HL Deb 29 January 1985 vol 459 cc635-7

House again in Committee.

New Clause 7 agreed to.

Clause 8 [Duty of court to disqualify in certain cases of directors of companies in liquidation]:

Lord Bruce of Donington moved Amendment No. 17: Page 7, line 11, leave out ("shall") and insert ("may, if it is satisfied that the person's conduct makes him unfit to be concerned in the management of a company,").

The noble Lord said: I beg to move Amendment No. 17, which stands in my name. It will be noted that at line 11, in the paragraph that follows Clause 8(2)(b), the amendment seeks to remove the mandatory element on the making of a disqualification order and to substitute: may, if it is satisfied that the person's conduct makes him unfit to be concerned in the management of a company". This is an inevitable conclusion which follows the passing of Amendment No. 16 relating to Clause 7. There may be some technical overlap between the two clauses, but the amendment I am now moving is thoroughly in accord with the intentions of Amendment No. 16, which your Lordships have passed. In order to eliminate the mandatory aspect of the disqualification order and make it more a matter for the discretion of the courts, I beg to move.

Lord Lucas of Chilworth

The events of a short while ago have thrown me, anyway, into a certain amount of confusion. My understanding is that this amendment is unnecessary because it would only be applicable if the court had made a provisional disqualification order. Since the Committee adopted the version of Clause 7 proposed by the noble Lord, Lord Benson, which does not provide for this provisional disqualification order, what is before us now becomes unnecessary. That is my understanding of the position at the moment. I think that the best I can offer the Committee is that, if they will accept that that is the understanding which I now have, if I find that my understanding is not totally correct then, of course, we shall find a means to bring it back at a later stage.

Lord Bruce of Donington

I immediately accept the noble Lord's explanation and his undertaking, and ask leave to withdraw the amendment.

Amendment by leave, withdrawn.

8.45 p.m.

Lord Benson moved Amendment No. 18: Leave out Clause 8 and insert the following new clause:


8. The costs of any sucessful application under section 7 to disqualify a person, or where it is determined by the court that the person is personally liable for all or any of the debts, shall be borne by the Crown in the event of there being insufficient funds from the assets of the company concerned, after all creditors have been paid and all liabilities discharged.").

The noble Lord said: I beg to move Amendment No. 18, which stands in my name and in the names of other noble Lords. I am in some difficulty in not quite realising how the procedures work, because the intention of the new Clause 7—the amendment which the Committee accepted—was to replace the whole of the then existing Clauses 8, 9, 10, 11 and 12. This amendment was tabled on the assumption that Amendment No. 16 was agreed to, and I should like to speak to it to get on record what it is about.

The point is that when creditors are not paid in full, the liquidator should not spend the creditor's money in pursuing the delinquent directors. It is suggested that the cost of pursuing delinquency is essentially a matter for the state and not the creditors, and that the cost should properly be born by the Government. I suggest to the Committee that this has merit in justice and common sense, because if the application is made by the Secretary of State or the Official Receiver the cost is automatically borne by the state. Where it is borne by the liquidator, the person best knowing what should be done, then the cost has to be borne by the creditors. The point of this amendment is to suggest that the cost of pursuing delinquent directors should rest on the Government. I beg to move.

Lord Bruce of Donington

We on this side of the Committee accept the reasons that have been given by the noble Lord, Lord Benson. It is quite unnecessary for me to repeat anything that he has said. We entirely concur.

Lord Meston

We on these Benches would also agree with the idea that it would be wrong for past creditors to pay for the protection of possible future creditors. The wider public interest involved makes it proper that the public purse should bear the costs where necessary in the circumstances envisaged by this new clause. For those reasons, we support this amendment.

Lord Lucas of Chilworth

Again, I am in some little difficulty, in that we are talking about successful applications under the new Clause 7. As far as the cost of any application is concerned, subsection (11) provides for the costs of the successful applicant to be borne by the Crown and not only that but the Crown itself would be unable to recover its costs until all the creditors had been paid in full and liabilities discharged. This goes far beyond any benefits available under legal aid. I think that I should have had some sympathy with the provision had it been restricted to applications for a disqualification order, because that is effectively the position today.

If this provision requires the taxpayer to provide a free debt collecting service for the creditors of a company, one effect of adopting the amendment would be, I think, that if a company had a deficiency of, say, £50,000 and the court made the directors liable for only £10,000, the Crown would not be able to cover its costs. I do not believe that that is reasonable or fair. I do not believe, in all seriousness, that would be totally acceptable to your Lordships.

I think that I should have to give further consideration to this question of costs in the light of the detail which flows from the new clause of the noble Lord, Lord Benson. I would invite him in the light of that to withdraw his amendment while I give serious consideration to the implication that his new Clause 7 has for this element of the Bill.

Lord Benson

That would be entirely acceptable to me and I beg leave to withdraw the amendment standing in my name.

Amendment, by leave, withdrawn.

Clause 8 agreed to.

Lord Denham

I am of course in the hands of the Committee, and it was agreed through the usual channels that we should carry through with this Bill tonight until we reached the end of Clause 10. I do understand that there is a great deal of difficulty with the new Clause 7 as to how the other amendments until the end of Clause 10 are affected. Unless any noble Lord disagrees—and I shall sit down and give any noble Lord who wishes the opportunity to do so—I suggest to the Committee that we should resume the House and adjourn the Committee stage at this point. But I should welcome suggestions on this point from any other side of the Committee.

Lord Bruce of Donington

We on this side understand that it would be quite desirable, for administrative reasons, to allow a reappraisal of the situation to take place in some detail before we continue further with the Bill. We on this side think that the suggestion put forward by the Government Chief Whip is a most sensible one and, for our part, are disposed to agree with him.

Lord Taylor of Gryfe

I should like to support the suggestion, from these Benches. Obviously the carrying of the amendment has a whole lot of repercussions on the Bill—not only in relation to cost but in relation to other aspects of the Bill—and it would be wise for the Committee to think over the full implications regarding the Bill and to adjourn now. I support the suggestion.

Lord Denham

I should like to make it quite clear that I am not looking at other aspects of the Bill. It is just the question that I think it would be wrong for the Committee to be discussing amendments when the full implications of the previous amendment are not understood, and with absolutely no commitment at all about how we proceed from now on. Of course there will be talks with the usual channels. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.