Trustee Savings Bank, Scotland: Judgment (Hansard, 13 November 1985)

§ Lord Young of Graffham
My Lords, with the leave of the House, I will now repeat in the form of a Statement the Answer that has been given in another place to a Question about yesterday's ruling concerning the Trustee Savings Bank in Scotland. The Statement reads as follows:
"We are now carefully but urgently considering Lord Davidson's judgment and opinion, which have only just become available and raise complex legal issues. The Trustee Savings Bank Bill, now the Trustee Savings Bank Act 1985, would not have been presented to the House if the Government had not received firm legal advice, which was reflected in last December's White Paper (Cmnd. 9415). It remains the Government's expectation that we will wish to lodge formal notice of appeal as soon as practicable".
My Lords, that concludes the Statement.

§ Lord Stoddart of Swindon
My Lords, I should like to thank the noble Lord the Minister for repeating the Statement made in another place, but it sounds to me as though there is a great rustling of chickens coming home to roost. In this House I and other noble Lords raised the question of legality at various stages of the Bill. Indeed, right at the last, when the Commons amendments were being considered by this House, I and other noble Lords again raised the whole question as to whether the Bill was really legal. We argued all the way through that the Trustee Savings Banks belonged to the depositors.
Indeed, we received an assurance from the noble Earl, Lord Gowrie, who has now left the Front Bench opposite, which appears at col. 1266 of Hansard for 24th July 1985, that: The Government are satisfied that the legal position is as stated in the White Paper; namely, that neither depositors, staflF, trustees, nor the Government themselves own the Trustee Savings Banks". Later, at col. 1271, the noble and learned Lord the Lord Advocate, Lord Cameron of Lochbroom, went even further and said: … since there has been a suggestion that in this matter there is a peculiarity of Scots law, perhaps it would be only right at this stage to make quite clear that the existing banks are covered by legislation which applies throughout the United Kingdom". That raises a very serious question indeed.
It appears from what was said by the noble and learned Lord the Lord Advocate in this House that the judgment of the Scottish courts extends to England and Wales as well. Have the Government considered that position? If so, what conclusion have they reached? Furthermore, is the judgment not bound to affect the flotation itself? Have the Government decided not to vest the bank? May we have an assurance that, under the circumstances, they will not proceed with the flotation until all the legal implications are out of the way—including a possible appeal to the European Court?
Does the noble Lord the Minister not agree that if the Trustee Savings Bank went ahead with the flotation, then the flotation could very well be a disaster, since potential investors might be frightened off, or at least the price at which the shares are sold might be affected? In the circumstances, would it not be preferable for the Government to suspend any further action regarding the flotation?
I want to help the Government. Indeed, everyone in this House wants to help the Government. We tried to help the Government when the Bill was going through this House. My noble friend Lord Ross of Marnock, who I see in his place, tried to help. The noble Lord, Lord Taylor of Gryfe, also tried to help. We all tried to help the Government to avoid the trap into which they have now fallen. We want to help them again. I ask the noble Lord: would it not be preferable to suspend any further action regarding the flotation? Would he not agree that to attempt a flotation anyway, even if it were legal in England and Wales, without Scotland would be like floating the Trustee Savings Banks decapitated?

§ Lord Taylor of Gryfe
My Lords, I should like to follow the noble Lord in trying to be as helpful as possible and to say that we on these Benches have no desire to diminish the total sum realised in the ultimate flotation, under whatever auspices it is 286 projected. Neither have we any intention or desire to frustrate the restructuring of the Trustee Savings Bank since it is obvious that the present structure and constitution of that bank is irrelevant to the general purposes which it exercises at the moment in providing a full banking service.
Having said that, I must ask the Minister this: is he satisfied that the complicated situation that has arisen is not due to the insensitivity of the trustees of the Trustee Savings Bank who have been conducting these negotiations on restructuring for three years? At no time during those three years have they communicated, or corresponded, with any of the depositors in the bank whose moneys they were handling. Would it not have been a sensible and wise action for the trustees at least to have communicated with the people whose funds they were handling during that three-year period, explaining just what was happening in the restructuring? That is the first point.
Secondly, I note a reference in the other place yesterday to a statement from the Prime Minister in July of this year. She said that the findings of the Scottish courts must be obeyed. This raises important constitutional questions. If the Scottish courts find that the assets of the Trustee Savings Bank should be in the ownership of the depositors that, in my view, makes a flotation impossible at the moment. That would require to be built into the prospectus of any issue and would obviously diminish the attractiveness for any potential investor. As I said, we have no desire to diminish the total sum that is realised. As the noble Lord said, the issue may be taken to the European Court and in that event, if the European Court found against them, it would be the Government who would be responsible for restoring the funds—the £700 million of reserves—plus the other assets which amount to a total commitment of £ 1 billion i n this bank. It is a £1 billion flotation. If the European Court were to find that the Government had acted in a way which was contrary to the best advice of the Scottish courts and that the Scottish courts were right in this case that would involve a substantial Government commitment.
Let me echo the plea from the Labour Front Bench. Is this not a time for us to consider the complex issues that have arisen from this judgment and also to say that if it is held that the assets of this bank belong to the depositors there is a first-class case for creating a mutual structure rather than a PLC? Will the Government look at that before proceeding further on this matter?
Will the Government also accept that if they are to obey the Scottish courts and at the same time allow the flotation to proceed in England, one solution might be to hive off the Scottish TSB as a mutual and let the flotation proceed for the other part of the TSB bank? These issues should be considered candidly, without dogma and without prejudice, and I appeal to the Government not to rush into an appeal and not. like the TSB trustees this morning, announce bluntly that the flotation will go ahead. That is not acting responsibly and I hope the Government will encourage the trustees to be a little more responsible.

§ Lord Young of Graffham
My Lords, I am grateful to the noble Lord, Lord Stoddart, for his assurances, which I accept, that the Opposition will do everything in their power to assist the Government. Indeed, for my part I should like to calm the chickens generally—I think that is the expression—and repeat that the advice which the Government received was firm legal advice on the propriety of their action and that was reflected in last December's White Paper. Having now received the long judgment of the court it is only right and proper that we should consider it calmly—and here I agree with the noble Lord, Lord Taylor—and without haste in order to see the full implications. I do not think that at this time it is proper to comment on the behaviour of the trustees. Your Lordships have had the opportunity for long and, perhaps I may say, eloquent debates on this subject and if we are not careful we shall come very close to reopening the whole debate again.
My right honourable friend the Prime Minister said—as I have no doubt every Member of your Lordships' House would say—that the judgment of the court must be obeyed. No doubt it will be obeyed. I really think that this is a time just to wait a little and allow the Government to make up their mind, having read the judgment, and once again taken legal advice.

§ Lord Ross of Marnock
My Lords, the Minister will be aware that the flotation of shares in this bank (in which we now find there are, if not owners, beneficiaries who have not agreed to such a flotation), cannot go ahead as quickly as was expected. I have been accused of helping the Government. I never sought to help the Government. I am not guilty ofthat. What we did was to warn the Government that what the Minister now calls firm legal advice was not firm at all. The person who gave that legal advice in that direction had at an earlier stage given legal advice along the lines of the judgment that has now been given. Surely this flotation is not going ahead now. In the light of this judgment, can we be assured that it will not go ahead?

§ Lord Young of Graffham
My Lords, if I made any grave imputation against the noble Lord, Lord Ross of Marnock, that he helped the Government, I would withdraw it; but I did not.
I repeat that the position is simply this. It was only yesterday that the Government received the judgment of the court and it is only yesterday and today that the Government have been considering their future action. The Government will act as expeditiously as possible but they should do so only after proper reflection.

§ Lord Harmar-Nicholls
My Lords, can my noble friend tell me this: is it not a fact that the Scottish judgement is advisory and not binding in law?

Noble Lords
Oh!

§ Lord Harmar-Nicholls
I think that is the position, my Lords. If so, ought not the Government to think in terms of trying to keep to their own programme? They talk about going to a flotation. Is there any objection 288 to going through all the parliamentary procedures before flotation, after which a decision can be made resulting from the appeal that my noble friend says that the Government are in any case instituting?

§ Lord Young of Graffham
My Lords, I think I can do no better than repeat the words of my right honourable friend the Prime Minister. The judgment of the court will be obeyed.

§ Lord Mackie of Benshie
My Lords, the Minister must admit that the whole question has been reopened. I said on a previous occasion that it was morally wrong that the investors should be handed the assets of the depositors. That view has now been upheld by law. What better advice does the Minister want than the testing of the law in the courts? Surely that is the ultimate advice. I remember the amused smiles and the patronising grins when I asked whether Scottish advice had been taken and was told that I must understand that the Treasury had the best possible advice. I think that the whole question of the flotation is now reopened, the whole question of mutuality is reopened, and the Government must admit it.

§ Lord Young of Graffham
My Lords, I commenced my life as a lawyer but even in those days I never confused law with morals. What we have today is a judgment of the first court. There are such matters as appeal. The Government are considering their position and all will become clear very shortly.

§ Lord Stodart of Leaston
My Lords, while perhaps resenting the suggestion of my noble friend Lord Harmar-Nicholls that the judgment of the court in Scotland is not binding, at least in Scotland, I should like to ask my noble friend whether he is aware that there really is considerable confusion among those who are not lawyers—who form the vast majority of the population not only of Scotland but of the United Kingdom—on a very, very complex case? Is it not perfectly proper that, though a decision has been given by Lord Davidson, the ordinary process of appeal to the Inner House should be gone through?

§ Lord Young of Graffham
My Lords, I have often noticed that there is much confusion about law among non-lawyers, and no doubt this continues in this case as well, but until the Government have had time to consider the judgment, take further advice and make up their mind on a course of action, I think that we can do nothing but wait a little more patiently.

§ Lord Houghton of Sowerby
My Lords, may I ask whether, within the knowledge of the noble Lord, the Trustee Savings Bank has made any announcement that it is going on regardless which gives rise to the press report that that is just what they intend to do?

§ Lord Young of Graffham
No, my Lords, not within my own knowledge, no—but that may well be so.

§ Lord Stoddart of Swindon
My Lords, I am sorry to come back again. I understand, appreciate and accept that the Government will want time to think about this; but would the noble Lord assure me that when 289 they have done so—and I hope it will be soon—they will come back to Parliament and make a proper Statement?

§ Lord Young of Graffham
Yes, my Lords, I am glad to give that assurance.