INSOLVENCY BILL [H.L.] (Hansard, 4 December 1975)

§ The LORD CHANCELLOR

My Lords, may we now return to the less attractive topic of insolvency. I am most grateful to the noble Earl, Lord Mansfield, and the noble Lord, Lord Wade, for their welcome to the Bill. The noble Earl explained to me his reason for being unable to remain till the end, and I fully understand, of course. I should add that my noble friend Lord Hale was also obliged to leave, and he has reminded me of the valuable contribution of the Committee of Mr. Justice Payne in regard to the enforcement of debts, the Committee upon which he played so distinguished a part for three or four years. I fully recognise the value of the work of that Committee, and indeed his work, particularly in regard to administration orders.

Several points were raised, some of them of a Committee character. The noble Earl, Lord Mansfield, raised points under Clauses4, 6 and 7, which I will deal with briefly. As to Clause 4, the form of proof of debt of companies winding up is laid down in the winding-up rules and these can be amended under existing powers. It is intended to amend the rules accordingly to keep bankruptcy and company winding-up forms of creditors' claims in line. As to Clause 6, we understand the court would not make a money order in the absence of the bankrupt. On the point raised under Clause 7, I understand that an appeal does lie against an order under Section 188.

The noble Lord, Lord Wade, asked me what would be the criteria for the dispensing of public examinations under Clause 5. As he pointed out, the relevant facts and degrees of culpability of the debtor vary considerably from bankruptcy to bankruptcy. The debtor's failure, for example, may, as he suggested, be due to misfortune or may be due to his own conduct, which might vary from the merely improvident to the positively criminal, and it would be difficult, therefore, to lay down fixed criteria which would determine whether or not a public examination should be held in any particular case. The Bill leaves the decision to the court so that it can make an order 783 dispensing with public examination if it thinks fit. But it is intended, by guidance, to ensure that no application for an order dispensing with public examination shall be made unless the debtor has already made a full disclosure of his affairs to the satisfaction of the Official Receiver and the failure does not affect a wide circle of trade creditors and is of little public interest. For that reason the Bill provides that only the Official Receiver may make such an application, so that the court's discretion will be exercised on the facts of each particular case.

Then the noble Lord asked me a question about the language of Clause 7 regarding the disabilities which will be imposed on a person as a result of a disqualification order under that clause. The language is exactly the same as that to be found in Section 188 of the Companies Act. In practice the court has taken the view that for the purposes of Section 188 —and the same will apply here—a person is concerned or takes part in the management of a company where he is performing duties consistent with those of a director; that is to say, where he is taking a leading part in the company's overall management. On the other hand, a person who is merely managing a part of the company's activities, for example, a sales manager, would not be concerned or taking part in the management of the company within the meaning of Section 188, nor indeed of Clause 7 of the Bill. The effects of the clause, therefore, arc not to deprive a person from earning his living but to deprive him from acting in connection with a company in an overall managerial capacity. There are a number of decided cases which have given that interpretation to the words which are presently found in the Bill.

In my opening observations I referred to the aim of the Bill to reduce the number of trivial cases, and it is right in that connection that I should add that it is also proposed, under powers conferred by the 1914 Act, to increase substantially the fees payable on deposits for petitions, and that will play its part in reducing the number of trivial cases.