Insolvency Bill [H.L.]

HL Deb 02 April 1985 vol 462 cc159-206

5.5 p.m.

Consideration of amendments on Report resumed on Clause 117.

Lord Lucas of Chilworth moved Amendment No. 204: Page 94, line 7, at end insert— ("(3A) Subsection (3) above shall apply to a bankrupt after his discharge.").

The noble Lord said: My Lords, the purpose of this amendment is to make it quite clear that the duties of a bankrupt in relation to the official receiver, in terms of supplying information and co-operating in the proceedings, continue after his discharge. This is the position under the law at present. The new subsection inserted by this amendment has an equivalent effect to that of Clause 148(3) of the Bill, which re-enacts the relevant part of Section 26(9) of the Bankruptcy Act 1914 and provides that the bankrupt's duty to co-operate with his trustee continues after discharge. I beg to move.

On Question, amendment agreed to.

Clause 122 [Appointment of trustee by Secretary of State]:

Lord Lucas of Chilworth moved Amendments Nos. 205 and 206:

[Printed earlier: 1/4/85, col. 53.]

The noble Lord said: My Lords, I spoke to Amendments Nos. 205 to 208, inclusive, yesterday when we were dealing with Amendment No. 21. I beg to move Amendments Nos. 205 and 206.

On Question, amendments agreed to.

Clause 123 [Special cases]:

Lord Lucas of Chilworth moved Amendments Nos. 207 and 208:

[Printed earlier: 1/4/85, col. 53.]

On Question, amendments agreed to.

Clause 124 [Removal of trustee and vacation of office]:

Lore Lucas of Childworth moved Amendment No. 209: Page 97, line 33, leave out ("his") and insert ("the bankrupt's").

The noble Lord said: My Lords, this is a technical amendment which corrects a possible ambiguity in Clause 124(1). It is possible that the relevant meeting of creditors mentioned in that subsection could be construed to mean a meeting of the appointed trustee's creditors. This obviously is not the case. The meeting of creditors referred to in this section is that of the bankrupt's creditors and this amendment therefore makes that clear beyond doubt. I beg to move.

On Question, amendment agreed to.

Clause 125 [Release of trustee]:

Lord Lucas of Chilworth moved Amendments Nos. 210 to 213:

[Printed earlier: col 84.]

The noble Lord said: My Lords, when dealing with Amendment No. 110, I spoke to Amendments Nos. 210 to 213. I beg to move these amendments en bloc.

On Question, amendments agreed to.

Clause 127 [Control of trustee by creditors etc.]:

Lord Lucas of Chilworth moved Amendments Nos. 214 to 217:

[Printed earlier: col. 53.]

The noble Lord said: My Lords, when we were discussing Amendment No. 21 I spoke to Amendments Nos. 214 to 217 applying to clause 127, and at the same time I spoke to Amendments Nos. 218 to 220 attached to Clause 128. With the leave of the House, I beg to move Amendments Nos. 214 to 217 en bloc.

On Question, amendments agreed to.

Clause 128 [Exercise by Secretary of State or court of functions of supervisory committee]:

Lord Lucas of Chilworth moved Amendments Nos. 218 to 220:

[Printed earlier: cols. 53–54.]

On Question, amendments agreed to.

Clause 130 [Liability of trustee]:

Lord Lucas of Chilworth moved Amendments Nos. 221 and 222:

[Printed earlier.]

The noble Lord said: My Lords, I spoke to both these amendments when we were dealing with Amendment No. 134. I beg to move.

On Question, amendments agreed to.

Clause 136 [Acquisition by trustee of control]:

[Amendment No. 223 not moved.]

Clause 138 [Charge on principal residence]:

Lord Bruce of Donington moved Amendment No. 224: Page 107, line 7, leave out ("an interest in").

The noble Lord said: My Lords, in moving Amendment No. 224 I should like to speak also to Amendments Nos, 225, 226 and 231. Amendment No. 225: Page 107, line 9, after ("spouse") insert ("or an interest in such a residence"). Amendment No. 226: Clause 139, page 107, line 30, at beginning insert ("Subject to section (Sale of bankrupt's principal residence) below"). Amendment No. 231: After Clause 139, insert the following new clause:

("Sale of bankrupt's principal residence.

.—(1) Subject to subsection (4) below, the trustee shall not sell any property consisting of the principal residence of the bankrupt or of his spouse or former spouse or an interest in such a residence without an order of the court. (2) If the court is satisfied that in all the circumstances (including any hardship which refusal of the order might cause to any creditor of the bankrupt) such an order or its immediate enforcement would cause undue hardship to any dependant of the bankrupt the court may dismiss or stay the application or may suspend the operation of the order for such time and on such conditions as it thinks fit. (3) The court may on making an order under subsection (1) above direct the trustee to apply some part of the proceeds of sale in purchasing another residence for occupation by the dependants of the bankrupt (with or without the bankrupt). (4) Subsection (1) above shall not apply—

1. (a) to a sale of the principal residence of the bankrupt if at the time of the sale no dependant of his is residing there; or
2. (b) if the trustee is satisfied that the purchaser intends to make the property available for continued occupation by the dependants of the bankrupt residing there (with or without the bankrupt).

(5) In this section— dependant" means a spouse or former spouse or any other member of the family of the bankrupt.").

Amendments Nos. 224 and 225 are amendments to Clause 138. Amendment No. 226 is an amendment to Clause 139. Amendment No. 231 is a new clause which I propose to your Lordships should be inserted after Clause 139. The first three of these amendments are paving amendments for the main new clause for which I invite your Lordship's consideration. They give effect to the recommendations of the Cork Committee, in paragraphs 1114 to 1131 (to which I shall return presently) that no sale of a bankrupt's family home—and I am emphasising the term "family"—should be possible without an order of the court. No order would be required if the bankrupt is living alone or if the sale is to someone such as a relative who is willing to allow the bankrupt's family to remain there.

5.15 p.m.

Subsection (3) is intended to cover a case where the family is living in a home which is large or more expensive than it needs to be but to whom homelessness would cause serious hardship. Your Lordships are invited to agree with the observations of the Cork Committee that the consequences of homelessness may be so disastrous that the creditors should not necessarily be given priority over the bankrupt's dependants. This particular new clause and the circumstances surrounding it perhaps show how unfortunate it is that the House was not afforded an opportunity of debating the Cork Report, published over two years ago. The sections dealing with this aspect of the matter were put in very plain but very cogent terms.

I should like to quote to your Lordships paragraph 1114 of the recommendations of the Cork Committee. It was a committee that had the opportunity of considering the impact of bankruptcy, not merely on the bankrupt himself but also on those who, in most cases—except perhaps in the case of a wildly extravagant wife; or maybe the term should be "wildly extravagant spouse"—had any connection with the failure of the bankrupt financially and who, in old circumstances, were subjected to very severe pressures from outside.

I should think the lot of the spouse of a bankrupt has to be experienced to be truly realised. It comes, and must always come—here we are dealing with the wife—after she has borne the transmitted anxieties of the person going bankrupt over a period of years or perhaps over only a short time—maybe months. She is a person who has borne the anxiety of the continued financial decline of the husband upon whom she has depended and who has been afraid not only of the financial consequences of a possible failure but also of the social implications that are inherent in the reduced civil status and the reduced status within society of the person who has gone bankrupt. If, added to those anxieties and those disabilities, the wife or the family are faced with eviction from the family home as a result of the bankruptcy, then the results can be very hard indeed.

As the Cork Report said, in paragraph 1114: The house in which a debtor is living with his wife and family (or, more often, the residual value of such a house after the repayment of the mortgage debt) is frequently the major asset of a consumer debtor and may also be the major asset of a sole or partnership trader".

At paragraph 1115 it continues: A shortage of domestic accommodation throughout the country has been a persistent feature, certainly of the post-war years. Houses for rent are particularly scarce. Most people (other than those who are tenants of a local authority) find it necessary or financially advantageous to buy freehold or long leasehold property. Prices are high"— they can say that again— and loans on mortgage—a necessity for most—not always readily available. Changing houses is therefore not easy, and to buy a house without the proceeds from the sale of another is even more difficult". I shall not continue to read the rest of the paragraphs which follow that because I have already endeavoured to describe them, however inadequately, in brief terms.

However, the Cork Committee went on to say that it had to bear other considerations in mind; and very properly so. At paragraph 1118 it says: It would be clearly wrong to allow a debtor or his family to continue to live in a lavish style at the expense of the debtor's creditors for an extended period. Nevertheless considerable personal hardship can be caused to the debtor's family by a sudden or premature eviction, and we believe it to be consonant with present social attitudes"— we are talking perhaps of years ago— to alleviate the personal hardships of those who are dependent on the debtor but not responsible for his insolvency, if this can be achieved by delaying for an acceptable time the sale of the family home. We propose therefore to delay, but not to cancel, enforcement of creditors' rights". It goes on in later paragraphs, in particular paragraph 1131, to set out the various considerations which, in its view, ought to be borne in mind by the courts when deciding what ought to be done in particular circumstances.

I do not propose to say very much more on this amendment, save to commend it to your Lordships with as much force of feeling as I can muster for the occasion. It is a matter that far transcends any party boundaries. I sincerely trust that your Lordships may be able to view it in that sense. The clause proposed may not be perfect. It is designed in conformity with the general sentiments that the noble Lord, Lord Lucas of Chilworth, has been kind enough to enunciate from time to time concerning flexibility. It has been deliberately drawn wide in order to give the maximum liberty, the maximum scope for consideration by the courts; so I hope it will not be faulted on that account.

Over recent years your Lordships will remember—I trust with approval if not with affection—the changes in this aspect of the law, though in a different field, for which the noble and learned Lord, Lord Denning, has been responsible. Your Lordships will recall the relief that has been given as a result of the profound and telling judgments he was able to deliver many years ago, covering this kind of situation which arises from time to time. In the hope that the noble Lord opposite will not seek too much to fault the formal structure of the clause but will, with the remainder of your Lordships I trust, lay the whole thrust of his proposed action behind it, I commend the amendments to your Lordships.

Lord Denning

My Lords, I should like to support this group of amendments. My noble friend has been much too kind in what he has said about me. As your Lordships know, this Bill, for the most part, is dry, abstruse, and to most of us quite unintelligible. So the attendance of your Lordships has been very sparse. However, in this clause and in the amendments, we get to the human side and to the social side which your Lordships should, as a whole, consider most seriously.

The clause deals with one aspect of the matrimonial home. In my time in the Court of Appeal we have had to consider who owns the matrimonial home. Previously, it was in the name of the husband. Even though the wife had lived there and had helped with all the outgoings and so on, she had no interest at all in it. Then, by a serious of decisions, we realised the present position whereby the wife often contributes financially to the deposit. She goes out to work and her earnings help to pay the mortgage instalments, the housekeeping and all the rest. She has contributed in money and often through her services in the home to the value of the matrimonial home. In those cases, even though the home was legally in the name of the husband, the courts have held that the husband was a trustee for both of them and that the wife, in most cases, had an equal share in the home in equity. Although the home was in the husband's name, the wife had an equal share and interest in it.

The clause realises that and deals with the situation in which the wife has an interest in the home—a half, a third or a quarter—so that when the husband goes bankrupt, he cannot, or the trustee cannot, turn her or the children out. The home remains there for their occupation. It is for the court eventually to say whether or not it should be sold and the trustee in bankruptcy, if it is sold, gets the husband's share. That in quite properly dealt with in Clause 138. The Cork Committee recognises that. The amendments deal with the entirely different position where the wife has not contributed to the building society instalments or in any other monetary way. She has been there as a good wife in the house bringing up the children. The house is in the husband's name. He goes bankrupt. What is the position? According to the law as it stands, the trustee in bankruptcy can evict the wife and her family for the benefit of the creditors, sell the house and use all the money for the creditors.

Let me tell you, my Lords, the legal history of how this has come about. The very first case with which I was concerned years ago involved a husband with a house in his name who deserted the wife and left her there with an invalid child. He went off with another woman and brought proceedings in the courts to evict his wife and their invalid child. The law, as most people thought, was that he had a right to do it. But, as the judge of first instance, I held that it was the duty of the husband to provide a roof over the wife's head. It was, I said, within the discretion of the court whether or not to order the wife out. I held—I am glad that this has always been affirmed—that the husband had no right to turn his wife out. His duty was to provide a roof over her head.

In the next case, the husband transferred the house into the name of his new mistress who sued to get the wife out. We did not allow that either. The third case is one that effects our present proceedings. The husband went bankrupt. The trustee in bankruptcy sought to evict the wife and children. It was the important case of Bendar v. McWhirter over which I presided. We held in that case that the trustee in bankruptcy could not turn the wife out automatically. But the court had a discretion. It could say that the creditors were not to step in now and that the matter should be postponed to allow the wife to find other accommodation. Everything was to be done to allow her to stay there for the time being and for the trustee not to come in at that stage. That was Bendar v. McWhirter.

Unfortunately for the law I think and unfortunately for the country the House of Lords, judicially, in a later decision, said that we were wrong and that the trustee in bankruptcy could turn out that wife and children. Similarly, a bank could turn out the wife and children. Lady Summerskill introduced a Bill at once, and that became the Matrimonial Homes Act 1967, which gave protection in nearly all cases, affirming our earlier decision in respect of the wife and the children. The trouble was that Section 4(5), I think, of that Act said that even though the wife had a charge on it, that did not operate against the trustee in bankruptcy. The trustee in bankrupty could still turn out the wife. Even though she was perfectly innocent and had nowhere else to go, she could still be turned out. Was that just? The Cork Committee, in a special chapter on the family home, considered this and decided virtually upon a position that would restore the decision in my court in Bendar v. McWhirter saying that the trustee in bankruptcy cannot automatically turn out the wife. The house may be in the husband's name and the wife has no interest in it, but still the trustee in bankrputcy should not turn her out simply for the sake of the creditors. Paragraph 1120 of the Cork Report states that, we consider that any new Insolvency Act should confer on the Court a specific power to postpone a trustee's right of possession and sale of the family home. In exercising this power the Court should have particular regard to the welfare of any children of the family and of any adult members of the family who are ailing or elderly. Giving this power to the Court will, we hope and expect, serve to support the natural inclination of the usually sympathetic trustee, and to protect the debtor's family in those cases where lack of sympathy with, or anger at, the debtor produces unfortunate and undeserved consequences for his family".

5.30 p.m.

There it is. The amendments which my noble friend has proposed are dealing with the great housing shortage of the day. If the matrimonial home is the sole asset of a couple, and if the husband goes bankrupt, is the trustee in bankruptcy to be able to turn the wife out? The Cork Committee said: not automatically; let the court have a discretion; let it be postponed until a convenient time; let the house then be sold, and perhaps some of the proceeds can be used to buy another, cheaper house. It is not an automatic eviction of the wife, but a discretion of the court to postpone it until a convenient time and then, in due course, let the creditors have their share.

I would suggest that the Cork Committee made this recommendation itself. As I read them, the amendments do carry out those recommendations, and I hope they will have the support of the House.

Lord Milverton

My Lords, I hope Her Majesty's Government will be able to support the amendments of the noble Lord, Lord Bruce of Donington, and his new clause. I shall be very happy to support them. This is human and decent, showing compassion for persons, including dependants, who are unfortunate enough to find themselves in that position. I wholeheartedly support these amendments and the new clause, and I hope Her Majesty's Government will be able to see their way to do so as well.

Lord Rochester

My Lords, I had not intended to speak on this occasion, having taken no active part in the proceedings on this Bill, but I say from these Benches that I have been influenced by the speech of the noble Lord, Lord Bruce of Donington, and particularly influenced by the speech of the noble and learned Lord, Lord Denning. Like other Members of your Lordships' House, I very much hope that the Government may see fit to accept this amendment.

Lord Lucas of Chilworth

My Lords, I am in fact going to ask the noble Lord, Lord Bruce of Donington, to withdraw his amendments, and I shall explain why. It is not purely because they are drafting amendments, and I think that when I have given an explanation he will probably accede to my wish in this matter. Your Lordships will probably remember that these amendments are similar in substance to those that were moved in Committee, and your Lordships will probably recall that in Committee I expressed sympathy with the aims of those amendments. Indeed, I appreciate very much the terms in which the noble Lord, Lord Bruce of Donington, has moved his amendments this afternoon.

At the Committee stage I expressed the view that serious thought had to be given to striking the correct balance between the creditors and the bankrupt's family. I then undertook to examine the matter more closely to see whether a more appropriate balance between the various interests could be achieved. We have been examining this matter, and we have formed the opinion that in view of the fundamental importance of the subject we should like to seek the views of major bodies and others who have shown an interest in the matter, both in the consultations of the review committee's report and, indeed, the Government's White Paper. We are in the process of preparing a very short and very simple consultative document, which I anticipate will go out within the next two weeks. We are going to invite representations on that consultative document, to be with us by the end of June of this year. In that way, we feel that the Government can give proper consideration to all the views that may be represented to us, and that the Government's reponse to those views could be put into amendments which will of course have to be dealt with while the Bill is in another place.

In this way we feel that the Government will be enabled to bring forward amendments in the light of informed opinion from a number of bodies, as well as to take into proper account the views that have been expressed by your Lordships this afternoon. There is a force of feeling. It has been expressed, I think, under the general heading, "The human side of this Bill". The noble and learned Lord, Lord Denning, put it very succinctly, and my noble friend Lord Milverton and the noble Lord, Lord Rochester, added their comments to those which were outlined by the noble Lord, Lord Bruce of Donington.

I think, this is a matter on which all your Lordships and the Government are agreed that firm guidelines for a court would be desirable. We wish to ensure that the amendments that are brought forward are as fair and as well balanced as possible. I can put it this way: we are inclined to make haste slowly, though not all that slowly. I think I said, in regard to our consultation document, that we were anticipating responses by the end of June. In fact, I meant the end of May, since we want to get our amendments to the other place while the Bill is there; and no doubt it will be there in June and July.

I appreciate that your Lordships may very well be disappointed with what I have to say, since any amendment would not be brought forward while the Bill is before your Lordships' House. There will be ample opportunity for your Lordships to comment upon those amendments when the Bill returns to your Lordships' House from another place, though I appreciate that such consideration has limitations because of the nature of the way in which we conduct our business following the consideration of a Bill in another place. Nevertheless, I think that what I should like to offer as some small recompense is that I undertake to advise your Lordships by way of a letter to those of your Lordships who have taken part in this afternoon's debate—of course, a copy will be placed in the Library—so that you may be aware of what the Government are intending to do by way of response. I shall also ensure that your Lordships have a copy of the consultative document.

I think there is no fundamental difference between our thinking and that of noble Lords who have spoken; it is perhaps just a question of the method by which we achieve what, as I have said on previous occasions, is the right balance. With that undertaking, I would ask the noble Lord, Lord Bruce of Donington, to withdraw his amendments.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for his response. I must say—and I hope I may have some measure of support from your Lordships—that I was somewhat surprised to learn from the noble Lord that the Government want more time to consult with interested parties. I noted that the noble Lord, particularly in his concluding remarks, concurred with the general spirit that quite evidently pervades your Lordships' House on this matter.

The Cork Report has been out since June, 1982; it has been available for Government consideration for a long time. If the Government had really wanted to consult, what better method is there of consultation than to have the Cork Report itself, including these clauses, debated in one or both Houses of Parliament? That is the finest way in which to do it; that is the way in which the British democratic institutions work. Another place and this place are not only the legislative sections of Parliament; they are the two public forums in the Unitd Kingdom in which issues of great public importance can be debated and to which public interest can be directed. They exist as public forums in order that the nation as a whole may be aware of the issues that are being debated either in another place or here. They are not merely a closed club in which one can debate in semi-secrecy or semi-confidentiality, with the public excluded.

One of the reasons I personally have always insisted on the validity of the second Chamber—your Lordships' House—is precisely that it is a public forum which attracts the wide interest of the public. Therefore, what better method of consultation has there been than to have all these issues, including the particular one that we have debated this afternoon, become the subject of public discussion?

I do not in any way query the sincerity of the noble Lord when he says—and I am bound to say, just mildly reproachfully, at the eleventh hour or maybe the eleventh-and-half hour—that the time has now come for wider consultation. I appreciate the sincerity of purpose that obviously animated the noble Lord, and indeed the Government in offering that solution. The solution which I am going to propose to your Lordships certainly does not exclude that. Indeed, it may reinforce the arguments that perhaps may need to be re-stated in another place when the Bill goes there.

I had the honour for some time to be a Member of another place and as a result of that I have the facility of wandering quite freely in all parts of another place, except the Chamber itself. I would be less than frank with your Lordships if I refrained from disclosing to you that I have had very wide discussions about this particular clause not only with Members of my own Party but also with Members of the Party opposite with whom in this connection I am on extremely friendly terms. Therefore, I am quite convinced in my own mind that another place will not take a different view from this place.

I want this Bill when it goes from this House to be this House's Bill. I want this House to express the view that it can collectively form on the substance of the Bill and in particular on this clause. If another place or if the Government have later views on this matter which are illuminated by the further inquiries that they are able to make, it lies within their power in another place, in view of the great majority that they possess, to amend anything which comes from your Lordships' House.

I do not in any way impugn the sincerity of the Government or the intentions of the noble Lord, Lord Lucas of Chilworth. However, I want the Bill to carry your Lordships' imprint on it when it goes from this place. Notwithstanding the undertaking given by the noble Lord, I fear that in the interests of this House as well as in the interests of the public at large, whose interest may be attracted towards it, I must ask your Lordships in all parts of the House to support the amendments which your Lordships have afforded me the opportunity of moving this afternoon, if necessary in the Division lobbies. I beg to move.

5.45 p.m.

Lord Boyd-Carpenter

My Lords, before the House comes to a decision, I want to ask my noble friend a question which may affect the way in which some of your Lordships will react if the matter is put to a Division. I hope that I understood my noble friend to be promising, without specifying, that there would be an amendment or certain amendments put into the Bill in another place. If such amendment—even one—is put in, your Lordships will have a chance to consider it when it comes back to this House. However, if there were to be no amendment the opportunity for your Lordships to consider the matter would not arise. Therefore, I wonder whether my noble friend, with the leave of the House, would clarify the position. It may be due to my imperfection of understanding, but I did not understand whether he was saying that there would be consultations and there might be amendments or that there would be consultations which would result in at least one amendment. Perhaps my noble friend will clear up the matter.

Lord Lucas of Chilworth

My Lords, with the leave of the House, I am very willing to clear up the question which my noble friend Lord Boyd-Carpenter has put to me. Perhaps I may say that there is no feeling of the eleventh-and-a-half hour on the part of the Government. I gave an undertaking during the Committee stage when these matters were put fairly forcefully by the noble Lord, Lord Meston.

As we proceeded with our thinking on this matter we came to the conclusion then, notwithstanding what had been said to us as a result of the Government's White Paper, but most particularly as a result of what had been said in your Lordships' House, that we should consult wider. The more we discussed the matter, the more important it became. This is a direct response to what your Lordships said during the Committee stage.

It takes some little while even in the best of well-run departments of state, to get out a short, concise, consultative document. The notice of our intention to do this has already brought response. As a result of the responses which we expect we shall receive by the end of May in consideration of what your Lordships have said in the House this afternoon I have given a firm undertaking—this is the point which my noble friend wants to know—that amendments will be tabled to take care of that response. I thought that I had made a generous offer for further consultation with your Lordships in regard to the documents and in regard to receiving anything that anybody would like to say on this matter. I have given that firm undertaking. The Government will respond by way of amendment. I ask the House to support me in that undertaking and to support my request to the noble Lord opposite to withdraw his amendments.

Lord Mottistone

My Lords, not having spoken before, perhaps I may intervene for a moment. It seems to me that if these amendments were taken to a Division and were lost, it would do the cause with which the House as a whole agrees harm rather than good. If there is any doubt in the Government's mind after they have had their consultations as to exactly how they might frame the amendment that my noble friend the Minister has said he will definitely put down in another place, if the consultations show a balance that is too even and this discussion we have just had is not taken to a Division, one can perhaps suggest that the Government would take full account of what has been said from these Benches by my noble friend as well as by others in making their decision. If, on the other hand, it is taken to a Division and it is defeated, and it is an even balance, the Government might not pay quite so much attention to what we have said in this House as they otherwise would.

Lord Bruce of Donington

My Lords, I am grateful to the noble Lord. I do not wish in any way to impugn the undertaking that the noble Lord has given. If the noble Lord intends, following consultation, to effect certain changes in the Bill that goes from your Lordships' House he will undoubtedly do so, and he may well do so within the spirit of our discussions this afternoon, although he said that my final decision as to what should be done must await the consultations which he anticipates are going to be taken by the end May.

As I say, I do not wish to impugn the Government's intention in any way, but I do not see that it can deflect the Government's final course whatever decision is made this afternoon. If the amendments that I have suggested are incorporated in the Bill, then the Government will review them and will review the whole structure of the Bill in the light of the consultations which are going to take place. If the Bill, as it leaves your Lordships' House, does not meet the result of their consultations, they will amend it. All I wish to do is to give this House an opportunity to send the Bill from this place in conformity with its wishes. We shall all, I think, vote in this matter without offence to anyone and according to the dictates of our individual consciences. It is to those consciences that I now appeal.

5.53 p.m.

On Question, Whether the said amendment (No. 224) shall be agreed to?

Their Lordships divided: Contents, 73; Not-Contents, 116.

DIVISION NO. 1
CONTENTS
Ardwick, L.	Birk, B.
Avebury, L.	Blease, L.
Aylestone, L.	Blyton, L.
Beaumont of Whitley, L.	Boston of Faversham, L.

Bottomley, L.	Lloyd of Kilgerran, L.
Briginshaw, L.	Lockwood, B.
Brockway, L.	Longford, E.
Brooks of Tremorfa, L.	Mackie of Benshie, L.
Bruce of Donington, L.	McNair, L.
Carmichael of Kelvingrove, L.	Milverton, L.
Chitnis, L.	Molloy, L.
Collison, L.	Mulley, L.
Davies of Leek, L.	Nicol, B.
Dean of Beswick, L.	Northfield, L.
Denning, L.	Oram, L.
Elwyn-Jones, L.	Phillips, B.
Ewart-Biggs, B.	Pitt of Hampstead, L.
Ezra, L.	Ponsonby of Shulbrede, L. [Teller. ]
Fisher of Rednal, B.
Gallacher, L.	Rea, L.
Galpern, L.	Rhodes, L.
Glenamara, L.	Rochester, L.
Graham of Edmonton, L.	Ross of Marnock, L.
Gregson, L.	Shepherd, L.
Grey, E.	Shinwell, L.
Hampton, L.	Stedman, B.
Hanworth, V.	Stewart of Fulham, L.
Harris of Greenwich, L.	Stoddart of Swindon, L [Teller.]
Jeger, B.
Kagan, L.	Taylor of Blackburn, L.
Kennet, L.	Taylor of Mansfield, L.
Kilmarnock, L.	Tordoff, L.
Kinloss, Ly.	Wallace of Coslany, L.
Kirkhill, L.	Walston, L.
Lawrence, L.	White, B.
Leatherland, L.	Winstanley, L.
Listowel, E.	Wootton of Abinger, B.
Llewelyn-Davies of Hastoe, B.

NOT-CONTENTS
Airey of Abingdon, B.	Hailsham of Saint Marylebone, L.
Alexander of Tunis, E.
Allerton, L.	Harmar-Nicholls, L.
Ampthill, L.	Hemphill, L.
Atholl, D.	Henderson of Brompton, L.
Auckland, L.	Holderness, L.
Belhaven and Stenton, L.	Hornsby-Smith, B.
Belstead, L.	Hylton-Foster, B.
Boardman, L.	Inglewood, L.
Boyd-Carpenter, L.	Ingrow, L.
Brabazon of Tara, L.	Kaberry of Adel, L.
Broxbourne, L.	Lane-Fox, B.
Bruce-Gardyne, L.	Lauderdale, E.
Buckinghamshire, E.	Lindsey and Abingdon, E.
Caithness, E.	Long, V.
Cameron of Lochbroom, L.	Lucas of Chilworth, L.
Campbell of Alloway, L.	McFadzean, L.
Campbell of Croy, L.	Macleod of Borve, B.
Carnegy of Lour, B.	Mancroft, L.
Cathcart, E.	Margadale, L.
Chelwood, L.	Marley, L.
Coleraine, L.	Marsh, L.
Constantine of Stanmore, L.	Marshall of Leeds, L.
Cork and Orrery, E.	Maude of Stratford-upon-Avon, L.
Craigavon, V.
Cullen of Ashbourne, L.	Merrivale, L.
Davidson, V.	Mersey, V.
De La Warr, E.	Montgomery of Alamein, V.
Denham, L. [Teller.]	Mottistone, L.
Dilhorne, V.	Munster, E.
Drumalbyn, L.	Murton of Lindisfarne, L.
Dundee, E.	Noel-Buxton, L.
Ellenborough, L.	Nugent of Guildford, L.
Elles, B.	O'Brien of Lothbury, L.
Elliot of Harwood, B.	Onslow, E.
Elton, L.	Orkney, E.
Faithfull, B.	Orr-Ewing, L.
Ferrier, L.	Pender, L.
Fisher, L.	Peyton of Yeovil, L.
Fortescue, E.	Portland, D.
Fraser of Kilmorack, L.	Rankeillour, L.
Gainford, L.	Reay, L.
Glanusk, L.	Renwick, L.
Grimston of Westbury, L.	Rodney, L.

Romney, E.	Teviot, L.
St. Davids, V.	Teynham, L.
Selkirk, E.	Trefgarne, L.
Sharples, B.	Trumpington, B.
Skelmersdale, L.	Tryon, L.
Somers, L.	Vaux of Harrowden, L.
Stockton, E.	Vickers, B.
Stodart of Leaston, L.	Vivian, L.
Strathcarron, L.	Ward of Witley, V.
Strathspey, L.	Westbury, L.
Sudeley, L.	Whitelaw, V.
Suffield, L.	Windlesham, L.
Swansea, L.	Young, B.
Swinfen, L.	Young of Graffham, L.
Swinton, E. [Teller.]	Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendment No. 225 not moved.]

6 p.m.

Clause 139 [General powers of trustee]:

[Amendment No. 226 not moved.]

Lord Lucas of Chilworth moved Amendment Nos. 227 and 228:

[Printed earlier: 1/4/85, col. 54.]

The noble Lord said: My Lords, when we were dealing with Amendment No. 21 I spoke also to Amendments Nos. 227 and 228. I beg to move these two amendments.

On Question, amendments agreed to.

Lord Lucas of Chilworth moved Amendment No. 229:

[Printed earlier: 1/4/85, col. 54.]

The noble Lord said: My Lords, it might be for the convenience of the House if I speak also to Amendment Nos. 232 and 233: Amendment No. 232: Clause 144, page 114, line 33, leave out ("Subsection (4)") and insert ("Subsections (4) and (4A)"). Amendment No. 233: Page 114, line 34, leave out ("it has") and insert ("they have").

These amendments are desirable to retain the flexibility provided by the law as at present. The Government appreciate that although in the great majority of cases the trustee in bankruptcy should obtain the sanction of his committee as required by Clauses 139 and 144, there will be occasions when he needs to act quickly, but where it would be impossible to obtain the necessary sanction in time; for example, where it is necessary to maintain a business as a going concern to the ultimate benefit of the creditors. These amendments recognise that such situations may arise, but provide that the committee can sanction such action by the trustee only where it is satisfied that the trustee has sought its sanction without undue delay and that the trustee had to act urgently in the matter. The inherent jurisdication of the courts to give retrospective permission where the trustee has acted without the sanction of his committee is also preserved by these amendments. I beg to move.

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 230:

[Printed earlier: 1/4/85, col. 54.]

The noble Lord said: My Lords, I spoke to Amendment No. 230 while we were discussing Amendment No. 21. I beg to move.

On Question, amendment agreed to.

[Amendment No. 231 not moved.]

Clause 144 [Manner of distribution of estate]:

Lord Lucas of Chilworth moved Amendments Nos. 232 and 233:

[Printed above.]

On Question, amendments agreed to.

Clause 145 [Priority of debts]:

Lord Cameron of Lochbroom moved Amendment No. 234: Page 115, line 35, leave out ("given any priority in bankruptcy") and insert (", in the event of bankruptcy, to have a particular priority or to be postponed.").

The noble and learned Lord said: My Lords, this is a technical amendment to Clause 145 which establishes the priority of claims in a bankruptcy. Other provisions of the Bill (for example, Clause 157) and of other Acts (for example, Section 3 of the Partnership Act 1890) can also affect priority. Consequently Clause 145(7) expressly preserves the effect of those other provisions.

Representations have been made that the use of the word "priority" in Clause 145(7) means that the subsection may apply only to provisions in other Acts which advance the priority of a particular claim and not provisions such as Section 3 of the Partnership Act 1890 to which I have referred which defer rather than advance claims.

The purpose of the amendment is merely to make it absolutely clear that other statutory provisions which alter the order of priorities in a bankruptcy whether by advancing or by deferring the order of payment of certain claims are not prejudiced by the provisions of Clause 145. I beg to move.

On Question, amendment agreed to.

Schedule 5 [Preferential debts]:

Lord Cameron of Lochbroom moved Amendment No. 235: Page 166, line 20, leave out paragraph 1 and insert— ("1.—(1) Sums due at the relevant date from the debtor on account of deductions of income tax from emoluments paid during the period of twelve months next before that date, being deductions which the debtor was liable to make under section 204 of the Income and Corporation Taxes Act 1970 (pay as you earn), less the amount of the repayments of income tax which the debtor was liable to make during that period. (2) Sums due at the relevant date from the debtor in respect of such deductions as are required to be made by the debtor for that period under section 69 of the Finance (No. 2) Act 1975 (sub-contractors in the construction industry).").

The noble and learned Lord said: My Lords, in moving this amendment I should like, with your Lordships' permission, to speak also to certain other amendments to Schedule 5, these being Amendments Nos. 236 to 247, 253 to 257, 259 to 261 and 264. Amendment No. 236: Page 166, line 35, leave out ("bankrupt") and insert ("debtor") Amendment No. 237: Page 166, line 40, leave out ("bankrupt") and insert ("debtor") Amendment No. 238: Page 167, line 8, leave out ("bankrupt") and insert ("debtor") Amendment No. 239: Page 167, line 11, leave out paragraph 3. Amendment No. 240: Page 167, line 16, leave out ("bankrupt") and insert ("debtor"). Amendment No. 241: Page 167, line 18, leave out ("bankrupt") and insert ("debtor"). Amendment No. 242: Page 167, line 21, leave out ("bankrupt") and insert ("debtor"). Amendment No. 243: Page 167, line 26, leave out ("bankrupt") and insert ("debtor"). Amendment No. 244: Page 167, line 30, leave out from ("Any") to ("Schedule") in line 31 and insert ("sum which is owed by the debtor and is a sum to which"). Amendment No. 245: Page 167, line 32, leave out from ("premiums") to end of line 35 and insert ("applies"). Amendment No. 246: Page 167, line 38, leave out ("bankrupt") and insert ("debtor"). Amendment No. 247: Page 167, line 39, leave out ("his") and insert ("the debtor"). Amendment No. 253: [Printed earlier: col. 129.] Amendment No. 254: Page 168, leave out lines 12 to 27 and insert—

1. (" (a) where at the time the bankruptcy order was made there was an interim receiver of the debtor's estate appointed under section 112 of this Act, to the date on which the interim receiver was first appointed after the presentation of the bankruptcy petition; and
2. (b) in a case not falling within paragraph (a) above, to the date of the making of the bankruptcy order.").

Amendment No. 255: Page 168, line 42, leave out ("bankrupt") and insert ("debtor"). Amendment No. 256: Page 168, line 46, leave out ("bankrupt") and insert ("debtor"). Amendment No. 257: Page 169, line 2, leave out ("bankrupt") and insert ("debtor"). Amendment No. 259: Page 169, line 19, leave out ("a bankruptcy") and insert ("his employer going into liquidation or being adjudged bankrupt"). Amendment No. 260: Page 169, line 28, leave out ("bankrupt") and insert ("debtor"). Amendment No. 261: Page 169, line 32, leave out ("bankrupt") and insert ("debtor"). Amendment No. 264: Transpose Schedule 5 to after Schedule 2.

Certain of these amendments fulfil the substance of a commitment which I gave in Committee that the Government would bring forward amendments to abolish the preferential status of assessed taxes and local rates. As I explained in dealing with certain earlier amendments, the opportunity has also been taken to propose a number of technical changes to improve the format of the Bill and to secure harmonisation of corporate and personal insolvency provisions in priority of debts. There are a number of consequential amendments therefore which flow from this exercise, a number of these being those which I ask leave to speak to in addition to the present amendment.

I assure your Lordships that they are all technical in nature and will improve the Bill considerably. I hope your Lordships will accept that it is the most sensible arrangement that practitioners should have to refer to only one Act to discover the law relating to preferential debts in insolvencies. I also take this opportunity to assure Scottish practitioners that the Government intend to propose in another place amendments to the Bankruptcy (Scotland) Bill which will produce an almost identical set of rules for use in sequestrations in Scotland.

If I may now deal with the amendments briefly, I should be willing, if your Lordships wish, to explain the effect of each amendment in detail, but first I shall deal with the principal matter which gives rise to this series of amendments. That is the acceptance by the Government of the case for the abolition of preference of the so-called assessed taxes and also for local rates. The present amendment and Amendment No. 239 fulfil that undertaking. The additional amendments are, in the main, to secure the harmonisation in Schedule 5 of the two types of insolvency, corporate and personal, by substituting the word "debtor" for the word "bankrupt", which is used in Schedule 5 only in relation to personal insolvency.

The result of your Lordships accepting these amendments, if you do so, is that the only preferential debts remaining in an insolvency will be those set out in Schedule 5 to the Bill as amended. Your Lordships will recall that so far as the so-called collector taxes were concerned, taxes such as PAYE and VAT, I announced in Committee that the Government wished to have the benefit of the views of your Lordships before reaching a final view. However, I think I made it clear at that time that the view of the Government, as then advised, was that the present 12-month period for these taxes should remain. In the course of the debate in Committee noble Lords on both sides of the Chamber shared that view while others dissented.

Having considered the various arguments, the Government have come to the conclusion that the period of preference for the collector taxes ought to remain at a full year. The nature of PAYE and sub-contractors' deductions (which are dealt with in the amendment we are dealing with at the moment and the next following part of the amendment) are quite different from that of other taxes, as was recognised by a number of noble Lords from all parts of the Committee. It was widely recognised that what was in question was money that does not, and never did, belong to the employer. It is money that he is required by law to deduct from his employees' wages and to hold, as it were, in trust for the Crown. Why should he then be permitted to divert these funds to meet his own debts so that, to the extent of the diversion, other creditors will have benefited at the Crown's expense?

Similar considerations apply to other monies collected on behalf of the Crown. In the words of Cork, it cannot be right that statutory provisions enacted for the more convenient collection of the revenue should inure to the benefit of private creditors. Given the significant difference between taxes collected on behalf of the Crown on the one hand, and the employers' own tax debts on the other, it could reasonably be argued, as I indicated in Committee, that there should be no limitation of the preferential status accorded to the former class of tax liability, that is to say, the collector taxes. However, in conformity with the law as applied to assessed taxes, it was decided to limit the period of preference to a maximum of 12 months. As your Lordships are aware, that is a position which has obtained for some considerable time.

By reducing the preferential period to less than 12 months, pressure would inevitably be placed on the revenue-collecting departments to review their collection procedure. This would be particularly necessary, for instance, in the case of PAYE and national insurance contributions, both of which (as your Lordships will be aware) are based upon an annual return. Accordingly, there is no reconciliation of the amount due by an employer and the amount paid by him until after the submission of the annual return at the end of the tax year. If a reduced period of preference were to be introduced, then inevitably both departments would have to consider introducing checks on employers' schemes more frequently than on an annual basis in order that they might protect their rights to claim outstanding arrears in the event of an employer becoming insolvent. That, as noble Lords will realise, would in turn affect the employers and would inevitably increase their administrative demands and the related costs of doing so—and that at a time when Government are seeking to reduce the administrative pressures upon employers in general and small businesses in particular.

6.15 p.m.

As has been said on a number of occasions, the Crown is not in a position of being able to choose its debtors. If an individual or a company takes on employees, then PAYE and national insurance contributions must be deducted as laid down by law. The opportunity for indebtedness thus exists whether or not the revenue collecting department regards the employer as credit worthy. So far as VAT is concerned, on reaching a certain level of turnover a person has a statutory requirement to charge tax on supplies and to account for that tax to the Customs. Customs and Excise, like other revenue-collecting departments, cannot therefore choose their debtors, and it is limited in the measures that it can take to secure its debts.

I think it is generally accepted by most people, including Sir Kenneth Cork, that it is right for the Crown to have a degree of preference for the collector taxes. Indeed, as I have said, on one view the logic of the arguments for retaining preference for these collector taxes might lead one to say that Crown preference there should be unlimited. The Cork Committee gave no reasoning for their conclusion that the present 12-month period was excessive. Their recommendation that the limit should be reduced in general to three months was based entirely on the interval between returns for various taxes; but, as Cork himself recognised, the interval is not always as little as three months. In any event, I would suggest that the interval between returns is not a logical basis for limiting the liability to account for collecting periods.

Certain amendments at Committee stage suggested a period of six months. As I have already indicated, 12 months is the present rule and a rule which has been present for some considerable time. I suggested in Committee that it is for those who seek to move on to some shorter period to justify the need for such a change. By accepting the principle behind the amendments moved in Committee that assessed taxes should no longer receive preference, the Government recognised the arguments put forward in this Chamber and made a substantial concession. I would suggest that no substantive argument has been made out for reducing the period of preference any further than that at which it presently stands. So it remains the Government's view that the present limited preference for the collector taxes is justified in both principle and in degree. I beg to move.

Lord Bruce of Donington

My Lords, I am most grateful to the noble and learned Lord for having moved the various amendments that he has described to your Lordships. The House will be grateful that he has, at any rate, honoured in part the assurance that he gave in Committee about proposed amendments to Schedule 5. It is quite easy to see from the length of time that the noble and learned Lord devoted to the position of Crown preference, particularly in regard to the taxes collected on behalf of the revenue or Customs and Excise, that those are the aspects upon which the Government feel weakest. If they had felt strong, they would not have devoted all the time and argument along the tortuous path about not being able to choose their debtors and sums collected on behalf of the public, and so on. In other words, methinks they have protested too much about this.

It is not as though they always held the same view. Had there been a consistency between what the noble Lord said this afternoon and, for example, what the Chancellor of the Exchequer has said, there would be some case for it. But in another place, only a few months ago, his right honourable friend the Chancellor of the Exchequer was claiming that he could not very well tamper with VAT because in practice it was used as working capital by the firms which became liable for it. I must say that it is either working capital or it is not, and the noble Lord knows perfectly well that in both cases, when it suits the Government, they say, "You have the use of the money, you are using it as working capital and therefore it would be against the stimulus we would like to give to small businesses to make collection more restrictive than it is". The argument has been used in another place by the right honourable gentleman the Chancellor of the Exchequer.

The Cork Committee considered this matter in great depth and came to the conclusion that the period ought to be reduced. I believe most of your Lordships considered that a three months' limitation would probably be appropriate in the circumstances. It is well known that one of the greatest hardships that is endured, on a firm going into liquidation or an individual partnership going bankrupt, is endured by the unsecured creditors. When a business ceases, as it normally does in these circumstances, of course the assets of the concern are no longer valuable as a going concern, and no benefit can inure to the creditors by virtue of the business being sold as a going cencern. When the "chop" comes down the assets are valued at break-up value, and what happens in the event is that unsecured creditors very rarely get anything at all by the time the debenture-holders and other preferential shareholders have proved their claims. Indeed, one of the results of the very welcome concessions that have been made by the noble Lord is that slightly more win now become available for the general body of creditors. Bearing in mind that the principal conclusions of the Cork Committee were that so far as is feasible in a bankruptcy or liquidation the claims of creditors should abate pari passu, then of course the concessions that have been made, welcome though they are, are comparatively miniscule.

In common with many of your Lordships, I have received representations from local authorities concerning the abolition of the preferential statements of rates. In common with your Lordships, I have had to weigh the claims of the individual as a consumer and the individual as a creditor against the individual as a ratepayer; and it is very difficult to arrive at a balance. I have come to the conclusion, on the basis that you cannot ill-treat a local authority because that is a body, and you can only ill-treat the people who are comprised within the local authority, treating them as individuals, that a fair balance has been struck as between those competing interests by the abolition of the rates preference; although, as I say, I have had many eloquent testimonies to the contrary from local authorities.

I had rather hoped that the Government were going to go much further than they have gone, but the concessions that the noble and learned Lord has been able to offer on behalf of the Government are a step in the right direction. They will marginally increase the amount available for the general body of creditors in a liquidation or a bankruptcy, and I trust that the House will support them.

Lord Mottistone

My Lords, I came in yesterday on Amendment No. 130, and I do not want to repeat exactly what I said then. But now, after having heard the full argument of my noble and learned friend the Lord Advocate, I want to thank him very much for the good points he has advanced for us. I saw his argument about PAYE. I am not so convinced about VAT. It may be a collector tax, but it is a business tax rather than a tax on individuals. If PAYE is not passed on, in the end the individual person will be found out by the Revenue and they will get back at him; so it will be more difficult for the individual person. But in regard to VAT, I would not be so sure. However, I think I shall have to await advice from the CBI on this whole package of amendments. As I said in connection with Amendment No. 130, there is a possibility that I may come forward with some refinement to improve the generosity of the Government as evidenced by my noble and learned friend's moving of this amendment.

Lord Noel-Buxton

My Lords, I should like to take this opportunity to record my thanks to the Government and to my noble and learned friend the Lord Advocate for these amendments to Schedule 5, which have fulfilled the assurances that were given in response to the amendments moved by me in Committee. Of course I should like the period of 12 months to be reduced to six months, as I said in Committee, but I take my noble and learned friend's point that it is for those who seek to change the status quo to show why it should be changed. I am only sorry that the Government have not been persuaded but, on the other hand, I find my noble and learned friend is very persuasive. I suppport these amendments.

The Earl of Selkirk

My Lords, I, too, should like to thank the noble and learned Lord the Lord Advocate most warmly for fulfilling fully the promise he made during the course of the Committee stage. He says that this is the simplest way to do it. I cannot say that reading the amendments constitutes simple reading in any circumstances whatever. In fact, I had the utmost difficulty in finding what on earth the Government really had done.

I, too, am very sorry that he has not accepted a shorter period than 12 months. He says that administratively it is easier to take the 12 months on which income tax is based; but of course insolvency does not take place to coincide with any financial year whatever, and it may be for quite a different period that the income tax has to be collected. I should have thought it would be just as easy in these circumstances to make it six months rather than 12 months. I do not think that the argument that this is administratively easy is correct; but I thank the noble and learned Lord for what he has done even though it may not be all that we should have liked to see done.

Lord Denning

My Lords, may I say one word? I always thought that VAT was really in the nature of working capital when it is collected. It is not really a collector tax at all. I would agree with the noble Lord, Lord Mottistone, and others that if we could do something about VAT and not allow that a preference, it would be a good thing. But, still, one ought to be very thankful for even small mercies; so on the whole one would not object to this.

Lord Cameron of Lochbroom

My Lords, I am very grateful to those noble Lords who have spoken. The noble Lord opposite said I had honoured in part the assurance I had given. I think that to he fair to me and to him perhaps a reading of the Hansard report would indicate that I had honoured the assurances I gave both in full and also in relation to the fact that I was prepared to hear.

Lord Bruce of Donington

My Lords, I wish to withdraw that immediately. They have not met my expectations in full but I do completely withdraw my observation. The noble and learned Lord has in fact honoured his promise and I would not like it to be thought otherwise.

Lord Cameron of Lochbroom

My Lords, I am most grateful to the noble Lord for that very generous withdrawal. I shall make only one point in relation to the matters which he raised. I do not dispute that the Cork Committee considered the matter of Crown preference in great depth. I think the point that I made was in relation simply to their recommendation as regards the shortening of the timescale. I made the point—and I still do—that they do not provide reasoning there. I have put before your Lordships the reasons why the Government have stayed firm on that matter notwithstanding the blandishments which noble Lords—and, indeed, my noble friends Lord Mottistone, Lord Noel-Buxton and Lord Selkirk—have stated in their responses to what I have said. I would add that I am most grateful to them for the attitudes which they have adopted in this matter. I do not know whether my noble friend Lord Mottistone feels that it is appropriate in the light of what has been said today to seek to make any further suggestions, but I hope it has been made quite clear the principle on which the Government are standing in making these amendments.

6.30 p.m.

There is one minor matter which I should have brought to the attention of the House when I stood up to move this amendment. I should have drawn to the attention of your Lordships the last line of Amendment No. 235. Your Lordships will observe that, as it appears on the Marshalled List, the word at the beginning of that line should be "sub-contractors" as opposed to "b-contractors". With that, I commend this amendment and the others consequential upon it to your Lordships.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 236 to 247:

[Printed earlier: cols. 172–3.]

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 248:

[Printed earlier: col. 126.]

The noble and learned Lord said: My Lords, this amendment was spoken to by me in relation to Amendment No. 154. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 249: Page 167, line 44, leave out sub-paragraph (2).

The noble and learned Lord said: My Lords, for the convenience of the House, I shall speak to this amendment and also to Amendment No. 250. Amendment No. 250: Page 168, line 5, leave out from ("the") to end of line 6 and insert ("debtor has been terminated, whether before, on or after that date. (3A) So much of any sum owed in respect of money advanced for the purpose as has been applied for the payment of a debt which, if it had not been paid, would have been a debt falling within subparagraph (1) or (3) above.").

In speaking to these two amendments perhaps I may also make reference to Amendment No. 251, set down by the noble Lord, Lord Bruce of Donington, which is of course an amendment to Amendment No. 250. Amendment No. 251 [As an amendment to Amendment No. 250]: Leave out the proposed sub-paragraph (3A).

Amendments Nos. 249 and 250 are technical amendments which form part of the amendments to harmonise and modify the list of debts which attract preferential status in the event of insolvency. Their purpose is to clarify and preserve the preferential status of debts owed to employees in respect of holiday pay.

In revising the list of debts which attract preferential status in the event of insolvency, the opportunity was taken in Schedule 5 to deal with a deficiency which appeared in the way in which Schedule 19 to the 1985 Act was drawn. Schedule 19 provided that amounts owed and unpaid in respect of holiday pay during the 12 months immediately preceding insolvency would, within limits, be preferential where the employees' employment was terminated "by or by the effect of" the insolvency of the employer. Doubts were expressed, however, as to the adequacy of this wording in protecting the preferential status of such debts when an employee is dismissed a short while after the date of insolvency, and it has been argued that such a dismissal might not be "by the effect of" the insolvency of the employer.

The Bill as introduced attempted to close this potential loophole in paragraph 6(3) of Schedule 5, which now establishes the preferential status of accrued holiday pay. Nevertheless, it has continued to be felt that Schedule 5 does not entirely remove uncertainty as regards preferential status. Accordingly, the amendments which are now proposed are to remove any doubts on this subject.

I should add that the second amendment relates to a matter which was also the subject of consideration by the Cork Committee and by the Scottish Law Commission. In the Cork Report careful consideration was given as to whether subrogated preferential rights should continue to exist in a winding up; and, if so, whether they should be extended to bankruptcy. A majority of the committee came down in favour of both those propositions.

The Scottish Law Commission, I am glad to say, when considering the matter of bankruptcy in Scotland and also looking at the same questions, came to an identical conclusion. The recommendation was given effect to in the Bankruptcy (Scotland) Bill, which of course is now in another place. It will be found in paragraph 6(2) of Schedule 3 to that Bill.

I appreciate, as the Cork Committee pointed out, that the arguments are finely balanced in connection with this matter. On the one hand, it is argued that the banks, knowing that their rights are well protected, advance money to traders for the purpose of paying wages, and by so doing enable some businesses to keep going for longer than they ought. That, of course, is to the detriment of other creditors in the meantime. But the counter argument—the one which found favour with both the Scottish Law Commission and the Cork Committee—is that it is desirable that banks and other lending institutions should be encouraged to advance money to traders to pay wages at critical periods, particularly when the continuation of the business concerned hangs in the balance. If such funds could not be advanced in the knowledge that in the event of a subsequent formal insolvency any related claims could rank preferentially, then the potential lenders might well be discouraged from making the advances in cases particularly where such funds were desperately needed to enable a business to turn the corner, and thus lead to the early and unnecessary demise of businesses which could have been saved.

It is for that reason that the second amendment is proposed in the general context of the technical amendments to cure doubt about the effectiveness of the preference in relation to holiday pay. I beg to move.

On Question, amendment agreed to.

The Deputy Speaker (Lord Murton of Lindisfarne)

My Lords, if the noble and learned Lord the Lord Advocate would care to move Amendment No. 250 formally, we can proceed to deal with the amendment to it.

Lord Cameron of Lochbroom moved Amendment No. 250:

[Printed above.]

The Deputy Speaker

My Lords, I call Amendment No. 251 as an amendment to Amendment No. 250.

Lord Bruce of Donington moved, as an amendment to Amendment No. 250, Amendment No. 251:

[Printed above.]

The noble Lord said: My Lords, with the permission of the House, I should like to deal with Amendments Nos. 251 and 325 together. Amendment No. 325: Schedule 9, page 191, line 36, column 3, at end insert— (" In Schedule 19, paragraph 13.").

This amendment and the sections of the Cork Report that deal with the matters which the noble and learned Lord has outlined this afternoon have given me much cause for anxiety. It has been most difficult for me to make up my mind as to which of the arguments, to which the Cork Committee has given equal weight, is decisive.

I have to say that after listening to the noble and learned Lord and re-reading portions of the Cork Report, I have come to the conclusion that the noble and learned Lord is right and that I am wrong. His balance of argument is far more valid than the one that I was about to adduce. To save myself the embarrassment of putting forward an argument in which I no longer believe, I beg the leave of the House to withdraw the amendment.

Amendment to the amendment, by leave, withdrawn.

On Question, Amendment No. 250 agreed to.

[Amendment No. 252 not moved.]

The Deputy Speaker

My Lords, I understand that Amendments Nos. 253, 254, 255, 256 and 257 are consequential.

Lord Cameron of Lochbroom moved Amendments Nos. 253 to 257:

[Printed earlier: col. 173.]

The noble and learned Lord said: My Lords, it is the case that these amendments are consequential on Amendment No. 235. I beg to move.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 258:

[Printed earlier. col. 126.]

The noble and learned Lord said: My Lords, spoke to this amendment with Amendment No. 154. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 259 to 261:

[Printed earlier: col. 173.]

The noble and learned Lord said: My Lords, these amendments are consequential upon Amendment No. 235. I beg to move.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 262:

[Printed earlier: col. 126.]

The noble and learned Lord said: My Lords, this amendment is consequential on Amendment No. 154. I beg to move.

On Question, amendment agreed to.

[Amendment No. 263 not moved.]

Lord Cameron of Lochbroom moved Amendment No. 264:

[Printed earlier: col. 173.]

The noble and learned Lord said: My Lords, this amendment is consequential upon Amendment No. 235. I beg to move.

On Question, amendment agreed to.

Clause 148 [Duties of bankrupt in relation to trustee]:

Lord Lucas of Chilworth moved Amendment No. 265:

[Printed earlier: col. 149.]

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 194. I beg to move.

On Question, amendment agreed to.

Clause 149 [Second bankruptcy]:

Lord Lucas of Chilworth moved Amendment No. 266: Page 118, line 34, leave out ("comprised, or") and insert ("which is, or by virtue of section 134 above is").

The noble Lord said: My Lords, this amendment is proposed to Clause 149 of the Bill, which is concerned with the situation where a further bankruptcy order is made against a bankrupt who has not yet been discharged from earlier bankruptcy proceedings. The clause establishes how the debts and assets of the earlier proceedings are to be dealt with in the subsequent bankruptcy.

Under Clause 149(7) certain property "comprised or capable of being comprised" in the estate at the time of the first bankruptcy is not comprised in his estate for the purposes of the second bankruptcy. The purpose of the amendment is to make clear what is meant by property "capable of being comprised in the bankrupt's estate". It provides that the property referred to is that which a trustee may claim under Clause 134 of the Bill; that is, property which is on the face of it exempt from the bankrupt's estate under Clause 109(2) because it is necessary to him for his domestic or business purposes. However, the trustee may, within 42 days of acquiring knowledge of the property, or such longer time as the court may allow, claim it for the estate and provide a less expensive replacement.

The purpose of this provision is I think self-evident in that it would not be right to allow a bankrupt to retain an expensive antique table, while recognising at the same time that a table of some sort is necessary for normal domestic purposes.

Where a second or subsequent bankruptcy follows a first, it is obviously right that if the first trustee is still considering action under Clause 134 (and it may be that he has only recently become aware of the property concerned) the matter should proceed unaffected by the second bankruptcy; the property involved being something which the bankrupt actually owned at the time of the first bankruptcy order. With that explanation, I beg to move the amendment.

On Question, amendment agreed to.

Clause 152 [Extortionate credit transactions]:

Lord Lucas of Chilworth moved Amendments Nos. 267 and 268:

[Printed earlier: 1/4/85, col. 104.]

The noble Lord said: My Lords, when moving Amendment No. 139 I spoke also to these two amendments. I beg to move.

On Question, amendments agreed to.

Clause 165 [Obtaining credit]:

6.45 p.m.

Lord Bruce of Donington moved Amendment No. 269: Page 132, line 37, at beginning insert ("Subject to subsection (4A) below").

The noble Lord said: My Lords, with the leave of the House, I should like to address myself to this amendment and also to Amendment No. 271: Amendment No. 271: Page 133, line 18, at end insert— ("(4A) The bankrupt is not guilty of an offence under subsection (1) above if—

1. (a) he obtains credit for the purpose of acquiring any such property as is mentioned in section 109(2) above;
2. (b) at the time he obtains such credit he has reasonable cause to believe that he will be able to repay such credit and any interest thereon in accordance with the terms on which the credit is provided; and
3. (c) he has complied with his obligations as to the repayments of such credit and interest or if he has failed to do so, such failure is not caused wholly or in part by any improper or negligent act or omission of the bankrupt.").

These amendments endeavour to deal with the situation of the possible granting of credit in very reasonable amounts to a bankrupt. The present situation on the right to obtain credit is in practice, in an increasingly credit-orientated society, the most serious of the disabilities suffered by a bankrupt. The Cork Committee proposed no relaxation of the present rule. Your Lordships may refer to paragraphs 1840 to 1851, but the argument in paragraph 1844 seems to us to be rather circular.

The deception involved is not—as the Cork Committee suggested—failing to disclose facts which might lead to the refusal of credit (which may, for example, include the fact that the borrower has just obtained his discharge) but failing to disclose facts which the borrower is legally required to disclose. The real justification for the restriction on credit is to prevent the bankrupt from getting into further trouble by borrowing money to spend for non-essential purposes.

I invite your Lordships to consider that it may be reasonable to allow a bankrupt to obtain necessaries on credit without disclsure, provided that he reasonably believes he can repay the credit, and either does so or is prevented from doing so by reasons (such as illness) which are outside his control. I beg to move.

Lord Lucas of Chilworth

My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, for explaining so explicitly the purpose behind his amendments. While I am not unsympathetic to the position in which the undischarged bankrupt may find himself in this context, I have to say that, for a number of reasons, I am not able to accept these amendments.

The principal purpose of Clause 165, which reenacts the substance of Section 155 of the Bankruptcy Act 1914, is to protect the potential supplier of credit. That person is entitled to know what sort of risk he is taking—and the fact that the person applying for the credit is an undischarged bankrupt is something that the potential supplier of credit will wish to take into account when considering the application.

Of course, there is nothing to stop him from agreeing to supply credit to an undischarged bankrupt, and I am sure that in reaching such a decision he will take into account the type of considerations to which the noble Lord has referred in proposing these amendments. But the supplier of credit should reach that decision in full knowledge that he is dealing with an undischarged bankrupt who previously failed to manage his financial affairs.

A further purpose of Clause 165 is to dissuade an undischarged bankrupt from being tempted into engaging in the sort of credit transactions which may have led to his insolvency in the first place. I would ask your Lordships to bear in mind that most bankrupts will, under the Bill, be discharged after three years or, under the new provisions for accelerated discharge, after two years.

I feel that these amendments would remove an important protection for the suppliers of credit and indeed might encourage undischarged bankrupts to over-extend themselves in the management of their necessarily limited resources. The prescribed amount under Section 155 of the Bankruptcy Act 1914 stands at present at £50 and has done so since it was increased by the Insolvency Act 1976. This and the various other monetary sums in the insolvency code will be reviewed prior to the new legislation coming into force so that they can be set at a level more appropriate to the present day. To some extent, that might take care of what the noble Lord seeks to introduce into the Bill.

Having said that, and in inviting the noble Lord to withdraw his amendment, there is perhaps one other thing I should like to say. I believe this is the last amendment that the noble Lord, Lord Bruce of Donington, is to move during this stage of our proceedings. It is certainly the last of his amendments, he may be happy to know, to which I shall be responding. I should like to take this opportunity of thanking the noble Lord for his courtesy in the past couple of days in what has been—and I use his words—something of a marathon. I appreciate, as does my noble and learned friend the Lord Advocate, that he has not had the benefit of a number of his noble friends who, unfortunately, had to be absent from the country. I compliment the noble Lord on his patience and fortitude.

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for his very kind remarks which, I can assure him, are deeply appreciated. I reciprocate by saying that having a disputation with him in these circumstances has been a pleasant experience from which I have learned greatly and for which I am deeply indebted to the noble Lord. I thank him very much.

I am very pleased that the noble Lord has indicated that at a later stage regulations will be published which possibly vary the amounts of permitted credit to a bankrupt in the circumstances I have described. I am reassured by this because we are increasingly living in a credit card era. I must confess that I have not yet accustomed myself to it. I much prefer to pay my way as I go, but that is now old-fashioned. Possibly the noble Earl, Lord Stockton, if he were in the House today, would appreciate those sentiments; but perhaps there are those among us who are more modern in outlook. I am glad that there is to be flexibility. I completely accept the noble Lord's explanation and ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas of Chilworth moved Amendment No. 270: Page 132, line 37, leave out ("is") and insert ("shall be").

The noble Lord said: My Lords, this is a drafting amendment only. All the other clauses which deal with bankruptcy offences provide that where certain events have taken place the bankrupt shall be guilty of an offence, but in Clause 165 the term used is that the bankrupt is guilty of the offence. This amendment merely removes the inconsistency. I beg to move.

On Question, amendment agreed to.

[Amendment No. 271 not moved.]

Clause 174 [Power to appoint special manager]:

Lord Lucas of Chilworth moved Amendment No. 272: Page 139, line 32, leave out from ("shall") to end of line 34 and insert—

1. ("(a) give such security as may be prescribed;
2. (b) prepare and keep such accounts as may be prescribed; and
3. (c) produce those accounts in accordance with the rules to the Secretary of State or to such other persons as may be prescribed.").

The noble Lord said: My Lords, Clause 174 is concerned with the appointment of a person to be the special manager of the business or property of a bankrupt. Under subsection (5) the special manager is required to produce accounts to the Secretary of State.

Under the provisions of Clause 174 special managers will in future be appointable not only, as at present, on the application of the official receiver but also on the application of a trustee. Where the special manager is appointed on the application of a trustee it will not necessarily be appropriate for the accounts to be produced to the Secretary of State. Your Lordships will see that in Clause 70(5)—the corresponding provision for winding up—the special manager is required to produce accounts to the Secretary of State or to such other persons as may be prescribed. The proposed amendment achieves the same result where a special manager is appointed under Part III of the Bill. I beg to move.

On Question, amendment agreed to.

Clause 175 [Re-direction of bankrupt's letters etc.]

Lord Lucas of Chilworth moved Amendment No. 273: Page 139, line 39, leave out ("telemessage") and insert ("telegram").

The noble Lord said: My Lords, this amendment is necessary as the term "telemessage" does not cover conventional telegrams which are still sent and received internationally. I understand that the term "telegram" is an omnibus term which covers both conventional telegrams and telemessage telegrams. The term "telemessage" would, therefore, be unduly restrictive. Moreover, we have been informed that "telemessage" is in fact a registered trademark of British Telecom and it would therefore be inappropriate to have it in the Bill. I beg to move.

Lord Bruce of Donington

My Lords, I entirely support the amendment. It is quite clear that new is not always best.

On Question, amendment agreed to.

Schedule 6 [Provisions capable of inclusion in individual insolvency rules]:

Lord Lucas of Chilworth moved Amendment No. 274:

[Printed earlier: 1/4/85, col. 54.]

The noble Lord said: My Lords, I spoke to this amendment when discussing Amendment No. 21. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 275:

[Printed earlier: col. 126.]

The noble and learned Lord said: My Lords, I spoke to this amendment when speaking to Amendment No. 154. I beg to move.

On Question, amendment agreed to.

Clause 186 [Interpretation of Part III]:

Lord Cameron of Lochbroom moved Amendment Nos. 276 to 278:

[Printed earlier: 1/4/85, col. 93.]

The noble and learned Lord said: My Lords, for convenience I seek leave to move these amendments en bloc. These amendments were spoken to in relation to Amendment No. 131.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 279: Page 144, leave out lines 37 to 39.

The noble and learned Lord said: My Lords, this amendment was spoken to in relation to Amendment No. 170. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 280:

[Printed earlier: col. 126.]

The noble and learned Lord said: My Lords, I spoke to this amendment when speaking to Amendment No. 154. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 281: After Clause 187, insert the following new clause:

("Parliamentary disqualification.

.—(1) Where a court in England and Wales or Northern Ireland adjudges an individual bankrupt or a court in Scotland awards sequestration of an individual's estate, the individual shall be disqualified—

1. (a) for sitting or voting in the House of Lords;
2. (b) for being elected to, or sitting or voting in, the House of Commons; and
3. (c) for sitting or voting in a committee of either House.

(2) Where an individual is disqualified under this section, the disqualification shall cease—

1. (a) except where the adjudication is annulled or the award recalled or reduced without the individual having been first discharged, on the discharge of the individual; and
2. (b) in the said excepted case, on the annulment, recall or reduction, as the case may be.

(3) No writ of summons shall be issued to any lord of Parliament who is for the time being disqualified under this section for sitting and voting in the House of Lords. (4) Where a member of the House of Commons who is disqualified under this section continues to be so disqualified until the end of the period of six months beginning with the day of the adjudication or award, his seat shall be vacated at the end of that period. (5) A court which makes an adjudication or award such as is mentioned in subsection (1) above in relation to any lord of Parliament or member of the House of Commons shall forthwith certify the adjudication or award to the Speaker of the House of Lords or, as the case may be, to the Speaker of the House of Commons. (6) Where a court has certified an adjudication or award to the Speaker of the House of Commons under subsection (5) above, then, immediately after it becomes apparent which of the following certificates is applicable, the court shall certify to the Speaker of the House of Commons—

1. (a) that the period of six months beginning with the day of the adjudication or award has expired without the adjudication or award having been annulled, recalled or reduced; or
2. (b) that the adjudication or award has been annulled, recalled or reduced before the end of that period.").

The noble and learned Lord said: My Lords, with the permission of the House I shall speak also to Amendments Nos. 295, 301, 303, 304, 318, 338, 341 in part and 352 in part. Amendment No. 295: Page 177, line 17, leave out ("the expiration of five years from"). Amendment No. 301: Page 178, line 46, leave out ("the expiration of five years from"). Amendment No. 303: Page 179, line 16, at end insert—

("The Recess Elections Act 1975

19B. In section 1(2) of the recess Elections Act 1975 (which defines certain expressions used in that Act), in the definition of "certificate of vacancy", for the words from "the relevant bankruptcy enactment" to the end of paragraph (b) there shall be substituted the words "section (Parliamentary disqualification) (6)(a) of the Insolvency Act 1985".").

Amendment No. 304: Page 179, line 32, leave out ("the expiration of five years from").

Amendment No. 318: Page 186, line 33, leave out ("Part III of Schedule 9 to this Act") and insert ("Parts III and IV of Schedule 9 to this Act (so far as they so relate)").

Amendment No. 338: Page 194, line 22, at end insert—

("34 & 35 Vict. c. 50.	The Bankruptcy Disqualification Act 1871.	The whole Act.
35 & 36 Vict, c. 58.	The Bankruptcy (Ireland) Amendment Act 1872.	Sections 41 and 42.
46 & 47 Vict. c. 52.	The Bankruptcy Act 1883.	In section 32, in subsection (1) paragraphs (a), (b) and (e), in subsection (2), the words from "with" to "appeal" and subsection (3).
		Section 33(1).
		In section 34 the words from "guardian" to "vestry".
53 & 54 Vict. c. 71.	The Bankruptcy Act 1890.	Section 9.")

Amendment No. 341: Page 194, line 26, at end insert—

("1975 c. 45.	The Finance (No. 2) Act 1975.	In section 71(6), the words "section 30 of the Finance Act 1952."
1975 c. 66.	The Recess Elections Act 1975.	In section 1(2), the definition of "the relevant bankruptcy enactment" and the word "and" immedately preceding it.
1976 c. 24.	The Development Land Tax Act 1976.	Section 42.")

Amendment No. 352: Page 155, line 26, leave out from ("of") to ("does") in line 28 and insert ("this section and of—

1. (a) section 187(8);
2. (b) section (Parliamentary disqualification);
3. (c) so much of section 201 and Schedule 7 as relates to enactments which extend to Northern Ireland; and
4. (d) so much of section 201 and Schedule 9 as relates to the Bankruptcy Disqualification Act 1871, the Bankruptcy (Ireland) Amendment Act 1872 and the Bankruptcy Act 1882,")

I should like to make clear that although there are certain connected amendments—namely, Amendments Nos. 288 and 289—I will speak to those separately.

7 p.m.

The noble Lord, Lord Mishcon, drew to the attention of your Lordships during Committee the difference between the law of Scotland and the law of England and Wales in the matter of the disqualification period for a bankrupt Peer from sitting in your Lordships' House. Equivalent differences also exist in relation to members in another place and in connection with other public offices. This was in fact something of which the Government were aware and which they intended to bring before your Lordships for consideration. That is the purpose of the present amendment.

Under the law of Scotland a Peer or Member of Parliament is disqualified from normal House activities during his bankruptcy but is eligible to be elected to, or to sit, as the case may be, and vote in the House immediately upon his discharge from bankruptcy. On the other hand, a person subject to the bankruptcy laws of England and Wales and Northern Ireland is not so eligible for a further period of five years after his discharge; a similar disqualification period applies to members of other public offices—for instance, local authorities, land drainage boards and local valuation panels.

The Cork Committee recommended the abolition of the extended disqualification period of five years in relation to all public offices. The committee considered that the period was unduly long and that once discharge has been granted it should be accompanied by full civil rehabilitation. The Government agree with the Cork Committee and Amendments Nos. 295, 301, 304 and 338 implement that recommendation.

They will allow a bankrupt on discharge to become a justice of the peace or a member of a local valuation panel, a local authority or a land drainage board, either in cumulo or separately.

The amendments which are grouped with this amendment have the added benefit of replacing various United Kingdom legislative provisions relating to disqualification by one provision. Amendments Nos. 318, 338, 341 in part and 352 are purely consequential.

I would add that the authorities of both Houses have given considerable assistance in the drawing up of these amendments for which we are most grateful.

This is an important matter and one which directly affects this House, and I look forward to hearing the views of your Lordships. I beg to move.

Lord Bruce of Donington

My Lords, the House will be grateful to the noble and learned Lord for explaining this new clause. It is one which filled me with alarm when I first saw it. In fact, I woke up in the middle of the night thinking about it because it mentioned the rights of sitting in or voting in the House of Commons. I wondered how the other place would take it if we started legislating for what happens there; so I was very worried about it. First thing this morning I sought counsel with the Clerk of the Parliaments, who patiently explained the position to me and said that my fears about any kind of ill feeling arising between the two Houses as a result of our initiating the legislation here were entirely groundless. I was very relieved. He also explained the work that had been done on this, not only by the noble and learned Lord and his department but also by my noble friend Lord Mishcon. With my anxieties finally at rest, I have much pleasure in inviting the House to support the Government on this amendment.

Lord Raglan

My Lords, I wonder whether I may ask the Lord Advocate a question. He mentioned that already holders of public offices and others are disbarred from those offices by virtue of bankruptcy. I think he said that. I should like to ask him whether this amendment is bringing the House of Lords and the House of Commons into line with those rules or that legislation and whether up until now we have been exempt.

Lord Cameron of Lochbroom

No, my Lords. The point was that a Scots Peer made bankrupt could return to this House and sit and vote in it immediately he had received his discharge. His fellow Peer in England and Wales, and an Irish Peer who sat in this House (though he would do so, I suppose, as an English Peer), would have to get his discharge and then wait five years. No doubt there were good reasons historically for the difference in this arrangement between the peerage of Scotland and the peerage of England and Wales.

The matter was considered by the Cork Committee and it took the view that there was no good reason why Peers, and, indeed, the holders of other offices, including membership of the other House, should not receive civil rehabilitation, as it is called, as soon as discharge had been given to bring them into line with the peerage of Scotland.

Lord Raglan

My Lords, why then are Peers and Members of Parliament specifically mentioned rather than the holders of other public offices?

Lord Cameron of Lochbroom

My Lords, the provision concerning the holders of other offices arises in other amendments which are taken with this.

Lord Boyd-Carpenter

My Lords, I hope that my noble and learned friend has not exhausted his right to reply. I rose as quickly as I could to ask him two questions about the new clause. First, I must confess that having read and re-read subsection (2), I find it extraordinarily difficult to understand. It appears to be an exception to the cesser of a disqualification. Although I am sure that it is pellucidly clear to my noble and learned friend, I must confess that my conning of it has not been wholly successful.

My other question is a more general one. No doubt it is proper to take such steps as the new clause proposes in the case of bankruptcy. Of course it has been in somewhat different form the law for some considerable time. Can my noble and learned friend refresh my memory and perhaps that of the House as to how those disqualifications compare with what might be regarded as the analogous situation in which either a Peer or a Member of the House of Commons is convicted of a serious criminal offence? Are we treating them more severely when they go bankrupt or is the treatment the same?

The Earl of Selkirk

My Lords, I should like to thank the noble and learned Lord for amending what really is Clause 200 which I thought was quite unsatisfactory. I should like to ask two questions. First, I agree with what my noble friend Lord Boyd-Carpenter said. I cannot understand subsection (2). It starts by saying: Where an individual is disqualified under this section, the disqualification shall cease … except where the adjudication is annulled". That seems to me to be a non sequitur. I may be quite wrong in saying that.

There is one other point. There is no provision here for informing the House when anyone goes bankrupt. I do not see why that should happen and the House should remain ignorant of it. I should have thought that some procedure should be there. There may be something later which I have not read, but I should have thought that everything should be contained as neatly as possible in this one clause.

Lord Cameron of Lochbroom

My Lords, I shall endeavour to answer the questions put. If I may deal first of all with the last question which my noble friend Lord Selkirk put to me, I think that the answer may be found in Clause 200, which provides that: If a peer of the United Kingdom … or any other lord of Parliament is adjudged bankrupt the court shall, as soon as practicable, cause the adjudication to be certified to the Speaker of the House of Lords", so the matter is immediately brought to notice.

Perhaps almost the last person who should be called upon to construe an Act of Parliament is a lawyer. I think I have to say that I was not responsible for drafting this amendment. It was drafted by responsible parliamentary counsel. What I understand this to mean is simply that one starts with subsection (1), which is the adjudication of bankruptcy or the sequestration of the individual and the disqualification. It may be that that order of disqualification is then annulled—that is, it ceases to have effect—in which case that disqualification immediately flies off. Therefore it is really providing for the case where there is an annulment, or recall or reduction of the original disqualification, in which case the disqualification shall cease. I understand that perhaps it might at first blush appear convoluted, but I trust that at least by my taking my noble friends through the road it has become a little more clear, perhaps not clarus luceo but as near to it as I can make it.

I was asked what I can only call in cricketing parlance a rather hot one by my noble friend Lord Boyd-Carpenter. The answer is that I cannot tell him just now and I shall write to him on the matter. Since I think the matter is of some interest and importance to the House, I shall take care to see that the letter goes into the Library.

Perhaps I should correct one matter. I said to my noble friend Lord Selkirk that Clause 200 is the appropriate place to find the matter. I am reminded that of course by this amendment it is incorporated in subsections (5) and (6) of this new clause. The certification to the Speaker of the House provision was originally found in Clause 200. It is now found at the end of this new clause. It is all brought together.

The Earl of Selkirk

My Lords, I thank my noble friend. Is there any use in asking him whether that clause could be clarified a little? It is quite simple to say that when an individual is disqualified under this section the disqualification shall cease "when he is discharged". I think that that is what is meant. The other matters are to me extremely complicated. I do not know what "recalled or reduced" means, if it does not mean the same as annulled. I should have thought that a simple explanation would be very advantageous.

Lord Cameron of Lochbroom

My Lords, I have taken on board what my noble friend has said. I should only say this. The words "annulment", "recall" and "reduction" involve different legal processes and legal remedies and are obviously used for a particular purpose. Obviously, note will be taken of what my noble friend has said. If anything can be done to make it easier, I am sure that that will be done.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 282: After Clause 187, insert the following new clause:

("Power to inspect Land Register etc.

. After section 112A of the Land Registration Act 1925 (inspection in connection with criminal proceedings) there shall be inserted the following section— Inspection in connection with insolvency. 112AA.—(1) If an official receiver, the liquidator or adminstrator of a company or the trustee of a bankrupt's estate—

1. (a) applies to the registrar for permission to make an inspection under this section in relation to a person specified in the application or to property so specified; and
2. (b) gives the registrar an appropriate certificate,

the registrar shall permit him to inspect and make copies of and extracts from any register or document kept in the custody of the registrar so far as it relates to the person or property so specified. (2) In subsection (1) above "appropriate certificate" means a certificate that there is reason to believe that the register may contain information which would be of assistance to the person giving the certificate in the carrying out of his functions as official receiver, as liquidator or adminstrator of a company or as trustee of a bankrupt's estate. (3) In this section—

1. (a) references to an official receiver are references to an official receiver for the purpose of the Insolvency Act 1985 or the Companies Act 1985 or a person acting as a deputy to such an official receiver, and
2. (b) references to the trustee of a bankrupt's estate include references to a permanent or interim trustee in the sequestration of a debtor's estate in Scotland." ").

The noble and learned Lord said: My Lords, it may be convenient if I discuss this amendment along with Amendments Nos. 292, 339, and 349. Amendment No. 292: Schedule 7, page 174, line 25, leave out sub-paragraph (5) and insert— (" (5) In section 112 (general provision as to inspection of register and other documents) for the words "section 112A" there shall be substituted the words "section 112A and 112AA". (6) In section 112A(1) (inspection in connection with criminal proceedings) for the words "a chief officer of police or an official receiver" there shall be substituted the words "or a chief officer of police"."). Amendment No. 339: Schedule 9 page 194, line 24, at end insert—

("15 & 16 Geo. 5. c. 21.

The Land Registration Act 1925

Section 112A(4)").

Amendment No. 349: Clause 202, page 155, line 18 at end insert— (" ( ) section (Power to inspect Land Register etc.);"). These amendments implement the substance of the recommendation contained in paragraph 794 of the Cork Committee Report. It may be helpful if I explain something of the background to the amendments.

Generally speaking, the land register in England and Wales can only be inspected by a third party with the permission of the registered owner of the land. There are only a few limited exceptions to this general rule. Where an insolvent company or individual has disposed of property and either the official receiver, for investigative purposes, or the person administering the estate wishes to obtain information about the property, there can, as indeed was recognised by the Cork Committee, be considerable problems. It is particularly the case that, where dubious transactions have occurred, information may not be forthcoming, either from the persons concerned or from the records of the insolvent company or the bankrupt individual.

These amendments provide that the official receiver, trustee, liquidator or administrator will be able to apply to inspect the land register in relation to a person or property specified in the application. The application will be supported by a certificate which must state that the applicant has reason to believe that the estate which he is administering may have an interest in the property or may have a cause of action against the registered owners related to the property. In the opinion of the Government this power will enhance the official receiver's investigative ability and assist trustees, liquidators and administrators in their expeditious administration of the insolvent's estate for the benefit of creditors.

The amendments tabled to Clause 202 and to Sections 112 and 112A of the Land Registration Act 1925 are consequential upon this main amendment. The only one to which I should otherwise refer your Lordships specifically is Amendment No. 349, which refers to inspection of the land register in England only, although such inspections can equally be made by Scottish trustees, liquidators or administrators. The land register in Scotland of course is open to public inspection and equivalent provisions are therefore not required. I beg to move.

Lord Bruce of Donington

My Lords, we on this side of the House entirely support the insertion of the new clauses.

On Question, amendment agreed to.

7.15 p.m.

Lord Cameron of Lochbroom moved Amendment No. 283: After Clause 188, insert the following new clause:

("Amendments of Employment Protection (Consolidation) Act 1978.

.—(1) Section 122 of the Employment Protection (Consolidation) Act 1978 (employee's right on the insolvency of his employer to be paid certain debts out of the Redundancy Fund) shall be amended as follows. (2) For subsection (2) (date for determining debts payable out of Fund) there shall be substituted the following subsection— (2) In this section 'the relevant date'—

1. (a) in relation to arrears of pay (not being remuneration under a protective award made under section 101 of the Employment Protection Act 1975) and to holiday pay, means the date on which the employer became insolvent;
2. (b) in relation to such an award and to a basic award of compensation for unfair dismissal, means whichever is the latest of—
1. (i) the date on which the employer became insolvent;
2. (ii) the date of the termination of the employee's employment; and
3. (iii) the date on which the award was made;
194
3. (c) in relation to any other debt to which this section applies, means whichever is the later of the dates mentioned in sub-paragraphs (i) and (ii) of paragraph (b)."

(3) For subsection (4) (debts to be treated as arrears of pay) there shall be substituted the following subsection— (4) For the purposes of this section, the following amounts shall be treated as arrears of pay, namely—

1. (a) a guarantee payment;
2. (b) remuneration on suspension on medical grounds under section 19;
3. (c) any payment for time off under section 27(3) or 31(3) or 31A(4);
4. (d) remuneration under a protective award made under section 101 of the Employment Protection Act 1975;
5. (e) statutory sick pay, payable under Part I of the Social Security and Housing Benefits Act 1982."

(4) In subsection (7) (reasonable payments to apprentices and articled clerks), for the words from "section 34" onwards there shall be substituted the words "section 157 of the Insolvency Act 1985 (effect of bankruptcy on apprenticeships etc.), whether as originally enacted or as applied to the winding up of a company by rules under section 86 of that Act". (5) In subsection (9) (provisions applying on appointment of certain officers) —

1. (a) after the words "a liquidator," there shall be inserted the words "an administrator,"; and
2. (b) for the words from "'liquidator,' and" onwards there shall be substituted the words "'trustee', in relation to a composition or arrangement, includes the supervisor of a composition or scheme proposed for the purposes of, and approved under, Chapter I of Part III of the Insolvency Act 1985".").

The noble and learned Lord said: My Lords, with the leave of the House, with this amendment 1 shall speak to Amendments Nos. 305 to 308. Amendment No. 305: Schedule 7, page 180, line 16, leave out sub-paragraph (3). Amendment No. 306: Page 180, line 34, leave out from beginning to (" 'trustee' ") in line 37 and insert— ("In section 123 (payment of unpaid contributions to occupational pension scheme)—

1. (a) in subsection (4), for the words "section 121(2)" there shall be substituted the words "section 122(4)";
2. (b) In subsection (6)—
1. (i) after the words "a liquidator" there shall be inserted the words "an administrator"; and
2. (ii) for the words from "'liquidator'; and" onwards there shall be substituted the words" ").

Amendment No. 307: Page 180, line 44, leave out ("section 145") and insert ("sections (Preferential debts), 145 and 157"). Amendment No. 308: Page 180, line 45, after ("1985") insert ("and any rules under that Act applying the said section 157 to the winding up of a company; and").

This relates to Section 122 of the Employment Protection (Consolidation) Act of 1978 and the debts that employees can claim from the redundancy fund if their employer is insolvent. Among other debts, employees can claim back pay and holiday pay outstanding at the "relevant date". For these debts the relevant date is defined as the date of the employer's insolvency or the date that the employee's job ended, whichever is the later. This has meant that some of the unpaid wages and holiday pay which receivers, and indeed liquidators, have been able to pass on to the redundancy fund, accrued after the date of their appointment. In other words, they have been able to use the redundancy fund to finance or underwrite their decision to continue trading. Clearly, this is not the purpose of the legislation and the effect of the first two subsections of this new clause will prevent this practice. Back pay and holiday pay accrued up to and including the date of insolvency only will now be payable under the provisions.

Subsections (3) and (4) of this new clause deal with a technical point and a consequential amendment which do not alter the basic provisions in any way.

Subsection (5) brings the 1978 Act into line with this Act which introduces an alternative insolvency mechanism—the administration order. This amendment adds the administrator to the list of "relevant officers" who act on behalf of the Secretary of State in assessing, verifying and agreeing employees' claims. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 284: After Clause 189, insert the following new clause:

("Amendments of County Courts Act 1984

.—(1) the County Courts Act 1984 shall be amended as follows. (2) In section 112(4)(b) (minimum amount which must be owed to creditor presenting, or joining in, a bankruptcy petition while administration order is in force), for "£400" there shall be substituted "£1500". (3) In subsection (1) of section 115 (execution while administration order is in force if debtor's property exceeds £10 in value), for "£10" there shall be substituted the words "the minimum amount". (4) After subsection (1) of the said section 115 there shall be inserted the following subsection— In subsection (1) above 'the minimum amount' means £50 or such other amount as the Lord Chancellor may by order specify instead of that amount or the amount for the time being specified in such an order, and an order under this subsection shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament." ").

The noble and learned Lord said: With the permission of the House, it will be convenient if I also speak to Amendment 350. Amendment No. 350: Clause 202, page 155, line 19, leave out ("190") and insert ("(Amendments of County Courts Act 1984)"). The new clause to be inserted into the Bill by this amendment amends two monetary limits in the County Courts Act of 1984. The first limit to be raised is that in Section 112(4) of the Act which provides that a creditor can only present a bankruptcy petition against a debtor whose estate is subject to an administration order if, among other things, the debt on which the petition is founded exceeds £400.

The County Courts Act is a consolidation. Section 112 re-enacts an earlier section in the Administration of Justice Act of 1965, and the entry relating to it in Schedule 1 to the Insolvency Act of 1976. Due to an accident of timing, on the very day on which the County Courts Act came into force the Insolvency Proceedings (Increase of Monetary Limits) Regulations 1984 were made which sought to raise the £400 limit to £1,500. Because the regulations sought to amend the old provision in the Administration of Justice Act 1965 and not its replacement in the County Courts Act 1984, the amendment never took effect.

The purpose of the amendment now before your Lordships is to give effect to what was the intention of the 1984 regulations. I should stress, however, that any future alteration in the limit in Section 112 will be by regulations under Section 112(7) which are subject to affirmative resolution.

The other section of the County Courts Act which it is proposed should be amended is Section 115. This empowers the county court registrar to issue execution against the goods of a debtor who is subject to an administration order where his property does not exceed £10 in value. This sum has remained unchanged since 1883. The amendment will increase that sum to £50 which is considered a more appropriate figure in 1985. It also enables that figure to be amended in the future by the Lord Chancellor by order. Any such order will be subject to the negative resolution procedure.

Amendment No. 350 is consequential and includes the new clause among those provisions of the Bill which do not extend to Scotland, since the relevant provisions of the County Courts Act do not so extend. I beg to move.

On Question, amendment agreed to.

Clause 194 [Insolvent partnerships]:

Lord Cameron of Lochbroom moved Amendment No. 285:

[Printed earlier: 1/4/85, col. 12.]

The noble and learned Lord said: My Lords, this amendment was spoken to by my noble friend Lord Lucas with Amendment No. 2. I beg to move.

On Question, amendment agreed to.

Clause 195 [Insolvent estates of deceased persons]:

Lord Cameron Lochbroom moved Amendments Nos. 286 and 287:

[Printed earlier: 1/4/85, col. 12.]

The noble and learned Lord said: My Lords these amendments were spoken to by my noble friend Lord Lucas under Amendment No. 2. I beg to move.

On Question, amendments agreed to.

Lord Taylor of Gryfe had given notice of his intention to move Amendment No. 287A: After Clause 195, insert the following new clause:

(" Powers of the Secretary of State to make regulations in respect of prepayments etc.

.—(1) With a view to protecting the interests of unsecured creditors in a winding up, the Secretary of State may make regulations making provision as to the manner in which companies are to be required to hold prepayments, advance payments or deposits received from customers in respect of uncompleted orders. (2) Without prejudice to the generality of subsection (1), regulations under this section may—

1. (a) specify the type of company to which the regulations are to apply, whether by reference to the identity or nature of such companies, the type of trade or business which they carry on or the type of orders in question;
2. (b) make different provision according to the amount of a prepayment, advance payment or deposit;
3. (c) make provision for the holding of prepayments, advance payments or deposits in separate bank accounts;
4. (d) make provision for the transfer of such prepayments, advance payments or deposits from separate bank accounts on completion of a customer's orders;
5. (e) require the keeping of such records and books of account as may be specified;
6. (f) provide for exemptions from any provision of the regulations;
7. (g) otherwise make different provisions for different circumstances or provision relating only to specified circumstances; and
197
8. (h) contain such incidental and supplemental provisions as the Secretary of State considers appropriate.

(3) No regulations may be made under this section unless a draft of the regulations has been laid before and approved by a resolution of each House of Parliament. (4) A person who contravenes any regulation made under this section shall be guilty of an offence and shall be liable—

1. (a) on summary conviction, to imprisonment for a term not exceeding six months or to a fine not exceeding the statutory maximum or to both;
2. (b) on conviction or indictment, to imprisonment for a term not exceeding two years or a fine or both.").

Lord McNair

My Lords, in the absence of my noble friend Lord Taylor, I wish to say that unless some noble Lord wishes to speak, it is my intention not to move the amendment.

[Amendment No. 287A not moved.]

Clause 200 [Peers and Members of Parliament]:

Lord Cameron of Lochbroom moved Amendment No. 288: Page 154, line 13, leave out subsection (1).

The noble and learned Lord said: My Lords, if it is convenient, I should like also to speak to Amendment No. 289. Amendment No. 289: Page 154, line 20, at end insert ("or peerage. (2A) Proceedings under Part Ill of this Act may be commenced or continued in relation to a person notwithstanding that he has privilege of Parliament or peerage."). Section 128 of the Bankruptcy Act 1914 provides that if a person having privilege of Parliament commits an act of bankruptcy, he may be dealt with under the Bankruptcy Act as if he did not have such privilege. Clause 200(2) of the Bill only partially re-enacts Section 128 in providing that the privilege in relation to powers of arrest conferred by the Bill shall not be exercisable.

We consider it desirable for the avoidance of doubt for this amendment to be made to the Bill so that the full exemption from privilege conferred by Section 128 continues under the new bankruptcy code contained in Part III of the Bill relating to Peers as well as to Members of Parliament. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Loch broom moved Amendment No. 289:

[Printed above.]

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 290: After Clause 200 insert the following new clause:

("Crown application.

. For the avoidance of doubt it is hereby declared that this Act hinds the Crown so far as it affects or relates to the following matters, namely—

1. (a) remedies against, or against the property of, companies or individuals;
2. (b) priorities of debts;
3. (c) transactions at an undervalue or preferences;
4. (d) compositions or schemes approved under Chapter I of Part III; and
5. (e) discharge from bankruptcy.").

The noble and learned Lord said: My Lords, the new clause inserted in the Bill by this amendment is a reenactment of Section 151 of the Bankruptcy Act 1914, as that section was construed in the 19th century case of re Thomas. Because of the application under the present law of certain provisions of the Bankruptcy Act to the winding up of companies and because the Bill deals with both corporate and individual insolvency, the provisions of Section 151 also relevant to companies are included in the new clause.

To the extent that provisions are not listed in the new clause, the well established principle of law will continue to apply; namely, that the Crown will be bound by such provisions if by necessary implication from the nature of the provision it should be so bound. I beg to move.

On Question, amendment agreed to.

Schedule 7 [Consequential amendments]:

Lord Lucas of Chilworth moved Amendment No. 291: Page 172, line 31, at end insert—

("The Small Dwellings Acquisition Act 1899

.—(1) The Small Dwellings Acquisition Act 1899 shall be amended as follows. (2) In section 3(5) (conditions affecting house purchased by means of advance), for the words "being administered in bankruptcy under section one hundred and twenty-five of the Bankruptcy Act, 1883" there shall be substituted the words "falling to be administered in accordance with an order under section 195 of the Insolvency Act 1985". (3) In section 7(3) (suspension of condition as to residence), for the words "is administered in bankruptcy under section one hundred and twenty-five of the Bankruptcy Act, 1883" there shall be substituted the words "falls to be administered in accordance with an order under section 195 of the Insolvency Act 1985".").

The noble Lord said: My Lords, this is another technical amendment which adds a further consequential amendment to Schedule 7. The Small Dwellings Acquisition Act 1899 contains references in Section 3 and Section 7 to Section 125 of the Bankruptcy Act 1883. That section was consolidated in Section 130 of the Bankruptcy Act 1914, which is now to be replaced by Clause 195 of the Bill. This amendment updates the references in the Small Dwellings Acquisition Act. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 292:

[Printed earlier: col. 192.]

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 293: Page 176, line 3, after ("insolvency)") insert—

1. ("(a) in paragraph (a), for the word "become" there shall be substituted the words "been adjudged"; and
2. (b)").

The noble Lord said: My Lords, this is a minor technical amendment to Section 68(6) of the Agricultural Holdings Act 1948. It substitutes a reference to a person becoming bankrupt with the more precise reference to his being adjudged bankrupt. I beg to move.

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 294:

[Printed earlier: 1/4/85, col. 54.]

The noble Lord said: My Lords, I spoke to this amendment when we were dealing with Amendment No. 21. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 295:

[Printed earlier: col. 187.]

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 296: Page 177, line 30, at end insert—

("The Transport Act 1968

13A. In section 86 of the Transport Act 1968 (transferability of operators' licences), for the words "bankruptcy or liquidation of" there shall be substituted the words "or bankruptcy of the holder or, in the case of a company, or the holder going into liquidation, of an administration order being made in relation to".").

The noble Lord said: My Lords, in moving this amendment, I should also like to speak to Amendments Nos. 297 and 311. Amendment No. 297: Page 177, line 48, at end insert— ("(aa) in paragraph (c) of that subsection, after the words "winding-up order" there shall be inserted the words "or an administration order";"). Amendment No. 311: Page 182, line 22, at end insert—

("The Public Passenger Vehicles Act 1981

26A. In section 19(3)(a) of the Public Passenger Vehicles Act 1982 (holder of PSV operator's licence to give notice of bankruptcy etc.), after the word "estate" there shall be inserted the words "or the making of an administration order under Chapter II of Part II of the Insolvency Act 1985 in relation to the holder".").

All of these are minor consequential amendments. They are required to introduce into the Transport Act 1968, the Road Traffic Act 1972 and the Public Passenger Vehicles Act 1981 references to the new administration order procedure set out in this Bill, in addition to the references already in those Acts to existing insolvency procedures. I beg to move.

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 297:

[Printed above.]

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendment No. 298: Page 178, line 8, leave out ("For subsection (8) of section 5") and insert ("In section 5(8)").

The noble Lord said: My Lords, with permission, I shall speak also to Amendments Nos. 299, 300 and 331. Amendment No. 299: Page 178, line 10, leave out from ("bankruptcy)") to end of line 14 and insert ("the words "without notice of an available act of bankruptcy" shall be omitted."). Amendment No. 300: Page 178, leave out lines 23 to 27 and insert— ("(c) in subsections (5) and (6), the words "without notice of an available act of bankruptcy" shall be omitted."). Amendment No. 331: Schedule 9, page 193, line 10, column 3, leave out ("Section 5(9)") and insert—

		("In section 5, in subsection (8), the words "without notice of an available act of bankruptcy" and subsection (9).
		In section 6(5) and (6), the words "without notice of an available act of bankruptcy".").

The noble Lord said: My Lords, this group of amendments make further consequential amendments to the land charges Act 1972. Paragraph 16 of Schedule 7 to the Bill already makes a number of changes to the Land Charges which are consequential on the abolition by the Bill of the concepts of acts of bankruptcy and receiving orders. Under Sections 5(8) and 6(5) of the Land Charges Act, as amended by paragraph 16, a purchaser will be deemed to have notice of a bankruptcy petition and a bankruptcy order if it is registered. These proposed amendments make further consequential changes to the Land Charges Act to provide that petitions and orders which are not registered shall not bind a purchaser of a legal estate in good faith for money or money's worth. I beg to move.

On Question, amendment agreed to.

Lord Lucas of Chilworth moved Amendments Nos. 299 and 300:

[Printed above.]

On Question, amendments agreed to.

7.30 p.m.

Lord Cameron of Lochbroom moved Amendment No. 301:

[Printed earlier: col. 188.]

The noble and learned Lord said: My Lords, I spoke to this amendment on Amendment No. 281. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 302: Page 179, line 16, at end insert—

("The Social Security Pensions Act 1975

("19A.—(1) In section 58 of the Social Security Pensions Act 1975 (under which Schedule 3 to that Act has effect for giving priority in bankruptcy etc. to certain debts) after the word "effect" there shall be inserted the words "for the purposes of Schedule 5 to the Insolvency Act 1985 (preferential debts)"; and Schedule 3 to the said Act of 1975 shall be amended as follows.

(2) In each of paragraphs 1, 2(1) and 3(1), for the words from the beginning to "included" there shall be substituted the words "This Schedule applies to".

(3) In the said paragraphs 1 and 2(1), for the words "date of the relevant event" there shall be substituted the words "relevant date" and, in the said paragraph 3(1), for the words "the occurrence of the relevant event" there shall be substituted the words "a person going into liquidation or being adjudged bankrupt".

(4) In paragraph 4, for the words from "event'," to "that Act" there shall be substituted the words "'date' has the same meaning as in Schedule 5 to the Insolvency Act 1985".").

The noble and learned Lord said: My Lords, the introduction of this new paragraph is necessary for the following reasons. Schedule 3 to the Social Security Pensions Act includes certain debts relating to contributions to occupational pension schemes and state scheme premiums among the debts which by virtue of Section 153 of the Social Security Act 1975 are priority debts. This structure is no longer appropriate because Schedule 5 to the Bill will consist of a list of preferential debts. Also, Schedule 3 to the Social Security Pensions Act refers to a "relevant event"—which in personal insolvency cases usually means a receiving order or death—but this is no longer appropriate because the Bill is drafted in terms of "bankruptcy orders" rather than "receiving orders" and "the relevant date" rather than "the relevant event". I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 303 and 304.

[Printed earlier: col. 188.]

The noble and learned Lord said: My Lords, I beg leave of the House to move these amendments together. They were spoken to under Amendment No. 281.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 305 to 308.

[Printed earlier: col. 194.]

The noble and learned Lord said: My Lords, with the leave of the House I beg leave to move these amendments together. They were spoken to with Amendment No. 283.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 309 and 310:

[Printed earlier: 1/4/85, col. 54.]

The noble and learned Lord said: My Lords, with the leave of the House I beg leave to move these amendments together. They were spoken to under Amendment No. 21 by my noble friend Lord Lucas of Chilworth.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 311:

[Printed earlier: col. 199.]

The noble and learned Lord said: My Lords, this amendment was spoken to with Amendment No. 296. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 312:

[Printed earlier: 1/4/85, col. 54.]

The noble and learned Lord said: My Lords, this amendment was spoken to by my noble friend Lord Lucas under Amendment No. 21. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 313 and 314: Amendment No. 313: Page 182, line 42, leave out ("in subsections (1) and (2)") and insert ("— (a) in subsection (1),"). Amendment No. 314: Page 182, line 44, at end insert ("; and (b) in subsection (2), for the words "section 663 of the Companies Act" and the words "section 614 of, and Schedule 19 to, the Companies Act" there shall be substituted, respectively, the words "section 86 of the Insolvency Act 1985" and the words "section (Preferential debts) of, and Schedule 5 to, the Insolvency Act 1985" ").

The noble and learned Lord said: My Lords, Amendment No. 313 is a consequential amendment to the amendments I spoke to in relation to Amendment No. 235. I beg to move Amendments Nos. 313 and 314 en bloc.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 315: Page 183, line 4, at end insert— ("(2A) In section 102(8) (claims for rent where goods seized in execution), for the words "section 35 of the Bankruptcy Act 1914" there shall be substituted the words "section 155 of the Insolvency Act 1985".").

The noble and learned Lord said: My Lords, this is a technical amendment. Section 192(8) of the County Courts Act 1984 contains a reference to Section 35 of the Bankruptcy Act 1914. Section 35 will be repealed by the Bill and replaced by Clause 155. This amendment makes the necessary consequential amendment to the County Courts Act. I beg to move.

On Question, amendment agreed to.

Schedule 8 [Transitional provisions and savings]:

Lord Cameron of Lochbroom moved Amendments Nos. 316 and 317: Amendment No. 316: Page 184, line 6, leave out ("paragraph 11 or") and insert ("paragraphs 10A to"). Amendment No. 317: Page 184, line 24, leave out ("paragraph") and insert ("paragraphs 12A to").

The noble and learned Lord said: My Lords, these amendments refer to receivers and managers in England and Wales and receivers in Scotland, and are consequential upon Amendments Nos. 152 and 153, which have already been discussed. I beg to move.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 318:

[Printed earlier: col. 188.]

The noble and learned Lord said: My Lords, this amendment was spoken to with Amendment No. 281. I beg to move.

On Question, amendment agreed to.

Schedule 9 [Repeals]:

Lord Cameron of Lochbroom moved Amendment No. 319: Page 189, line 28, column 3, leave out ("entry relating to section") and insert ("entries relating to sections 467(4) and (5) and ").

The noble and learned Lord said: My Lords, Schedule 24 to the Companies Act 1985, which is affected by this amendment, lists various offences under that Act. Two of the offences relate to acting as a receiver by a body corporate or Scottish firm, and by an undischarged bankrupt. The provisions in Clauses 1 and 2 of the Bill will render these entries in the Companies Act 1985 redundant because it will be an offence for anyone other than an individual, and for an undischarged bankrupt, to act as insolvency practitioners. It is in order to effect the necessary repeals to the Companies Act 1985 that this amendment is brought forward. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 320: Page 189, line 39, column 3, leave out lines 39 to 41.

The noble and learned Lord said: My Lords, this amendment was spoken to under Amendment No. 56. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 321:

[Printed earlier: 1/4/85, col. 54.]

The noble and learned Lord said: My Lords, this amendment was spoken to with Amendment No. 21. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 322:

Page 190, line 51, column 3, leave out ("Section 612") and insert ("Sections 612 to 614").

The noble Lord said: My Lords, with the leave of the House I will speak also to Amendments Nos. 324, 328, 329, 332 to 337, 340 to 347.

Amendment No. 324: Page 191, leave out lines 34 and 35 and insert ("Schedules 17 to 19."). Amendment No. 328: Page 191, line 49, column 3, leave out from ("and") to end of line 57 and insert ("59 of the Insurance Companies Act 1982."). Amendment No. 329: Page 192, leave out lines 48 and 49. Amendment No. 332: Page 193, leave out lines 18 and 19. Amendment No. 333: Page 193, leave out lines 27 to 30. Amendment No. 334: Page 193, line 31, column 3, leave out ("Section 2."). Amendment No. 335: Page 193, leave out lines 37 to 44. Amendment No. 336: Page 193, leave out lines 54 to 58. Amendment No. 337: Page 194, leave out lines 4 to 15. Amendment No. 340: Page 194, line 25, column 3, at end insert— ("Section 153. Schedule 18."). Amendment No. 341: [Printed earlier: col. 188.] Amendment No. 342: Page 194, line 27, column 3, leave out ("Section 10.") insert— ("Sections 1 and 2. Section 10. Schedule 1."). Amendment No. 343: Page 194, line 27, at end insert—

("1978 c. 44.

The Employment Protection (Consolidation) Act 1978.

Section 121. In section 125(2, paragraph (c) and the word "and" immediately preceding it.")

Amendment No. 344: Page 194, line 29, at end insert—

("1980 c. 42.	The Employment Act 1980.	In Schedule 1, paragraph 15.
1981 c. 62.	The Betting and Gaming Duties Act 1981.	Section 30.
1982 c. 24.	The Social Security and Housing Benefits Act 1982.	In Schedule 3, paragraph 12.
1982 c. 46.	The Employment Act 1982.	In Schedule 3, paragraph 3.
1983 c. 53.	The Car Tax Act 1983.	In Schedule 1, paragraph 4.
1983 c. 55.	The Value Added Tax Act 1983.]	In Schedule 7, paragraph 12.").

Amendment No. 345: Page 194, line 34, column 3, leave out ("entry relating to section 10(1) of") and insert ("entries relating to the Social Security Act 1975, to sections 2 and 10(1) of, and Schedule 1 to,"). Amendment No. 346: Page 194, line 36, column 3, at end insert ("and to the Employment Protection (Consolidation) Act 1978."). Amendment No. 347: Page 194, line 36, at end insert—

("1985 c. 00.

The Reserve Forces (Safe-guard of Employment) Act 1985.

section 13.")

Schedule 9 contains the repeals which are consequential upon the Bill. The amendments tabled to Schedule 9 reflect the repeal of certain enactments as a consequence of the package relating to preferential debts, if I may so call it. I trust your Lordships will be content if I do not describe them in detail at this hour, but I would be happy to do so if any of your Lordships have any queries on them. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 323:

[Printed earlier: col. 126.]

The noble and learned Lord said: My Lords, this amendment was spoken to with Amendment No. 154. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 324:

[Printed earlier: col. 203.]

The noble and learned Lord said: My Lords, this amendment was spoken to with amendment No. 322. I beg to move.

On Question, amendment agreed to.

[Amendment No. 325 not moved.]

Lord Cameron of Lochbroom moved Amendment No. 326: Page 191, line 39, column 3, leave out ("497(8)") and insert ("497(7)").

The noble and learned Lord said: My Lords, this amendment corrects an error in Schedule 9. The reference to Section 497(8) of the 1985 Act in line 39, column 3, on page 191, should read, "Section 497(7)". I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 327:

[Printed earlier: col. 54.]

The noble and learned Lord said: My Lords, this amendment was spoken to with Amendment No. 21. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment Nos. 328 and 329:

[Printed earlier: col. 203.]

The noble and learned Lord said: My Lords, I beg to move Amendment No. 328 together with Amendment No. 329. They were spoken to with Amendment No. 322.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 330: Page 192, line 55, at end insert—

("1965 c. 25.

The Finance Act 1965

In Schedule 10, paragraph 15(1).").

The noble and learned Lord said: My Lords, this amendment repeals a provision in the Finance Act 1965 which provides that, in a bankruptcy, capital gains tax and corporation tax have the same priority as income tax. This was originally restated in paragraph 1(1) of Schedule 5 to the Bill, but of course that paragraph has now been removed by amendment. As a consequential amendment—and no more—I ask your Lordships to accept this amendment. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 331:

[Printed earlier: col. 200.]

The noble and learned Lord said: My Lords, this amendment was spoken to with Amendment No. 298. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendments Nos. 332 to 337:

[Printed earlier: col. 203.]

The noble and learned Lord said: My Lords, with the leave of the House, I beg to move Amendments Nos. 332 to 337 inclusive en bloc. These amendments were spoken to under Amendment No. 332. I beg to move.

On Question, amendments agreed to.

Lord Cameron of Lochbroom moved Amendment No. 338:

[Printed earlier: col. 188.]

The noble and learned Lord said: My Lords, I spoke to this amendment under Amendment No. 281. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 339:

[Printed earlier: col. 192.]

The noble and learned Lord said: My Lords, I spoke to this amendment under Amendment No. 282. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 340:

[Printed earlier: col. 203.]

The noble and learned Lord said: My Lords, I spoke to this amendment under Amendment No. 322. I beg to move.

On Question, amendment agreed to.

7.45 p.m.

Lord Cameron of Lochbroom moved Amendment No. 341:

[Printed earlier: col. 188.]

The noble and learned Lord said: My Lords, I spoke to this amendment under Amendment No. 281. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved amendments Nos. 342 to 347:

[Printed earlier: col. 203.]

The noble and learned Lord said: My Lords, with the leave of the House I shall move Amendment No. 342 together with Amendments Nos. 343 to 347 en bloc. The amendments were spoken to in relation to Amendment No. 322. I beg to move.

On Question, amendments agreed to.

Clause 202 [Short title, commencement and extent]:

Lord Cameron of Lochbroom moved Amendment No. 348:

[Printed earlier: col. 125.]

The noble and learned Lord said: My Lords, I spoke to this amendment with Amendment No. 152. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No 349:

[Printed earlier: col. 192.]

The noble and learned Lord said: My Lords, I spoke to this amendment with Amendment No. 282. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 350:

[Printed earlier: col. 195.]

The noble and learned Lord said: My Lords, I spoke to this amendment with Amendment No. 284. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 351:

[Printed earlier: col. 125.]

The noble and learned Lord said: My Lords, I spoke to this amendment with Amendment No. 152. I beg to move.

On Question, amendment agreed to.

Lord Cameron of Lochbroom moved Amendment No. 352:

[Printed earlier: col. 188.]

The noble and learned Lord said: My Lords, I spoke to this Amendment with Amendment No. 281. I beg to move.

On Question, amendment agreed to.