HL Deb 14 April 1980 vol 408 cc55-62

5.6 p.m.

The PARLIAMENTARY UNDERSECRETARY of STATE, NORTHERN IRELAND OFFICE (Lord Elton) rose to move, That the draft order laid before the House on 11th March be approved. The noble Lord said: My Lords, it may be for the convenience of the House if, together with this order, which is the draft Bankruptcy (Northern Ireland Consequential Amendments) Order 1980, which was laid before the House on 11th March, we consider the draft Bankruptcy Amendment (Northern Ireland) Order 1980, which also was laid before the House on the same day. Owing to an administrative oversight, these two orders have become transposed on the Order Paper and I shall therefore be moving the consequential order formally before the order upon which it is consequential; but as your Lordships will have heard the Government's proposals on each and will have discussed them before deciding on the merits of either, that ought not to present any difficulty—although, of course, I apologise to the House for the apparent lack of logic of the sequence in which the orders have been presented on the Order Paper.

Turning to the draft Bankruptcy Amendment (Northern Ireland) Order 1980, a copy of which was laid before this House on 11th March, I would make the following observations. The law in Northern Ireland on the insolvency of limited companies was amended in 1978 to bring it into line with that in Great Britain, but the legislation on the insolvency of individuals dates back as far as the middle of the last century and, despite amending enactments, still differs in some important aspects from the law in England and Wales. Notwithstanding these differences, the general principles are similar and the law can be readily adapted so as to incorporate alterations based on existing English legislation.

Ultimately, consideration will have to be given to the question of modernisation of the law on bankruptcy and to achieving more complete uniformity between Northern Ireland and England and Wales. A major exercise of this nature would take considerable time, and in view of the fact that there is a committee under the chairmanship of Sir Kenneth Cork at present considering the law of insolvency both of individuals and of companies in England and Wales, it would be inappropriate to embark on such major legislation until that committee's report has been received and considered by the Government. This is reinforced by the fact that a draft EEC Convention on bankruptcy is also under negotiation at the moment. For these reasons, the order has been limited to matters requiring immediate consideration and to some general tidying-up provisions to facilitate consolidation of the existing law as soon as practicably possible.

The Department of Trade has responsibility for the Official Receiver's service, but it was only in 1978 that the Companies (Northern Ireland) Order made provision for the establishment of a similar service in respect of company liquidation by the Northern Ireland Department of Commerce. The order will now complete the service by transferring the Official Assignee service from the Northern Ireland Supreme Court to the Department of Commerce. A committee under the chairmanship of the late Lord MacDermott recommended this transfer and the Judicature (Northern Ireland) Act 1978 transferred the office to the Secretary of State, who delegated responsibility to the Department. The order now formally completes the transfer. It is hoped that the facility to provide a co-ordinated insolvency service will be of assistance to the public and to the legal profession.

The order co-ordinates management of the estates and funds of insolvent companies and bankruptcies, and provides for the control and audit of those funds.

The most pressing matter of general interest dealt with by the order is the important changes in the law governing discharge from bankruptcy. Under the present law in Northern Ireland most bankrupts remain permanently undischarged. This order now seeks to remedy this by adopting the provisions operating in England and Wales, including the changes made there by the Insolvency Act 1976. Many existing bankrupts will be discharged immediately the order comes into force or within five years thereafter. A debtor adjudged bankrupt after the order is in operation will be automatically discharged five years after his adjudication, if the court, when concluding or dispensing with his public examination, so orders. All bankrupts adjudicated in the future or within the past five years will have their cases reviewed by the court, with a view to discharge during the sixth year after their adjudication.

In addition, any bankrupt will be able to apply to the court for discharge and on such an application the court will have a wide discretion to grant or withhold discharge, suspend the operation of a discharge or make it conditional on the bankrupt agreeing to make payments to his creditors. The order also gives the court the power to dispense with the public examination of a bankrupt.

A large portion of the order is concerned with the proving and ranking of debts and the distribution of a bankrupt's estate and, in general, it brings Northern Ireland law into line with that in England and Wales. It simplifies the existing law on claims and provides for the manner of proving debts. It also deals with the set off of mutual credits, mutual debts and other mutual dealings in the same way as in England and Wales. The law on preferential debts in bankruptcy is at present spread throughout the statute book, and one very useful purpose of this order is to collect together and consolidate those provisions in the order.

I now turn formally to the draft Bankruptcy (Northern Ireland Consequential Amendments) Order 1980, which was laid before the House on 11th March. In moving that it be approved, I would say that this order is within the provisions of Section 38(2) of the Northern Ireland Constitution Act 1973, which empowers amendments of the law of any part of the United Kingdom to be made in consequence of a provision made by or under a measure of the Northern Ireland Assembly. By virtue of the Northern Ireland Act 1974, a reference to "a measure" also includes an Order in Council. Such is the Bankruptcy Amendment (Northern Ireland) Order, which we are also considering this afternoon. The order to which I am now speaking contains only provisions consequential to the Bankruptcy Amendment (Northern Ireland) Order. My Lords, I beg to move.

Moved, That the draft order laid before the House on 11th March, be approved.—Lord Elton.)

5.13 p.m.

Lord BLEASE

My Lords, I am grateful to the noble Lord, Lord Elton, for his very comprehensive explanation of the two orders. There is no doubt that the new provisions which are contained in the main order are long overdue, and in the context of business and commercial life in Northern Ireland should have a most useful and beneficial effect. The order greatly assists in tidying up the law governing bankruptcy matters, making it more simple to understand. I accept that this amending order brings the legislation in Northern Ireland considerably into line with similar legislation in Great Britain. However, there are three points which I hope the Minister will be able to clarify.

I understand that under paragraph 3 the Official Assignee now becomes an officer of the Department of Commerce, and that the whole department, with its staff and officers, will become a corporate section of the Department of Commerce. It appears to me that if the order is fully implemented additional administrative and monitoring arrangements will be required, involving considerable clerical work and other legal approaches. I should like to ask the Minister whether the present staff will be able to cope adequately with this additional workload.

Paragraphs 19, 20 and 21 deal with preferential payments, and the noble Lord has already referred to the fact that there will be considerable tidying up, bringing together provisions which have been scattered throughout other Northern Ireland Acts. Can the Minister confirm that wages and salaries, and related matters such as holiday entitlements and pension rights, will rank equally with rates and taxes as preferential payments in the distribution of the property of a bankrupt?

I understand that that position pertains in Great Britain at the present time, but I would add the caveat that it is not the way that I think it should operate. I consider that wages and salaries and related matters should have first preference, but as the law stands in Great Britain they rank equally. Will the Minister confirm that that will be the position? I should also like to ask, because some consideration has been given to this matter in respect of the Industrial Relations (Northern Ireland) Order 1976, whether this order will continue to provide an additional and necessary safeguard for employees in respect of a bankrupt employer.

Thirdly, paragraph 33, which deals with bankruptcy rules, mentions that a review committee will deal with procedures and the making of rules relevant to this order. I understand that some accountants and academics have given consideration to paragraph 33, and there appears to be some confusion about the role and functions of the review committee. Will the review committee operate independently of the Lord Chancellor's Committee on Insolvency, which was set up under the chairmanship of Sir Kenneth Cork? Also, if the Cork Committee subsequently propose the introduction of legislation dealing with bankruptcy matters, will additional legislation require to be passed in Northern Ireland? In other words, will the review committee be dealing with rules arising from this order, whereas the Cork Committee will be dealing with more fundamental matters arising out of bankruptcy?

Finally—and I am sorry that I was not able to give the noble Lord notice—I should like to ask him this question. I came into possession of the Twenty-Third Report from the Joint Committee on Statutory Instruments only within the last couple of hours, and paragraph 3 states that further elucidation is required of the draft Bankruptcy (Northern Ireland Consequential Amendments) Order, which does not appear in the instrument or in the explanatory note. I hope that the noble Lord may be able to give a further explanation. Was there a difference of opinion between the drafters of the order, or was their point of view upheld by the Joint Committee on Statutory Instruments? In conclusion, may I say that both of these orders are warmly welcomed from this side. We believe that they are in the best interests of industry and of the Northern Ireland community, and we naturally support their adoption.

5.19 p.m.

Lord ELTON

My Lords, I am obliged to the noble Lord, Lord Blease, for his reception of these orders and for his constructive approach to the questions. The first point that he raised was the question whether administration in the new form would involve an increase in the load on the staff of the Department of Commerce. I can assure him that, with the transfer of the Office of the Official Assignee from the Court Service to the Department of Commerce, the staff became subject to Civil Service terms and conditions of employment which included, among other things, increased working hours. It is therefore considered that the existing staff will be able to undertake the additional work in view of the additional working hours and improved office procedures.

The noble Lord asked me whether wages and salaries would rank equally with other preferential debts under the provisions of the order. I should like to emphasise in reply, referring to Articles 18 to 21, that the preferential provisions contained in the order are only a form of consolidation of the existing legislation on preferential payments in bankruptcy and that they equate with the law on the subject in England. Under the Industrial Relations (Northern Ireland) Order 1976, arrears of wages due, holiday pay, payments in lieu of notice and amounts due for unfair dismissal are all paid direct to employees by the Northern Ireland Department of Manpower Services. That department in turn claims from the bankrupt's estate and payment is on the same preferential basis. The claim by the Department of Manpower Services ranks equally with the other preferential payments, but the situation is better than the noble Lord supposes. Because of the effect of the employment protection legislation in Northern Ireland, the people who are entitled to receipt of these payments will get them, whatever the result of the proceedings with regard to the individual bankrupt.

The third point which the noble Lord raised was a difficulty with which I entirely sympathise. It was the difficulty of identifying the review committee referred to in Article 33. The Insolvency Law Review Committee is a body appointed specially by the Secretary of State for Trade to examine generally the law on insolvency, whereas the review committee referred to in Article 33 of the order is a body appointed by the Lord Chancellor solely to review the winding up and bankruptcy rules made under this order and the Companies (Northern Ireland) Order 1978. In other words, the Cork Committee to which I referred when I introduced these orders are looking at the whole position of equating the law and bringing it up to date, whereas the committee mentioned in Article 33 is charged specifically with the rules under this order and the Companies (Northern Ireland) Order 1978.

I should like at this stage to thank the noble Lord for giving me notice of those three questions, which has ensured that he gets a coherent and, I hope, a helpful answer. Of the next question he did not give me notice, but I hope that I can do very nearly as well. I am aware of the difficulty and of the remarks made by the Joint Standing Committee on Statutory Instruments. I read their report with interest. The Bankruptcy (Northern Ireland Consequential Amendments) Order which is partly consequential upon the Bankruptcy Amendment (Northern Ireland) Order, which we are just taking, is to be made simultaneously with the latter order. The Joint Committee has said that this order's purport calls for elucidation and they suggest that the order or the explanatory note should contain an indication of the date upon which the Bankruptcy Amendment (Northern Ireland) Order, upon which the order we are now talking about is partly consequential, is to be made.

We have submitted to the committee that it would not be proper to anticipate the decision of Parliament by including in the text of an order or in its explanatory note the date upon which another order, still to be considered by Parliament, is to be made, since parliamentary business may get the date changed at the last moment. We further submitted that the explanatory note as it now stands makes it clear that this order is consequential upon the Bankruptcy Amendment (Northern Ireland) Order, and that also from footnote (c) to the principal order—that is, to Article 1(2)—it can be inferred by the reader that the Bankruptcy Amendment (Northern Ireland) Order has yet to be made. If the noble Lord cares to look, he will see that the date has been left blank, which makes it clear that the amendment has not been made.

As I have said, the orders are to be made simultaneously, just as we are discussing them simultaneously. It may appear at first sight to be paradoxical that an order consequential upon another is to be made simultaneously with that order. However, it is the provisions of one order which are consequential upon the other and there is no logical reason why the two cannot be made together. I should like, none the less, having made those defensive noises, to assure the House that in the light of the report of the Joint Committee we are again considering whether there is any more satisfactory way in which to meet the Joint Committee's point in the general drafting of future consequential orders laid before this House.