LORDS AMENDMENT (Hansard, 28 July 1977)

§ The LORD CHANCELLOR

My Lords, I beg to move that this House doth disagree with the Commons Amendments Nos. 9 and 10 to Lords Amendment No. 8. Your Lordships will recall that the noble and learned Lord, Lord Hailsham of Saint Marylebone, successfully urged the House on Report stage to accept a provision relating to a contract term (being a term which limits a person's liability to a specified sum of money) that in determining the requirement of reasonableness of such a term, the court should have regard in particular to two matters: first, the resources which that person could expect to be available to him for the purpose of meeting the liability and, second, how far it was open to him to cover himself by insurance. That was the Amendment which is numbered 8 on the printed sheet.

This provision reflected what I think was the very real need felt by the noble 1187 and learned Lord and others to protect parties to a contract, possibly individuals or partnerships, where the risk they undertook was such that there was no possibility of insurance and where, in going bankrupt, it might well be beyond the capacity of a single person without limited liability to meet the obligations which might arise. As your Lordships will know, the Government spokesman and the Promoter of the Bill agreed with that and we were happy to see the Amendment made. I am now of the opinion that the Amendment proposed in another place should not be accepted and I think perhaps I should explain in a little detail why I take this view.

When the Amendment was considered in another place a qualified view of the matter prevailed. It was there urged that it was not the total of the assets available to a person that should be taken into account for the purpose of the Amendment but only those available in the course of that person's business. Words were written into the Amendment so as to make it refer to the resources which in the course of his business he could expect to be available to him for meeting the liability. As I understand it, the ostensible purpose of the Amendment was to focus the attention of the court solely on what might loosely be described as "business assets" and to require it to disregard what may also be loosely called "personal assets".

If that is the purpose of the Amendment from another place, I venture to express the view that it is doubtful in the extreme whether the words are in fact capable of achieving that result. But, in my view, a more important consideration is that such ought not to be the result in any event. The view that I believe the sponsors of the Bill take—and I support it—is that we cannot accept the principle which apparently underlines the Amendment for it is a rule of law that where any individual person—not, of course, a limited liability company—is liable all his assets are available to meet the liability. In the provision that left this House we were concerned with the availability of a person's assets as the criterion for justifying his having contractually imposed on the other party a limit on his liability. By the same token the only logical and sensible way to apply 1188 such a criterion, in my view, is to bring in all that person's assets.

It may be that the mover of the Amendment in another place was influenced by the fact that the Bill in general applies only to exemptions from liability sought to be contractually applied where the liability arises in the course of a business. But that is not a relevant consideration, for the nature of a liability has nothing to do with the nature of the assets which could be called upon to meet it. Apart from that, I think it would clearly undermine the basic purpose of the provision which was introduced in this House if the Amendment from the other place were to prevail, for a businessman could, for example, so arrange his affairs as to divest himself of assets held for the purpose of his business, for example by assigning them to his wife or some other nominee, with the reesult that he would always be able to assert the reasonableness of the limit of liability specified in the contract term on which he sought to rely.

As to the other Amendment, that is now couched in terms which I regret to say that, for my part, I do not find make any sense at all and indeed would add to the confusion which would already be created by this Amendment. For those reasons, my Lords, my view and the view of the Government and I think of the Promoter is that both Amendments should be rejected. I beg to move that this House doth disagree with the Commons in their Amendments.

§ Lord HAILSHAM of SAINT MARYLEBONE

My Lords, I can only endorse what the noble and learned Lord the Lord Chancellor has said. I am not now speaking about the problem of time and saving the Bill; I am speaking about the merits of the case, and I wish to give whatever little weight that I can to the very full analysis which the noble and learned Lord has made. I am only rather sorry that these Amendments were inserted on a Friday by two Members of my Party who clearly did not understand the principles involved in what they were doing. I understand that this Bill had a rather curious fate in the Commons because the Government Whips—ha, ha!—had not got a quorum and therefore if they had had a Division 1189 they would have lost the business and the Bill would have fallen by the wayside. So they did not put in Tellers, with the result that by a strange quirk of fortune the Amendment was inserted by what is grandiosely referred to as "the elective Chamber" which is so much deferred to by the noble and learned Lord on the Cross Benches to whom we always listen with great advantage.

But I think it is sometimes unwise to attach too much importance to the fact of election and too little to the sense of what they are doing. I can only say that if either of the two Members of my Party had asked me about these Amendments I should have been only too glad to give them advice, but it is wholly contrary to principle that when a man is trading otherwise than through the means of a limited company he should be thought to be setting aside part of his assets as being alone liable to meet the honourable obligations which he undertakes as a trader, and it is quite contrary to the principles of the Conservative Party, at least, that that should be so.