either side. I think we need a legal eye cast over this subject, and I do not say that mine is by any means adequate. So, perhaps, against that background and the discussions I have had, I may proceed.
I have only one point to raise on Clause 127, and it is this. The clause provides that the county court shall have the sole jurisdiction to hear and determine the three sorts of action set out in subsection (1). The definition of a "regulated agreement" is in itself fairly complicated under this Bill, and I think that in due course there is bound to be an argument whether or not a particular contract which has been made is, or is not, a regulated agreement. If this does not arise naturally, in view of the restraints that are placed upon creditors and other people who lend money, it is probable that people will seek to find ways to avoid the strict provisions of the Bill which protect debtors and other consumers against some of the more disreputable practices in this world. The county courts have a financial limit in dealing with contracts, and there will therefore be cases where the creditor, at any rate, will be saying that the agreement in question is not a regulated agreement and is therefore not something which is hound to be brought in the county court under this Bill; and where, moreover, the amount of money concerned will be above the limit of the jurisdiction of the county court.
The first argument will be about whether or not it is a regulated agreement. If the action is brought in the High Court, it being above the limits with which the county courts can normally deal, and the High Court decides that it is after all a regulated agreement, then the High Court will not have jurisdiction to do any more. In fact, I very much doubt whether the High Court will have jurisdiction to decide whether it is a regulated agreement. We 446 need some method of avoiding this dilemma. I am not quite certain what it is, but I believe there are precedents for this where the county courts have been given sole jurisdiction in other cases. Whatever they are, I suggest to the noble Lord, Lord Shepherd, that they should be studied and that the solution should be incorporated into the Bill, because nothing would be more absurd than to get into the dilemma where no court has any jurisdiction at all to decide anything. I would therefore ask that something should be done about this matter.
§ LORD SHEPHERDI am very grateful to the noble Viscount for the manner in which he has dealt with this point, and for his words of appreciation about the meeting that we had earlier. I have long felt that a great deal of time could be saved in Committee if there were more exchange in a more informal atmosphere when a Minister was able to have official advice available to him. Those of my noble friends who have served in another place in Committee know that when a Minister is sitting in his place it is relatively easy for an official to pass the vital piece of paper at the right moment for him to be able to deal with a point. But taking a Committee stage in your Lordships' House, where one's officials are a fair way away, makes it more difficult to deal with problems of a highly technical nature and the sort of problem that the noble Viscount has raised.
May I make one point, however—because it has been twice referred to—about 1the absence of my noble and learned friend the Lord Chancellor? It was referred to yesterday. This is not the first time—nor, I suspect, will it be the last, whatever be the Administration—that the noble and learned Lord who sits on the Woolsack at a particular time has not been available in Committee, but I know that, in the past, any noble and learned Lord who sat on the Woolsack has sought to make himself readily available for the convenience of noble Lords. But in this particular case my noble and learned friend sought the leave of your Lordships' House and has gone to Strasbourg—I will not say on ceremonial duties, but on a visit of considerable importance—and I am quite sure that your Lordships would not wish that my noble and learned friend had not gone. Nor do 447 I believe that it would have been your Lordships' wish that we should have delayed the progress of this Bill because of the absence of my noble and learned friend.
This is a matter which, if I cannot satisfy the noble Viscount, we can deal with on Report. But I am quite sure that the noble Viscount, in his comments to-day, was not in any way making any criticism of my noble and learned friend, for we know the heavy duties which any Lord Chancellor is required to undertake.
VISCOUNT COLVILLE OF CULROSSMay I at once respond to that? No, of course I was not. All I was doing was to commiserate with non-legal noble Lords opposite who have to do battle with some of this, and really with the Committee who have to listen to us on this subject without the advice of somebody like the noble and learned Lord the Lord Chancellor.
§ LORD SHEPHERDI am very grateful to the noble Viscount. Frankly, I said what I did quite deliberately, because the noble Viscount will know that what is said in your Lordships' House, in the general spirit in which this House operates, and what is read in cold print in Hansard, may be totally different. I think I can now leave that.
The noble Viscount has in fact raised a new point, and one which in my view is not adequately covered in the Bill. We accept that there may be occasions when, in an action in the High Court for enforcement of an unregulated agreement, it is found to be a regulated agreement. Our initial reaction is that there needs to be some kind of power given to the High Court in such circumstances, so that the matter can be transferred to the county court, which has the jurisdiction under the Bill. I am grateful to the noble Viscount for bringing my attention to this matter, and I assure him that an appropriate Amendment will be laid before-your Lordships' House on Report to deal with this particular point.
VISCOUNT COLVILLE OF CULROSSI am most grateful to the noble Lord. I think it could work the other way round as well. I think that there could be an action brought in the county court by a debtor who says, "This is a regulated 448 agreement", where the sum of money is such that it is beyond the county court limit and where it turns out, after argument, not to be a regulated agreement at all, whereupon the county court will not have jurisdiction either, but the case would have had to be brought in the county court for decision. Therefore, I think the transfer should be provided for in both directions. Perhaps the noble Lord and his advisers could consider that point. One wants to have the position completely flexible, so that whatever court turns out to be the one which ought to have dealt with the case can, after all, be enabled to do so, if that is the correct way of putting it. If we can do that, then I think we are all right.
§ LORD SHEPHERDCertainly I will look at this matter and, as I have at an earlier stage here, I will certainly consult with the noble Viscount, not only on this clause but on other clauses on which he raises points, to see whether our initial reaction to what the noble Viscount has said is right, and then make it possible for the noble Viscount again to put his views in that informal atmosphere which I think is most helpful.
§ Clause 127 agreed to.
§ Clause 128 agreed to.
§ Clause 129 [Agreements and security instruments improperly executed]:
§ On Question, Whether Clause 129 shall stand part of the Bill?
§ 6.50 p.m.
VISCOUNT COLVILLE OF CULROSSThere is a small point I should like to raise on subsection (5)(b). In this clause we are really building on the experience of the old hire-purchase legislation, which was consolidated in the Hire-Purchase Act 1965. The area of transactions covered is now wider than was dealt with in that legislation. I wonder whether the noble Lord could give me an example of the kind of circumstances in which the court might wish to use its powers under Clause 129(5), which is the basic clause, as your Lordships will see, dealing with an improperly executed regulated agreement—not one which is wholly void but one where there is something wrong with the method of execution. I wonder how that failure properly to execute the agree-or hirer and what circumstances we had 449 in mind in legislating in this way. It may simply be copying, but I am not altogether content to take on board all the old hire-purchase legislation, since we have so wide a field to cover.
§ LORD SHEPHERDIn view of our earlier exchange, no doubt the Committee will not be surprised to learn that I have an example of the kind for which the noble Viscount has asked. Clause 129 permits the court, in certain circumstances, to allow the enforcement of an agreement against a debtor or hirer, even though the agreement was not properly executed. But the debtor or hirer may have been prejudiced in some way by reason of this fact. For example, the agreement may not have set out the terms properly, so that a debtor may have entered into it without fully realising how much he was going to pay. He may have thought that the total amount he was to pay would be £500, whereas in fact it would be £600. It may be that an error in the agreement was due to some unintentional slip by a shop assistant, so that it would be unfair on the creditor to deprive him of all his rights under the agreement.
On the other hand, it might be unfair to the debtor in such a case to make him pay the whole sum. In such a case we feel that the court should be able to act justly between the parties, and order the debtor to pay the creditor a substantial part of the £600, but not the whole of it. If the debtor had been misled into thinking that £500 was all he would have to pay, we think the court should be able to order him to pay £500 only. This is what Clause 129(5)(b) gives the court power to do. It should perhaps be added that subsection (5) is based on a similar provision—and the noble Viscount has referred to it—in Section 10 of the Hire-Purchase Act 1965, which permits the court to allow enforcement of an improperly executed agreement, "subject to any conditions it thinks fit to impose." In Clause 129(5), we have gone further, by spelling out the sorts of conditions which the court may impose.
Another example could exist when we make regulations under Clause 55, as we intend, requiring the cash price of goods to be purchased on credit to be disclosed to the debtor before the agreement is made. If this was not done, the debtor 450 would not realise how much more it was going to cost him to buy the goods on credit instead of for cash. Here again, the court may feel it just to reduce the amount which the debtor was liable to pay. That is the explanation and the example for which the noble Viscount asked. I suggest he may like to consider what I have said and, again, if he wishes to consult further I shall be very happy so to do.
§ Clause 129 agreed to.
§ Clause 130 [Instalment Orders]:
§ On Question, Whether Clause 130 shall stand part of the Bill?
VISCOUNT COLVILLE OF CULROSSHere we have another point on which I hope the noble Lord will be able to help me and also those who have raised this point with me. Under the hire-purchase and conditional sales rules and powers as they exist in the courts at the moment, if you have a situation where a hirer or buyer under a conditional sale agreement has not had the title to the goods transferred to him but is still in the process of paying for them and he falls behind in his payments, there is a piece of machinery—I think it is in Section 38 of the Hire Purchase Act—whereby the creditor can go the court and the court can make what is called a postponement order. That order may be subject to a number of conditions, one of which is that if the debtor or hirer does not pay the instalments under the postponement order, as the court has required him to do, then the moment he defaults the owner of the goods can come in at once and take them, without going back to the court.
Under Clause 130 as it stands, the instalment order system looks very similar to that, but there is one important distinction. We have departed from this provision in subsection (4) of Section 38 of the Hire Purchase Act, in that under the Bill as it stands if this sort of situation arises—and I appreciate that it applies to a wider set of circumstances than just the old hire-purchase or conditional sale—even after the debtor has defaulted on the instalment order or one of the instalments under the instalment order, the creditor has still to go back to the court yet again in order to reclaim the goods. Included among the things 451 to be dealt with under Clause 130 is the perfectly ordinary hire-purchase or credit sale agreement. I am told that the postponement order worked perfectly well and indeed it was very often used; and it seems to be fair and to fit in with the provisions of this Bill, because if one looks at Clause 134(7) we have the same situation in that the debtor in possession is to be treated as a baillee; in other words, the ownership will not be in his hands but will still be in the hands of the person from whom they are being bought or hired. I should have thought that a postponement order was a good option for a court to have in the right situation. It is not in the Bill at the moment. I do not suggest that it should be put in instead of the instalment order—I am sure that will be useful in a wider field—but the postponement order has worked well. Why not have that as an extra weapon in the armoury of the court which will, in a suitable case, be used by it in just the same way as it has been before? I think that the noble Lord may be able to help me on this. It will need a certain amount of amendment and I have not at the moment worked out whether it needs an Amendment to Clause 131 as well. No doubt his advisers will be able to tell him about that and I should be very grateful if the noble Lord would say what was in his mind on this point.
§ LORD SHEPHERDI am very grateful to the noble Viscount. He is, of course, quite correct: the provision in the Hire Purchase Act referring to what is called the postponement order has not been included in this Bill. It was felt at one time that this particular provision was slightly unfair to the debtor. I am happy to say that after reflection we have come to the view that this is a fit and proper provision that ought to be in the Bill; it is our intention to move an Amendment on Report stage. However, I would advise the noble Viscount that, for various reasons, it will look rather different from the provision in the Hire Purchase Act because it is dealing with a much wider area of credit. Here again when we have the Amendment—and I suspect the noble Viscount will have a better understanding of it than some of us—if there is any difficulty we will be happy to have consultations.
VISCOUNT COLVILLE OF CULROSSI am grateful to the noble Lord. I do not know whether you can buy a rose satisfactorily on hire-purchase—it might fade a little—but if it smells as sweet in the Amendment proposed as what we have already I will be very content.
§ Clause 130 agreed to.
§ Clauses 131 to 133 agreed to.
§ Clause 134 [Hire-purchase et cetera agreements: special powers of court]:
§ On Question, Whether Clause 134 shall stand part of the Bill?
VISCOUNT COLVILLE OF CULROSSI have two questions on subsection (3) of Clause 134. We are dealing with a rather complicated situation again in the hire-purchase or conditional sale field where there are a number of different items being hired or bought simultaneously, by the debtor. We get into a situation where he has not managed to pay for all of them and one of the things that can be done under subsection (1)(c) is to make a transfer order so that the debtor gets some of the goods, but not all of them, and the others go back to the creditor. When one looks at subsection (3) the transfer order includes a provision that the debtor can select which of the goods he is to keep and which are to go back to the creditor. I do not mind that the debtor should select them in the first place, but I do not think he ought to have the right of selecting them to the exclusion of everybody else. This is a matter of doing justice between at least two parties and involving a number of different pieces of merchandise of one kind or another. If one were to have a transfer order of this kind, the selection of the goods which will be kept by the debtor, as opposed to those that will be given back, should be part of the proceedines in the court and both parties ought to be consulted and the court ought to have a say in deciding whether or not this is a fair way of dealing with the situation. Therefore I ask whether we could incorporate the selection procedure as part of the proceedings which the court blesses as being a fair solution to the problem.
Secondly, after the semicolon in subsection (3) there is an interesting series 453 of words which looks to me as though it requires a mathematical illustration. It is probably only explicable if one sees some examples of it. Can the noble Lord give us one example? I notice that this was asked for when the similar Bill was being dealt with by a Standing Committee in another place. Secondly, can the noble Lord tell us why this provision, which has been inherited from the old hire-purchase legislation and which goes back a long time, is still thought to be necessary to be included in the Bill? Why cannot we leave it to the court to find some just solution to this matter without tying them clown to rather complicated mathematical and, for all I know, algebraic calculations? I should be grateful if he could deal with these points.
§ 7.5 p.m.
§ LORD SHEPHERDI shall be dealing with the second point first. A similar provision to this has been in hire-purchase legislation since 1938. When a hire-purchase agreement covers more than one item, and the debtor has paid a certain amount of the total due, it is necessary to have some formula by which the court can work out which of the goods should become the property of the debtor and which should be handed back to the creditor. Without such a rule the courts would have a difficult task and varying standards might arise from court to court.
Let me give an example. If under a hire-purchase agreement a debtor was purchasing a refrigerator costing £40 (including charges) and an electric cooker costing £75 (including charges), the total price of the agreement would be £115 (£40 plus £75). If the debtor had paid £79, the unpaid balance of the total price would be £36 (£115 minus £79). Thus in respect of the refrigerator, the court could make an order transferring title to the debtor since the paid-up sum (£79) exceeds the cost of the refrigerator (£40) by £39 which is more than one-third of the unpaid balance—that is £12 (36÷3). But in respect of the cooker, the court could not make a transfer order since the paid-up sum (£79) exceeds the cost of the cooker (£75) only by £4 which is less than one-third of the unpaid balance—that is £12 (36÷3).
We take the point the noble Viscount makes about the debtor's right to select 454 the goods which are to be transferred. The Hire Purchase Act does not make this provision and, on reflection, we think it right that, subject to the figures being right, the court should have a say in what goods are to be transferred although in most cases the court would obviously take into account the debtor's wishes. I should like to look at this and, if appropriate, introduce an Amendment at a later stage. This is a very involved example, but I have no doubt that courts which deal with this type of action are able to come to a satisfactory judgment.
As to the first point that the noble Viscount raised, regarding the debtor's right to select the goods which are to be transferred, the Hire Purchase Act does not make this provision; but on reflection we think it right that, subject to the figures being right, the court should have a say in what goods are to be transferred, although in most cases the courts would obviously take into account the debtor's wishes. It would take the wishes into account but not necessarily accept them. I should like to look at this and, if it is appropriate, introduce an Amendment at a later stage. I am grateful to the noble Viscount for raising this matter and giving me the opportunity of putting in Hansard yet another of these examples which one finds right through one's brief. The only difficulty is that I find the explanations and examples more difficult to understand than the Bill as drafted, which is saying something.
VISCOUNT COLVILLE OF CULROSSThere are two points I might make about this. I have the greatest admiration for those who write the OFFICIAL REPORT, particularly if they are assisted by a view of the figures that have been read out on the Floor of the House. Secondly, I have even greater admiration for county court judges. If the noble Lord would look at the first point I raised, I should be grateful.
§ Clause 134 agreed to.
§ Clauses 135 and 136 agreed to.
§ Clause 137 [When bargains are extortionate]:
§ 7.10 p.m.
§ On Question, Whether Clause 137 shall stand part of the Bill?
455VISCOUNT COLVILLE OF CULROSSHaving covered the extortionate credit bargains under Clause 136, we enter a realm which has hitherto really been occupied by the Moneylenders Acts, which arose out of what was the inherent jurisdiction of the Chancery Courts in Equity. These clauses go very much wider; so wide that they cover any agreement. I regret that I have a rather involved argument or series of questions on Clause 137 which I should like to put to the noble Lord. It is interlocking to an extent, and it does not by any means follow that I expect the noble Lord to be able to provide an exact answer for everything this evening. It is a very involved state of affairs indeed.
Hitherto, the law has developed from the straight equitable jurisdiction of the old Chancery Division whereby they could put right matters that were monstrously unfair, even if the Common Law of Contract told them to the contrary. Then there were at any rate two Moneylenders Acts—one in 1900 and another in 1927—which improved upon the situation in Statute form. Of course, these were construed by the courts and a big body of case law has grown up. Two points have emerged. Under the moneylenders' code, as it were, the moneylenders' law as it has evolved, one cannot do without a remedy in the courts to lending money on terms that are harsh and unconscionable—those are terms of art which have been widely construed and carry a large number of implications with them.
The second point which has emerged is that one has seen the law develop so that the burden of proof has been carefully tailored to the circumstances. Under the 1927 Act, if the rate of interest was more than 48 per cent, per annum the burden of proof passed from the person who borrowed the money to show reason why it was exorbitant or harsh and unconscionable; so when it was above 48 per cent. it was for the lender to show why it was not harsh and unconscionable to lend at that rate. This did not mean that if the rate of interest was below 48 per cent. the courts would not interfere; they would. But in those circumstances it was for the debtor to show that the bargain was harsh and unconscionable. Many rules were built up about this. Many factors could be 456 taken into account; and, as I say, there were a series of cases which built up case law upon it.
In 1906, in a case called Samuel Newbold, the then Lord Chancellor, Lord Lawburn, said that he thought it was a great mistake to lay down an exhaustive category of the kind of circumstances one wanted to look at to see whether any bargain was harsh and unconscionable because, as in so many other fields, one never really got a proper list. Ever since then there has been no attempt by the Legislature to categorise the kind of factors that ought to be taken into account by the courts, although the courts have in fact taken into account a large number of matters, including the personal situation of the debtor.
The moneylenders' code in this Bill has been spread out to cover a large number of extra transactions far beyond pure money lending. So those who have drafted the Bill have had to see what use they can make of the experience that already exists in legislation and in case law, and see how they would like to adapt it. I can readily understand that, if one is venturing into entirely new fields where people are not dealing with moneylending as it is well known but many much wider transactions, one would wish to mark the occasion by making it perfectly certain that one is not dealing only in terms that have been familiar to the courts in moneylending transactions in the past.
In fact, one may want to try to get away from that in order to start afresh and not tie the court down to what has been decided before. I believe that that is what has happened in Clause 137. We have a situation at heart where the court will be able to decide what is or is not fair; what is or is not, in the old term, harsh and unconscionable. But it is not expressed in that way. In addition, there is a situation in Clause 167(5), to which I would invite the attention of the Committee. Clause 167(5) says that if
the debtor or any surety alleges that the credit bargain"—any credit bargain—is extortionate it is for the creditor to prove the contrary".So first we have abandoned "harsh and unconscionable" with all the case law built up under it, and secondly we have 457 abandoned the watershed for the purposes of the onus of proof which used to exist at 48 per cent. And, on the second point, the onus of proof now relies upon the creditor whatever the rate of interest and whatever the bargain, if once the debtor says, "This was an extortionate agreement".Let us just for one moment examine this. First one finds that we have written into the Bill—and this I believe is an attempt to express what has been held to be the case law—two adverbs which I would wish to lock at with some severity. We have in Clause 137 subsection (1)(a) the words "grossly exorbitant", and in subsection (1)(b) the words
otherwise grossly convenes ordinary principles of fair dealing".There has been a good deal of criticism and discussion about similar terms. For instance, "gross negligence" is just negligence only rather rudely described. On the other hand, in this case, when we use the words "grossly exorbitant" in the Bill we are saying in effect, if anybody chose to take the point, that a bargain which was exorbitant is all right—and that in itself is rather an extraordinary proposition—but a bargain which is grossly exorbitant is not all right. It is for the creditor, if the point is raised, to prove which, and to try to prove that it is not grossly exorbitant. The same thing applies when we are dealing with ordinary principles of fair dealing. One may contravene them, and do so with impunity, under this particular provision. What one cannot do is grossly to contravene them.I think that when we look at the language in which we are trying to express these provisions, first of all we are getting into a fairly silly situation where Parliament says: "You can be exorbitant and get away with it", and secondly: "You can contravene the ordinary principles of fair trading and get away with it. The only thing that you must not do in either case is to do so grossly." It is a matter of pure verbiage, but it is very bad public relations, and it would be very unfortunate if the courts had to hold in either case that somebody was allowed to get away in law with either of these activities. I do not know whether the noble Lord and his advisers could think again about 458 this matter to see whether we can get rid of these rather unfortunate adverbs, because I believe that the Bill would look better, and indeed would probably work better, in practice if we did.
The second point is this. When we are talking about ordinary principles of fair dealing, let us remember that we are probably considering for the main part what is going to go on in the county court. The matter is one of evidence. A good deal of evidence is going to be brought in this kind of action anyway, because there must be evidence which will fulfil any necessity to deal with matters in subsections (2), (3) or (4)—all those are evidential. But the ordinary principles of fair dealing are something one would expect to apply across the whole of the country, and not to be different in Kilburn from what they are in Kensal Green, or in Wick (if this Bill applies to Scotland, about which point I have not looked) from Penzance. County court hearings and decisions are not reported. County court judges have possibly different methods of interpretation of what the ordinary principles of fair dealing might be, and one has a major problem in trying to discover what these principles as applied by the courts may turn out to be.
One must remember that all the time the burden is upon the creditor who may find that one county court judge will knock him down for what he does in that area, although precisely the same exercise, precisely the same deal, may be held to be all right in another. If, of course, I say that to the creditor, if you are dealing with an organisation which trades nation-wide, the debtor will be in precisely the same difficulty. My second point, therefore, is this: can we do anything about the evidence which is able to be adduced to the courts about what are the ordinary principles of fair dealing? They may not be instantly available, but, as the case law is built up, if it cannot be looked at in the Law Reports, is there anything that the Director could do? Is there any method whereby the courts should be entitled to look at some sort of code? I am really groping my way in this, because it is a new area but one which I think could be quite important and could save a good deal of money. We will not have to call in experts upon what is fair and what is not fair in a 459 number of quite widely differing fields of credit dealing of one sort or another. I wonder, therefore, whether we can have a look at this to see whether we can be a little more specific.
I pass to subsection (2). One observes here that, contrary to what has happened in other clauses in Part IX, we are not giving the court an option in this case: whether it shall look at the interest rates, any other factors mentioned in subsections (3) to (5) and any other relevant considerations. We are requiring it to have regard to them. This carries a rather wider implication, because if somebody who is providing credit or, indeed, lending money, knows that on the occasion when his bargain may be examined by the court the court is required to look at certain things, he is going to have to take the trouble in advance in every case, lest there should be a challenge, to go through all of them, and some of them will not be relevant in every sort of agreement that may be entered into. I would therefore suggest that as we are, after all, here doing nothing more than to list a number of things which I am inclined to think will probably always be available to the courts to take into consideration where they relate to moneylending—in so far as they could relate to moneylending; and I appreciate that two of them, perhaps, could not—we ought not to force the courts in every case to inquire into these. We should perhaps use the word "may" rather than "shall" at the beginning of subsection (2).
May I say one last thing. In subsection (3) we have factors in relation to the debtor himself. First of all, I find it fairly difficult to understand how, in the case of, say, the debtor's experience or business capacity—if that is something upon which the debtor is relying—the creditor can prove anything. Remember that the onus of proof is upon the creditor, and I think that there are going to be practical difficulties in the creditor being able to establish that somebody has or has not got a sufficient degree of business capacity to be able to sustain the imposition upon him of the full records of a contract into which he has entered. There are, therefore, difficulties of proof under 460 subsection (3) which again might be considered, because I believe that we are here getting into rather complicated areas of law and of practice.
May I just put the corollary of this: that the creditor at the moment, as the Bill is drafted, does not quite know what it is that he has to prove. If you look at these factors which are set out in subsection (3), it does not seem to me that they all necessarily pull the same way in any one transaction. If you have money lent to, shall we say, an old man who is not very well, who is not very experienced in business and has, by some good fortune, come upon something that is extremely profitable in the way of a high risk enterprise, it would seem to me that his age and his health might suggest that the rate of interest goes up or goes down before it is considered to be extortionate—I am not quite sure which—and that the hope of a large profit might sustain a higher risk of interest without being exorbitant.
At the moment I do not know—and in another place in Standing Committee this was never answered—which way these factors are supposed to go. My understanding and my guess is that they are not supposed, in any case, to go all the same way, and they may be taken in either sense in any particular set of circumstances. In fact, they are only listed as being things that the court can take into account. But when one puts the burden of proof explicitly upon one of the two parties, I think it would be helpful to make it perfectly plain that they do not all, for instance—and I do not believe that this is the case—mean that the higher rate of interest is likely to be exorbitant if one or other of these factors is present. I find it very difficult to explain this concisely, but I think the noble Lord, Lord Shepherd, probably knows what I mean. Again, therefore, if one could give some indication—perhaps by saying that these factors could work one way or the other, as the case may be—we should, at any rate, have brought a little more clarity into the Bill.
This is a difficult clause. It raises a number of problems, and I think that it could do with a little combing through and improvement for the sake of clarity and in order to get things dealt with in the courts without an enormous amount of cost and complication. This, after all, 461 if we are trying, to protect the consumer, is just as much to his advantage as it ever is to anybody upon whom the burden of proof may lie. If, therefore, the noble Lord can help me on any of these things, it would, I believe, be a very great step forward.
§ LORD SHEPHERDThe Committee will be indebted to the noble Viscount for the very concise way in which he has dealt with four particular points. Perhaps, in view of the last few words of the noble Viscount, I can say this. We intend, between now and Report, to set down a fairly substantial number of Amendments with the object of tidying up the whole of Part IX. It may be that, in that tidying up, we can deal with some of the points that the noble Viscount has raised. Since again with this Bill there is a degree of urgency to get it into another place, if the noble Viscount would be willing I would be happy to have consultations with him in regard to the tidying up of the whole of Part IX. I think it would be very helpful not only to Her Majesty's Government and the Department but also in the interests of an expeditious Report stage.
The noble Viscount raised four points, and if I may I will take them in reverse order. I listened with great attention to what he had to say in regard to subsection (3), and I am advised that there could be a small amendment to this subsection which might deal with the matter to which the noble Viscount referred. It is difficult, but I think we may be able to overcome some of the difficulty. In regard to his comments upon subsection (2), and whether there should be an Amendment replacing the word "shall" with "may" to give discretion to the court, we are sympathetic to this point. We accept that there may be transactions to which all the factors mentioned in subsections (3) to (5) may not be relevant. Here again we shall look at the point in the light of all the circumstances, and if we think it appropriate we will bring forward an Amendment on Report.
The noble Viscount then went on to what are the principles of fair dealing. As he rightly said, the onus of proof is always upon the creditor to prove that his agreement is not extortionate. I believe the noble Viscount thinks that for him to prove that the method by which he trades does not contravene 462 ordinary principles might in future lead to difficulties. I readily accept that. I wonder—and I am merely wondering—whether this difficulty could be overcome if the Secretary of State were able to define by Order the ordinary principles of fair trading. To a certain extent I am speaking aloud. I think this is one way in which to proceed but, not being a lawyer, I am not quite sure whether it is acceptable. However, I will certainly look at it between now and the Report stage of the Bill.
I do not intend to debate with the noble Viscount the phrase "grossly exorbitant". When I took up this Bill my understanding was that what we had intended here was at least to have the same sort of meaning as we had in previous legislation—the money-lending Acts. If your Lordships will excuse my language I said: "Why the blazes cannot we use the same words?" It was pointed out that we are now dealing with a much wider field of credit and therefore such a phrase is not appropriate. I am advised that the Government would be unwilling to use the existing words of the Act because, as I have already explained, the provisions extend to a wider range of credit transactions.
At the moment I cannot hold out any hope, but since this is possibly a field more for my noble and learned friend the Lord Chancellor, I will await his return from Strasbourg, and will tell him that the noble Viscount has raised a matter of definition within the proposed Bill. I shall see what advice he can give me, and again, if the noble Viscount is still unsure, perhaps we may have further consultations. I hope I have been able to deal, albeit in a layman's fashion, with the four points the noble Viscount has raised.
VISCOUNT COLVILLE OF CULROSSThe noble Lord has dealt with them most thoroughly, if I may say so, and very much to my satisfaction. I think the problem about the words "grossly exorbitant" really has two limbs: first, that one must look at the source and see whether one can find something that carries out the intention of the old words "harsh and unconscionable" by the use of some other adjective. Secondly, I seem to remember on a fairly large number of occasions in this House that noble 463 Lords have attempted to qualify an adjective by putting an adverb in front of it. It has always been resisted, for much the sort of reasons that I was speaking about. I suggest that we ought to be very chary of doing this, and that the Government draftsmen and those who consider this matter carefully ought to be very wary before they set such a precedent as this, which no doubt will be seized upon by one and all and is unlikely to be a success in terms of law.
As for the ordinary principles of fair dealing, I have no fixed views about the matter at all. As I said, we are talking about evidence. In what form the evidence comes I do not mind. The difficulty is to decide what is admissible as evidence. We have to make sure that if a code or a series of parts of a code which gradually get stitched together do evolve, then these are available for evidential purposes without calling an expert on fair trading in each petty case in the county court. Therefore any thought which can be given to this problem is most welcome. I thank the noble Lord. I am sorry that mine was such a very long speech on the Question, Whether the clause shall stand part of the Bill? The clause is a difficult one, and I think a key one in this Part of the Bill. Therefore I look forward to further discussions—and I hope amendments—in due course.
§ Clause 137 agreed to.
§ Clause 138 [Reopening of extortionate agreements]:
§ On Question, Whether Clause 138 shall stand part of the Bill?
§ 7.35 p.m.
VISCOUNT COLVILLE OF CULROSSThere are two short points I wish to raise in regard to this clause. First, in subsection (1), both in paragraph (a) and paragraph (c), we have the intention to prescribe a period within which a credit agreement may be reopened. I wonder very much how on earth one is going to prescribe a period, or indeed a series of periods, which will be apt to deal with the enormous range of transactions which may be covered by the sort of area of credit that we are speaking about. I do not know whether the law has gone so far that we can no longer rely upon the ordinary principles of equity, but there is quite a good one, the technical term 464 for which is "laches", an old Greek word; but in practice, if I am not sounding condescending, perhaps I may just explain what it is. The court says: "If you are going to ask for equitable remedies you must not wait so long that it is no longer fair to reopen the bargain". In other words, you judge the period of time within which you may properly come to the court and complain that the thing is exorbitant by the actual nature of the bargain you have struck. If you borrow money over the weekend the court will not hear you if you come back three years later; if you borrow the money over 25 years, I have little reason to suppose that the court would not be prepared to reopen the matter at any time within that period. Therefore I am not certain, first, how we are going to prescribe; and secondly, I wonder whether it would not be better to leave it to the inherent and equitable jurisdiction of the courts anyway.
My second point is that under subsection (3) we have—and I entirely see the point—a provision whereby the re-opening of one of these agreements may have the effect of bringing an advantage—an unfairly enjoyed advantage—to a person who is involved in a linked transaction. Linked transactions of course come in under Clause 137(5). If we are dealing with what is fair all round, giving the court power to do justice to everybody concerned, and linked transactions are to be brought in, I see no particular reason why, if it is proper, and perhaps if either the creditor or the court asks for it, somebody else who will get an unfair advantage by a side wind should not be brought into the action as well and, if necessary, made to contribute. It need not happen every time; indeed, for all I know, it need never happen. But I think there should be powers whereby such a person can be brought into the argument; and if it is fair that he should pay something towards what the creditor is losing there should be power in the court to make him do so. I may be wrong but I do not think that subsection (3) allows this to happen at the present moment. I suggest to the noble Lord that we should improve the Bill if we set about inserting such an express provision.
§ LORD SHEPHERDMy reaction was identical to that of the noble Viscount in regard to the first point. When I saw my officials with regard to this particular 465 clause, and I saw the words "prescribed period", I asked, "Where is the prescribed period in the Bill?" I was told that there was no such definition, but it was put to me that this was something which was covered by the "Lord Chancellor's Rules", or some such phrase as that. Here again, speaking slightly aloud and probably getting into difficulties with those who advise me, it seemed to me to be of some importance that in using a phrase like this in a Bill which was very much for the consumer's benefit, then it should, if possible, be clearly stated. I think the noble Viscount is perhaps conscious that there may be difficulties in regard to making a prescribed period within the Bill itself. I have already asked for the matter to be looked at, and if necessary I will either put down an Amendment or communicate with the noble Viscount, Lord Colville of Culross. With regard to the second point, this is slightly more difficult, but here again I have a certain amount of sympathy with it. I should like to examine this point in the light of existing court rules. If I undertake to write to the noble Viscount or to introduce an Amendment at a later stage, I hope that he will be satisfied.
Since this may be the last occasion on which I shall be speaking on the Committee stage, I should like to express a very sincere word of appreciation to all noble Lords who have taken part, particularly the noble Lord, Lord Aberdare, and the noble Earl, Lord Limerick, and others who have sat on various Benches in this House. I should like to express my sincere thanks to my noble friend Lord Jacques, who carried a very heavy burden during the Committee stage. I understand it has been agreed that we should take the Report stage on Thursday week, May 16, so we have very little time. I have asked my officials to put down all the Amendments as they come forward in order that there should be the greatest possible opportunity for consideration. I would not expect difficulty here, because I know there is continual discussion between the Department and those who are interested in the Bill.
I shall endeavour to ensure that explanatory notes on those Amendments which we intend to put down on Report will be made available to noble Lords 466 who have been interested in the Bill. Taking the Report stage on Thursday week gives us a little more time and a little more flexibility in dealing with the Control of Pollution Bill, and therefore it is a sensible arrangement. But I am equally conscious of the shortage of time. However, there is another place, and if we have not got the Bill exactly right I have no doubt that the House of Commons will be able to take up much that we have discussed, and will be able to deal with those matters with which we may not have been able to deal.
My Lords, may I also thank the noble Viscount, Lord Colville of Culross, not only for raising some valuable points but for having had the courtesy to meet me this morning to appraise me of what he intended to raise, and for giving me an opportunity as a layman to deal with some highly complex legal matters.
VISCOUNT COLVILLE OF CULROSSMy Lords, I will see that my noble friends Lord Aberdare and Lord Limerick are told of what the noble Lord the Leader of the House has so generously said. I did indicate to them that the subject matter of what I was going to talk about might be a little sterile from their point of view, and it would not offend me if they were not present. Of course, they did not expect the accolade that the noble Lord has given them.
My Lords, there can be no doubt that what we ought to be doing in this House is to make as much progress as we can with clarification and improvement. I understand the timetabling difficulties, and I have no doubt there have been discussions through the usual channels. My part has been small in this Bill but, quite plainly, the more we can put right, the better. If there is a rush it will apply to another place as well, so let us go on with this very valuable process of consultation. In my turn I was very grateful Ito the noble Lord the Leader of the House; I do not remember having had so many concessions made in such a short time on any other occasion that I have taken part in this Bill.
§ LORD SHEPHERDMy Lords, it must not go to the noble Viscount's head!
§ Clause 138 agreed to.
§ Clauses 139, 140 and 141 agreed to.
§ House resumed: Bill reported with the Amendments.