HL Deb 16 May 1974 vol 351 cc1108-37

3.25 p.m.

THE LORD PRIVY SEAL (LORD SHEPHERD)

My Lords, I beg to move that this Report be now received.

Moved, That the Report be now received.—(Lord Shepherd.)

On Question, Motion agreed to.

Clause 2 [Powers of Secretary of State]:

LORD JACQUES moved Amendment No. 1: Page 2, line 21, after ("Act") insert ("(other than the making of a determination to which section 41 or 146 applies)").

The noble Lord said: My Lords, the Council on Tribunals has made several suggestions for Amendments to the Bill and this is one of them. This particular Amendment makes it clear that the Secretary of State shall not give directions to the Director General on his adjudicating functions. I beg to move.

LORD ABERDARE

My Lords, this is the first of nearly 100 Amendments on the list and I should like to say to the noble Lord how grateful we are for having been supplied with notes on all these Amendments, which I know in such a short space of time has meant a considerable effort. We are most grateful as it will allow us to run through them rather more quickly than otherwise we could hope to do.

On Question, Amendment agreed to.

Clause 3 [Supervision by Council on Tribunals]:

LORD JACQUES moved Amendment No. 2: Page 3, line 4, at end insert ("and any member of the Director's staff authorised to exercise those functions under paragraph 7 of Schedule 1 to the Fair Trading Act 1973").

The noble Lord said: My Lords, this is a similar Amendment. In this case it makes it clear that if the Director General shall delegate any of his adjudicating functions to another officer, that officer, like the Director General himself, will be under the supervision of the Council on Tribunals. I beg to move.

On Question, Amendment agreed to.

Clause 10 [Running-account credit and fixed-sum credit]:

3.27 p.m.

LORD JACQUES moved Amendment No. 3: Page 4, line 20, leave out from first ("a") to ("to") in line 21 and insert ("facility under a personal credit agreement whereby the debtor is enabled").

The noble Lord said: My Lords, I wish to speak to Amendments Nos. 3, 4 and 6 together which I think will save time. These Amendments all go together and are intended to meet the objection of the clearing banks to the words "right" and "entitled" in the clause as printed. The banks fear that if it is said that credit is a right conferred on a debtor to receive something, or that he is entitled to receive something, it might be construed that the creditor is bound to allow a customer to continue exceeding his credit limit after he has allowed him to do this once. In any case, we now feel ourselves that the word "right" is inappropriate in relation to fixed-sum credit and where a credit is usually given at once and there is no time during which the debtor has a right to receive it. Accordingly, these Amendments replace the words "right" and "entitled" with the neutral words "facility" and "enabled". I beg to move.

LORD SEEBOHM

My Lords, the clearing banks much welcome these Amendments which are most helpful, but there are a number of technical points which still leave us in doubt about the definitions in Part II. I hope we can have some assurance that further conversations will go on with the Department in these matters. I should like to refer to Clause 10 because I do not think I can raise it anywhere else, which says that the same position still applies to the current account loan area, where we believe there is still some definition which would meet the difficulties which remain on this point between the clearing banks and the Government.

THE EARL OF LIMERICK

My Lords, before the Minister replies may I add that I am aware of the considerable amount of consultation that is taking place on these issues; it has been approached in a spirit which has been extremely helpful and which is much appreciated. For that reason it should not be thought that it is entirely due to the influence of other Members of this House who considered the Bill that there are very few Amendments, other than Government Amendments, at this stage. We are aware that these consultations continue and hope that they may lead to further, perhaps minor, amendments on the lines that the noble Lord, Lord Seebohm, has suggested.

LORD JACQUES

My Lords, the discussions are continuing on this and several other technical issues and I can give an assurance that there is no objection to their being continued. We fully understand that that is the reason why there are so few Amendments, other than Government Amendments, and we appreciate the assistance we are being given to get the Bill through the House.

On Question, Amendment agreed to.

LORD JACQUES

My Lords, I formally beg to move this Amendment.

Amendment moved— Page 4, line 28, leave out from ("other") to "to") in line 29 and insert ("facility under a personal credit agreement whereby the debtor is enabled").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

My Lords, Amendment No. 5 is a purely drafting Amendment which is consequential on the Amendment to Clause 8 which was made in Committee. I beg to move.

Amendment moved— Page 4, line 36, leave out ("8(1)") and insert ("8(2)").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES

My Lords, I have already spoken to Amendment No. 6. I beg to move.

Amendment moved— Page 4, line 43, leave out ("entitled") and insert ("enabled").—(Lord Jacques.)

On Question, Amendment agreed to.

Clause 17 [Small agreements]:

LORD JACQUES

My Lords, again, Amendment No. 7 is a purely drafting Amendment and is also consequential on Amendments to Clause 8 made in Committee. I beg to move.

Amendment moved— Page 8, line 33, leave out ("8(1)") and insert ("8(2)").—(Lord Jacques.)

On Question, Amendment agreed to.

Clause 18 [Multiple agreements]:

LORD JACQUES moved Amendment No. 8: Page 9, line 31, at end insert— ("(4A) In the case of an agreement for running-account credit, a term of the agreement allowing the credit limit to be exceeded merely temporarily shall not be treated as a separate agreement or as providing fixed-sum credit in respect of the excess.").

The noble Lord said: My Lords, this clause is concerned with multiple agreements. The Amendment is in response to the clearing banks' criticism of the complications that could arise under this clause where there is a temporary excess of the credit limit on an overdraft on current account. The issue was raised in Committee by the noble Lord, Lord Seebohm. This Amendment adds a new subsection to this clause, which provides that a term of an agreement for running account credit which allows the credit limit to be temporarily increased is not to be treated as a separate agreement or as providing fixed sum credit in respect of the excess. This means that by allowing a temporary excess drawing on an overdraft a bank will not be creating a new agreement for fixed-sum credit, but will be merely modifying the existing agreement temporarily. I beg to move.

LORD SEEBOHM

My Lords, we welcome very much the move towards meeting our requirements by this Amendment, but it does not go quite far enough. There is still a snag. In fact, if the words "a term of the agreement" were omitted, I think that would satisfy everybody. I wonder whether that point could be looked at again.

LORD JACQUES

My Lords, I think that this would be a suitable point for discussion in the talks that are to take place.

On Question, Amendment agreed to.

Clause 25 [Licensee to be a fit person]:

3.35 p.m.

LORD AIREDALE moved Amendment No. 9: Page 13, line 5, at end insert— ("( ) Every licence shall contain a copy of the relevant entry in the register, and a note explaining the effect of sections 360) and 39(3) of this Act.")

The noble Lord said: My Lords, this is a variation of an Amendment which I put down in Committee, which met with some criticism at that stage, and I hope that this new version deals with those criticisms. Under Clause 35 the Director is required to keep a register of the licences issued, and, because it is necessary to keep the register up to date, under Clause 36 it is the duty of the licence holder to notify the Director of any changes which need to be made in the register; and if the licence holder fails to discharge that duty he commits an offence under subsection (3) of Clause 39. As the Bill stands at present, if the licence holder wants a copy of the entry in the register he has to apply specially for it, and is liable to pay a fee for it. I should have thought that the least that can be done is to supply, with the licence, a copy of the relevant entry which the licence holder is under a duty to see is kept up to date; that he should be reminded that he has this duty to notify changes and that if he fails in that duty he then commits a criminal offence. That is what this Amendment seeks to introduce into the Bill. My Lords, I beg to move.

LORD JACQUES

My Lords, in accordance with the undertaking given in Committee, the Government have given sympathetic consideration to the Amendment. Their hope was to be able to accept the Amendment or to propose an alternative Amendment which would have a similar effect. Closer examination of the matter has led the Government to the conclusion that they should be rather cautious about amending the Bill in the way suggested. In the first place, there may be a matter recorded in the register, such as convictions for offences under the Bill, which a licensee would not wish to appear in his licence, especially if he wanted to hang it up in his office. This problem could be overcome by requiring the copy of the entry to acompany the licence rather than appear on it, but other more substantial objections remain.

We think it, in principle, inappropriate to deal with such a matter of administration in the Bill. To do so diminishes the scope for flexibility which is achieved at many places in the Bill. The need for flexibility is by no means a minor consideration in this context. The licensing system and the register will entail a complex operation. A vast amount of paper will be involved and, as yet, final plans have not been made as to how this will be handled. We do not wish to build unnecessary constraints into the legislation. The inclusion of too much detail in the Bill would also tend to diminish the stature of the Director, who, it is generally agreed, ought to be, and indeed is, the sort of person who could be trusted to get on with the job.

For these reasons, we think that a provision on the lines proposed would be unwise, and we hope that, given an assurance that his concern will be drawn to the Director's attention, the noble Lord, Lord Airedale, will be prepared to withdraw his Amendment. I would also add that we are prepared to put that assurance in writing.

LORD AIREDALE

My Lords, I am not so concerned about my concern being drawn to the attention of the Director. What I am concerned about is the Director drawing the attention of the licensee to the fact that unless he does something he will be liable to commit a criminal offence. That is my concern in this matter. If I can have an assurance from Her Majesty's Government that the licensee really will be reminded by the Director of his responsibility in this matter, and will not have to pay a fee to get his copy of the entry in the register, then my concern will be allayed. But so far it has not been.

THE EARL OF LIMERICK

My Lords, having expressed some sympathy with the purpose of the noble Lord, Lord Airedale, when we considered this point in Committee, may I add just a word to that? Of course we all agree that the Director is the sort of person who could be, should be and would be trusted to get on with his job; and, in the spirit of this Bill, we are making such marvellous progress that the last thing I wish to do is to detain the House on this matter. But I wonder whether the noble Lord, Lord Jacques, can tell us that this matter will be looked at once more. At the end of his remarks the noble Lord, Lord Airedale, summed up what I feel about the purposes of this Amendment, and about what it seeks to do. Perhaps this could be looked at once more with the Director General, to see whether the very real objections, which I recognise, can be met in some other way which will serve the public purpose which the noble Lord, Lord Airedale, has in mind.

LORD JACQUES

My Lords, we have it in mind that the licensee will be given a copy of the relevant part of the register, either at the time of his application or at the time of his being granted a licence. We also have it in mind that he should be warned of his responsibility for keeping the register up to date in regard to his own firm, and of the consequences if he does not. But there are so many ways in which the licensee could be informed that we should be reluctant to agree to this being expressed in legislation. We can certainly give an assurance that we will draw the attention of the Director General to the issue and we will also draw his attention to the assurance that I have given in this House. We have complete sympathy with this issue and will make that clear beyond doubt, but we do not want to tie down the Director General in a manner which might appear to be unnecessary.

LORD AIREDALE

My Lords, I am well satisfied with the assurance which has been given and I am grateful for the co-operation given to me by the Minister between the Committee stage and the Report stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 40 [Enforcement of agreements made by unlicensed trader]:

LORD JACQUES moved Amendments Nos. 10, 11 and 12. Page 20, line 28, leave out ("this section") and insert ("subsection (2)") Line 37, leave out ("this section") and insert ("subsection (2)") Page 21, line 3, leave out ("this section") and insert ("subsection (2)")

The noble Lord said: My Lords, with the permission of the House, I beg to move Amendments Nos. 10. 11 and 12 together. They are all drafting Amendments: indeed perhaps they could be called "polishing" Amendments, because instead of merely making a reference to a section, they will enable reference to be made to a subsection. These Amendments will also add to the consistency shown throughout the Bill. I beg to move.

On Question, Amendments agreed to.

Clause 41 [Appeals to Secretary of State under Part III]:

LORD JACQUES moved Amendment No. 13: Page 21, leave out lines 23 and 24 and insert— ("(4) A direction tinder subsection (3) for payment of costs may be made a rule of the High Court on the application of the party in whose favour it is given")

The noble Lord said: My Lords, this Amendment is made in response to a suggestion made by the Council on Tribunals, who thought it would be preferable to replace the present text with an adaptation of Section 250(5) of the Local Government Act 1972. We accept that this is a more familiar procedure, and the Amendment provides for it to be used. I beg to move.

On Question, Amendment agreed to.

LORD JACQUES

My Lords, I beg to move Amendment No. 14. This Amendment makes the same provision in respect of Scotland, where the term "expenses" is used instead of "costs".

Amendment moved— Page 21, line 24, at end insert— (5) In Scotland a direction under subsection (3) for payment of expenses may be enforced in like manner as a recorded decree arbitral."—(Lord Jacques.)

On Question, Amendment agreed to.

Clause 60 [Form and content of agreements]:

LORD JACQUES

My Lords, I beg to move Amendment No. 15. This is a drafting Amendment which remedies a small error in the present wording.

Amendment moved— Page 29, line 16, leave out ("licensee") and Insert ("person carying on a consumer credit business or a consumer hire business")—(Lora Jacques.)

On Question, Amendment agreed to.

Clause 64 [Duty to give notice of cancellation rights]:

3.45 p.m.

LORD JACQUES moved Amendments Nos. 16, 17 and 18. Page 31, line 31, leave out ("licensee") and insert ("person") line 33, leave out ("licensee") and insert ("person") line 36, leave out ("licensee") and insert ("applicant")

The noble Lord said: My Lords, with the permission of the House, I beg to move Amendments Nos. 16, 17 and 18 together. These are parallel Amendments to Amendment No. 15 to Clause 60, and likewise correct a small drafting error in the present wording. I beg to move.

On Question, Amendments agreed to.

Clause 65 [Consequences of improper execution]:

LORD JACQUES moved Amendment No. 19: Page 32, line 6, after ("goods") insert ("or land")

The noble Lord said: My Lords, here we are dealing with a circumstance which is unusual in the country as a whole but which I understand is current practice in some parts of it—the case where a house is bought, as it were, on hire-purchase—that is to say, the tenant pays a rent for a number of years and at the end of the period has the option to purchase.

This Amendment remedies an omission in Clause 65(2) which, as at present drafted, makes clear that the re-taking of goods to which a regulated agreement relates is enforcement of the agreement and can therefore, under Clause 65(1), only be carried out on an order of the court if the agreement has not been properly executed, but makes no reference to the retaking of land. As, legally speaking, land under a conditional sale agreement is the property of the creditor, there could be some doubt about whether the re-taking of the land is enforcement of the agreement. This Amendment dispels any such doubt. I beg to move.

On Question, Amendment agreed to.

Clause 75 [Liability of creditor for breaches by supplier]:

LORD JACQUES moved Amendments Nos. 20 and 21. Page 38, line 43, leave out from ("agreement") to ("a") in line 1 on page 39 and insert ("any claim against the supplier in respect of"). Page 39, line 4, leave out ("for the damages").

The noble Lord said: My Lords, with the leave of the House, I should like to move Amendments Nos. 20 and 21 together. These two Amendments deal with points made by the noble Viscount, Lord Colville of Culross, when this clause was debated in Committee. He pointed out that a customer might not wish simply to claim damages from a supplier but might wish instead to return the goods which he had received and get his money back. The noble Viscount pointed out that, as printed, the clause referred only to the recovery of damages and not any other right which a customer might have. These Amendments deal with this point by deleting the references to "damages" and by making it clear that where a debtor under a debtor-creditor-supplier agreement falling within Clause 13(b) or (c) has any claim against the supplier in relation to a transaction financed by the agreement he shall have the same claim against the creditor. I beg to move.

LORD ELTON

My Lords, I should like to welcome these Amendments. As we see it, they represent a notable improvement in the Bill. We are very glad to have the Amendments.

On Question, Amendments agreed to.

LORD JACQUES

My Lords, I beg to move Amendment No. 22. This is a drafting Amendment which is intended to clarify the meaning of Clause 75(3)(b), as at present worded.

Amendment moved— Page 39, leave out line 12 and insert— ("(b) so far as the claim relates to any single item to which the supplier has attached a cash price")—(Lord Jacques.)

LORD ELTON

My Lords, we cannot be so grateful about this Amendment, largely because our hopes were so greatly aroused by the original circulation of the Amendment, by means of which it appeared that the whole clause was coming out instead of only the first line. There was a great deal of silent jubilation because this brought about exactly the improvements which we sought to bring about during the Committee stage. I am very sorry that the noble Lord has set his face against the improvements we wanted; but again, if battle is to be joined on the subject, it is better that it should be joined in another place. Therefore I shall not pursue the matter further beyond expressing my regret.

LORD JACQUES

My Lords, I am delighted to leave the matter to another place.

On Question, Amendment agreed to.

LORD JACQUES moved Amendment No. 23: After Clause 75 insert the following new clause:

Duty to give notice before taking certain action

".—(1) The creditor or owner is not entitled to enforce a term of a regulated agreement by—

  1. (a) demanding earlier payment of any sum, or
  2. (b) recovering possession of any goods or land, or
  3. (c) treating any right of the debtor or hirer as terminated, restricted or deferred,
except by or after giving the debtor or hirer not less than seven days' notice of his intention to do so.

(2) A notice under subsection (1) is ineffective if not in the prescribed form.

(3) Subsection (1) does not prevent a creditor from treating the right to draw on any credit as restricted or deferred.

(4) Regulations may provide that subsection (1) is not to apply to agreements described by the regulations.

(5) Subsection (1) does not apply to a right of enforcement arising by reason of any breach by the debtor or hirer of the regulated agreement."

The noble Lord said: My Lords, this Amendment represents the insertion of an entirely new clause after Clause 75. The new clause makes mandatory the service of a notice on the debtor or owner before the creditor or owner can become entitled to enforce a term of a regulated agreement, in the terms specified. Under the Bill as at present drafted, the creditor can in effect evade the default provisions where there is a repayment-on-demand provision in the agreement. After consideration, we have decided to extend the protection already provided in the case of default to all action taken to enforce accelerated provisions and regulated agreements. Whatever the term in his agreement the consumer will, under this clause, have seven days in which to take appropriate action before the term is enforced and can, if necessary, apply to the court for a time order under Amendment No. 51. I beg to move.

LORD ABERDARE

My Lords, on the face of it we have no objection to this new clause, but we have not had very long to consider it in much detail and again we may want to come back to it at a later stage in another place. But with that proviso we are quite happy with it at the moment.

LORD HAWKE

My Lords, could the noble Lord tell me where the form of notice is prescribed? I expect I should know.

LORD JACQUES

My Lords, I could not tell the noble Lord off the cuff, but I will see that we communicate and tell him exactly where it is.

LORD HAWKE

I wondered whether it was a slip of the draftsman. I wanted to be sure that somewhere the form of notice is prescribed.

On Question, Amendment agreed to.

Clause 82 [Liability for misuse of credit facilities]:

LORD JACQUES

My Lords, Amendment No. 24 is a drafting Amendment consequential on Amendments Nos. 3 and 4. I beg to move.

Amendment moved— Page 43, line 14, leave out ("facilities") and insert ("facility").—(Lord Jacques.)

On Question, Amendment agreed to.

LORD JACQUES moved Amendment No. 25: Page 43, line 17, at end insert ("or to any loss in so far as it arises from misuse of a cheque").

The noble Lord said: My Lords, this Amendment is in response to a point made by the noble Viscount, Lord Amory, in moving an Amendment to this clause in Committee. He pointed out that as drafted the clause ignored the duty which existing law imposes on people who draw cheques to take reasonable care in drawing them. We do not wish to interfere with this duty, so this Amendment makes it clear that the clause does not relieve debtors from any liability which they may have under existing law as a result of misuse of a cheque. I beg to move.

VISCOUNT AMORY

My Lords, I appreciate very much the efforts that the noble Lord has made to meet the point and he has gone a very long way in doing it. I am told that there is one strange reservation. Some articles that the ordinary man in the street would think were cheques I am told are not technically cheques, at least within the meaning of this clause and that therefore it may not stretch as far as them. I believe that cheques drawn for cash may come under that heading. But I am perfectly happy to leave it to the noble Lord to look into that narrow point, and if there is any substance in it I am sure he will see that it is dealt with at some later stage in the Bill. I appreciate the efforts he has made.

LORD JACQUES

My Lords, I understand that this is one of the technical points that will be discussed at an early meeting.

On Question, Amendment agreed to.

Clause 84 [Duty on issue of new credit-tokens]:

LORD JACQUES moved Amendment No. 26: Page 44, line 11, leave out ("under the agreement").

The noble Lord said: My Lords, Amendment No. 26 is a drafting Amendment to remove unnecessary words. I have pleasure in moving it.

LORD SEEBOHM

My Lords, this is to regulate the use of cheque cards and cash cards and we do not think that it quite puts right the objection we previously tabled under Clause 14. I hope that this can be further discussed with the Department. It can, I think, be put right fairly easily.

LORD JACQUES

My Lords, I understand that this is also one of the technical points for further discussion.

On Question, Amendment agreed to.

Clause 85 [Death of debtor or hirer]:

LORD JACQUES moved Amendment No. 27: Page 44, line 25, leave out from ("only") to end of line 31.

The noble Lord said: My Lords, this Amendment removes the latter part of Clause 85(2) which lays down the circumstances in which the court may make an order allowing the creditor or owner under a partly secured or unsecured regulated agreement to take certain action by reason of the death of the debtor or hirer. The deleted provisions are being transferred to Clause 128 as part of the amendments to Part IX of the Bill. Provisions governing actions by the court are now grouped in that Part of the Bill. I beg to move.

On Question, Amendment agreed to.

Clause 87 [Contents and effect of default notice]:

LORD JACQUES moved Amendment No. 28: Page 45, leave out line 41.

The noble Lord said: My Lords, this Amendment deals with an issue raised in Committee by the noble Lord, Lord Mais. It deals with a problem that could arise if the creditor learned, before serving a default notice, that the debtor, who was in default under his agreement, was bankrupt.

As at present drafted, Clause 87(3) allows the creditor to restrict the debtor's right to draw credit from the time of service of a default notice. Under Clause 88(3) a default notice is deemed to be served on the day of delivery or the day after posting. The combined effect of these provisions is to impose a time-lag, depending on the means by which the notice is delivered, during which the creditor, even though he may know that a debtor who is in default is bankrupt, is unable to stop him drawing further credit.

The Amendment remedies this situation by removing the stipulation that the creditor must wait until the default notice has been served before restricting the right of a debtor who is in breach of his agreement to draw further credit. Under the clause, as amended, a bank upon notice of the bankruptcy of a debtor who was in breach of his agreement could immediately refuse him further credit. Lord Mais, in moving Amendment No. 77A to this clause in Committee, mentioned problems under this clause in relation to bankruptcy; and this specific point has been drawn to our attention in subsequent discussions with the clearing banks. I beg to move.

On Question, Amendment agreed to.

Clause 88 [Service of default notice]:

LORD JACQUES

My Lords, Amendment No. 29 is a drafting Amendment to pave the way for Amendment No. 80 to Clause 171. As a result of the proposed Amendment to Clause 171, Clause 88 is no longer required and this Amendment accordingly deletes it. I beg to move.

Amendment moved— Leave out Clause 88.—(Lord Jacques.)

On Question, Amendment agreed to.

3.58 p.m.

LORD JACQUES moved Amendment No. 30: After Clause 98 insert the following new clause:

Duty to give notice of termination (non-default cases) .—(1) The creditor or owner is not entitled to terminate a regulated agreement except by or after giving the debtor or hirer not less than seven days' notice of the termination. (2) A notice under subsection (1) is ineffective if not in the prescribed form. (3) Subsection (1) does not prevent a creditor from treating the right to draw on any credit as restricted or deferred. (4) Regulations may provide that subsection (1) is not to apply to agreements described by the regulations. (5) Subsection (1) does not apply to the termination of a regulated agreement by reason of any breach by the debtor or hirer of the agreement.".

The noble Lord said: My Lords, this clause is parallel to the new clause after Clause 75. It makes mandatory the service of a notice on the debtor or hirer before the creditor or owner can become entitled to terminate a regulated agreement. The clause also provides that a minimum of seven days' notice must be given before the termination takes effect. I beg to move.

LORD HAWKE

My Lords, this clause has the same "prescribed notice" mentioned in it. Does the noble Lord remember now whereabouts it is to be found in the Bill? I do not wish him to take the trouble to write to me. I just wanted to check up that the draftsman has not erred over this matter.

LORD JACQUES

My Lords, between the last time we mentioned "prescribed notice" and the present moment I have not had time to think about anything except the Amendments I have been moving. In the circumstances, I would prefer to communicate quite independently with the noble Lord, either in writing or verbally.

LORD HAWKE

I believe there is succour on the way!

LORD JACQUES

My Lords, "prescribed" means by regulations.

On Question, Amendment agreed to.

Clause 105 [Form and content of securities]:

LORD JACQUES moved Amendments Nos. 31 to 37:

Page 53, line 23, leave out ("or linked transaction").

Page 53,line 40, leave out ("(if a different person)").

Page 54, line 6, after ("security") insert—

("(a) provided by the debtor or hirer, or (b)")

Page 54,line 14 after ("(5)") insert ("(b)"). line 16, at end insert— ("(6A) If an application for an order under subsection (6) is dismissed (except on technical grounds only) section (Ineffective securities) (ineffective securities) shall accordingly apply to it. (6B) Regulations under section 60(1) shall include provision requiring documents embodying regulated agreements also to embody any security provided in relation to a regulated agreement by the debtor or hirer.")

Page 54, line 18, leave out ("or prospective linked transaction").

Page 54, line 20, leave out ("or actual linked transaction").

The noble Lord said: My Lords, with the leave of the House, I should like to move Amendments Nos. 31 and 37, inclusive, together. There has been considerable confusion and disagreement about Clause 105. In particular, the clearing banks have objected that it would oblige them to comply with the provisions of the Bill whenever they took security which might later be used to secure a regulated agreement, even though it did not secure such an agreement when it was first given. For example, a customer might mortgage his house to a bank as a security for an overdraft granted to his company, which would be an unregulated agreement, and agree at the same time that it should also secure an overdraft which the bank might later grant to him personally, which would be a regulated agreement. The banks feared that in order to be safe in such a case they would have to comply with the Bill in taking the mortgage, even though at the time it was taken it did not secure a regulated agreement. This might complicate and delay ordinary business transactions. In the debate on the Amendment to this clause moved by the noble Lord, Lord Seebohm, my noble friend Lord Shepherd explained that we intended to move Amendments to meet these points. I beg to move Amendments Nos. 31 to 37.

LORD SEEBOHM

My Lords, I am immensely grateful for the work which has gone into the Amendments to Clause 105. It may well be this satisfies our requirements; it is a complicated matter to understand, and I hope we may be allowed time to study it and discuss it if there is a point that we should like to raise later.

THE EARL OF LIMERICK

My Lords, I rise to echo the words of the noble Lord, Lord Seebohm, and also because I feel the noble Lord, Lord Jacques—who is doing very well this afternoon—could do with a "breather". By taking these Amendments en bloc he has contrived to pass the post which marks one third of the course. I hope that he is in good voice and will continue to give us much help as he has done on the first third of the course.

VISCOUNT AMORY

My Lords, may I join with other noble Lords in expressing grateful thanks for the way that the noble Lord, Lord Jacques, has so far completely kept faith with the assurances he gave at an earlier stage that he would study the points raised. This is a clear example of the benefit flowing from the noble Lord concentrating solely on the Amendments with which he is dealing.

On Question, Amendments agreed to.

LORD JACQUES moved Amendment No. 38: After Clause 105 insert the following new clause:

Ineffective securities

" . Where, under any provision of this Act, this section is applied to any security provided in relation to a regulated agreement then, subject to section 172 (saving for registered charges),—

  1. (a) the security, so far as it is so provided, shall be treated as never having effect;
  2. (b) any property lodged with the creditor or owner solely for the purposes of the security as so provided shall be returned by him forthwith;
  3. (c) the creditor or owner shall take any necessary action to remove or cancel an entry in any register, so far as the entry relates to the security as so provided; and
  4. (d) any amount received by the creditor or owner on realisation of the security shall, so far as it is referable to the agreement, be repaid to the surety."

The noble Lord said: My Lords, this is a tidying-up Amendment. It transfers the provisions relating to ineffective securities from Clause 112(3) to a separate new clause, and applies the provisions to all cases under the Bill where a security is to be treated as ineffective. I beg to move.

Clause 110 [Default Notices]:

LORD JACQUES moved Amendment No. 39: Page 57, line 20, after ("notice") insert ("or a notice under section (Duty to give notice before taking certain action) (1), or (Duty to give notice of termination (non-default cases)) (1)").

The noble Lord said: My Lords, this Amendment is consequential on Amendments Nos. 23 and 30 by which new provisions are introduced requiring the creditor or owner to give seven days' notice before taking certain action, such as demanding early repayment, and before terminating an agreement. I beg to move.

On Question, Amendment agreed to.

LORD JACQUES moved Amendment No. 40: Page 57, line 24, after ("(1)") insert ("in the case of any surety").

The noble Lord said: My Lords, this Amendment deals with a point raised by the noble Lord, Lord Aberdare, during Committee stage. Clause 110(1) provides that when a default notice is served on a debtor or hirer a copy of it must be served on any third party acting as surety. Clause 110(2) provides that if the creditor or owner fails to serve a default notice on the surety the security is enforceable on an order of the court only.

The noble Lord, Lord Aberdare, expressed concern that, in cases where some security was provided by the debtor and some by a surety, the present wording of the clause might have the effect that failure to serve a copy of the default notice on the surety would render security provided by the debtor, as well as by the surety, unenforceable except by order of the court. We hold the view and we subsequently told the noble Lord by letter that this was not what we intended and was not what we were advised was the effect of the clause. But although we remain of that opinion we have decided to amend the clause slightly in order to make the meaning of it clear.

This Amendment, by including in sub-section (2) a specific reference to the surety, makes clear that failure to serve a copy of a default notice on a surety only affects security provided by the surety on whom no default notice has been served and does not affect security provided by the debtor or hirer or any other surety on whom a default notice was properly served.

LORD ABERDARE

My Lords, this is a matter which the Finance Houses Association were worried about. It is now quite clear. I am very grateful to the noble Lord.

4.6 p.m.

LORD JACQUES moved Amendment No. 41: Page 57, line 26, leave out subsection (3).

The noble Lord said: My Lords, this is a drafting Amendment which paves the way for the extensive amendments of Part IX of the Bill dealing with judicial control. Clause 110(3) at present gives guidance to the court as to the factors it shall consider in determining whether or not to make an order for the enforcement of a security in a case where the creditor or owner has failed to send a copy of a default or other notice on the surety. Provisions of this nature are now being grouped in Part IX of the Bill and this particular provision is now included in the new clause after Clause 125 which contains general guidance on enforcement orders in all cases of infringement under the Bill.

On Question, Amendment agreed to.

Clause 112 [Act not to be evaded by use of security]:

LORD JACQUES moved Amendment No. 42: Page 58, line 4, leave out ("only on an order made under section 40 or 65(1)") and insert ("on an order of the court or the Director only").

The noble Lord said: My Lords, Clause 112(2) provides that where the creditor or owner was unlicensed and, under Clause 40, an order by the Director is required before the agreement can be enforced, or the agreement was improperly executed and, under Clause 65(1), can only be enforced on an order of the court, any security provided in relation to the agreement can only be enforced after such orders have been made.

This Amendment widens this protection of the security. It ensures that in the case of contravention of the provisions of Clause 122 any security cannot be enforced until after the court has made an order for the enforcement of the agreement. And it also ensures that where a regulated agreement was made on the introduction of an unlicensed credit broker any security for the agreement will be enforceable only if the Director has made an order under Clause 145. I beg to move.

On Question, Amendment agreed to.

LORD JACQUES moved Amendment No. 43: Page 58, line 8, leave out from ("Where") to end of line 28 and insert—

  1. ("(a) a regulated agreement is cancelled under section 69 or terminated under section 91, or
  2. (b) in relation to any agreement an application for an order under section 40(2), 65(1), 123(1) or 145(2) is dismissed (except on technical grounds only), or
    3. 1128
  3. (c) a declaration is made by the court under section (Power to declare rights of parties) (1) (refusal of enforcement order) as respects any regulated agreement,
section (Ineffective securities) shall apply to any security provided in relation to the agreement. ( ) Where subsection (1)(c) applies and the declaration relates to a part only of the regulated agreement, section (Ineffective securities) shall apply to the security only so far as it concerns that part. ( ) In the case of a cancelled agreement, the duty imposed on the debtor or hirer by section 71 or 72 shall not be enforceable before the creditor or owner has discharged any duty imposed on him by section (Ineffective securities) (as applied by subsection (1))").

The noble Lord said: My Lords, this Amendment follows Amendment No. 38, which transfers the provisions relating to ineffective securities from Clause 112 to the new clause after Clause 105 and gives them general application to all cases of ineffective securities (for example, where the court has dismissed an application for enforcement of a security). The Amendment lays down how the provisions of the new clause are to apply to security provided in relation to an agreement that is cancelled or terminated or in respect of which the debtor obtains a declaration by the court under subsection (1) of the new clause (power to declare rights of parties) that the creditor or owner is not entitled to enforce the security. I beg to move.

On Question, Amendment agreed to.

4.10 p.m.

LORD JACQUES moved Amendment No. 44: Page 58, line 33, leave out from ("that") to ("apply") in line 34 and insert ("section (Ineffective securities) shall thereupon").

The noble Lord said: My Lords, this is a consequential Amendment on Amendment No. 38 by which the provisions relating to ineffective securities have been transferred from Clause 112(3) to the new clause following Clause 105. I beg to move.

On Question, Amendment agreed to.

Clause 119 [Consequence of failure to redeem]:

LORD JACQUES moved Amendment No. 45: Page 61, line 6, leave out ("an instalment order under section 129") and insert ("a time order under section (Time orders)").

The noble Lord said: My Lords, this Amendment paves the way for the extensive Amendments proposed to Part IX of the Bill dealing with judicial control. I beg to move.

On Question, Amendment agreed to.

Clause 123 [Consequences of breach of s. 122]:

LORD JACQUES moved Amendment No. 46: Page 62, line 39, leave out subsections (3) and (4) and insert— ("(3) Where an application for an order under subsection (2) is dismissed (except on technical grounds only) section (Ineffective securities) shall apply to the security").

The noble Lord said: My Lords, by the extensive amendment of Part IX of the Bill dealing with judicial control, provisions in relation to enforcement orders in cases of infringement under the Bill are now grouped in the new clause after Clause 125. There is, therefore, no need for these provisions in Clause 123 and this Amendment accordingly deletes them. At the same time the Amendment makes provision for what is to happen to the security if an application for an order to enforce it is dismissed by the court. This is done by reference to the new clause after Clause 105 which now makes provision for all cases of ineffective securities. An exception is made if the application is dismissed on technical grounds (for example, because of some technical error in court or other procedure) in which case the applicant merely has to apply again. I beg to move.

On Question, Amendment agreed to.

Clause 125 [Enforcement of land mortgages]:

LORD JACQUES moved Amendment No. 47: Page 63, line 24, leave out subsection (2) and insert— ("(2) Where an application for an order under subsection (1) is dimissed (except on technical grounds only) section (Ineffective securities) shall apply to the land mortgage").

The noble Lord said: My Lords, this Amendment deals with a point raised by the noble Lord, Lord Aberdare, during the Committee stage. Also it makes a consequential drafting amendment to the Amendments dealing with ineffective securities in the rest of Part VIII of the Bill. The noble Lord, Lord Aberdare, expressed concern that the present wording of the clause might result in a creditor losing his security when an application to enforce a land mortgage securing a regulated agreement was dismissed on purely technical grounds, that is, as a result of an error in court or other procedure. This was not the effect intended, and to make this clear a specific exception is made by this Amendment if an application is dismissed on technical grounds. I beg to move.

LORD ABERDARE

My Lords, I was wondering what this Amendment meant. I am pleased to know that it meets my point and I am very grateful indeed.

On Question, Amendment agreed to.

4.14 p.m.

LORD SHEPHERD moved Amendment No. 48: After Clause 125 insert the following new clause:

Enforcement orders: general principles (" . Where—

  1. (a) under any provision of this Act a thing can be done by a creditor or owner on an order of the court (an "enforcement order") only, and
  2. (b) the creditor or owner applies to the court for such an order,
then, subject to sections (Enforcement orders in cases of infringement) and (Enforcement order on death of debtor or hirer) and without prejudice to sections 136 to 138 (extortionate credit bargains), the court shall make the order if it is satisfied that, apart from that provision, the applicant would be entitled to do the act in question.")

The noble Lord said: My Lords, I beg to move Amendment No. 48 and also to speak to all Amendments up to and including Amendment No. 71 to Clause 139. I suspect that by the end of the day some of us may feel that the United States Congress have a very sensible provision by which speeches can appear in the printed report without having to be delivered. May I also say in regard to Amendment No. 48 that the reference in it to Sections 136 to 138 should be to Sections 135 to 138. It is a printing error.

My Lords, this is the most extensive group of Amendments with which we are dealing to-day, and these concern Part IX of the Bill. I forewarned the House that we were going to reorganise this Part during the Committee stage. Noble Lords will have seen the answer to a question from my noble friend Lord Raglan which appeared in yesterday's OFFICIAL REPORT and which sets out the main elements of the reorganisation; but it might also be useful if I run briefly over these as well as explaining the new elements we have introduced.

The first new clause that is covered by Amendment No. 48—"Enforcement orders: general principles"—is essentially a re-write of the present Clause 127(1). The second new clause, which is Amendment No. 49—"Enforcement orders in cases of infringement"—is made up of a large part of the present Clauses 128, 110(3) and 123(3). Subsection (1)(ii) of this new clause is new and consequential on other Amendments. The third new clause—that is, Amendment No. 50: "Enforcement order on death of debtor or hirer"—comes from Clause 85(2). The fourth new clause—Amendment No. 51: "Time orders"—contains a large part of Clause 129(1) but goes beyond that clause, in that it enables the court to give debtors and hirers not only time to pay sums of money which they owe but also time to do other things to remedy breaches of agreement by them. This is an important new protection for the consumer. For example, a debtor who has mortgaged his home as security for a loan might keep up with his payments but fail to keep the house in good repair, in breach of his agreement. We think that the debtor should be able to be given the opportunity to put right such breaches, and under the new "Time orders" provision the court could give him further time to carry out necessary repairs.

The fifth new clause—that is Amendment No. 52, "Supplemental provisions about time orders"—is based largely on the present Clauses 129, 130 and 133; but also in subsection (2) it provides that in the case of a hire-purchase or conditional sale only, a time order for payment by instalments may deal not only with sums already payable by the debtor but also with sums which would become payable later if the agreement continued in force. This provision is not in the Bill at present but is necessary to deal with cases where the creditor terminates a hire-purchase agreement but the court considers that the debtor should be able to go on and finally become the owner of the goods which he is buying under an agreement. It follows from this that the court must be able to deal with all of the sums payable under the agreement and not only with those which are due when a creditor terminates the agreement.

Subsection (5) is also new and provides that during the extra time given to the debtor or hirer he is protected against further action by the creditor or owner, in the same way as he would be between the time of service and the time of expiry of a default notice and that when the breach is remedied it should be treated as never having occurred.

The sixth new clause, which is Amendment No. 53—"Protection orders"—contains the present Clause 126(4).

The seventh new clause which is Amendment No. 61—"Power to impose conditions, or suspend operation of order"—contains the present Clause 129(5) and also introduces a new concept into the Bill, but one which exists in the present hire-purchase legislation. It enables a court to order a debtor to return goods to the creditor but to suspend this order for so long as the debtor keeps up payments which he has been ordered to make under a time order. If such a suspended order were made, then the creditor could enforce the debtor's duty to return the goods directly the debtor failed to make a payment. In particular, the creditor would not have to go back to the court if such an order were made. Suspended orders of this kind have been in hire-purchase legislation for many years, and may be in the interests of the debtor just as much as the creditor. It saves the creditor going back to the court if the debtor fails to keep up payments: and, when the debtor is content to let repossession take place, he is saved the bother of going back to the court a second time.

I should perhaps add that having made an order of this kind, the court can always vary it on the application of either party. This means that if such an order has been made and the debtor finds that he cannot keep up the payments, he does not have to allow the goods to be automatically repossessed but can apply to the court for a variation in the terms of the instalments he has to pay. The eighth new clause, which is Amendment No. 62, "Power to vary agreements and securities" contains the present Clauses 132 and 133(1)(a).

On a slightly different topic from our reorganisation of this Part, we have also tabled four Amendments to Clauses 136 and 137 to deal with points raised by the noble Viscount, Lord Colville of Culross, in Committee. I am sorry that he cannot be present, but we have been able to meet him and I believe he is satisfied with what we have done. He suggested that instead of requiring a court to have regard to the matters set out in Clause 136(2) in determining whether a credit bargain is extortionate, the Bill should provide merely that the court might have regard to them. We have accepted this suggestion in principle. The Amendment to Clause 136, which is Amendment No. 63, has the effect of requiring the court to have regard to the matters listed only if evidence is given about them. This means that the court will not be bound to consider them, nor will the parties be bound to give evidence about them. It is only if one party or another chooses to give evidence about them that the court will have to consider these matters.

The noble Viscount, Lord Colville, also thought that the courts might have difficulty in relation to the definition of "ordinary principles of fair dealing", and consequently the different interpretations that county courts might give to this phrase. My initial reaction, as I indicated in Committee, was that the Secretary of State should be able to define by Order such principles, but on further reflection we have come to the conclusion that this would be difficult and might set an unfortunate precedent. Any such code might be taken as a definitive and comprehensive statement of the ordinary principles of fair dealing and, therefore, as implying that any action not mentioned in it was not fair dealing. We consider that there are already adequate methods of establishing standards in the county courts and bringing relevant matters to their attention, and of allowing such matters to be adduced by creditors and others in their evidence.

Under Clause 26 the Secretary of State may make "conduct of business regulations". If there is any facet of conduct that the Secretary of State guided by the Director General considers harmful to the consumer and therefore against the ordinary principles of fair dealing, he would be able to make a suitable conduct of business regulation which would then be the law, and as such the county courts could have regard to it. The Director General will also have to publish regularly information about the licensing system, and it could well be that the Director General will wish to publish a regular news-sheet or similar publication to which those interested can subscribe. This could be used by the Director General to contain reports of any county court judgments that he thinks are relevant and these could be cited in subsequent cases. There is also the official publication entitled, Trade and Industry, which could be used to report any cases. In these various ways we consider that the county courts will be well apprised of the standards by which the ordinary principles of fair dealing are to be determined, without the need for any more formal arrangements which might have drawbacks in other areas.

The ninth new clause, Amendment No. 67, "Jurisdiction and parties" contains much from Clauses 126 and 129, but also deals in subsection (2) with a point that was again raised by the noble Viscount, Lord Colville. He pointed out that there was no machinery in the Bill whereby an agreement which is brought in the High Court but which ought to have been brought in the county court could be transferred to the county court. Provision is now made for this. It might be asked why the Bill does not contain a similar provision about actions commenced in the county court, but which ought to have been commenced in the High Court. The reason is that this is already dealt with by Section 66 of the County Courts Act 1959.

The tenth new clause, "Power to declare rights of parties", is completely new. It enables the court to declare what the rights of parties are in cases where otherwise there might be doubt. For example, an agreement which has been improperly executed is enforceable against the debtor on an order of the court only, and thus security for it is also enforceable on an order of the court only. If a debtor had mortgaged his house as security for a loan but was advised that the agreement was improperly executed, as a result he might stop paying his creditor. The creditor may not bother to sue him, because he has a registered mortgage on the debtor's home and is sure that he will get his money when the debtor wants to sell his house but finds that he cannot because of the mortgage.

In such a case there must therefore be a method whereby the debtor can get the security removed. This clause provides that in such a case the debtor will be able to ask the court to look at the matter to decide whether or not a court order would be needed by the creditor and whether he would get a court order, and to declare in a proper case that, in fact, the creditor had no right to enforce the agreement. If the court makes such a declaration, then under Clause 112(3)(b) as amended, and the new clause "Ineffective securities", the mortgage is treated as ineffective and the creditor would be under a duty to remove it from the register. The only other Amendments in Part IX are some consequential ones to Clause 139 dealing with the jurisdiction of the county court in Northern Ireland. I apologise for the length of my statement, but I thought I would take the Amendments together instead of treating each one separately. Certainly, if any doubts arise between now and the next stage of the Bill I shall be only too happy to discuss them with any noble Lord, or for that matter with any organisation.

Amendment moved— After Clause 125 insert the following new clause:

Enforcement orders: general principles" . Where—

  1. (a) under any provision of this Act a thing can be done by a creditor or owner on an order of the court (an "enforcement order") only, and
  2. (b) the creditor or owner applies to the court for such an order,
then, subject to sections (Enforcement orders in cases of infringement) and (Enforcement order on death of debtor or hirer) and without prejudice to sections 135 to 138 (extortionate credit bargains), the court shall make the order if it is satisfied that, apart from that provision, the applicant would be entitled to do the act in question."—(Lord Shepherd.)

LORD ABERDARE

My Lords, we are grateful to the noble Lord for that comprehensive statement and I congratulate him on his grasp of these very tricky matters of judicial control. I know that my noble friend Lord Colville of Culross will be most grateful for the Amendments, that have met points he raised in the Committee stage. I know that he had hoped to be here this afternoon but he had an engagement outside London, and we have made such good progress on the Report stage that he has obviously not arrived here in time. In any case, I doubt whether even my noble friend's mind could have grasped the full implication of the very considerable recasting of Part IX of the Bill, and it will undoubtedly take time to absorb it. So I would say to the noble Lord that we shall certainly take up his offer of coming to talk to him before the next stage of the Bill, if my noble friend thinks that there are points which he would like clarified.

LORD SHEPHERD

My Lords, I am most grateful. Perhaps I omitted one thing. I should now like to express a very sincere word of appreciation to the noble Viscount, Lord Colville. Not only was his intervention in Committee valuable, but his meetings afterwards were even more valuable, and as a consequence of this interchange certain parts of this Bill are in a much better shape than they were.

On Question, Amendment agreed to.

4.30 p.m.

LORD SHEPHERD

My Lords, I beg to move Amendment No. 49:

Amendment moved— After Clause 125 insert the following new clause:

Enforcement orders in cases of infringement

".—(1) In the case of an application for an enforcement order under—

  1. (a) section 65(1) (improperly executed agreements), or
  2. (b) section 105(6)(a) or (b) (improperly executed security instruments), or
  3. (c) section 110(2) (failure to serve copy of notice on surety), or
  4. (d) section 123(1) or (2) (taking of negotiable instrument in contravention of section 122),
the court may dismiss the application if it considers it just to do so having regard to—
  1. (i) prejudice caused to any person by the contravention in question, and the degree of culpability for it; and
  2. (ii) the powers conferred on the court by subsection (2) and sections (Power to impose conditions or suspend operation of order) 1137 and (Power to vary agreements and securities).

(2) If it appears to the court just to do so, it may in an enforcement order under any provision mentioned in subsection (1) reduce or discharge any sum payable by the debtor or hirer, or any surety, so as to compensate him for prejudice suffered as a result of the contravention in question.

(3) The court shall not make an enforcement order under section 65(1) if section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).

(4) The court shall not make an enforcement order under section 65(1) in the case of a cancellable agreement if—

  1. (a) a provision of section 62 or 63 was not complied with, and the creditor or owner did not give a copy of the executed agreement, and of any other document referred to in it, to the debtor or hirer before the commencement of the proceedings in which the order is sought, or
  2. (b) section 64(1) was not complied with.

(5) Where an enforcement order is made in a case to which subsection (3) applies, the order may direct that the regulated agreement is to have effect as if it did not include a term omitted from the document signed by the debtor or hirer."—(Lord Shepherd.)

On Question, Amendment agreed to.

LORD SHEPHERD

My Lords, I beg to move Amendment No. 50.

Amendment moved— After Clause 125, insert the following new clause:

ENFORCEMENT ORDER ON DEATH OF DEBTOR OR HIRER

" . The court shall not make an enforce-men order under section 85(2) unless—

  1. (a) the creditor or owner proves that he has been unable to make satisfactory arrangements with the deceased's personal representatives for the carrying out of the regulated agreement, or
  2. (b) there as no such personal representatives."—(Lord Shepherd.)

On Question, Amendment agreed to.

LORD SHEPHERD

My Lords, I spoke to the series of Amendments up to Amendment No. 71. It is perhaps subject to correction, but I think we can take up to Amendment No. 71 en bloc. If that would be the agreement of the House, I would so propose it. I beg to move Amendments Nos. 51 to 71 en bloc.

Amendments moved— After Clause 125, insert the following new clause:

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