UNFAIR CONTRACT TERMS BILL

HL Deb 20 June 1977 vol 384 cc435-530

4.48 p.m.

Lord JACQUES

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, that the House do now resolve itself into Committee.—(Lord Jaques.)

Lord AIREDALE

My Lords, I think that this opportunity should be taken to point out that the Second Reading debate took place very nearly a month ago, and yet about 75 per cent. of the Amendments on the Marshalled List were not available to your Lordships last Thursday, the last Sitting Day, and only became available from the Printed Paper Office last Friday. I do not think that we get the best value out of Committee stages if we put down Amendments at the eleventh hour like this. It is unfair to noble Lords. It is unfair to those who have to advise the noble Lord who is in charge of the Bill who presumably have to devote their weekend to preparing their advice. I think it is extremely unfair to people outside Parliament who are going to be affected by the legislation and who wish to follow it closely and put down suggestions for the Committee stage. I should like to see the Procedure Committee recommending, and the House agreeing, to regard with disfavour Amendments which are put down, say, within a week of the day appointed for the Committee stage, unless of course the pressure on the timetable makes a week an unreasonably long time.

Lord LYELL

My Lords, I was going to preface my remarks on the Amendments which stand in my name on the Marshalled List by issuing a number of apologies. First of all, I hope your Lordships will accept an apology on behalf of my noble and learned friend Lord Hailsham, who has his name on one or two Amendments towards the end of the list but who, through no discourtesy to your Lordships, is answering questions elsewhere in your Lordships' House at this moment on another extremely important matter.

I also proffer my own apologies to the noble Lord, Lord Jacques, and to your Lordships, first of all, on the number of Amendments which stand in my name and, secondly, as to their timing and when they were put down. Your Lordships will believe me, I am sure, when I say that Amendments and pleas for consideration are still coming in, and were coming in even at 2.30 this afternoon. Many of the outside interests concerned, of course, do not appreciate the difficulties so eloquently outlined by the noble Lord, Lord Airedale. He pointed out that about 75 per cent. of the Amendments had been put down at a late stage. Certainly the gist of his remarks would tend to veer in my direction, and I would accept everything that he has said. I should like to apologise for any inconvenience which has been caused. For my own part, I certainly would not expect or ask for any detailed explanations today. Most of my Amendments will be in the form of probing Amendments, some may refer to drafting changes, and others may be entirely a matter of taste. There are very few which are substantive, and so I would hope that we shall be able to obtain preliminary soundings from the noble Lord, Lord Jacques, and on behalf of the Government. The noble Lord, Lord Airedale, mentioned pressure of Business in your Lordships' House. So far as I am concerned, that is indeed true, but certainly that is no excuse for what has happened. I should like to apologise once again to the noble Lord, Lord Jacques, and to your Lordships.

Lord JACQUES

My Lords, I should like to take the opportunity to express the greatest sympathy with the point of view put forward by the noble Lord, Lord Airedale. The practice of putting down Amendments at the last minute is extremely unfair to Members of the House because they do not get a chance to see the Amendments in good time; but it is far more unfair to the civil servants who have to prepare answers and often have to work all day on Saturday and Sunday in order to do so. It is also, of course, very unfair to those people who are handling the Bill and who get little time in which to consider the Amendments. I have known occasions when, because Amendments have been late, I have been at the Dispatch Box and have had to read a brief I had never seen before, because the Amendments did not come in until a few moments before the Committee stage was due to begin.

I determined that when I retired from the Front Bench one of the first things I would do would be to appear before the Procedure Committee and insist that there should be at least three clear Sitting days after all the Amendments had been put in, so that there should be at least three Sitting days' notice. That would have to apply to the Government as well as to Members of your Lordships' House. I think it would be a godsend, particularly at a Committee stage, to everybody concerned because, following the Committee stage, there are further stages when Amendments could be put. I hope that one day the noble Lord, Lord Airedale, together with myself and perhaps a Member from the Conservative Benches will be able to appear jointly before the Procedure Committee and put that point of view.

Lord LYELL

My Lords, I should like to second that proposal put by the noble Lord, Lord Jacques, and I should be delighted to represent my noble friends on this side of the House, particularly bearing in mind the fact that the noble and learned Lord, Lord McCluskey, the noble and learned Lord who is sitting on the Woolsack at this moment and I were involved in very lengthy proceedings within this House on a Bill which is at present wending its way through another place. In that connection, some of the Amendments which came from all quarters were indeed perilously close to the three Sitting days' deadline which has been so ably advocated by the noble Lord, Lord Jacques. May I say that I entirely agree with the point he made; he is absolutely right in what he says, and I am sure that my noble friends on these Benches would second his proposal most warmly.

The LORD CHANCELLOR

My Lords, may I say how much I, too, agree with what was said by the noble Lord, Lord Airedale. I am glad that he raised the question. I confess that I myself was able to read the bulk of the Amendments for the first time only this morning. I should like also to express my gratitude for the generosity expressed, typical of the noble Lord, Lord Lyell, in accepting responsibility for the fact that the bulk of these Amendments were received by us this morning. That is not his own fault, but those advising him—I understand an organisation of considerable substance and manpower—may read with dismay the comments which have been made, and if, on a future occasion, they seek to have their point of view put in this House, or indeed in another place, I hope they will act more expeditiously, because this Bill has been in their hands for a very long time.

This matter, of course, was canvassed in the Renton Report and a rigid timetable was suggested there. However, I fear we have already fallen behind and so I would support measures, especially those emanating from without the regions of Government, for this to be done. But in Government circles, too, I think it is only fair to legislators, to Parliamentary draftsmen, to the civil servants who have to consider these matters, and also to members of this House and perhaps even to Ministers, that we should mend our ways and avoid this sort of situation in the future. Perhaps we might now proceed as expeditiously as we can with the Committee stage of this Bill.

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD DERWENT in the Chair.]

Clause 1 [Scope of Part I]:

4.57 p.m.

Lord LYELL moved Amendment No. 1: Page 2, line 1, at beginning insert ("In so far").

The noble Lord said: It might be for the convenience of the Committee if I were to speak to Amendments Nos. 1 and 2 together. We put forward these Amendments in the hope of clarifying the drafting. First, the word "as" seems to have a number of meanings. We believe that the one which is intended here is "in so far as" or possibly "to the extent that". Secondly, we believe that the exceptions are not necessarily made by Schedule 1. It seems that they are made in Schedule 1, because the Schedule merely lists the exceptions. These are small Amendments and we wondered whether we might ascertain if the drafting was correct. I beg to move.

Lord JACQUES

I have had consultations regarding these Amendments. We are satisfied that the original wording in both cases is absolutely clear and we can see no reason for changing the wording.

Lord LYELL

Having received an unequivocal reply like that from the noble Lord, Lord Jacques, I certainly do not seek to pursue these matters today. I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Lord JACQUES moved Amendment No.3: Page 2, line 3, leave out from ("1") to end of line 5.

The noble Lord said: I think it would be for the convenience of the Committee if I were to speak to Amendments Nos. 3 and 78 together. So far as Amendment No. 3 is concerned, it is a drafting Amendment. It deletes the words: and are subject also to section 26 (contracts for sea carriage of passengers and their baggage subject to regulation under the Athens Convention of 1974)". from Clause 1(2). They are now considered to be unnecessary.

So far as Amendment No. 78 is concerned, that is a technical Amendment dealing with the same matter. A number of technical defects in Clause 26 have come to light, and Amendment No. 78 is a complete redraft and puts right the things that were wrong. The policy remains the same. The new clause, like the old one, provides interim arrangements covering the Athens Convention on the carriage of passengers and their baggage by sea, which the United Kingdom has signed but has not yet implemented. I beg to move.

Lord LYELL

Am I right in thinking that, if this Amendment were accepted, I should not be able to speak on Amendment No. 80 which stands in my name?

The LORD CHANCELLOR

I should have thought not, but if I am right in that I think that we ought to give latitude to the noble Lord to deal with Amendment No. 80, in any event.

On Question, Amendment agreed to.

5.1 p.m.

Lord AIREDALE moved Amendment No. 4: Page 2, line 8, leave out from beginning to second ("liability").

The noble Lord said: This is a matter of drafting. Subsection (3) coins a phrase "business liability", and it then proceeds to define it. Is this phrase a useful one to coin? The word "business" is already defined in the interpretation clause, and we all know what "liability" means. So would it not be better to let subsection (3) say what it has to say, without going through the motions of coining a rather unnecessary phrase and then proceeding to define it? I beg to move.

Lord JACQUES

The purpose of this Amendment is to improve what is apparently tautological wording. But few words are saved, and we feel that it is better to give emphasis to business liability, which would be lost if this Amendment were accepted. We think it is much clearer, on reading the Bill, to refer to "business liability" and then to define it, which is what the Bill does at present. We believe that the Bill would not be so clear with the Amendment.

Lord AIREDALE

I think that I should always be prepared to give way on a matter of mere drafting, so I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord JACQUES moved Amendment No. 5: Page 2, line 14, at end insert ("of the occupier").

The noble Lord said: I think it will be for the convenience of the Committee if, in moving this Amendment, I also speak to Amendments Nos. 54 and 58, because they do the same in Scottish law as Amendment No. 5 does in English law. This Amendment is necessary to ensure that the Bill does not apply to terms and notices imposed by an occupier of premises who uses the land solely for private purposes. The kind of situation which this Amendment deals with is one where the owner of a house with a large garden allows a travelling circus to put on a performance in his garden. Terms or notices relied upon by the occupier of the house and garden who uses the premises for private purposes should not be subject to control, and this Amendment achieves that objective. I beg to move.

Lord LYELL

May I seek clarification from the noble Lord, Lord Jacques? He gave an excellent example of a private householder arranging for a circus, or for some similarly dangerous activity, on private land. But if an accident occurred, or one of the wild beasts attacked an onlooker who was one of the householder's guests, would there be no case to answer at civil law?

Lord JACQUES

I should have thought that that would be a liability as between those holding the circus and the person who suffered damage, and not for the occupier of the private house.

On Question, Amendment agreed to.

5.6 p.m.

Lord LYELL moved Amendment No. 6: Page 2, line 18, leave out ("inadvertent") and insert ("reckless").

The noble Lord said: This Amendment follows on from the second report of both Law Commissions on exemption clauses. In their second report, the term "inadvertent" was used, and we believe that this was done for two reasons: first, to indicate that reference was being made to something more than what we normally understand by the word "negligent" in the English law of tort, and by what I am told is culpa in the Scottish law of delict; and, secondly, to indicate that intentional and unintentional breaches of duty were to be covered. But it is quite possible that the word "inadvertent" implies some stricter liability, although this would not appear to be the purpose of the Bill, and liability for damage, irrespective of any intention to cause damage, would be covered. However, throughout the United Kingdom the law on negligence still depends upon proof of a fault; that it is the intention of the wrongdoer, his disregard for the consequences of his act or his omission.

This Amendment will substitute the word "reckless" for "inadvertent". That is the concept which is already known, and we understand that it is correctly understood in both English and Scottish law. Also, we believe that it will avoid the dangers which I have attempted to outline. We have noted that the Scottish Law Commission did not use the word "inadvertent" in the Bill which it appended to the second report, but referred to "breaches of duty (whether intentional or not)". This last snippet might be a little semantic, but I should be grateful for such guidance as is forthcoming. I beg to move.

Lord JACQUES

This Amendment, by substituting "reckless" for "inadvertent", weakens the protection afforded by the Bill. The word "inadvertent" was chosen as the equivalent of "done negligently"; that is, without reasonable care. "Reckless" means done without caring about the consequences, which is more serious than to do something inadvertently, but not as deliberate and premeditated as doing something intentionally. "Inadvertent" and "intentional" cover the extremes of the kind of breach that the Bill deals with. "Reckless" could be said to he between the two. Its substitution for "inadvertent" creates the wrong result, in that it puts ordinary negligent breaches outside the scope of the Bill, which is a nonsense.

The LORD CHANCELLOR

Quite right!

Lord LYELL

we are very grateful for that reply from the noble Lord, Lord Jacques, together with the obiter dictum from the Front Bench opposite. It was a quite considerable clarification. The noble Lord, Lord Jacques, was beginning to skate upon thin ice, and if I were one of the Olympic judges I would award him 5.9 for technical merit and the same for artistic expression. But I am grateful for his explanation, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 1, as amended, agreed to.

Clause 2 agreed to.

Clause 3 [Liability arising in contract]:

5.10 p.m.

Lord AIREDALE moved Amendment No. 7: Page 2, line 33, after ("consumer") insert ("(within the meaning of section 11(1) of this Act)").

The noble Lord said: This Amendment is a forward reference to Clause 11 where the expression "deals as consumer", which occurs in subsection (1), is defined. Without it, the reader, reading Clause 3 and the expression "deals as consumer", may fall to speculating what these words mean and he will be wasting his time. I think that with his next Amendment the noble Lord, Lord Lyell, is on the same point as I am. I am bound to say that in the last hour or two it has occurred to me that as the expression "deals as consumer" occurs so many times between Clause 3 and Clause 11 it would be better drafting to print the three subsections of Clause 11 as part of Clause 3. I throw that out as a suggestion for the future, but in the meantime I beg to move this Amendment.

Lord JACQUES

It is common practice in legislation for a phrase to be defined once, and for all uses of the phrase to be taken as having that meaning, unless the contrary is stated. I cannot understand why the noble Lord sees fit to add this reference to Clause 3 but not to other places in the Bill where it would be equally necessary if a concession were made so far as Clause 3 is concerned. For example, if it is used in Clause 3, logically it should be used in Clause 4. We feel that the Bill is satisfactory as it is at present and that it is unnecessary to add this definition to one clause and not to any others where the same circumstances apply.

Lord DRUMALBYN

Although that may be so, is not the thought valid which the noble Lord, Lord Airedale, says has occurred to him in the past hour or two; that is, that it would be better to have Clause 11 as part of this clause so that we know what we are speaking about when we read Clause 3?

Lord JACQUES

It is not common practice to have definitions at the beginning of a Bill; they are usually given towards the end. It is a point we should look at and I give the noble Lord that undertaking without making any promise to him, because clearly the Bill is following common practice.

Lord DRUMALBYN

While it may be common practice to reserve an interpretation clause until the end, this does not mean that a substantive clause governing following clauses should not come before instead of after them.

The LORD CHANCELLOR

As has been indicated, this phrase arises in several provisions of the Bill. Your Lordships will recollect that the Renton Committee urged the importance of putting interpretation clauses, which is what Clause 11 is, at the end of Bills. With great respect, I do not feel that any harm has been done, nor that there would be any clarification if it were put before the first reference to "deals as consumer "instead of where one would normally look for a definition clause, which is towards the end of a Bill.

Lord DRUMALBYN

If it is there.

Baroness SEEAR

At the end seems to be the most illogical place of all to put it.

The LORD CHANCELLOR

It comes at the end of the England and Wales provisions. Then in Part II we move to the amendment of law for Scotland. If there is great feeling about this point we will certainly have a look at it. I do not want to go to the stake upon its order in the Bill, but I think that it is all right where it is.

Lord AIREDALE

I am very glad that this point will be looked at. It is fairly common practice in an Act of Parliament to see such words as "as defined in Section" so and so "of this Act". If somebody starts to read the Bill, my concern is that when they get to Clause 3 and the expression "deals as consumer" they will wonder what it means. It may or may not occur to them that its definition may appear in an interpretation clause which may or may not be at the end of the Bill. By putting in the words "within the meaning of section 11(1) of this Act" right from the start, everybody is alerted to the fact that those words, which are going to appear a great many times, are defined and that one does not have to wonder what they mean. However, the point is going to be looked at, so I beg leave to withdraw the Amendment for the time being.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 8: Page 2, line 34, at end insert ("as defined in section 13 of this Act.").

The noble Lord said: I wonder whether it would be for the convenience of the Committee if in speaking to Amendment No. 8 I spoke to Amendments Nos. 42 and 43, which relate to Clause 13, and also to Amendment No. 56, which relates to Clause 16 and deals with the Scottish law, since all of these Amendments stand in my name. I hope the Committee will agree that it is convenient that I should speak to these four Amendments. The first Amendment is a paving Amendment for the second and the third Amendments. I am very grateful for the support that I have received in this matter of principle from the noble Lord, Lord Airedale.

The later Amendments seek to provide a definition of the words "standard terms of business". The last Amendment seeks to provide a similar definition in Part II of the Bill which is apposite to Scottish law. The Committee will be aware that the Law Commissioners put forward several different reasons for not attempting to define, "standard terms of business". I wonder whether this opinion of the Law Commissioners should deter draftsmen in your Lordships' House from providing or attempting to provide their own definition.

This clause gives to the courts a new power of supervision over what we call standard form contracts. We believe that it confers new benefits on businesses, in particular small businesses which tend to contract and carry on business according to the standard terms of business drawn up by the other party. Whenever and where-ever new rights and liabilities are created, it seems to be in the interests of certainty that all relevant terms in these standard forms should be defined.

We do not believe it is enough to rely on the ability of the courts to recognise standard form contracts when they see them. There could be—indeed, we believe there will be—difficulties in obtaining the necessary proof that a particular contract was a contract which was covered by this clause. We believe that this itself could lead to some lengthy and difficult litigation. Equally, it is important for both parties to be able to ascertain with some degree of certainty whether their contract falls or does not fall within the clause.

This Amendment seeks to clarify the clause with a view to making its application easier, wherever that is possible, for all interested parties. The definition we have put forward may not be satisfactory, but we hope that it will go some way towards providing some kind of workable criteria. Therefore we should be very grateful to hear the Government's view and, indeed, what the noble Lord, Lord Jacques, has to say. I beg to move Amendment No. 8.

5.20 p.m.

The LORD CHANCELLOR

This group of Amendments, the first of which has been moved, seeks to supply a definition for written standard terms of business. The Bill, it is true, does not provide a definition and in so omitting to do it follows the Law Commissions' recommendation. The conclusion of the part of the Law Commissions' report dealing with this, at paragraph 157 says this—and I agree with their conclusion: We think that the courts are well able to recognise standard terms used by persons in the course of their business, and that any attempt to lay down a precise definition of 'standard form contract' would leave open the possibility that terms that were clearly contained in a standard form might fall outside the definition. In our view this would be unfortunate. We have not, therefore, attempted to formulate a statutory description of a standard form of contract". I respectfully agree that if a statutory definition was formulated the danger would arise that controls could be evaded relatively easily by means of a technicality. In the draft definition the words "fixed in advance" appear and, as a matter of interest, those words were specifically considered by the Law Commissions and it may be a matter of interest that, according to paragraph 155 of the Law Commissions' report, they appear in the law of Israel on this matter. I hasten to say that that does not make it any better or worse so far as I am concerned, and the view the Commissions come to is that they did not think that the idea of terms fixed in advance would be a useful element for the purposes of the Bill.

In a sense every writing forming—or incorporated into—a contract necessarily comes to existence in advance of the making of the contract and from the words used in the definition it is not clear what earlier stage than the actual making of a contract might be chosen as the time in advance of which the terms are fixed. Accordingly, I think it is better to leave the phrase that is well known to the courts and well known to business undefined, in the same situation as drunkenness is in the relevant legislation relating to that. It has been said that that is like an elephant, easy to recognise but hard to define.

Lord DENNING

I quite agree that we always know standard terms and conditions when we see them and if they had to be fixed in advance they would have to be printed in advance. There are all sorts of ways of getting round this definition and if it is left as standard terms and conditions we will see that we get hold of them every time. If they are unreasonable we shall hold them to be unreasonable.

Lord DRUMALBYN

I should like to make one point that may have some value. A trader may have several standard terms of business related to the several different products in which he deals. I do not know whether this would have any effect upon the drafting here or whether possibly some words should be added relating to the product or service provided in the circumstances. I do not know whether I have made my meaning clear to the noble and learned Lord: there may be several standard terms of business employed by the same trader and some legal doubt might arise in a particular case as to which terms of business were concerned.

The LORD CHANCELLOR

I am sure the courts could look at that point but I will examine it and if it calls for some consideration in the Bill we will look at it but I should have thought the courts would look at each transaction and the form of the contract and would be able to arrive at a conclusion on it. However, I take the point and we will look at it.

Lord LYELL

I am deeply grateful to the noble and learned Lord the Lord Chancellor when he says that he will look at this group of Amendments, and particularly the standard terms, because I think my noble friend Lord Drumalbyn has found a clear example of what could be a difficulty in these particular standard terms. Indeed, one trader may deal in a number of commodities. We are grateful for the reception that this has received from the noble and learned Lords opposite and we are grateful to them for saying that they will look into these standard terms.

The LORD CHANCELLOR

I do not want to encourage the feeling that I am not happy about what the Law Commission and I said earlier, but if there is substance in the suggestion that there would be difficulties because a company trades in various commodities, each involving a standard form of contract that would give rise to difficulty, I will look at it. But at the moment I cannot see that it ought to cause any difficulty at all. I am afraid that that is as far as I can go.

Lord LYELL

Given the shortness of time that the noble and learned Lords have had with the information in their hands and the fact that they have given a clear indication that these points will be looked at, that would certainly clarify the minds of non-lawyers such as myself and other noble Lords. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 9: Page 2, line 41, leave out ("was reasonably") and insert ("could reasonably have been").

The noble Lord said: Perhaps I may speak to Amendment No. 10 at the same time. These two Amendments are in relation to Clause 3(2)(b)(i). This appears to have been intended to make the same provisions as subsection (2)(b) of the Bill which was appended to the Law Commissions' report. It seemed that the Law Commissions considered that the rules construction which are ordinarily applied to interpret exclusion clauses do not satisfactorily cover the type of clause which we have under consideration. These are frequently inserted into contracts for travel and indeed for holiday arrangements, and of course there is a continuing danger that a person to whom goods are to be sold or supplied or for whom services are to be performed may have exceptionally high expectations or unreasonable demands as to what to expect from the other party. The qualification "reasonably" in the clause as drafted implies what we hope is an element of objectivity, and the two Amendments emphasise that aspect of objectivity. I beg to move Amendment No. 9.

Lord JACQUES

These Amendments, when taken together, make Clause 3(2)(b) less objective and specific. Surely what matters is what the particular customer reasonably expected and not what customers in general might reasonably expect, which is the interpretation opened up by the Amendments. After all, if the particular customer expected very little because he understood that for various reasons explained to him complete fulfilment of the contract was unlikely, is it fair that he should later be able to have the term struck out on the grounds that the performance was not what could reasonably have been expected, even if not by him?

Lord LYELL

I am grateful to the noble Lord, Lord Jacques, for explaining this. I followed him for 90 per cent. of his explanation but I must admit that he added a sting to the tail of it. When we come to "fair and reasonable" I think we may have more to discuss at a later stage. I hope the noble Lord, Lord Jacques, will accept this, but I should like to read what he has said and to reserve my judgment because I think he may have gone some way towards meeting my problem. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4 [Unreasonable indemnity clauses]:

5.30 p.m.

Lord LYELL moved Amendment No. 11: Page 3, line 9, after ("liability") insert ("(whether to the consumer or otherwise)").

The noble Lord said: Perhaps I might speak to Amendments Nos. 11 and 13. The purpose of these two small Amendments is that we hope to improve the drafting of Clause 4. At present Clause 4(2) is not necessarily easy to interpret by itself, and we hope that the insertion of the words in Amendment No. 11 will clarify the entire clause. For that reason I beg to move.

Lord JACQUES

These Amendments delete subsection (2) of Clause 4 and introduce words to cover its substance in subsection (1). The meaning is not changed in any way, but subsection (1), which is already a long complicated sentence, becomes even longer. The original wording, though not perfect, is, in our opinion, to be preferred. It is clearer.

Lord LYELL

I am very grateful for the noble Lord's reply. I think these two Amendments are not important enough to warrant further major argument at this stage. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord JACQUES moved Amendment No. 12: Page 3, line 10, leave out ("his own").

The noble Lord said: It has been suggested that, because of the words "his own" in Clause 4, a term requiring an indemnity in respect of a businessman's vicarious liability might not be included. Since negligence is a breach of duty, the point is probably covered by Clause 1(4), but as the words serve no purpose other than that of emphasis they might as well be omitted for the avoidance of doubt. I might say that a similar Amendment, No. 57, in relation to Scottish law, has the same effect as the one I am moving. I beg to move.

Lord HAILSHAM of SAINT MARYLEBONE

I want to put this to the noble Lord, Lord Jacques. I am not asking the noble Lord to answer straight away. I am not quite sure that he is right in saying that if these words are omitted they do not change the sense. I quite see that he is intending, and I would accept rightly intending, to cater for cases of vicarious liability. But is it not possible that he ought none the less—while accepting his main contention—to make it plain that the negligence which is referred to in subsection (1) is negligence for which the person in question is himself responsible, whether himself or vicariously, and only such negligence? Would it not be wise to alter the drafting at Report stage so as to make that plain?

Lord JACQUES

If the Committee will be kind enough to accept this Amendment, I will have the point raised by the noble and learned Lord examined with a view to further amendment, if need be.

On Question, Amendment agreed to.

Clause 4, as amended, agreed to.

Clause 5 ["Guarantee" of consumer goods]:

Lord LYELL moved Amendment No. 14: Page 3, line 22, leave out ("for") and insert ("with regard to").

The noble Lord said: Perhaps I might speak briefly to this Amendment, No. 14, and also Amendments Nos. 59, 77 and 83. These four small Amendments seek to redraft the Bill in a very small and minor aspect. We believe it is not necessarily accurate to refer to liability "for" loss or damage. Is it true that a person is liable for his breach of duty or obligation which may result in loss or damage? We would wonder if the four Amendments do not clarify the Bill beyond all doubt—or peradventure I think is the legal term. I beg to move.

Lord AIREDALE

I would not have thought it a helpful Amendment at all. I would always tend to prefer one word to three, and I should have thought "liability for" loss or damage was much more crystal clear than "liability with regard to", which I should have thought was a rather woolly phrase. I hope this Amendment will not be accepted.

The LORD CHANCELLOR

I am delighted to get support from the noble Lord, Lord Airedale, on this; I entirely agree with what he has said. Liability "for" loss or damage is well known, simple, clear and much more specific than "with regard to". I venture to submit that these four Amendments are not only unnecessary but, with great respect, quite pointless.

Lord LYELL

I will face those remarks from the noble and learned Lord. I will not seek to delay the Committee any further. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 15: Page 3, line 23, after ("term") insert ("operating by reference to a guarantee of the goods").

The noble Lord said: This Amendment, standing on its own, is in the nature of a probing Amendment. We wonder whether the clause is not somewhat equivocal as at present drafted. It is not clear to those of us who are not lawyers whether the controls over the guarantees which are created by Clause 5 continue to extend to any contract terms which seek to exclude or restrict the liability described in subsection (1) or only to those contract terms which operate by reference to a guarantee of the goods. This is indicated in the marginal note. I am seeking to elicit some information, if that is possible and reasonable, from the noble Lord, Lord Jacques. I beg to move.

Lord JACQUES

This Amendment would have the effect of preventing Clause 5 from affecting exclusions or restrictions of liability contained in a guarantee where the guarantee took effect contractually. The clause as drafted follows the Law Commissions' recommendation. They recommended that the control should apply whether the exclusion or restriction took effect by contract or by notice or whether it was contained in the guarantee or operated by reference to the guarantee. This can be seen from Clause 10(2) of the English Bill and Clause 4(2)(a) of the Scottish Bill, which are annexed to the report. I can see no reason to depart from this recommendation. Whether Clause 5 applies should not depend on matters of form; that is, on whether the exemption clause was contained in a guarantee or whether it merely operated by reference to a guarantee.

Lord LYELL

I thank the noble Lord, Lord Jacques, for his explanation. I do not think I obtained a very favourable answer. I pointed out that I sought to probe, test out, the opinion of the Government, and indeed of the noble Lord, Lord Jacques. It seems that their opinion is not very favourable at this stage. I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 16: Page 3, line 28, leave out ("exclusively") and insert ("wholly or mainly").

The noble Lord said: This is a slightly more substantive Amendment. We propose it for two reasons. First, the word "exclusively" seems to be one which appears fairly frequently in taxation Statutes. So far as we can gather, it is not used in Section 55 of the Sale of Goods Act 1893. We wondered if the words "wholly or mainly" would not fit more easily into this context. Secondly, this particular phrase is designed to cover the cases in which goods are supplied for mixed purposes, and that we would seek to define as being for both business and for private or consumer purposes. A very common example of this would be the business or company car used by an employee on occasions for his own private purposes.

Whether goods are supplied wholly or mainly for the purposes of a business is indeed a question of degree, but to the extent that the goods are so used for a business we believe that the provisions of the 1893 Act, which preserve the freedom of contract between businesses, and which were indeed retained by the 1973 Act, should, if possible, be allowed to remain. For that purpose I beg to move this Amendment.

Lord JACQUES

This Amendment, if accepted, would seriously reduce the number of contracts protected by this provision and would create what, in the opinion of many, would be unfair situations. The word, "wholly" being a synonym for "exclusively" is not so important; but the word, "mainly" alters the meaning of the provision. Under the original wording, the doctor's car, for example, unless used exclusively for business—that is, unless he never uses it for visiting friends, et cetera—would be considered as being in consumer use. Under the amended wording, if the doctor used the car predominantly for visiting patients, it could not be regarded as being in consumer use. That would be difficult to determine in many cases and could lead to contracts being regarded as outside the scope of the provisions which both Law Commissions recommend should be covered by the provisions. I hope, with that explanation, that the noble Lord may see fit to withdraw his Amendment.

Lord DAVIES of LEEK

As a layman, I should like to add to that. As I am interested in linguistics and semantics, I sincerely believe that the noble Lord is merely playing semantic roulette; if his phraseology is used it would be much less definite than the word, "exclusively", and would blur the edges. Lawyers would complain wonderfully about the phraseology contained in the noble Lord's Amendment. I hope that he will stick to the original phraseology of the Bill.

Lord LYELL

I am, indeed, deeply grateful for the comments made by the noble Lord, Lord Davies of Leek, I would all but say to him, with the greatest respect, "Join the club, my Lord" because certainly this afternoon we shall deal a great deal with semantics. I hope that I am not playing a mere game of linguistic and semantic roulette. Indeed, the noble Lord, Lord Davies of Leek, may believe that "wholly or mainly", and "exclusively" are blurred, but at the beginning of my remarks I said that such words occur in the taxation statutes and, indeed, many pitched battles are fought out in the law courts over these differences. In no way are they blurred. I am certainly grateful for the remarks made by the noble Lord, Lord Jacques. I appreciate that there could be disputes and difficulties over doctors' and other people's cars. However, I did not necessarily agree with his views that the difficulties would be irreparable or irreconcilable. Nevertheless, I should like to study some of his comments. For that reason I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

5.43 p.m.

Lord LYELL moved Amendment No. 17: Page 3, line 31, leave out ("purports to contain") and insert ("seeks to import").

The noble Lord said: This Amendment is indeed semantic and I believe that the noble Lord, Lord Davies of Leek, may appreciate this. We wondered whether it was possible to ascertain the meaning of the words, "purports to contain" and whether the phrase, "seeks to import" was not preferable. However, it is a matter of taste. I beg to move.

Lord JACQUES

This is the most astonishing Amendment of all. It adds nothing to either the elegance or the clarity of the Bill.

Lord LYELL

I should be grateful if the noble Lord, Lord Jacques, could explain the meaning of the word, "purporting". I take his comment that he thinks it is astonishing, but it certainly provides fertile ground for dispute in my mind. I am not a lawyer; nor is the noble Lord, Lord Jacques. We do not think that the meaning is entirely clear. I shall withdraw the Amendment, but I should like to study the case further. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 18: Page 3, line 37, at end insert ("nor does it apply where the loss or damage occurs more than two years after the contract was made").

The noble Lord said: We propose this Amendment because is it not the case that the Bill, as drafted, leaves the period completely unlimited, except by prescription for compensation or for claiming, after discovery of the loss or damage. We believe that something which might be called a guarantee, which would last for, say, two years, should be allowed as it would go some way towards limiting a manufacturer's liability thereafter. We had better not get into the case of reasonableness, but I think that this would be a reasonable provision. I beg to move.

Lord AIREDALE

I do not quite understand this. As I see it, this clause sets its face against phoney guarantees. Surely the effect of this Amendment would be to say that if one is lucky enough to have one's washing machine, or whatever it may be, break down within two years, this clause against phoney guarantees would come to one's aid. However, if one is unlucky enough not to have the breakdown until two years have elapsed, the clause is not available to help one. Perhaps I have misunderstood it, but if that is what it means it does not seem to help.

The LORD CHANCELLOR

With respect, the noble Lord has it absolutely right. I submit that what is proposed in this Amendment is quite unacceptable. Not only does it run contrary to the whole principle and philosophy behind the Bill, but it is inconsistent with the framework of the law relating to limitation of actions in English law. The implication of the Amendment is that it is somehow more acceptable for manufacturers to exclude or restrict liability for their negligence where the loss or damage occurs more than two years after the date when the guarantee was given. Clearly, it may be more convenient for manufacturers to know that, once the two years have passed since the giving of the guarantee, they will be under no liability for negligence. What about the victim who suffers loss or damage? As matters stand, the longer the time between his obtaining the goods and the accident, the more difficult it will be for him to prove that the loss or damage was caused by the negligence of the manufacturer. It is undesirable to make that position even more difficult.

Our law of limitation of actions requires a person to bring an action within a specified time after the cause of action arises. In the case of negligence, that cause of action arises when the victim suffers loss or damage. This Amendment implies that the time should begin to run against the plaintiff as soon as he enters into a contract with a manufacturer, even though the manufacturer's liability does not arise until later when the plaintiff suffers injury as a result of the manufacturer's negligence. I submit that this Amendment is quite ill-conceived and it is a little hard that the noble Lord, Lord Lyell, should have to support it.

Lord DENNING

May I rise in order to resist the Amendment. I can quote a leading case where a machine tool was supplied which, negligently, had a latent defect. Seven years later when a man was using it, it broke, a piece flew into his eye and he lost that eye. He had his cause of action even though seven years had elapsed. This Amendment would enable manufacturers to get out of liability up to two years after the contract had been made. I do not think that we should accept it.

Lord LYELL

I am grateful for the vast amount of very concise and excellent advice that has come from noble and learned Lords on all sides and, indeed, from the noble Lord, Lord Airedale. I certainly take their point. Perhaps I could vicariously, or impudently, ask the noble and learned Lord who normally sits on the Woolsack and the noble and learned Lord, Lord Denning, not to mention the noble Lord, Lord Airedale, whether any of them use wheeled transport. So far as I am aware, many manufacturers of motor cycles and/or motor cars limit specific items of the motor cycle and motor car as regards replacement, free warranty, labour or parts to two years or 24,000 miles, whichever is the less. I am not sure how these particular warranties or implied warranties are applied, particularly in view of the 1973 Act. However, certainly from my studies around the retail world I see limitations, and two years is a very common one in the wheeled transport industry, if I can so describe it.

Lord HAILSHAM of SAINT MARYLEBONE

I think that the noble and learned Lord the Master of the Rolls has perhaps been a little hasty in citing his leading case, because that would be saved by Clause 2 of this Bill and we are now talking about Clause 6.

Baroness PHILLIPS

May I just intervene as a consumer activist rather than as a noble and learned Lord. I would say that one of the greatest hazards presented in dealing with cases of people who are in some distress is the fact that there is a limitation of liability. This applies so frequently that I would be very sad to see it written yet again into this Bill. What we have to seek to do is to eliminate periods of time written into Acts of Parliament rather than add more.

Lord LYELL

I think that we have proceeded with the many arguments on this particular Amendment for long enough. I have taken the points raised by noble and learned Lords all round the Committee. I would seek leave to withdraw the Amendment at this stage.

Amendment, by leave, withdrawn.

Clause 5 agreed to.

Clause 6 agreed to.

Clause 7 [Miscellaneous contracts under which goods pass]:

5.52 p.m.

Lord LYELL moved Amendment No. 19: Page 4, line 30, at end insert ("but liability with regard to—

1. (a) the right to transfer ownership of the goods, or give possession; or
2. (b) the assurance of quiet possession to a person taking goods in pursuance of the contract,

can be excluded or restricted by reference to such a term in so far as the term satisfies the requirement of reasonableness.").

The noble Lord said: It might be for the convenience of the Committee if I were to speak to Amendments Nos. 19, 20. and 21 together. We have put forward these Amendments to clarify the drafting of subsections (2) and (3). It seems that as at present drafted subsection (2) refers to the liabilities to consumers in relation to the quality of the goods, whereas subsection (3) deals with the liability to persons other than consumers in connection with the quality of goods. This subsection also deals with liability to both consumers and non-consumers in relation to the question of title and of quiet possession. We hope that these Amendments would tidy up the subsections so that subsection (2) can deal exclusively with liability to consumers, and subsection (3) would deal exclusively with liability to persons who deal otherwise than as consumers. I beg to move.

Lord JACQUES

This is a gallant attempt to simplify, but I regret that it fails to do so. It renders the meaning of subsection (3) even less clear than it is now. By this Amendment subsection (2) deals with both of the two groups of liability, but yet after amending subsection (3) the words remain: "neither the liability mentioned in that subsection nor.…" Which liability is subject to subsection (2)? The second group of liabilities has been incorporated by the Amendment in subsection (2), so that there are now two there. Therefore, subsection (3) becomes very unclear.

Lord LYELL

I was mightily encouraged by the preliminary remarks of the noble Lord, Lord Jacques. If the clause, and indeed these two subsections, are not necessarily clear, they are becoming less and less clear in my mind, and I am grateful for the effort that the noble Lord, Lord Jacques, made to explain them to me. I took on board some of what he said. When he comes to two separate forms of liability, I should like to call it a day so far as this Amendment is concerned and study what the noble Lord said and indeed what he intended to do. In that category, however, I can scarcely believe that my Amendments make the subsection less clear than it is at the moment. Perhaps we can return to this at a later stage, possibly in a different form, to see whether we can clarify the clause. I beg leave to withdraw the Amendment.

Lord JACQUES

Before the Amendment is withdrawn, may I say that the Bill as it stands is quite tidy. Subsection (2) deals with those clauses that are void. Subsection (3) deals with those clauses to which the reasonableness test will be applied. The Bill is drawn up quite rationally and fairly.

Lord LYELL

Quite rationally, but we shall be discussing the question of its fairness probably at a later stage. There are other criteria and issues and not solely the two which the noble Lord, Lord Jacques, expressed with such clarity. I take his last point. Certainly at this time we should withdraw the Amendment, and I beg leave to do so.

Amendment, by leave, withdrawn.

On Question, Whether Clause 7 shall stand part of the Bill?

5.57 p.m.

Lord LYELL

Perhaps I may say a word on Clause 7. The noble Lord, Lord Jacques, may be a trifle displeased at my raising this point here, but I should like to get it into the report so that we can study it at a later stage. I must apologise to him and to the Committee, with the usual disclaimer that this case was only drawn to my attention earlier this morning. It concerns a fairly common occurrence that we see now; the question of the security industry, and indeed of burglar alarms and similar devices which are often installed in private premises, and indeed in private houses, and very often at the behest of insurance companies, or indeed as a mere measure of prudence.

I understand that most of the contracts for the installation of these devices concern rental or indeed hire, and it seems that Clause 7 is applicable to most, if not all, of these cases. The question I would seek to put to the Committee—and certainly I would not expect an answer, although possibly it could be a basis for discussion and possibly fairly stern correction from the noble Lord, Lord Jacques, or noble and learned Lords opposite—is whether companies who specialise in installing these types of device are liable, or under the Bill will or should be liable, for a loss which, for them, could be absolutely unlimited.

The liability would arise in this way: a burglary, or a break-in could, indeed would, occur in private premises. It might be found that the alarm which was fitted were to be faulty, or possibly have been inadequately maintained or wrongly installed. But, as I understand would be the case at the moment, the householder, or consumer in this case, or the non-businessman, the person who had the alarm or device installed, would be reimbursed or indemnified by the insurance company.

I am given to understand that then the insurance company is able to sue the alarm company in the place of the householder. Many of us would be grateful to know where lies the alarm company in this case. Does the law of subrogation apply here or not, and is the householder a consumer for the purposes of the Bill? Does the law of subrogation turn a businessman into a consumer for the purposes of the Bill? This is not clear to me. I am not a lawyer. Doubtless I shall be able to study under and learn greatly from the noble and learned Lord the Master of the Rolls, and indeed the noble and learned Lord opposite. But this is a major point that worries me and many of the industries who install and maintain these devices.

We might think that the reasonableness clauses would be of assistance to the alarm company were it to come under litigation from the insurance company, but would reasonable damages be awarded to the insurance company against the alarm company? We wonder whether there would be any limitation of the liability. Should the householder be warned when installing such a device—which, after all, is designed to deter burglars—that he must disclose the value of the property which he wishes to protect?

All these points are in the forefront of the minds of one group in industry and, as we understand the clause as drafted, their liability is almost unlimited. We therefore hope it is possible to be given an opinion, perhaps at a later stage, as to whether these provisions apply in the circumstances I have described and, if so, what might be done to assist the particular interests concerned.

The LORD CHANCELLOR

The noble Lord, Lord Lyell, said he had not given notice of the point he raised and therefore perhaps the best thing would be for me to read carefully what he said and return to the matter. The advice I have briefly received is that if a contract for hire of the alarm is made and there is a defect in the alarm which would bring the "fitness for purpose" question into issue, Clause 7 will strike down as between customer and firm exclusions relating to fitness for purpose; in litigation between them, with or without subrogation the term would be void, as it would be upon sale of the alarm. Whether that covers the matters raised by Lord Lyell I know not, but I promise to look at what he said and at what I have just said in reply and, if the subject needs to be returned to, we will do so at a later stage.

Lord HAILSHAM of SAINT MARYLEBONE

I am grateful to the noble and learned Lord the Lord Chancellor because this is a point which should be considered and perhaps I may add a little in amplification to what my noble friend Lord Lyell said. Broadly speaking—I am of course over-simplifying—this is a Bill for the protection of consumers and not for the protection of insurance companies. Supposing I insure my house and its contents, which is the ordinary thing a prudent householder does. The insurance company goes into considerable detail with me as to what it contains, and it may contain nothing but old boots or it may contain a Rembrandt, and it makes rather a difference which of the two are the true contents of the house. The insurance company will insist that I disclose to them in considerable detail articles which are of value above a certain limit.

Supposing either at the instance of the insurance company or because I am a doubly prudent householder, I then go to Securicor or Group 4 or one of the other firms that specialise in these matters and say, "In addition to my insurance policy, I want to install a device which will tell the police when a burglar breaks in". That is a very sensible thing to do, but of course the security company does not go into the same detail with me as to what the house contains; it simply supplies me with a device which goes off in the police station when a burglary takes place.

A burglar comes in and the event I have been apprehending all along takes place; in my case it has taken place at certain times, so this is not altogether an imaginary instance. Let us suppose that what Lord Lyell has been putting to the noble and learned Lord occurs; the device does not go off. Let us assume that it does not go off because of what would otherwise be a breach of warranty of fitness on the part of the security company. Lord Lyell or I, to whom this mishap has taken place, has lost a Rembrandt, an heirloom of considerable value. While we mind that because it is of sentimental value, we get back from the insurance company the full value of the Rembrandt because we have prudently insured it, the insurance company having charged the appropriate premium, so we are none the worse off financially.

However, the insurance company are advised by rather a subtle lawyer—perhaps somebody like Sir Elwyn Jones—and he says to the insurance company, "You have a right of subrogation to Lord Lyell. You are entitled to sue Group 4 or Securicor for the full value of the Rembrandt because you are subrogated to his rights under the normal law of insurance". What has happened at that stage, when the insurance company is so advised, is that the insurance company, for whose benefit the Bill is not being passed, gets the full value of Lord Lye11's rights and the unfortunate indemnity people, who have failed to supply a reliable device, without any of the precautions which the insurance company have taken—that is, they do not charge an additional premium because a Rembrandt is in the house and they do not know whether it contains a collection of old boots or the most valuable Dutch paintings—have to pay £750,000 because something has gone wrong with their device.

I do not think that was the object of the framers of the Bill. I do not believe they designed the Bill to protect insurance companies, yet they would still be doing that because the insurance company, being subrogated to rights—not their own rights but the rights of Lord Lyell —would be entitled to say to Group 4 or Securicor, "The contract which you entered into with Lord Lyell is void to the extent that it purports to limit your liability, and we are entitled to take advantage of it". Perhaps there is something here which should cause us to pause.

Lord DAVIES of LEEK

After that delightful anecdote from the noble and learned Lord, Lord Hailsham of Saint Marylebone, perhaps I might put a simple question, and I have particularly in mind trading stamps, something which has not vet been mentioned. What are the implications of these provisions on trading stamps? Personally, I never bother with these terrible things and I cannot understand why people think they are getting value for money when they collect them. However, if my family and I collect trading stamps—if we fill cupboards with them, paper the walls with them—and one day I load up a lorry with books of them and go off to collect my suite of furniture, if that furniture does not meet the necessary standards, are they protected? I will not delay the Committee at this hour by considering further the possible implications of subsection (4), but I hope my noble and learned friend will clarify the point.

Lord LYELL

I thank my noble and learned friend for his valuable contribution and support; he voiced far more eloquently and succinctly than I did some of the qualms which have been expressed, and the most relevant of his points questioned whether the Bill sought to protect insurance companies. Although that is not what it is designed to do, that, inadvertly, is what it does. I am also grateful to the noble Lord, Lord Davies of Leek, for the issue he raised. I had intended to raise it and I had particularly in mind the question of trading stamps in Northern Ireland and whether they should be exempt, but at this stage I will not delay the Committee.

The noble and learned Lord the Lord Chancellor has given a clear undertaking to look into the matter. Following the plethora of legal advice I have had from my noble and learned friend, I look forward with growing expectation to receiving equally excellent advice from noble and learned Lords opposite in due course.

Lord JACQUES

As regards trading stamps, these are not dealt with here because they are already dealt with in existing legislation.

Clause 7 agreed to.

Clause 8 [Misrepresentation]:

6.11 p.m.

Lord LYELL moved Amendment No. 22: Page 5, line 13, leave out ("be of no") and insert ("have").

The noble Lord said: It may be for the convenience of the Committee if I speak to Amendments Nos. 22, 23, 24, 30, 31, 64 and 65, which are in my name. I was also given to understand that Amendments Nos. 33 and 63, in the name of my noble friend Lord Selkirk, might conveniently be discussed at this point. I do not know what would he the feeling of my noble friend but, should it he for the convenience of the Committee, I can speak to the Amendments that I have mentioned en bloc.

The LORD CHANCELLOR

They all raise the same point.

Lord LYELL

As the noble and learned Lord has said, all these Amendments relate to the same point. These are probing Amendments, in that the first three Amendments proposed to Clause 8 derive from the fact that, at an earlier stage in another place, the Lord Advocate undertook to carry out further consultations before taking a final and irrevocable decision as to where the burden of proof should lie.

We hope that this Amendment heralds, and is also consistent with, other Amendments that are proposed later. It repeats an Amendment tabled by the proposer of the Bill in another place, the honourable Member for Peterborough, Mr. Ward. With later Amendments to Clauses 10 and 22 as regards the burden of proof, we hope to distinguish between the burden of proof in consumer transactions and the burden of proof in business transactions. Amendments Nos. 30 and 31 deal with the law in England and Wales and Amendments Nos. 64 and 65 refer to the law of Scotland. As we see it, in the case of consumer transactions, the Amendments leave the Bill as drafted unchanged and thus the burden of proof lies upon the person who seeks to rely upon the clause. But, in the case of business transactions, we believe that it is very important that the burden of proof should lie upon the party seeking to vitiate the clause.

Here, we come to three points. To provide otherwise would, first, create considerable difficulties in the commercial world; secondly, to leave the burden of proof as at present construed in the Bill would cause a great deal of uncertainty in relation to insurance. Following what my noble and learned friend has said, I do not believe that we want to enter the world of insurance. Thirdly, it would also create difficulty if one party should seek to escape its obligations by alleging that the term was unreasonable. This would force the other party to prove the term to be reasonable.

We hope that these Amendments follow the recommendations of both the Law Commissions. In another place, the Minister of State put forward a strong and convincing argument in favour of this particular incidence of the burden of proof for commercial transactions only. We take a fairly strong view of this and we believe that it is of particular relevance to the Bill. I beg to move.

The Earl of SELKIRK

If my noble friend wants to discuss the onus of proof at this stage, I am happy to take part. In the course of his winding-up speech on Second Reading, the noble and learned Lord the Lord Chancellor said that we would have to look at this, and I believe that there is absolutely no doubt that we must do so. I believe that it is worth looking at what the two Law Commissions said. They were completely united on this point and, if I may, I should like to read what the English Law Commission had to say. The words of the Scottish Law Commission were practically the same. The onus of proving that it is not fair or reasonable to rely on the terms or notice should rest on the party challenging the exemption clause". That is the established procedure in law at the present time, and when the two Commissions drew up their Bill, they made no reference to it. Why should they? However, when it came to the Bill, for some reason which may or may not be divulged, a clause was put in saying that the onus would rest on those challenging the rightness of it. This, not unexpectedly, was too much for the Committee in the other place and it reversed the onus of proof, putting it on the other side. However, when it came to the Scots clauses, the Committee put it in the other way round. So out came the Bill from the Committee with the onus of proof on the one side on the claimant and on the other side on those who were maintaining that it was legal.

I must say that this is very embarrassing to me because at the Report stage the Scottish position was reversed to the English position but no reason was advanced. There is no doubt that the Lord Advocate was extremely reluctant to do it. The Scottish Law Commission is perfectly clear on this: it considers that the onus of proof is on those claiming that this is unfair, as is the normal and established practice. To express my own view quite briefly, I believe that if the Bill is not adequately fair to the consumer, clauses in the Bill should make it fair. It should not tinker about with what is the established practice of evidence which has stood the test of time fairly well. Frankly, this has not been supported by any particular evidence.

When one comes to the purely commercial side, this becomes quite impossible. There is no doubt that the commercial side puts it on an impossible basis. Let me put it this way. If one signs a contract, the next day one may claim that it is unreasonable. In other words, today, a contract is valid until challenged; henceforth, it will be invalid until it is upheld. I believe that this is an impossible position for any commercial company to be expected to face.

I should have thought that the united decision of the two Law Commissions, which in the course of discussions are said to have examined this for 10 years—though I do not know whether this is true—and have been into the matter in very great detail, should be accepted. We are entering upon pretty new ground. There is a lot of new stuff coming out and I do not think that anybody is quite certain how this will work out in individual cases. I shall not say that I have not confidence in the court's ability to decide what is reasonable, but I feel that the answers may well vary from time to time. As my noble and learned friend Lord Hailsham said, it is a leap in the dark. To some extent that is so. I should have thought that, on this basic matter of evidence, we should maintain the established method.

It is generally assumed that consumers are nice little innocent people, that they are poor, that they do not know the law and that they know nothing. The consumers include a great many different sorts of people. Some are extremely well informed and some have means behind them and will undoubtedly use the Bill and demonstrate litigious qualities that may astonish people. I believe that, if we are not careful, we shall throw ourselves open to an enormous amount of litigation. Indeed, it was even suggested in the other place that that would be a good thing. I should have thought that any Bill that produced a great deal of litigation was probably a bad Bill.

I have no doubt that the Bill could lead, particularly if the onus rests on those who are showing that it is reasonable, to a great deal of harassment—quite deliberate and calculated harassment, even on the consumer basis. That is why I prefer the Amendment in my name to that of my noble friend. He has made provision that contracts can be made valid by reference to the Ministry which deals with fair trading. I realise the difficulty, but this adds greatly to the complication of it, and in trader's dealing the matter should not be more complicated than it need be. I think that this is essential in order to be fair to everybody, and I am quite certain that the balance of fairness could probably be set by the courts themselves. The Law Commission has examined this matter, and I think that in these circumstances, where we are going on to new ground, we would he very well advised to maintain the established rules of evidence. It is for that reason that I have tabled my Amendment which will arise later, but I have been asked to speak, and I have expressed certain views.

6.21 p.m.

Lord DENNING

This is not dealing with contracts in general or terms of contracts in general. It is dealing with exclusion clauses, which are excluding the ordinary liability of a firm or company, or whatever it may be. When those clauses are considered by the courts, the burden is on the person who seeks to take advantage of them in exempting himself from his ordinary liability. Usually he drafts those exclusive clauses himself, and we have a principle, which in Latin we call contra proferentem, whereby it is to be construed against him if he seeks to exclude himself from his ordinary liability. If he seeks to exclude himself, we say that he has to do it in the clearest possible words—not only with consumers, but in all contracts in which a person seeks to exclude himself from the ordinary liability which the common law would impose upon him. So in regard to these special clauses, in a way the law already puts the burden on the person who seeks to exclude his ordinary liability. Therefore I would suggest that the Bill in its present form is satisfactory in so far as it puts the burden on the person who seeks to exclude the ordinary liability imposed by law.

6.24 p.m.

The LORD CHANCELLOR

I am grateful that Amendments have been put down by the noble Lord, Lord Lyell, and by the noble Earl, Lord Selkirk, which has enabled us to have a brief look at this question of the burden of proof. I am interested that the noble and learned Lord, Lord Denning, firmly comes down in support of the Bill as it now stands, hut it is true that there is a complicated history of disagreement which has marked this discussion, and I can say at once that my disposition is to examine what has been said by the noble Lords who have supported their Amendments and to consider also what the noble and learned Lord, Lord Denning, has said.

We are discussing the question of the burden of proof, which is raised in Clause 8, and in Clauses 10 and 22 as well; these relate to the Misrepresentation Act 1967, and the corresponding Northern Ireland Act, and to the "reasonableness" test for the Bill in England and Wales, and in Scotland respectively. So it is an important matter. As the noble Earl, Lord Selkirk, said, when the Bill was originally introduced in another place all the three clauses threw the burden of proof upon the party seeking to upset the term. That is how the story started. But Amendments were moved in Committee in another place by the Conservative Front Bench to alter the burden of proof in the "reasonableness" test under the Bill for England and Wales, and those Amendments were carried on a Division. But on Report the sponsors moved Amendments so that the Bill as a whole, including Clause 8, should be consistent on the burden of proof, on the understanding that the Government and the sponsors would give further consideration to this question before the Bill reached its final stages. Now we have the opportunity of looking at this matter again.

I am certainly prepared—and my noble friend Lord Jacques has indicated like- wise—to consider further what has been said today, along with representations we have received from other quarters. The Government have been taking further advice from the two Law Commissions, but I am afraid that we have not yet had an opportunity of considering the views that they have expressed. If I may be permitted a personal view on this matter, I should like to say that I have great doubts about how the proposed split burden of proof, which the noble Lord, Lord Lyell, proposes in his Amendments to Clauses 10 and 22, would work. Indeed, he has, I think, himself seen the awkwardness that this entails in the context of the 1967 Misrepresentation Act, which does not contain the concepts of "dealing as consumer" and business liability. I feel that a split burden of proof could discriminate against the small businessman in the context of Clauses 10 and 22, since he might be put in the position of carrying the burden of proof both in his dealings with consumers and with his own suppliers, and that is a crossfire which could well be unfair to him.

In addition, the so-called split burden would involve introducing into Clause 2, dealing with negligence, and into the equivalent Scottish clause, the concept of dealing as a consumer, which is not at present part of it. This is not fatal, but the difficulty does arise. So my own view at the moment is that the choice may well lie, at the end of the day, between the Bill as it stands and the Bill as it was originally introduced. However, we have an open mind on this matter, and perhaps the best course would be for us to return to this subject on Report, after we have all had an opportunity of considering the matter further.

6.28 p.m.

Lord HAILSHAM of SAINT MARYLEBONE

I am sure that the last piece of advice which we have received from the noble and learned Lord is the right one. This is one of the questions of principle, which in the end we must make up our minds about, and it is not altogether an easy one. Therefore I do not see why we should make up our minds about it today. There is, I think, a division of opinion, probably not corresponding exactly to Party differences, because there is no Party question in it. Probably in the end we shall have to have a Division— and a Division which would be a perfectly free vote for anybody who cares to take part in it. I do not think that we are quite ready to make up our minds at the present stage. I should like to put one or two thoughts in the minds of the noble and learned lord and the noble Lord. Lord Jacques, before we part from the question.

First, I think we are all agreed—at least I hope we are all agreed—that there should be no difference here between the law of England and the law of Scotland; in other words, once we have decided which way the burden of proof should lie, it should be the same for both parts of the island. Secondly, I quite see that there may be technical points of the kind that the noble and learned Lord has raised. I think that it would he more convenient—though I am open to conviction— either to decide that those who challenge an exemption clause should have to discharge some kind of burden, or that those who defend an exemption clause ought to discharge some kind of burden. I think the more complicated we make the Bill the less good it will be; and, therefore, let us have a perfectly straight decision as between the two burdens, and let it apply to all parts of the United Kingdom.

Now I have two criticisms, if he will allow me to say so, of the view at the moment of my noble and learned friend on the Cross-Benches. In the first place, I do not think that the contra proferentem analogy is a good one. The contra proferentem argument applies only where the words are ambiguous: where the words are clear, it has no application. Therefore, I do not think that we should be wise to pursue that ingenious and learned analogy. I think we must make up our minds about it. Assume that a clause has no ambiguity about it at all; that it says what it means and is intended to mean what is says; Are those who challenge the clause to have to discharge a burden before they can upset it, or are those defending the clause to have to discharge a burden before they can sustain it?

There are two more remarks I should like to make in relation to the speech of the noble and learned Lord the Master of the Rolls. Of course, if you visualise this with the small man being the consumer and the big man being the supplier, and the big man drafting a clause which is onerous on the consumer, it is easy to see the case for the burden of proof resting where the Commons have left it. But this, of course, is not necessarily the case, as the noble and learned Lord pointed out on Second Reading in relation to this Bill. Take, for instance, the case of professional negligence. Take the case of a solicitor who is advising a very large multinational company on a contract for the sale of land. We will come to this particular dispute a little later when I come to move an Amendment which stands in my name, but such a solicitor cannot insure against his liability. The possibility is that, if he is wrong and is guilty of even the smallest negligence, he may incur personal liability, because he is not a limited company, for £2 million or £3 million.

Is it really the case that he has got to defend a clause which says, "I will be limited to £50,000 to anyone for that piece of advice", as part of his normal terms of doing business? I think it is very hard to say so. You are imposing on the man absolute certainty of ruin unless he can discharge a burden which he has sought to avoid by what, in relation to a very large client, would be a very much more powerful negotiator, because lie has to choose between abandoning, perhaps, the most valuable client in his whole repertoire of clientele or else rendering himself liable, if' he keeps that client, to a form of liability which he could not possibly sustain and against which he cannot insure. So I do not think the case is as simple as the noble and learned Lord puts it.

The other point I should like to make is this. As the Bill is drafted—a fact which I did not spot at the time when I drafted the Amendment which is in my name afterwards—the guidelines do not apply to professional negligence. They do not apply at all, that is to say, to Clause 2, which would cover professional negligence. The result is that there are no guidelines to help the Master of the Rolls in his judicial capacity, to tell him what is reasonable or not. If, in addition to that, you are going to put the burden upon the party seeking to sustain an exclusion clause or a limitation clause, as well as leaving no guidelines at all to the court to help them as to the principles on which they are going to decide the question of reasonableness, you are in fact imposing a double burden on people where a single burden might well be thought to be enough in respect of what my noble friend Lord Selkirk referred to, from a speech of mine, as a leap to some extent in the dark.

The other point I want to make is that of course the problem, although it is a very acute one, is perhaps less important and rather more esoteric than might appear at first sight. If a person is charged with a criminal offence—let us say murder—it is perfectly simple to say that the burden of proof rests on the prosecution and the jury have got to acquit unless they feel certain he has done it. This is perfectly sensible and one of the great bastions of our liberty. But what is reasonable is not quite the same kind of question as whether a man is guilty of a criminal offence. It is a matter of opinion, and a matter of opinion is not in the ordinary sense, although it may be in strict law, a question of fact. One is therefore bound to ask the slightly metaphysical question as to what the burden of proof means in relation to something which is of its nature a matter of opinion, assessment and judgment. I doubt myself whether it means very much.

My view, for what it is worth, is that in matters of that kind courts ought to make up their mind one way or another, and that the judge who says, "I am in doubt so I am going to rely on the burden of proof", is probably a bad judge. I think a good judge will make up his mind without regard to the burden of proof, and will come down on one side or the other; because a doubtful judge is not a good one, in my experience. A judge is there to give decisions; and on matters of opinion or discretion my own view is that he should not haver between two opinions, lie should come down ultimately and say "Yes" or "No". My father once gave me advice, when I went to the bar, about writing opinions. He said, "They pay for your opinions and not your doubts", and I think that applies to judges as well as to barristers giving advice.

The LORD CHANCELLOR

Would the noble and learned Lord give way? Of course, the difficulty we have here is the difficulty of the pleadings. Who is to make the relevant submission on the burden of proof? That is a worrying feature which we cannot escape, I am afraid, by saying that the judges will find the right answer.

Lord HAILSHAM of SAINT MARYLEBONE

I think that is perfectly true, and my view, for what it is worth, is that, whatever way the evidence lies, it ought to be for the person deciding to rely upon the exclusion clause to plead it and that once it is pleaded it is for the party challenging that exclusion clause to say in his pleading that he is going to challenge it. I think an exclusion clause ought to be pleaded by the party relying on it and that, if not directly challenged in the pleadings, then it ought to be accepted. This is my own feeling about it, but once the issue appears, after issues are joined, it ought to be for the judge to make up his mind.

Of course, in the end we have got to come down marginally on one side or the other on this important question. I would say that the noble and learned Lord is right in asking us to postpone a Division. It is a relatively thin Committee, and this is a very highly technical problem. I do not think anyone who has heard this discussion would think it was altogether an easy one; and, therefore, my advice to my noble friend is to withdraw this Amendment—and, indeed, to my noble friend below the Gangway, not to move his—but for the Committee to recognise that we shall come back to this in some form on Report, when we shall probably have to have a free vote.

6.39 p.m.

Lord MORRIS of BORTH-Y-GEST

I, for my part, should like very much to follow the advice tendered by the noble and learned Lord, the Lord Chancellor, and echoed by the words just used by the noble and learned Lord, Lord Hailsham. I think there are difficult points here. I have a feeling at the moment that I am not disturbed by the proposals in the Bill, but I should like to keep an open mind on it for the time being. I intervene only to make a few observations, and to remind ourselves what the position was in 1973. As I follow it, there was a First Report of the Law Commission and following on that First Report there was passed the Supply of Goods (Implied Terms) Act 1973. One section of that Act modified the original Section 55 of the Sale of Goods Act. What was the result? I think I am right in saying that the result was that any exemption clause or any provision exempting from liability under Section 12 of the Sale of Goods Act was just void and there was an end to the matter.

In regard to Sections 13, 14 and 15, I think there was a split, somewhat on the lines proposed by the noble Lord, Lord Lyell, as between someone dealing as consumer and someone not dealing as consumer; for I think that the section provided that any term exempting from liability under Sections 13, 14 and 15, shall be void in the case of a consumer and shall in any other case not be enforceable to the extent that it is shown it would not be fair or reasonable to allow reliance on the term. It is interesting to see those words "to the extent that it is shown". Did Parliament then mean to put the burden on somebody who was relying on the exemption clause or not?

We see in Paragraph 7 of the Explanatory Memorandum of this Bill: The existing controls (in the Sale of Goods Act 1893 and the Supply of Goods (Implied Terms) Act 1973) on exclusions and restrictions of liability for breach of the obligations implied by law into contracts for the sale and hire-purchase of goods are, for convenience, restated in the Bill…". If that is right, Clause 6 of the present Bill means what the provisions in the earlier Bill were intended to mean.

On the question of onus of proof, I agree entirely with what was said. It may be important, often, in deciding who has to begin in litigation; but I think it is useful to remind ourselves that in connection with this Bill there are two kinds of onus of proof. There is the onus of proof in regard to reasonableness and the onus of proof in regard to the question whether somebody was acting as a consumer. In the 1973 Act, the modified Section 55(8) of the principal Act was in these terms: The onus of proving that a sale falls to be treated for the purposes of this section as not being a consumer sale shall lie on the party so contending. That provision, I think, is to he found in Clause 11(3) of the Bill as drafted.

Might it be a little embarrassing or might it be a little difficult to have different stages of onus of proof? Might it be better to have the onus of proof on the party relying on the exemption, who will be the party sometimes saying, "Oh, but this was not a consumer sale at all"? Might it be a good thing to have consistency throughout and to have the onus of proof on the party seeking to exempt himself from liability? While promising to keep an open mind, I have to, a large extent, the approach indicated by the noble and learned Lord, Lord Denning, the Master of the Rolls. We are dealing here with situations where liability must first be proved. Then, if there is no liability, well, cadit quastio; there is nothing further to be discussed. But if liability is proved, if there has been negligence, if there has been breach of contract, then it does not seem to me unreasonable if somebody is going to say, "Ah, but I exempt myself from liability". I do not think it is wholly unreasonable for the law to say, "The burden of proving that it was reasonable to impose the exemption lies on you who are seeking to exclude your liability". But I am sure it is good advice to keep an open mind, and I only mention these matters in regard to the 1973 Act in the hope that they throw some light on the questions which ultimately we shall have to decide.

Lord LYELL

We have had a tremendous debate on this particular aspect. I have noted the excellent, indeed noteworthy speeches, which will require study, not just by the various Members of the Committee, but, I believe, by all the advisers. For that reason I beg leave to withdraw the Amendment.

Amendment, by leave withdrawn.

Clause 8 agreed to.

Clause 9 agreed to.

Clause 10 [The "reasonableness" test]:

6.44 p.m.

Lord LYELL moved Amendment No. 25: Page 5, line 34, leave out ("and") and insert ("or").

The noble Lord said: In moving this Amendment I should like to speak also to Amendment No. 29. These two small Amendments, we hope, will remove some small inconsistencies between clauses in the Bill and between this Bill and earlier legislation. It seems that the Sale of Goods Act 1893, in Section 55(5) (which is amended by the 1973 Act) refers to "fair or reasonable" in Part II which is the Scottish aspect of this Bill. In Clauses 15, 16, 17, 19, 20, 21 and 22 there are references to "fair or reasonable" Clause 24, which applies to the whole of the United Kingdom, appears to refer to "fair or reasonable" as well. Should not Amendment No. 25 together with Amendment No. 29 be accepted? I am seeking guidance from the noble and learned Lord, Lord McCluskey, concerning the difference between "fair or reasonable" under Scottish law and "fair and reasonable" under the English legal rules outside Scotland. I beg to move.

Lord JACQUES

We did not think this Amendment would make any difference. We find if difficult to imagine that a court would find that a term was fair but not reasonable, or that a court would find it reasonable but not fair. We think the correct term is "fair and reasonable"; but there are inconsistencies, as has been pointed out by the noble Lord, and we should like to look at those inconsistencies.

Lord LYELL

If the noble Lord is saying that he will look at these inconsistencies, I am grateful. The noble Lord, Lord Jacques, will see that the term "fair or reasonable" is used entirely in Scottish legislation. I accept what the noble Lord, Lord Jacques, has said regarding a term being "fair or reasonable" or "fair and reasonable", or a combination of both. What concerns me as a non-lawyer is that clearly under the Scottish section of this legislation and under the English, Welsh and Northern Irish part of the Bill there is a distinction. I wondered what it was, and why it is "fair or reasonable" in Scottish legislation and "fair and reasonable" in English legislation. I accept that the noble Lord is going to study it.

Lord JACQUES

In English law it is customary to use "and" in this particular case and in Scottish law it is customary to use "or". As I said earlier, it will make no difference.

Lord MORRIS of BORTH-v-GEST

I rather agree with the noble Lord, Lord Jacques. If this matter is being looked at again, might it be useful then to have in mind the section of the Act of 1973 to which I referred? May I read the relevant words? The new subsection (4) of the modified Section 55 of the Sale of Goods Act reads: (4) In the case of a contract of sale of goods, any term of that or any other contract exempting from all or any of the provisions of section 13, 14 or 15 of this Act shall be void in the case of consumer sale and shall, in any other case, not be enforceable to the extent that it is shown that it would not be fair or reasonable to allow reliance upon the term". I found those words difficult to construe. It may be that though they say there: "fair or reasonable", the exemption clause probably has to be both "fair and reasonable". If this matter is being looked at again, it will be useful to have that section in mind.

Lord LYELL

I am grateful for the contribution of the noble and learned Lord, Lord Morris of Borth-y-Gest. I am sure he joins the rest of the Committee in thanking the noble Lord, Lord Jacques, for his comments. We will study what the noble Lord has said. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.51 p.m.

Lord LYELL moved Amendments Nos. 26 and 27:

Page 5, line 35, after first ("to") insert ("all"). Page 5, line 35, leave out from ("circumstances") to end of line 37 and insert ("of the case").

The noble Lord said: I hope that it will be for the convenience of the Committee if I move Amendments Nos. 26 and 27 together, and couple with them Amendment No. 62. Amendments Nos. 26 and 27 deal with the English and Welsh aspect of the Bill. Amendment No. 62 deals with the Scottish aspect. The Bill as drafted adopts the recommendation of the Scottish Law Commission that the reasonableness of a term which is contained in a contract should be judged by reference to the circumstances at the time of the contract. However, the Law Commission for England and Wales considered that regard should be had to all the circumstances of the case. That appears on page 71 of the English and Welsh Law Commission's Report.

Amendments Nos. 26 and 27, regarding the English legislation, seek to give effect to the recommendations of the Law Commission for England and Wales in relation to that particular aspect of the law. The purpose of all the Amendments is to enable the courts to take into account all the circumstances of the case in assessing the reasonableness of the terms. This would include, where appropriate, any factors arising after the contract was made. It might happen that what seems reasonable when a contract is made turns out many years later to be totally unreasonable in the light of changed circumstances or events.

The courts should be allowed sufficient flexibility of approach to prevent any enforcement of such terms in circumstances which could not have been foreseen by the parties. However, the courts may also give effect to a term which at first appeared unreasonable. To take into account matters arising after the date of a contract, we believe is not a new departure in the law. It seems the courts already do so in assessing damages, and also in determining whether a breach has been committed, and finally in determining the nature of the breach, the remedies available and the effectiveness of an exemption clause.

If it is the wish of the Committee that we adopt the test recommended by the Scottish Law Commission, then there is an inconsistency between Clause 10(1) for England and Wales, and Clause 22(1) for Scotland. In the latter category, Clause 22(1), we find: …regard shall be had only to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties to the contract at the time the contract was made". In the English aspect of this legislation, Clause 10(1), the word "only" is missing. We hope that the third of our Amendments cures that inconsistency. This is of necessity somewhat complicated, and for my part I apologise to the Committee. I beg to move.

Lord DENNING

I should like to support this Amendment. It is a matter on which there was a division of opinion between the Law Commission of England and Wales and that of Scotland. It has arisen already for our consideration in the courts in a similar connection: a contract in restraint of trade or, for instance, a servant leaving his imployment being restrained afterwards from competition, and so forth. That is only valid if it is reasonable.

In considering whether it is reasonable, we often say: "It is not unreasonable at the time of the contract". Although hypothetical or fanciful situations in which it might operate unreasonably could be suggested, we say that that is not going to strike down the clause as a whole. We are not going to strike it out as being unreasonable. But it happens from time to time that in relying on a clause which appeared reasonable at the time the contract was made, the parties to a case enforce it unreasonably. The English Law Commission have said: "The courts can consider the position as it actually arises at the time when the facts have happened. Does it operate unreasonably or not at that time?"

There may be a difference of opinion about it, but I suggest that the courts can consider it not only at the time when the contract was originally made, but also at the time when it is sought to enforce it unreasonably against an individual. The Law Commission of England have gone through the various reasons in paragraphs 78 to 184. I happen already to have quoted them myself in one or two cases in the courts. Although it is differing from the Scottish Law Commission, I hope that this Amendment will be supported so as to give effect to what the Law Commission of England recommended. Therefore it will be declared wrong if it is not only unreasonable at the time of' making the contract, but if it is sought to be enforced unreasonably in the circumstances of the case.

The LORD CHANCELLOR

These Amendments would, with respect, alter fundamentally the formulation of the reasonableness test, both in the English Part I and, consequentially, in the Scottish Part II of the Bill. We gave great thought to this. It was unfortunate that there was a difference of view between the English and the Scottish Law Commissions. I and the Promoters of the Bill came down in favour of the Scottish version. These Amendments, if accepted, would allow the courts to take into account circumstances which, although existing at the time the contract was made, were neither known nor could have reasonably been known to the parties when entering into the contract. I fear that this would go unacceptably wide. It could produce unfair results. It alters the fundamental policy of the Bill, which was accepted by the House on Second Reading and which has been accepted in another place. I therefore urge the Committee to reject these Amendments, in view of a consequence of unfairness and uncertainty in the whole contractual field with which we are concerned, which would be highly unsatisfactory.

Lord LYELL

I am grateful for the reply of the noble and learned Lord opposite. I must say my heartbeat rose when I heard support from the noble and learned Lord, Lord Denning. I accept the argument of the noble and learned Lord opposite. We would not wish to press these Amendments at this stage. We should like to consider what the noble and learned Lord has said. Therefore I beg leave to withdraw these Amendments.

Amendments, by leave, withdrawn.

7 p.m.

Lord LYELL moved Amendment No. 32:

Page 6, line 7, at end insert:— ("Provided always that if the party so claiming proves that in the case of written standard terms of business, the contract term or contract terms have been approved by the Director-General of Fair Trading, following consultation with the appropriate consumer organisation or consumers organisations or other appropriate organisations acceptable to the Director-General of Fair Trading, then, until such approval is withdrawn, such contract terms so approved shall be deemed to satisfy the requirement of reasonableness").

The noble Lord said: We have reached an Amendment which is concerned with the insertion of quite a lengthy subparagraph. The purpose of this Amendment is to see whether, in particular contracts which are drawn up as between consumers and large organisations, it would be possible for standard terms, or even exemption terms, to he agreed beforehand by reference to an outside, possibly quasi-legal authority. It has been suggested that the Restrictive Practices Court might vet similar standard terms, if one might so describe them. We wondered whether the Director-General of Fair Trading might be a suitable person to consider such contracts where a consumer might be acquiring, buying or taking services. We have particularly in mind services in the form of travel and holidays, inclusive tours and the like.

I think that Members of the Committee will see what form this pleading is taking; but certainly it might be for the convenience of the courts, and might obviate a great deal of lengthy and acrimonious litigation between consumers and business organisations, if such standard terms were readily available to the consumer and could be vetted, as I have said, beforehand by a quasi-legal authority such as the Restrictive Practices Court. In this case, as I said, we believe it would be more apposite to bring in the Director-General of Fair Trading.

This is an Amendment of more substance than many of the others standing in my name. I should like to apologise to the noble Lord, Lord Jacques, and to the noble and learned Lord for the brevity of notice concerning this Amendment, but we look forward to hearing the view of the Government on this aspect of goods and services supplied to a consumer. I beg to move.

Lord AIREDALE

I expect it may already have occurred to the noble Lord, Lord, Lyell, or at any rate it will perhaps he a comfort to him, that even if this Amendment were not agreed to it would be open to the plaintiff mentioned in this Amendment to call as a witness in this case the Director-General of Fair Trading, or one of his assistants, to say they have given their blessing to the terms of the contract; and on the strength of that he would probably win his case.

The LORD CHANCELLOR

This is an intriguing suggestion, to take it out of the hands of the courts and give the determination of it to the Director-General of Fair Trading. It is a very remarkable proposition but, of course, what is remarkable is sometimes practicable. However, I fear that this would not be.

What is suggested is a sort of voluntary system of prior validation of contract terms by the Director-General of Fair Trading, in consultation with others. I quite agree with the noble Lord, Lord Airedale, that the Director-General, if he was willing to help, might be called as a witness. However, that is not a practice I would seek to encourage by giving it support, because the Director-General would have other things to do. I suppose it might be said that what is proposed is rather similar to the Director-General's present procedure for negotiating codes of practice; but what will work in one area will not, alas! necessarily work in another.

Codes are a compromise between what the Office of Fair Trading believe a consumer ought to have and what the trade feels it can give. That does not matter so much with codes because they merely provide a framework in which business relations can be conducted. They do not prejudge specific issues, nor do they prevent either side going to law, as the Amendment proposes to do. I feel that standard terms of business are a quite different matter. What would be validated would be the terms to be used in specific situations, but all that could be considered at the time of validation would be the fairness or otherwise of the terms in general. One set of terms combined with another could be grossly unfair, yet reasonable if placed in another factual context. One set of terms could be fair and reasonable in certain circumstances, but the contrary in others.

The Law Commission in their Second Report considered prior validation and decided against it, I think rightly. They took the view that it would be cumbersome and costly to administer, and that it could give rise to injustice because it would be confined to generalities, whereas of course the court would look at the facts and the specific circumstances of each case that came before it. My advice to the Committee is: Let us give the Bill a chance first. The disadvantages of a system of validation seem to me to outweigh its advantages, and I cannot really think of a situation where one would willingly introduce it. Accordingly, while the idea is an interesting one, I hope it will not be pressed to a Division.

Lord LYELL

I am very grateful to the noble and learned Lord. I think even he believes in miracles if he thinks that we would press this to a Division at this stage in the evening, and indeed after the excellent explanation which he has given. I have a great deal more "backing" literature with this brief, but I certainly would not attempt to burden the Committee with it at this stage. I would seek to read what the noble and learned Lord has said, and also to note the comments of the noble Lord, Lord Airedale. In the meantime, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Clause 11 agreed to.

Clause 12 [Varieties of exemption clause]:

7.7 p.m.

Lord LYELL moved Amendment No. 35: Page 6, line 24, leave out ("prevents") and insert ("affects").

The noble Lord said: I shall be very brief here. I should like to speak to Amendments Nos. 35, 36 and 38. With regard to all those Amendments, we wonder whether the word "prevents" is strictly accurate in this particular context and we wonder whether the word "affects" would not cover both types of control mentioned in this clause.

Lord JACQUES

We have had a look at these Amendments, but we feel that in each case it does "prevent"; and if it prevents, why say "affect"?

Lord LYELL

I thank the noble Lord, Lord Jacques. We wondered whether the word "prevent" was apposite or accurate here. I certainly do not want to go into semantics now. I hope that the noble Lord, Lord Jacques, will allow me to study this, to obtain far better semantic advice and to come back at a later stage, particularly in view of the number of detailed Amendments of this nature that I have put down. I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 37: Page 6, line 26, at end insert ("unduly").

The noble Lord said: This Amendment is one of slightly more substance and, with the leave of the Committee, I should like to speak to Amendment No. 70 at the same time. It seems that in business and sometimes in consumer transactions, we find that a term in the contract allows the supplier of goods or services not to accept liability for loss or damage unless he is notified of that loss or damage and the claim is substantiated in writing within a specific period. The purpose of these clauses is to encourage a claimant to pursue his claim with diligence. It is beyond reasonable doubt that a claimant must indeed adopt all possible speed in pursuing his claim; otherwise, the passage of time will create major difficulties of proof one way or the other. Further, if a supplier wishes to be able at some point to regard a transaction as completed, he is not able to do so. We believe that this is a matter of business efficiency.

In some cases, limitation is placed upon the amount to which a supplier w ill accept liability for insurance purposes. But this is a matter concerning insurance companies, and we had a powerful reminder from my noble and learned friend Lord Hailsham that we should not delve too deeply tonight into matters pertaining to insurance companies, although what he said was particularly relevant. Such clauses, which purport to exclude some liability in business transactions, are not necessarily by themselves, unreasonable, but some may be framed with conditions which are unnecessarily or unduly harsh. The purpose of these two Amendments is to make it absolutely clear that the Bill applies solely to unreasonable conditions of this type, and not to all restrictive conditions. Noble Lords will see that Amendment No. 37 applies to English and Welsh law, and Amendment No. 70 applies to Scottish law. I beg to move.

Lord JACQUES

Many of the clauses subject to control in the Bill, as excluding or restricting liability, are subject to the test of reasonableness. This Amendment would impose what is, in effect, a preliminary test of reasonableness for exemption clauses which take the form of imposing restrictive conditions on enforcement of liability. The court would have to determine whether or not they were unduly restrictive or onerous, and, if they were, the test of reasonableness would apply. This is obviously unnecessary, as well as being undesirable. In the case of those terms which are made void, any restriction on the rights of the party suffering loss or injury is ipso facto unduly restrictive. If it is considered that restrictions on the right of the injured person can be reasonable, surely the appropriate control would not be to render them void.

Lord LYELL

I thank the noble Lord, Lord Jacques, for his reply. Many of us believe that the Amendment would provide a first hurdle to be cleared in this question of reasonableness. However, there is considerable merit in the noble Lord's reply and I should like to read what he has said. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

On Question, Whether Clause 12 shall stand part of the Bill?

7.14 p.m.

The LORD CHANCELLOR

May I make a brief observation on Clause 12 stand part, in order to mention arbitration clauses? As the Committee will be aware, during the Report stage of the Bill in another place the Minister of State for the Department of Prices and Consumer Protection announced that, subject to consultation with any interested bodies, consideration would be given to amending the Bill in order to provide that an agreement requiring a consumer to submit any future difference to arbitration should be voidable at the instance of the consumer. Strong support for such an Amendment has been received from the National Consumer Council and the Consumers' Association.

The only opposition which we have heard about has come from the Association of Consulting Engineers, whose model contract recommended for use by its members contains a clause which, if it is accepted by the client, binds him to accept arbitration in the event of a future dispute. The Association argues that the present arrangements work well and are quicker and cheaper than recourse to the courts, in a situation which almost invariably involves the technical advice of expert witnesses. But of course the client, if he is persuaded of this, is always free to accept arbitration to a dispute after it has arisen. The Government are therefore still considering whether an Amendment as proposed would cause any real difficulty, and it may be that I shall he able to table an appropriate Amendment on Report. But, in the meantime, I would certainly consider any further representations which may be made before a final decision is reached.

Lord HAILSHAM of SAINT MARYLEBONE

I should be sorry if this clause were altered. Arbitration is a very valuable alternative to litigation, and it has been the policy of Parliament for a very long time, since 1889, to give arbitration clauses increasing effect. It is the case that we, almost alone of European countries, limit the right of arbitration to an extent which in European countries is quite exceptionally severe. Our European partners, on the whole, give much greater effect to arbitration clauses than we do, and exclude the jurisdiction of the courts to a much greater extent. I do not think that our enthusiasm for consumer rights and protection ought to lead us to take a retrogressive line as regards arbitration as an alternative to litigation. It might go a very long way in the wrong direction.

In small cases, I suppose that it would not matter very much one way or the other. But only the other day, we were being pressed—certainly, during my Lord Chancellorship—to have what was called a special court, but was in effect a statutory arbitration, in respect of small consumer claims. These various pressure groups, who purport to act on behalf of the consumer, are usually very vulnerable to arguments which apply only to a particular section of consumers, and in a Bill of this sort, which covers every kind of service for which there may be liability for negligence, liability for breach of statutory duty or liability for breach of warranty, to seek to interfere with the process of arbitration as an alternative to litigation would be a much more serious matter than some people realise.

Lord DENNING

I should like to say a word to the same effect, because arbitration has proved a most valuable way of resolving disputes. We interfere far more than other countries with arbitration awards, and in that respect other countries think that we are retrograde. In those circumstances, I hope that the clause will be retained as it is.

The LORD CHANCELLOR

I will, of course, take on board what has been said. I know the expertise of the noble and learned Lord, Lord Hailsham, in the field of arbitration, and of course the experience and expertise of the noble and learned Lord, Lord Denning. I will bear these in mind before we come back to this matter on Report.

Clause 12 agreed to.

Clause 13 [Interpretation of Part I]:

7.19 p.m.

Lord AIREDALE moved Amendment No. 39A: Page 6, line 40, after ("the") insert ("business").

The noble Lord said: I apologise for this being a manuscript Amendment. It is identical to Amendment No. 67 to Clause 23. I am afraid that I failed to observe that Clause 23 is the interpretation clause which applies to the Scottish part of the Bill, and what I intended was to introduce this Amendment into this clause, which is the general interpretation clause. It is a probing Amendment to try to resolve what appears to be an ambiguity in the clause as drafted.

The clause states: 'business' includes … the activities of any … public authority". The question is whether that means the business activities of any public authority or all the activities. While public authorities carry out many quite normal business transactions—as, for example, when the local authority empties your cesspool and charges for the service—many of the activities of public authorities have nothing to do with business of any kind. Therefore it seems to me that we ought to say either "business activities" or "all the activities", and that we ought not to leave it ambiguous. I have plumped for the intention being to restrict it to business activities. I may have backed the wrong horse—I usually do —but I feel that we should resolve the question by writing this into the Bill. If we leave it to the courts to decide what those words mean, with the best will in the world the courts may get the answer wrong. I beg to move.

Lord JACQUES

I take it that the purpose of the Amendment is to exclude from the scope of the Bill the non-trading activities of Government Depart- ments, both local and national, although the Amendment deals only with the definition of "business" for the purposes of Part II of the Bill, the part dealing with Scottish law, subject, of course, to the manuscript Amendment which we now have dealing with English law.

The application of the Bill to the terms and conditions used by Government Departments and local and public authorities in the course of non-trading activities follows the recommendations of the Law Commissioners in paragraph 203 of the report. They give their reasons in paragraph 201. First, persons dealing with these bodies will usually not be of sufficient bargaining strength to negotiate reasonable terms and conditions. Secondly, unlike purely private transactions, which are generally exempt from control under the Bill, there is no social relationship between a public authority and an individual which provides an incentive to protect the interests of the recipient of the service. Finally, public bodies are set up to serve the public and it must have been intended that they should carry out their functions properly. The law imposes on them a duty to take reasonable care and it does not seem appropriate that they should be able to exclude their liability without any control. It might be argued that where public bodies provide services free of charge they should be entitled to exclude their liability for negligence, but I do not think that to draw a distinction between the voluntary activities of a businessman and those of a public body would be justified. In both cases the law imposes a duty to take reasonable care, and in both cases an attempt to exempt from liability for breach of that duty should be subject to control—that is, subject to the Bill.

Lord HAILSHAM of SAINT MARYLEBONE

I rather agree with what the noble Lord, Lord Jacques, has said. I take the broad view that what is sauce for the goose is sauce for the gander. If we are going to apply to private bodies medicine of the kind administered by this Bill, public bodies must be prepared to accept their own share of the dose. I can reinforce what the noble Lord, Lord Jacques, has said only by reference to one of the cases in which this House has had to make a determination in its judicial capacity. A very large number of bodies are included in the phrase "public bodies"—not only local authorities and Government Departments but railway companies, now that they are nationalised, gas, electricity and coal boards and, I have no doubt, the air authority (the name of which I have for the moment forgotten) which the noble Lord, Lord Beswick, ornaments. I am glad to see him here. I do not think that these bodies should be exempt from liability if the ordinary businessman, or professional man or the owner of a small sweets and tobacco shop is not exempted, too.

Lord AIREDALE

The arguments prove that I did back the wrong horse, and that does not surprise me at all. I was not advocating that this should be limited to the business activities of public authorities. I was merely drawing attention to an apparent ambiguity and probing the matter. May I urge the noble Lord, Lord Jacques, to consider the point that if we do not put into the definition all the activities of a public authority, and what was meant by this definition of the word "business" has to be decided by the court, there is a danger that the court may say that in their definition of the word "business" Parliament must have been referring to business activities. So at the next stage do let us resolve this ambiguity by inserting the words "all the activities", and then we shall not have to leave it to the courts to try to find out what we intended.

Lord JACQUES

The point raised by the noble Lord will be looked at.

Lord AIREDALE

I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.26 p.m.

Lord LYELL moved Amendment No. 40: Page 6, line 41, at end insert ("or statutory undertaker").

The noble Lord said: In speaking to this Amendment perhaps I may also speak very briefly to Amendment No. 68 and to Amendments Nos. 97 and 98, all of which stand in my name. All four are very simple, brief and, I hope, swift Amendments in which we seek from the noble Lord, Lord Jacques, an explanation of why the phrase "statutory undertaker" is not going to be used in this Bill and why, indeed, it is to be removed from earlier legislation. I wonder whether the noble Lord, Lord Jacques, can give us guidance on this point. I beg to move.

Lord JACQUES

In this Bill we have used the term "any public authority" which includes the statutory undertaker and avoids ambiguity. In consequence, the Amendment is unnecessary.

Lord LYELL

I am grateful for the noble Lord's reply, which I shall study. Certainly it was kind of the noble Lord to reply so quickly tonight. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Lord LYELL moved Amendment No. 41: Page 7, line 7, leave out ("or pretended communication").

The noble Lord said: Could the noble Lord give me some indication of what is a "pretended communication"? This is not vicarious or mischievous; it is akin to the charge which was often levelled against me as a young soldier, of attempting to deceive an officer when, indeed, I had. Could the noble Lord explain what is the relevance of a "pretended communication"? I beg to move.

Lord JACQUES

I have great sympathy with the noble Lord—I feel exactly the same as he does about it; so I will read to the Committee the brief which has been prepared by my legal advisers.

A person may exclude or restrict his liability by giving notice, and the exclusion or restriction of liability may be affective, even though the injured person was not actually aware of its exact terms, as long as the person seeking to exclude or restrict his liability took reasonable steps to draw the exemption to his attention. Thus it is necessary for the definition to include a reference to something rather less than an actual communication. I am advised that these are apt words to achieve the right result. I hope that with this explanation the noble Lord will withdraw his Amendment.

Lord LYELL

I am grateful for the very full explanation which the noble Lord, Lord Jacques, has given. I shall have to study the Bill considerably further to discover whether the noble Lord's explanation covers a consumer. I hope that his explanation does not affect the consumer, otherwise we shall be in all sorts of deep, not to mention hot water. I am grateful to the noble Lord, Lord Jacques, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 13 agreed to.

Clause 14 [Scope of Part II]:

7.30 p.m.

The SOLICITOR-GENERAL for SCOTLAND (Lord McCluskey) moved Amendment No. 44:

Page 7, line 14, leave out from beginning to ("sections") and insert— ("is subject to Part III of this Act. ( ) Subject to subsection (2) below,").

The noble and learned Lord said: This Amendment is required because Part III of the Bill contains various provisions exempting contracts from the controls in Parts I and II. For this reason the provisions of Part II require to be qualified by a general reference to Part III and that is what this Amendment does. The reference to Clause 26 in the present draft of the Bill should be absorbed into that wider reference. There is no English Amendment corresponding to this one. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 45: Page 7, line 17, leave out ("provides for") and insert ("relates to").

The noble and learned Lord said: In moving Amendment No. 45 I should like to mention at the same time Amendments Nos. 48 and 60, which are to the same effect. These are all drafting Amendments. At present it is provided that Clauses 15 to 17 apply to any contract only to the extent that the contract provides for the transfer of ownership or possession of goods et cetera or provides for services". To use the shorthand term, an exemption clause in a contract (which is, in general, the type of contractual term which is subject to controls in Clauses 15 to 17) cannot happily be said to "provide for" these matters and it is thought that the expression "relates to" expresses the relationship rather better. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 46: Page 7, line 20, leave out from ("them);") to end of line 23.

The noble and learned Lord said: I can take this Amendment very briefly. It is simply a drafting Amendment which is intended to remove words which we now consider to be unnecessary. The whole substance of Clause 14 (1) (a) (ii) seems to be covered either by what is now Clause 14(1)(a)(i) or Clause 14(1)(c). Accordingly it is unnecessary to continue to have this phrase in the Bill. We simplify the Bill by removing the phrase. I beg to move.

On Question, Amendment agreed to.

Lord LYELL moved Amendment No. 47: Page 7, line 24, leave out paragraph (b).

The noble Lord said: I hope it may be for the convenience of the Committee if I speak also to Amendments Nos. 86 and 90. I have a list from the usual channels which seems to me to convey various other points somewhat apart from those to which I wish to speak. I do not know whether the noble Lord, Lord Jacques, or the noble and learned Lord, Lord McCluskey, would mind if I were to take the first three Amendments independently because it seeems to me they are concerned with contracts of service. My Amendments Nos. 87 and 90 and Amendment No. 86 tabled by the noble Lord, Lord Jacques, seem to be fairly long and fairly substantial so I am wondering whether it would be for the convenience of the Committee if I were to speak to Amendment No. 47 and also Amendments Nos. 87 and 90. I will attempt briefly to cover these three Amendments which seem to be relevant to the one particular point. We wonder whether it is appropriate for a Bill such as this, dealing mainly with contracts for the sale and supply of goods and services, to contain provisions relating to contracts of employment. We wonder whether this would not create some difficulties, not only for those who seek to rely upon this small provision but also for those who are responsible for applying it. We think it is preferable for all legislation dealing with employment contracts to be contained in legislation which would be identifiable as emanating from the Department of Employment and not as a reference in this Bill, which could deal with a question of services. We believe that contracts of employment should be taken from the Department of Employment. I hope this is not too semantic a point. I beg to move.

Lord JACQUES

The Scottish Law Commission in paragraph 327 of the report recommended that the scope of the proposed control over negligence should apply to contracts of service and apprenticeship. Similarly in the case of the other two Amendments the English Law Commission did the same as their Scottish colleagues specifically in relation to the liability of an employer to his employee—see paragraph 329a of the report. It is clearly right that this should be so since an employee should be as much entitled to the protection afforded by the Bill in the case of negligence as any other person. For example, he should be in the same position as a consumer or another businessman so far as his employer is concerned. These Amendments would make serious inroads into the social policy underlying the Bill if they were accepted. We hope that with this explanation the Amendment will be withdrawn.

Lord LYELL

It is a certainty that the Amendment will be withdrawn but I should like to study what the noble Lord has said. I found it a little difficult to follow the entire argument, but I think probably the noble Lord had merit in his points and I now seek leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

Lord McCLUSKEY moved Amendment No. 48: Page 7, line 25, leave out ("provides for") and insert ("relates to").

The noble and learned Lord said: I spoke to this Amendment when I moved Amendment No. 45, so I now formally move Amendment No. 48.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 49: Page 7, leave out lines 34 and 35 and insert ("(i) relates to the creation, transfer or termination of any estate or interest in or right in or over land;").

The noble and learned Lord said: I think this is simply a provision in the Scottish part of the Bill corresponding to Amendments and provisions in the English part of the Bill. The only separate Scottish points are two short ones. At present there is no reference in Clause 14(2)(a)(i) to the termination, as distinct from the creation or transfer, of any right or interest in land; for example, the discharge of a standard security, the renunciation of a lease or—although it may not be a contract—theconsolidation of two separate heritable estates resulting in the extinction of the doininium utile. For completeness, the Amendment includes a reference to such a termination.

The other small point is that as at present drafted Clause 14(2)(a)(i) refers only to a "right or interest" in land. As there may be some doubt whether a separate heritable estate, such as a superiority in the Scottish land law or salmon fishings, would be included, a reference has been made in the Amendment to an "estate … in land". This is precedented; one finds a similar reference in Section 20(1) of the Offshore Petroleum Development (Scotland) Act 1975. I beg to move.

The Earl of SELKIRK

I take it these are purely drafting points?

Lord McCLUSKEY

The points to which I have spoken are purely drafting.

On Question, Amendment agreed to.

7.39 p.m.

Lord McCLUSKEY moved Amendment No. 50: Page 7, leave out lines 38 to 40 and insert ("(iii) relates to the formation, constitution or dissolution of any body corporate or unincorporated association or partnership").

The noble and learned Lord said: Again, this is related to a matter which I think will be more fully discussed when we come to Amendment No. 86. The Amendment is required to keep Clause 14 in line with the Amendment tabled by my noble friend Lord Jacques to Schedule 1, applying to England, Wales and Northern Ireland. At present Clause 14(2)(a)(iii) refers to a contract which provides for "the formation or dissolution of a company" or relates to its management or constitution. The main effects of the revised wording are to bring within the terms of the exceptions provided for in the Bill unincorporated associations and partnerships and to remove the exemption of contracts relating to the management of a company. I beg to move.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendments Nos. 51 to 53:

Page 8, line 3, leave out second ("or").

Page 8, line 5, at end insert— ("or, a contract to which subsection (3) below relates,").

Page 8, line 13, at end insert— ("(3) This subsection relates to a contract in pursuance of which goods are carried by ship or hovercraft and which either—

1. (a) specifies ship or hovercraft as the means of carriage over part of the journey to be covered; or
2. (b) makes no provision as to the means of carriage and does not exclude ship or hovercraft as that means,

in so far as the contract operates for and in relation to the carriage of the goods by that means").

The noble and learned Lord said: With the leave of the Committee, I will take Amendments Nos. 51, 52 and 53 together. They are all in the same category. They correspond in Part II, the Scottish Part, to changes made in Schedule 1 by Amendment No. 86, to be moved in due course by the noble Lord, Lord Jacques. I beg to move Amendments Nos. 51 to 53 en bloc.

On Question, Amendments agreed to.

Clause 14, as amended, agreed to.

Clause 15 [Liability for breach of duty]:

7.42 p.m.

Lord McCLUSKEY moved Amendment No. 54: Page 8, line 17, after ("purposes") insert ("of the occupier").

The noble and learned Lord said: This Amendment again is formal. It is the same Amendment as was made to Clause 1, which I believe was No. 5. I would in due course make the same Motion in respect of No. 58, where the point is exactly the same. For the moment I beg to move Amendment No. 54.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 55: Page 8, line 21, at end insert ("(1A) Subsection (1)(a) above does not affect the validity of any discharge and indemnity given by a person, on or in connection with an award to him of compensation for pneumoconiosis attributable to employment in the coal industry, in respect of any further claim arising from his contracting that disease").

The noble and learned Lord said: This again is one of the Amendments to the Scottish Part of the Bill which corresponds to an Amendment yet to be spoken to in Schedule 1; namely, No. 86. Perhaps I should briefly say, however, that the Amendment is required to avoid bringing within the control of Clause 15(1) the existing arrangement whereby a miner who fulfils the qualifying conditions and who has contracted pneumoconiosis is entitled to claim compensation without having to prove negligence by his employers; and in return, under a scheme which has been agreed between the National Coal Board and the unions, he relinquishes any common law rights against the National Coal Board which he may have then or in the future in respect of the pneumoconiosis. The Amendment snakes it clear that the Bill is not to affect the validity of any discharge given by a claimant so far as regards future claims under and in terms of such a scheme. I beg to move.

On Question, Amendment agreed to.

Clause 15, as amended, agreed to.

Clause 16 agreed to.

Clause 17 [Unreasonable indemnity clauses in consumer contracts]:

Lord McCLUSKEY moved Amendment No. 57: Page 9, line 5, leave out ("his own").

The noble and learned Lord said: This follows exactly the terms of Amendment No. 12, which has already been spoken to, which was an Amendment to Clause 4. I can content myself with moving it formally. I beg to move.

Lord DRUMALBYN

I take it that the noble and learned Lord moves it for acceptance on the same terms as Lord Jacques moved his Amendment; namely, that the resulting status of the words will be considered before the next stage?

Lord McCLUSKEY

Yes, I should have made that clear. I am much obliged to the noble Lord.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 58: Page 9, line 10, at end insert ("of the occupier").

The noble and learned Lord said: I mentioned this Amendment when I moved Amendment No. 54. I beg to move.

On Question, Amendment agreed to.

Clause 17, as amended, agreed to.

Clauses 18 and 19 agreed to.

Clause 20 [Obligations implied by law in other contracts for the supply of goods]:

The DEPUTY CHAIRMAN of COMMITTEES (Earl Cathcart)

Amendment No. 60. There is a mistake on the Marshalled List. It should be line 28, not line 38.

Lord McCLUSKEY moved Amendment No. 60 (as amended): Page 10, line 28, leave out ("makes provision such") and insert ("relates to any such matter").

The noble and learned Lord said: This Amendment is consequential upon Amendments Nos. 45 and 48. It is purely drafting at this stage. I beg to move.

On Question, Amendment agreed to.

Clause 20, as amended, agreed to.

Clause 21 [Consequences of breach]:

Lord McCLUSKEY moved Amendment No. 61: Leave out Clause 21 and insert the following new clause:

Consequence of breach.

("21. For the avoidance of doubt, where any provision of this Part of this Act requires that the incorporation of a term in a contract must be fair or reasonable for that term to have effect—

1. (a) if that requirement is satisfied, the term may be given effect to notwithstanding that the contract has been terminated in consequence of breach of that contract;
499
2. (b) for the term to be given effect to, that requirement must be satisfied even where a party who is entitled to rescind the contract elects not to rescind it").

The noble and learned Lord said: This is a slightly more substantial matter. Clause 21 was intended to give guidance on the application of the reasonable test in two sets of circumstances. The circumstances are, first, where a contract is terminated in consequence of a fundamental breach; and, second, where it could have been so terminated had not the party entitled to do so chosen not to exercise his right. In the first case the termination of the contract is not to affect the application of an exemption clause where that satisfies the requirement of reasonableness.

In the second case the decision not to terminate the contract is not of itself to be taken as declaring the inclusion of the clause to have been fair and reasonable. This must be subject to the normal test. Paragraph (a) of the new Clause 21 is intended to clarify the wording of the first part of the clause as it stands in the Bill. Paragraph (b) covers the contingency met by Clause 9(2) in Part I. The second part of the existing Clause 21 appears now to contain wholly unnecessary provisions and accordingly that may be dropped. I beg to move.

Lord HAILS HAM of SAINT MARYLEBONE

May I ask whether this is a provision which applies solely to Scotland, or in what way does it relate to the law of England as it will be when the Bill becomes law?—because I should not like the two laws to diverge.

Lord McCLUSKEY

I venture with considerable trepidation into an answer to that question, because it involves saying something about English law. As I understand the position, under English law there is some uncertainty as to whether when a contract is terminated in consequence of a breach of contract an exemption clause contained in the contract is thereby automatically rendered invalid. In Scotland there have been very few cases dealing with this subject, and where there may be uncertainty in English law there is perhaps even greater uncertainty in Scots law. In these circumstances, the Scottish Law Commission, in Paragraph 210, recommended that for Scotland the matter should be put beyond doubt. That is why the new Clause 21 begins with the words "For the avoidance of doubt". Perhaps for completeness I should mention that it is Clause 9 in the present Bill which deals with the matter in relation to England.

Lord HAILSHAM of SAINT MARYLEBONE

Yes, I think it does. As long as the noble and learned Lord and the noble and learned Lord the Lord Chancellor get together before the Report stage and are then in a position to tell me that the two laws are now going to be the same, although expressed in slightly different language, I shall be perfectly content.

Lord McCLUSKEY

I hope to be able to do that with great certainty at that stage, so far as I can in advance of a court decision. But that is the intention, and the differences in language derive from differences in the legal systems.

On Question, Amendment agreed to.

Clause 22 [The "reasonableness" test]:

The DEPUTY CHAIRMAN of COMMITTEES

In calling Amendment No. 63 I should inform your Lordships that if it is agreed I cannot call Amendments Nos. 64 or 65.

7.51 p.m.

The Earl of SELKIRK had given notice of his intention to move Amendment No. 63: Page 11, line 23, leave out subsection (3).

The noble Earl said: I wish to speak to this Amendment and to say that I fully agree with what has been discussed between the noble and learned Lord the Lord Chancellor and the noble and learned Lord, Lord Hailsham of Saint Marylebone. I must make one caveat on this. The noble and learned Lord, Lord Hailsham, said that it is fundamental that England and Scotland agree. I think that it is highly desirable. I shall not say that it is an absolutely fundamental law of the covenant, because so far as I am aware the whole of the Scottish Law Commission and the great body of the law profession in Scotland—so I am informed—are wholly agreed on what the burden of proof should be.

There are two grounds for their agreement. One is that contracts would be left uncertain. That would have an extremely adverse effect on the general freedom of contract and trade. It is all very well for the noble and learned Lord the Master of the Rolls to give examples of where people have gone astray, but there are hundreds, thousands and perhaps millions of contracts which go nowhere near it. The second reason that they are strongly in favour of this rule is that they fear the Bill may be used for mischievous purposes—that is to say, in order to achieve some other objective than that contained in the Bill.

I make those observations because I very much hope that in the course of time—and I hope that there will be reasonable time for discussion between now and the next stage—we shall reach an agreement which is wholly satisfactory to both sides. Having said that I do not wish to move the Amendment.

Clause 22 agreed to.

Clause 23 [Interpretation of Part II]:

Lord McCLUSKEY moved Amendment No. 66: Page 11, line 26, leave out ("(whether intentional or not)").

The noble and learned Lord said: I believe that this Amendment to some extent traverses ground that we have already covered. I think that Amendment No. 66 can be related to Amendment No. 69, which I shall move in due course. These Amendments clarify the scope of Part II by making it explicit that a breach of duty or obligation is subject to the terms of Part II of the Bill, whether that breach was inadvertent or deliberate, and that liability for such breach may arise directly or vicariously. At present it is only provided in the definition of breach of duty that the breach may be intentional or not.

We now take the view that this provision is rather too limited because it does not cover breach of obligation, and as it would he rendered unnecessary by the new subsection (1)(a), it is being deleted. I should say, however, that we are still looking at this wording because we are not 100 per cent. satisfied that it is yet right. But at this stage I believe it would help matters if both Amendments were allowed. I formally move Amendment No. 66.

Lord DRUMALBYN

I hope that these words will be retained if the decision is to have similar words in England. I do not think that they need be the same. These are far clearer words than those in the English version.

On Question, Amendment agreed to.

Lord McCLUSKEY moved Amendment No. 69:

Page 12, line 20, at end insert— ("(1A) In relation to any breach of duty or obligation, it is immaterial for any purpose of this Part of this Act whether the breach was inadvertent or intentional, or whether liability for it arises directly or vicariously.")

The noble and learned Lord said: I mentioned this Amendment when speaking to Amendment No. 66. Perhaps I could reply to the remarks made by the noble Lord, Lord Drumalbyn. The point that he has made will be borne in mind when this whole matter is being examined. I beg to move Amendment No. 69.

On Question, Amendment agreed to.

Clause 23, as amended, agreed to.

Clause 24 [International supply contracts]:

7.57 p.m.

Lord LYELL moved Amendment No. 71: Page 13, line 7, leave out ("subsection (3) below") and insert ("this section").

The noble Lord said: I should like to speak to this Amendment together with the next four Amendments in my name —Amendments Nos. 73, 74, 75 and 76, skipping Amendment No. 72 which is in the name of the noble Lord, Lord Jacques. Those Amendments are all relevant to the same point and concern the definition of a business in Clauses 13 and 23. As we understand it, in both those clauses the definition of a business includes that of a profession. Therefore it would seem that the Bill extends to the providers of professional services. Clause 24 specifically excludes from the scope of the Bill international contracts for the sale and supply of goods. Yet it does not specifically—nor indeed generally—exclude international contracts for the supply of services. These are frequently made by all types of professional groups—for example, to take two or three, consulting engineers, management consultants and indeed scientists who are employed both by private and governmental agencies.

In their second report the Law Commissions did not refer to such contracts but only to those relating to the supply of goods. We believe that that could have been an oversight. Consequently, these Amendments are seeking to include the express exclusion for international service contracts, which would satisfy the conditions which are set out in the clause. I beg to move.

Lord JACQUES

The present exemptions to international contracts for the supply of goods implement the recommendation of the Law Commissions made in paragraph 228 of their report. They gave reasons for those exemptions in paragraph 213. But in paragraph 229 they express the opinion that the reasons were not valid in relation to other international contracts. I would point out that the result of accepting the Amendments would be to impose a serious limitation on the protection which the Bill gives to consumers.

Part of the definition of a contract for the supply of services which the noble Lord proposes for this purpose in the last of his Amendments is that the contract is one which provides for the services to be supplied in the territory of a State other than that in whose territory the offer and acceptance was carried out. That would mean that ordinary people who make contracts in this country for their holidays abroad would be unprotected against the exemption clauses which I believe are commonly used in this field. I need hardly stress how important it is that this should not be so, especially as regards the protection given by Clause 2 in relation to negligence. With that explanation, I hope that the noble Lord may feel that he can withdraw his Amendment.

Lord LYELL

I am grateful for the explanation that the noble Lord has given. When he mentioned services, I had in mind the type of services that I had made an example of. For instance, engineers, management consultants, and others. I had not necessarily thought of services rendered as tour operators or something of that type, to which the noble Lord, Lord Jacques, referred. Nevertheless, after this stage is over I should like to study what the noble Lord has said. For that reason I certainly see fit to withdraw the Amendment at this stage.

Amendment, by leave, withdrawn.

8.1 p.m.

Lord JACQUES moved Amendment No. 72: Page 13, line 7, leave out from "below") to end of line 9.

The noble Lord said: The purpose of this Amendment is to remove the last few words of Clause 24(1) which we now believe unnecessarily and undesirably limit the clause. Clause 24 excludes from the Bill's effect international supply contracts as defined in subsection (3) of the clause. Unless the Amendment is accepted, the Bill could bite on certain contract terms which ought to be outside the scope of the Bill. These are terms which, although not contained in a contract for international sale or other supply of goods, exclude or restrict liabilities arising under such a contract. I beg to move.

Lord LYELL

I should like to put on record that I should like to study Lord Jacques' comments, particularly in view of the reply he gave to me on my last series of Amendments. I find it difficult in this brief period of time to detect much divergence between his answer to my Amendment and the Amendment that he is seeking to put forward. Doubtless a period of study might enlighten me, but I should probably like to come back to him on this point, among many others, at a later stage.

Lord JACQUES

In both cases we are dealing with supply contracts: that is, contracts for the supply of goods. When replying to the last Amendment I was justifying the exemption being given only in that case. With this Amendment I am now saying that sometimes the restriction is outside the contract, but nevertheless there is a restriction on international supply. What this Amendment does is to treat the restriction which is outside the contract in exactly the same way as it treats the restriction which is inside the contract.

Lord LYELL

I thank the noble Lord, but this becomes curiouser and curiouser. I should like to study it and indeed the entire clause. The noble Lord said that these conditions are outside the contracts. Certainly in my title on the right-hand side of page 13, it says, "International supply contracts", but doubtless more study by myself and perhaps by the noble Lord, Lord Jacques, could solve our query.

On Question, Amendment agreed to.

On Question, Whether Clause 24, as amended, shall stand part of the Bill?

Lord HAILSHAM of SAINT MARYLEBONE

I do not wish to initiate a debate, but as the noble and learned Lord the Lord Chancellor has come back perhaps he would consider between now and the Report stage the position of a supplier of services rather than goods—for instance, a consulting engineer who contracts for the supply of services, say, in New Zealand, under a contract which he concludes here. We do not want our exporters of services to suffer competitive disadvantages compared with comparable suppliers of services from other countries, and we do not want the consumer in New Zealand necessarily to be in a better position to sue a British consulting engineer than to sue, say, a German consulting engineer. Would the noble and learned Lord just consider this and take it on board?

The LORD CHANCELLOR

Of course, I should be happy to do so.

Clause 24, as amended, agreed to.

Clause 25 agreed to.

Clause 26 [Effect of Athens Convention]:

Lord JACQUES moved Amendment No. 78: Leave out Clause 26 and insert the following new clause—

"Temporary provision for sea carriage of passengers

(.—(1) This section applies to a contract for carriage by sea of a passenger or of a passenger and his luggage where the provisions of the Athens Convention (with or without modification) do not have, in relation to the contract, the force of law in the United Kingdom.

(2) In a case where—

1. (a) the contract is not made in the United Kingdom, and
506
2. (b) neither the place of departure nor the place of destination under it is in the United Kingdom,

a person is not precluded by this Act from excluding or restricting liability for loss or damage, being loss or damage for which the provisions of the Convention would, if they had the force of law in relation to the contract, impose liability on him.

(3) In any other case, a person is not precluded by this Act from excluding or restricting liability for that loss or damage—

1. (a) in so far as the exclusion or restriction would have been effective in that case had the provisions of the Convention had the force of law in relation to the contract; or
2. (b) in such circumstances and to such extent as may be prescribed, by reference to a prescribed term of the contract.

(4) For the purposes of subsection (3)(a), the values which shall be taken to be the official values in the United Kingdom of the amounts (expressed in gold francs) by reference to which liability under the provisions of the Convention is limited shall be such amounts in sterling as the Secretary of State may from time to time by order made by statutory instrument specify.

(5) In this section,—

1. (a) the references to excluding or restricting liability include doing any of those things in relation to the liability which are mentioned in section 12 or section 23(2) and (4); and
2. (b) "the Athens Convention" means the Athens Convention relating to the Carriage of Passengers and their Luggage by Sea, 1974; and
3. (c) "prescribed" means prescribed by the Secretary of State by regulations made by statutory instrument;

and a statutory instrument containing the regulations shall be subject to annulment in pursuance of a resolution of either House of Parliament.")

The noble Lord said: I spoke to Amendment No. 78 when I moved Amendment No. 3. I therefore formally move it.

On Question, Amendment agreed to.

Clause 27 [Saving for other relevant legislation]:

8.6 p.m.

Lord JACQUES moved Amendment No. 79: Page 14, line 36, leave out from ("not") to ("contemplated") in line 37 and insert ("operate more restrictively than is").

The noble Lord said: This is a technical Amendment. Clause 27 is concerned with international conventions to which the United Kingdom is a part. At present Clause 27(l)(b) refers only to contract terms which exclude or restrict liability, and so does not cover terms which relate to inadequate contract performance. But the relevant convention provisions specifically contemplate the inclusion of both types of term, and both kinds should of course be free from control. The Amendment rectifies this omission by generalising the description of contract term which is not to be subject to control. Instead of referring directly to the particular kind of term which is to be excluded, it achieves the desired result by referring to terms which do not operate more restrictively than is contemplated by the international agreement in question. The effect is that, in so far as the particular contract term is one that is within the scope of the convention, it will automatically be freed from control under any relevant provision in the Bill.

On Question, Amendment agreed to.

8.8 p.m.

Lord LYELL moved Amendment No. 80:

Page 14, line 37, at end insert— ("; or (c) if any service is to be provided wholly or substantially outside the United Kingdom, restricts liability for breach of duty in respect of death or personal injury and is authorized or required by the express terms or necessary implication of the law of the country in which the service or the relevant part of the service is to be performed.").

The noble Lord said: This Amendment arises from the more special cases covering international obligations which we discussed earlier at Clause 24. However, it is not necessarily relevant at Clause 24. We believe it is more relevant here at Clause 27. I wonder whether the noble Lord, Lord Jacques, or perhaps one of the noble and learned Lords on the Front Bench, would be able to give some indication as to the liability which might arise in the case of a consumer; albeit in this particular example someone who might suffer personal injury or indeed death when abroad, and the consumer might be abroad as a member of a party or as a result of a contract with a holiday or tour operator.

We could think of examples of someone killed or injured on a lake or river steamer I or, as happens regrettably very often, on a ski lift or funicular railway where there is quite often death or injury to tourists. In many of these cases in different foreign countries the law of that particular country has some limitation of liability, and in particular in these cases of death or personal injury. If a British tour operator were found liable in respect of the death or personal injury of somebody who had booked a holiday or tour with him, then, if the damages which he would have to pay under the terms of the contract exceeded those which he could recover from the owner of the steamer ski-lift or funicular railway, what would be the position of the tour operator?

Lord JACQUES

The effect of the Amendment would be that if a service was to be performed in a foreign country, a contract term or notice exempting the operator from liability would not be subject to control if it was to be authorised or required by the law of that country. The Bill follows the general principles of private international law. Generally, the controls will apply where the law most closely connected with the contract is the law of the United Kingdom; I see no reason why exemption clauses in tour operators' or travel agents' contracts should be governed in any respect by a foreign law where the law most closely connected with the contract is the law of England or Scotland.

An example of the effect of the Amendment is this: suppose a British tour operator owns and runs a hotel in Greece and includes a term in his contract with holidaymakers exempting him from liability to them and a British holidaymaker, who will usually have made the contract with the operator in Britain, is killed through the negligence of the hotel staff. If the Greek law authorised terms excluding the liability of a hotel owner, the tour operator could rely on the exemption clause if the Amendment were approved. We consider that is completely unacceptable; the contract is made in England by a member of the public who cannot be expected to know the foreign law.

Lord LYELL

The noble Lord, Lord Jacques, described my Amendment as totally unacceptable. He presented an example but I submit that he has not met my case in any way. He mentioned the case of a hotel or premises abroad owned by a British company. I know of the possibility of one funicular railway or ski-lift in the French Alps being owned by a British company, but in most of the cases I have in mind—indeed, that most aspects of business and commerce have in mind—there is no question of the site or situation of the accident giving rise to such liability (death or personal injury) being owned by a Briton. I accept what the noble Lord said in general—that it might be unreasonable that a British tourist who would not know about foreign liability should be placed in a worse position than if he had an accident, say, on a British lake. But what about the case I cited where the situation of the death or accident occurs in a place or on premises not owned by a British company?

Lord JACQUES

The noble Lord is asking me to decide an issue on which he has not presented all the facts; he will appreciate that it will all depend on the facts of the particular case. For example, one must ask whether, in respect of the other party to the contract, there was any negligence. Is there to be a test of reasonableness? We do not know any of these things. His case is not sufficiently specific.

Lord LYELL

I accept what the noble Lord says about our not knowing all the facts, but neither does the provider of the services. However, we are in danger of livening up the debate at this hour. I will read his reply in Hansard and, meanwhile, beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.16 p.m.

Lord JACQUES moved Amendment No. 81:

Page 14, line 38, leave out subsection (2) and insert— ("(2) A contract term is to be taken—

1. (a) for the purposes of Part I of this Act, as satisfying the requirement of reasonableness; and
2. (b) for those of Part II, to have been fair and reasonable to incorporate,

if it is incorporated or approved by, or incorporated pursuant to a decision or ruling of, a competent authority acting in the exercise of any statutory jurisdiction or function. (3) In this section— competent authority" means any court, arbitrator or arbiter, government department or public authority; enactment" means any legislation (including subordinate legislation) of the United Kingdom or Northern Ireland and any instrument having effect by virtue of such legislation; and statutory" means conferred by an enactment.").

The noble Lord said: There is a mistake in the Marshalled List in that my name, rather than that of the noble Lord, Lord Lyell, should have appeared above the Amendment. Clause 27 at present provides for the exclusion from all the controls under the Bill those contract terms which in general are authorised by existing legislation or are included in pursuance of international agreements. This Amendment extends Clause 27 by making provision for the exclusion from the controls of contract terms which, in the exercise of a statutory jurisdiction or function, have been incorporated or approved by, or incorporated pursuant to a decision or ruling of, a court or arbitrator or a Government Department or public authority, but only in so far as they apply the test of reasonableness.

On Question, Amendment agreed to.

8.17 p.m.

On Question, Whether Clause 27, as amended, shall stand part of the Bill?

Lord HAILSHAM of SAINT MARYLEBONE

I do not want to detain the Committee at this late hour, but I wish to refer to the exchange a moment ago between my noble friend Lord Lyell and the noble Lord, Lord Jacques. I wonder whether the noble and learned Lord the Lord Chancellor would look at the whole question of private international law in relation to the Bill rather more closely than we have been able to do at this late stage of the debate. Obviously a great number of contracts for the provision of services or the supply of goods are governed by foreign law. Some of them will be undertaken by British contractors and some by foreign contractors, and there will of course be cases where foreign contractors expressly undertake to be governed by English or Scottish law. Sometimes these present complicated issues.

We are at the moment limiting exclusion or exemption clauses, and I am not absolutely clear that what the law will be will necessarily be as plain as it seemed to be when Lord Jacques was expounding the matter. Obviously in the case which Lord Lyell was postulating—of a foreign company operating a ski-lift, say, in Yugoslavia—it is fairly clear that Yugoslav law applies to the exclusion of English or Scottish law, but there may be more complicated cases than that and I hope that, before the next stage, the noble and learned Lord will look into the matter to see whether there are problems.

The LORD CHANCELLOR

We will certainly do that. We have done our best to cover these kind of problems and situations, but we will have another look at the matter in the light of the caution that has been addressed by the noble and learned Lord.

Clause 27, as amended, agreed to.

Clause 28 agreed to.

Clause 29 [Commencement; amendment; Repeals]:

8.20 p.m.

Lord AIREDALE moved Amendment No. 82:

Page 15, line 11, leave out subsection (1) and insert— ("29.—(1) This Act shall come into force on such day as the Secretary of State may by order in a statutory instrument appoint.").

The noble Lord said: The reason for this Amendment is that this is not the only Bill which will affect what may be contained in the documents of traders and finance houses: there are two other measures which are to come into force shortly and which will have the same effect. There is the Restriction on Statements Order which will come into effect on 1st November, and the documentation regulations which are to be made under the Consumer Credit Act, which it is thought will come into force at about the end of the year. If the Secretary of State can be given elbow room to co-ordinate matters so that the requirements of these three measures, in so far as they affect the documents of traders and finance houses, can be co-ordinated so that a fresh set of documents complying with all the regulations can come into use on the same day, that would be an advantage. However, it is certainly not intended that the Secretary of State should, if this co-ordination cannot be arranged, hold up the coming into force of the Bill. I beg to move.

Lord HAILSHAM of SAINT MARYLEBONE

There is a point which is closely connected with this Amendment and which has been disturbing me. As the Bill is drafted, it will come into force three months from the date on which it is passed. Nobody knows when the Bill will be passed because we do not know what will be the fate of our various Amendments when they reach another place. However, the best estimate that I can give is that it will pass somewhere about the end of July. From the point of view of a very large number of business and professional people, August and September are practically menses non for the purposes of advice and of changing their habits. That means that, effectively, a great number of people will have a month in which to alter their arrangements for the purposes of the Bill. I believe that three months is a very short time and it may very well be that, on reflection, the noble Lord, Lord Jacques, or the noble and learned Lord the Lord Chancellor, may think so too, especially having regard to the time of year when this Bill is likely to pass into law. I should like to hear the observations of those responsible for the Bill upon this point.

Lord JACQUES

The Amendment raises two issues; first, whether the date should be in the Bill or should be by statutory order; secondly, if the date is in the Bill, whether three months is the right period. We believe that the date should be in the Bill because this is not one of those cases where an indefinite time is needed because there are to be consultations and we do not know how long those consultations will take. In practice, any reasons for delay here would be reasons which would make it better for traders to know the date towards which they were working. For example, the most important kind of representation that has been made to us relates to the trader who insures his liabilities but finds that when the Bill becomes law he will have to increase the amount of his coverage. Consequently, he will want to know well in advance the date from which he will have to do this.

Therefore, we are quite firmly of the opinion that the date should be in the Bill. However, we appreciate the concern that has been expressed about the period of three months and T can tell the Com- mittee that this is being examined with a view to bringing in an Amendment at Report stage.

Lord AIREDALE

That is very encouraging. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 29 agreed to.

Clause 30 [Citation and extent]:

The DEPUTY CHAIRMAN of COMMITTEES

I should say that if Amendment No. 84 is agreed, I cannot call Amendment No. 85.

8.26 p.m.

Lord HAILSHAM of SAINT MARYLEBONE moved Amendment No. 84: Page 15, line 21, leave out from ("the") to end of line and insert ("Contract, Negligence and Breach of Duty (Exemption Clauses)").

The noble and learned Lord said: This is my great moment. It is the first Amendment in my name and I rise to move it realising that it is late and that long debates can take place on the question of what is in a name. I indicated on Second Reading that I was not happy about the amended name of the Bill. When it was introduced it had another name, but the present Title is, as a matter of fact, misleading. There are many clauses in contracts which are unfair but which the Bill does not touch at all, whereas it touches a number of things which, although lawyers would recognise them as contracts, are not normally recognised as contracts by members of the public. It is therefore misleading in two ways.

I frankly admit my proposed alternative Title is a boring one and possibly not so exciting to consumer organisations and Members of another place as that which they have chosen. It does, however, happen to be what the Bill is about, whereas the Title as set down in the present Short Title is misleading and does not describe what the Bill is about. If the choice is between being boring and accurate or exciting and misleading, I choose to be boring and accurate.

I must tell the noble and learned Lord that it would be quite unfair to the Committee for me to attempt, if my Amendment is not to be accepted—which I hope it may be, if only in principle—to divide the Committee at this stage, at this hour and with this attendance of excited Peers eager to go into the Division Lobbies. However, I warn noble Lords that there may be a sting in my tail when we come to Report stage and I ask them to take the Amendment extremely seriously. I beg to move.

The LORD CHANCELLOR

Regardless of the sting in the tail that is threatened for the Report stage, I am afraid that I cannot advise the Committee that the words that the noble and learned Lord has rightly defined as extremely dull ought to be accepted, for not only are they dull but they do not include the whole terms of this complex Bill. I feel that the proposed Title is not only dull but unwieldy, and certainly almost unintelligible to the man in the street—not that the man in the street makes reading Acts of Parliament his favourite occupation. The Title also fails to take into account the fact that the Bill, unlike those put forward by the Law Commissions in their second report, covers in Clause 4 certain indemnity clauses which, in many cases, are not exemption clauses. So, if it were sought to be complete in the sense of indicating all the contents of the Bill, there would be a further boring addition to provide for indemnity clauses as well.

Therefore, while I cannot claim that the present Title of the Bill is entirely and wholly satisfactory, I confess that, having looked at all the other alternatives, there is no other that seems better. Certainly, I am afraid that I am not attracted by the present proposal of the noble and learned Lord. I am comforted by the fact that the matter is not to be taken to a Division at this time. Perhaps the noble and learned Lord will think about the matter again, as I promise to think again about the existing Title.

8.30 p.m.

Lord AIREDALE

As I was told that the ground was liable to be swept from under my feet in relation to the next Amendment in my name, perhaps I may say a few words at this stage on this Amendment. It is a little long. I think that we shall wrestle forever if we try to explain all of the Bill in a Title of two or three words. We shall never do it. I think that I would plump for the Title "Exemption Clauses Bill"—three words; but if the Government and the noble Lord, Lord Jacques, are so strongly wedded to the expression "contract terms", the reason that I put down my Amendment to leave out "Unfair", was that I took to heart the words on Second Reading of the noble and learned Lord, Lord Hailsham of Saint Marylebone, who pointed out that there are all kinds of unfair contract terms not covered by the Bill, like the estate agent who tells you that his commission will be payable if you put your house in his hands, even if he does no work and you sell your house privately without his help. This Bill is about contract terms, and it might be helpful, if noble Lords are wedded to that expression, simply to leave out the word "Unfair". That might console to some degree the noble and learned Lord, Lord Hailsham. But I should have thought "Exemption Clauses Bill" were three words which, more closely than any other three words, describe what the Bill is about.

Lord HAILSHAM of SAINT MARYLEBONE

I am very disappointed by the Lord Chancellor in this respect. On Second Reading, I was supported by no less a legal luminary than the Master of the Rolls, and now I have what is virtual support in principle from the Liberal Benches in a splendidly constructive speech by the noble Lord, Lord Airedale. I do not mind being boring, dull, or even unwieldy; nor are my withers in the least wrung by the fact that Clause 4 deals with indemnity clauses, because, as the noble Lord, Lord Airedale, rightly points out, it is the Long Title and not the Short Title which determines the scope of a Bill. The present Title of the Bill is simply a catchpenny Title which is almost deliberately misleading.

As the noble Lord, Lord Airedale, reminded us, I pointed out on Second Reading that there are a very large number of unfair terms in a whole range of contracts with which the Bill makes absolutely no attempt to deal at all. Some of them are dealt with in other branches of the law; some of them are not. But to sell these goods under the false label is contrary to the whole spirit of consumer protection. Therefore, I must tell the noble and learned Lord that he will find another Amendment in my name. I may take a leaf out of Lord Airedale's splendid book and reduce the cumbersomeness of my own alternative Title. But the noble and learned Lord is not going to get away with such a non-possumus attitude another time and I shall, if I can think of a good Title, divide the House against him.

The LORD CHANCELLOR

I am not surprised to hear that from the noble and learned Lord, but as the noble Lord, Lord Airedale, said, the Bill does not deal with all unfair contract terms; least of all does it deal with all contract terms, which is the alternative that he suggests—unless we get rid of the Title altogether, and opt for his. So I think that his attempted rescue operation, in that respect at any rate, is even more unsatisfactory than the present Title of Unfair Contract Terms Bill, if unsatisfactory it is. But we will look at this matter again. It is useful if the short Title of the Bill can give an indication of the essence of the matter. There is no great certainty about any of these judgments on words, and I hope that in the light of that we shall not have this unwieldy et cetera Title, proposed by the noble and learned Lord, pressed tonight.

Lord HAILSHAM of SAINT MARYLEBONE

I will yield to the blandishments extended to me from the Front Bench opposite. But I must point out to the Lord Chancellor that the real life-line offered me by the noble Lord, Lord Airedale, was "Exemption Clauses Bill", and it seemed to me that this was a very nice Title. The noble and learned Lord would, I think, do well to ponder the sage advice of the noble Lord, Lord Airedale, as indeed I shall do before the Report stage. With those words, at this stage I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.36 p.m.

Lord AIREDALE had given Notice of his intention to move Amendment No. 85: Page 15, line 21, leave out ("Unfair").

The noble Lord said: I succeeded with an Amendment which turned the Trade Descriptions Bill from something else into the Trade Descriptions Bill, so I am full of hope, and am not going to move this Amendment.

Clause 30 agreed to.

Schedule 1 [Scope of sections 2 to 4]:

Lord JACQUES moved Amendment No. 86: Leave out Schedule 1 and insert the following new Schedule:

("SCOPE OF SECTIONS 2 TO 4 AND 7

1. Sections 2 to 4 of this Act do not extend to—

1. (a) any contract of insurance (including a contract to pay an annuity on human life);
2. (b) any contract so far as it relates to the creation or transfer of an interest in land, or to the termination of such an interest, whether by extinction, merger, surrender, forfeiture or otherwise;
3. (c) any contract so far as it relates to the creation or transfer of a right or interest in any patent, trade mark, copyright, registered design, technical or commercial information or other intellectual property, or relates to the termination of any such right or interest;
4. (d) any contract so far as it relates—
1. (i) to the formation or dissolution of a company (which means any body corporate or unincorporated association and includes a partnership), or
2. (ii) to its constitution or the rights or obligations of its corporators or members;
5. (e) any contract so far as it relates to the creation or transfer of securities or of any right or interest in securities.

2. Section 2(1) extends to—

1. (a) any contract of marine salvage or towage;
2. (b) any charterparty of a ship or hovercraft; and
3. (c) any contract for the carriage of goods by ship or hovercraft;

but subject to this sections 2 to 4 and 7 do not extend to any such contract except in favour of a person dealing as consumer.

3. Where goods are carried by ship or hovercraft in pursuance of a contract which either—

1. (a) specifies that as the means of carriage over part of the journey to be covered, or
2. (b) makes no provision as to the means of carriage and does not exclude that means then sections 2(2), 3 and 4 do not, except in favour of a person dealing as consumer, extend to the contract as it operates for and in relation to the carriage of the goods by that means.

4. Section 2(1) and (2) do not extend to a contract of employment, except in favour of the employee.

5. Section 2(1) does not affect the validity of any discharge and indemnity given by a person, on or in connection with an award to him of compensation for pneumoconiosis attributable to employment in the coal industry, in respect of any further claim arising from his contracting that disease.")

The noble Lord said: This Amendment redrafts Schedule 1. It introduces two new exceptions from the provisions of the Bill. The first of the new exceptions is in paragraph 3. This extends the exclusion (in paragraph 2(c)) for contracts for carriage of goods by sea to those terms of a contract for carriage by more than one means of transport which relate to carriage by sea. For example, if goods are being taken partly by sea and partly by rail, then the exception will apply to that part of the carriage which is by sea, in the same way as it would have done had the carriage been wholly by sea.

The second exception is that which was explained in relation to Scottish law by my noble and learned friend Lord McCluskey, and it relates to the agreement between the National Coal Board and the NUM. They have an agreement whereby compensation was paid on a very generous scale, taking into consideration future cases of pneumoconiosis, and this Bill provides that the recipients will not get the benefit of this Bill. There are other technical differences, but they are of much less importance. I beg to move.

The DEPUTY CHAIRMAN of COMMITTEES

I think that it would be for the convenience of the Committee if I were to call Amendment No. 87 as an Amendment to Amendment No. 86.

Lord LYELL had given Notice of his intention to move Amendment No. 87: In paragraph 1, after head (e) insert ("(f) any contract of employment.")

The noble Lord said: I think that it would be for the convenience of the Committee if I do not seek to move, nor indeed speak to, Amendments Nos. 87 and 90, which are all in the same category, as was pointed out by the Chairman of the Committee. But it might be convenient if I were to say a few words on Amendments Nos. 88 and 89. I do not propose to say anything about Amendments Nos. 87 and 90.

Lord LYELL moved, as an Amendment to the Amendment, Amendment No. 88: In paragraph 2, after head (c) insert— ("(d) any contract or other arrangement for the provision by a harbour authority of services or facilities for the handling or storage of goods in a harbour or on harbour land.")

The noble Lord said: Noble Lords will see that Amendments Nos. 88 and 89, in my name, cover one particular aspect of international trade, when the goods pass through harbours. We are concerned here with the process of documentation of goods passing from one hand to another, as part of the intercontinental journey, as the noble Lord, Lord Jacques, pointed out. He pointed out very clearly in paragraph 3 of his new Schedule where there would be multi-use; the goods would, at some stage, be continuing their journey by sea, and at some stage by rail, or road or some other means.

But I am now given to understand that the practicalities of the cases where goods pass through harbour land is such that in many cases in which damage or loss is incurred there is considerable litigation between the harbour authorities and relative insurance companies as well as between the insurance companies in respect of these goods on their journey from the factory gate to the ultimate consumer and the road haulier or the rail haulier. Certainly it has been presented to us that the harbours are the scene of much litigation, and it is believed that if these two small Amendments were made to the Bill the opportunity for a great deal of litigation which is carried on at the moment would be obviated. That is the small point I would seek to raise on Amendments Nos. 88 and 89, and I hope it is to the convenience of the Committee to discuss them at this stage. I beg to move Amendment No. 88.

Lord JACQUES

These Amendments are seeking to accord certain contracts made by harbour authorities the same treatment as that granted to certain categories of maritime contracts. Maritime contracts have been treated in a special way under the Bill in order to allow the maintenance of existing arrangements in the commercial maritime field. Maritime business is essentially international by nature, and it is therefore important for business convenience, for easy trading and for competition reasons that the same rules and conditions are observed around the world. As I am sure your Lordships are aware, over the centuries continuous efforts have been made to harmonise international maritime law because it has been recognised that this would be in the best interests of all countries. This trend has been very successful. Indeed, contracts for charter parties, bills of lading and towage in general in worldwide use are, I am told, all based upon the British contract form. If we were now to move out of line with other countries, United Kingdom companies would be put at a serious competitive disadvantage. This would be very damaging to the United Kingdom's interests, particularly since London is the world centre for maritime business.

I am sure your Lordships will agree that these are very powerful reasons for according maritime contracts special treatment under the Bill. However, I fail to see that any such considerations apply in the case of harbours and harbour authorities. There is, it seems to me, little or no element of international competition so far as dock facilities are concerned. Where goods are carried by sea, they enter or leave Britain. There is no alternative to using a British port. With respect to the noble Lord, I would submit that there is no good reason why port authorities should be given any special treatment. Where their notices or contract terms excluding or restricting liability are fair and reasonable, I am sure they will be upheld by the courts; but where they are otherwise there is no reason why they should be upheld by the courts. I therefore ask the noble Lord to consider what I have said and to withdraw his Amendment.

Lord LYELL

Thanks to the noble Lord, Lord Jacques, and his kind reply, I certainly will accept his invitation to consider all that he has said. He gave me a very fair and substantial reply. I thank him, and beg leave to withdraw my Amendment.

Amendment to the Amendment, by leave, withdrawn.

On Question, Amendment agreed to.

Schedule 2 ["Guidelines" for application of reasonableness test]:

Lord HAILSHAM of SAINT MARYLEBONE moved Amendment No. 95:

Page 16, line 47, at end insert— ("( ) in cases where the party seeking to exclude or limit liability is not a limited company, the extent to which insurance is available to protect that party against the risk of liability, and the extent to which without such insurance that party might be expected to meet that liability from his own resources.").

The noble and learned Lord said: It is very unfortunate that these two Amendments, this and the next one, have come on so late, because I think they involve quite serious discussion which I should have liked to have taken at a much earlier hour of the day. I think that probably the best course is for us to have a short discussion on each of them separately at this stage now, and we may (I think almost certainly we will) have to revert to them on Report, when I hope we shall reach them at a more rational hour.

This Amendment, No. 95, is intended to give effect to a point which I sought to raise on Second Reading; and, again, I had the support in doing so of the Master of the Rolls, who, quite independently of me, was disturbed by the same question. In this Bill we are dealing with very different sorts of character. There is, as the Master of the Rolls pointed out, the unfortunate man with unlimited liability. He is not able to take advantage of the limited company procedure, and, therefore, his liability goes to his last and ultimate possessions except, I think, the tools of his trade, which in the case of a professional man may involve a protractor and a fountain pen and perhaps his bedding and two or three of the more intimate articles of furniture. Otherwise, the bailiffs can come in and chase him. His liabilities may be almost unlimited, because they may go up, on occasion, to millions of pounds. As the Master of the Rolls pointed out, the obvious thing is to ask how far he can guard himself against the liabilities which he may incur under this Bill by insurance, which is profitable for him because he will be able to deduct it from his income tax if he can, profitable for the potential victim because instead of a very doubtful payer he will have the backing of a reputable insurance company, and profitable for the insurance company which gives him the protection which he will very badly need if this Bill is passed.

I said earlier in this discussion that I did not look carefully enough at the Bill, and there will be an important class of person—those affected by Clause 2, for instance, and not by Clause 6 and some of the other clauses—who will not be affected by my Amendment as it is drafted at the moment because the guidelines do not apply to Clause 2. I think the guidelines ought to apply more generally, and perhaps the noble and learned Lord, the Lord Chancellor, may take on board that suggestion, that on Report I may put down an Amendment to provide an extension of the application of the guidelines to cases outside the supply of goods, and so forth, to which they are limited at the moment. But, in the meantime, I think that in our zeal for consumer protection we should not in fact impose on an individual terms of trade which are altogether unreasonably onerous. I think, therefore, that the principle underlying my Amendment is a sound one.

I should also like to say this to the noble arid learned Lord the Lord Chancellor about it. In our zeal for consumer protection, we must not forget, I think, the interest of the general body of consumers as distinct from the potential victim of a particular mishap. We must remember that the interest of the general body of consumers is the provision of services and goods at a reasonable cost, and that, if in fact we impose on the provider of goods and services terms which are unreasonably onerous, either those services will be withdrawn from the market altogether or they will be supplied at a cost which people are not prepared to accept. Therefore, I seriously put forward this Amendment, regretting that it is at such a late hour, intending that the noble and learned Lord should tell me what, in his view, is the best way to deal with a problem which I believe to be a very real one. I beg to move.

8.50 p.m.

The LORD CHANCELLOR

I agree that Amendment No. 95 is a very important Amendment and it may be fitting that it should be moved by a gallant rifleman of the 95th of Foot whose musical entertainment, which, I understand, was heard in certain quarters, is not, unhappily, available for this Committee to hear.

It is an important matter. I have given a great deal of sympathy to the point of substance since it was first raised at Second Reading. The Amendment, as it now stands, seeks to add another guideline to help the courts in applying the reasonableness test to cases involving liability for loss or property damage. My first reaction is to wonder whether it is really necessary to spell this out since, having regard to the wording of Clause 10 (which requires the court to have regard to the circumstances of the case) and Clause 22 (which is the Scottish equivalent of those words) the ability of the defendant to obtain insurance cover would surely, in any case, be a relevant circumstance which the courts would be bound to take into account when considering whether any particular limitation of liability was reasonable or not; provided that the plaintiff could reasonably be expected to know of the defendant's difficulties in obtaining cover at the time of the contract.

The Law Commissions in their report specifically stressed that the guidelines now in Schedule 2, which as the noble and learned Lord pointed out, incidentally are not at present altogether appropriate for the purpose which he intends, since they apply only to exemption clauses relating to liability for breach of certain implied terms in contracts for the sale et cetera of goods, should not be regarded as exhaustive.

I recognise the concern expressed about the matter, which I share; and, if the noble and learned Lord would agree to withdraw his Amendment, I undertake to table on Report at the appropriate time a suitably worded Amendment since it seems to me, with respect, that the Amendment—and I think he will agree with this—should refer only to a limitation of liability rather than to an exclusion of liability and should also avoid the difficulty that the guidelines in Schedule 2 are at present only of limited application.

It may be of interest if I were to draw the Committee's attention to paragraphs 184 to 191 of the Law Commissions' Report and, in particular, to the guidelines set out in paragraph 188. Those guidelines were not put forward for use in cases not covered by the present guidelines, and although the Law Commissions suggested that they should not be incorporated in the Bill, I think it is certainly very proper for the Committee to look at them when considering this difficult problem of insurability. In particular, guideline (g) in paragraph 188, provides that the court would be obliged to take into account in appropriate cases the fact that: the clause did not exclude liability but only imposed an upper limit". In this passage the Law Commissions were clearly conscious of the problem about insurability which we are now discussing. If, therefore, it is generally felt that an Amendment is required to bring to the surface the point about insurability and part of the issue of the reasonableness test then, I think, we should have regard to the proposals of the Law Commissions.

I would anticipate that any Amendment would follow the thinking of the noble and learned Lord in basing itself on restrictions to an upper limit rather than on all kinds of exclusions which I rather suspect he has in mind. I imagine that this is the significance of his reference to parties which are not limited companies. That, obviously, is what the noble and learned Lord has in mind; but perhaps he will consider whether we can leave the matter on the basis that the problem about insurability is already in the Bill, and whether the question is one of emphasis rather than of the need for a direct change in effect. I am inclined to take the view that perhaps it is not sufficient that a matter of this importance should be left as it is in the Bill.

Lord HAILSHAM of SAINT MARYLEBONE

I am very grateful to the noble and learned Lord for his very thoughtful and constructive reply. When I have made one or two comments, I shall, of course, accede to his request that at this stage I should withdraw this Amendment. I should very much prefer to see a considered Amendment made by the noble and learned Lord the Lord Chancellor with the advantage of the Parliamentary draftsman behind him. That is obviously very much more satisfactory, and if we can arrive at some kind of considered conclusion, this would be the best thing.

I considered whether it was necessary at all to have this; but this leads us into a debate which, curiously enough, is about the only thing we have not discussed in this rather protracted Committee stage. It underlies this Bill to a very considerable extent. There was a difference at one time between the Scotsmen and the Englishmen on this Bill. The Scotsmen, for some reason, thought it best to have no guidelines at all; the Englishmen, on the whole, thought it better to have guidelines.

I can understand the Presbyterian purity of the Scots in this respect but I come down wholly on the side of the English. If you are going to leave "reasonableness" and "all relevant circumstances" to the judges to decide what is reasonable and what circumstances are relevant, I think you are really substituting the banyan tree for any rational system of jurisprudence. Although I know that there are very well-known judges on the Bench who are constantly attracted by the nostalgia of the banyan tree, this is not my approach to modern jurisprudence. I like to know something more definite. I think that the judges are very reliable provided they are given something which is justiciable. The question of reasonableness and what is relevant are, at best, on the fringes of what is justiciable and, at worst, allow the eccentric judge to provide a jurisprudence which is just as long as his own foot I am not in favour of that.

The noble and learned Lord has suggested therefore that he will consider seriously a compromise clause with the benefit of the Parliamentary draftsman. I should like him to consider seriously the application of guidelines to Clause 2 (or in some form to Clause 2) and if he will do that between now and Report and put down something which embodies, at any rate, some of my thinking, I should be happy to think that I have done a good job of work, certainly at this stage, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.59 p.m.

Lord HAILSHAM of SAINT MARYLEBONE moved Amendment No. 96:

Page 16, line 47, at end insert— ("( )whether the customer had requested the other party to the contract to purchase the goods.").

The noble and learned Lord said: This, again, is an important subject. It is an Amendment for which I have less enthusaism than the last but which, I think, does none the less merit discussion; although it may be that we shall have to revert to it, as in other cases, on Report.

This reflects a problem which I have had to deal with before when we were dealing with the Supply of Goods (Implied Terms) Act 1973. There was considerable discussion inside Government about it at the time which I should like now to ventilate in public. The point is this. In the way in which modern business transactions have developed, one can understand, of course, that in the simple case where a supplier of goods or services supplies those goods or services, the law has implied, and rightly implied, terms as to quality, fitness and merchantability and so on, which Parliament is increasingly reluctant to exclude by any of these exemption clauses.

But this is based upon the fact that, if you go into a shop and buy a kipper, you are entitled to rely on the skill and judgment of the fishmonger that the kipper, which is designed for human consumption, shall in fact be suitable for human consumption. This is perfectly sensible as an ordinary business transaction. But when you embark upon the more elaborate form of consumer durable, you often find that the way in which finance is provided is that a bank or somebody who is not in the position of supplying the goods, and knows nothing whatever about their nature or quality, goes through the motion of buying the goods from the original supplier who does know, and either hiring them, supplying them or providing them in some form to the ultimate consumer.

The effect of this legislation which we are discussing protects the consumer against his supplier; but if the supplier is only a finance house and the real party, whose skill and judgment ought to be the subject of the implied term, is the third party and not the finance house, it seems a little hard to saddle the finance house with responsibility for its quality. I know it was said when we were discussing this matter inside the Government that the finance house has to deal only with reputable suppliers. But this is not always the case; they very often deal with a supplier who has been found by the ultimate customer. Very often it is found that it is the customer who is pressing for credit and not the finance house which is forcing the credit on the customer. So this presents a real problem in the field of consumer protection.

At this late hour I can do no more than ventilate the subject and provoke the noble and learned Lord the Lord Chancellor into one of his thoughtful utterances in response. I do not want to do more than tell the noble and learned Lord the Lord Chancellor what the purpose of this Amendment is and to ask him to make his comments upon it. With only that view in mind, I beg to move.

9.2 p.m.

Lord AIREDALE

We ought to be careful about this situation. This Amendment does not refer to cases where the financial third party comes into it. Under this Amendment, as at present drafted, if a customer went into a shop and asked the proprietor to get a commodity which had been skilfully advertised in some Sunday paper, and the supplier obtained it and sold it to the customer, the supplier would then be able to rely to some extent on the fact that the customer had requested him to get it. My experience is that good wine needs no bush; some of the nastiest and cheapest commodities only sell succesfully because they are skilfully advertised in the Sunday papers, and so on. I am sure that the Sunday papers take great care to try to see that their advertisers do everything that they should.

It is the business of the shop to know something about mowing machines, or whatever it is, to guide the customer against a cheap and nasty model which has been skilfully advertised, and to try to persuade the customer to buy a better and reliable model. This Amendment will not achieve good consumer protection unless its scope is rather more limited to the finance houses, and so on, to which the noble and learned Lord referred.

The LORD CHANCELLOR

I have listened with care to what the noble and learned Lord, Lord Hailsham of Saint Marylebone, said in his fascinating explanation ranging from the kipper designed for human consumption—which is an interesting conception in itself—to finance houses. I wondered at times whether the finance house problem was covered, if the Committee accepted the Amendment, by the specific context in which this addition to the guidelines will go. I share the anxieties and questions of the noble Lord, Lord Airedale, about that.

We can all think of any number of cases with particular facts which should be taken into consideration in the application of the test of reasonableness. The list of guidelines which we now have is not to be taken to be exhaustive, but only to be in the sense illustrative as matters which appear to be relevant. However, if the customer had asked the retailer to obtain specific goods for him, that fact would be taken into consideration, even though the present list does not include it. I am inclined to agree with the noble Lord, Lord Airedale, that it ought not to be a complete answer on the supplier's part, depending again on the facts of the case and the kind of commodity that is indicated. I confess I am not wholly clear what the noble and learned Lord is after in so far as the draft seeks to give effect to what he wants to do, but I am willing to look at it.

Lord HAILSHAM of SAINT MARYLEBONE

The truth is that this Amendment had to he put down at rather short notice. I took the actual drafting from the people who put the point to me, as my noble friend Lord Lyell did in a great many cases. Something rather unfortunate has happened in this Bill for the proper performance of our Parliamentary duties. This Bill, for some reason, slipped through the House of Commons without anybody noticing that it was there. Exactly why this happened, I do not rightly know. There have been two Law Commission reports and immense consultation with all reputable bodies. The Bill seemed to have almost universal approval. But for some reason the Second Reading debate in this House attracted considerable attention. The result was that those of us who have to operate an Opposition line almost without assistance—although we are very grateful for the assistance we get—became inundated with something like 150 or 200 Amendments from various responsible bodies, including the CBI, all of which they wanted us to ventilate in this House.

It so happened that this Amendment fell to my lot because I understood what it was about and my noble friend Lord Lyell did not, because I had had the previous experience of discussing the matter internally in the Government four years ago. It does not surprise me that my noble friend Lord Lyell did not follow this because I do not think that the noble and learned Lord the Lord Chancellor followed it until I explained it to him. However, he does know now—he "kens the noo" as they say in the famous apocalyptic story—and I hope he will take this on board. In a Bill which resembles "banyan tree justice" rather more than the more sophisticated type of jurisprudence, it is true to say that this is a very common feature of current commercial life, that is, the situation I sought to explain in my speech, attached to an Amendment which I am bound to say was fed to us, and which I did not bother to improve because I knew what would happen anyway. We would hope to get a little more sense out of it either on Report stage or on Third Reading. Now that the noble and learned Lord knows what it is about, I hope he will think about it, because, although I do not expect that he will find unanimity inside his Government any more than I did in the Government of which I was a member, it is a more important question than is generally recognised.

I therefore hope the noble and learned Lord will bring to bear the resources of his Department and of his own enormous intellect and give us a lucid account of his conclusions when we reach a later stage. Therefore, with some enthusiasm, I now beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Schedule 2 agreed to.

Schedule 3 [Amendment of enactments]:

Lord LYELL had given Notice of his intention to move Amendment No. 97: Page 17, leave out lines 7 to 9.

The noble Lord said: In view of what my noble and learned friend has said, I may say that I do not necessarily understand Amendments Nos. 97 and 98 any further. I have in fact spoken to them and I withdrew Amendments Nos. 40 and 68 earlier. I shall not move Amendment No. 97.

Schedule 3 agreed to.

Remaining Schedule agreed to.

Title agreed to.

House resumed: Bill reported with the Amendments.