§ 2.52 p.m.
§ The LORD CHANCELLOR (Lord Hailsham of Saint Marylebone)
My Lords, I beg to move that this Bill be now read a second time. It is another law reform Bill, this time based on a report of the Law Commission, the Limitation Bill having been based on a report of the Law Reform Committee. Like the Limitation Bill, it owes its origin to a reference by myself, though this time under the inspiration of a memorandum by the Bar Council and the Law Society. Like that Bill, the seed thus sown germinated and in the course of years fructified into a report to my noble and learned successor and present predecessor. This Bill is the fruit, carefully nurtured by the noble and learned Lord, Lord Elwyn-Jones, and, I hope, introduced with equal impartiality by myself. The subject-matter is, I am sorry to say, both technical and difficult, but I hope to keep my speech short. It concerns the means by which judgments for the payment of money may be enforced. The Law Commission's Report—for those interested, No. 74—is short, clear and cogent and the Bill differs only slightly from the draft Bill annexed to the report. Changes have been made in three respects: first, the short title is now even shorter; secondly, the distribution of jurisdiction, by Clause 1(2), between the High Court and the county court; and thirdly, the provisions in Clause 3 regarding charging orders in respect of registered 11 land are slightly different. The changes that have been made are concurred in by the Law Commission.
I should begin at the beginning, and to do so I must tell your Lordships shortly what a charging order is and how it works. It is an order, obtainable sometimes in the High Court, sometimes in the county court, whereby the property of a judgment debtor is charged in the creditor's favour with the payment of his debt. It is, in short, a method of execution, a means of enforcing payment, and is available only where the debt is established by a judgment or the award of an arbitrator. Where the order is made, it puts the creditor in substantially the same position as if the debtor had himself voluntarily executed an equitable charge over the property in question. In effect, it gives the judgment creditor security which may be enforced if the judgment debtor defaults.
The history of the matter is this. Before 1838, judgments were enforced by two main methods. The first was used in the case of the great Pickwick of immortal memory, by seizure of the debtor's person and his detention in the Fleet Prison until the debt was paid. The second was by seizure and sale of his goods. So far as his land was concerned, the creditor might take possession of it on what, for some reason, was called the writ of elegit, but that did not allow the creditor to sell the land; he merely took possession and remained in possession until the money was produced.
In 1838, by the Judgments Act of that year, the creditor was given a new remedy. He was given the chance of taking a charging order over the debtor's land and certain of his securities. Between 1838 and 1956, developments were relatively unimportant. But charging orders on land, and interests in land, were put on a new footing by Section 35 of the Administration of Justice Act 1956, which is where the existing law is to be found. The Law Commission pointed in their report to a number of defects in Section 35 and this Bill's main purpose is to cure them. The other area of concern is the law relating to charging orders on securities. These, for reasons that I need not go into, are contained in Rules of Court. Here too the Law Commission have suggested improvements which the Bill is designed to effect.
12 Clause 1 provides that, subject to certain exceptions, a charging order may be granted by the High Court in respect of a judgment debt of over £2,000. In other cases, the order is made by the county court. The shift from the High Court to the county court in all but the larger cases is intended to make it easier for the judgment debtor to attend the hearing, to enable the court to determine whether it would be oppressive—from the debtor's point of view, that is—or unfair to the other unsecured creditors to make the order in favour of the applicant.
Clause 2 sets out the different types of property which may be charged. It is wider than the existing law in that it covers not only land and interests in land but also interests under trusts. In particular it makes it possible to deal with the case where land is vested in the debtor and his wife on a statutory trust for sale. By Clause 2(2) a charging order may be made against the debtor's beneficial interest. In addition, in certain circumstances the order may be made against the legal estate in land held on trust for the debtor by someone else. As for securities, Clause 2(2)(b) includes a few additions to the list of chargeable securities, notably local government stock, stock of bodies incorporated outside England and Wales and unit trusts. Clause 3 provides for the variation or discharge of charging orders and for the registration and cancellation of entries made under the Land Charges Act 1972 and the Land Registration Act 1925. Subsections (7) and (8) of Clause 3 give the Lord Chancellor by Statutory Instrument power to change the categories of chargeable assets listed in Clause 2 if the list now proposed gets out of date.
Clause 4 deals with a fascinating but highly technical point in the law of insolvency which came before the Court of Appeal in 1963. In a case called In re Overseas Aviation Engineering (G.B.) Ltd., reported in 1963, Chancery, page 24, it was held by a majority (my noble and learned friend Lord Russell of Killowen, then Lord Justice Russell, dissenting) that in order to retain his security in the event of the debtor's bankruptcy, the creditor could not rely on a charging order alone; he had in addition to apply for a receiver. This has been criticised as creating a trap for the unwary creditor and involving the wary creditor (and, for that matter, the 13 debtor, too) in unnecessary inconvenience and expense. Clause 4 provides that the extra step is no longer required.
Clause 5 empowers the two rule committees (respectively of the Supreme Court and of the county courts) to make such procedural changes as they may judge to be expedient to give effect to the previous clauses, and to make the process of enforcement by charging order quicker and cheaper. Clauses 6, 7 and 8, where they do not restate the existing law, are in other respects self-explanatory.
§ Moved, That the Bill be now read 2a.—(The Lord Chancellor.)
§ 3.1 p.m.
§ Lord ELWYN-JONES
My Lords, I am sure that the whole House will be grateful to the noble and learned Lord the Lord Chancellor for his lucid explanation of this highly technical matter, and I am sure that we are all the better for having heard it. It has the quality of being non-controversial perhaps in part because it is so highly technical. As the noble and learned Lord said, the Bill is based on a report from the Law Commission, which in turn acted upon a recommendation that was made jointly by the Law Reform Committees of the Bar Council and the Law Society, which in 1971 made representations to the Lord Chancellor for the reform of aspects of the law relating to charging orders. Therefore, the House will see that the legal profession is interested in law reform. In the bad old days it used to be said that it was no more likely to see lawyers urging law reform than tigers urging reform of the jungle. That has been a wholly unwarranted observation, at least in recent times, as the activities of the Law Reform Committees of the profession are showing.
I should like to take this opportunity to pay a tribute to the continuing work of the Law Commission. Since its inception in 1965 it has contributed immensely to the process of law reform, and I believe that we owe much to the energetic, able, and wise judges who have chaired the Law Commission since 1965: the noble and learned Lord, Lord Scarman; then Mr. Justice Cooke, whose early death was a grievous loss; and now Mr. Justice Kerr.
14 Law reform is, I believe, primarily the responsibility of Parliament. I hope that that observation will not unduly distress the noble and learned Lord, Lord Denning. The existence of the Law Commission has supplied the process of law reform with both expertise and momentum, and I consider that Parliament can at least take some satisfaction from the fact that we have not simply docketed these reports and forgotten about them. Broadly speaking, the successive Parliaments since 1965 have a good record of giving effect to the Law Commission's proposals, and I am glad to see that that is being done by the present Administration.
Noble Lords will note that in bringing forward its recommendations the Law Commission has continued its usually used procedure of first publishing a working paper on the subject under consideration. That in turn evokes—and in this case did evoke—responses from a number of interested organisations and individuals, and I think that this process of consultation by the Law Commission with those who might be affected by the change is of very great importance indeed. The noble and learned Lord the Lord Chancellor has described the Bill and I will not myself venture to enter into its esoteric mysteries. Sufficient it is for me to express the view that it is a worthwhile piece of law reform which will be welcomed by the legal profession.
On the important matter of enabling a creditor with a charging order to rank automatically as a secured creditor, which would give him preference over other creditors, the House will note that the court has a full discretion as to whether or not to accede to an application for the charging order, and in exercising that discretion the court should take into account any evidence before it not only about the personal circumstances of the debtor but also about any other creditor of his who might be unfairly prejudiced if the charging order was granted. So a good precautionary requirement is included to prevent injustice. My Lords, I am happy to support the Bill.
§ 3.7 p.m.
§ Lord HALE
My Lords, once again the printed list of speakers, which is an extraordinarily short one, has not been 15 adhered to, and I am in a little difficulty in taking up the points that I had in mind. The list as printed bears only my name apart from that of the noble and learned Lord the Lord Chancellor, which appears twice. The noble and learned Lord on the Woolsack will recall that I raised the matter of bankruptcy reform in an Unstarred Question tabled by me in early February of 1974. I think that the list of speakers then was just about the same as it is today, and the noble and learned Lord dealt with me with his usual magnanimity and generosity. I was then particularly concerned to refer to the Committee on Judgment Debts of which I had been a member, and which sat under the benign and brilliant chairmanship of Mr. Justice Payne from 1965, when I was a Member of Parliament, to 1969, after I had resigned; it was a very brilliant committee. The noble and learned Lord on the Woolsack was good enough to assure me that many of the reforms recommended, which of course included references to charging orders, had been dealt with, and indeed I have since been told about many of the recommendations of the committee, which ran to about 1,400 paragraphs and involved a number of dissentient or other reports, including one from me.
I do not want to waste the time of the House, and I should be doing that if I were now to pursue this matter. Due to the difficulty regarding Order Papers and other papers, and the problem of knowing what was happening, as well as being absent ill on Thursday, I had some difficulty in my mind and I was concerned about some of the problems which would arise on the new proposals regarding charging orders on homes. Since then, I have consulted the Law Society's memorandum, and I pay increasing deference and respect to what the society says now that I have ceased to be a member. The society confirms that it was a joint reference from it and the Bar Council to the noble and learned Lord on the Woolsack which was followed by the reference to the Law Commission.
I have read the report of the Law Commission—indeed, I have read it more than once, because I had read it previously—which is a quite remarkable, gifted and diligent report. I agree with every word 16 that my noble and learned friend on the Front Bench has said about it. Indeed, it is from my noble and learned friend that I have from time to time received assurances about what is happening. I am not sure whether, in his summary, the noble and learned Lord on the Woolsack mentioned, as I am told by the Law Society is the case, that provision is now being made for there to be an application by someone who has had a charging order made against him to remove it from real property if and when the debt has been discharged. The Law Society understand that that is the case. They tell me that their difficulties are met and that they are grateful for what has been done, even if it has taken time. I was left only with a little doubt about the application.
Finally, my Lords, may I say this—and I say it with great sincerity. One has apprehensions about provisions for charging orders on a man's home, which I am told now predominate and which predominated, as I understand it, in the time of the writ of elegit. I have in fact looked that up in the dictionary, and I find that it apparently originated from the wisest school in Christendom, in the early years of the 1600s. In any event, this useful but limited reform is clearly acceptable to everybody. I have had no intimation of any intention to file amendments, and I shall therefore not put down any amendment in Committee. I thank the noble and learned Lord for his very lucid and helpful explanation.
§ 3.13 p.m.
§ The LORD CHANCELLOR
My Lords, I am very grateful to both noble Lords who have played their part in explaining this Bill to the House. I am particularly grateful to the noble and learned Lord, Lord Elwyn-Jones, for what he said about the Law Commission. I really think that it is a major instrument of law reform which has come into being in our time. It was, by some, given rather a grudging welcome when it arrived in 1965, but I am happy to think that I was not one of those who grudged it. Certainly in both my incarnations as Lord Chancellor I have used it habitually, as did the noble and learned Lord, Lord Elwyn-Jones, before me and between me. I am therefore grateful for what he said, and also for mentioning the names of the various chairmen of the Commission, 17 each of whom has played a notable part in the help they have given, both on this and on other matters.
I also quite agree with the noble Lord, Lord Hale, that the real watershed in judgment enforcement in recent years was the work of the Payne Committee. It would take me rather out of my way to expatiate on this matter, but I think he is entitled to regard himself and the other members of that committee as having made the major reform in this field. I think he will find the little doubt that he expressed (if I caught it rightly) answered in Clause 3(5) of the draft Bill; but if he finds that he is in any more trouble, I know my office would be happy to help him.
I must say this about the last two or three sentences of what the noble Lord said. Since the Payne Committee there has been, as the noble and learned Lord, Lord Elwyn-Jones, would know, not a flood but a trickle of letters, through various Members of the other place, from disappointed creditors who complain that they cannot enforce their judgment debts as well as before. I do not say that this will entirely reassure them, but we think of them as well as of the debtors, and we have demonstrated by our actions and by the continuing interest we have shown in this matter that we are interested in humanity to the debtor as well. So we try to do justice as far as it is practicable to do it in this rather thorny field of the law. At any rate, we have travelled a long way from Mr. Pickwick and the Fleet Prison.
On Question, Bill read 2a, and committed to a Committee of the Whole House.