Lords Sitting of 23 October 1985

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Southwark.

The Lord Bishop of Saint Albans
John Bernard, Lord Bishop of Saint Albans— was (in the usual manner) introduced between the Lord Bishop of Rochester and the Lord Bishop of Carlisle.

The Nation's Housing Stock
2.43 p.m.
Lord Dean of Beswick: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action they intend in order to remedy the deterioration of the nation's housing stock.
Lord Skelmersdale: My Lords, the Government's proposals for safeguarding the condition of private sector housing stock in England and Wales were published in May this year as a Green Paper (Cmnd. 9513), Home Improvement—A New Approach. In April my right honourable friend the then Secretary of State for the Environment launched an inquiry into the repair and improvement needs of public sector stock. We expect to publish those findings shortly.
Lord Dean of Beswick: My Lords will the Minister comment on reports in the responsible press that the inquiry calls for a minimum of £20 billion to be spent in order to deal with the present situation? Bearing in mind that that view has been reinforced by the institute of maintenance and building management and the Building Employers Confederation, can the Minister say what we are waiting for? When will the Government take the necessary action?
Lord Skelmersdale: No, my Lords, I cannot comment except to say that obviously newspapers thrive on speculation. However, that does not necessarily mean that we have to be sucked in by it. As I said, I expect publication of the report shortly.
Baroness Fisher of Rednal: My Lords, will the Minister give some consideration to the accumulated capital receipts held by those authorities which have to deal with inner city deprivation, to enable some of them to use those capital receipts to take care of properties in need of repair and improvement?
Lord Skelmersdale: Yes, my Lords, the Government have been giving considerable thought to the use of capital receipts in the past 18 months or so, especially since those receipts have been increased so dramatically by the successful policy of selling council houses. Unfortunately, if vast amounts of money are spent it has a deleterious effect on inflation.
Baroness Nicol: My Lords, if the Minister will not take very seriously the questions which have been put to him but dismisses them as speculation, then will he take seriously the report of the national chairman of the Young Conservatives who has, in conjunction with the construction federation, said that we have 4·3 million houses which are substandard, unfit for habitation, or lacking basic amenities? He has called on the Government to do something about that situation. Will the Government not take that request seriously?
Lord Skelmersdale: My Lords, there is no question of not taking this matter seriously. I said that we will have to wait for the true picture to be revealed, when the results of the inquiry are published. Certainly one takes all such comments with great seriousness.
Lord Dean of Beswick: My Lords, is the Minister not aware that most of the bodies which have reported on this subject are non-political but have expertise in this particular area? They include the National Housing Improvement Council. It is not a question of loose newspaper talk. Will the Minister be more sympathetic to the large conurbations in the United Kingdom, such as the City of Manchester, which has submitted a claim under its housing investment programme for £90 million to deal with its problems in a modest way, but which was granted access to only £36 million? Is this really good enough? That situation is mirrored in every other major city of this country. When will the Government do something about it? Action in this area would create tens of thousands of jobs which would be beneficial to everybody.
Lord Skelmersdale: My Lords, we are talking about houses which may or may not be fit for human habitation; accommodation which may not be in the kind of state in which we should like people to live in them. Wherever such houses are, that will be where such money as is decided upon will be directed. So far as employment goes, since 1979 the number of construction firms has grown by 69,000. The number of firms employing from one to seven people grew from 79,000 in 1979 to 153,000 in 1984. The growth in the number of construction firms between 1980 and 1983 was more than 25 per cent. of all gains in United Kingdom businesses. It was the highest gain in any United Kingdom industrial sector.
Lord Underhill: My Lords, have the Government taken any notice of the many other reports which have been published on the condition of the housing stock, particularly that of the Building Trades Employers Federation and the survey conducted by the Association of Metropolitan Authorities?
Lord Skelmersdale: Yes, my Lords, of course we take notice of such reports; but as I have already informed the House on previous occasions, we have been conducting our own survey. Today's questions were directed at when the results of that inquiry will be analysed and published. I have answered that question.
Baroness Fisher of Rednal: My Lords, while it may be that the noble Lord takes notice of such reports, when does he propose any action?
Lord Skelmersdale: My Lords, we are currently spending £3,051 million per year. That is action.

AIDS Disease: Containment
2.50 p.m.
Lord Campell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they are satisfied that the expected onset of the disease AIDS in this country can be contained within the next three years.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, over the next few years there are bound to be new cases of AIDS arising out of those people who are already infected with the virus. In the current state of medical knowledge these cannot be prevented. The Government are however concerned to minimise the number of new people who become infected and action has been taken, and is being taken, to this end.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for that reply. Are the Government yet able to give the following assurances? First, that the blood transfusion service in this country has been made safe from this disease? Secondly, are the Government able to say whether haemophiliacs in particular can have confidence that they will not run the risk of infection?
Baroness Trumpington: My Lords, we have taken steps whereby we have actively discouraged at risk groups from donating blood. Blood donations are now all tested. As regards haemophiliacs, all blood products for this purpose are now heat treated and therefore no haemophiliacs can be newly infected.
Baroness Nicol: My Lords, can the Minister say whether the blood presently in stock and taken from donors before these new regulations came into force is being screened before use?
Baroness Trumpington: My Lords, the blood which is now being given to patients is screened and is safe.
Baroness Masham of Ilton: My Lords, is the Minister aware of the extreme stress under which some of the staff are working in such specialised units as the haemophiliac unit in Newcastle where about 75 per cent. of patients have the AIDS antibody? Is she further aware of the need for counselling? Is she also aware that she would earn the gratitude of many people if she could obtain some specific funds for the staffing of social workers dealing with counselling for so many people who need this service?
Baroness Trumpington: My Lords, in answer to the many parts of the question put by the noble Baroness, I am aware of the splendid work done at the haemophiliac centre at Newcastle. I am also aware that it has a social worker involved in the care of
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haemophiliacs and their families. Counselling is being organised from St. Mary's in London and I should like to pay tribute to the incredibly hard work that has been done in order to get over 180 counsellors trained who will pass on their knowledge of counselling to other people. I do not think that the question of funds is one for me to answer because it is for local authorities and the regional health authorities to deal with that. However, I should like to make one small point clear. The noble Baroness mentioned 75 per cent. of haemophiliac patients in the area to which she referred. The national percentage is not as high as that; it is 35 per cent.
Lord Mackie of Benshie: My Lords, is the noble Baroness in a position to tell the House how much money has been made available for extra research and to whom it has been made available?
Baroness Trumpington: My Lords, the Government have funded the Medical Research Council which has projects costing nearly £400,000. Other United Kingdom projects are under way in drug companies and universities. The MRC is always willing to consider other projects.
Lord Wallace of Coslany: My Lords, is the noble Baroness aware that it is very nice indeed for your Lordships' House to realise that the noble Baroness is giving us reassuring answers on her birthday? May we wish her many happy returns?
Noble Lords: Hear, hear!
Lord Campbell of Croy: My Lords, is my noble friend aware that in the United States very large sums of money have been allocated for research and other programmes connected with AIDS? Are the Government confident that we in Britain will benefit from whatever is discovered as a result of those very expensive programmes?
Baroness Trumpington: My Lords, we are in constant touch with all bodies and persons wherever they are in the world who are researching and looking into AIDS disease. The Government initially gave £1 million for the original funding for testing and for other outlets for this research programme, and for counselling. The Government have just given a further £1 million and are looking into the need for more funding should that be necessary.
Lord Sefton of Garston: My Lords, may I ask the noble Baroness whether or not the Government have given consideration to the possibility of suing some of the commercial organisations in the United States which supplied contaminated blood?
Baroness Trumpington: No, my Lords.
Lord Sefton of Garston: My Lords, I asked whether the Government would consider giving consideration to recovering some recompense for the damage that has been caused in this country by the commercial organisations in the United States?
Baroness Trumpington: My Lords, I shall pass the noble Lord's thoughts on to my right honourable friend the Secretary of State.
Lord Ritchie of Dundee: My Lords, I hate to cause the noble Baroness any discomfort on her birthday, but may I ask that she answer the question put to her by the noble Baroness, Lady Nicol; namely, whether there is screening of existing stocks of blood?
Baroness Trumpington: My Lords, the screening of blood procedure came in only last week, so with any blood that was imported before the screening began there was an element of risk. It is not actually blood but plasma which is imported, because we are self-sufficient in blood. The blood in this country now has no risk, as I said. The tests were started only last week, so as from last week all blood is safe.
Lord Cledwyn of Penrhos: My Lords, is the plasma which was in stock before screening started to be used?
Baroness Trumpington: My Lords, routine screening of all blood donations has been introduced, as I said, and all supplies of Factor 8—which is the blood clotting agent neeeded by haemophiliacs—are heat treated, which therefore makes them safe. No blood coming into this country has any risk attached to it.
Lord Taylor: My Lords, is the noble Baroness, on behalf of the Government, prepared to try and tackle AIDS at its source; namely, promiscuity among homosexuals?
Baroness Trumpington: My Lords, we have made very clear, and publicly, the groups of people at high risk. I can enumerate those or I can write to the noble Lord. I think that the House would probably prefer that I write. We have also given money to the Terrence Higgins Trust, which is very active and very helpful in trying to put the word over to the high risk groups that they should not give blood.
Baroness Nicol: My Lords, I am now a little confused about the answer to my supplementary question which the noble Baroness first gave to me, and I am sorry to press her on this matter on the occasion of her birthday. It is not clear to me—it may be my own lack of technical knowledge—whether we can be absolutely certain that every blood transfusion of any kind now given is made with blood which is safe. Is this heat treatment applied at the time of the making of the plasma or before it is turned into whatever is used in the transfusion?
Baroness Trumpington: My Lords, a blood transfusion is made from whole blood. Plasma which is given to haemophiliacs is heat treated which thereby makes it safe. I cannot answer whether stocks of blood from the past are being used which have any risk, but I am assured that the risk of being infected by the AIDS virus through receiving a blood transfusion is now very remote indeed since routine screening of all donations started this month. By that I feel it is implied that only routine screened blood will be used for donations. If I am wrong I shall write to the noble Baroness.
Lord Winstanley: My Lords, is the supply situation now such that old stocks of blood products which may have been contaminated could now be destroyed?
Baroness Trumpington: Yes, my Lords.

Geneva Negotiations: East-West Relations
3 p.m.
Lord Jenkins of Putney: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they wish the Geneva talks to succeed, and, if so, whether they think that the release of the spy dust stories and the timing of the recent expulsion of Soviet diplomats were conducive to that objective.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, we have made clear on many occasions that we want the Geneva negotiations to succeed. The expulsion of Soviet diplomats from London was related solely to considerations of national security. Speculation about the wider effects of the expulsions on East-West relations was clearly not well founded.
Lord Jenkins of Putney: My Lords, in spite of a somewhat doubtful note in her reply, may I nevertheless congratulate the noble Baroness on her birthday—which I understand is also today.
Noble Lords: Hear, hear!
A noble Lord: What about Tom?
Lord Jenkins of Putney: My Lords, will the noble Baroness accept that there is a feeling abroad, of which I think she must be aware, that the West is going into these negotiations leading up to the summit talks in a doubtful, uncertain and reluctant way? As I understand it, the Prime Minister is going to Washington in order to dispel some of those doubts. Will the noble Baroness agree that if the object of the exercise is to make it clear that the West is equally keen to reduce nuclear arms to a workable level and is embarking upon these talks with enthusiasm and a determination that they will succeed, then in those circumstances the Prime Minister will carry a lot of goodwill with her on her visit to Washington?
Baroness Young: My Lords, I should like to thank the noble Lord, Lord Jenkins, for his kind congratulations, and I should like to add mine also to the noble Lord, Lord Ponsonby. May I say that the answer to the second part of his question is, "Yes". We hope that the discussions that will be taking place in November will be successful and will have a constructive outcome.
Lord Paget of Northampton: My Lords, will the noble Baroness tell us how the difference between success and failure on these occasions is defined? Will it be any easier to define it at Geneva than it has been at the Bahamas? And does it actually matter very much either way?
Baroness Young: My Lords, I think the noble Lord has answered his own question by implying that if you ask a question couched in those terms it is impossible to give a sensible answer. I do not intend to try.

Civil Service Recruitment: Ethnic Minorities
3.3 p.m.
Lord Rochester: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they consider that members of the ethnic minorities are being recruited to the Civil Service in adequate numbers, particularly in areas where they form a relatively high proportion of the population.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, the Government have a long-standing commitment to equal opportunity in Civil Service recruitment, irrespective of ethnic origin. The Government are determined that this policy should be vigorously applied, and every effort is made, through advertising and through detailed guidance to staff involved in recruitment, to avoid the possibility of discrimination. In order to gauge the effects of these policies the Government have undertaken a programme of monitoring recruitment to the Civil Service by ethnic origin. In addition, all new entrants to the Civil Service are being asked to complete an ethnic questionnaire from 1st October 1985. These steps will enable the Government to assess the position of recruitment to the Civil Service from the ethnic minorities.
Lord Rochester: My Lords, I thank the noble Lord for that comprehensive response, so far as it goes—and I am sorry that I cannot wish him a happy birthday, too. Does the noble Lord agree that there are areas, particularly in the inner cities, where between 4 and 5 per cent. of the population are coloured people but where less than one per cent. of the Civil Service comes from the ethnic minorities? In the light of these figures, does the noble Lord accept that there is a need for the Government, as the direct employer of civil servants, to make a substantial improvement in their record if they are to give an adequate lead to other employers in this respect?
Lord Belstead: My Lords, I think that the noble Lord had in mind a particular newspaper report when he was referring to 4 or 5 per cent. I believe I am right in saying that the newspaper report went on to say that the surveys on which this statement was based had not been finished. So far as concerns the Civil Service, this is indeed true. Surveys have been undertaken in the north-west of the country and in the county of Avon which showed that in areas where the ethnic working population averaged 2½ per cent. of the total population, the numbers in the Civil Service were only 1 per cent.
However, I think two facts must be borne in mind. The first is that 23 per cent. of staff did not reply. The second—which is much more important—is that a parallel recruitment survey in the same areas shows
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that the numbers being recruited into the Civil Service from ethnic minorities come very near to the numbers of the working population from ethnic minorities. I think that is good news. Nonetheless, I take seriously the last part of the noble Lord's question. Of course, we still need to take this matter very seriously.
Baroness Seear: My Lords, would the noble Lord agree that what is important is not only the numbers recruited into the Civil Service but the numbers of ethnic minorities to be found at different levels, particularly in the higher grades of the Civil Service, where I think the noble Lord will agree they are conspicuous by their absence? Can the noble Lord confirm that the Civil Service enunciated an equal opportunity policy in 1973 and that we have not heard very much about the results of that policy since that date?
Lord Belstead: My Lords, as regards the first part of the question from the noble Baroness, the Government are an equal opportunity employer, and making one's way in the Civil Service is on the grounds of merit. As to the second part of the noble Baroness's question, I think that the Civil Service is doing a great deal. A survey of staff in post is being undertaken; a survey of recruitment is being undertaken; a survey of progress of staff within the Civil Service is being undertaken; and, perhaps most important of all, a survey of the attitudes of school leavers to the Civil Service is being undertaken. It is in the light of that last survey particularly that it may of course be necessary to decide what further action to take.
Lord Elystan-Morgan: My Lords, on that particular matter, I wonder whether the Minister can say whether or not there is any machinery for maintaining a constant contact between the requisite branch of the Civil Service and universities, technical colleges and education authorities, with a view to recruiting persons of the highest calibre from ethnic minorities?
Lord Belstead: My Lords, I should like to look at that question. If I may say so, I believe that surveys which have been undertaken since the time of the Tavistock Report have invariably been undertaken in consultation with the Civil Service unions. However, the noble Lord's question goes rather wider than that reply, and I hope that he will forgive me if I look at his question and answer it in writing.
Lord Glenamara: My Lords, can the noble Lord the Minister say specifically how many people from ethnic minorities have been recruited to the administrative grade of the Civil Service in recent years? Will the noble Lord find this out and write and tell me?
Lord Belstead: My Lords, I doubt whether the information is available. I pointed out to the House that one of the difficulties of surveys, which will be familiar to the noble Lord, is that of getting replies to the survey questions. In fact, in the survey which has just been taking place in the County of Avon and the north-west of England, 23 per cent. of staff did not reply. It is good news that, as I understand it, the surveys which will be taking place over the next four years will be undertaken in consultation with the

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unions and with their agreement. I believe that is correct. But looking backwards, to answer the noble Lord's question, I may very well find that the information is not available. Of course I shall look into it and I shall undertake to write to the noble Lord.
The Earl of Onslow: My Lords, how does my noble friend define "ethnic minorities"? My great grandmother was the granddaughter of a West Indian slave. I do not know whether or not I belong to an ethnic minority. Can my noble friend tell us what constitutes an ethnic minority?
Lord Belstead: My Lords, the Race Relations Act is quite clear that there must be no discrimination, and in order to decide whether there is one has to look at the details of the Act. I do not think that my noble friend falls within any of its clauses.
Lord Renton: My Lords, are not the Scots, the Irish and the Welsh regarded as ethnic minorities where they are found in some concentration in English places?
Lord Belstead: My Lords, I think not; but, in all seriousness, the adjuration of the Race Relations Act is, "No discrimination". I am quite certain that the Government are an equal opportunity employer, and we are determined to remain as such.
Lord Cledwyn of Penrhos: My Lords, is the noble Lord aware that, having been here for a very long time, we do not regard ourselves as an ethnic minority? Can he say what are the chief causes of the failure to recruit since the Tavistock Report? He has not made that clear. We wish the Government well in the steps they are taking, but it would be of interest to the House to know why there has been so great a failure up to now.
Lord Belstead: My Lords, with respect to the noble Lord, I have not admitted on behalf of the Government that there has been such a failure. In my original Answer to the noble Lord, Lord Rochester, I endeavoured to go out of my way to say that the recruitment survey for the north-west of the County of Avon shows that recruitment in those areas is very nearly up to the percentage of the working population which is drawn from the ethnic minorities. However, the noble Lord has a point, but we cannot tell to what extent it is valid until we begin to get more information from the surveys going on at the present time.
Lord Plant: My Lords, can the noble Lord tell us whether there have been discussions with the Civil Service trade unions and what co-operation they are offering in that respect?
Lord Belstead: My Lords, I said earlier that there had been consultation with the Council of Civil Service Unions, and other trade unions, so far as I know. The monitoring programme which is being embarked on at the present time is being done as a result of consultation.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that consideration of Commons Amendments on the Insolvency Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during that adjournment a Motion to disapprove the Statement of Changes in Immigration Rules will be taken.
Essex Bill [H.L.]
Greater Manchester (Light Rapid Transit System) Bill [H.L.]
Swansea City Council (Tawe Barrage) Bill [H.L.]
West Glamorgan Bill [H.L.]
Sonia Ann Billington and Norbury Billington (Marriage Enabling) Bill [H.L.]
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move the first of the two procedural Motions standing in my name on the Order Paper, and to speak to the second, as they both have the same purpose.
I very much regret that there has been a printer's error in the first Motion and that the second paragraph was not correct. I can read it out if your Lordships wish, but the correct paragaph was contained in the Green Paper's Notices and Orders of the Day and is also available in Xerox form in the Printed Paper Office.
The purpose of these two Motions is to enable the Bills that are listed on the Order Paper to continue their progress through Parliament in the next Session if that is the wish of the promoters. Similar Motions have been moved at the end of previous Sessions in both Houses and there is nothing unusual in what I am proposing. I beg to move.
Moved, That the promoters of the Bills have leave to suspend any further proceedings thereon in order to proceed with the Bills, if they shall think fit, in the next Session of Parliament, provided that notice of their intention to do so be lodged in the Office of the Clerk of the Parliaments not later than three o'clock on the day before the close of the present Session, and that all fees due thereon up to that period shall have been paid;
That such Bills shall be deposited in the Office of the Clerk of the Parliaments not later than three o'clock on the third day on which the House shall sit after the commencement of the next Session of Parliament, with a declaration annexed to each, signed by the Agent, stating that the Bill is the same in every respect as the Bill at the last stage of the proceedings thereon in this House in the present Session;
That the proceedings on such Bills shall in the next Session of Parliament be pro forma only in regard to every stage through which the same shall have passed in the present Session, and that no new fees be charged to such stages;

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That the Standing Orders by which the proceedings on Bills are regulated shall not apply in the next Session of Parliament to such Bills in regard to any of the stages through which the same shall have passed during the present Session.—(Lord Aberdare.)
On Question, Motion agreed to.

South Yorkshire Passenger Transport Bill
Lord Aberdare: My Lords, I beg to move the second Motion standing in my name on the Order Paper, which is correctly printed.
Moved, That the Promoters of the Bills have leave to suspend any further proceedings thereon, in order to proceed with them, if they shall think fit, in the next Session of Parliament, provided that notice of their intention to do so be lodged in the Office of the Clerk of the Parliaments not later than three o'clock on the day before the close of the present Session, and that all fees due thereon up to that period shall have been paid;
That, if any of the Bills are brought from the Commons in the next Session, the Agent for the Bill shall deposit in the Private Bill Office a declaration, signed by him, stating that the Bill is the same, in every respect, as the Bill which was brought from the Commons in the present Session;
That the proceedings on such Bill shall, in the next Session of Parliament be pro forma only in regard to every stage through which the same shall have passed in the present Session and that no new fees be charged in regard to such stages;
That the Standing Orders by which the proceedings on Bills are regulated shall not apply, in the next Session of Parliament, to such Bill in regard to any of the stages through which the same shall have passed during the present Session.—(Lord Aberdare.)
On Question, Motion agreed to.

European Communities (Finance) Bill
Brought from the Commons endorsed with the Certificate from the Speaker that the Bill is a Money Bill within the meaning of the Parliament Act 1911; read a first time, and to be printed.

Insolvency Bill [H.L.]
3.14 p.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth): My Lords, I beg to move that the Commons amendments be now considered.
Moved, That the Commons amendments be now considered.—(Lord Lucas of Chilworth.)
Lord Bruce of Donington: My Lords, I rise in somewhat unprecedented circumstances. The House is required to consider the amendments that have been passed by another place to this Bill, together with a number of amendments to those amendments which
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have been put down by the Government, and a small but modest number which have been put down by myself on behalf of those who sit behind me. I said that the circumstances were unprecedented. We are required this afternoon to consider some 569 amendments, among which are 46 new clauses and quite substantial additions to and subtractions from the Bill as it left your Lordships' House. The sheer volume of what we have to consider may be gathered by those noble Lords who have a copy of the Marshalled List. It runs to some 114 pages. Even before the subsequent Government amendments to the Commons amendments were put down, it amounted to some 95 pages.
The original Bill as presented to your Lordships' House was 95 pages, so what we are considering in volume—and I am well aware of the number of consequential amendments—is roughly one half of the size of the original Bill presented to your Lordships' House. I cannot believe that this House can consider adequately amendments of this scale of importance, size and detail within the time restrictions that we have been given.
When I first saw the amendments that came from the Commons—some 95 of them—I gave a rough estimate of the time that I thought would be required to give them the consideration and study which Parliament has increasingly grown to expect from this House. I remain of the opinion that some four days should have been allowed.
Had four days been allowed, I am bound to say that such a course would have been politically attractive. With our knowledge of the Government's timetable, it was clear to us that within the constraints of the existing parliamentary Session four days could not be given, and it might have run the risk of disrupting the Government's legislative programme. I repeat that that course was politically attractive.
But at the same time—and I am bound to take account of this—we might have lost this Bill altogether. There are two views about that. Many of the bodies interested in this vital, if non-controversial, Bill would be most reluctant to lose the improvements already incorporated in it, notwithstanding its many shortcomings to which I may later have to refer. The Confederation of British Industry and most of the professions would be reluctant to lose the Bill on that account. Then, of course, there is the non-party nature of the Bill. I speak within the political perceptions of many noble Lords who know how difficult it is to arouse interest in their respective parties on Bills which are quite non-political and arouse no party passions. Indeed, this is one of the characteristics of this Bill.
At a later stage, through the kindness of the Government Chief Whip, we were offered as an alternative an extra Friday on which to discuss this Bill. I came to the conclusion, and so advised my colleagues, that that would give us the worst of both worlds. It would be too short to give adequate consideration to the Bill and it would be too long otherwise. The Government have some courses open to them.
The first purpose of my intervention is to ask the Government a question in view of all the circumstances and on the assumption that the

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amendments that are put forward go through and are incorporated in the Bill—and in this connection we are most grateful to the Government for having published as Bill No. 240 a Bill that does show the result on the assumption that all the amendments are put into operation. I ask the Government whether they would withdraw the Bill and whether they would introduce it again in the new Session so that during the interval a comprehensive study could be made as to how the Bill could be better understood, its provisions better operated and better enforced.
I do not think there would be very much difficulty if that course were adopted, because the main principle and thrust, the balance of interest that the Government have contrived to comprise within the Bill, are already settled and there are no matters of controversy between us. But it would give an opportunity for the Bill to be further studied in its final form. The Bill has had over 1,000 amendments made to it since it first came to this House and further suggestions could be made to the Government to (as we loosely say) lick it into shape.
The House itself has a reputation as a revising Chamber. One is quite sure that after a comparatively short time in this House revision of this Bill would not be difficult to do. In particular, the operational nature of the Bill is important. The present position under Clause 236 of the new Bill is that the Bill can be brought in by stages. I speak after consultation with members of the legal profession and members of other professions. I am advised that this will be most difficult to do because of the interlocking nature of the phraseology used in various parts of the Bill. In fact, in the view of those best qualified to say (I am not a lawyer) it is going to be very difficult to activate separate parts of the Bill without introducing special amending legislation.
The other thing which has to be borne in mind in this connection is that so much of the Bill is spattered with references to rules. These have still to be formulated on the basis of a Bill which, if we pass it today, is going to be most difficult to understand. Moreover, there is the third possibility that affects its operation. Your Lordships will be aware of the steps taken by the Minister for Employment to ease the burdens on business, small businesses in particular. He will be aware that some of these affect the accounting provisions.
On my reading of the position, it is quite likely that there will be a conflict between the very strict accounting regulations reflected in this Bill and some of the actions that may be taken, or may be contemplated, by the Minister for Employment. As a consequence, at present there is uncertainty as to the future of the Bill, an uncertainty which your Lordships will have noticed is reflected in the columns of the Financial Times today.
In order to clarify some of the uncertainties, I want to ask the noble Lord three questions. First of all, by what date do the Government expect the Bill to be in full operation, bearing in mind that it is nine years since the Cork Committee was first appointed? Secondly, is an amending Bill to be introduced? If so, when? Thirdly, is it intended to bring into operation those parts of the Bill dealing with the appointment,
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role and powers of administrators? There are rumours—they may be entirely baseless but I am bound to give them articulation—that the Government do not intend to proceed with the administrator part of the Bill. In this, I may be entirely wrong.
My second point in raising this matter is the precedent for the future. Can we have an undertaking—and I am now looking more especially to the noble Viscount the Leader of the House, for whom I have a profound respect—that this compression of our deliberations today will not act as a precedent in any way, and will not be cited as such in the future? I know that perhaps the Government may reply that the reason why they have felt constrained to compress our proceedings today is precisely because the Bill is non-controversial. In my respectful submission, Bills, whether they are controversial or not, should be considered by your Lordships' House on the basis of their merits, and on their merits alone, whatever party passions may be roused. I think the House is entitled to an assurance from the noble Viscount the Leader of the House that what happens today in the compression of our deliberations will not be taken as a precedent for the future.
Lord Diamond: My Lords, I do not want to say anything about the content of the Bill or about the date on which it may be brought into effect. But I do want to draw the attention of your Lordships to the fact that once more we are back in the familiar position, which we have so often traversed in previous Sessions, of having much too much to do at this point in the Session to do it properly and up to the standard of your Lordships' work. I am bound to draw this point to the attention of your Lordships again because, fortunately, the proposal we are considering, that we should now consider amendments, comes immediately after two proposals, which your Lordships have accepted without any dissent whatsoever from the noble Lord the Chairman of Committees, to enable Private Business to be dealt with, quite adequately and according to precedent (and without too much trouble, according to precedent), partly in the Session in which it started and partly in a subsequent Session.
Therefore, I am bound to draw the attention of the House to the question whether we ought not to give further consideration to the possibility of adapting that procedure for Private Bills to Public Bills, so that when we are in this difficulty again we can give full and proper consideration to the final stages of a Bill, without having to go through all the previous stages once more, by considering the final stages properly and fully in a subsequent Session.
May I remind your Lordships that one of the predecessors of the present noble Lord the Chairman of Committees was himself, after his experience in that office, in favour of this very procedure. I am suggesting nothing new or revolutionary, but a method of alleviating the difficulty in which we find ourselves time and time again.
3.30 p.m.
Lord Denning: My Lords, may I say a word on this Bill? First, as to its importance, the last Act dealing

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with insolvency was the Bankruptcy Act 1914, although there were some subsequent Companies Acts. Since then, the subject has become far more complicated in business and in other ways. Our world is different. We need a new, comprehensive Act dealing with insolvency. The attempt has very rightly been made. In 1977 Sir Kenneth Cork and his committee entered upon a review of the insolvency law. They sat for five years and heard the most expert evidence. It is the most technical subject you can imagine. Both lawyers and accountants hate it. Most of them know nothing about it. On the other hand, it is most important. Sir Kenneth Cork and his committee, after five years, produced an excellent report with many recommendations. The Government took it away. They issued a consultative paper. That was not nearly so good, if I may say so. On the other hand, after three years—that is the time between 1982 and 1985—this Bill was produced.
I cannot say that I know much about it, but when the Bill was considered on Second Reading and during its subsequent stages in this House, your Lordships were helped by the most expert opinion from lawyers, accountants and directors of companies, all of them closely involved. We went through the Bill on Second Reading and on the various amendments, and there it was. We passed it here so that it could go to another place.
There were some promises on the Government side. They would do this, that and the other. I am glad to say that they have done so, as in the case of the matrimonial home, in which I was so interested. They put in a very good new clause for that; I am entirely in favour of it. They may have done the same in respect of other matters. I feel that a great number of these amendments made by the Commons are first class. So far as I can see, I would agree with most of them. However, I should not like to say that they should go through this House without proper consideration and debate. There are many details which could have been and should have been before this House as a revising Chamber in the first place on Second Reading. But your Lordships are to get, goodness knows, 30 or 40 new clauses and a whole new chapter on voluntary arrangements—all this coming to us from the Commons. In addition, there are all sorts of other amendments.
We should consider these matters with the same care as if they had been introduced into this House in the first place. We should be able to consider whether such and such goes a little too far, whether this does not take care of something else or whether we ought to be able to amend that. This necessarily takes time. Here we have 113 pages, whatever it is, on a most complicated subject. I have tried to go through it but I am no good at it. On the other hand, the accountants may go through it and we shall want advice upon it. This House can do a most important and valuable task if it takes this Bill, reprinted as the Commons have amended it, goes through it again and makes it into a real Bill.
I stress again that this Bill, when it is an Act, will govern our bankruptcy law perhaps for another 70 years—the same as the 1914 Act. So do let us get it right this time after proper consideration in this House. It cannot be done today, I suggest, after my
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scant reading of the amendments, to and fro. I suggest that it cannot be done today even with an extra Friday. I do not myself think it can be done.
What, then, is the solution? I would endorse what the noble Lord, Lord Bruce of Donington, said. Is there not some way in which we can get it through quickly, yet have it properly considered? Could it be left, as the noble Lord said, so that we take it at the beginning of the next Session? I should like to see an alteration in our procedure to enable us to do that. If that is not possible, cannot the Bill be withdrawn now and brought in again as a quick, new Bill? It would be in a pretty good shape once we got these Commons amendments in. But let them come in after full consideration and discussion. I support what the noble Lord, Lord Bruce of Donington, suggests.
The Earl of Onslow: My Lords, this is really not my subject. My noble friend the Chief Whip can say "no" if he wishes, and I will agree with him. I have had a major discussion with my honourable friend the Member for Tynemouth, Neville Trotter, who, it appears, is a practitioner on behalf of the bankruptcy and insolvency people. His view—I speak with his knowledge and consent, and from notes provided by him—is that part of the problem is that the Government have been very sensible and have listened a great deal to what people have said. This explains why there are so many amendments. If, therefore, we can take this concession just a little further and introduce the Bill again in the next Session, when it will go through extremely quickly, we shall obviate the necessity for an amending Bill that is bound to come up if we do not get it right and rush through 100 amendments of our own and 500 Commons amendments today.
It would seem to me sensible to adopt the course I suggest. Your Lordships' House will have further laurels attributed to it for being sensible. Above all, so will the Government. I am interested in the Government appearing very sensible. I know that at heart they are, but on this occasion they can appear so as well.
Viscount Mountgarret: My Lords, may I lend my support to my noble friend Lord Onslow and subscribe to what he has said? We have had today a situation in which a number of Bills can be held over for another Session. Cannot we do the same with this Bill'.' This would enable us to consider it thoroughly and get it right first time instead of compressing three days' worth of amendments, as I understand it, into one day, which cannot be giving them enough consideration.
Lord Boyd-Carpenter: My Lords, I would only add one word to express my own unhappiness at the idea of the role of this House as a revising Chamber being dealt with in the way proposed. As the noble and learned Lord, Lord Denning, has said, this is a Bill of great importance. It is one to which this House has already given a great deal of care and attention. To deal with this mass of amendments, some of which appear to me to be of considerable importance, in the course of a day, seems to me to undermine the role of this House—the very important role of this House—as the revising Chamber. I hope that even at this stage, my noble friend the Leader of the House can give us a

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little hope that it is not proposed to deal with it in this way.
Lord Mishcon: My Lords, I follow, if I may, upon a great judge, a parliamentarian of great repute sitting, as he does, as a former Minister on the Government side, and a somewhat courageous Back-Bencher in the form of the noble Earl, Lord Onslow. I do so because in my view there is no party consideration in what we are now discussing. It is a question of the dignity, the pride and the tradition of this House. As rightly stated by the noble Lord, Lord Boyd-Carpenter, we have our great tradition in the role of the revising Chamber. I go this far, speaking completely non-politically. The procedure that we are asked to adopt today is an insult to this Chamber. It is an insult, too, to people who are meant to practise in insolvency law whether they be lawyers or whether they be accountants. Both professions welcome many of the principles of the Bill. But they are being asked to deal with a Bill that will not have had a proper amount of attention in your Lordships' House in relation to a number of amendments. There are 70 Government amendments to Commons amendments filling up many pages.
I wish to take up one other point before I sit down. I believe that is a very important point. There are occasions in your Lordships' House when the question of good faith is of great importance in deciding about Government business. The noble Earl, Lord Onslow, talked in terms of a speedy dealing with this Bill if it were re-presented in the form in which it now is so that we could go through it in a proper way and deal with many ambiguities and many controversial points that are still in this Bill arising out of the Commons amendments. I am authorised by my noble friend Lord Bruce of Donington—and if I may say so humbly I certainly speak for myself—that if this course were adopted we would regard it as a matter of good faith to deal with the new Bill as speedily as it is practicable to do so. We would even give undertakings about limitations of time, and so on, as long as those times were reasonably given.
Whatever any Government department may say, I hope that the Leader of the House, with his usual courage and his love of this Chamber, will see to it that today is not a miserable day in our history because we have, for Government programme reasons which cannot be so urgent, dealt with this Chamber in an improper way, and dealt with this Bill in a very negligent way.
Lord Mottistone: Perhaps I may intervene very briefly, with one further point. I am much taken with the recommendation of my noble friend Lord Onslow. The CBI—who advise me, as your Lordships know—are of the opinion that this Bill should go through now regardless. I am therefore not speaking for them. But I should like to remind the House that one of the most successful Bills of a non-political nature which originated in this Chamber in recent years was the Data Protection Bill which fortuitously was stopped because of the Election in 1983. That Bill had gone a long way—right through this House, and halfway through the other place—and many of the views that had been expressed had not been properly encompasssed by the Government department
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concerned. The Bill then had to be reintroduced shortly afterwards, quite quickly, and furthermore had a lot of points incorporated within it that almost certainly would not otherwise have been incorporated, which improved the Bill greatly and was itself a classic example of how things should be handled.
I implore my noble friends on the Front Bench to give great thought to what has been suggested by my noble friend Lord Onslow, and the special points that were made by the noble Lord, Lord Mishcon, and to consider whether this Bill could not be put on one side and reintroduced hastily in the next Session.
The Lord President of the Council (Viscount Whitelaw): My Lords, I appreciate that the noble Lords who have spoken have raised some very important points. I should like to deal with them in the same spirit.
First of all, I have to say to the noble Lord, Lord Diamond, and to my noble friends Lord Mottistone, Lord Mountgarret, and Lord Onslow—being the reasonable, understanding people that they are—that to ask at this moment suddenly to change all the conventions concerning various Bills and indeed to postpone the Bill which is being considered at this time—and Lord Mishcon put his point very fairly too—is asking something to which one could not expect the Leader of your Lordships' House to concede just like that. That would be totally inconceivable for someone in my position to do.
The noble Lord, Lord Diamond, asks," Could we not move to the procedure for public Bills that is adopted for private Bills?" The noble Lord knows very well that that would have to change a major position of our whole parliamentary procedure and it could not be something that in my position I could consider at this stage. I am sure that your Lordships will appreciate that. That I could not do.
3.45 p.m.
However, I want to help in every way that I can on an important Bill. That is certainly true. Perhaps I may make some comments on the various points which have been made. First of all, no one has worked harder over this Bill than the noble Lord, Lord Bruce of Donington. No one has tried harder to get this Bill into what the noble Lord would like to see as a non-controversial Bill; the best for the country in the long run. I accept absolutely what he has done. My noble friend Lord Lucas has done an enormous amount so far as concerns the Government, too. However, I hope your Lordships will appreciate something else. I fought extremely hard to get this Bill to come to your Lordships' House so that it could be considered first here and then in another place. I think that that was very important. I should like to say that to my noble friend Lord Boyd-Carpenter. I hope that your Lordships will understand that, having fought as hard as that to get the Bill here in the first place, I cannot say to another place, "We had this Bill, we did a great deal of work on it, changes have been made in accordance with what we wanted in another place, and, having come back here, we cannot get it through". I understand some of the feelings that have been raised but I hope that those who put them forward will look at my position for a moment. If I were to concede that,

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where would I be then? How would I get Bills to come to your Lordships' House first to enable us to consider them in very great detail and to make very great changes to them? I would be in a very difficult position. I understand that there are a great many noble Lords who would love to see me in a very difficult position—and I do not blame them for that—but if they see me in a very difficult position I beg them to believe that they might be seeing your Lordships' House in a difficult position, too. I ask for that understanding.
This Bill arrived and has been substantially changed in your Lordships' House. Some of the changes that were made were made against the advice of the Government. I have learned, as Leader of your Lordships' House, that these are matters which I have stoically to accept. When the Bill is changed against the wishes of the Government, sometimes I reflect afterwards—when I have overcome my initial irritation—that in fact your Lordships' House was probably right and the Government wrong. But that has been done on several occasions as far as this Bill is concerned. The Bill went to another place. Many of the matters which the noble Lord, Lord Bruce of Donington, raised in this House were changed in another place; and I think for the better. It now comes back here and many of the changes that have been made—and I appreciate totally what the noble and learned Lord, Lord Denning, has said in this matter—have been made at the instigation of this House. I am told—when one uses that famous phrase, one is always very well aware that what one is told someone may dispute; that is why I say "I have been told"—that the amendments have been combined to a total of some 40 groups. Nearly all of these deal with issues that came up previously in your Lordships' House rather than with new issues. Many of them are simply meeting points that were made in your Lordships' House. One new addition is a group of amendments intended to produce an equitable balance between a bunkrupt's family and his creditors in relation to the family home. But this group results from undertakings given by my noble friend Lord Lucas in your Lordships' House.
I understand that there are a great many amendments. I believe that many of them will go through quickly because I know that the noble Lord, Lord Bruce of Donington, agrees with them. The noble Lord will want them to go through quickly because he thinks that they are right for the Bill and will therefore be very speedy in his consideration of these matters. I know that that is what he would wish. There are others which will require some further consideration, and I also understand that.
When all this was considered it was agreed through the usual channels that this would be the time available to deal with the Bill. I am bound to say that because that is the way in which our business is conducted. I hope that your Lordships' House will seek to regard this Bill as a Bill which your Lordships have done a great deal to improve and that many of these improvements are being, as one might say, completed in the discussions today. I hope that that can be done speedily; I hope that we shall get on well.
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However, if at the end of the day there is not enough time, I have to say that the Government could give time on Friday, if that is really necessary. I wonder whether it will be; I very much hope that it will not be necessary. I absolutely understand the feelings that have been put forward, but I must return to my point that, having once managed to start the Bill in your Lordships' House, and having, I consider, improved the Bill out of all recognition, when it comes back to us at the end of the day from the other place I believe that there is some duty on us to accept the changes that we have made ourselves as quickly as possible and to look at the other matters concerned in a reasonable time. I hope that it will be possible to do this in the time allotted.
But I have made the maximum concession which I think is reasonable in the circumstances. Throughout I have tried to be reasonable in relation to what after all, is a very important principle for this House: 1 must fight to start important Bills in this House at the beginning of the Session. That is extremely difficult to do. Every objection is put to me as to why these Bills should not come here. My senior colleagues say that they wish to start them in another place because they are their Bills and they wish to make the major speeches on them at the beginning. I understand their views, but I have to fight them. Then there are the arguments that they are too much a matter of finance and cannot come to your Lordships' House.
I do not accept many of those arguments. I believe that it is in the interests of your Lordships' House to start major Bills here, and I argue the matter time and time again. I am doing my best for your Lordships' House, but I beg your Lordships to realise that it I have to go back on something like this, after having won the battle, I shall be in a very weak position in the future, and that will be bad for your Lordships' House.
Lord Cledwyn of Penrhos: My Lords, we appreciate what the noble Viscount the Leader of the House has just said, and I am bound to say that I agree with virtually everything that he has said. I am grateful to the noble Viscount for the generous tribute which he paid to my noble friend Lord Bruce of Donington, who has, as he said, worked hard and assiduously over a long time to master the details of one of the most complex Bills that we have seen during the Session. I should also like to add my own tribute to the work which has been done by the noble Lord, Lord Lucas. It is because of their efforts and those of other noble Lords, but their efforts in particular, that, as the noble Viscount has just said, the Bill is a much better Bill today than it was when it started on its course through this House.
I should also like to pay my own personal tribute to the noble Viscount for the effort he made to enable the Bill to start in this House. I know that he was doing this at the beginning and, as Leader of the Opposition, I felt that it was my duty to support him to the full because, the more such Bills start in this House, the greater the contribution that this House makes to the legislative process. Over the last few years this House has, of course, done a great deal. We certainly do not wish to lose the opportunities which may present themselves to us in the future to enable Bills to be launched in this House in the first instance.

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Nevertheless, having listened to most of the contributions—and a good deal of common sense has been spoken about the Bill—I regard it as unfortunate that at this stage this House should be presented with over 600 amendments. All I would say—and I am quite sure that the noble Viscount will agree with me—is that this needs very careful thought indeed. If we proceed as he suggests—and I support what he says—I would ask him to take advice from the appropriate quarters to see whether this kind of situation can be avoided in the future. For example, it would be unfortunate if 12 months from now we are confronted with a similar situation, because if we have to deal with over 600 amendments in a very short space of time—obviously not all of them are of the same value but a number of them are of the first importance—and if noble Lords do not think that they have the opportunity to pay the kind of attention which they believe should be paid to the amendments, that would be unfortunate.
I would ask the noble Viscount to ensure that this does not become a precedent; that he will make certain with his colleagues and with the party managers that we do not find ourselves in the position of having major legislation—and it is major legislation, albeit not party political legislation—before us at the fag-end of a Session without adequate opportunity to go into it in detail, which is indeed our primary duty. I am quite sure that the noble Viscount will give those assurances. In those circumstances, I would give general support to the noble Viscount.
Viscount Whitelaw: My Lords, I am extremely grateful to the noble Lord the Leader of the Opposition, Lord Cledwyn, for his remarks in what I accept is for this House a very difficult situation. I do not deny that for one moment. The noble Lord asked me if I will give assurances about a precedent for the future. Probably the right thing to say on these occasions is that one never knows what will happen in life owing to human frailty, but I will do my best given the opportunity to do so. That I shall certainly do, and I can give that undertaking, but that is a very human undertaking and it is subject to all the relevant factors of human frailty in this life.
On Question, Motion agreed to.

Insolvency Bill [H.L.]

  COMMONS AMENDMENTS
  1 Clause 1, page 1, line 9, leave out ', and knows or has reasonable cause to suspect that he is.'
  2 Page 1, line 18, at end insert 'or as supervisor of a composition or scheme approved by it under Chapter IA of Part II of this Act'.
  3 Page 2, line 4, leave out 'in Scotland'.
  4 Page 2, line 6, after 'under' insert 'a deed which is'.
  5 Page 2, line 15, leave out from beginning to ("to") in line 17 and insert 'References in this section to an individual include, except in so far as the context otherwise requires, references to a partnership and'.
  6 Clause 2, page 2, line 32, leave out from beginning to end of line 7 on page 3 and insert—
  '(2) A person is not qualified to act as an insolvency practitioner at any time unless, at that time—

  (a) he is authorised to act as an insolvency practitioner by virtue of section (Authorisation of members of recognised professional bodies) below, or

  (b) he holds an authorisation granted under section (Grant, refusal and withdrawal of authorisation) below.

  1104
  (3) A person is not qualified to act as an insolvency practitioner in relation to another person at any time unless—

  (a) there is in force at that time security or, in Scotland, caution for the proper performance of his functions; and

  (b) that security or caution meets the prescribed requirements with respect to his so acting in relation to that other person.

  (4) A person is not qualified to act as an insolvency practitioner at any time if, at that time—

  (a) he has been adjudged bankrupt or sequestration of his estate has been awarded and (in either case) he has not been discharged;'.

  7 Page 3, line 10, at end insert 'or

  (c) he is a patient within the meaning of Part VII of the Mental Health Act 1983 or section 125(1) of the Mental Health (Scotland) Act 1984'.

  Lord Lucas of Chilworth: My Lords, with the leave of the House, I beg to move that this House do agree with the Commons in their Amendments Nos. 1 to 7 en bloc.
  When the Bill left this House the system for regulating insolvency practitioners was an entirely statutory one. The task of licensing those who were fit and proper and had sufficient training and experience to act as insolvency practitioners fell upon the Secretary of State, who had power to delegate his functions to bodies chosen by him. The intention was that professional associations would exercise the Secretary of State's statutory powers in relation to their members as his delegate.
  Very strong representations were made to the Government by the accounting and legal professional bodies that delegation on totally defined terms would restrict the ability of bodies with a proven record of establishing and improving standards of expertise and conduct from continuing to raise such standards in relation to insolvency. Such bodies, it was submitted, should be permitted to undertake the whole procedure on a self-regulatory basis; that is to say, by operating within their own rules, which may be amended where appropriate, following negotiations with the Secretary of State. The Government accepted the force of these contentions and introduced on Report in another place the new clauses and related amendments that are before your Lordships now. In broad terms, the vast majority of practitioners will now be licensed and disciplined by the professional body of which they are members according to their separate rules.
  4 p.m.
  Amendment No. 8—that is in Clause 3 of the print of the Bill at 31st July—provides the machinery for the Secretary of State to recognise bodies, which fulfil the requirements of the clause, as entitled to authorise their members to act as insolvency practitioners for the purposes of Clause 2 as amended. The bodies likely to fall under this heading are those whose members qualify for membership after a supervised period of relevant training and the passing of a written examination at good standard.
  The bodies will also be issuing practising certificates and controlling their members on the basis of strong ethical and business codes, and furthermore they should be able to demonstrate an involvement in the development of insolvency procedures and practice. Part I of the Bill still retains the procedure for the

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  Secretary of State to license insolvency practitioners directly himself and to appoint other bodies to operate the direct statutory licensing system.
  There are existing practitioners in the field who are not members of professional, legal or accounting bodies but who are entirely fit and proper and sufficiently experienced to act as insolvency practitioners under the new system. The direct licensing procedure will enable these to become authorised and provide a continuing means of entry into the field of insolvency for those who meet the requirements but are, for some reason, not members of professional bodies.
  While the recognised professional bodies will rely on their existing examination procedures augmented, as they will be, with a measure of experience to produce licensed practitioners, those not being members of recognised bodies who apply to the Secretary of State for a licence will be required to show a long and considerable experience of insolvency procedures, including work at a senior management level. In the initial arrangements full weight will be given to those applicants who have held a substantial number of appointments in their own name as a liquidator, trustee, or a receiver.
  It might be helpful to your Lordships if I explain briefly the new licensing procedure. In doing so, I should perhaps remind your Lordships that with this group of amendments, Nos. 1 to 7, I am speaking also to Amendments Nos. 8, 9, 10, 11, 12, 13, 13A, 13B, 13C, 13D, 14 and 14A, 15, 16, 17, 18, 19, 389, 410, 414, 414Aand 540.
  8 After Clause 2, insert the following new clause:
  'Authorisation of members of recognised professional bodies.
  .—(1) A member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted so to act by or under the rules of that body.
  (2) The Secretary of State may by order declare a body which appears to him to fall within subsection (3) below to be a recognised professional body for the purposes of this section; and any such order may be revoked by a further order it it appears to the Secretary of State that the body no longer falls within that subsection.
  (3) This subsection applies to any body which regulates the practice of a profession and maintains and enforces rules for securing that such of its members as are permitted by or under the rules to act as insolvency practitioners—

  (a) are fit and proper persons so to act; and

  (b) meet acceptable requirements as to education and practical training and experience.

  (4) Any order under subsection (2) above shall have effect from such date as is specified in the order, and any such order revoking a previous order may make provision whereby members of the body in question continue to be treated as authorised to act as insolvency practitioners for a specified period after the revocation takes effect.
  (5) In this section references to members of a recognised professional body are references to persons who, whether members of that body or not, are subject to its rules in the practice of the profession in question'.
  9 After Clause 2, insert the following new clause:
  'Applications for authorisation.
  —(1) An application for authorisation under section (Grant, refusal and withdrawal of authorisation) below—

  (a) shall be made in such manner as the relevant authority may direct;

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  (b) shall contain or be accompanied by such information as that authority may reasonably require for the purpose of determining the application; and

  (c) shall be accompanied by the prescribed fee;

  and the relevant authority may direct that notice of the making of the application shall be published in such manner as may be specified in the direction.
  (2) At any time after receiving the application and before determining it the relevant authority mas require the applicant to furnish additional information
  (3) Directions and requirements given or imposed under subsection (1) or (2) above may differ as between different applications.
  (4) Any information to be furnished to the relevant authority under this section shall, if it so requires, be in such form or verified in such manner as it mav specify.
  (5) An application for authorisation under section (Grant, refusal and withdrawal of authorisatu m) below may be withdrawn before it is granted or refused.
  (6) Any sums received under this section by a relevant authority other than the Secretary of State may be retained by that authority; and any sums received under this section by the Secretary of State shall be paid into the Consolidated Fund'.
  10 After Clause 2, insert the following new clause:
  'Grant refusal and withdrawal of authorisation
  .—(1) The relevant authority may, on an application duly made in accordance with section (Applications for authorisation) above and after being furnished with all such information as it may require under that section, grant or refuse the application.
  (2) The relevant authority shall grant the application if it appears to it from the information furnished by the applicant and having regard to such other information, if any, as it may have—

  (a) that the applicant is a fit and proper person to act as an insolvency practitioner; and

  (b) that the applicant meets the prescribed requirements with respect to education and practical training and experience.

  (3) An authorisation shall, unless previously withdrawn, continue in force for such period not exceeding the prescribed maximum as may be specified in the authorisation.
  (4) An authorisation granted under this section may be withdrawn by the relevant authority if it appears to it—

  (a) that the holder of the authorisation is no longer a fit and proper person to act as an insolvency practitioner; or

  (b) without prejudice to paragraph (a) above, that the holder of the authorisation has failed to comply with any provision of this Part or of any regulations made under it or, in purported compliance with any such provision, has furnished the relevant authority with false, inaccurate or misleading information.

  (5) An authorisation granted under this Section may be withdrawn by the relevant authority at the request or with the consent of the holder of the authorisation.'
  11 After Clause 2, insert the following new clause:
  'Notices
  .—(1) Where the relevant authority grants an authorisation, it shall give written notice of that fact to the applicant, specifying the date on which the authorisation takes effect.
  (2) Where the relevant authority proposes to refuse an application or to withdraw an authorisation under section [Grant, refusal and withdrawal of authorisation] (4) above, it shall give the applicant or holder of the authorisation written notice of its intention to do so, setting out particulars of the grounds on which it proposes to act.
  (3) In the case of a proposed withdrawal the notice under subsection (2) above shall state the date on which it is proposed that the withdrawal should take effect.
  (4) A notice under subsection (2) above shall give particulars of the rights exercisable under sections [Right to make representations] and [Reference to Tribunal] below by a person on whom the notice is served.'
  12 After Clause 2, insert the following new clause:
  'Right to make representations
  .—(1) A person on whom a notice is served under section [Notices] (2) above may within fourteen days after the date of service make written representations to the relevant authority.
  (2) The relevant authority shall have regard to any representations made in accordance with this section in determining whether to refuse the application or withdraw the authorisation, as the case may be.'
  13 After Clause 2, insert the following new clause:
  Reference to Tribunal.
  '.—(1) A person on whom a notice is served under section [Notices] (2) above may within twenty-eight days after the date of service give written notice to the relevant authority requiring the case to be referred to the Tribunal referred to in subsection (6) below.
  (2) Where a requirement is made in accordance with subsection (1) above, then, unless the relevant authority within the period there mentioned—

  (a) decides to grant the application or, as the case may be, decides not to withdraw the authorisation; and

  (b) gives written notice of that fact to the person by whom the requirement was made,

  it shall refer the case to the Tribunal.
  (3) On a reference under this section the Tribunal shall—

  (a) investigate the case; and

  (b) make a report to the relevant authority stating what would in their opinion be the appropriate decision in the matter and the reasons for that opinion;

  and it shall be the duty of the relevant authority to decide the matter accordingly.
  (4) The Tribunal shall send a copy of the report to the applicant or, as the case may be, the holder of the authorisation; and the relevant authority shall serve him with a written notice of the decision made by it in accordance with the report.
  (5) The relevant authority may, if it thinks fit, publish the report of the Tribunal.
  (6) For the purposes of this section there shall be a tribunal—

  (a) which shall be known as the Insolvency Practitioners Tribunal (in this Part referred to as "the Tribunal"); and

  (b) in relation to which the provisions of Schedule 1 to this Act shall apply.'

  13A Line 2, leave out from beginning to ("give") in line 4 and insert—
  (".—(1) Where a person is served with a notice under section (Notices) (2) above, he may—

  (a) at any time within twenty-eight days after the date of service of the notice; or

  (b) at any time after the making by him of any representations in accordance with section (Right to make representations) above and before the end of the period of twenty-eight days after the date of the service on him of a notice by the relevant authority that the authority does not propose to alter its decision in consequence of the representations,").

  13B Line 8, leave out from ("authority") to ("to") in line 10 and insert—
  ("(a) has decided or decides").
  13C Line 11, leave out ("decides").
  13D Line 12, leave out ("gives written notice of that fact") and insert ("within seven days after the date of the making of the requirement, gives written notice of that decision").
  14 After Clause 2, insert the following new clause:
  Refusal or withdrawal without reference to Tribunal.
  '. Where no requirement is made under section [Reference to Tribunal] (1) above in respect of a proposed refusal or withdrawal, the relevant authority may, at the expiration of the period within which such a requirement can be made, give written notice of the refusal or
  1108
  withdrawal to the person concerned in accordance with the proposal in the notice given by it under section [Notices] (2) above.'
  14A Line 2, leave out from beginning to ("give") in line 5 and insert—
  ("Where in the case of any proposed refusal or withdrawal of an authorisation either—

  (a) the period mentioned in paragraph (a) of subsection (1) of section (Reference to Tribunal) above has expired without the making of any requirement under that subsection or of any representations under section (Right to make representations) above; or

  (b) the relevant authority has given a notice such as is mentioned in paragraph (b) of that subsection and the period so mentioned has expired without the making of any such requirement,

  the relevant authority may").
  15 Leave out Clause 3.
  16 Leave out Clause 4.
  17 Leave out Clause 5.
  18 Clause 6, page 4, line 25, leave out from 'for' to 'shall' in line 29 and insert 'the purpose of giving effect to this Part.
  (1A) Without prejudice to the generality of subsection (1) above or to any provision of this Part by virtue of which regulations may be made with respect to any matter, regulations under this section may contain—

  (a) provision as to the matters to be taken into account in determining whether a person is a fit and proper person to act as an insolvency practitioner;

  (b) provision prohibiting a person from acting as an insolvency practitioner in prescribed cases, being cases in which a conflict of interest will or may arise;

  (c) provision imposing requirements with respect to—

  (i) the preparation and keeping by a person who acts as an insolvency practitioner of prescribed books, accounts and other records; and

  (ii) the production of those books, accounts and records to prescribed persons;

  (d) provision conferring power on prescribed persons—

  (i) to require any person who acts or has acted as an insolvency practitioner to answer any inquiry in relation to a case in which he is so acting or has so acted; and

  (ii) to apply to a court to examine such a person or any other person on oath concerning such a case;

  (e) provision making non-compliance with any of the regulations a criminal offence; and

  (f) such incidental, supplemental and transitional provisions as may appear to the Secretary of State necessary or expedient.

  (2) Any power conferred by this Part to make regulations, rules or orders'.
  19 After Clause 6, insert the following new clause:
  Interpretation of Part I
  '. In this Part—
  "prescribed" means prescribed by regulations made by the Secretary of State;
  "the relevant authority" means—

  (a) in relation to a case of any description specified in directions given by the Secretary of State, the body or person so specified in relation to cases of that description; and

  (b) in relation to a case not falling within paragraph (a) above, the Secretary of State;

  "the Tribunal" means the Insolvency Practitioners Tribunal.'
  389 After Clause 194, insert the following new clause:
  Amendment of Restrictive Trade Practices Act 1976.
  (".—(1) No restriction in respect of any of the matters specified in subsection (2) below shall, after the coming into force of this section, be regarded as a restriction by virtue of which the Restrictive Trade Practices Act 1976 applies to any agreement (whenever made).
  (2) The said matters are—

  (a) the charges to be made, quoted or paid for insolvency services supplied, offered or obtained;

  1109

  (b) the terms of conditions on or subject to which insolvency services are to be supplied or obtained;

  (c) the extent (if any) to which, or the scale (if any) on which, insolvency services are to be made available, supplied or obtained;

  (d) the form or manner in which insolvency services are to be made available, supplied or obtained;

  (e) ihe persons or classes of persons for whom or from whom, or the areas or places in or from which, insolvency services are to be made available or supplied or are to be obtained.

  (3) In this section "insolvency services" means the services of persons acting as insolvency practitioners or carrying out under the law of Northern Ireland functions corresponding to those mentioned in section 1(2) or (3) above, in their capacity as such; and expressions which are also used in the said Act of 1976 have the same meanings as in that Act.
  (4) In Schedule 1 to the said Act of 1976 (services excluded from designated services), after paragraph 9 there shall be inserted the following paragraph—
  "9A. Insolvency services within the meaning of section (Amendment of Restrictive Trade Practices Act 1976) of the Insolvency Act 1985.".")
  410 Clause 211, page 165, line 26, at end insert—
  '(ba) section [Amendment of Restrictive Trade Practices Act 1976];
  (bb) section 196;'
  414 Schedule 1, page 167, line 30, at end insert—
  Supervision by Council on Tribunals
  5.—(1) The Tribunals and Inquiries Act 1971 shall be amended as follows.
  (2) In section 8(2) (concurrence required for removal of members of certain tribunals), after "6A" there shall be inserted "10A".
  (3) In section 13(1) (appeals from certain tribunals), after "10" there shall be inserted "10A".
  (4) In Schedule 1 (tribunals under general supervision of Council), after paragraph 10 there shall be inserted the following paragraph—

  "Insolvency Practioners. 10A.

  The Insolvency Practitioners Tribunal established under section (Reference to Tribunal) of the Insolvency Act 1985."

  Parliamentary disqualification
  6.—(1) In Part III of Schedule 1 to the House of Commons Disqualification Act 1975 (disqualifying offices), there shall be inserted at the appropriate place the following entry—
  "Any member of the Insolvency Practitioners Tribunal in receipt of remuneration."
  (2) A corresponding amendment shall be made in Part III of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975.'.
  [Consequential on Commons Amendment No. 414]
  414A Page 165, line 26, at end insert—
  ("(bc) paragraph 6 of Schedule 1;")
  540 Schedule 9, page 202, line 9, column 3, at beginning insert 'In section 302(1), the words "or liquidator".'
  Reverting to the new licensing system, Commons Amendments Nos. 9 to 14 inclusive introduce further new clauses which provide in more detail than the clauses they replace for the procedure to be followed when an application for a licence is made to a relevant authority, who may be the Secretary of State, or some other body appointed by him who will operate the same licensing requirements. These clauses in particular provide the relevant authority with greater powers to require all the information that may be necessary in order for it to be satisfied that an applicant is fit and proper and suitably experienced for appointment.
  Commons Amendment No. 12 increases the rights of an applicant who is refused a licence or whose existing licence is about to be revoked. On being served with such a notice of such intention by the Secretary of State, he will have two options which he may consider as alternatives. He may first attempt to persuade the Secretary of State not to refuse his application or revoke his licence, by making written representation within 14 days. Alternatively he may ask that the matter be referred to the Insolvency Practitioners Tribunal for consideration, and Commons Amendment No. 13 increased from 14 days to 28 days the period in which the applicant might opt for this course. However, he may first make written representations and, if unsuccessful, he may then ask for the case to be referred to the tribunal.
  It would seem appropriate to speak now to our own Lords' amendments to the Commons' Amendments, 13 A and 13D and 14A. These amendments anse from an undertaking given in another place and they provide that, where written representations are made by a person against an impending decision by the Secretary of State, the 28-day period in which referral to the tribunal must be requested shall not begin to run until he, the applicant, becomes aware that his written representations have been rejected. I am sure that noble Lords will agree that this is a desirable improvement.
  The tribunal's role has also been more clearly defined in the new clause, and the obligation of the relevant authority to follow the tribunal's decision. Noble Lords may recall that in Schedule 1 we provided for the Secretary of State to set up the tribunal, and for the Secretary of State and the Lord Chancellor to provide panels of persons from whom the tribunal members will be drawn.
  Commons Amendment No. 414 places the Insolvency Practitioners Tribunal under the supervision of the Council on Tribunals The consequential Amendment No. 414A ensures that members of the Insolvency Practitioners Tribunal are subject to equivalent parliamentary disqualification in Northern Ireland as in Great Britain.
  Commons Amendment No. 18 extends the general rule-making powers previously provided in relation to the licensing of practitioners. In particular it enables rules to be made prohibiting conflicts of interest, replacing Clause 2(3) of the Bill as it left this House. Your Lordships will recall that that particular matter excited a good deal of criticism through its complexity.
  Commons Amendment No 389 disapplies the Restrictive Trade Practices Act to agreements and arrangements involving the supply of insolvency services. This will ensure that the services of insolvency practitioners will be treated in the same way as legal and auditing and accounting services for the purpose of the Restrictive Trade Practices Act. It will enable the rules of the professional body requirement to implement the licensing and disciplinary arrangements to be exempt.
  I should emphasise that the bodies will still be subject to the fair trading and competition Acts which the Government consider to be the more appropriate legislation for dealing with the competition implications of the rules of an insolvency practitioners'

  1111
  professional body. In effect, this will mean that the recognised bodies, by the use of their licensing procedures, will not be able to create a monopoly or operate a cartel.
  I assure your Lordships that the remaining amendments in the group to which I have been speaking relating, as they do, to Part I of the Bill, where they do not delete clauses which are now replaced are technical and consequential, or in fact minor drafting improvements. Accordingly, I commend these amendments to the House.
  Moved, That this House do agree with the Commons in their Amendments Nos. 1 to 7.—(Lord Lucas of Chilworth.)
  Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord for the clear explanation he has given to this group of amendments. May I at this stage refer to three matters which underline not only this group of clauses but in fact all groups of clauses. In fact, I thought that the noble Lord was about to reply to the questions I addressed to him earlier in these proceedings.
  I asked the noble Lord by what date the Government expected the Bill to be in full operation; secondly, I asked whether an amending Bill was going to be introduced and, if so, when; then I asked whether it was intended to bring into operation those parts of the Bill dealing with the appointment of administrators, and, if so, to what extent. As I raised these three questions, within the profession curiosity will have been aroused by the fact that the questions were asked, so I think it only proper that the noble Lord should be offered the opportunity of replying to them now to clear up any misunderstandings that there still may be in the public mind in relation to these three matters.
  In relation to the amendments that have been discussed by the noble Lord, and outside the amendments which I hope to move presently, I have one question to ask which he undoubtedly will be able to answer fairly quickly. It is in regard to the relevant authority. It would be useful at this stage if the noble Lord were to notify the House what relevant bodies by name he proposes to establish for the purpose of implementing this part of the Bill. For example, one would expect the Law Society to be one of the relevant bodies and one might hope that the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants in Scotland would be other relevant bodies. Is it possible for the House to be given a list of these?
  The Earl of Selkirk: My Lords, as I understand it, a new profession is being set up. One wonders whether Clause 1 is necessary at all. I am not aware whether, if anyone tries to act as a barrister when he is not qualified, he is liable to summary conviction and a period of imprisonment. I should have thought that if this profession were being properly set up these words would be totally unnecessary.
  As the Bill stands, it is the responsibility of the person to say that he is qualified. If one takes out these words in Clause 1 one comes to the other party, that is, the company. It seems to me that it falls to the company to make quite certain that the liquidation or
  1112
  insolvency is carried out by a qualified person. I should like to have confirmation that this applies to any liquidation regardless of whether there is an element of insolvency. I should like confirmation that that is true. Why should an insolvency practitioner be engaged in a company dissolution or a company reorganisation which has nothing to do with insolvency? I do not understand that.
  What I think is desirable is to know how one is to decide whether a practitioner is qualified as an insolvency practitioner. He may start on the work and when, it is going may be found to be incompetent. He may be sent to prison for three years, but that does not help the company. The company is put to the further expense and difficulty of finding someone else to do the work. Much of the organisation has already been done by a chartered accountant of some kind, but he will have to do it again with another practitioner. Is that the purpose of this clause? The clause surely requires complete redrafting to make it more sensible. I should be grateful for the noble Lord's confirmation that I have interpreted the clause correctly.
  Lord Meston: My Lords, I should like to support this group of amendments. The integrity and competence of insolvency practitioners is absolutely vital. It is important, however, that we ensure that insolvency practitioners, or the phrase "insolvency practitoner", is not just an impressive label for an unimpressive package, because without competence at ground level the whole edifice of this legislation falls to the ground.
  The insolvency practitioners must be competent, but so also must those to whom they delegate. That is vital. I mention an example from some recent litigation with which I was involved, in which a receiver was held to be negligent because he had sold the assets of the company at about half their true value. He had had very little to do with the winding up or the receivership. He had simply delegated to unqualified people who would have found if difficult to get a penny in the pound. Indeed, they would have found it difficult to sell a pound for a penny. It is therefore critically important that not only are the so-called insolvency practitioners competent but that their employees are as well.
  4.15 p.m.
  Lord Lucas of Chilworth: My Lords, I am grateful to noble Lords for their contributions to this first series of amendments. I wish to answer the three specific points that the noble Lord, Lord Bruce of Donington, put to me in his opening remarks. At the risk of upsetting the order of our proceedings, I should perhaps do that now. He asked me when we were anticipating bringing into effect this Bill when enacted. The greater part of the Bill is designed to be brought into effect at the same time, but some of the provisions are free-standing such as those related to the disqualification of directors and the attachment of personal liability for wrongful trading. Others such as the provisions for licensing of insolvency practitioners will need to be brought into force in advance of the main procedural provisions to ensure that they are in existence at the time that the practitioners, who are then duly authorised, are likely to undertake insolvency work.

  1113
  We have not made an announcement, nor has a final decision been taken, on the target date for the various commencement orders. One factor to be taken into account is the preparation of the new and revised insolvency rules. I suspect that we shall return to those later. That is necessary to assist the smooth running of the procedures contained in the Bill.
  Here I come to the point recently raised by the noble Lord opposite in regard to the recognised bodies. The noble Lord used the phrase "relevant authority". We have referred throughout to the "recognised bodies". We have no list, because were I to give a list it would imply exclusion of others who may properly make claim to be a recognised body to grant licences to practitioners. Therefore it would be wrong to do that. All those bodies now recognised in the accountancy profession—I believe there are five separate bodies there—together with the Law Society and the Association of Insolvency Practitioners, as well as associated bodies, have already been invited to consultations to establish the common criteria. If I gave a list, that would then exclude the individuals who will make application on their own account without the authority of a recognised body behind them. That it why I am reluctant to give a definitive list.
  The noble Lord also asked me whether we are planning to introduce an amending Bill in the next Session. I must say now that we have no intention of introducing amending insolvency legislation in the forthcoming Session. As my noble friend the Leader of the House has said, the Bill before us has greatly benefited from the contributions offered by your Lordships, by practitioners and others with whom we have consulted, not least with regard to the administrative procedure which we aim to maintain.
  Lord Mishcon: My Lords, perhaps the noble Lord will forgive me for intervening before he passes to another point. He made the specific statement that there would be no amending Bill during the next Session. Can he make it clear that it is not the Government's intention to have an amending Bill before this Bill comes into operation?
  Lord Lucas of Chilworth: My Lords, it is certainly not the intention of the Government to have an amending Bill before this Bill, when hopefully it becomes an Act, comes into operation.
  Lord Mishcon: My Lords, thank you.
  Lord Lucas of Chilworth: My Lords, my noble friend Lord Selkirk asked a number of questions with regard to the authorised insolvency practitioner, whether or not he is acting in a liquidation. The purpose of requiring that in all such companies receiving the services of a liquidator he shall be a licensed liquidator is precisely that which the noble Lord, Lord Meston, set out in his remarks. One is not here concerned with, as it were, the competence or incompetence but with the regulation of someone who sets out to practise as an insolvency practitioner, whether he be an accountant, a lawyer or some other kind of person. Those persons will have to
  1114
  demonstrate, through the authorising bodies or directly to the Secretary of State, that they are fit and proper, and have relevant experience and practice to undertake the work.
  By this means we hope to prevent the practice to which our attention has been drawn, where people with no experience and perhaps lacking suitable ethics have involved themselves in liquidations, perhaps to the benefit of the directors of companies or other parties, without taking proper regard for the position of the creditors.
  No Act of Parliament can provide against the incompetence of an individual, even if he be licensed. However, the body which has authorised the licence would obviously take into account such elements of incompetence, as would the Secretary of State in the event of his being the sole licensing authority, and this would give rise to consideration of a revocation of such a licence.
  The Earl of Selkirk: My Lords, perhaps I may ask my noble friend this. The point I am really making is why should a licensed insolvency practitioner deal with a case which involves no question whatever of insolvence? That is what I cannot quite understand.
  Lord Lucas of Chilworth: My Lords, because at that stage there may not be a question of insolvency and only a licensed practitioner should determine whether or not the company is insolvent. I feel sure that my noble friend will agree that a number of companies have in fact traded while insolvent, or have ceased trading and been insolvent. It is for the practitioner to determine properly and professionally the circumstances of the company.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  8 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg formally to move that this House do agree with the Commons in their Amendment No. 8, to which I have spoken.
  Moved, That this House do agree with the Commons in their Amendment No. 8.—(Lord Lucas of Chilworth.)

  AMENDMENTS TO COMMONS AMENDMENT No. 8
  8A In subsection (3)(b) leave out ("acceptable") and insert ("such").
  8B In subsection (3)(b), at end insert ("as shall be prescribed to the Secretary of State after consultation with the Committee and Council respectively established under subsection (3A) below").
  8C* After subsection (3) insert the following new subsection—
  ("(3A) For the purpose of establishing and maintaining uniform standards of education and practical training and experience as required by section 3(3)(b) and section 5(2)(b) of this Part of the Act, there shall be established:—

  (a) a Committee to advise the Secretary of State with regard to such requirements, and

  (b) a general council of education for insolvency practitioners.

  The membership of the said Committee and constitution and forms of the said council shall be such and in such manner as the Secretary of State may determine").
  Lord Bruce of Donington: My Lords, I beg to move Amendments Nos. 8A, 8B and 8C, to which I shall speak together. The purpose of these amendments is to take steps to establish common standards. Your Lordships will be aware that under the terms of the Bill each of the recognised bodies, relevant bodies, whatever they may be, may decide to license those of their members who they consider meet the requirements enabling them to become insolvency practitioners and to be licensed as such. Matters of competence, matters of legal and accounting knowledge, matters of experience, will all be taken into account. However, they will be taken into account by different bodies with different standards.
  If my noble friend Lord Mishcon will forgive me for saying so, I am second to no one in my admiration for the Law Society, which is a very venerable and indeed reputable body, well represented in your Lordships' House. However, I venture to say that its present concept of the technical knowledge requirements of an insolvency practitioner will probably differ, for perfectly good and proper reasons, from the requirements put forward by, for example, the Institute of Chartered Accountants in England and Wales. That is not to say that the Institute of Chartered Accountants in England and Wales is of necessity a good example; because their syllabus for the study of students struggling to get through their examinations contains very little guidance as to the knowledge of insolvency matters required. Again, the Association of Insolvency Practitioners may of course overlap with the other learned professions to which I refer, and indeed I know that in many instances they do so. There are many members of the Insolvency Practitioners' Association who are simultaneously chartered accountants, lawyers or whatever.
  Then we have the position of the Department of Trade and Industry itself. How will the Department of Trade and Industry determine the technical requirements in terms of knowledge of the law, knowledge of accounting practice, and (if I may say so) knowledge of investigation processes which undoubtedly ought to be the characteristics of an insolvency practitioner?
  There are bound to be some differences. This amendment is tabled in order that the Secretary of State may establish machinery, first of all, to determine uniform standards of education, practical training and experience as required. Once common standards have been established, this will powerfully aid the whole thrust and purpose of the Bill. It would be a pity if this part of the Bill, requiring quite properly the appointment of insolvency practitioners, were regarded with some doubt due to a suspicion that some insolvency practitioners were not sufficiently technically skilful or trained in order to accomplish this very responsible job. This is the sole purpose of this amendment.
  I am sorry that the noble Earl, Lord Selkirk, is not in his place. He raised a point of very considerable importance which impinges on this. As at the end of 1984, there were 3,772 companies that had gone into members' voluntary liquidation. The noble Lord was kind enough to confirm that in each case in the future (and on the assumption that members' voluntary liquidations run to about 3,000 a year) these will automatically require the services of an insolvency
  1116
  practitioner, notwithstanding the fact that before there can be a members' voluntary liquidation, there has to be a declaration of insolvency; which, if made frivolously, I think would get the person swearing the declaration of insolvency into trouble.
  However, the further point, and that to which this particular amendment is germane, is the fact that some members' voluntary liquidations are for the purposes of company reconstruction. I am quite certain that there are very many very competent, ethically qualified, experienced members of the Association of Insolvency Practitioners. On the other hand, many of those who are licensed directly by the Department of Trade and Industry as being capable of conducting an insolvency or liquidation are by no means capable of conducting the very sophisticated operation of a company reconstruction, which requires qualities of a totally different nature and, indeed, much more technical knowledge in different fields that is in the possession of an insolvency practitioner as such.
  One can see now how relevant it is that there should be common standards and that steps should be taken by the Minister to ensure that there are common standards. If members' voluntary liquidations are to be brought within the Bill, then quite clearly the competence and the technical knowledge of an insolvency practitioner dealing with reconstruction will require to be far greater than that required in the narrow field of liquidation as such. That is a problem. Incidentally, it is one of the problems which I had in mind in the opening remarks that I was able to make to your Lordships this afternoon with a view to further time being given to the consideration of problems of this kind.
  I am hopeful that the noble Lord, who, I am quite sure, will inform us that he is going to rely on the voluntary collaboration between the various bodies recognised by the Department of Trade (notwithstanding his and the Government's preference for some kind of woolly, amorphous and time-consuming collaboration) will see fit to accept these amendments and will take the necessary steps to put them into operation. I beg to move.
  Lord Lucas of Chilworth: My Lords, I am most grateful to the noble Lord, Lord Bruce of Donington, for explaining the purport of his three amendments and the worries that perhaps lie behind the setting down of them. I have to say here—and I do this with great sincerity—that throughout the last ten or eleven months I have come very much to admire the tenacity with which the noble Lord opposite applies himself to this Bill, and have come very much to hold in high regard his not inconsiderable experience in this field, which noble Lords will recognise is not shared by me. However, I think that perhaps on this occasion he has perhaps got this one a little wrong, and I shall invite your Lordships to reject his invitation to accept these three amendments.
  I think that many noble Lords will be aware of the consultations which have been taking place over these past ten or eleven months, since early this year, when officials in the insolvency service of my department circulated a discussion document on education, training and experience. They received submissions

  1117
  from a very large number of interested organisations. Formal meetings were undertaken with representatives of the accountancy bodies and also with the Law Society, and perhaps less formal meetings with other bodies.
  Certainly, the consultations which we have had have revealed a very large measure of agreement as to what will be required of a practitioner licensed by a recognised body. From the material that we have so far collected we are quite confident that when the criteria are published for the applicant who will be applying to the Secretary of State they will be seen to be fair and to strike the proper balance between the two roots. Those are specifically the steps that have so far been taken and which will continue.
  Your Lordships will also know that the major legal and accountancy bodies are justifiably proud of their achievements in raising the standards of education, training and, indeed, if I may say so, the ethics of their members. I am quite confident that the same dedication will be applied to the training of the insolvency practitioners of the future. We must bear in mind that many practitioners will automatically, to an extent, be granted licences by virtue of their past performance.
  In any event the Secretary of State will monitor the progress of the recognised bodies and will be able to ensure that the standards are maintained and that all practitioner applicants have the necessary training and previous experience. The noble Lord is quite right: we are not generally in favour of setting up yet another body which to an extent might very well be in competition with those recognised bodies in the accountancy profession, the legal profession and so on. We really think that it is those bodies that should rightfully have the role that the Bill prescribes.
  Lord Bruce of Donington: My Lords, to pursue that point a little further, may I ask the noble Lord a question as to whether he considered the fusion of the joint interests of the four Inns of Court (which operated quite separately at one time, with each qualified to be a recognised body) into one organisation was or was not a desirable thing? This involves exactly the same principle. This is exactly why one body was established to incorporate the interests of the four Inns of Court—and that happened a long time ago.
  Lord Benson: My Lords, I wonder whether the noble Lord, Lord Bruce of Donington, would be willing not to press this amendment with the determination which he so gallantly shows in this House. This Bill has had a long and difficult period of months of birth pangs, and throughout that period the four chartered accountancy bodies and the Insolvency Practitioners' Association have been working hard together to settle, as prospective licensing authorities, what their responsibilities should be. They work in close contact with each other and, as the noble Lord, Lord Lucas, has said, with the Department of Trade and Industry.
  Not only that, but they have already reached agreement among themselves on the general lines of experience and expertise which will be necessary and
  1118
  the education that will be required. In those circumstances, I suggest that it is hardly necessary to introduce a new layer of bureaucracy and yet another quango when, in fact, the work is already being done voluntarily and with great enthusiasm and a determination to do the job well.
  The noble Lord, Lord Bruce of Donington. made a point which I think ought to be considered. He asked how the Department of Trade and Industry will be able to exercise its functions when it does not have the expertise. I think that is a perfectly fair point to make. But, in fact, what they will have to do from the point of view of common sense and ordinary dealing is to take guidance from the four chartered bodies, the Insolvency Practitioners' Association and any other bodies who are licensed through their experience and their knowledge. Using that, they will apply the recommendations which they make. In those conditions, I very much hope that this House will not feel that it is necessary to introduce this rather ponderous piece of administration.
  Lord Lucas of Chilworth: My Lords, since the noble Lord, Lord Bruce, asked a specific question. I feel bound to respond by underlining what the noble Lord, Lord Benson, has so adequately said, which is really what I wanted to say in response. There is one particular point which was mentioned by the noble Lord, Lord Benson. He asked how I felt the Department of Trade and Industry's service was going to be able to cope with this, and whether we in fact had the expertise. I assure your Lordships that in the insolvency service we have a considerable amount of expertise in these matters. I am equally sure that that decision will take on board any experience, any advice and any guidance which is given by the recognised bodies arising out of these consultations.
  Lord Bruce of Donington: My Lords, the House should know that since these matters have been under consideration I have been in close consultation with the noble Lord, Lord Lucas of Chilworth, and his department. We have sought to co-operate together in these matters, and I had already undertaken that I would not press this amendment. My main reason for raising the matter this afternoon was precisely to elicit the responses I have had from the noble Lord and, in particular, the information so kindly provided to us by the distinguished accountant, the noble Lord, Lord Benson.
  One matter, if I may venture to suggest it, has not yet been dealt with, and, if I may say so with respect, it is the point I raised about the competency of insolvency practitioners as such to act in company reconstructions. The noble Lord, Lord Benson, will recall, since he has participated in the debate, that this question of members' voluntary liquidations and the competency of insolvency practitioners to act therein was one of the misgivings of the Institute of Chartered Accountants of England and Wales, which they were kind enough to communicate to me officially. Perhaps the noble Lord might give some response to that.
  Lord Lucas of Chilworth: My Lords, I do not really think that I can make further comment. I think that in fact I really have covered everything that can be said in answer to these amendments.
  Lord Bruce of Donington: My Lords, I am sorry; I must apologise to the noble Lord. Perhaps I did not make myself quite clear, and I will seek to do so now without detaining the House for too long. I have already undertaken to expedite the position as much as possible. I pointed out in the course of my remarks that the Bill required insolvency practitioners to act even in members' voluntary liquidations, and I pointed out that many members' liquidations were in fact in implementation of reconstructions, in respect of which insolvency practitioners per se were not necessarily technically trained.
  I wondered whether the noble Lord would comment on the necessity for possibly making some additional arrangements. That is why I raised the question of further and more detailed consideration being given to the Bill regarding the necessity for having insolvency practitioners as such in cases of quite bona fide company reconstructions, which are a very complicated technical matter needing skills far outside the scope of a normally qualified insolvency practitioner. Could the noble Lord give that some consideration?
  Lord Lucas of Chilworth: My Lords, I do not think I can add anything new. I can repeat that we are confidently anticipating that the consultations which have been going on and which will give rise to the criteria for the licensing of a practitioner will take into account that very point. Of course I recognise that in the case of a bona fide reconstruction (and in parenthesis I would ask: when do we determine that the reconstruction is bona fide?) there are people practising now as insolvency practitioners who have skills which are better utilised in other areas. I do not foresee any difficulty. I accept that there may well have to be considerable adjustments by a number of individuals, but I do feel, however, that they will be of sufficient competency to accommodate that new responsibility which the noble Lord foresees.
  4.45 p.m.
  Lord Bruce of Donington: My Lords, I am very much obliged to the noble Lord, and I will not pursue the matter further. I am quite sure the professions will be interested in the text of the noble Lord's reply to the question I addressed to him. With the leave of the House, I beg leave to withdraw the amendments.
  Amendments to the amendment, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  9 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally that the House do agree with the Commons in their Amendment No. 9, to which I have already spoken.
  Moved, That this House do agree with the Commons in their Amendment No. 9—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  10 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg formally to move that this House do agree with the Commons in their Amendment No. 10.
  Moved, That this House do agree with the Commons in their Amendment No. 10—(Lord Lucas of Chilworth.)
  [Amendments Nos. 10A and 10B not moved.]
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  11 to 19 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 11 to 19, as amended by my Amendments Nos. 13A to 13D and 14A, to which I have alread spoken.
  13A-13D and 14A [Printed above.]
  Moved, That the House do agree with the Commons in their Amendments Nos. 11 to 19 as amended by Amendments Nos. 13A to 13D and 14A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  20 Clause 7, page 5, line 10, leave out 'gone into insolvent liquidation' and insert 'become insolvent'.
  21 Page 5, line 17, leave out subsections (2) and (3).
  22 Page 5, line 42, leave out subsection (5).
  23 Page 6, line 11, at end insert—
  '(6A) Except with the leave of the court, an application for the making under this section of a disqualification order against any person shall not be made after the end of the period of two years beginning with the day on which the company of which that person is or has been a director became insolvent'.
  24 Page 6, line 13, leave out from '(a)' to 'in' in line 16.
  25 Page 6, line 18, at end insert—

  '(b) in the case of a person who is or has been a director of a company which is being wound up otherwise than as mentioned in paragraph (a) above, it appears to the liquidator;

  (c) in the case of a person who is or has been a director of a company in relation to which an administration order is in force, it appears to the administrator; or

  (d) in the case of a person who is or has been a director of a company of which there is an administrative receiver, it appears to that receiver.'

  26 Page 6, line 20, leave out 'liquidator or, as the case may be, the official receiver' and insert 'official receiver, the liquidator, the administrator or, as the case may be, the administrative receiver'.
  27 Page 6, line 24, leave out 'or former liquidator' and insert 'administrator or administrative receiver of a company or the former liquidator, administrator or administrative receiver'.
  28 Page 6, line 29, leave out from 'director' to end of line 32.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 20 to 28 en bloc. With the leave of the House, I will also speak to Amendments Nos. 29 to 32, 34 and 34A, 35, 415 and part of 440, 442, 525, 526, 527 and 550.
  29 Page 6, line 36, leave out subsection (9) and insert—
  '(9) For the purposes of this section a company becomes insolvent if—

  (a) the company goes into liquidation at a time when its assets are insufficient for the payment of its debts

  1121
  and other liabilities and the expenses of the winding up;

  (b) an administration order is made in relation to the company; or

  (c) an administrative receiver of the company is appointed,

  and references in this section to a person's conduct as a director of any company or companies include, where that company or any of those companies has become insolvent, references to that person's conduct in relation to any matter connected with or arising out of the insolvency of that company.'.
  30 Page 7, line 3, at end insert—
  '(bb) in the case of a person who is or has been a director of a company in relation to which an administration order is in force, the court by which that order was made;'.
  32 Page 7, line 7, leave out 'and 9' and insert 'to 9'.
  32 Page 7, line 10, leave out subsection (12).
  34 After Clause 8, insert the following new clause:
  'Matters for determining unfitness of directors.—(1) Where it falls to a court to determine whether a person's conduct as a director of any particular company or companies makes him unfit as mentioned in section 7(1) or 8(2) above, the court shall, as respects his conduct as a director of that company or, as the case may be, each of those companies, have regard in particular—

  (a) to the matters mentioned in Part I of Schedule (Matters for determining unfitness of directors) to this Act; and

  (b) where the company has become insolvent, to the matters mentioned in Part II of that Schedule;

  and references in that Schedule to the director and to the company shall be construed accordingly.
  (2) Subsection (9) of section 7 above applies for the purposes of this section and Schedule (Matters for determining unfitness of directors) to this Act as it applies for the purposes of that section.
  (3) Subject to subsection (4) below, any reference in Schedule (Matters for determining unfitness of directors) to this Act to any enactment contained in the 1985 Act or this Act shall include, in relation to any time before the coming into force of that enactment, a reference to the corresponding enactment in force at that time.
  (4) The Secretary of State may by order modify any of the provisions of Schedule (Matters for determining unfitness of directors) to this Act; and such an order may contain such transitional provisions as may appear to the Secretary of State necessary or expedient.
  (5) The power to make orders under this section shall be exercisable by statutory instrument which shall be subject to annulment in pursuance of a resolution of either House of Parliament.'.

  AMENDMENT TO COMMONS AMENDMENT No. 34
  34A In subsection (4), leave out ("and such order may contain") and insert ("in order to establish").

  COMMONS AMENDMENTS
  35 Clause 9, page 8, line 29, at end insert—
  '(7) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.'
  415 After Schedule 1, insert the following new schedule:

  'MATTERS FOR DETERMINING UNFITNESS OF DIRECTORS PART I MATTERS APPLICABLE IN ALL CASES
  1. Any misfeasance or breach of any fiduciary or other duty by the director in relation to the company.
  2. Any misapplication or retention by the director of, or any conduct by the director giving rise to an obligation to account for, any money or other property of the company.
  3. The extent of the director's responsibility for the company entering into any transaction liable to be set aside under section 191 of this Act.
  1122
  4. The extent of the director's responsibility for any failure by the company to comply with any of the following provisions of the 1985 Act, namely—

  (a) section 221 (companies to keep accounting records);

  (b) section 222 (where and for how long records to be kept);

  (c) section 288 (register of directors and secretaries);

  (d) section 352 (obligation to keep and enter up register of members);

  (e) section 353 (location of register of members);

  (f) sections 363 and 364 (company's duty to make annual return);

  (g) section 365 (time for completion of annual return); and

  (h) sections 399 and 415 (company's duty to register charges it creates).

  5. The extent of the director's responsibility for any failure by the directors of the company to comply with section 227 (directors' duty to prepare annual accounts) or section 238 (signing of balance sheet and documents to be annexed) of the 1985 Act.

  PART II MATTERS APPLICABLE WHERE COMPANY HAS BECOME INSOLVENT
  6. The extent of the director's responsibility for the causes of the company becoming insolvent.
  7. The extent of the director's responsibility for any failure by the company to supply any goods or services which have been paid for (in whole or in part).
  8. The extent of the director's responsibility for the company entering into any transaction or giving any preference, being a transaction or preference liable to be set aside under section 84 of this Act or section 522 of the 1985 Act or challengeable under section 615 A or 615B of that Act or under any rule of law in Scotland.
  9. The extent of the director's responsibility for any failure by the directors of the company to comply with section 68 of this Act.
  10. Any failure by the director to comply with any obligation imposed on him by or under section 482 of the 1985 Act (company's statement of affairs) or section (Statement of affairs to be submitted to administrator), (statement of affairs to be submitted to administrative receiver), 50, 68, 81 or 82 of this Act.'.
  440 Schedule 4, page 174, line 46, at end insert—
  '18A. Provision as to the manner in which the liquidator of a company is to act in relation to the books, papers and other records of the company, including provision authorising their disposal.
  18B. Provision imposing requirements in connection with the carrying out of functions under section 7(7) of this Act (including, in particular, requirements with respect to the making of periodic returns).'.
  442 Page 175, line 10, after first 'section' insert '7(8).'
  525 Schedule 8, page 196, line 13, after '2' insert '—(1)'.
  526 Page 196, line 13, leave out from 'Where' to end of line 16 and insert (a) an application is made under section 7 of this Act by virtue of paragraph (a) of subsection (9) of that section; and'.
  527 Page 196, line 19, leave out 'the order it is required to make by' and insert 'an order under'.
  550 Schedule 9, page 204, line 16, column 3, leave out 'Part II of Schedule 12' and insert 'In Schedule 12, Part II and paragraphs 15 and 16'.
  The amendments to Clause 7—that is, the duty of a court to disqualify unfit directors—are designed to strengthen the overall reporting and disqualification procedure. The amendments, which have the support of the insolvency practitioners, will require administrators and adminstrative receivers to report to the Secretary of State if they consider a director's conduct makes him unfit to be concerned in the management of a company.
  As the Bill left your Lordships' House, only the liquidator had this duty placed upon him. If the change I am suggesting were not made, an administrator

  1123
  or administrative receiver would be able to inform the Secretary of State of the unfitness of directors of the company with which he was concerned but would not have the clear protection of qualified privilege from defamation actions that compliance with the satutory duty brings. Moreover, we would not have the wider range of information that a mandatory requirement should provide.
  The amendments also cater for the position in Scotland where there is no Official Receiver's Office. Liquidators of companies being wound up in Scotland will have a duty to report to the Secretary of State concerning unfit conduct whether the company is being wound up voluntarily or by the court. In order to bring about these changes it has been necessary to introduce separate definitions of when a company "becomes insolvent" for the purpose of this clause and when it "goes into insolvent liquidation" for the purpose of Clause 9—that is the clause dealing with wrongful trading. This is achieved by Amendments Nos. 29 and 35 respectively. An examination of the text will provide sufficient explanation.
  On the matter of the time limit for the bringing of applications, the Government recognise the concern that was expressed on behalf of directors that they should not have the threat of being made subject to a disqualification order hanging over their heads indefinitely. However, we felt that the one-year limit suggested by the noble Lord, Lord Benson, was too short a time and might allow an unfit director, or an alleged unfit director, to escape disqualification on a technicality. The type of technicality one envisages is a case where the director absconds and where it may take more than 12 months for the evidence to come to light by virtue of that. Amendment No. 23 will therefore prevent an application for a disqualification order being made more than two years after the company became insolvent unless the court gives leave for an application to be made out of time.
  The second part of Amendment No. 440 is designed to meet concern that the insolvency practitioner should be obliged to demonstrate in every case that he has considered the conduct of the directors in relation to the guidelines as to unfitness. It will enable the Secretary of State to require by way of the rules, for example, that the practitioner shall make a report to the Secretary of State after 12 months, including, to meet the requirement which was identified in another place, nil returns in those cases where no evidence as to unfitness has come to his attention.
  Amendments Nos. 525 to 527 make consequential amendments to the transitional provisions contained in Schedule 8. Amendment No. 550 is a technical amendment consequential upon the repeal by this Bill of Section 300 of the Companies Act 1985. That was the section dealing with disqualification by reference to association with insolvent companies.
  During the Report stage in your Lordships' House I indicated that the Government would give serious thought to the possibility of including in the Bill guidelines on what constitutes unfit conduct. Amendment No. 34 is intended to implement the Government's decision in favour of providing what I think at that time we were calling a kind of highway code. That was the description of the noble and
  1124
  learned Lord, Lord Denning, of how he foresaw the guidelines. These guidelines are expressed in Amendment No. 415 by way of a schedule, Schedule 2, setting out matters for determining unfitness of directors. Schedule 2 will enable the court to direct its attention particularly, but not necessarily exclusively, to those matters which Parliament considers indicate a person's unfitness to take part in the management of a company. It will be of use to liquidators, administrators, administrative receivers and the Official Receiver in deciding what particular aspects of directors' conduct they should report to the Secretary of State. I should add that the schedule will be of illustrative help to directors as a means of keeping themselves and their fellow directors on what I might call the right path.
  The schedule reflects both the experience of the insolvency service and the comments of experienced insolvency practitioners. It identifies the areas of noncompliance with the Companies Act and company law generally which are encountered in companies that are found to have been controlled by less than competent directors. In the interests of the private consumer, paragraph 7 of the schedule directs attention to the extent of a director's responsibility for any failure by the company to supply goods or services for which prepayments or deposits have been made. I wish to emphasise that the list is illustrative rather than exhaustive, and it may very well be reviewed as and when appropriate.
  The new clause introducing the schedule provides for its modification by statutory instrument. The standards which we may reasonably expect from those who direct limited liability companies will continue to evolve, and the schedule may be revised from time to time in the light of such developments and indeed of the experience which we will all gain from operating the provisions of the Bill. That experience will show us the extent of the improvements in the standard of management in companies which we expect to result from the new disqualification and wrongful trading provisions in particular, and enable us to see more clearly whether more needs to be done. I beg to move that this House do agree with the Commons in the said amendments.
  Moved, That this House do agree with the Commons in their Amendments Nos. 20 to 28.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  29 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally that the House do agree with the Commons in their Amendment No. 29.
  Moved, That this House do agree with the Commons in their Amendment No. 29.—(Lord Lucas of Chilworth.)

  AMENDMENT TO COMMONS AMENDMENT NO. 29
  29A Line 12, after ("companies") insert ("including a company or companies capable of being wound up under Part XXI of the 1985 Act").
  Lord Bruce of Donington: My Lords, in moving this amendment I should like to move at the same time

  1125
  Amendment No. 29B, because both amendments are substantially on the same point.
  29B Page 7. line 24, after ("section") insert (" "company" includes a company which may be investigated under section 453 of the 1985 Act and").
  I should like to thank the noble Lord the Minister for the very clear explanation he has given concerning these matters which affect a vital section of our community, the directors of limited liability companies. I think that his explanation combined with the text of the Bill represents a very great advance indeed. The House and indeed another place did not like the idea of automatic disqualification. They preferred to adhere to the British tradition that a person should not be required to prove himself innocent but that a charge should be brought against him directly, that he should be accused and that the onus of proof should lie upon those prosecuting him. Therefore I believe that these new clauses represent a very distinct advance.
  The two amendments that I am submitting for your Lordships' consideration would extend the net rather wider. Amendment No. 29A is moved because otherwise discreditable behaviour in relation to an overseas company—for example, in Jersey or the Isle of Man—could not be considered by the court. It should be noted that disqualification is already limited to United Kingdom companies, so crooks will tend to use foreign companies anyway. The second amendment follows exactly the same reasoning. In my view, if it is not so, no disqualification can follow investigations of overseas companies and misconduct should be on the grounds of disqualification from being a director of a British company. In other words, all I want to do is extend the net.
  As your Lordships will be aware I have had consultations with the noble Lord about parts of the Bill and I have been assured by him that the Bill already provides for this. It is not my intention to press these amendments. I am moving them so that the noble Lord may answer officially, giving chapter and verse and the actual references, in order that this matter is made entirely clear. I beg to move.
  5 p.m.
  Lord Lucas of Chilworth: My Lords, I thank the noble Lord for his explanation. Indeed, I should like to take this opportunity to set out clearly why these two amendments are not necessary. Directors of companies being capable of being wound up under Part 21 of the 1985 Act are already covered by the clause. This is because Clause 91(2) provides that Section 295 of the Companies Act 1985 applies for the purposes of Sections 7, 8 and 10 of this Bill. That ensures that Section 295(3) of the 1985 Act, which defines "company" as including any company which may be wound up under that part of the Act to which I have referred, operates to apply the same definition of company to the disqualification provisions in the Bill.
  The second amendment to which the noble Lord drew attention is also unnecessary since the provisions of Clause 13 as we have amended it already cover overseas companies, which are the subject of Section
  1126
  453 of the Companies Act 1985. The definition of "company" which applies for the purposes of that clause goes wider than that provided in Section 453 of the 1985 Act. Any information that is obtained from investigations into the latter type of companv under Section 447 can be used to disqualify its directors. That is the formal position to which the noble Lord referred.
  Lord Bruce of Donington: My Lords, I ask the noble Lord to clarify this point just a trifle more. When he referred to Clause 13, was he referring to Bill 240, which is the larger, explanatory Bill which incorporates the various Commons Amendments, or was he referring to Bill 127? The noble Lord will appreciate that there may be confusion unless he makes that distinction absolutely clear.
  Lord Lucas of Chilworth: My Lords, I was referring to the old Clause 8, which I believe is in Bill 1 27.
  Lord Bruce of Donington: My Lords, I am much obliged and beg leave to withdraw the amendments.
  Amendments to the Motion, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  30 to 32 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 30 to 32, to which I have already spoken.
  Moved, That this House do agree with the Commons in their Amendments Nos. 30 to 32.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  33 Clause 8, page 7, line 15, after 'Act' insert'. or from information or documents obtained under section 447 or 448 of that Act,'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 33, and I should at the same time like to speak to Amendments Nos. 445 and 528:
  445 Schedule 5, page 175, line 38, at end insert—
  '3A. In section 449(1) (non disclosure, except for certain purposes, of information obtained by Secretary of State), after paragraph (b) there shall be inserted the following paragraph—
  "(ba) with a view to the institution of, or otherwise for the purposes of, any proceedings on an application under section 7 or 8 of the Insolvency Act 1985,".'.
  528 Schedule 8, page 196, line 24, after 'made' insert 'or information or documents obtained'.
  This amendment is needed to deal with an aspect on which the Cork Report was silent; namely, whether information obtained as a result of an order under Section 447 of the Companies Act 1985 requiring a company to produce books and papers for inspection might be used by the Secretary of State as the basis for an application order against an unfit person.
  This set of amendments permits such use in cases of insolvency and enables the Secretary of State to make use of that information to apply for the

  1127
  disqualification of directors on the basis of Section 447 information where no insolvency has taken place. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 33.—(LordLucas of Chilworth.)
  Lord Bruce of Donington: My Lords, discussion of this amendment affords me an opportunity of expressing certain misgivings with regard to the responsibilities of liquidators in respect of the reports they are required to make upon directors who are thought to be delinquent. For convenience I am referring now to Bill 240, at pages 8 and 9.
  One observes in Clause 12(1) that if it appears to the liquidator, that the director is or has been a director of a company which has at any time become insolvent, and that his conduct as a director of the company, either taken alone or together with his conduct as a director of any other company or companies makes him unfit to be concerned, then the liquidator is required to report the matter to the Secretary of State.
  That is a very useful provision and I make no complaint about it. Section 12(6) of Bill 240, to which I am referring for convenience because it presumes that all the various amendments have been passed, states that the Secretary of State may require the former liquidator, administrator or administrative receiver to furnish him with information. That responsibility must not be taken lightly.
  Speaking from my own practical experience in the course of investigations into matters which liquidators have entrusted me to investigate, I have found that such is rather a long process. It is all very well to put into a Bill that it is a liquidator's responsibility to report to the Secretary of State—and in certain cases he may have to make virtually a nil return. However, that is not an activity which can be embarked upon lightly.
  I speak from personal experience. In some cases it has needed some three to four weeks' investigation of a company's books and accounts and interrogation of individuals and staff to ascertain whether a director has been culpable. In 50 per cent. of the cases the directors have been culpable. In the other 50 per cent. they probably have not been. But that is a very responsible process.
  Not only does that process have to be undertaken very thoroughly in justice to the persons concerned but it is also very time consuming. Unhappily, the Bill makes no provision for the costs involved in such operations. I invite the attention of the noble Lord to this point because it is one thing to legislate but I am sure he will agree with me that a director should not escape the consequences of his actions purely because the assets of the company remaining over are insufficient to pay the costs of the investigation of his conduct. That cannot be the intention.
  Again, this is one of the questions to which I referred in my opening remarks prior to our consideration of the Bill, when much more mature consideration could probably have produced a more constructive answer. I am making that point now prior to moving my own amendment to the next clause with a view to ascertaining whether the noble Lord has given consideration to
  1128
  this point. I can assure the House that members of the accounting and legal profession have certainly given very great thought to it.
  Lord Lucas of Chilworth: My Lords, the provisions in this Bill will give every liquidator—indeed administrator and administrative receiver—a duty to report to the Secretary of State when it appears to him that the conduct of a director makes him unfit. Schedule 2, as I have explained, provides the guidelines on matters to be taken into account.
  Two types of report arise from this requirement. The first type will be the positive report as to unfitness which the practitioner is required to report. The second is the requirement identified and provided for in another place that the reports to be provided by practitioners should include nil reports where no evidence as to unfitness has come to light. This will be achieved by using the rule-making power which Amendment No. 440 provides to require the practitioner to provide a return after a period on the conduct, as it then appears, of the directors. Such periodic returns would include the nil reports to which I have referred.
  These requirements will impose different burdens on the insolvency service. Where the official receiver himself is charged with the duty to provide such reports, the additional work should not be great since he is already charged with investigatory duties. The reporting requirement will not add to these but will merely require him to report where evidence of unfitness comes to light; again, having regard to the guidelines. It is of course a major purpose of the Bill to free the official receiver to concentrate on the investigatory duties.
  As regards handling the reports, there will obviously be an additional task to be formed by the insolvency service for which the Government will make appropriate resources available. Perhaps it might be as well if I drew your Lordships' attention to our original estimate of a staff saving of 60 which would have resulted from the streamlining and simplification provided by the Bill. That has now been scaled down to 40 to reflect changes which we have made.
  We anticipate that the new alternative procedure which the provisions for corporate voluntary arrangements will afford and the improved standards of company management which the Bill disqualification and personal liability provisions will bring about will have a beneficial impact on both the number of insolvencies and of course on the instances of unfit conduct.
  I think that I should, in response to the point raised by the noble Lord, Lord Bruce of Donington, about the burden on liquidators, emphasise the last line of Clause 12(6), on page 9, line 24 of the 31st July print, which I feel puts the matter into proper perspective. On the matter of costs I should, of course, say that any additional work performed by the insolvency service as a result of the reporting requirement will fall to be met, as with other costs, out of the fee income of the insolvency service itself.
  5.15 p.m.
  Lord Bruce of Donington: My Lords, I do not know whether I heard the noble Lord aright on that. I do not

  1129
  see any powers taken in the Bill for the Secretary of State to be provided with funds to enable him to reimburse liquidators in respect of their reporting responsibilities and requirements as laid down in subsection (6). I do not see it at all. If it be the case that, as a result of the very detailed investigations that have to be made in response to the Secretary of State's request for a report, the work can, in fact, be paid for on a time-charge basis at a pre-determined fee then I am quite sure the profession generally will be reassured to learn that.
  I remind your Lordships that in 1984, according to the House of Lords Hansard of 16th January, col. 1066, in response to a Question of mine, there were some 8,461 voluntary liquidations in 1984 and 5,226 compulsory liquidations. That is an awful lot of liquidations. I am quite sure that the noble Lord will be aware that the trouble is that in many cases where there has been a delinquency by directors—I use the term loosely—it is precisely in those cases where there are insufficient assets to pay the liquidator. That is the problem. Nevertheless, the liquidator, a qualified insolvency practitioner from the time the Bill comes into operation, is statutorily bound to carry out these various matters.
  I must assure the noble Lord that in many cases these investigations enabling, first, a decision to be made as to whether or not a director has been at fault and, secondly, the detailed investigation justifying a proper report to be made to the Secretary of State, are very time-consuming matters. It is very easy to trip them off the tongue and say there will be very little extra work involved, possibly half an hour or so, but from practical experience I can tell the noble Lord that they are often very time-consuming; if only in justice for those who are suspected or accused. It would be a pity if the whole Bill were to fail by reason of there being unsufficient funds to make available to the liquidators to carry out duties imposed on them by statute.
  Lord Lucas of Chilworth: My Lords, let me say that we would regard the cost of preparing the statutory report, including the cost of providing such further information as may be required, as part of the cost of the insolvency procedure. As such therefore those costs would fall to be met out of the funds in the estate.
  It is not necessary at this stage for the duty to include further investigation. It is on the basis of the report that the Secretary of State would proceed with an investigation. It would therefore fall to the insolvency service, in carrying out such an investigation, to meet such costs. Under Clause 12(5), in the 31st July print of the Bill, the duty of an insolvency practitioner is not to investigate but only to report. That would come about by virtue of his normal functions. If he finds an element of unfitness, that is reported but not necessarily investigated. Therefore, the cost to which the noble Lord, Lord Bruce of Donington, refers does not at that time arise.
  Lord Bruce of Donington: My Lords, will the noble Lord say quickly and succinctly how the insolvency practitioner can report without ascertaining the facts first? Ascertaining the facts of course means, in
  1130
  ordinary parlance, investigation. One must investigate before reporting otherwise one has no facts on which to report.
  on Question, Motion agreed to.

  COMMONS AMENDMENT
  34 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 34.
  Moved, That this House do agree with the Commons in their Amendment No. 34.—(Lord Lucas of Chilworth.)

  AMENDMENT TO COMMONS AMENDMENT No. 34
  34A [Printed above.]
  Lord Bruce of Donington: My Lords, I beg to move Amendment No. 34A. On this amendment I refer to the new clause set out in Amendment No. 34 and to subsection (4) thereof which at the moment reads:
  The Secretary of State may by order modify any of the provisions of Schedule (Malters for determining unfitness of directors to this Act; and such an order may contain such transitional provisions as may appear to the Secretary of State necessary or expedient."
  My amendment seeks to tighten up this particular subsection in order that the Secretary of State may modify the situation set out in the schedule only to the extent necessary to accomplish transitional provisions. As I say, the purpose of the amendment is restrictive.
  If the House will turn to the new schedule, which, for convenience, is set out in the new Bill—I shall not refer to the specific amendment itself but to Sehedule No. 2 to the Bill, which is on page 194 of Bill No. 240—your Lordships will find there set out the "Matters for determining unfitness of directors". There are two Parts. Part I is headed "Matters applicable in all cases"; Part II "Matters applicable where company has become insolvent". The purpose of this amendment is to restrict the right of the Secretary of State to modify the provisions of Schedule No. 1 unless they are for the purpose of accomplishing the transitional arrangements, which will be necessary in this case.
  The reason for this is very clear. If the noble Lord will refer to Schedule 2 he will find at paragraph 4 that one of the matters for determining unfitness of directors to which the courts must have regard—and undoubtedly it is one of the matters to which any liquidator must have regard in reporting to the Secretary of State—is:
  "The extent of the director's responsibility for any failure by the company to comply with any of the following provisions of the 1985 Act, namely—
  (a) section 221 (companies to keep accounting records)''
  I regard this as one of the most important matters that the court should consider. My view, which I think is shared by most of my profession, is that it ought to be insisted upon.
  Section 221 of the Companies Act is a most comprehensive section. On the basis of my experience over 40 years I would tell the house that had companies complied with this particular section, which has been in existence ever since the 1948 Act,

  1131
  had they obeyed the law and kept within the provisions of Section 221, which has been enacted on several occasions—in the 1948 Act, and in the 1976 Act, Section 12 for example—many liquidations would not have taken place at all. The failure of companies and their directors to keep proper books of accounts, in compliance with the conditions laid down in the Companies Act itself, is one of the prime causes of a good number of liquidations. I do not wish to read Section 221 to the House because it would be unduly time-consuming, but I solemnly advise all directors, whether they are executive or non-executive directors, who will undoubtedly come under the consideration of the Insolvency Bill and its new provisions, to read Section 221 very carefully. It specifies precisely—and the requirements are not unduly onerous—the records that companies ought to keep and that directors ought to insist that their companies keep, on penalty of resigning unless proper accounts are in fact kept.
  My reason for trying to restrict the provision is this. The noble Lord, Lord Young of Graffham, has recently undertaken the onerous task of relieving burdens on business, and among the reliefs that are under consideration by the noble Lord, Lord Young of Graffham, and his Department, is the relaxation of certain accounting requirements, in particular those relating to auditing. I should like to have from the noble Lord an assurance that so far as concerns Her Majesty's Government there will be no tampering with Section 221 of the Companies Act, however much the noble Lord, Lord Young of Graffham, may think that keeping to the requirements of the Companies Act, Section 221, is too onerous a burden and that business ought to be relieved of the responsibility. In my view, nothing could be more destructive of the general disciplines that all good businesses should apply, whether they are small, medium or large, that the weakening of this particular section.
  If I may, I want to go a little further. The original Act as it was presented to your Lordships involved the automatic disqualification of directors, as a streamlining process, and the House rejected this, though of course it was far less time-consuming. New disciplines have been substituted for directors which are incorporated in Schedule 2 of the Bill as it stands and which are already incorporated in other sections of the Bill in regard to liquidators. Disciplines have been laid upon liquidators, insolvency practitioners and directors, and now what we need are disciplines upon the Government.
  If noble Lords will refer to col. 213 of Hansard of 22nd January they will find there listed, in response to a question of mine, the number of proceedings brought against persons in respect of failing to keep proper accounting records. In the past four years the total number of proceedings was 36 and I fancy that since 1948 there have probably not been 100 prosecutions brought in respect of breaches of this particular provision of the Companies Act. I am not blaming this Government. All governments, even governments which I have supported, have taken exactly the same attitude. I can assure the noble Lord, that Section 221 of the Companies Act is more honoured in its breach than in its observance.
  I should like an undertaking from the Government that in future, even though it means increasing their
  1132
  staffs very significantly indeed, this Section 221 will be thoroughly and rigorously enforced. They will do for the entire business community a very great service. They will certainly be safeguarding the interests of creditors, promoting the health of all businesses and protecting the interests of directors.
  If I may use this occasion, I advise any director of any company who cannot obtain the assurance that Section 221 of the Companies Act 1985 will be complied with to present his company with a seven-day notice of resignation unless the defect is remedied in the shortest possible time. That is the reason I wish to have this amendment to restrict the right of the Secretary of State to amend the matters which have to be taken account of and which are set out at Schedule 2.
  If they are to be amended, they should be amended by statute. I do not want any weakening of the provisions or any pressure by the noble Lord, Lord Young, for example, to water down paragraph 4(a) of Schedule 2. That would be a grave blow to company disciplines which the noble Lord, Lord Lucas, seems to be anxious to enforce—as is reflected in the Bill. I beg to move.
  5.30 p.m.
  Lord Lucas of Chilworth: My Lords, the noble Lord has explained his amendment in a good deal of detail. I understand the fear underlying it, but it restricts the order-making power of the Secretary of State to making transitional provisions in relation to the matters now in the schedule. If your Lordships carried the amendment, it would defeat an essential purpose of the amendment provided in another place. In another place there was virtual unanimity—and this view was shared by the noble Lord and others—that the Bill should give guidance on matters to be taken into account in determining unfitness. There was general agreement also that the Bill should enable the Secretary of State to vary that guidance from time to time, as necessary in the light of experience gained from the operation of this Bill and obviously to reflect the evolution of commercial practice and standards. That is the very point to which the noble Lord referred in dealing with the Companies Act.
  During recommitment the noble Lord was persuasive when he urged upon us the very flexibility which Amendment No. 34 provides and which his proposed amendment would remove. I cannot be persuaded by the noble Lord but I can give him this assurance. We have no plans to seek modifications to the schedule at this time, though we have said all along that the guidelines have to be sufficiently flexible to meet contingencies and to have regard to experience gained. I cannot go back on that, and neither would your Lordships expect me to. I cannot at the same time give the assurance that he seeks that the guidelines are set in concrete. They cannot be. I cannot at the same time prejudge what my noble friend Lord Young may propose in future legislation which may affect this or any other Act of Parliament. I think perhaps on reflection the noble Lord will realise that. It will at that time be for him to argue the point if such hypothetical legislation impinges upon matters which we are discussing today.
  Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord, but he troubles me. What he is saying is this. The noble Lord, Lord Young, could go to his right honourable friend and say, "Section 221 of the Companies Act 1985 lays down certain standards for the keeping of proper company records. In my view, that is inhibiting businesses from developing. It is all part of the red tape that I am there to try to ease". Incidentally, that would be despite the fact that in research that his department undertook only about 2 per cent. of those in the survey made any complaint about audit or accounting requirements, and then only after prompting. But the noble Lord's right honourable friend might be persuaded.
  It is essential that the requirements of the Companies Act (particularly of Section 221) which are quite unambiguous, should not be flexible. They are fundamental to the control of any business, to the proper security of creditors, to interests of shareholders and ultimately to the success or failure of any business.
  I am sorry that the noble Lord cannot give me the assurance that by order paragraph 4(a) will not be eliminated at a stroke by the Secretary of State's laying an order. The noble Lord, Lord Lucas, knows quite well, because he is a parliamentarian, that one of the advantages of having an order laid before the House. whether it be under the negative or the positive procedure, is that it cannot be amended. The House has either to accept it as a whole or reject it. If the noble Lord, Lord Young, is given the licence which the Commons amendment as at present drafted would give him, he is quite capable of putting in that order seven matters to which no objection whatsoever could be taken and one vital one to cover this point. The House would be left with the choice to accept the order as a whole or to reject it.
  I am all for flexibility, but this matter has stood the test of time since the 1948 Act and probably some time prior to that, as noble and learned Lords may know. It has remained absolutely fixed and unchanged, and I want it to be immutable. I hope that even at this late stage the noble Lord will agree. First, Schedule 2 has been drafted after consultation with all the learned professions, as he indicated. Secondly, if it is to be amended, particularly in the vital regard to which I have referred, the matter should come before Parliament as part of an amending Act. It should not be left to the discretion of the Secretary of State, who might, for all I know, succumb to the blandishments and charm for which the noble Lord, Lord Young, is well known and be persuaded to do something contrary to the spirit of the insolvency legislation before your Lordships.
  Lord Lucas of Chilworth: My Lords, the noble Lord has followed every single word that has been said on the Bill in this House. I am surprised that he should think that we would depart from what is absolutely fundamental. Why should he bring forward at this stage a hypothetical situation which, indeed, might apply to his own side? He shakes his head; I shake mine also. I know of no intention to remove from the schedule the requirement to keep books of account. I delete the word "proper" which he put in. The
  1134
  schedule does not use that word. I turn to page 194.I quote:
  Schedule 2—"Matters for Determining Unfitness of Directors. paragraph 4(a) section 221 (companies to keep accounting records)".
  It is necessary, and I cannot foresee why we would want to remove that requirement. But I am not going to undertake that other legislators, whether in this Government or in any other Government, may not seek to achieve other aims to introduce legislation which may have an impact. We would have to deal with that at that stage. Certainly we cannot deal with it at this stage and I invite your Lordships to reject this amendment.
  Lord Bruce of Donington: My Lords, the noble Lord, Lord Lucas of Chilworth, has gone on record quite sufficiently for the limited purposes I had in mind in moving this amendment. I hope he likes what he sees when he reads the report of the debate, and I hope the professions and in particular all directors will take note. In those circumstances, I ask the leave of the House to withdraw the amendment.
  Amendment to the Motion, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  35 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 35.
  Moved, That this House do agree with the Commons in their Amendment No. 35—(Lord l.ucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  36 After Clause 10, insert the following new clause:
  'Restriction on use of company names.
  '(1) This section applies to a person where a company ("the relevant company") has gone into insolvent liquidation and he was a director or shadow director of the company at any time in the period of twelve months ending with the day before it went into liquidation; and for the purposes of this section a name is a prohibited name in relation to such a person if—

  (a) it is a name by which the relevant company was known at any time in the said period; or

  (b) it is a name which is so similar to a name falling within paragraph (a) above as to suggest an association with the relevant company.

  (2) Except with the leave of the court a person to whom this section applies shall not at any time in the period of five years beginning with the day on which the relevant company went into liquidation—

  (a) be a director of any other company that is known by a prohibited name; or

  (b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or

  (c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.

  (3) If a person acts in contravention of this section, he shall, in respect of each offence, be liable—

  (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;

  (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.

  1135
  (4) In subsection (2) above "the court" means any court having jurisdiction to wind up companies; and on an application for leave under that subsection, the Secretary of State or the official receiver may appear and call the attention of the court to any matters which seem to him to be relevant.
  (5) References in this section, in relation to any time, to a name by which a company is known are references to the name of the company at that time or to any name under which the company carries on business at that time.
  (6) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.
  (7) In this section "company" includes a company which may be wound up under Part XXI of the 1985 Act.'

  AMENDMENT TO COMMONS AMENDMENT No. 36
  36A Line 13, after ("court") insert ("or in such circumstances as may be prescribed").

  COMMONS AMENDMENTS
  37 Clause 11, page 8, line 38, after 'order' insert 'of section [Restriction on use of company names] above'.
  38 Page 9, line 2, after 'order' insert ', to be in contravention in relation to that company of section (Restriction on use of company names) above'.
  39 Page 9, line 30, after 'order' insert ', to be in contravention in relation to that company of section (Restriction on use of company names) above'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 36 to 39,en bloc, but as amended by No. 36A. With permission, I wish to speak also to Amendments Nos. 203 and 529.
  203 Leave out Clause 77.
  529 Schedule 8, page 196, line 28, at end insert—
  '4A. Section (Restriction on use of company names) of this Act shall not apply where the relevant company within the meaning of that section) went into liquidation before the coming into force of that section.'.
  Clause 77 of the Bill had the intention of preventing an important element of the so-called phoenix syndrome; namely the use in successive companies or other businesses of the same or a similar name to that used by a company which had gone into insolvent liquidation. This procedure is often conducted by a company name-swap carried out shortly before liquidation with a newly-acquired off-the-shelf company taking the insolvent company's name and being run by persons connected with the insolvent company. The new company obtains the benefit of customer and/or supplier goodwill, and may also acquire assets of the insolvent company at an undervalue. This would certainly be to the detriment of the creditors of the old company.
  The provisions inserted into the Bill at the Commons Committee stage relating to voluntary winding up (Clauses 66 to 70, as amended) and the necessity for liquidators to give information to creditors' committees as to sales of assets to connected persons, contained in Commons Amendments Nos. 307 to 309, 460 to 463, 470 and 472, together with the disqualification and wrongful trading provisions, all move in different ways to prevent the phoenix syndrome abuse. Clause 77 was one more piece in what I might call that jigsaw.
  The clause attempted to alleviate the confusing situation which arises by these company name changes. A major drawback was that it created difficulties by preventing the continued use of a company name which might possibly prevent the disposal of a company as a going concern to totally independent persons, where indeed the trading name was an asset of some value.
  5.45 p.m.
  The new clause introduced by Commons Amendment No. 36 and the amendments consequential upon it approach the problem from what we believe to be a more effective angle. Rather than preventing altogether the continued use of a company name or trading style, the new clause strikes at the directors or shadow directors of the company in insolvent liquidation in that, subject to their being able to obtain the leave of the court to do so, they must not within five years of the commencement of the liquidation be involved in any other company using the same name as the company in liquidation or, indeed, any other name which is so similar that it would suggest an association with that company. Contravention of this may involve personal liability for the debts of the new company.
  Amendment No. 36A widens the scope for exemption from the provisions of this clause. Although the new provisions were welcomed in the other place as tackling a genuine abuse of present company law, reservations have been expressed by some members of that House and by practitioners that the provisions could adversely affect the sale of businesses or parts of businesses as going concerns: that is, of course, sales by an administrative receiver, an administrator or a liquidator.
  The new amendment which I am proposing meets that criticism by allowing exemption from the provisions in certain circumstances to be held and prescribed by rules. It is intended here that discussions will be held with practitioners to formulate appropriate circumstances, but that they will involve sales by administrative receivers, administrators and liquidators who will be under a duty to obtain undertakings from the buyers, and that those undertakings will ensure that those subsequently dealing with the new company are properly and adequately informed about the circumstances in which it is using the relevant name. This would ensure thereby that they are not misled.
  That is a rather fulsome and perhaps convoluted explanation of what is in essence a proper attempt to meet the requirements and also to satisfy the fears expressed in both Houses during the earlier proceedings. I commend the amendments to your Lordships.
  Moved, That this House do agree with the Commons in their Amendments Nos. 36 to 39, as amended by Amendment No. 36A.—(Lord Lucas of Chilworth.)
  Lord Bruce of Donington: My Lords, I thank the noble Lord, Lord Lucas of Chilworth, for his explanation of Amendment No. 36, and also for his Amendment No. 36A, which goes some way to meet the anxieties of many who find themselves in the

  1137
  position where they are in charge of the company's assets and for the benefit of creditors or principals are required to dispose of a business as a going concern.
  The difficulty is this. In many cases apprehended by, among others, the Institute of Chartered Accountants of England and Wales it is very often the case that the only people able and willing to take over a business as a going concern are in fact directors or shadow directors who are not of necessity dishonest by reason of being directors or shadow directors. As I see it, this clause, even as amended, would still prevent any disposal to a director or a shadow director of the company going into liquidation, and that bothers me a little. I repeat, not every director or shadow director of a company going into voluntary liquidation is of necessity a crook or of necessity is involved in any kind of phoenix syndrome, or in any case remotely culpable in the matter to be taken into consideration to determine his fitness as set out in Schedule 2 of the revised Bill. It is that which I am bothered about.
  I put it to the noble Lord that the powers he has already taken in the Bill to report on the fitness of directors, or their unfitness (as the case may be) and to enable the Secretary of State to demand and to receive reports on individual directors, plus the powers of the courts to punish or disqualify (as the case may be) are themselves pretty formidable weapons without adding this extra safeguard against the phoenix syndrome. If all the other safeguards in the Bill, which are very properly being taken, are enforced, including, I must say again, the rigid enforcement of Section 221 of the Companies Act 1985, then this extra safeguard to prevent the Phoenix syndrome might prove unnecessary.
  I must defer to the noble Lord's inquiries in these matters. It is, again, one of these questions where, had we had time to consider in depth and had we had time to make the necessary consultations with those well versed in these matters among the legal and accountancy professions, we could probably have found a form of words that would safeguard everyone. As it is, it seems to me still to be a bit of a bludgeon. Well, it cannot be helped. I have undertaken to facilitate the passage of our proceedings today with the utmost expedition. I do not intend to pursue the matter further. Therefore, although I have much misgiving, I trust sincerely that the noble Lord will do his best to allay this through the practice of his department.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  40 After Clause 12, insert the following new clause:
  Application of Chapter IA.

  'CHAPTER 1A VOLUNTARY ARRANGEMENTS
  This Chapter applies where—

  (a) in the case of a company which is being wound up or in relation to which an administration order is in force, the liquidator or administrator intends; or

  (b) in the case of any oher company, the directors intend,

  to make a proposal to the company and to its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs, being a proposal which provides for some person who is qualified to act as an insolvency practitioner in relation to the company (in this Chapter referred to as "the nominee") to act in relation to
  1138
  the composition or scheme either as trustee or otherwise for the purpose of supervising its implementation
  41 After Clause 12, insert the following new clause:
  Report by nominee who is not liquidator or administrator.
  '.—(1) Where the nominee is not the liquidator or adminstrator of the company, he shall, within twenty-eight days (or such longer period as the court may allow) after he is given notice of the proposal, submit a re port to the court stating—

  (a) whether, in his opinion, meetings of the company and of its creditors should be summoned to consider the proposal; and

  (b) if in his opinion such meetings should be summoned, the date on which, and time and place at which, he proposes the meetings should be held.

  (2) For the purposes of enabling the nominee to prepare his report the person intending to make the proposal shall submit to the nominee—

  (a) a document setting out the terms of the composition or scheme which he is proposing; and

  (b) a statement of the company's affairs containing—

  (i) such particulars of its creditors and of its debts and other liabilities and of its assets as may be prescribed; and

  (ii) such other information as may be prescribed.

  (3) The court may, on an application made by the person intending to make the proposal, in a case where the nominee has failed to submit the report required by this section, direct that the nominee shall be replaced as such by another person qualified to act as an insolvency practitioner in relation to the company.'
  42 After Clause 12, insert the following new clause:
  Summoning of meetings.
  '.—(1) Where the nominee is not the liquidator or administrator of the company and a person has reported to the court under section (Report by nominee) above that such meetings as are mentioned in subsection (1) of that section should be summoned, that person shall, unless the court otherwise directs, summon those meetings for the time, date and place proposed in his report.
  (2) Where the nominee is the liquidator or administrator of the company, he shall summon meetings of the company and of its creditors to consider the proposal for such a time, date and place as he thinks fit.
  (3) The persons who shall be summoned to a creditors' meeting under this section shall be every creditor of the company of whose claim and address the person summoning the meeting is aware.'
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in Amendments Nos. 40 to 42 en bloc. I wish to speak at the same time to Amendments Nos. 43 to 46C, 204, 232, 379, 391, 401, 428, 437, 438, 499, 500 and 515 to 517 inclusive.
  43 After Clause 12, insert the following new clause:
  'Decisions of meetings.
  .—(1) The meetings summoned under section (Summoning of meetings) above shall decide whether to approve the proposed composition or scheme (with or without modifications).
  (2) The modifications subject to which the proposed composition or scheme may be approved may include one conferring the functions proposed to be conferred on the nominee on another person qualified to act as an insolvency practitioner in relation to the company but shall not include any modification by virtue of which the proposal ceases to be a proposal such as is mentioned in section (Application of Chapter IA) above.
  (3) Except with the concurrence of the secured creditor concerned, a meeting summoned under section (Summoning of meetings) above shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security.

  1139
  (4) Except with the concurrence of the preferential creditor concerned, a meeting summoned under section (Summoning of meetings) above shall not approve any proposal or modification under which—

  (a) any preferential debt of the company is to be paid otherwise than in priority to such of its debts as are not preferential debts; or

  (b) a preferential creditor of the company is to be paid an amount in respect of a preferential debt that bears to that debt a smaller proportion than is borne to another preferential debt by the amount that is to be paid in respect of that other debt.

  (5) Subject to subsections (1) to (4) above, a meeting summoned under section (Summoning of meetings) above shall be conducted in accordance with the rules.
  (6) After the conclusion in accordance with the rules of a meeting summoned under section (Summoning of meetings) above, the chairman of the meeting shall report the result of the meeting to the court, and, immediately after reporting to the court, shall give notice of the result of the meeting to such persons as may be prescribed.
  (7) In this section "preferential debt" means any of the debts which in a winding up are, under section 72 below and Schedule 3 to this Act (read with Schedule 3 to the Social Security Pensions Act 1975), to be paid in priority to all other debts, and "preferential creditor" shall be construed accordingly.
  (8) For the purposes of this section, Schedule 3 to this Act and Schedule 3 to the said Act of 1975 shall each have effect, in relation to a company which is not being wound up, as if—

  (a) references to the relevant date were references to the date of the making of the administration order or, where no such order has been made, the date of the approval of the proposal; and

  (b) references to the company being wound up were references to the administration order being made or, as the case may be, the proposal being approved.'.

  44 After Clause 12, insert the following new clause:
  'Effect of an approval.
  .—(1) This section has effect where each of the meetings summoned under section (Summoning of meetings) above approves the proposed composition or scheme either with the same modifications or without modifications.

  (2) The approved composition or scheme shall take effect as if made by the company at the creditors' meeting and shall bind every person who in accordance with the rules had notice of, and was entitled to vote at, that meeting (whether or not he was present or represented at the meeting) as if he were a party to the composition or scheme.

  (3) Subject to subsection (4) below, if the company is being wound up or an administration order is in force in relation to the company, the court may do one or both of the following, namely—

  (a) by order stay or sist all proceedings in the winding up or discharge the administration order,

  (b) give such directions with respect to the conduct of the winding up or the administration as it thinks appropriate or facilitating the implementation of the approved composition or scheme.

  (4) The court shall not make an order under subsection (3)(a) above—

  (a) at any time before the end of the period of twenty-eight days beginning with the first day on which each of the reports required by section (Decisions of meetings) (6) above has been made to the court; or

  (b)at any time when an application under section (Challenge of decisions) below or an appeal in respect of such an application is pending or at any time in the period within which such an appeal may be brought.").

  45 After Clause 12, insert the following new clause:
  'Challenge of decisions.
  .—(1) subject to the provisions of this section, an application to the court may be made by any of the
  1140
  persons specified in subsection (2) below, on one or both, of the following grounds, namely—

  (a) that a composition or scheme approved at the meetings summoned under section (Summoning of meetings) above unfairly prejudices the interests of a creditor, member or contributory of the company;

  (b) that there has been some material irregularity at or in relation to either of the meetings.

  (2) The persons who shall be entitled to make an application under this section shall be—

  (a) a person entitled, in accordance with the rules, to vote at either of the meetings;

  (b) the nominee or any person who has replaced him under section (Report by nominee who is not liquidator or administrator) (3) or (Decisions of meetings) (2) above; and

  (c) if the company is being wound up or an administration order is in force in relation to the company, the liquidator or administrator of the company.

  (3) An application under this section shall not be made after the end of the period of twenty-eight days beginning with the first day on which each of the reports required by section (Decisions of meetings) (6) above has been made to the court.
  (4) Where on an application under this section the court is satisfied as to either of the grounds mentioned in subsection (1) above, it may do one or both of the following, namely—

  (a) revoke or suspend the approvals given by the meetings or, in a case falling within subsection (l)(b) above, any approval given by the meeting in question;

  (b) give a direction to any person for the summoning of further meetings to consider any revised proposal the person who made the original proposal may make or, in a case falling within subsection (1)(b) above, a further company or, as the case may be, creditors' meeting to reconsider the original proposal.

  (5) Where at any time after giving a direction under subsection (4)(b) above for the summoning of meetings to consider a revised proposal the court is satisfied that the person who made the original proposal does not intend to submit a revised proposal, the court shall revoke the direction and revoke or suspend any approval given at the previous meetings.
  (6) In any case where the court, on an application made under this section with respect to any meeting, gives a direction under subsection (4)(b) above or revokes or suspends an approval under subsection (4)(a) or (5) above, the court may give such supplemental directions as it thinks fit and, in particular, directions with respect to things done since the meeting under any composition or scheme approved by the meetings.
  (7) Except in pursuance of the preceding provisions of this section, an approval given at a meeting summoned under section (Summoning of meetings) above shall not be invalidated by any irregularity at or in relation to the meeting.'

  AMENDMENT TO COMMONS AMENDMENT No. 45
  45B Line 51, leave out ("meetings") and insert ("meeting").

  COMMONS AMENDMENTS
  46 After Clause 12, insert the following new clause:
  'Implementation and supervision of approved composition or scheme.
  .—(1) This section applies where a composition or scheme approved by the meetings summoned under section (Summoning of meetings) above has taken effect.
  (2) The person who is for the time being carrying out in relation to the composition or scheme the functions conferred by virtue of the approval on the nominee, or by virtue of section (Report by nominee who is not liquidator or administrator) (3) or (Decisions of meetings) (2) above on a person other than the nominee, shall be known as the supervisor of the composition or scheme.
  (3) If any of the company's creditors or any other person is dissatisfied by any act, omission or decision of the supervisor, he may apply to the court; and on such an application the court may confirm, reverse or modify any

  1141
  act or decision of the supervisor, may give him directions or may make such other order as it thinks fit.
  (4) The supervisor may apply to the court for directions in relation to any particular matter arising under the composition or scheme and shall be included among the persons who may apply to the court for the winding up of the company or for an administration order to be made in relation to the company.
  (5) The court may, whenever—

  (a) it is expedient to appoint a person to carry out the functions of the supervisor, and

  (b) it is inexpedient, difficult or impracticable for an appointment to be made without the assistance of the court,

  make an order appointing a person who is qualified to act as an insolvency practitioner in relation to the company, either in substitution for the existing supervisor or to fill a vacancy.
  (6) The power conferred by subsection (5) above shall be exercisable so as to increase the number of persons exercising the functions of the supervisor or, where there is more than one person exercising those functions, so as to replace one or more of those persons.'

  CONSEQUENTIAL AMENDMENTS TO THE BILL
  46A Page 41, line 24, at end insert—
  ("(1A) Where a winding-up order is made at a time when there is a supervisor of a composition or scheme approved in relation to the company under Chapter II of this Part, the court may appoint as liquidator of the company the person who is the supervisor at the time when the winding-up order is made.").
  46B Page 41, line 26, after ("(1)") insert ("or (1A)").
  46BA Page 176, line 12, at end insert—
  (" Voluntary arrangements
  6A. In section 153(3) (financial assistance allowed), for the words "section 601 (winding up imminent or in progress)" there shall be substituted the words "Chapter II of Part II of the Insolvency Act 1985".").
  46C Page 203, line 33, column 3, at end insert—
  ("Section 601.").

  COMMONS AMENDMENTS
  204 Clause 79 page 61, line 31, at end insert—
  '(3) Section [Supplies by utilities: Part II] below shall apply where a composition or scheme approved by meetings summoned under section [Summoning of meetings] above has taken effect as it applies where a company goes into liquidation as if references in that section to the office holder were references to the supervisor of the composition or scheme.'.
  232 Clause 91, page 73, line 23, after 'includes', insert 'the approval of a composition or scheme under Chapter IA of this Part.'.
  379 Clause 191, page 152, line 15, leave out from 'transaction' to end of line 20 and insert—

  '(b) in a case where a person who is, or is capable of being, prejudiced by the transaction is bound by a composition or scheme approved under Chapter IA of Part II or Chapter I of Part III of this Act, by the supervisor of the composition or scheme or by any person who (whether or not so bound) is, or is capable of being, so prejudiced; or

  (c) in any other case, by a person who is, or is capable of being, so prejudiced;

  and an application made under any of the preceding paragraphs in relation to a transaction shall be treated as made on behalf of every person who is, or is capable of being, prejudiced by the transaction.'.
  391 Clause 195, page 157, line 5, after 'under' insert 'Chapter IA of Part II or'.
  401 Clause 209, page 164, line 14, after 'under', insert 'Chapter IA of Part II or'.
  428 Schedule 4, page 172, line 47, at end insert—
  'Registration of voluntary arrangements
  4A. Provision for the registration of compositions or schemes approved under Chapter IA of Part II of this Act, including provision for the keeping and inspection of a register.'.
  437 Page 174, line 37, after 'company', insert 'or by the supervisor of a composition or scheme approved under Chapter IA of Part II of this Act'.
  438 Page 174, line 42, after 'company', insert 'or by the supervisor of such a composition or scheme'.
  499 Schedule 7, page 186, line 34, at end insert 'and at the end there shall be inserted the words "or of a composition or scheme proposed for the purposes of Chapter IA of Part II of the Insolvency Act 1985 being approved under that Chapter".'.
  500 Page 187, line 20, after 'under', insert 'Chapter IA of Part II or'.
  515 Page 192, line 37, at end insert 'and at the end there shall be inserted the words "or a composition of scheme proposed for the purposes of Chapter IA of Part II of the Insolvency Act 1985 is approved under that Chapter".'.
  516 Page 193, line 5, after 'under' insert 'Chapter IA of Part II or'.
  517 Page 193, line 24, at end insert 'and at the end there shall be inserted the words "or a composition or scheme proposed for the purposes of Chapter IA of Part II of the Insolvency Act 1985 is approved under that Chapter".'.
  The principal Amendments Nos. 40 to 46 will form a new Chapter II in Part II of the Bill. They introduce a new voluntary procedure for companies in financial difficulties. The need for such a system was recognised particularly to assist an administrator in his efforts to rehabilitate a company and arose from our consultations with practitioners on these particular provisions. There is, however, a wider application. The Cork Committee, the review committee, recommended that a simple but binding procedure should be available to enable companies to come to terms with creditors, the existing provisions for schemes under Section 425 of the Companies Act 1985, for example, being very expensive and realistically appropriate only to major reconstructions.
  A corporate voluntary arrangement may therefore be set into motion by the directors of a company and the court in those circumstances will have no role in approving arrangements as in Section 425 but will be available to settle disputes. These clauses are an adaptation of the voluntary arrangements procedure for individuals which are to be found in Part III of the Bill.
  The directors can initiate this procedure by approaching an insolvency practitioner with a proposal that they wish to put to creditors and shareholders. If the practitioner considers their suggestion to be workable, he will so report to the court and he will call meetings of creditors and members. If the creditors and members voting in single groups in each case then accept the proposal or a modification thereof by a majority of 75 per cent. of those attending and voting, the arrangement will be binding on all notified creditors and on the company. The need for class meetings and formal consideration by the court is avoided, although any person bound by the scheme who considers that he has been unfairly prejudiced may, of course, apply to the court for relief.
  We believe that voluntary arrangements will be of considerable assistance to small otherwise viable companies which have suffered an exceptional calamity such as a strike or a large single bad debt and whose resultant financial difficulties can be overcome given time. When an arrangement is in force it will continue to be supervised by an independent licensed insolvency practitioner and the clauses to which this refers, supported by the rules, will contain a number of safeguards for creditors.
  A voluntary arrangement may also become part of a formal liquidation process and in appropriate cases where a company can be rehabilitated, may bring a stay of such proceedings. The system is therefore more flexible than the provisions currently available to a voluntary liquidator under Section 601 of the Companies Act 1985. That section has found little application because of the high voting requirement of an approving majority of three-quarters of all creditors and its inability to save a company from complete liquidation. I am therefore asking this House by Amendment No. 46C to authorise the repeal of Section 601 which is made redundant by these new provisions.
  The remaining amendments, together with the other amendments to Commons amendments, are, I assure the House, technical and consequential to this Bill and to other Acts required to give effect to the new procedure. I commend the acceptance of this series of amendments to your Lordships.
  Moved, That this House do agree with the Commons in their Amendments Nos. 40 to 42.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  43 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in the said amendment.
  Moved, That this House do agree with the Commons in their Amendment No. 43.—(Lord Lucas of Chilworth.)

  AMENDMENT TO COMMONS AMENDMENT No.
  43A In subsection (3) at end insert ("and no secured creditor shall be required to value his security before voting at and taking part in meetings to which he is summoned under this section").
  Lord Bruce of Donington: My Lords, to echo a phrase that the noble Lord has used many times this is a technical amendment. It may in the event be unnecessary, and I put it with some diffidence. I have already discussed it with the noble Lord. Subsection (3) of the new clause in the proposed Amendment No. 43 says:
  "Except with the concurrence of the secured creditor concerned, a meeting summoned under section (Summoning of meetings) above shall not approve any proposal or modification which affects the right of a secured creditor of the company to enforce his security".
  The amendment seeks to add to that:
  "and no secured creditor shall be required to value his security before voting at and taking part in meetings to which he is summoned under this section".
  If this amendment was not put in, what would happen in a common case where it is unknown whether a security will pay a creditor or not? In a certain sense he may be part secured and part unsecured. It is in an endeavour to solve that little problem that this amendment has been put down.
  The noble Lord may say that it is covered in the rules. If I have the assurance of the noble Lord that that will be covered in the rules—although I do not like
  1144
  rules on principles because they are put in statutory orders which one cannot then amend except by rejecting the whole order—then I shall accept that. I beg to move, and perhaps the noble Lord can reply.
  6 p.m.
  Lord Lucas of Chilworth: My Lords, I am grateful to the noble Lord opposite. I understand that he is concerned to protect the rights of a secured creditor in all the circumstances. I should then say that subsection (3) of the clause introduced by Commons Amendment No. 43 fully protects him against any attempt to tamper with his rights over his security.
  With regard to the debt itself it is our intenten to provide the secured creditor with a weighted right to vote dependent upon the nature of the proposal for an arrangement. Where an arrangement would seek to defer or otherwise alter his right to repayment he will be able to vote for his full debt. This in turn would enable him to challenge the proposal before the court if he still felt that he was unfairly prejudiced by the proposal.
  The noble Lord, Lord Bruce of Donington, of course anticipated that at the end of the day I was going to say that in this chapter—as indeed throughout the Bill—voting rights are to be determined in the rules. I give him the assurance that he seeks: that they will be so held in the rules.
  Lord Bruce of Donington: My Lords, I am greatly obliged to the noble Lord. I ask leave of the House to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  4 [Printed above.].
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 44 to which I have spoken.
  Moved, That this House do agree with the Commons in their Amendment No. 44—.(Lord Lucas of Chilworth).
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  45 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 45.
  Moved, That this House do agree with the Commons in their Amendment No. 45.—(Lord Lucas of Chilworth.)

  AMENDMENTS TO COMMONS AMENDMENT No. 45
  45A In subsection (3) at end insert ("and given to such persons as may be prescribed in accordance with that section").
  45C In subsection (6) at end insert ("or proposed to be done prior to any further order of the court under sub-section 24(3) above").
  Lord Bruce of Donington: My Lords, I beg to move Amendments Nos. 45A and 45C. These once again are purely technical amendments. With regard to

  1145
  Amendment No. 45A it is thought that it will take time to get all these orders and meetings organised. Therefore a further latitude should be given specifically. In so far as Amendment No. 45A is concerned—which is to add at the end,
  "and given to such person as may be prescribed in accordance with that section"—
  I would say that if that amendment is not put in how else can the creditors be certain that they will not lose their rights? If the court is told, but the creditors are not, on the present wording, they would still lose any right to appeal to the courts after 28 days. I beg to move.
  Lord Lucas of Chilworth: My Lords, it is provided in subsection (6) of the clause introduced by Amendment No. 43 that the chairman,
  "immediately after reporting to the court the result of a meeting to consider a proposal, shall give notice to such persons as may be prescribed".
  Where a proposal is approved so as to bind creditors it is intended by the rules to require that that notice is to be given to all creditors so bound who were not represented at the meeting; and that the notice shall include a copy of the proposal in its final form and that it shall be sent to creditors on the day on which the report is filed in the court. I would suggest that this will be sufficient to give adequate opportunity for such creditors to challenge the implementation of the proposals.
  The Amendment No. 45C which the noble Lord has moved, adds, I suggest, nothing to the court's power as already provided in relation to a company voluntary arrangement which has been challenged or directions in an administration or winding up where they coexist. The power granted under subsection (6) of the clause which is introduced by Amendment No. 45 is a general power to make such supplemental directions as the court thinks fit. A particular example of how the court may exercise the power is given which makes it clear that the court, in addition to its general power to give directions as to the future conduct of the arrangements, has power to review what has already taken place.
  Subsection (3) of the clause introduced by Commons Amendment No. 44 applies where a company is being wound up or is in administration and a voluntary arrangement has been approved and is therefore in effect. Directions thereunder apply to the conduct of the winding-up or the administration and not to the arrangement itself.
  We are satisfied that under these two provisions the court has all the necessary powers to give directions. With that assurance, I would invite the noble Lord, Lord Bruce of Donington, to withdraw this associated series of amendments.
  Lord Bruce of Donington: My Lords, I am grateful for the noble Lord's explanation. I ask leave to withdraw the amendments.
  Amendments, by leave, withdrawn.

  COMMONS AMENDMENT
  45B [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment. No. 45B.
  Moved, That this House do agree with the Commons in their Amendment No. 45B.—(Lord Lucas of Chilworth.)
  On Question, amendment agreed to.
  On Question, Motion, as amended, agreed to

  COMMONS AMENDMENT
  46 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 46, to which I have already spoken.
  Moved, That the House do agree with the Commons in their Amendment No. 46.—(Lord Lucas of Chilworth.)
  Lord Bruce of Donington: My Lords, this amendment seeks to round off the position so far as supervisors are concerned. The Bill itself makes provision for their appointment and for their various duties. The clauses that I put forward tidy it up to provide for what they do when they cease to perform their functions.
  For once I am at the mercy of the noble Lord Lord Lucas of Chilworth, because I am not quite sure how we should proceed. With Amendments Nos. 46ZA and 46ZB being superseded by Amendments Nos. 46BZA and 46BAA which have been put down since, I shall ask for the guidance of the noble Lord as to how we should proceed in order to achieve the purpose I have in mind. The noble Lord will be aware that there is this supplementary amendment that has been tabled on the same point which is No. 46BZA. As I understand it the final achievement that we both want is for Amendment No. 46BZA to prevail together with an addition from the noble Lord. As to exactly how we accomplish that, I must confess that I am completely stumped procedurally. I do not know whether I withdraw the original Amendments Nos. 46ZA and 46ZB and then beg to move Amendment No. 46BZA. I am really not quite sure how to proceed. For once I have to throw myself under the noble Lord's protection in order to accomplish the purpose that I have in mind.
  Lord Lucas of Chilworth: My Lords, my understanding of this procedural matter is that we should go to Amendments Nos. 46BZA and 46BAA, which is consequential. Therefore, perhaps I may suggest that the noble Lord speaks to those amendments en bloc, in the last analysis the matter being decided on Amendment No. 46BZA. That is how I understand we should proceed.
  Lord Bruce of Donington: My Lords, I am grateful to the noble Lord. I am given to understand—I may be entirely wrong—that this is one of the amendments which, in his wisdom, the noble Lord proposes to accept from me. I do not know whether or not that is the case, but it would have a profound effect upon how long I address the House on it. However, I am given to understand that the noble Lord is prepared to accept this amendment. I shall therefore not move Amendments Nos. 46ZA and 46ZB, and beg at the

  1147
  appropriate moment to move Amendment No. 46BZA:

  AS AN AMENDMENT TO COMMONS AMENDMENT No. 46
  46BZA Page 174, line 46, at end insert—
  ("18A. Provision requiring the person who is the supervisor of a composition or scheme approved under Chapter 1A of Part II of this Act, when it appears to him that the composition or scheme has been fully implemented and that nothing remains to be done by him under the composition or scheme—

  (a) to give notice of that fact to persons bound by the composition or scheme; and

  (b) to report to those persons on the carrying out of the functions conferred on the supervisor of the composition or scheme.").

  In the light of the attitude of the noble Lord, Lord Lucas—who has been most accommodating in this matter—I propose to regard the amendments as being self-explanatory and not speak to them at all.
  [Amendments Nos. 46ZA and 46ZB not moved.]
  The Deputy Speaker (The Earl of Listowel): My Lords, we now come to Amendment No. 46A.
  Lord Mishcon: My Lords, I wonder whether the noble Lord the Minister can help me. It is very important that we get this right and it is a rather complex matter because of the supplementary list. May I respectfully suggest that the House do adjourn for a couple of minutes in order that we can get this procedurally right rather than make an error at this last stage of the Bill?
  Lord Meston: My Lords, we are getting in a terrible muddle and I think that we may be amending amendments which have not been moved.
  Lord Brabazon of Tara: My Lords, I quite agree and I beg to move that the House do adjourn for five minutes until 6.20, while we discuss this matter.
  Moved accordingly, and, on Question, Motion agreed to.
  [The Sitting was suspended from 6.15 until 6.20 p.m.]

  AMENDMENTS CONSEQUENTIAL ON COMMONS AMENDMENTS Nos. 40 to 46
  46A and 46B [Printed above.]
  Lord Lucas of Chilworth: My Lords, I formally move that this House do agree with Amendments Nos. 46A and 46B as consequential amendments to the Bill.
  Moved, That Amendments Nos. 46A and 46B be agreed to.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.
  46BZA [Printed earlier.]
  Lord Bruce of Donington: My Lords, I have already spoken to this amendment. I beg to move.
  Moved, That Amendment No. 46BZA be agreed to. —(Lord Bruce of Donington.)
  On Question, Motion agreed to.
  46BA [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with Amendment No. 46BA as a consequential amendment to the Bill.
  Moved, That Amendment No. 46BA be agreed to.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENT CONSEQUENTIAL ON CONSEQUENTIAL AMENDMENT No. 46BZA
  46BAA Page 183, line 45, at end insert—
  ("26A. Provision requiring the person who is the supervisor of a composition or scheme approved under Chapter I of Part III of this Act, when it appears to him that the composition or scheme has been fully implemented and that nothing remains to be done by him under the composition or scheme—

  (a) to give notice of that fact to persons bound by the composition or scheme; and

  (b) to report to those persons on the carrying out of the functions conferred on the supervisor of the composition or scheme.").

  Lord Bruce of Donington: My Lords, I beg to move.
  Moved, That Amendment No. 46BAA be agreed to—(Lord Bruce of Donington.)
  On Question, Motion agreed to.

  AMENDMENT CONSEQUENTIAL ON COMMONS AMENDMENTS Nos. 40 to 46
  46C [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move this House do agree with Amendment No. 46C as a consequential amendment to the Bill.
  Moved, That Amendment No. 46C be agreed to—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  47 Clause 13, page 11, line 5, leave out 'will be' and insert 'is
  likely to become'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 47. In speaking to Amendment No. 47, which is designed to refine the drafting of the Bill, I should like also to deal with other amendments which are of a minor technical or drafting or consequential nature to the provisions for the administrative procedure and for receiverships in England and Wales and Scotland. The additional amendments are Nos. 53 to 55, 60, 61, 63, 64, 64A, 67, 69, 70, 75 to 77,81 to 86, 88 to 95, 97 to 100, 102, 106, 107, 110 to 116, 118 to 120, 122 to 127, 127A, 132, 134 to 138, 140, 141, 143to 145, 200, 222, 227 to 229, 231, 233 to 235, 237, 377, 378, 403, 404, 408, 416, 417, 430, 434, 443, 447 to 450, 453 to 455, 501 and 514.
  53 Page 11, line 25, at end insert—
  '(4) Section 518 of the 1985 Act (definition of inability to pay debts) shall apply for the purposes of this section as it applies for the purposes of Chapter II of Part XX of that Act.'
  54 Clause 14, page 11, line 27, leave out '(with or without a resolution of its members)' and insert 'or the directors'.
  55 Page 11, line 31, after 'court' insert '—(a)'.
  60 Clause 15, page 12, line 21, leave out 'or retention of title agreement'.
  61 Page 12, line 25, after 'continued' insert 'and no distress may be levied'.
  63 Page 12, line 30, leave out 'and chattel leasing agreements' and insert 'chattel leasing agreements and retention of title agreements.'
  64 Page 12, line 32, leave out 'shall be construed as references to diligence' and insert 'being commenced or continued shall include references to diligence being carried out or having effect and references to distress being levied shall be construed as references to poinding being carried out.'

  AMENDMENT TO COMMONS AMENDMENT No. 64
  64A Line 3, leave out from ("or") to the end of line 5 and insert ("continued and references to distress being levied shall be omitted.").

  COMMONS AMENDMENTS
  67 Clause 16, page 13, line 8, after 'continued' insert 'and no distress may be levied'.
  69 Clause 17, page 13, line 41, leave out 'contain' and insert 'also contain the administrator's name and'.
  70 Clause 18, page 14, line 17, leave out from 'made' to end of line 28 and insert—

  '(a) by any continuing administrator of the company; or

  (b) where there is no such administrator, by any committee established under section (Committee of creditors) below; or

  (c) where there is no such administrator and no such committee, by any creditor or creditors of the company.'

  AMENDMENT TO COMMONS AMENDMENT No. 70
  70A Line 8, after ("by") insert ("the company or the directors or by").

  COMMONS AMENDMENTS
  75 Leave out Clause 19.
  76 Leave out Clause 20.
  77 Leave out Clause 21.
  81 Leave out Clause 23.
  82 Leave out Clause 24.
  83 Clause 25, page 19, line 38, leave out from 'purpose' to 'and' in line 2 on page 20 and insert 'or purposes specified in the order'.
  84 Page 20, line 15, leave out '23' and insert '(Information to be given by administrator)'.
  85 Clause 26, page 20. line 39. leave out from 'shall' to end of line 40 and insert ', within fourteen days after the making of the order effecting the discharge, send an office copy of that order to the registrar of companies.
  (7) If the administrator fails without reasonable excuse to comply with subsection (6) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.'

  AMENDMENT TO COMMONS AMENDMENT No. 85
  85A Line 5, leave out ("fails without reasonable excuse") and insert ("without reasonable excuse fails").

  COMMONS AMENDMENTS
  86 Leave out Clause 27.
  88 Leave out Clause 29.
  89 Before Clause 30, insert the following new clause:
  Committee of creditors
  '—(1) Where a meeting of creditors summoned under section 25 above has approved the administrator's proposals (with or without modifications), the meeting may, if it thinks fit, establish a committee to exercise the functions conferred on it by or under this Part.
  (2) If such a committee is established, the committee may, on giving not less than seven days' notice, require the administrator to attend before it at any reasonable time and furnish it with such information relating to the carrying out of his functions as it may reasonably require.'
  90 Clause 30, page 22, line 27, leave out 'or was.
  91 Page 22, line 33, leave out from 'On' to 'make' in line 34 and insert 'an application for an order under this section the court may, subject to subsection (2A) below.'
  92 Page 22, leave out lines 38 and 39 and insert:
  '(2A) An order under this section shall not prejudice or prevent:

  (a) the implementation of any composition or scheme approved under section (Decisions of meetings) above or any compromise or arrangement sanctioned under section 425 of the 1985 Act: or

  (b) where the application for the order was made more than twenty-eight days after the approval of any proposals or revised proposals under section 26 or 28 above, the implementation of those proposals or revised proposals.

  (3) Subject to subsection (2A) above, an order under this section may in particular'.
  93 Page 23, line 9, leave out from 'shall' to end of line 10 and insert (", within fourteen days after the making of the order effecting the discharge, send an office copy of that order to the registrar of companies.
  (5) If the administrator without reasonable excuse fails to comply with subsection (4) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum, and for continued contravention, to a fine not exceeding one-fiftieth of the statutory maximum.'
  94 Leave out Clause 31.
  95 Before Clause 32, insert the following new clause:
  >'Preliminary
  (1) This Chapter does not apply to receivers appointed under section 467 of the 1985 Act (power to appoint receivers under law of Scotland).z
  (2) In this Chapter "administrative receiver" means—

  (a) a receiver or manager of the whole (or substantially the whole) of a company's property appointed by or on behalf of the holders of any debentures of the company secured by a charge which, as created, was a floating charge, or by such a charge and one or more other securities; or

  (b) a person who would be such a receiver or manager but for the appointment of some other person as the receiver of part of the company's property.'.

  97 Clause 33, page 24, line 36, after ("invalid") insert '(whether by virtue of the invalidity of the instrument or otherwise)'.
  98 Page 24, line 37, after 'whom' insert 'or on whose behalf.
  99 Clause 34, page 25, line 8, after 'company' insert '—(a)'.
  100 Page 25, line 9, at end insert 'and

  (b) references to the property of the company shall be construed as references to the property of which he is or, but for the appointment of some other person as the receiver of part of the company's property, would be the receiver or manager.'.

  102 Leave out Clause 35.
  106 Clause 37, page 26, line 8, leave out 'The' and insert 'An'.
  107 Page 26, line 13, leave out 'The' and insert 'An'.
  110 Clause 38, page 26, line 26, leave out subsection (2).
  111 Page 26, line 33, leave out 'does' and insert 'and section (Statement of affairs to be submitted to administrative receiver) below do'.
  112 Page 26, line 38, leave out 'it applies' and insert 'they apply'.
  113 Page 26, line 39, leave out 'it has' and insert 'they have'.
  114 Page 26, line 40, after 'section', insert 'and section (Statement of affairs to be submitted to administrative receiver) below'.
  115 Page 27, line 2, leave out '39' and insert '(Statement of affairs to be submitted to administrative receiver)'.
  116 Page 27, line 5, leave out 'a person' and insert 'the administrative receiver'.
  118 Leave out Clause 39.
  119 Clause 40, page 28, line 12, at end insert 'so far as he is aware of them'.
  120 Page 29, line 12, leave out '38' and insert '(Statement of affairs to be submitted to administrative receiver)'.
  122 Page 29, line 17, leave out subsection (7).
  123 Clause 41, page 29, line 26, leave out 'at any time' and insert 'on giving not less than seven days' notice'.
  124 Page 29, line 27, after first 'it' insert 'at any reasonable time'.
  125 Clause 43, page 30, line 16, at end insert—
  (aa) in paragraph (c) of subsection (1), after the word "to" there shall be inserted the words "raise or".'.
  126 Page 30, line 17, leave out 'subsection (1)' and insert 'that subsection'.
  127 Page 30, line 43, at end insert—
  '(ee) after paragraph (r) there shall be inserted the following paragraph—
  "(rr) power to change the situation of the company's registered office;";'.

  AMENDMENT TO COMMONS AMENDMENT No. 127
  127A Line 2, after ("paragraph (/)") insert ("of that subsection").

  COMMONS AMENDMENTS
  132 Clause 45, page 31, line 28, after 'invalid' insert '(whether by virtue of the invalidity of the instrument or otherwise)'.
  134 Clause 46, page 31, line 41, leave out from beginning to end of line 6 on page 32.

  AMENDMENT CONSEQUENTIAL ON AMENDMENT No. 134
  134A Page 175, line 11, leave out ("481 (2) or").

  COMMONS AMENDMENTS
  135 Page 32, line 7, leave out 'does' and insert 'and section 482 do'.
  136 Page 32, line 11, leave out 'it applies' and insert 'they apply'.
  137 Page 32, line 12, leave out 'it has' and insert 'they have'.
  138 Page 32, line 13, after 'section' insert 'and section 482'.
  140 Clause 48, page 33, line 41, at end insert 'so far as he is aware of them'.
  141 Page 35, line 3, leave out '481' and insert '482'.
  143 Page 35, line 10, leave out 'whose debt is secured on assets' and insert 'who holds in respect of his debt a security over property'.
  144 Clause 49, page 35, line 20, leave out 'at any time' and insert 'on giving not less than 7 days' notice'.
  145 Page 35, line 21, after first 'it' insert 'at any reasonable time'.
  200 Clause 72, page 54, line 39, leave out 'under (and, in Scotland' and insert 'secured by, or'.
  222 Clause 87, page 70, line 30, leave out subsection (5).
  227 Clause 91, page 72, line 25, leave out 'and managers in England and Wales' and insert 'or managers'.
  228 Page 73, leave out lines 4 to 17 and insert—

  (a) an administrative receiver within the meaning of Chapter III of this Part; or

  (b) '.

  229 Page73,line 19, at end insert 'in a case where the whole (or substantially the whole) of the company's property is attached by the floating charge'.
  231 Page 73, line 22, at end insert—
  ' "floating charge" means a charge which, as created, was a floating charge;'.
  233 Page 73, line 25, at end insert—
  ' "office copy", in relation to Scotland, means a copy certified by the clerk of court;'.
  234 Page 73, line 29, at end insert—
  ' "receiver", in the expression "receiver or manager", does not include a receiver appointed under section 467 of the 1985 Act;'.
  235 Page 73, line 38, at end insert—
  ' "secured creditor", in relation to a company, means a creditor of the company who holds in respect of his debt a security over property of the company, and "unsecured creditor" shall be construed accordingly.
  237 Page 73, line 39, leave out subsection (4).
  377 Clause 191, page 152, line 11, leave out 'that is being wound up' and insert 'which is being wound up or in relation to which an administration order is in force'.
  378 Page 152, line 13, after 'liquidator' insert 'or administrator'.
  403 Clause 211, page 165, line 10, at end insert—
  '() section (Power to dispose of charged property, etc.);'.
  404 Page 165, leave out lines 11 and 12.
  408 Page 165, leave out lines 22 and 23.
  416 Schedule 2, page 167, line 40, after 'to', insert 'raise or'.
  417 Page 168, line 36, at end insert—
  '21A. Power to change the situation of the company's registered office'.
  430 Schedule 4, page 173, line 32, leave out '27' and insert '(Committee of creditors)'.
  434 Page 174, line 21, at end insert—
  '14A. Provision as to the fees, costs, charges and other expenses that may be treated as properly incurred by the administrator or administrative receiver of a company.
  14B. Provision as to the fees, costs, charges and other expenses that may be incurred for any of the purposes of Chapter IA of Part II of this Act or in the administration of any composition or scheme approved under that Chapter.'.
  443 Page 175, line 10, leave out '23(2), 24, 38(2), 39' and insert
  (Statement of affairs to be submitted to administrator), (Statement of affairs to be submitted to administrative receiver)'.
  447 Schedule 5, page 176, line 20, leave out paragraph 9 and
  insert—
  '9. In section 425(1) (power of company to compromise with creditors and members), for the words ", of the liquidator" there shall be substituted the words "or an administration order being in force in relation to a company, of the liquidator or administrator".
  9A. In section 426(6) (liability of officer or liquidator of company for default in connection with the circulation of information as to a compromise), after the word "liquidator" there shall be inserted the words "or administrator".
  9B. In section 478(6) (receiver to be appointed within one month of cessation of appointment of earlier receiver), at the end there shall be inserted the words—
  "and for the purposes of calculating the period of one month under this subsection no account shall be taken of any period during which an administration order under Part II of the Insolvency Act 1985 is in force".'.
  448 Page 176, line 39, at end insert—
  '(1A) In subsection (1), after the words "secured by" there shall be inserted the words "a charge which, as created, was".'.
  449 Page 177, line 13, leave out 'For subsection (1) of and insert '(1)'.
  450 Page 177, line 14, after 'court)' insert 'shall be amended as follows.
  (2) For subsection (1)'.
  453* Page 178, line 10, at end insert—
  ("16A.—(1) Section 476(1) (distribution of monies) shall be amended as follows.
  (2) After the words "categories of persons" there shall be inserted the words "(which rights shall, except to the extent otherwise provided in any instrument, have the following order of priority)".
  (3) In paragraph (d), after the word "remuneration" there shall be inserted the words "and any indemnity to which the receiver is entitled out of the property of the company.".".).
  454 Page 178, line 12, at end insert—
  '(1A) After the entry relating to section 470(3) there shall be inserted the following entry—

  "477(2E) Failing to send to registrar of companies a certified copy of authorisation to dispose of certain property.

  Summary

  One-fifth of the statutory maximum.

  One-fiftieth of the statutory maximum.".'.

  455 Page 178, leave out lines 15 and 16 and insert—
  '(3) For the entry relating to section 482(5) there shall be substituted the following entry—

  "482(6) Failure to comply with obligation to submit statement of affairs to receiver.

  1. On indictment

  A fine.

  2. Summary

  The statutory maximum

  One-tenth of the statutory maximum.".'.

  501 Schedule 7, page 187, line 45, leave out from 'adjudged" ' to end of line 47.
  514 Page 192, line 20, leave out from second 'or" ' to end of line 22.
  If your Lordships require it I shall be pleased to explain any of these amendments in more detail, but I propose really to deal with the five amendments Nos. 64, 70, 85, 127 and 134, which are also minor drafting amendments. Amendment No. 64 was intended to translate into Scottish legal terminology what is meant by the reference in Clauses 15 and 16 to execution being commenced or continued and to distress being levied. The translation however goes further than intended and the proposed amendment to it ensures that it has a similar effect as in England and Wales.
  Amendment No. 70 will enable a company or the directors themselves, as well as the continuing administrator, the committee of creditors or creditors of the company, to apply to the court for an order to fill a vacancy in the office of administrator. The amendments to Commons Amendments Nos. 85, 127 and 134 are all minor drafting amendments. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 47.—(Lord Lucas of Chilworth.)
  Lord Bruce of Donington: My Lords, one thing is clear from the noble Lord's remarks, and that is that he is very numerate. I have not had the opportunity of checking through these consequential and other minor amendments in detail, for reasons that the noble Lord will appreciate. I entirely trust the noble Lord in this matter and would support him.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  48 Page 11, line 8, leave out 'promote either' and insert 'achieve one or more'.
  49 Page 11, line 15, at end insert '; and such an order shall specify the purpose or purposes for whose achievement it is made'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 48 and 49 en bloc. With the leave of the House I shall speak to Nos. 52, 56 to 58, 62, 65, 74, 74A, 79, 79A, B and C.
  52 Page 11, line 22, leave out from beginning to 'a' in line 24 and insert—

  '(a) the survival of the company, and the whole or any part of its undertaking, as a going concern;

  (b) the approval under section (Decisions of meetings) above of a composition in satisfaction of the company's debts or a scheme of arrangement of its affairs;

  1154

  (c) the sanctioning under section 425 of the 198 Act of a compromise or arrangement between the company and any such persons as are mentioned in that section; and

  (d) '.

  56 Page 11. line 34. at end insert 'and to such other persons as may be prescribed; and

  (b) the petition shall not be withdrawn except with the leave of the court."

  57 Page 11. line 35, leave out subsection (3) and insert—
  '(3) Where the court is satisfied that there is an administrative receiver of the company, the could shall dismiss the petition unless it is also satisfied eithcr—

  (a) that the person by whom or on whose behalf the receiver was appointed has consented to the making of the order; or

  (b) that, if an administration order were made,. any security by virtue of which the receiver was appointed would be liable to be released or discharged under section 84 below, would be avoided under section 87 below or would be challengeable under section 615A or 615B of the 1985 Act or under any rule of law in Scotland."

  58 Page 12, line 12, at end insert—
  '(5) Without prejudice to the generality of subsection (4) above, an interim order under that subsection may restrict the exercise of any powers of the directors or of the company (whether by reference to the consent of the court or of a person qualified to act as an insolvency practitioner in relation to the company or otherwise).'
  62 Page 12, line 27, at end insert—
  '(1A) Nothing in subsection (1) above shall require the leave of the court—

  (a) for the presentation of a petition for the winding up of the company;

  (b) for the appointment of an administrative receiver of the company; or

  (c) for the carrying out by such a receiver (whenever appointed) of any of his functions.

  (1B) Where—

  (a) a petition for an administration order is presented at a time when there is an administrative receiver of the company; and

  (b) the person by or on whose behalf the receiver was appointed has not consented to the making of the order.

  the period mentioned in subsection (1) above shall be deemed not to begin unless and until that poison so consents.'
  65 Clause 16, page 12, line 34, leave out from 'order to end of line 36 and insert—

  '(a) any petition for the winding up of the company shall be dismissed; and

  (b) any administrative receiver of the company shall vacate office.

  (1A) Where an administration order has been made, any receiver of part of the company's property shall vacate office on being required to do so by the administrator.'
  74 After Clause 18, insert the following new clause:
  'Applications for discharge or variation of administration order.
  —(1) The administrator of a company may at any time apply to the court for the administration order to be discharged or to be varied so as to specify an additional purpose.
  (2) The administrator of a company shall make an application under this section if—

  (a) it appears to him that the purpose or each of the purposes specified in the order either has been achieved or is incapable of achievement;

  (b) he is required to do so by a meeting of the company's creditors summoned for the purpose in accordance with the rules.

  1155
  (3) On the hearing of an application under this section, the court may by order discharge or vary the administration order and make such consequential provision as it thinks fit, or adjourn the hearing conditionally or unconditionally, or make an interim order or any other order it thinks fit.
  (4) Where the administration order is discharged or varied, the administrator shall, within fourteen days after the making of the order effecting the discharge or variation, send an office copy of that order to the registrar of companies.
  (5) If the administrator without reasonable excuse fails to comply with subsection (4) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.'
  74A Line 9, at end insert ("or")
  79 Before clause 23, insert the following new clause:
  'Information to be given by administrator
  .—(1) Where an administration order is made, the administrator shall—

  (a) forthwith send to the company and publish in the prescribed manner a notice of the order, and

  (b) within twenty-eight days after the making of the order, unless the court otherwise directs, send such a notice to all creditors of the company (so far as he is aware of their addresses).

  (2) Where an administration order is made, the administrator shall also, within fourteen days after the making of the order, send an office copy of the order to the registrar of companies.
  (3) If the administrator without reasonable excuse fails to comply with this section, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.'
  79A Line 2, leave out ("is") and insert ("has been")
  79B Line 10, leave out ("is") and insert ("has been")
  79C Line 13, at end insert ("and to such other persons as may be prescribed")
  These amendments follow further consideration of the comments made by your Lordships and consultation with practitioners and other interested parties since the Bill left this House, and a number of quite major changes have been made to the provisions dealing with the administrator procedure. The main aim has been to simplify the procedure and to reduce the need for frequent recourse to the court.
  The first three of the amendments in this group are intended to make the court's task of assessing the desirability of making administration orders simpler as well as putting those with the power to block the making of the order in a better position to assess the aims of the administration. This is achieved by empowering the court to make an order specifying the purpose or purposes for which the administrator is to be appointed. The administrator then has a duty to manage the company with a view to achieving these purposes. Amendment No. 52 sets out the options available to the administrator. He may try to rehabilitate the company and may do this by putting together a scheme of arrangement under Section 425 of the Companies Act 1985 or an arrangement under the new composition procedures which I explained to your Lordships earlier. Alternatively he may attempt a more advantageous realisation of the company's assets than would be effected on a winding up and, if
  1156
  the court permits, may also achieve this by using Section 425 or the new composition procedure.
  Amendment No. 57 amends the provisions which deal with those who may prevent the making of an administration order. The holder of a floating charge may block the making of an administration order by appointing an administrative receiver. If he does so, or if an administrative receiver is already in office when a petition for an administrator is presented, the court is required to dismiss the petition unless the person who appointed the administrative receiver had consented to the making of the administration order. However, the court may make an administration order without that consent if the security, under which an administrative receiver was appointed, was liable to be set aside under Clause 84 or Clause 87, or the equivalent Scottish provisions.
  6.30 p.m.
  In the case of a petition presented against a company where an administrative receiver has already been appointed, Amendment No. 62 prevents the moratorium from beginning until the consent of the chargeholder, who appointed the administrative receiver, has been obtained. This will ensure that there is no unnecessary interference with the affairs of the company in receivership where a petitioner fails to consult the appointing chargeholder before presenting the petition. The amendment also makes it clear that an administrative receiver may be appointed in the period between presentation and hearing of the petition and will enable him to exercise the powers conferred by the floating charge. It also makes it clear that it will be possible to present a petition for winding-up in the period prior to the making of an order.
  The remaining amendments are mainly procedural. Amendment No. 56 is aimed at preventing the presentation of frivolous or mischievous petitions and will enable the rules to stipulate that the company shall be informed of the presentation of a petition. Amendment No. 65 requires the administrative receiver to vacate office on the making of an order and enables the administrator to dismiss a receiver if he considers it necessary for the conduct of the administration, although he may allow the administrator to remain in office to realise his appointor's assets where the asset is not essential to the purpose of the administration.
  Since the administrator will be required to pursue the purposes stated in the order and will not be able to change purposes in mid-stream, as was originally envisaged, he will be required to seek a variation of the original order so that an additional purpose may be specified. Amendment No. 74 sets out these provisions as well as procedural provisions dealing with notification of discharge orders to the Registrar of Companies. Finally, there are the amendments in my name to Commons Amendments Nos. 74 and 79. These are technical amendments aimed at fine tuning of the provisions of the Bill relative to these matters. I beg to move.
  Moved, That this House do agree with the Commons in their Amendments Nos. 48 and 49.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  50 Page 11. line 18, leave out 'or'.
  51 Page 11. line 20, at end insert 'or'
  (c) where the company is a recognised bank or licensed institution within the meaning of the Banking Act 1970 or an institution to which sections 16 and 18 of that Act apply as if it were a licensed institution'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 50 and 51, and I wish to speak also to Amendments Nos. 398 and 518:
  398 After Clause 203, insert the following new clause:
  ('Recognised banks etc.
  .—(1) The Secretary of State may, by order made with the concurrence of the Treasury and after consultation with the Bank of England, provide that such provisions of Part II of this Act and Parts XVIII to XXI of the 1985 Act as may be specified in the order shall apply in relation to—

  (a) recognised banks and licensed institutions within the meaning of the Banking Act 1970; and

  (b) Institutions to which sections 16 and 18 of that Act apply as if they were licensed institutions,

  with such modifications as may be so specified.
  (2) An order under this section may make different provision for different cases and may contain such incidental, supplemental and transitional provisions as may appear to the Secretary of State necessary or expedient.
  (3) An order under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.")
  518 Schedule 7, page 193, leave out lines 28 to 30.
  Amendment No. 398 empowers the Secretary of State, with the concurrence of the Treasury and after consultation with the Bank of England, to introduce by order a modified version of the administrator procedure to apply to recognised banks, licensed and other institutions covered by the Banking Act 1979. Pending the making of that order Amendments Nos. 50, 51 and 518 disapply the provisions of Part II Chapter 2 from recognised banks and licensed institutions. The decision in principle that the new procedure shall be available in respect of such institutions was taken at the beginning of last year. Unfortunately, however, the evolution of the new procedure following consultation with practitioners on its detailed provisions has meant that it has not been possible to devise appropriate modifications to make it suitable for application to Banking Act institutions in time for their inclusion in the Bill.
  Clearly such modification is necessary in recognition of the Bank of England's statutory status in relation to the supervision of recognised banks and licensed institutions. The provisions of the winding-up code already recognise this statutory status. It is intended therefore that an order will be made under the new clause which will modify Part II Chapter 2 in a way which recognises the Bank of England's supervisory responsibilities. The provisions of the winding-up code will be the principal guide in devising the modified procedure, although I have to say that the detailed consultations with all the relevant departments has yet to take place. It is intended that the draft order will be ready by the time Part II Chapter 2 is brought into force. I beg to move.
  Moved, That this House do agree with the Commons in their Amendments Nos. 5 ! and 52.—(Lord Lucas of Chilworth.)
  Lord Bruce of Donington: My Lords, the noble Lord mentioned that at a later stage some orders would be brought out setting out the matters that had been arrived at and agreed in the process of consultation. I wonder whether the noble Lord can give the House more advanced information than that and if a general statement could be made as to the agreements arrived at as a result of the consultation prior to the order itself being issued. It would be for the greater advance of the business community as a whole if they were aware of the agreements included by his department and the various other bodies with whom he has been consulting.
  Lord Lucas of Chilworth: My Lords, if I understand the noble Lord, Lord Bruce of Donington, aright, he is seeking assurance that the outcome of consultations will be made widely available—of course, to your Lordships' House as well as to other interested parties—before an order is made. I should be glad to give him that undertaking.
  Lord Bruce of Donington: My Lords, I am obliged.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  52 to 58 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 52 to 58, to which I have already spoken.
  Moved, That this House do agree with the Commons in their Amendments Nos. 5? to 58.—[Lord Lucas of Chilworth.]
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  59 Clause 15, page 12, line 18, leave out 'charge on or'.
  The Lord Advocate (Lord Cameron of Lochbroom): My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 59. At the same time, for the convenience of the House, I shall speak also to Amendments Nos. 236, 236A, 375, 376 and 381:

  COMMONS AMENDMENT
  236 Clause 91, page 73, line 38, at end insert—
  ' "security" means—

  (a) in relation to England and Wales, any mortgage, charge, lien or other security;

  (b) in relation to Scotland, any security (whether heritable or movable), any floating charge and any right of lien, retention or preference;'.

  AMENDMENT TO COMMONS AMENDMENT No. 236
  236A Line 7, leave out (", retention or preference") and insert ("or preference and any right of retention (other than a right of compensation or set off)").
  375 Clause 190, page 151, line 11, leave out subsection (5) and insert—
  '(5) Subject to subsections (6) and (7) below and any provision of the rules requiring a creditor to give up his security for the purposes of proving a debt, a debt is secured for the purposes of this Part to the extent that the

  1159
  person to whom the debt is owed holds any security for the debt (whether a mortgage, charge, lien or other security) over any property of the person by whom the debt is owed.'.
  376 Page 151, line 28, leave out 'lien' and insert 'security'.
  381 Clause 191, page 153, line 38, at end insert—
  ' "security" means any mortgage, charge, lien or other security.'
  These amendments were made in response to comments received from the legal profession. They harmonise the definition of the term "security" throughout the Bill. The amendment in the name of my noble friend to Amendment No. 236 makes certain technical adjustments to the definition of "security" for the purposes of Scotland. It excludes from the Scottish definition of "security" any right of set-off or compensation which would otherwise have been included in the reference to a right of retention. This brings the position in Scotland into line with that in England and Wales. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 59.—(Lord Cameron of Lochbroom.)
  Lord Bruce of Donington: My Lords, may I say how pleasant it is to have the noble and learned Lord appearing in these proceedings and to say that we accept the explanations that he has given.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  60 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 60.
  Moved, That this House do agree with the Commons in their Amendment No. 60.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  61 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move formally that this House do agree with the Commons in their Amendment No. 61.
  Moved, That this House do agree with the Commons in their Amendment No. 61.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT No. 61
  61A At end insert ("or peaceable re-entry made").
  Lord Bruce of Donington: My Lords, I beg to move Amendment No. 61 A. I should like to speak also to Amendments Nos. 67A, 67B and 100A.

  AMENDMENT TO COMMONS AMENDMENT No. 67
  67A Clause 16, at end insert ("or peaceable re-entry made").

  AMENDMENT CONSEQUENTIAL ON COMMONS AMENDMENTS Nos. 61 and 67
  67B Insert the following new clause—
  (". No proceedings to forfeit leases or agreements for leases on grounds of the appointment of an administrator may be commenced or continued, and no peaceable reentry made, while the administrative receiver remains in
  1160
  office, except with the leave of the court and subject to such terms as the court may impose").

  AMENDMENT CONSEQUENTIAL ON COMMONS AMENDMENT No. 100
  100A After Clause 34, insert the following new clause—
  (". No proceedings to forfeit leases or agreements for leases on grounds of the appointment of an administrative receiver or any other receiver may be commenced or continued, and no peaceable re-entry made, while the administrative receiver remains in office, except with the leave of the court and subject to such terms as the court may impose").
  The reason for the insertion of these amendments is to deal with circumstances where either an administrator, an administrative receiver, a receiver or a liquidator takes possession of a business or finds himself in control of a business which occupies leased premises. It is to ensure that the very fact of his appointment as an administrator, an administrative receiver or receiver is not grounds for the landlord to forfeit the lease. In other words, it is designed to ensure that the administrator in charge of a business on leased premises is entitled to the quiet possession of them in accordance with the normal terms of the lease, notwithstanding any provision to the contrary in the lease.
  Those noble Lords who are in possession of long leases of ordinary, residential properties will be aware that the freeholders often seek to insert in the lease a clause by virtue of which it becomes forfeit in the event of the lessee becoming bankrupt, or anything like that. That means of course that for the purposes of obtaining a building society loan it becomes immediately invalid in the sense that no building society will give any advance on a long lease if that clause remains valid, since it would destroy their security in the event of the lessee becoming bankrupt.
  That is the principle behind this. As I say, it is to ensure that where an administrator takes over a business, supervises a business, or an administrative receiver or receiver takes over a business or its conduct, and the business is in leased premises, notwithstanding any provision in the lease he is entitled to the possession of it and that no peaceable entry can be made by virtue of the terms of the lease itself.
  As I indicated to your Lordships, I have had unofficial conversations on this matter with the Department of Trade and Industry. We have sought the expedition of this Bill by co-operating together. I am given to understand that the Department of Trade and Industry think that this provision is unnecessary in that no court would permit this to happen. In my last unofficial conversations, which by agreement in this instance I am entitled to reveal, the way I left it was this. I said that if they could produce a cited case, a case precedent, for this then I should be happy to withdraw the amendment.
  If the noble Lord can produce to mean authoritative cited case that safeguards the rights of an administrator, an administrative receiver and receiver against the head landlord in the event of such a clause being put in the lease, then I should be quite happy to withdraw the amendment. I am quite sure that the noble Lord, being himself a lawyer of some distinction, will realise that a cited case is required in order for a matter to be watertight. One does not always like to refer to judges' rules. I beg to move.
  Moved, That this House do agree with Amendment No. 61A as an amendment to Commons Amendment No. 61.—(Lord Bruce of Donington.)
  6.45 p.m.
  Lord Meston: My Lords, as I understand this amendment, it proposes a very serious alteration in the existing law of landlord and tenant and a very serious inroad into the freedom of contract between landlord and tenant which has stood for many years. As I anticipate the Government's answer, notwithstanding the presence or absence of any decided case law, the fact of the matter is that the court has power to grant relief from forfeiture.
  Lord Cameron of Lochbroom: My Lords, the noble Lord, Lord Meston, has anticipated the Government's response and indeed has put things much more clearly than ever I could, in a matter which in some sense is foreign to me. I shall adopt what he has said.
  In my response I take all four amendments together because they are all directed to the same point, although the individual concerned is in each case different. If the right to re-enter is being considered here, of course, as the noble Lord, Lord Meston, has pointed out, that is a substantive right of a landlord, not merely a procedural remedy. The object of this part of the Bill is to impose a moratorium, to suspend creditors' remedies while not affecting their substantive rights. I do not think it justifiable to make an exception to that rule in the case of landlords.
  I am also not convinced that landlords will be able to achieve or will even attempt peaceable re-entry in most cases. Obviously if the administrator or the receiver, or the like, agrees to it, then no difficulties arise. I understand that in the case of receiverships, which of course is the point that is under discussion in relation to Amendment No. 100A, although leases may provide that the lease can be terminated on the appointment of a receiver, the receiver usually negotiates with the landlord either to remain in occupation or to dispose of the unexpired term of the lease for the benefit of the debenture holder. Of course in the case of the administrator, any such disposal will be for the benefit of the company. I believe that landlords will react in a similar manner to the appointment of an administrator.
  I suggest that Amendment No. 67B is unnecessary to the extent that it relates to proceedings for forfeiture being commenced or continued. Such proceedings are already subject to the moratorium by virtue of Clauses 15(1)(c) and 16(2)(c). I should also point out that there is a technical defect in Amendment No. 67B, in that it provides for no proceedings to be taken on the grounds of an administrator being appointed while an administrative receiver is in office.
  In regard to Amendment No. 100A, I understand it is quite common for leases to contain provision for forfeiture on the appointment of a receiver. If the amendment were accepted it would mean that one creditor, the debenture holder who appointed the receiver, would then benefit at the expense of another—the landlord. In other words, we would interfere, as the noble Lord, Lord Meston, said, with
  1162
  the contractual rights, to favour one class of creditor over another. I can see no reason why this preference should be given.
  Accordingly, particularly since here again in practice the receiver usually negotiates with the landlord either to remain in occupation or to dispose of the unexpired term of the lease for the benefit of the debenture holder, I do not see any advantage in this amendment. For these reasons, I would not advise your Lordships to accept these amendments.
  Lord Bruce of Donington: My Lords, I am very grateful to the noble and learned Lord and also to the noble Lord, Lord Meston, for having cleared this matter up to some extent. I am still not quite clear about the position of the administrator. The whole point in the appointment of an administrator as such is surely in circumstances in which it is possible for the business to be pulled round and set on its feet again and for the business to proceed. If there were in the lease of the property occupied by the company concerned a clause that automatically forfeited the lease on the appointment of an administrator this would completely frustrate that. I appreciate what the noble Lord, Lord Meston, has said about the sacredness of a particular contract. What I am anxious to obtain from the noble Lord is what remedy there is for an administrator in those circumstances where he had been appointed on the basis of being able and believing himself able to pull a company round who suddenly finds himself in possession of a property, the lease of which contains a provision that on his appointment it is to be forfeited.
  What kind of remedy would he have? What kind of relief is open to him? Or, alternatively, are the Government saying that in such cases there is no use appointing an administrator because the premises would be whisked from under him from the moment that he started? These are the practical implications of this. If I may say so, I speak very humbly on this. As is well known, I am not a lawyer and I make no claim to the legal wisdom which the noble and learned Lord has and which he shares with the noble Lord, Lord Meston. For the moment, I am merely concerned with the practical implications of it. If the noble and learned Lord can explain or if the noble Lord, Lord Meston, can explain or if anybody else in the legal profession can explain, I shall be greatly relieved and much obliged.
  Lord Cameron of Lochbroom: My Lords, I had hoped that I had made it clear. Obviously, it is entirely my fault that I failed to do so. What is proposed in the Bill is not intended to affect the substantive rights which lie in particular parties in this regard. I would simply respond to the noble Lord's questions by repeating what I said at the beginning; that is to say, the the object of the moratorium is to suspend creditors' remedies while not affecting their substantive rights. Obviously, in the case where, as otherwise, there is provision in the contract itself for certain things happening, those provisions will rule, as I have already indicated. I do not think I can assist the noble Lord any further.
  Lord Meston: My Lords, I venture with some hesitation simply to add this. The noble Lord, Lord

  1163
  Bruce, asked what remedies there are. The remedies are that the tenant, or the administrative receiver standing in his shoes can go to court and ask for relief against forfeiture.
  Lord Bruce of Donington: My Lords, I am greatly obliged to the noble Lord, Lord Meston, and ask leave to withdraw the amendments and all the consequential amendments.
  Amendment to the Motion, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  62, 63, 64, 64A and 65 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move formally that this House do agree with the Commons in their Amendments Nos. 62, 63 and 64, as amended by my noble friend's Amendment No. 64A, and 65 en bloc.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  66 Page 13, line 6, after 'appointed' insert—
  (bb) no other steps may be taken to enforce any security over the company's property, or to repossess goods in the company's possession under any hire-purchase agreement, except with the consent of the administrator or the leave of the court and subject (where the court gives leave) to such terms as the court may impose;'.
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 66. At the same time I would speak to Amendments Nos. 66A, 72, 72A, 72B, 72C, 72D, 72E, and 72F.

  AMENDMENTS TO COMMONS AMENDMENT No. 66
  66A Line 3, after ("property") insert ("or to recover debts assigned by the company to a third party unless notice of such assignment was given to the debtor prior to the presentation of a petition under section 28").

  COMMONS AMENDMENT
  72 After Clause 18, insert the following new clause:
  'Power to deal with charged property etc.
  .—(1) The administrator of a company may dispose of or otherwise exercise his powers in relation to any property of the company which is subject to a security to which this subsection applies as if the property were not subject to the security.
  (2) Where, on an application by the administrator of a company, the court is satisfied that the disposal (with or without other assets) of—

  (a) any property of the company subject to a security to which this subsection applies; or

  (b) any goods in the possession of the company under a hire-purchase agreement,

  would be likely to promote the purpose or one or more of the purposes specified in the administration order, the court may by order authorise the administrator to dispose of the property as if it were not subject to the security or to dispose of the goods as if all rights of the owner under the hire-purchase agreement were vested in the company.
  (3) Subsection (1) above applies to—

  (a) any security held by a person (whether by virtue of the security or otherwise) appointed or, but for section 16(2)(6) above, would be entitled to appoint an administrative receiver of the company;

  (b) any security to which a security falling within paragraph (a) above has priority; and

  (c) any security which, as created, was a security over existing or future book debts;

  1164
  and subsection (2) above applies to any security not falling within paragraph (a), (b) or (c) above.
  (4) Where any property is disposed of under subsection (1) above, the security shall have effect in relation to any property of the company which represents the property disposed of as if—

  (a) the security had been created by the company as a floating charge over the property; and

  (b) any condition precedent to the exercise of the right to appoint a receiver of the property by virtue of the security were satisfied.

  (5) It shall be a condition of an order under subsection (2) above that—

  (a) the net proceeds of the disposal; and

  (b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would be realised on a sale of the property or goods in the open market by a willing vendor, such sums as may be required to make good the deficiency,

  shall be applied towards discharging the sums secured by the security or payable under the hire-purchase agreement.
  (6) Where a condition imposed in pursuance of subsection (5) above relates to two or more securities, that condition shall require the net proceeds of the disposal and, where paragraph (b) of that subsection applies, the sums mentioned in that paragraph to be applied towards discharging the sums secured by those securities in the order of their priorities.
  (7) An office copy of an order under subsection (2) above shall, within fourteen days after the making of the order, be sent by the administrator to the registrar of companies.
  (8) If the administrator without reasonable excuse fails to comply with subsection (7) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.
  (9) Where any property is disposed of under this section in its application to Scotland, the administrator shall grant to the disponee an appropriate document of transfer or conveyance of the property, and—

  (a) that document; or

  (b) where any recording, intimation or registration of that document is a legal requirement for completion of title to the property, that recording, intimation or registration,

  has the effect of disencumbering the property of or, as the case may be, freeing the property from the security.
  (10) Nothing in this section shall be taken as prejudicing applications to the court under section 30 below.
  (11) References in this section to hire-purchase agreements include references to conditional sale agreements, chattel leasing agreements and retention of title agreements.'.

  AMENDMENTS TO COMMONS AMENDMENT No. 72
  72A Line 20. leave out from ("security") to end of line 29 and insert ("which, as created, was a floating charge and subsection (2) above applies to any other security").
  72B In subsection 3(c) after ("book") insert ("or other").
  72C Leave out lines 30 to 38 and insert—
  ("(4) Where any property is disposed of under subsection (1) above, the holder of the security shall have the same priority in respect of any property of the company directly or indirectly representing the property disposed of as he would have had in respect of the property subject to the security.")

  AMENDMENT TO AMENDMENT No. 72C
  72D Leave out ("directly or indirectly").

  AMENDMENTS TO COMMONS AMENDMENT No. 72
  72E Leave out paragraph (b) of subsection (4) and insert—
  ("(b) the funds resulting from book or other debts become the property of the company subject to such a floating charge").
  72F Line 74, at end insert—
  ("(9A) Where any goods in the possession of the company under a hire-purchase agreement are disposed of under this section in its application to Scotland, the disposal shall have the effect of extinguishing, as against the disponee, all rights of the owner of the goods under the hire-purchase agreement.")
  The purpose of these amendments is to enable the administrator as well as the court to permit the enforcement of security or re-possession of goods if he does not require the assets for trading on. It also repairs defects in the clause dealing with the power of the administrator to deal with charged property. The principal difficulty with Clause 20, as introduced, is that although it was intended that the administrator would be entitled to deal with and dispose of the property of the company which was subject to a floating charge, a floating charge which entitled the holder to appoint an administrative receiver, or to a fixed charge held by that debenture holder, the clause did not enable him to do so.
  Our intention was to reproduce what we understood was the practice in receiverships and so to entitle administrators to make use of the assets, subject to those charges, to finance his continued trading. The fact of the crystalisation of the floating charge would have led to every item of the company's property subject to that charge becoming subject to a charge of a fixed nature which could have defeated the administrator's efforts to deal with that property.
  The remedy proposed is contained in subsection (1) of the new clause introduced by Amendment No. 72 which, taken with subsection (3), provides that the administrator is entitled to exercise his powers in relation to property covered by debenture creating a floating charge which entitles the holder to appoint an administrative receiver, together with any fixed charges held by that debenture holder. This ability to exercise these powers would not be affected by the existence of charges postponed to the floating and fixed-charge debentures; and the administrator would also be entitled to dispose of book debts owed to the company but subject to a fixed charge.
  However, we have received strong representations from financial institutions and practitioners and the Government are persuaded that it would be unjust for fixed charges held by a floating-charge holder and those over booked debts to be dealt with differently from those held by other fixed-charge holders. Amendment 72A therefore removes from subsection (1) property subject to fixed charges held by a floating-charge holder and fixed charges over book debts.
  The administrator must therefore apply to the court for authorisation to dispose of property subject to such charges in accordance with these provisions of the new clause which I shall shortly describe. He will remain entitled to dispose of assets subject to floating charges. We now understand those to be the category of property that a debenture holder sometimes allows receivers to use as a source of working capital. The effect of Amendment No. 72A, if approved by your Lordships, will remove the provision which Amendment 72B (proposed by the noble Lord, Lord Bruce) and Amendment 72BA (proposed by the noble
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  Lords, Lord Morton of Shuna and Lord Carmichael of Kelvingrove) seek to amend.
  Similarly, Amendment 72E tabled by Lord Bruce of Donington will no longer be necessary. All book debts subject to fixed charges will only be capable of disposal by the administrator with the consent of the court. In other words, they will be treated in the same manner as any other property subject to a fixed charge. 1 trust this will meet the concerns which lie behind the amendments tabled by the noble Lords.
  Turning to Amendment 72C, our intention was that the charges over the property which was at the administrator's disposal should not be destroyed or removed but preserved. This effect was sought by Amendment 72(4) but further consideration of how that amendment would operate, particularly in relation to property subject to Scottish charges, led to the view that it was not a practical solution. That is the reason for my noble friend's Amendment No. 72C to Commons Amendment No. 72. The new subsection (4) has the effect of transferring the security holder's priority to any property representing the charge property to be disposed of.
  It may assist your Lordships if I give an example of how the new provision will operate and, in particular, explain to the noble Lord, Lord Bruce of Donington, the necessity of the words "directly or indirectly" which Amendment 72D (tabled by him) would seek to remove. Thus, for example, if the administrator sells charged plant and machinery, the charge holder's security would attach to moneys obtained from the sale and then to any assets that these moneys might be converted into. Your Lordships will appreciate that successful trading by the administrator will usually bring new assets within the floating charge by the normal operation of business and thus increase the value of the floating charge. In the light of this, I trust the noble Lord will not press his amendment.
  7 p.m.
  I make no apology for emphasising the Amendment No. 72S and the clause as it stands so amended effects a substantial change in the manner in which an administrator will conduct the business of the company. We have accepted the strong presentations of the financial institutions and the insolvency practitioners that in its unamended state the clause put the interests of the secured financial creditors at very great risk by enabling the administrator to use their secured assets for trading funds. They saw themselves being compelled to make forced loans to someone over whom they had no control. In such circumstances, where possible, they would always appoint an administrative receiver to obtain control of the secured assets even though this might destroy the company's chances of rehabilitation. The widespread adoption by banks of this attitude would, as has been said, make the administration procedure unworkable and we have sought to meet the fears expressed by the amendment.
  We accept that in practice the administrator will in most cases need to obtain finance for trading from a company's bankers, but we anticipate that the institutions, having supported or consented to the appointment of the administrator, will play an important role in the achievement of the purposes of

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  the administration and provide on sensible terms the finance required. We trust that the changes in the procedure will increase its acceptability on the present structure of financing business in this country and provide a useful additional means of rehabilitating enterprises which would otherwise be destroyed.
  I turn now to the remaining subsections of the new clause which restate and expand what was already contained in Clause 20 of the Bill. Assets of the company or in the possession of the company with which the administrator is not empowered to deal will comprise property covered by fixed charges, including those over book debts and goods subject to hire purchase and other agreements listed in subsection(9) of the new clause. The moratorium, however, bites on such property and goods and so they may not be taken away from the administrator unless, under Amendment No. 66, he consents to enforcement of the security or repossession of the goods.
  In most cases it will be for the parties to negotiate sensible terms between themselves for the continued use or disposal of the property. In the event of failure to agree terms, the adminstrator is entitled to seek an order of the court for the sale of the goods so long as a net amount equivalent to the open market value is paid to the other party towards discharge of the debts owed to them.
  Subsections (6) to (11) and the new subsection (9A) proposed by my noble friend's amendment extend the procedural provisions of the existing Clause 20 to require notification of orders to the Companies Registrar and impose a penalty for failure to do so. They also enable the adminstrator to give good title to property disposed of and make clear that the power given to the court by the clause does not prejudice applications to the court under Clause 30.
  The new subsection (9A) makes it clear that, in Scotland, where any hire purchase goods are disposed of by the administrator, the disposal has the effect of extinguishing any of the rights of the hire purchase owner in the goods. The hire purchase owner would, of course, still have rights to the net value of the goods in terms of subsection (5) of the new clause inserted by Amendment No. 72. My Lords, I beg to move.
  Moved, that this House do agree with the Commons in their Amendment No. 66.—(Lord Cameron of Lochbroom.)
  Lord Bruce of Donington Lord Bruce of Donington moved, as an amendment to Amendment No. 66, Amendment No. 66A:
  [Printed above.]
  The noble Lord said: My Lords, this amendment extends the provisions of the existing amendment by the addition of the words,
  "or to recover debts assigned by the company to a third party unless notice of such assignment was given to the debtor prior to the presentation of a petition under section 28".
  This is designed to deal with the situation arising on factoring and I hope it is self-explanatory. I beg to move.
  Lord Cameron of Lochbroom: My Lords, I regret I cannot accept this amendment but would simply advise your Lordships on the matter. The sale or factoring of debts by companies is of course a well-known and long-established feature of financial life. Factoring agreements may or may not provide for notice of the assignment of the debts to be given to the debtors. They may also provide for the company to continue to collect the debts on behalf of the purchasers.
  The effect of the amendment proposed would be that where notice of the assignment of a debt was not given to the debtor before the administrator petitioned and the debtor therefore paid the company in satisfaction of the debt, the assignee or factor of the debt would not be able to recover from the company monies properly due to him. Where the company has sold a debt outright we can see no justification for allowing the company to retain the benefit of property which in fact no longer belongs to it.
  If the assignment of a debt does not constitute an outright sale but is instead a form of security—and that of course would depend on the terms of the agreement—then the party secured would not be able to enforce his security because of the terms of Amendment No. 66. In such a case he will not be able to recover debts paid to the company while the moratorium is in force. Perhaps in the light of what I have said the noble Lord, Lord Bruce, will feel able to withdraw his amendment.
  Lord Bruce of Donington: My Lords, I am greatly obliged to the noble and learned Lord for his explanation. The amendment was put down precisely to seek that explanation. I am happy to accept it and to ask the leave of the House to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  67 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg formally to move that the House do agree with the Commons in their Amendment No. 67.
  Moved, That this House do agree with the Commons in their Amendment No. 67.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.
  [Amendments Nos. 67A and 67B not moved.]
  Lord Brabazon of Tara: My Lords, it seems that we have reached a convenient moment to interrupt the proceedings and I suggest that we do not return to our consideration of Commons amendments before ten minutes past eight o'clock.
  Accordingly, I beg to move that further consideration of the Commons amendments be adjourned.
  Moved accordingly, and on Question, Motion agreed to.

Statement of Changes in Immigration Rules
7.8 p.m.
Lord Avebury Lord Avebury rose to move, That the Statement of Changes in Immigration Rules, laid before the House on 15th July, be disapproved.
The noble Lord said: My Lords, it is never entirely popular to say, "I told you so", but there are occasions on which it is necessary to do that if the errors which one criticised originally are to be prevented from recurring. My noble friend Lord Harris of Greenwich pointed out on 14th June, when the decision of the European Court which gave rise to the present rules was debated in your Lordships' House, that the United Kingdom had been judged to have breached the convention on no less than 12 occasions.
In the case of the immigration rules introduced in February 1980, following the White Paper of the previous November, I had ventured to suggest in your Lordships' House on 11th December 1979 that cases would be brought against the Government and that the complainants were going to be upheld. Admittedly I believed that the rules were discriminatory on grounds of both sex and race, while in the event the court found the Government guilty only on the former. However, I think I ought to point out that it was a narrow thing, with some members of the commission finding against us on both counts. In deciding what to do now the Government ought surely to listen more carefully to advice instead of saying, as they contented themselves with saying six years ago, that if charges were brought they had a good answer to them, when, as it turned out, they had no answer whatsoever.
The number of people entering Britain for settlement has in fact dwindled over the past five years—this was pointed out by the Minister in the debate in another place—because primary settlement has ceased and the dependants of the primary settlers are in a queue of finite and steadily decreasing length. Lest the Minister should trot out the usual Tory allegation that we on these Benches are in favour of unrestricted immigration, let me make it quite clear that we are not in favour of admitting anybody for work as such. What we do believe in, however, is the unity of the family, and we say that a person who has been allowed to settle here should also be entitled to bring in his or her spouse and children, as citizens of the EC already can do.
The Government, on the other hand, have created what has been described as an equality of misery in these rules by decreasing the rights of men to bring in their wives and creating additional barriers to the admission of spouses of both sexes. They have broken solemn undertakings given by Ministers; they have violated the principle of family unity; they have imposed a means test on family life; and they have continued to breach the convention.
The new rules provide that women settled here may be joined by a husband or fiance from abroad if certain
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tough conditions are satisfied. But the husbands and fiances of British women citizens will also have to satisfy these more stringent tests. Women coming to Britain for marriage will need to have entry certificates, which was never the case in the past. They will have to undergo the same tests as men have formerly, and in addition they are going to have to prove that they will be supported and accommodated for the rest of their lives without recourse to public funds. Even the wives of British citizens will have to go through the ordeal of satisfying an entry certificate officer that they can support themselves for life and that they are not getting married just to gain entry to Britain. Common law wives, who were formerly allowed to come here to join their common law spouses, are now to be excluded altogether.
The new public funds requirements—they have been dealt with in detail in another place and so perhaps we need not go into them here—are reinforced by a provision that a relative or friend may be asked to give an undertaking in writing to be responsible for the maintenance and accommodation of the person seeking entry, and the Department of Health and Social Security will be empowered to recover from the relative or friend any supplementary benefit paid to the entrant.
I must point out that the definition of public funds extends far wider than supplementary benefit. It includes housing benefit, family income supplement and housing under the Housing (Homeless Persons) Act. Thus it will not be enough for the couple to show that one of them has a job in one of the many areas of the National Health Service, or catering, where the wages are so low that a small family would be eligible for benefit. The couple will have to have at least one of its members in a professional job, and an employer could hardly be expected to offer such a job to an applicant from overseas without interview. 1 should also point out that in many public corporations employers will not take on workers who are here on a conditional basis. So because everybody has to be under the 12-months' probation rule the spouses will be excluded from many of the occupations for which they might be qualified, such as the Post Office or London Transport.
In the 1983 rules the burden of proof was laid on the applicant to show that the couple had met, that they intended to live together, and that the primary purpose of the marriage was not to obtain entry to this country. In our materialistic society it may be hard for anybody to believe that someone from a poor third world country is not motivated largely by economic considerations when he seeks to come to live here with a British woman, and the requirement that the couple must have met betrays another of our western prejudices against arranged marriages.
The primary purpose rule accounted for almost 90 per cent, of refusals in the last full year for which statistics are available, and the objective of much of the questioning by entry certificate officers was to establish that an applicant knew what the wage rates were in Britain, and hence that he must have been influenced by the fact that he could earn 25 times as much in Britain as in India or Bangladesh. From now

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on, he is going to be caught on "Brittan's Fork": if he has no job to come to, or only a badly-paid one, he fails the support test, while if he has a well-paid job to come to he fails on the primary purpose rule. Nobody except the rich, who will be mainly white, are likely to gain admission as spouses in future. There is in these rules a means test in reverse on family life.
As to the undertakings that may be required of third parties, we need to know much more about how this provision is to operate. Would undertakings be demanded of the parents-in-law of the spouse who is entering, and what sanctions are to be applied when the victims refuse to sign? If an applicant meets all the requirements of the rules, but the entry certificate officer is not satisfied that he can support himself and his family, could leave to enter be made conditional on some other person entering into sureties? If a man asked to come here to join his wife in this country, could the application be granted only on the condition that his wife's parents would sign an undertaking such as is provided for in these rules?
How would the Government recover from the guarantors benefits other than supplementary benefit, because that is the only one specifically mentioned in the rules? Is it simply a moral undertaking into which someone enters, or are there any legal means by which those undertakings can be enforced? If a person is given indefinite leave to remain, do the undertakings remain in force for ever? Is someone who signs that guarantee liable to have his goods distrained or action taken against him through the courts if, 20 years later, one of the couple falls on hard times and has to claim supplementary benefit? To carry it even further, could these guarantees be enforced against executors when the person who signs the undertaking dies and later on one of the couple claims supplementary benefit?
Is it really the purpose of the Government to make it dangerous for anyone entering as a spouse ever to claim benefits of any kind either for himself or herself or for his or her children? Is it seriously the purpose of the Government to say that if a person comes here and has satisifed the authorities that he is capable of supporting himself and his family, but during the first 12 months of his stay in the United Kingdom he becomes redundant or is evicted from his house and therefore needs to claim unemployment benefit or to depend on the services of the local authority for rehousing, he automatically forefeits his entitlement to remain in the United Kingdom?
The treatment of children under the new rules was commented upon adversely in another place. Any child accompanying the spouse who enters Britain is given one year's leave, the same as the parent. The Minister said that if the marriage breaks down it is sensible that the incoming parent and child should return together. Does that mean that the concession announced by my right honourable friend the former Home Secretary on 28th July 1975, that children under 12 would normally be allowed to join a single parent here without proof of sole responsibility provided there is adequate support and accommodation, has been revoked without any public announcement? If the Minister says the children will automatically be sent back to the parents, that means that children under 12 who might otherwise have
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wanted or were entitled to remain with the single parent in this country will not be allowed to do so.
I must also point out to the House that normally it is a matter for a court to decide the best solution for children when the parents separate, but in these cases the Minister sets himself up above the law. Technically the rules also make a child ineligible if he becomes 18 or marries during the 12-months' probationary period. The Minister says they will not expel the 18-year-olds, but woe betide any child who dares to marry before the year is out. Nothing was said about that matter in another place.
One further important matter was raised in another place but not dealt with by the Minister there, and perhaps we may hear something on it now. A provision has been slipped into these rules which has nothing to do with the judgment of the European Court; that is, the reversal of the judgment of the House of Lords in the case of Khawaja and Khera, where their Lordships condemned the attempt by the Government to impose a duty of "positive candour" on immigrants.
The proposition condemned by their Lordships was that an immigrant could be deprived of his leave to enter, already granted to him, if it could be shown that he had failed to disclose material facts, even if he was not asked about them at the port of entry or by the entry certification officer and had no idea that they might be relevant. This nasty little rule, which is the kind of thing one might expect to find in the penal code of the Soviet Union, perhaps, or of Paraguay, should be debated separately instead of being surreptitiously brought in here under cover of completely different matters. The Government's tactics are as repugnant as the rule itself, and although we may not be able to do anything about it this evening we shall make sure that what is being done here is widely understood by those who are concerned to maintain genuine parliamentary authority and the rule of law.
I come now to the rights of persons already settled here before the 1971 Act came into force. Every Home Secretary from Mr. Reginald Maudling onwards, including Mr. Leon Brittan, stressed the principle that immigrants who had arrived before 1973 had none of their existing rights taken away or impaired. Now those undertakings are to be dishonoured, and the Minister pretends that the Act was "transitional in character and effect". A child who arrived here with parents in 1972 might be married as late as some time in the 21st century, an event which could not be regarded as transitional except in geological or cosmological terms. He would have an absolute right to bring a wife from overseas to join him in the United Kingdom under the 1971 Act, and this is now to be taken away.
I understand the Government's dilemma, since the alternative would be to confer on those women settled here before 1st January 1973 an absolute right to bring in husbands from overseas, who would then be in a preferable position to those who arrived after that date. The solution adopted by the Government was to declare an intention to remove the sexually discriminatory effect of Section 1 (5) in order to comply with the court's judgment. Presumably it means that the

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tests imposed on post-1973 settlers will be applied also to those who came here before that time, in exactly the same terms as those found in these rules. That is supposition, but if such is the intention of the Government it ought to have been set out in the form of a White Paper, so that it could have been discussed when these rules were debated in another place.
Meanwhile, that provision is not the only one that still embodies sexual discrimination. Male work permit-holders are allowed to bring in their wives, as are male students, but female work permit-holders and students may not bring in their husbands. As your Lordships may know, a case dealing with this matter has already been brought before the European human rights commission, and has been found admissible there.
Finally, the Government have resolutely declined to face up to the judgment of the court that no effective remedy was provided to complaints against the immigration rules, as required by Article 13 of the convention. The Minister contented himself with the observation in another place that the case of Silver,
"seemed to suggest that there was no automatic and continuing breach of Article 13 if a member state did not incorporate the convention".
Obviously it must be left to the discretion of member states as to exactly how they comply with Article 13, and there could be effective remedies by means other than incorporation of the convention in the domestic law. The point is that as matters stand a complainant from this country has to go to Strasbourg, where it takes six years and many tens of thousands of pounds to assert his right. That is not good enough, and it is unfortunate that the heroic efforts of my noble friend Lord Wade over many years to incorporate the convention in our domestic law were not successful.
On 27th August the Foreign and Commonwealth Office announced new arrangements for queues in the Indian subcontinent. Applicants are to be divided into four classes, with corresponding degrees of priority. Fiancées, who could enter without notice until then, may have to wait for a year before even being interviewed in Pakistan. The addition of fiancées to the queue means also that 17 per cent. more people will have to be interviewed, while the new provisions on maintenance and accommodation will make the decision-making process even slower. The new procedures were introduced without any prior consultation, either with the communities from the subcontinent in Britain, the agencies responsible for helping people with immigration problems—such as the JCWI and the UKIAS—or the diplomatic representatives of the countries from which such people may come.
It is a depressing feeling to come here and argue a case knowing that whatever its objective merits there is little hope of its being accepted—though not an unfamiliar one for those of us who deal with the Home Office. It gives me no pleasure to see my own country in the dock at Strasbourg, but if it were not for the restraints of the convention the situation of minorities in Britain would undoubtedly be far worse than it is. I am under no illusion that the Government will agree to withdraw these particular rules as a result of this evening's proceedings, or of the considerations of morality and family unity which ought to be of
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paramount importance in dealing with the relationships between spouses and their children. I urge them, however, not to allow our reputation in Europe to sink any lower than it is already, but to review their immigration policies carefully so that further cases will not lie against us. I beg to move.
Moved, That the Statement of Changes in Immigration Rules, laid before the House on 15th July, be disapproved.—(Lord Avebury.)
7.28 p.m.
Lord Renton: My Lords, I am sure that the House should be grateful to the noble Lord, Lord Avebury, for giving us an opportunity to discuss these changes in the immigration rules. They are very important, and there is no doubt that they give rise to individual cases in which difficulties occur. May I say that having years ago been responsible for a number of years for the administration of immigration control, I learned that hard cases make bad law but that they are nevertheless inevitable. We should try to minimise personal hardships as much as we can, but we must get the principles right.
I should first like to stress that I was relieved to hear the noble Lord, Lord Avebury, say that he and his party agree on the need for immigration control. He made the very important point that, especially, we should not normally issue more work permits I think that many immigrants in this country would agree with that view of the matter.
There are three main reasons why, in my opinion, the Government have a duty to control the flow of immigration. This is the background to our discussion, and I shall come to the more specific matters later. The reasons are these. England, where most immigrants settle rather than in other parts of the United Kingdom, taken as a separate territory, is already one of the six most densely populated territories in the world if we exclude the small island and city states. The other countries comparable with us are lapan, Bangladesh, Belgium, Holland and West Germany.
The second reason is that we have 3 million unemployed, and other acute social problems. The third reason—and it is one which we should not ignore—is that many immigrants when they come here tend to go to those very areas which already have the most difficult social problems. Naturally they go there in order to be with other people of the same kind as themselves who have immigrated previously, or with their descendants.
The inflow of immigrants continues in fairly large numbers each year. The statistics are most interesting to study in some detail, but I will be very selective and quite brief. If we take the 10 years from 1975 to 1984—that is very nearly the period post-1973 to which the noble Lord, Lord Avebury, referred—661,540 people were accepted for settlement in this country from all parts of the world: the old and new Commonwealth, foreign, and so on. But let us get it in proportion. The average is 66,000 each year over the 10 years, but the figures have been steadily falling. In 1984, the last year for which we have complete figures, the total was nearly 5 1.000. Nearly half of those were from the new Commonwealth and Pakistan.

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A very interesting factor in these figures, which I believe is relevant to what the noble Lord, Lord Avebury, said about spouses, is that we find year after year, for many years, many more women than men have come here and have been accepted for settlement; indeed, far more women than children. If we take the new Commonwealth and Pakistan, we find that in 1984 the total number admitted for settlement, or on removal of time limit, which comes to the same thing, was 24,800, of whom only 5,740 were men but 12,020 were women. That was nothing new. That sort of pattern goes back through the past 10 years. Only 7,040 were children. I think this could be a relevant factor. We cannot continue to absorb the numbers I have mentioned and the Government are, in my opinion, justified in legislating in such a way as to ensure that the matter is kept in reasonable control, as the noble Lord, Lord Avebury, concedes.
I think that family unity has been achieved, bearing in mind the figures that I gave of settlement last year from the new Commonwealth and Pakistan, as it has in previous years, too. After all, there has been plenty of time since 1973 for family unity to be achieved. As to the admission of spouses, following the ruling of the European Court, I do not agree with the noble Lord, Lord Avebury, and I support the Government in their decision which, in my opinion, is fully justified. First, I think the Government are justified in treating men and women equally. That is what, for better or for worse—and I know some people have doubts about it—we have been trying to do throughout the whole of our law and our society.
Secondly, I think the Government are absolutely right—as I have understood it, having lived with the subject for so many years since I had to handle it with the late Lord Butler of Saffron Waiden—in ensuring that marriage is not primarily used as a device for entering the United Kingdom. It used to be very much so, goodness knows!
Thirdly, I am sure that the Government are right in insisting that couples admitted should be able to accommodate themselves, or have accommodation guaranteed for them, and maintain themselves without recourse to public funds. The working people and the taxpayers of this country have a right to expect that. Therefore, I really feel that the Government have made the right decision and no doubt my noble friend Lord Glenarthur, when replying to the debate, will give good reasons for the decision.
There is just one other point that I should like to make. There are other decisions of the Government reflected in this Statement of Changes in Immigration Rules dated last July. However, it is very difficult to ascertain them, because in order to do so one needs to have in one's hand the principal rules made in February 1983; two lots of rules containing fairly minor changes in March and May of this year; and now these rules which we are considering this evening and which contain 32 paragraphs of changes and cover seven-and-a-half pages.
Many ordinary people—as well as lawyers, people in libraries, and so on, who can use scissors and paste to get things right—need to study these rules. I must confess, in case any of your Lordships have been
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deprived, that I have in my hand the only copy of the principal rules that was available this evening in the Printed Paper Office. Of course, I have had to undertake to hand it back when the debate is over. That is the sort of situation in which on this occasion one finds oneself. Therefore, may I ask my noble friend Lord Glenarthur to advise the House how soon the rules will be consolidated? It should not be a difficult or lengthy process to do so because, wisely, the changes have nearly all been expressed in the form of textual amendment of the principal rules. An answer on that would be very helpful.
7.38 p.m.
The Lord Bishop of Southwark: My Lords the noble Lord, Lord Avebury, has given us a very clear and full explanation of the numerous difficulties which some people are now facing as a result of the rules made under Section 3(2) of the 1971 Immigration Act and he has strongly criticised some of the procedures involved. The noble Lord, Lord Renton, speaking from very long and full experience, has rightly given us the overall background—which is relevant and I fully take that point—but acknowledged that there are some difficulties for specific people and that we need to do more to minimise these. It is on that aspect in particular that I wish to speak for a few moments tonight.
May I try to illustrate these problems, drawing particularly on the experience of the Afro-Asian Advisory Service which, although based at Cambridge House in the Camberwell Road and catering, as your Lordships would expect, mainly for London clients, nevertheless sometimes has inquiries from all over the country and from time to time even the Indian subcontinent. The shoe pinches most sharply because of this so-called "primary purpose" rule in paragraphs 41(a) and 46(a) and especially, of course, in regard to the so-called "arranged marriages" which are still normative for many in an Asian cultural pattern of family life.
We are not talking about large numbers. An estimate puts the figure at about 3,000 applicants a year who fall into this specific group. Yet, contrary to the normal practices of British law, people are put in the position of having to prove that the primary purpose of their marrige is not to gain access to this country; that is, there is a presumption that they are ineligible unless they can demonstrate otherwise. Hence the human difficulties on both sides become very great, I think. The interviewer, or the interviewing officer, is expected to be rigorous in his or her questioning because, as we have heard, no country can allow slackness in its immigration policies and we all know that people do try to get round the regulations in order to gain access to the country where life certainly looks easier than in their own—or it used to.
On the other hand, the interviewee may well have language and cultural handicaps to contend with in this setting and often has very little idea of the hazards to which he or she is exposed in giving quite innocent answers to questions designed to expose any trace of false motive. In fact, sometimes one ends up with the extraordinary situation that the person who seems to stand the best chance of being cleared is the person who is both totally ignorant of this country and more

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or less unemployable, thereby establishing no ulterior motive. I put it in that extreme way, although he or she will then immediately fall foul of the second rule about support and accommodation; but that was the comment that was given to me on the basis of some of the actual cases interviewed by the Advisory Service.
I understand that the Home Office accepts that at least 80 per cent. of all marriages or engagements which are examined are genuine; that is, there is the intention of a lifelong relationship. Yet despite this, about 50 per cent. cannot or do not pass the test. On the face of it this seems to be a very high percentage. It is certainly very frustrating for the families concerned and causes a widespread feeling of discrimination. Earlier today I spoke to the right reverend Prelate the Bishop of Leicester and he confirms from his experience in his own diocese that this is indeed so. He has marked it as being on the increase and he feels that in some way it is contributing to growing restlessness there.
For the sake, then, of preventing a very small number of people from entering this country, we seem to be laying ourselves open to charges of serious discrimination. It is alleged that we are committing one or more offences against the European Convention on Human Rights and we certainly seem to be doing disproportionate damage to community and race relations. As has already been pointed out, the rules would now be very difficult to change or reject, so I should like to ask the Minister to do all that he can to ensure that the enforcement is less blunt and less rigorous and that the process of vetting and questioning applicants is also speeded up so that family life where it exists can be genuinely strengthened and a sense of justice and calm can be reestablished in some of our major communities in this country.
7.45 p.m.
Lord Pitt of Hampstead: My Lords, I am glad to be following the right reverend Prelate because I wanted to comment on our approach to this issue and the question of the way in which the immigration rules are both framed and applied. I do not accept that strict immigration control necessarily means harsh immigration rules. It is not necessary to have harsh immigration rules in order to have strict immigration control. The negative approach of the immigration rules has always struck me every time I read them. I shall illustrate this with the example of marriage. In the Statement of Changes in Immigration Rules paragraph 124 says:
"Where a person with limited leave seeks an extension of stay on the basis of marriage to a person settled here, an extension will not be granted unless the Secretary of State is satisfied:

(a) that the marriage was not entered into primarily to obtain settlement here".

That is the first thing, of course. That particular clause could well have been worded more positively, for example, "He should be entitled unless …".
It is because of the way it is worded that the situation is as the right reverend Prelate says, and because it is the duty of the immigration officer first and foremost to see that the applicant has not entered into marriage primarily in order to settle in this country. He has to begin with the assumption that that is why this person
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entered into the marriage; he has to work from there. I have used this example as an illustration but it is the same throughout the rules and the consequence of the way in which the rules are drafted is that there are these difficulties in the way of enforcement.
Having said that, I should like to make another point about something which worries me. We ought to have certain principles which guide us in our acceptance of new people into this society. I should have thought that one of the greatest and most important principles was that we wanted family cohesion. We want the family to be united and society to be cohesive. If that is what we want, and I hope it is, then men should not have to wait many years before their wives can join them. You cannot create a cohesive society if a man stays apart from his wife for many years. The chances are that he will have another family by the time she is actually allowed to come to this country. It may not be a legal family, but it is another family. The cohesion of the family is in fact already disturbed.
The same situation holds good for the children. We ought to be encouraging wives and children to join their husbands and parents as quickly as possible. When children are away from their parents for the length of time that many are away before they join them here, the parents find that they have lost the link which enables them to control their children properly. The parents are strangers to their children, who know adults other than their parents, so that when they come here it is not as easy for them to settle as they otherwise would if the break had not been that long.
My plea to the Home Office is that it takes on board the need to unite families as quickly as possible. I know that that means additional entry certificate officers. I think that we should have them. It will be worth while and probably cheaper than what other things may cost. I hope that the Minister will discuss this point with his right honourable friend the Secretary of State.
My other point is this. There are agencies in those countries which could help to speed up the process of getting people to this country. I know that over the years the entry certificate has been used to make sure that only a certain number of people come in every year. I think we are at the stage where that should stop. At this moment we do not need a slowing down in the entry of wives and children of the people who are here, but a quickening of that process, so that they may be quickly absorbed into the family fold and the family as a group can make a real contribution to this society. That would be an important step forward.
Many seeds are sown by the way in which we separate families. Having talked about helping families to come here, let me make a small plea about breaking up families when someone is deported. An individual may have broken all the rules and need to be sent out of the country, but the price of leaving his wife and children here while he is sent away may be future social problems for us. I put this to the Minister for him to discuss with his right honourable friend. In exercising their discretion, I hope that the Government will bear in mind the importance of keeping families together and not dividing them.

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That was the only contribution that I wanted to make tonight. I hope that it has some effect. I have not commented on the rules. I know that in any case the Home Secretary will not change the rules, and so I do not comment on them. What I ask for does not require a change of rules. It requires a more positive rather than a negative approach. That is my plea tonight.
7.45 p.m.
Lord Mishcon: My Lords, this has been a temperate, moderate and human debate on a human problem. I think we are all grateful to the noble Lord, Lord Avebury, for that opportunity as the result of his initiative. He uttered a rather pessimistic statement in the course of his interesting and informative speech. He said that he realised that there was little hope of his Motion being accepted and of the Government changing their attitude. From this Dispatch Box I refuse to adopt such a pessimistic view. We have a new Secretary of State. In saying that I in no way cast aspersions on his predecessor. We also have an understanding Minister dealing with Home Affairs in your Lordships' House.
We were delighted to hear from the right reverend Prelate who comes from his jurisdiction in Southwark—a part of London that has very much a racial problem; a problem of ethnic minorities. The noble Lord, Lord Avebury, needs no introduction or praise from me. He has conducted a fight on immigration and fairness to immigrants for a number of years. The noble Lord, Lord Renton, has a reputation in this House for kindness and the way in which he faces human problems, and that was apparent at the Home Office over many years. We are always delighted to hear my noble friend Lord Pitt of Hampstead, who again uttered in a moderate voice a plea for humanity in regard to those that he knows so well.
It is on that basis that I want to address your Lordships, following upon a Statement made in your Lordships' House on Monday last—and what a serious Statement it was. We were dealing with the ugly riots that had occurred. Brixton preceded Tottenham, and both followed riots in other parts of our country. They were chapters in our history that we had never known before. Police were brought in to control riots in ways that we had never known before. Looting took place. In our deliberations of course we condemned without qualification the violence and the rioting, but we said that there were basic social matters that had to be looked into carefully. Only a matter of days after the Statement we are talking about rules on immigration very much affecting ethnic minorities. As has been said by other speakers, we are dealing with rules related directly to family life.
In regard to social affairs, our social history and our social complex, if there is anything that we have stood for in this country it is the sanctity of family life. We are trying hard to see that juvenile delinquency among our ethnic minorities declines. We cannot always cure it by giving these young people employment, unfortunately. We all know of the percentage of unemployment among the ethnic minority youth. We cannot give them more than the social insurance cover to which they may be entitled if they are poor, or they
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cannot work or they suffer from ill health. But we can give them one thing at a time of reducing numbers for new immigration.
I am speaking personally. I have no right to say this on behalf of my party. I have had no consultations on the matter. But speaking personally, I should prefer to see more restrictions on new immigration, and, if one likes, as a compensation for that to ensure that family life for our existing ethnic minorities is made much easier, with relatives and dependants coming in more easily. I should prefer that rather than to start talking about political quarrels about the number of people who might be new immigrants. That is the plea which is being made tonight. There should be every facility on genuine grounds for the uniting of families so that we can say with due conscience that we are taking seriously the social, family and human problems of the immigrants who have come to this country from the continents of Africa and Asia. It is very likely we are speaking in the main tonight of those immigrants.
Having said that, and I do not want to address your Lordships for long, let us look at the rules that exist. Let us say to the noble Lord the Minister, "All right, they are indelibly written for the time being in an order, but please give instructions now to the immigration officers, and tell them"—because I know the sort of questions being asked—"the method they ought to adopt"—as has been said in this debate—"is that if a marriage looks genuine, do not try and cross-examine too much"—and I mean that.
If we are trying to attack arranged marriages, are we doing it—and the right reverend Prelate will support me on this I think—out of pride for the number of broken marriages that we have in this country which do not originate at all in arranged marriages, but are based on romance? Are we in a position to preach against arranged marriages which very often occur after a detailed examiniation by parents as to whether a young couple would be suitable for each other? Are we, the preachers, able to preach?
I know that the sort of questions asked by immigration officers are the following: "How long have you known the woman or the man you are married to?", "Have you had experience already of living with him, or her?" "You want to come to this country; do you want to obtain a job here?" The answer to that, in order to maintain a wife, obviously is, "Yes". "Did you have a job you were pleased with in the country you came from?", and the answer to that is, "No, I was not very pleased with it. I wanted to improve myself—ergo, the primary purpose is not marriage that has led to settlement. The primary purpose is to get a better job—quod erat demonstra-dum, one might almost say. There it is proved. And the job of the immigration officer is to ask these questions.
I beg the noble Lord the Minister to tell immigration officers, "Your department can do it". That is not the way we want questions asked; that is not the way in which we want immigration permission refused. My Lords, if you think that I am wrong, can you in human terms, knowing that the people who are seeing the immigration officers badly want to get in, in any way believe that what I am saying is exaggerated if you look at the figures given to me; namely, that by

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the end of 1984 46 per cent. of husbands and fiancés were refused entry clearance? And do you know that the percentage of those refused because they could not satisfy on primary purpose grounds was 89 per cent.? All of them wanted to give the right answers, that must be obvious; but 89 per cent. of those refused failed on primary purpose grounds. Can you doubt, my Lords, that the kind of questions I am talking about were asked?
We then turn to the next question. Having satisfied presumably the immigration officer that the primary purpose really was marriage and joining the wife, and so on, and no other purpose, and presumably because that was the primary purpose very little can be done from abroad about jobs and things of that kind, then it is said: "Ah! You have got home on your first ground; now you must jump this fence." Having said the primary purpose was marriage, the next question that is asked is in regard to the fact that parties must be able to maintain and accommodate themselves without recourse to public funds. Having said, "I want to join my wife, this is a new country and I will work as hard as I can if only I can get a job", the question is, "Oh, but you have not got a job yet, and if you have not got a job yet, how can you say you will get accommodation? Accommodation is expensive and scarce". If we are honest, we all of us know that with our unemployment figures and our housing problems, whether one says that is caused by things that could be altered or not—and we are not having that debate tonight—of course immigration has to be limited.
The purpose of this debate, if I am interpreting my noble friend Lord Avebury aright, and the purpose of the contributions made by my noble friend and the right reverend Prelate—and I have no doubt in his heart of hearts by the noble Lord, Lord Renton—is that if we have to have this sort of rule which we cannot upset tonight, please see to it that the Home Office gets a name not in the European Court of Human Rights, which is not a very good name at present so I will not go further than the noble Lord, Lord Avebury, went—but let us have a name for humanity and let us try to see that as many genuine families among our ethnic minorities are united families. Let us try and make one contribution at least to see that the riots we talked about last Monday never occur again.
8.7 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, it was on 14th June last that your Lordships debated the judgment of the European Court of Human Rights on an Unstarred Question asked by the noble Lord, Lord Harris of Greenwich. The Government were pressed then to take urgent action to cure the breach found by the court. The statement of changes was laid on 15th July, they were debated in another place on 23rd July, they were approved, and came into effect on 26th August. Our response was in keeping not only with the importance of the judgment, but also with the requirement to respond speedily to it.
My noble friend Lord Renton referred to the complication of the lack of consolidation of the rules. May I say to the noble Lord that I quite understand his point of view, but would tell him that although we
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have no plans yet to publish a formal consolidated edition incorporating all the changes made since 1983, I shall draw it to the attention of those concerned and shall place in the Library of the House a sequence of extracts containing a de facto current version of the rules in the hope that it will help your Lordships until such consolidation takes place.
I welcome the opportunity that the noble Lord's motion this evening gives me to explain why the Government responded to the criticisms in the European Court judgment by changing the rules in the way that they have been changed. But first I must emphasise that the changes do not amount to a fundamental revision of the immigration rules or the immigration policy of the Government. The judgment, and therefore the changes in the rules, essentially concern the specific if important issue of whether there should be common provisions for husbands and wives seeking permanent residence here on the basis of marriage.
There was no finding of a breach of the conventions on grounds of race discrimination. On the matter of different rules applying to the admission of spouses to join men and women in this country on the basis of marriage, the previous rules allowed a wife to loin a husband settled here whether or not he was a British citizen.
By contrast, a husband could only join his wife if she was a British citizen. That distinction manifestly treats the sexes differently. That is the essence of the European Court's judgment. The European Convention does not prevent different provisions for men and women as such. What it does do is protect the enjoyment of the rights guaranteed by the convention from sex discrimination unless there are good reasons for differences of treatment between the sexes What the court decided was that in the particular circumstances of the case the reasons advanced by the Government for differences in the rules between husbands and wives were not sufficient to outweigh the importance of sex equality.
My noble friend Lord Renton indicated, with some useful statistics and based upon his great experience, some features that point towards the need for an immigration policy. It is a fundamental aim of the Government's immigration policy to protect the domestic labour market. The European Court explicitly endorsed the objective of immigration policy to protect that domestic labour market. But it expressed the firm view that the advancement of equality of the sexes is today a major goal in the member states of the Council of Europe. This means that the court did not hold that the goal of sex equality must in every case be overriding.
The court balanced the arguments for distinctions between the sexes in the marriage rules with the goal of sex equality. It came to the conclusion that the reasons for allowing wives to settle on more favourable terms than husbands under the previous immigration rules were not sufficiently weighty to meet the requirements of the convention in this day and age. The court accepted the object of the rules to restrict primary immigration. But the judgment requires this object to be met without differences in the rules between the admission of husbands and wives of those settled here.

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The noble Lord, Lord Avebury, was concerned about lack of effective remedy in United Kingdom law to breaches of the European Court of Human Rights. I can tell him that we do not accept that by not incorporating the convention into United Kingdom law we are in breach of Article 13. These changes have been made to the rules to meet the finding on sex discrimination. In that, the rules comply with the convention. No one can complain of violation by reason of the proper application of these rules, and Article 13 would not be engaged.
Lord Avebury: My Lords, I did not propose that Article 13 had to be satisfied by incorporation of the convention in domestic law. I said that this was only one means by which it could be done. I said that we had failed to provide any remedy whatever for breaches of the convention in our domestic law and that the only recourse for the complainant was to go straight to Strasbourg, where it took him six years and tens of thousands of pounds to assert a right.
Lord Glenarthur: My Lords, if I misinterpreted the noble Lord, I can only apologise. I thought the indication of what he said was that he specifically referred to the need for that remedy to be available. I shall certainly study the noble Lord's remarks.
The Government of course accept the judgment of the European Court. The changes we have made to the immigration rules conform with our obligations under the European Convention. They reflect the spirit of the court judgment, not just its letter, and are not the grudging response which I think the noble Lord seems to think they are, to our obligations. Indeed our response has actually involved a relaxation of the provisions for admitting husbands.
Let me now turn to the three aspects of the marriage rules affected directly or indirectly by the European Court judgment: the nationality requirement, the marriage tests and the maintenance and accommodation requirement. The issue arising directly out of the court's judgment was whether to extend the nationality restriction to which the admission of husbands was subject, so that it applied to the admission of wives; or to relax the provisions for the admission of husbands. As I made clear to your Lordships on 14th June, the essential choice was between narrowing the provision for the admission of a wife so that she could only join her husband if he was a British citizen or widening the provision applying to the admission of a husband to enable him to join his wife settled here even if she was not a British citizen.
As my right honourable friend the then Home Secretary said in another place, a restrictive approach, narrowing the rules for the admission of wives, would have raised formidable difficulties. It would have meant that men settled here who were not British citizens would not have been able to bring in their wives when successive Governments have acknowledged the importance of allowing men who have come here to work and have settled here to be joined by their families. The new rules accordingly allow women as well as men who are settled here to bring in their spouses, whether or not the husband or wife here is a
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British citizen, provided they meet the other provisions of the rules. I believe that this is a generous response to the European Court judgment.
What of the other provisions which have been criticised as less generous? To protect the labour market, young men who do not qualify for admission for employment must not be able to use marriage to obtain entry. The rules we introduced in 1980 strengthened the provisions in the immigration rules of the previous Government. They contained three requirements: the parties to a marriage must have met; each must have the intention of living permanently with his or her spouse; and the marriage must not have been entered into primarily to obtain admission to this country—the so-called primary purpose test. Provided these requirements were met, a husband might be admitted for 12 months in the first place, with permanent residence if the marriage continued to subsist and the parties still intended to live permanently with each other. Like the provisions which they strengthened, these requirements applied only to the provisions relating to the admission of husbands. They did not apply to the admission of wives.
The noble Lord, Lord Mishcon, criticised the application of the primary purpose rule in so far as it might be applied too harshly. I should like to say to him that we shall continue to consider the exercise of discretion in individual cases where a genuinely exceptional feature appears, even if the formal requirements of the rules have not been met. This could be justified, for example, if there was some legal or other genuine obstacle to the couple living overseas.
Lord Mishcon: My Lords, before the noble Lord the Minister continues, he is now on a matter that I believe exercises the consciences and minds of everyone who has participated in the debate and those listening to it. What I was asking for, and what I think others who have participated in the debate were asking for, is a direct instruction from the Home Office to immigration officials as to the way in which they would deal with these tests in regard to primary purpose and the merciful way and understanding way in which they were to be asked to deal with them. Can the noble Lord the Minister at least say that he will give consideration to that matter and discuss it with his right honourable friend?
Lord Glenarthur: My Lords, in picking up that point and also the point made by the right reverend Prelate the Bishop of Southwark may I simply say that the Government's immigration control has two objectives—firmness as well as fairness. I can assure both the noble Lord and the right reverend Prelate that we do pay due regard to compassionate features of individual cases. If the noble Lord feels otherwise, I can tell him that that is not the case.
Lord Mishcon: My Lords, I interrupt the noble Lord the Minister I hope for the last time? I have not said that if a case comes to the Secretary of State he will not deal with it compassionately. That was not my remark. I take it for granted that he would. I am sure that if it came to the noble Lord the Minister he would show equal compassion. I am dealing with instructions

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given to immigration officers. All that I have asked the noble Lord the Minister, in view of the debate, is whether the noble Lord is prepared, as I hope he would be, to discuss with the Secretary of State the speeches made in the debate tonight with a view to compassionate treatment being given by instruction to immigration officers on the primary purpose regulation. That is all that I am asking for.
Lord Glenarthur: My Lords, I am sure that my right honourable friend will note the remarks that have been made in this debate. But I cannot agree with the noble Lord in his suggestion that the immigration officers who deal with these cases are not compassionate in the same way as, for example, those in the Home Office when one gets to the top of the tree, so to speak, are also compassionate. There has to be a measure of fairness and firmness together. Those are important features of any proper immigration policy, and I do not believe that the suggestion of the noble Lord, that it is not compassionate at the moment, holds water.
The European Court judgment left the Government with two alternatives: to drop these requirements from the rules relating to the admission of husbands, or to extend them to the admission of wives. To drop the tests so that they no longer applied to the admission of husbands would reopen the immigration rules to potential abuse, and would be an unjustifiable relaxation of immigration control. We cannot have strict provisions for the admission of men for employment without having rules which prevent marriage being used to circumvent that control. The European Court judgment did not raise questions about the requirements which husbands must satisfy as such. What the judgment did however clearly imply was that to continue to give wives preferential treatment by making the admission of husbands subject to tests not applied to the admission of wives would be in breach of the European Convention.
To comply with the principles annunciated by the court and maintain the protection of the labour market which the court specifically endorsed means retaining the requirements applying to the admission of husbands and extending them to apply on the same basis to the admission of wives. This is what the new rules do. Extending the marriage tests to the admission of wives follows logically from the change of approach to wives which underlies the European Court judgment.
The noble Lord, Lord Avebury, asked about common law wives, suggesting, or perhaps asking whether, they were going to be excluded altogether. May I simply say to him that the Government will always be prepared to consider the exercise of discretion outside the rules in favour of an applicant based on a stable and long-standing relationship if hardship would otherwise result. The rules in force at the time of the judgment made the admission of wives subject to provision for maintenance and accommodation, which the sponsoring husband had to satisfy. The admission of husbands was subject to no such requirement. Again a distinction between the sexes had to be removed in the light of the European Court judgment.
The principle that someone claiming admission to this country should be allowed to come here only if he
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or she will not become a burden on public funds, which the noble Lord, Lord Avebury, correctly defended, is manifestly justified. It is indeed incorporated throughout the immigration rules. The Government could not consider relaxing the requirement. Accordingly, the new rules adopt the realistic approach under which the admission of a spouse of either sex is subject to the requirement that there is adequate provision for maintenance and accommodation for the couple together. I should like to stress that this provision is designed to protect public funds—an objective shared not only by the noble Lord, Lord Avebury, but by many countries as well.
There has been criticism that the new rule sets an impossible task; namely, to prove adequate maintenance and accommodation for the future. In that respect it is no different from the previous provisions. It is of course different in the sense that a young girl, dependent on her parents, marrying a man abroad may not contribute much to the maintenance and accommodation of the new marital home. In such cases a sensible assessment will be made of the young man's prospects. I can assure your Lorships that the new rules are not designed to create a "Catch 22" situation whereby a young man having had the prudence to explore prospects of employment before seeking to come to this country is either refused under the primary purpose test or, to avoid failing the primary purpose test, is refused because he has not made provision for maintenance and therefore does not meet that requirement.
To answer the concern of the noble Lord, Lord Avebury, that the maintenance test is too exacting, I say that it is only proper that those seeking assessment should not become a burden on public funds. However, the receipt of benefits by someone already resident here will not necessarily preclude permission being granted for an entry of his or her spouse for settlement. What is at issue is whether there will be an additional burden on public funds. As to how the test will be applied after 12 months, the main emphasis is on assessing maintenance and accommodation for the family either when the spouse seeks to enter this country initially or seeks leave on the basis of marriage.
Lord Avebury: My Lords, I specifically asked the noble Lord about the case of the person who fell on hard times within the 12 months. Having been able to establish that he was likely to be able to support and accommodate himself and his family and having gained admission on that basis, if he then becomes redundant, or is evicted from his accommodation and is therefore forced into the position of claiming benefits of one kind or another, would it mean that at the end of the 12-month probationary period, having signed the undertaking that he would not claim benefit, and being forced into doing so, he would then be refused indefinite leave to remain?
Lord Glenarthur: My Lords, I shall have to study the remarks of the noble Lord. In the interests of time, with rather more to say to cover all the points raised, perhaps it is fair to deal with the one point I have dealt with and to come back to him in writing.

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I realise that there are many who are concerned about the issue of queues. I think that it must be recognised by all those who consider it necessary for the Government to respond to the judgment that these changes may to some extent increase the delays for entry clearance. Resources are not unlimited. But I can assure your Lordships that efforts will be made to keep increases to the minimum by the redeployment of staff and other measures.
The noble Lord asked me about a point which I think would concern your Lordships; that is, the under-12 concession. I can confirm that the concession which provides for the admission of a child under 12 to join a single parent will continue. I hope that reassures the noble Lord.
With regard to the matter of the duty of candour and the judgment of your Lordships' House in a particular case, the new rules contain at paragraph 98 general considerations providing for refusal of further leave if false representations have been made or material facts not disclosed. I can assure the noble Lord, Lord Avebury, that these provisions are designed to change the circumstances in which refusal may be warranted. This small change is not designed to place greater obstacles in the way of applicants.
Although the changes in the immigration rules are specific and limited, other consequences flow from the European Court judgment. The Government took the opportunity to make related changes, for example, to clarify the meaning of "public funds", in the immigration rules. This was in no sense, however, a comprehensive review of the rules. Its object was to make those changes necessary to meet our obligations in response to the judgment, and only those changes.
There is one respect in which our response to the European Court judgment must go beyond the rule changes. That was indicated by the noble Lord, Lord Avebury. As I have made clear, the different approach to husbands and wives has been a traditional part of immigration policy reflected in the drafting of the 1971 Immigration Act. Section 1(5), to which the noble Lord referred, is indeed cast in a form which is sexually discriminatory. That provision was designed to be transitional in preserving rights of Commonwealth immigrants who had entered under the previous legislation. But as my right honourable friend the then Home Secretary announced in the debate on the rule changes in another place, the Government intend as part of our response to the European Court judgment to introduce legislation in due course to put an end to the sexually discriminatory features of the provision.
The judgment of the European Court raised an important question about one aspect of our immigration rules. I have outlined our response to the judgment and the thinking that lay behind it. The noble Lord, Lord Mishcon, said that we had had a temperate debate. I agree with the noble Lord. The debate has been temperate in what is inevitably an emotional area. The changes we have made strike a balance. They preserve the Government's policy of firm control over immigration. The rules preserve the protection of the labour market and the protection of public funds. But the rules also respect the important
1188
principles of family unity—indeed, respect for family life—enjoined in the European Convention and about which all your Lordships who have taken part in this debate have spoken this evening. The changes we have made to the immigration rules reflect that. They are the right response to the issues raised by the European Court.
Lord Avebury: My Lords, it would obviously not be right for me to enter into a further discussion at any length on the points that have been made by the Minister in his speech, but I should like to thank him most warmly for giving such a comprehensive reply to the speeches that have been made in this discussion.
I should also like to thank the noble Lords who have taken part in it, particularly the noble Lord, Lord Renton, whose first point was that we had to create a policy that was based on firm principles, and he enunciated some of them. He said that we had to preserve family unity and that we had to treat men and women equally. Then the noble Lord went on to deal with some negative provisions: that marriage should not be used as a device for entering the United Kingdom and that accommodation and support should be properly arranged in advance by those who wished to come here for marriage.
Our contention is that the Government have still not satisfied some of those principles and that, in the attempt to protect the labour market, which indeed was found to be a legitimate purpose by the European Court, we have gone too far in the direction of excluding persons who have married citizens of the United Kingdom or those who have been settled permanently here. The aim of protecting the labour market will not be fully achieved as long as we are prepared to let in workers from the rest of Europe or patrials from the rest of the Commonwealth to the tune of several tens or even hundreds of millions of people. So if it was the fundamental aim of our policy to protect the labour market, we should have had a completely different immigration policy.
However, I do not think it would be appropriate for me to rehearse all those arguments at this late stage. It is sufficient for me to say that if this matter had not already been the subject of a Division in another place, I should have felt strongly enough about it to ask your Lordships to comment on it. As things stand, our custom prohibits us from doing that, and I can only say to the noble Lord and to the Government that we must return to this matter on another occasion. We do not believe that our criticisms have been met by the answers which we received this evening. My Lords, I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

Insolvency Bill [H.L.]
8.34 p.m.
Lord Brabazon of Tara: My Lords, I beg to move that the Commons amendments be further considered.
Moved accordingly, and, on Question, Motion agreed to.

Insolvency Bill [H.L.]

  COMMONS AMENDMENT
  68 Clause 16, page 13, line 9, leave out from 'the' to end of line 36 and insert 'consent of the administrator or the leave of the court and subject (where the court gives leave) to such terms as aforesaid.
  (3) Where at any time an administrative receiver of the company vacates office under subsection (1)(b) above or a receiver of part of the company's property vacates office under subsection (1 A) above—

  (a) his remuneration and any expenses properly incurred by him; and

  (b) any indemnity to which he is entitled out of the assets of the company,

  shall be charged on and paid out of any property of the company which is in his custody or under his control at that time in priority to any security held by the person by or on whose behalf he was appointed.'.

  AMENDMENTS TO COMMONS AMENDMENT No. 68
  68A Line 6, leave out ("vacates") and insert ("has vacated").
  68B Line 7, leave out ("vacates") and insert ("has vacated").
  68C Line 13, after ("and") insert (", subject to subsection (2) above,").
  68D Line 14, leave out ("is") and insert ("was").
  68E Line 16, at end insert—
  ("(3 A) Neither an administrative receiver of a company who vacates office under subsection (1)(6) above nor a receiver of part of a company's property who vacates office under subsection (1 A) above shall be required on or after so vacating office to take any steps for the purpose of complying with any duty imposed on him by section 196 or 475 of the 1985 Act (duty to pay preferential creditors).")
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 68, as amended by Amendments Nos. 68A, 68B, 68C, 68D and 68E. With the leave of the House, I would also speak to Amendments Nos. 78. 78A and 78B.
  78 Clause 22, page 17. line 31, at end insert—
  (2A) Where at any time a person ceases to be the administrator of a company—

  (a) his remuneration and any expenses properly incurred by him shall be charged on and paid out of any property of the company which is in his custody or under his control at that time in priority to any security to which section (Power to deal with charged property etc.) (1) above then applies; and

  (b) any sums payable in respect of debts or liabilities incurred while he was administrator under contracts entered into or contracts of employment adopted by him or a predecessor of his in the carrying out of his or the predecessor's functions shall be charged on and paid out of any such property as is mentioned in paragraph (a) above in priority to any charge arising under that paragraph;

  and for the purposes of paragraph (b) above the administrator is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.'

  AMENDMENTS TO COMMONS AMENDMENT No. 78
  78A In subsection (2A)(b) leave out from ("he") in line 2 to ("shall") in line 5 and insert ("or any predecessor was administrator").
  78B Leave out last four lines.
  I will deal with Amendment No. 68 first. The first part of this amendment was made in response to concern which was expressed by many of those consulted about the frequent recourse to the courts. Thus the administrator will be able to negotiate with
  1190
  the parties concerned in proceedings against the company to enforce security or repossess goods in the company's possession under, for instance, a hire-purchase agreement and also to exercise his discretion. Where matters remain in dispute, it will still be open to the court to resolve the case. The remainder of the amendment is concerned with providing for the remuneration, expenses and indemnity of receivers who are removed from office on the appointment of an administrator.
  This amendment would secure the position of those vacating office by providing that the receiver's expenses and remuneration and his indemnity out of the assets against personal liability will be a charge prior to the charges held by his appointer.
  Amendment No. 78 deals with debts and liabilities incurred under contracts entered into or contracts of employment adopted by an administrator. On further consideration, it was judged that the original proposal set out in Clause 21, which made the administrator personally liable for all post insolvency contractual obligations, would be impractical. Instead, it is proposed to adopt an approach similar to that applicable in liquidation where such debts and liabilities incurred by the practitioner form part of the costs of the liquidation and are payable first out of the assets. This was felt to be simpler to operate.
  The intention of Amendment No. 7 2A. to Amendment No. 72, which has already been discussed, is that the administrator's charge would rank prior to a debenture containing a floating charge capable of leading to the appointment of an administrative receiver. The logic of this is that if the floating chargeholder allows the appointment of an administrator, then the administrator should have an indemnity out of the assets subject to the floating charge. The administrator's remuneration expenses will be subject to a separate charge and will rank in priority behind that securing the debts and liabilities incurred by the administrator. I should perhaps explain the references to contracts entered into and contracts of employment adopted. As originally proposed the administrator was personally liable for debts and liabilities incurred under contracts entered into or adopted by him in carrying out his functions. However, practitioners and many others were concerned that the concept of adoption of contracts, if applied to all types of contracts into which companies had entered prior to the appointment of an administrator, would be onerous and would seriously divert administrators from their central purpose of rescue of businesses.
  However, it is not possible to abandon the concept of adoption altogether: a recent case in the Court of Appeal indicated that the interests of employees could be put at risk through the operation of Section 492 of the 1985 Companies Act. Accordingly the administrator is to be liable (as receivers will be under Amendments Nos. 103 and 104) for contracts of employment which he adopts, although he is to have a grace period of 14 days in which to consider whether he wishes to adopt any such contract.
  Finally, the group of five amendments, Nos. 68A to E to Commons Amendment No. 68, make it clear that any receiver displaced by the making of an ad ministration

  1191
  order or by the administrator is released from his obligations to the preferential creditors under Sections 196 and 475 of the 1985 Act. This release is of course only from the time he vacates office; the receiver remains fully accountable for his actions while acting in that capacity.
  I should like to deal in advance with an amendment which the noble Lord, Lord Bruce of Donington, put down to Amendment No. 78. It might be of assistance if I just explain precisely how paragraph (b) of subsection (2A) will work. Its principal purpose is to encourage people to contract with the administrator, after he is appointed, by making any liabilities that he incurs a charge on the free or floating charge assets of the company. It also implements the protection of the employees' interests, which I have just explained.
  The amendments would have the effect of making all debts and liabilities incurred by an administrator a charge on the free and floating charge, the protection for post-administration order debts, and liabilities. This is not the case. Indeed, it would not be acceptable because, for instance, it would mean that, if an administrator was liable in fort for, say, negligence, that liability would then have the status of a charge on the assets. That could not possibly be right, as the object of the provision is to provide some assurance to those contracting with the company that their debts will be met. If all liabilities were to have this advantageous status the effect would be lost.
  I would also add that paragraph (b) of the new subsection (2A) does not impose personal liability, as when the administrator contracts he does so as the agent of the company. I point this out because this is the reverse of the position when we first considered this Bill and I think a number of noble Lords argued a contrary policy. On reconsideration of the matter we agreed with them. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 68, as amended by Amendments Nos. 68A to 68E.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  69 and 70 [Printed above.]

  AMENDMENT TO COMMONS AMENDMENT No. 70
  70A [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 69 and No. 70 as amended by Amendment No. 70A. These are consequential.
  Moved, That this House do agree with the Commons in their Amendments Nos. 69 and 70 as amended by Amendment No. 70A.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  71 After Clause 18, insert the following new clause:

  'General powers

  .—(1) The administrator of a company—

  (a) may do all such things as may be necessary for the management of the affairs, business and property of the company; and

  1192

  (b) without prejudice to the generality of paragraph (a) above, shall have the powers specified in Schedule 2 to this Act; and in the application of that Schedule to the administrator of a company the words "he" and "him" shall be taken to refer to the administrator.

  (2) The administrator of a company shall also have power—

  (a) to remove any director of the company and to appoint any person to be a director of the company, whether to fill any vacancy or otherwise; and

  (b) to call any meeting of the members or creditors of the company.

  (3) Any power conferred on the company or its officers, whether by this Part or the 1985 Act or by the memorandum or articles of association, which could be exercised in such a way as to interfere with the exercise by the administrator of his powers shall not be exercisable except with the consent of the administrator, which may be given either generally or in relation to particular cases.
  (4) In exercising his powers the administrator of a company shall be deemed to be acting as agent of the company.
  (5) A person dealing with the administrator of a company in good faith and for value shall not be concerned to inquire whether the administrator is acting within his power.'

  AMENDMENT TO COMMONS AMENDMENT No. 71
  71A Line 17, at end insert—
  ("(2A) The administrator may apply to the court for directions in relation to any particular matter arising in connection with the carrying out of his functions.")
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 71 as amended by Amendment No. 71 A. I should like on this occasion to speak also to Amendments Nos. 73, 73A and 87.

  COMMONS AMENDMENT
  73 After Clause 18, insert the following new clause—

  'Genera! duties

  .—(1) The administrator of a company shall, on his appointment, take into his custody or under his control all the property to which the company is or appears to be entitled.
  (2) The administrator of a company shall manage the affairs, business and property of the company—

  (a) at any time before proposals have been approved (with or without modifications) under section 26 below, in accordance with any directions given by the court; and

  (b) at any time after proposals have been so approved, in accordance with those proposals as from time to time revised, whether by him or a predecessor of his.

  (3) The administrator of a company shall summon a meeting of the company's creditors if—

  (a) he is requested, in accordance with the rules, to do so by one-tenth, in value, of the company's creditors; or

  (b) he is directed to do so by the court.'

  AMENDMENT TO COMMONS AMENDMENT No. 73
  73A In subsection (2) at end insert ("and with due regard to the interests of the employees")
  87 Clause 28, page 21, line 12, leave out from beginning to 'shall' in line 19 and insert—
  '(1) This section applies where—

  (a) proposals have been approved (with or without modifications) under section 26 above; and

  (b) the administrator proposes to make revisions of those proposals which appear to him substantial.

  (2) The administrator'.
  Certain elements of Clause 19 dealing with the sale of property subject to a security are replaced by Amendment No. 72, to which I spoke earlier. After consultation with practitioners we felt that the existing Clause 19 might well be defective in its approach to the

  1193
  powers of the administrator. The granting to the administrator of the powers and duties of directors does not properly reflect the relationship that should exist between the administrator and the company to which he is appointed. Amendment No. 71 therefore places the administrator in a similar position in relation to the company as the floating charge receiver but with additional powers and also subject to the fundamental difference that he is not appointed on behalf of an individual creditor.
  He takes over control of the company's affairs, business and property with the power to do all such things as be necessary for their management as well as the specific powers set out in Schedule 2 to the Bill. The administrator will also have the power to dismiss and appoint directors and will be protected by subsection (3) of the new clause from any power of the company to hinder him in the discharge of his functions. These provisions are important because they will enable him to assemble a fresh management team as might be necessary.
  This will be of particular significance where he is acting to pursue the objective of survival of the company.
  The administrator is further empowered by subsection (2) (b) of the new clause to call meetings of members of creditors of the company. The purpose here is to enable the administrator to consult creditors and members on matters of importance and on which their assent is desirable.
  I come now to Amendment No. 73 and the administrator's general duties. The clause restates in part the current provisions of the Bill. Subsections (1) and (3) are drawn from subsections (1) and (7) of existing Clause 19. Subsection (2) of this clause is based on subsection (1) of Clause 28, and replaces it. It also deals with the position of the administrator and his ability to manage the business in the period following the making of the order but preceding the creditors' meeting.
  Although it is not expected that there will be a significant problem here, because the creditors and the administrator will of necessity need to work together, he ought not to be unfettered during this period. Accordingly subsection (2) (a) of the new clause provides that the administrator shall manage the business in accordance with such directions as the court may give.
  The amendment to Amendment No. 71 brings administration into line with the winding-up code and receiverships which provide statutory sanction for the giving of directions by the court to compulsory liquidators, receivers and debenture holders.
  The new clauses are now silent on the question of payments to pre-administration creditors, except in the specific circumstances which will apply in relation to the new clause introduced by Amendment No. 72. This will enable the administrator to make payments generally so long as they are intended to achieve the purpose for which he was appointed and do not unfairly prejudice any creditors. If he acts in a way which is unjust in relation to a creditor or a group of creditors the court will be able to rectify matters under the provisions of Clause 30.
  Finally, Amendment No. 87 is essentially a drafting amendment consequential on Amendment No. 73. The administrator's general duty to manage the affairs of the business in accordance with his proposals presently in subsection (1) of Clause 28 has been transferred to the new clause dealing with his general duties; that is in Amendment No. 73, subsection (2). Thus the amendment deletes subsection (!) and specifies when the section now applies. The creditors are to approve substantial revisions to the administrator's proposals. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 71 as amended by Amendment No. 71 A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT AND AMENDMENT TO COMMONS AMENDMENT No. 72
  72 and 72A [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg formally to move that the House do agree with the Commons in their Amendment No. 72 as amended by Amendment 72A.
  Moved, That the House do agree with the Commons in their Amendment No. 72 as amended by Amendment No. 72A.—(Lord Cameron of Lochbroom.]
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT No. 72
  72B [Printed above.]
  Lord Bruce of Donington: My Lords, I beg to move Amendment No. 72B. I should like to refer to the contributions made by the noble and learned Lord the Lord Advocate and the noble Lord, Lord Lucas of Chilworth. In the course of their speeches on these clauses they have commented on the amendments moved by me. Such was the speed at which they moved from amendment to amendment, including my own amendments, that it was impossible for me to follow through exactly what they were saying about my amendments, which time did not permit me even to trace on the Marshalled List while they were speaking. Perhaps the noble Lords will forgive me when moving this and other amendments if I require them, although I hope not at length, to repeat some of the arguments they adduced generally which I could not follow because they were moving so quickly.
  Lord Cameron of Lochbroom: My Lords, so far as this amendment is concerned, the effect of Amendment 72A is to remove the provision to which this amendment is directed.
  Lord Bruce of Donington: My Lords, I was about to ask the leave of the House to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 72BA not moved.]

  AMENDMENT TO COMMONS AMENDMENT No 72
  72C [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg formally to move that the House do agree with Amendment No. 72C.
  Moved, That this House do agree with Amendment No. 72C.—(Lord Cameron of Lochbroom.)
  [Amendment No. 72D not moved.]
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT NO. 72
  72E [Printed above.]
  Lord Bruce of Donington: My Lords, the purpose in moving Amendment 72E is that I believe it necessary to spell out that an administrator can use the cash flow of the company, and the present Clause 34(4)(b) does not appear to have any obvious meaning in relation to that requirement. Perhaps the noble and learned Lord will respond.
  Moved, That this House do agree with Amendment No. 72E.—(Lord Bruce of Donington.)
  Lord Cameron of Lochbroom: My Lords, again this is an amendment which is related back to Amendment No. 72 and the provision of Amendment No. 72A would remove the matter.
  Lord Bruce of Donington: My Lords, I am obliged for the correction. I have pleasure in asking leave to withdraw my amendement.
  Amendment, by leave, withdrawn.

  AMENDMENT TO COMMONS AMENDMENT NO. 72
  72F [Printed above.]
  Lord Cameron of Lochbroom: My Lords, this amendment has already been spoken to. I beg to move.
  Moved, That this House do agree with the Commons in Amendment No. 72F as an amendment to Commons Amendment No. 72.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.
  Lord Cameron of Lochbroom: My Lords, I beg formally to move that this House do agree with the Commons in their Amendment No. 72 as amended by Amendments Nos. 72A, 72C and 72F.
  Moved, That this House do agree with the Commons in their Amendment No. 72 as amended by Amendments Nos. 72A, 72C and 72F.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  73 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I have already spoken to Amendment No. 73. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 73.—(Lord Lucas of Chilworth.)

  AMENDMENT TO COMMONS AMENDMENT NO. 73
  73A [Printed above.]
  Lord Bruce of Donington: My Lords, this amendment seeks to persuade the administrator to take account of his administration,
  "with due regard to the interests of employees".
  1196
  This is a phrase that already is incorporated in the Companies Act proper. There would seem no reason why it should not be repeated here. We feel that the administrator of a company, in circumstances where he is hopeful of pulling the business round, of making such business and other trading and commercial arrangements as appear to him bona fide and to be in the interests of the company and its recovery, ought at the same time to have due regard to the interests of the employees within the longer sense of the term, the larger perspective. Unless he does that he is possibly prejudicing the future recovery of the company.
  One of the axioms of good management and good leadership, whether a company is in prosperous times or in bad times, is that the interests of employees should be studied for the benefit of the company as an organic whole. It would be undoubtedly that reasoning that lay behind the incorporation of these words into the Companies Act.
  Acts have to deal not only with rational people and rational management, with rational directors who automatically, in the interests of their companies, have due regard to the interests of their employees, but also with people who are not blessed with that intelligence, people who are not similarly aware of these very businesslike and commercially profitable attitudes towards employees, besides any moral and social aspects of the matter. Therefore in the protection of the interests of the company as a whole in the furtherance of its advance out of difficulties into prosperity it is vital that all administrators follow normal commercial practice in very successful commercial and manufacturing enterprises.
  The most successful of these are successful precisely because they pay regard to the interests of their employees. It is right that a Government should take powers to bring the shortsighted, the supine, the prejudiced or the perhaps class-ridden attitudes of some people into line with the intelligent majority of the great bulk of directors and managements in this country. It is in that sense that this amendment is moved, in the hope that it will be regarded with such common sense that it would immediately be accepted.
  I am immediately sensible of the fact that in another place this amendment was put and was rejected. One cannot always expect another place to have the equivalent wisdom of your Lordships' House. Without disrespect to another place, I suggest that the public ought to be aware that where enlightenment is to be found (if it is to be found anywhere in Parliament) it is occasionally to be found in your Lordships' House. Therefore it is with the utmost confidence in your Lordships' ability to assimilate, understand and appreciate the basic logic under which prosperous business enterprise proceeds in this country that I say that without any hesitation they and the Government will accept this amendment. I beg to move.
  Moved, That this House do agree with Amendment No. 73A as an amendment to Commons Amendment No. 73.—(Lord Bruce of Donington.)
  Lord Mottistone: My Lords, what the noble Lord, Lord Bruce, said at enormous length made good sense, but the English of his amendment, being put into the amendment of the Commons, does not strike me as

  1197
  being frightfully good. Perhaps the principle is good, but the amendment is not.
  Lord Lucas of Chilworth: My Lords, I am quite sure that the principal intent of the noble Lord opposite, supported by my noble friend Lord Mottistone, is acceptable. However, as he has said, the amendment imposes on the administrator a similar duty as is imposed on directors in Section 309 of the Companies Act 1985. That requires directors to have regard to the interests of employees in general in the performance of their functions.
  Of course one has to pay proper regard for and sympathise with the noble Lord's concern for the interests of employees in cases where administration orders have been made. However, one must not lose sight of the fact that the main purpose of the administrator procedure is as a business rescue mechanism. It is to save companies and per se to safeguard jobs. The administrator already has a duty to manage the company with a view to achieving the purpose or purposes for which he was appointed. Whether he is appointed to rehabilitate the company or to effect a more advantageous realisation of the company's assets, either of these purposes implies a regard for the interests of employees.
  While Section 309 of the Companies Act imposes a duty owed to the company by the directors, it is not only to the employees. If the noble Lord, as I suspect, wishes to impose a duty on the administrator owing directly to the employees, this could result in the amendment being subject to harnessing pressure and litigation by employees. This is not the case that applies under Section 309.
  I further suggest to the noble Lord that as the administrator's duties that I have outlined are clearly understood, an amendment such as is suggested might cause doubt as to what extra duties are imposed on the administrator. This would be most unfortunate. I do not feel, having regard to everything that the noble Lord opposite said, that an amendment of this kind would be helpful to the administrator in carrying out his specific duties. I ask the noble Lord to withdraw his amendment.
  Lord Bruce of Donington: My Lords, I am grateful to the noble Lord for his reply, and also to the noble Lord, Lord Mottistone, for his support, with his expertise in business administration and company affairs at large, particularly in the distinguished representative role which he occupies from time to time. I am sensitive of his criticism of the wording of my amendment. I have been through it very carefully but for the moment I fail to see where it is either illiterate or inappropriate; but perhaps the noble Lord's attitude towards literacy is different from mine.
  I accept fully what the Minister has said. It was not the intention of the amendment that it would impose on individual employees any specific duty that would give them any right of action in the courts, either individually or collectively. When it says, "with due regard to", it means what it says: There is no contractual obligation, in that as between the administrator and the individual employees, nothing that in any way affects their contracts of employment,
  1198
  whether or not they are adopted by the administrator. It is just a general obligation which should reflect in him the desire to conduct the affairs as an administrator just as efficiently as the most efficient businessman—and by efficient I mean enlightened as well, because one cannot be efficient unless one is enlightened—and to have due regard to the interests of the employees.
  This is the sole occasion on this Bill on which the noble Lord and I have been anywhere near a slight party political brush. The noble Lord will know that I intended to raise this point, which indeed I discussed with him. I do not think I shall convert the noble Lord, though I might do so after a time, and that might be a justification for further consideration to be given at some other time. I know I shall never convert the noble Lord, Lord Mottistone, and Heaven forfend that I should succeed; I might even regard that as a failure. In the circumstances, I ask leave of the House to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Motion agreed to.
  9 p.m.

  COMMONS AMENDMENT
  74 [Printed above].

  AMENDMENT TO COMMONS AMENDMENT NO 74
  4A [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 74 as amended by Amendment No. 74A, with which we have already dealt.
  Moved, That this House do agree with the Commons in their Amendment No. 74 as amended by Amendment No. 74A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  75–77 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 75 to 77.
  Moved, That this House do agree with the Commons in their Amendments Nos. 75 to 77.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  78 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 78.
  Moved, That this House do agree with the Commons in their Amendment No. 78.—'Lord Cameron of Lochbroom.)

  AMENDMENTS TO COMMONS AMENDMENT NO. 78
  78A [Printed above.]
  78B [Printed above.]
  Lord Bruce of Donington: My Lords, in the light of the explanation already given by the Minister in general terms, I do not intend to move these amendments.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  79 [Printed above.]

  AMENDMENTS TO COMMONS AMENDMENT NO. 79
  79A to 79C [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 79, as amended by Amendments Nos. 79A, 79B and 79C, as discussed.
  Moved, That this House do agree with the Commons in their Amendment No. 79, as amended by Amendments Nos. 79A to 79C.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  80 Insert the following new Clause:—Before Clause 23, Statement of affairs to be submitted to administrator.
  '.—(1) Where an administration order has been made, the administrator shall forthwith require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.
  (2) A statement submitted under this section shall be verified by affidavit by the persons required to submit it and shall show—

  (a) particulars of the company's assets, debts and liabilities;

  (b) the names and addresses of its creditors;

  (c) the securities held by them respectively;

  (d) the dates when the securities were respectively given; and

  (e) such further or other information as may be prescribed.

  (3) The persons referred to in subsection (1) above are—

  (a) those who are or have been officers of the company;

  (b) those who have taken part in the company's formation at any time within one year before the date of the administration order;

  (c) those who are in the company's employment or have been in its employment within that year, and are in the administrator's opinion capable of giving the information required;

  (d) those who are or have been within that year officers of or in the employment of a company which is, or within that year was, an officer of the company;

  and in this subsection "employment" includes employment under a contract for services.
  (4) Where any persons are required under this section to submit a statement of affairs to the administrator, they shall do so (subject to subsection (5) below) before the end of the period of twenty-one days beginning with the day after that on which the prescribed notice of the requirement is given to them by the administrator.
  (5) The administrator, if he thinks fit, may—

  (a) at any time release a person from an obligation imposed on him under subsection (1) or (2) above; or

  (b) either when giving the notice mentioned in subsection (4) above, or subsequently, extend the period so mentioned;

  and where the administrator has refused to exercise a power conferred by this subsection, the court, if it thinks fit, may exercise it.
  (6) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he shall be liable—
  1200

  (a) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-tenth of the statutory maximum;

  (b) on conviction on indictment, to a fine.'

  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 80. The purpose of this amendment is to amend what was Clause 24. This seeks to harmonise the provisions concerning the submission of a state of affairs to the administrator with those provisions relating to winding-up. Similar amendments to provisions for administrative receivers and receivers in Scotland will shortly be considered.
  The clauses relating to the provision of information, which are common to all forms of insolvency, were drafted in different terms, although their substance was virtually the same. The amendments made in the other place were put down with the intention of placing the different clauses on the same footing.
  Three minor consequential changes are made to the existing Clause 24 in the process of redrafting: first, the provision setting out the period for the submission of the statement of affairs is now located in the body of this clause relating to the statement of affairs. Previously it appeared in Clause 23(2). At the same time, modification has been made to this provision, providing the administrator with full discretion to extend the period for the submission of the statement subject to the ability of a person to appeal to the court if he refuses to do so. Secondly, the amendment enables the administrator to release a person from an obligation he has imposed on that person to supply information. Thirdly, the penalty for failure to supply information has been brought into line with Clause 50(7) of the Bill.
  Moved, That this House do agree with the Commons in their Amendment No. 80.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  81–85 [Printed above.]
  AMENDMENT TO COMMONS AMENDMENT No. 85
  85A [Printed above.]

  COMMONS AMENDMENTS
  86–95 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move formally that this House do agree with the Commons in their Amendments Nos. 81 to 84; 85 as amended by Amendment No. 85A; and 86 to 95 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 81 to 95, as amended by Amendment No. 85A.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  96 Clause 32, page 24, line 31, leave out subsection (3).
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 96.I should like at this time to speak to Amendments Nos. 199, 202, 208, 224 to the second of the Amendments No. 226 (I should remind your Lordships that there are two of those and that I am referring to the second one); Amendments Nos. 230, 238 to 241, 270 to 277, 279, 297 to 301, 303, 323 to 325, 328, 335, 336, 354 to 356, 358, 361, 363 to 367, 380, 384 to 388, 397, 399,402,413,476,477, 510, 530, 534, 535, 537 to 539, 539A, 543, 544, 548 and 549.

  COMMONS AMENDMENTS
  199 Clause 72, page 54, line 33, after 'themselves' insert 'after the expenses of the winding up'.
  202 Clause 76, page 59, line 21, leave out 'those debts' and insert 'the debts proved in a winding up'.
  208 Clause 82, page 63, line 25, leave out 'is' and insert 'was'.
  224 Clause 90, page 72, line 5, at end insert—
  '(1 A) The Lord Chancellor may, with the sanction of the Treasury, by order provide for sums to be deposited, by such persons, in such manner and in such circumstances as may be specified in the order, by way of security for fees payable by virtue of this section.'.
  225 Page 72, line 6, leave out 'Without prejudice to the generality of subsection (1) above,'.
  226 Page 72, line 8, leave out '(including provision requiring deposits by way of security)'.
  226 Clause 91, page 72, line 20, leave out 'preceding'.
  230 Page 73, line 19, at end insert—
  ' "business day" means any day other than a Saturday, a Sunday, Christmas Day, Good Friday or a day which is a bank holiday in any part of Great Britain;'.
  238 Clause 94, page 75, line 13, leave out from 'the' to end of line 37 and insert 'official receiver and, if there is one, to the trustee of his estate'.
  239 Clause 95, page 76, line 20, after 'was' insert 'an undischarged bankrupt or was'.
  240 Clause 98, page 79, line 11, leave out 'leave' and insert 'concurrence'.
  241 Page 79, line 32, after 'and' insert ', immediately after reporting to the court,'.
  270 Clause 112, page 92, line 9, leave out paragraph (b).
  271 Page 92, line 18, leave out 'or (b)'.
  273 Page 92, line 30, at end insert—
  '(4A) References in this Part to property, in relation to a bankrupt, include references to any power exercisable by him over or in respect of property except in so far as the power is exercisable over or in respect of property not for the time being comprised in the bankrupt's estate and—

  (a) is so exercisable at a time after either the official receiver has had his release in respect ot that estate under section 128 (2) below or a meeting summoned by the trustee of that estate under section 150 below has been held; or

  (b) cannot be so exercised for the benefit of the bankrupt;

  and a power exercisable over or in respect of property shall be deemed for the purposes of this Part to vest in the person entitled to exercise it at the time of the transaction or event by virtue of which it is exercisable by that person (whether or not it becomes so exercisable at that time.').
  274 Clause 113, page 93, line 7, after 'payment', insert '(whether in cash or otherwise)'.
  275 Page 93, line 23, at end insert—
  '(4A) Where after the commencment of his bankruptcy a bankrupt has incurred a debt to a banker or other person by reason of the making of a payment which is void under this section, that debt shall be deemed for
  1202
  the purposes of this Part to have been incurred before the commencement of the bankruptcy unless—

  (a) that banker or person had notice of the bankiuptcy before the debt was incurred; or

  (b) it is not reasonably practicable for the amount of the payment to be recovered from the person to whom it was made.'.

  276 Page 93, line 26, at end insert 'but nothing in this section shall affect any disposition made by any person of property held by him on trust for any other person'.
  277 Clause 114, page 94, line 10, leave out 'be entitled to realise his security until' and insert ', without the leave of the court, be entitled to realise his security unless'.
  279 Clause 117, page 96, line 11, leave out from 'made to end of line 12 and insert 'otherwise than on a debtor's petition'.
  297 Clause 136, page 108, line 10, at beginning insert 'Subject to subsection (3A) below,'.
  298 Page 108, line 12, leave out from 'and' to second 'the' in line 14.
  299 Page 108, line 16, at end insert—
  '(3A) Where, whether before or after the service of a notice under this section—

  (a) a person acquires property in good faith, for value and without notice of the bankruptcy; or

  (b) a banker enters into a transaction in good fault and without such notice,

  the trustee shall not in respect of that property or transaction be entitled by virtue of this section to any remedy against that person or banker, or any person whose title to any property derives from that person or banker.'.

  CONSEQUENTIAL AMENDMENTS TO THE BILL
  299A Page 190, line 22, leave out ("and")
  299B Page 190, line 23, leave out ("in subsections (5) and ") and insert—
  ("for subsection (5) there shall be substituted the following subsection—

  "(5) Subject to subsection (6) below, the title of a trustee in bankruptcy shall be void as against a purchaser of a legal estate in good faith for money or money's worth unless the bankruptcy order is for the time being registered under this section"; and

  (d) in subsection ")
  299C Page 206, line 2, column 3, leave out ("(5) and")

  COMMONS AMENDMENTS
  300 Clause 137, page 109, line 14, leave out 'out of the bankrupt's estate, purchase' and insert 'apply funds comprised in the bankrupt's estate to the purchase by or on behalf of the bankrupt of.
  301 Page 109, line 15, leave out 'him' and insert 'the trustee'.
  303 Clause 139, page 110, line 30, at end insert '; but notice of the deemed assignment shall not be required to be given except in so far as it is necessary, in a case where the deemed assignment is from the bankrupt himself, for protecting the priority of the trustee.'.
  323 Clause 146, page 118, line 9, at end insert—
  '(2A) Sums due from the bankrupt to another party shall not be included in the account taken under subsection (2) above if that other party had notice at the time they became due that a bankruptcy petition relating to the bankrupt was pending.'.
  324 Clause 147, page 118, line 40 leave out 'in the hands of the trustee' and insert 'available for the payment of any further dividend'.
  325 Page 118, line 44, leave out from 'before' to the end of line 2 on page 119 and insert 'that money is applied to the payment of any such further dividend'.
  328 Clause 148, page 119, line 25, after 'themselves' insert 'after the expenses of the bankruptcy'.
  335 Clause 158, page 129, line 7, leave out 'served on' and insert 'given to'.
  336 Page 130, line 19, leave out subsection (8) and insert—
  '(8) Neither subsection (2) nor subsection (3) above shall apply in relation to any execution against property which has been acquired by or has developed upon the bankrupt since the commencement of the bankruptcy unless, at the time the execution is issued or before it is completed—

  (a) the property has been or is claimed for the bankrupt's estate under section 136 above; and

  (b) a copy of the notice given under that section has been or is served on the sheriff or other officer charged with the execution.'.

  354 Clause 175 page 141, line 27, leave out 'him' and insert 'the bankrupt'.
  355 Clause 176, page 143, line 6 leave out from beginning to ("correspondence") in line 11 and insert—

  ("(a) any return, account or accounts submitted (whether before or after the commencement of the bankruptcy) by the bankrupt to any inland revenue official;

  (b) any assessment or determination made (whether before or after the commencement of the bankruptcy) in relation to the bankrupt by any inland revenue official; or

  (c) any").

  356 Clause 178, page 144, line 33, leave out 'letter, packet or telegram' and insert 'postal packet' within the meaning of the Post Office Act 1953).'.
  358 Clause 181, page 146, line 17, leave out from second 'Appeal' to the end of line 21.
  361 Clause 185, page 147, line 22, leave out 'power of attorney, proxy paper'.
  363 Clause 187, page 148, line 17, at end insert—
  '(1A) The Lord Chancellor may, with the sanction of the Treasury, by order provide for sums to be deposited, by such persons, in such manner and in such circumstances as may be specified in the order, by way of security for—

  (a) fees payable by virtue of this section; and

  (b) fees payable to any person who has prepared a report under section 106(3) above.'.

  364 Page 148, line 18, leave out 'Without prejudice to the generality of subsection (1) above'.
  365 Page 148, line 20, leave out '(including provision requiring deposits by way of security)'.
  366 Clause 188, page 148, line 35, leave out 'and'.
  367 Page 148, line 36, at end insert 'and (g) section 173(2)(d);'
  380 Page 153, line 17, leave out 'individual in question' and insert 'relevant person'.
  384 Clause 192, page 154, line 40, at end insert—
  ' (7) Subject to the preceding provisions of this section, so much of this Act and of any other enactment (whenever passed) and of any subordinate legislation (whenever made) as—

  (a) makes provision for or in connection with bankruptcy in one or more parts of the United Kingdom; or

  (b) makes provision conferring a power of arrest in connection with the winding-up or insolvency of companies in one or more parts of the United Kingdom,

  shall apply in relation to persons having privilege of Parliament or peerage as it applies in relation to persons not having such privilege.'.
  385 Clause 193, page 155, line 4, after 'receiver' insert 'or the official assignee'.
  386 Page 155, line 21, after 'receiver' insert 'or official assignee'.

  AMENDMENT IN LIEU OF COMMONS AMENDMENT NO. 386
  386A The Lord Bruce of Donington to move. That this House do disagree with the Commons in their Amendment No. 386, but propose the following amendment in lieu thereof:
  386B Page 155, line 17, leave out from second ("certificate") to end of line 22 and insert ("attaching a copy of an order of the court giving the official receiver, official assignee, liquidator or administrator leave to apply to the registrar following an application to the court for directions in that regard")

  COMMONS AMENDMENTS
  387 Page 155, leave out line 29.
  388 Page 155, line 33, after 'Scotland' insert—

  '(c) references to the official assignee are references to the Official Assignee for Bankruptcy in Northern Ireland or the Official Assignee for Company Liquidations in Northern Ireland; and

  (d) references to a company include references to a company registered or incorporated in Northern Ireland and references to a bankrupt include references to a person adjudged bankrupt in Northern Ireland.'

  397 Clause 201, page 160, line 13, at end insert 'and the appointment of any person as a member of the committee shall be made by the Lord Chancellor.'.
  399 Clause 205, page 161, line 18, at beginning insert 'In any proceedings (whether or not under this Act)'.
  402 Clause 210, page 164, line 36, after 'III', insert 'or IV.
  413 Page 165, line 36, leave out 'the Isle of Man'.
  476 Page 181, line 3, after '(2)', insert 'An order under this section may contain such transitional provisions as may appear to the Secretary of State necessary or expedient.
  (2A)'.
  477 Page 181, line 9, leave out '(2)' and insert '(2A)'.
  510 Page 189, line 31, at end insert—
  'The Insolvency Services (Accounting and Investment) Act 1970
  15A. In section 4 of the Insolvency Services (Accounting and Investment) Act 1970 (payment of interest under section 660(5) of the 1985 Act), for the words from "section 660(5)" to "1948" there shall be substituted the words "rules made by virtue of paragraph 13 of Schedule 4 to the Insolvency Act 1985.".'
  530 Page 197. line 29, leave out '18' and insert '17A'.
  534 Page 199, line 47, at end insert—
  '11A. Transactions entered into before the bankruptcy commencement date shall have effect on and after that date as if references to acts of bankruptcy in the provisions for giving effect to those transactions continued to be references to acts of bankruptcy within the meaning of the Bankruptcy Act 1914, but as if such acts included failure to comply with a demand served under section 103(3) of this Act.'.
  535 Page 200, line 23, leave out 'or any rules made thereunder' and insert ', any rules made under that Act or any such rules as are mentioned in paragraph 17(1) below'.
  537 Page 201, line 12, at end insert—
  'Copyright
  14A Where a person who is adjudged bankrupt on a petition presented after the bankruptcy commencement date is liable, by virtue of a transaction entered into before that date, to pay royalties or a share of the profits to any person in respect of any copyright or interest in copyright comprised in the bankrupt's estate, section 60 of the Bankruptcy Act 1914 (limitation on trustee's powers in relation to copyright) shall apply in relation to the trustee of that estate as it applies in relation to a trustee in bankruptcy under the said Act of 1914.
  538 Page 201, line 12, at end insert—
  'Second bankruptcy
  14B—(1) Section 152 of this Act shall apply with the following modifications where the earlier bankruptcy

  1205
  (within the meaning of that section) is a bankruptcy in relation to which the Bankruptcy Act 1914 applies instead of Part III of this Act, that is to say—

  (a) references to property vested in the existing trustee under section 136(3) of this Act shall have effect as references to such property vested in that trustee as was acquired by or devolved on the bankrupt after the commencement (within the meaning of the said Act of 1914) of the earlier bankruptcy; and

  (b) references to an order under section 138 of this Act shall have effect as references to an order under section 51 of the said Act of 1914.

  (2) Section 39 of the said Act of 1914 (second bankruptcy) shall not apply where a person who is an undischarged bankrupt under that Act is adjudged bankrupt under this Act.'.
  539 Page 202, line 4, at end insert—

  'PART IV MISCELLANEOUS
  19.—(1) A transaction entered into before the coming into force of section 191 of this Act shall not be set aside under that section except to the extent that it could have been set aside under the law in force immediately before that date.
  (2) References in sub-paragraph (1) above to setting aside a transaction include references to the making of any order which varies or reverses any effect of a transaction.'.

  CONSEQUENTIAL AMENDMENT TO THE BILL
  539A Page 165, line 20, leave out ("Part III") and insert ("Parts III and IV").

  COMMONS AMENDMENTS
  543 Page 202, leave out lines 21 to 23.
  544 Page 202, line 38, column 3. at end insert—

  'In section 512(3), the words from "but no" onwards.

  In section 515(5), the words from "but no" onwards.

  In section 518(2), the words from "but no" onwards.'

  548 Page 203, column 3, leave out lines 37 to 39 and insert—

  'Sections 611 to 615. Sections 616 to 618'.

  549 Page 203, line 42, column 3, at end insert—

  'In section 622(7), the words from "but no" onwards.

  In section 625(1), the words "with intent to defraud creditors of the company" and the words "with that intent".'

  This amendment, No. 96, with the others, form a very large group of amendments. They consist essentially of drafting and technical amendments relating to winding up, bankruptcies and miscellaneous matters. The amendments improve upon and give greater clarity to the Bill, or involve the re-enactment of current provisions in insolvency legislation. Of course, I shall be quite happy should your Lordships so wish, to expand on any individual amendment. Otherwise, I do not think that it would be over-helpful to take up the time of the House by going into details on every matter.
  However, there are six new amendments in this category: three consequential upon Commons
  1206
  Amendment No. 299, revised for the sake of greater clarity; a consequential amendment by the Bill to the Land Charges Act 1972; and the two amendments consequential upon Commons Amendment No. 388, which correct the title of the relevant official in Northern Ireland. Amendment No. 539A inserts a reference which is consequential upon Commons Amendment No. 539, which itself adds a new Part to Schedule 8 to the Bill in providing transitional provisions in relation to Clause 191 of the Bill. That deals with transactions defrauding creditors and, in itself, replaces Section 172 of the Law of Property Act.
  The noble Lord, Lord Bruce of Donington, has tabled amendments to Amendment No. 386 which appear in this group. I do not know whether the noble Lord would like me to comment upon his amendments at this stage, or whether he would prefer to leave it until later. In view of his indication, I commend this large block of amendments to the House.
  Moved, That the House do agree with the Commons in their Amendment No. 96—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  97 to 100 [Printedabove.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 97 to 100 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 9? to 100—(Lord Lacas of Chilworth.)
  On Question, Motion agreed to.
  [Amendment No. 100A not moved.]

  COMMONS AMENDMENT
  101 After Clause 34, insert the following new clause:
  "Power to dispose of charged property etc.
  .—(1) Where, on an application by the administrative receiver of a company, the court is satisfied that the disposal (with or without other assets) of any relevant property which is subject to a security other than one to which subsection (2) below applies would be likely to promote a more advantageous realisation of the company's assets than would otherwise be effected, the court may by order authorise the administrative receiver to dispose of the property as if it were not subject to the security.
  (2) This subsection applies to—

  (a) any security held by the person by or on whose behalf the administrative receiver was appointed: and

  (b) any security to which a security falling within paragraph (a) above has priority.

  (3) It shall be a condition of an order under this section that—

  (a) the net proceeds of the disposal; and

  (b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would be realised on a sale of the property in the open market by a willing vendor, such sums as may be required to make good the deficiency,

  shall be applied towards discharging the sums secured by the security.
  (4) Where a condition imposed in pursuance of subsection (3) above relates to two or more securities, that condition shall require the net proceeds of the disposal and, where paragraph (b) of that subsection applies, the

  1207
  sums mentioned in that paragraph to be applied towards discharging the sums secured by those securities in the order of their priorities.
  (5) An office copy of an order under this section shall, within fourteen days of the making of the order, be sent by the administrative receiver to the registrar of companies.
  (6) If the administrative receiver without reasonable excuse fails to comply with subsection (5) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.
  (7) In this section "relevant property", in relation to the administrative receiver of a company, means the property of which he is or, but for the appointment of some other person as the receiver of part of the company's property, would be the receiver or manager.".).
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 101. I should also like to speak to Amendments Nos. 129 and 129A.
  129 After Clause 43, insert the following new clause—
  ("Disposal of interest in properly.
  .—(1) Section 477 of the 1985 Act (disposal of interest in property) shall be amended as follows—
  (2) In subsection (2)

  (a) at the beginning there shall be inserted the words "Subject to subsection (2A) below,"; and

  (b) the words from "But that authorisation" to the end of the subsection shall be omitted.

  (3) After subsection (2) there shall be inserted the following subsection—

  "(2A) In the case of an application where a fixed security over the property or interest in question which ranks prior to the floating charge has not been met or provided for in full, the court shall not authorise the sale or disposal of the property or interest in question unless it is satisfied that the sale or disposal would be likely to provide a more advantageous realisation of the company's assets than would otherwise be effected.

  (2B) It shall be a condition of an authorisation to which subsection (2A) above applies that—

  (a) the net proceeds of the disposal; and

  (b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would be realised on a sale of the property or interest in the open market by a willing seller, such sums as may be required to make good the deficiency,

  shall be applied towards discharging the sums secured by the fixed security.
  (2C) Where a condition imposed in pursuance of sub-section (2B) above relates to two or more such fixed securities, that condition shall require the net proceeds of the disposal and, where paragraph (b) of that subsection applies, the sums mentioned in that paragraph to be applied towards discharging the sums secured by those fixed securities in the order of their priorities.
  (2D) A copy of an authorisation under subsection (2) above certified by the clerk of court shall, within 14 days of the granting of the authorisation, be sent by the receiver to the registrar of companies.
  (2E) If the receiver without reasonable excuse fails to comply with subsection (2D) above, he is liable to a fine and, for continued contravention, to a daily default fine." ")

  AMENDMENT CONSEQUENTIAL ON COMMONS AMENDMENT NO. 129
  129A Page 202, line 26, column 3, at end insert—

  ("In section 477(2), the words from "But that authorisation" onwards.")

  My Lords, these amendments introduce two new clauses, the first of which replaces Clause 35 and reproduces the provisions contained in that clause and adds several refinements. The second brings the provisions for Scotland into line with those for England and Wales. The new clause is designed to enable the administrative receiver in England and Wales and the receiver in Scotland to sell a property free from a security if the court is satisfied that the sale is likely to promote a more advantageous realisation of the assets.
  In most cases it is envisaged that a receiver would be able to negotiate with chargeholders to persuade them to sell a charged asset as part of his rescue scheme. However, this provision may be used by the receiver when a successful receivership is being frustrated by a secured creditor who refuses to allow assets charged to them to be sold unless the security is redeemed in full. The chargeholders' interests are protected by the provisions which make it a condition of any order that the net proceeds must be handed to the chargeholder, which will be the amount likely to be raised by a sale on the open market by a willing vendor less any necessary expenses incurred in effecting the sale.
  If the amount realised is less then it will be a condition of the order that the receiver pays over the difference. It is not intended that the power of sale should extend to fixed charge properties over which the appointer of the administrator receiver has no subsequent floating charge. This is made clear in subsection (7) of Amendment No. 101. A further refinement is the requirement that the receiver should send an office copy of the order to the registrar of companies with penalties for failure to do so. This is so that third parties may satisfy themselves with a receiver's powers to effect a sale.
  The amendment to Amendment No. 129 makes a minor consequential amendment to Section 477 of the Companies Act 1985. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 101.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  102 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg formally to move that the House do agree with the Commons in their Amendment No. 102.
  Moved, That the House do agree with the Commons in their Amendment No. 102.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  103 Clause 36, page 25, line 38, leave out from beginning to 'and' in line 40 and insert "by him in the carrying out of his functions (except in so far as the contract otherwise provides) and on any contract of employment adopted by him in the carrying out of those functions;'
  9.15 p.m.
  Lord Cameron of Lochbroom: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 103, and I would also speak to

  1209
  Amendments Nos. 104, 104A, 105, 108, 108A, 128, 128A, 128B, 130, 131, 451 and 451A.
  104 Page 25, line 42, at end insert '; and for the purposes of paragraph (b) above the administrative receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.'

  AMENDMENT TO COMMONS AMENDMENT No. 104
  104A At end insert ("or unless by a specific novation signed by him or on his behalf he adopts such a contract expressly")

  COMMONS AMENDMENTS
  105 Page 26, line 1, leave out subsections (2) and (3) and insert—
  '(2) This section does not limit any right to indemnity which the administrative receiver would have apart from it, nor limit his liability on contracts entered into or adopted without authority, nor confer any right to indemnity in respect of that liability.'
  108 Clause 37, page 26, line 15, at end insert—
  '(3) Where at any time an administrative receiver of a company vacates office—

  (a) his remuneration and any expenses properly incurred by him; and

  (b) any indemnity to which he is entitled out of the assets of the company,

  shall be charged on and paid out of any property of the company which is in his custody or under his control at that time in priority to any security held by the person by or on whose behalf he was appointed.
  (4) Where an administrative receiver of a company vacates office otherwise than by death, he shall, within fourteen days after his vacation of office, send a notice to that effect to the registrar of companies.
  (5) If an administrative receiver of a company fails to comply with subsection (4) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.'

  AMENDMENT TO COMMONS AMENDMENT No. 108
  108A Line 16, after ("company") insert ("without reasonable excuse")

  COMMONS AMENDMENT
  128 After Clause 43, insert the following new clause: Agency and liability of receiver for contracts.
  (".—(1) Section 473 of the 1985 Act (agency and liability of receiver for contracts) shall be amended as follows.
  (2) In subsection (2), after the word "provides" there shall be inserted the words ", and on any contract of employment adopted by him in the carrying out of those functions".
  (3) After subsection (4) there shall be inserted the following subsections—

  "(4A) For the purposes of subsection (2), a receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within 14 days after his appointment.

  (4B) This section does not limit any right to indemnity which the receiver would have apart from it, nor limit his liability on contracts entered into or adopted without authority, nor confer any right to indemnity in respect of that liability." ")

  AMENDMENT TO COMMONS AMENDMENT No. 128
  128A Line 4, after ("subsection (2)") insert—("—

  (a) the words "Subject to subsection (1)" shall be omitted; and

  (b) ").

  1210
  [Consequential on Amendment No. 128]
  128B Page 202, line 26, column 3, at end insert—

  ("In section 473(2), the words "Subject to subsection (1)".")

  COMMONS AMENDMENTS
  130 Clause 44, page 31, line 6, leave out from beginning to 'for' in line 7 and insert—
  '44.—(1) Section 478 of the 1985 Act (vacation of appointment by receiver) shall be amended as follows.
  (2) '.
  131 Page 31, line 16, at end insert—
  '(3) For subsection (4) there shall be substituted the following subsection—
  "(4) Where at any time a receiver vacates office—

  (a) his remuneration and any expenses properly incurred by him; and

  (b) any indemnity to which he is entitled oui of the property of the company,

  shall be paid out of the property of the company which is subject to the floating charge and shall have priority as provided for in section 476(1).".
  (4) In subsection (5) for the words "7 days" there shall be substituted the words "14 days".'
  451 Schedule 5, page 177, line 21, at end insert—
  '(3) In subsection (3), after the word "(provides) there shall be inserted the words 'and on any contract of employment adopted by him in the performance of those functions".
  (4) After that subsection there shall be inserted the following subsections—

  "(4) For the purposes of subsection (3)(a)' the receiver or manager is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.

  (5) Where at any time a receiver or manager so appointed vacates office—

  (a) his remuneration and any expenses properly incurred by him;

  (b) any indemnity to which he is entitled out of the assets of the company,

  shall be charged on and paid out of any property of the company which is in his custody or under his control at that time in priority to any charge or other security held by the person by or on whose behalf he was appointed." '.
  451 A Line 14, at end insert ("and").
  So far as these amendments are concerned, they have two broad purposes. First, Amendments Nos. 108,130,131 and 451 improve the drafting of Clauses 37 and 44, which reinforce the indemnity in respect of personal and other liabilities as well as remuneration expenses to which receivers appointed out of court are to be entitled on their vacation of office. Subsection (5) of Amendment No. 451 also extends this reinforcement of the indemnity to all receivers afforded protection against personal liability by virtue of Section 492 of the 1985 Act.
  Secondly, Amendments Nos. 103 to 105, 128 and 451 deal with the liability of receivers in England, Wales and Scotland under contracts they enter into or adopt. At present the Bill provides that the receiver is to be personally liable for debts incurred by him under contracts he enters into or adopts unless the contract otherwise provides. Clause 36 provides that the administrative receiver would be liable to meet such debts incurred by him from the assets of the company

  1211
  in respect of which he was appointed. As I explained when moving Amendment No. 68, great concern was expressed that the existing provisions in these clauses in relation to the adoption of contracts were not satisfactory.
  We are now satisfied that provisions as broad in scope as Clauses 21 and 36 are not necessary. Generally speaking, receivers pay for benefits they obtain after their appointment under contracts which existed at the time of their appointment. There is, however, a difficulty in relation to contracts of employment, to which I have already drawn your Lordships' attention earlier in speaking on Amendment No. 68.
  The amendments now before this House are therefore designed to make it clear that debts and liabilities incurred under contracts of employment adopted by receivers shall be a personal liability which he will be expected to meet either from funds made available to him by his chargeholder or from his indemnity out of and charge over the company's assets. These liabilities will rank for payment ahead of the chargeholder by whom he was appointed. Receivers and administrators are given a chance to decide whether or not to adopt existing contracts of employment on their appointment in that, for a period of 14 days, nothing they do or omit to do will be taken as constituting adoption.
  So far as the amendments to Amendment No. 108 are concerned, they ensure that an administrative receiver will not commit an offence under subsection (5) inserted by Amendment No. 108, if he has a reasonable excuse for not sending the requisite notice to the registrar. This is in line with other provisions in the Bill.
  The amendment to Amendment No. 451 is purely a drafting amendment. As for the amendment to Amendment No. 128, this removes a contradictory qualification on a Scottish receiver's personal liability by removing the reference to Section 473(1) of the Companies Act 1985 in Section 473(2) of that Act. The consequential amendment inserts the relevant words into the repeals schedule to the Bill.
  On Amendment No. 104A, which was put down by the noble Lord, Lord Bruce of Donington, which I undertook to consider in this particular answer, I made clear that this amendment is not acceptable, for these reasons. The purpose of Commons Amendments Nos. 103 and 104 is to provide a measure of protection to employees of companies to which administrative receivers are appointed. The recent decision of the Appeal Court concerning the effect of Section 492 of the 1985 Act, to which I have already referred, appeared to indicate that a receiver could take the benefit of services under an existing employment contract and then refuse payment on the grounds that the contract of employment was with the company, which was of course insolvent. Clearly this is not a desirable state of affairs.
  These amendments therefore indicate to the court that during the period of grace of 14 days after appointment the receiver should normally take steps to indicate to employees whether or not he intends to adopt their employment contracts. This does not
  1212
  mean that failure to do so of itself will constitute adoption. I think it is perhaps fear of that consequence that has alarmed some practitioners. Where, for example, the contract is not discovered for a month after appointment, the court will not deem adoption to take place by that fact alone; rather it will examine the circumstances, including in particular whether services under the contract had been rendered to the receiver. Thus fears of the kind that I have mentioned are not justified or justifiable.
  Amendment No. 104A would undermine this proposal by providing the alternative formulation of a specific document expressly signed constituting adoption. The receiver would be able to argue that in the absence of such a document no adoption had taken place. That is very far from the purpose which the amendments are intended to secure. I hope that the noble Lord will bear these matters in mind when the amendment is reached.
  Lord Bruce of Donington: My Lords, throughout the proceedings the noble and learned Lord has adopted the method of the pre-emptive strike—in other words, in discussing the various amendments that he is putting forward and in discussing the Commons amendments, the procedure he has adopted endeavours to cut the ground from beneath my feet before I have even started to extol the virtues of my amendments. I am not over-disturbed by this. I must defer to my noble friend Lord Mishcon in these matters because he is a lawyer and I am not; but it appears that I was trying to help the noble and learned Lord and he was trying to help me, and we have the roles mixed. It would have been more appropriate for the noble and learned Lord on his understanding of the position to have moved my amendment and for me to have moved his.
  The wording of the amendment gives me cause for some thought. Clause 36 of Bill 127 says at page 25:
  "The administrative receiver of a company—

  (a) shall be deemed to be the agent of the company unless and until the company goes into liquidation;

  (b) shall be personally liable on any contract entered into or adopted by him in the carrying out of his functions (except in so far as the contract or a notice under subsection (2) below otherwise provides); and

  (c) shall be entitled in respect of that liability to an indemnity out of the assets of the company".

  In Amendment No. 104 the noble and learned Lord wants to add at the end of line 42, if my arithmetic is correct, immediately after paragraph (c) of the clause in Bill No. 127:
  "and for the purposes of paragraph (b) above"—
  that is the one that makes him personally liable—
  "the administrative receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment".
  I now understand why learned members of the bar are able to earn such prodigious fees in arguing with one another about the construction of various clauses. I must confess that the straightforward logic of this one does not appear to me. It is very difficult to understand.
  The only reason why my amendment was put down with the words,

  1213
  "or unless by a specific novation signed by him or on his behalf he adopts such a contract expressly",
  was that I was under the impression that the receiver might, for fear of becoming personally liable, dismiss employees, which of course is the exact opposite of the desired effect. That is the logic as I see it. The noble and learned Lord, who, I repeat, is much more learned in matters of the law than I am—in fact, I operate on the very fringes of the law—has put forward an alternative version in which he obviously believes. I have not even taxed my noble friend Lord Mishcon on what he thinks about it.
  I have no alternative, given the legal reputation of the noble and learned Lord opposite, but to prefer his explanation to mine. His wisdom must prevail over my apparent ignorance, and in the circumstances, I do not propose moving my amendment to Amendment No. 104A.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  104 [Printed above.}
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 104.
  Moved, That this House do agree with the Commons in their Amendment No. 104.—(Lord Cameron of Lochbroom.)
  [Amendment No. 104A not moved.]
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  105 to 108A [Printed above.)
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 105 to 108 as amended by Amendment No. 108A.
  Moved, That this House do agree with the Commons in their Amendments Nos. 105 to 108 as amended by Amendment No. 108A—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  109 Clause 38, page 26, line 22, leave out 'fourteen' and insert 'twenty-eight'.
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 109, and I shoud like to speak also to Amendments Nos. 117, 133 and 139:

  COMMONS AMENDMENTS
  117 After Clause 38, insert the following new clause:
  ("Statement of affairs to be submitteed to administrative receiver.
  .—(1) Where an administrative receiver of a company is appointed, the administrative receiver shall forthwith require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.
  (2) A statement submitted under this section shall be verified by affidavit by the persons required to submit it and shall show—
  1214

  (a) particulars of the company's assets, debts and liabilities;

  (b) the names and addresses of its creditors;

  (c) the securities held by them respectively;

  (d) the dates when the securities were respectively given; and

  (e) such further or other information as may be prescribed.

  (3) The persons referred to in subsection (1) above are—

  (a) those who are or have been officers of the company;

  (b) those who have taken part in the company's formation at any time within one year before the date of the appointment of the administrative receiver;

  (c) those who are in the company's employment, or have been in its employment within that year, and are in the adminstrative receiver's opinion capable of giving the information required;

  (d) those who are or have been within that year officers of or in the employment of a company which is, or within that year was, an officer of the company;

  and in this subsection "employment" includes employment under a contract for services.
  (4) Where any persons are required under this section to submit a statement of affairs to the administrative receiver, they shall do so (subject to subsection (5) below) before the end of the period of twenty-one days beginning with the day after that on which the prescribed notice of the requirement is given to them by the adminstrative receiver.
  (5) The administrative receiver, if he thinks fit may—

  (a) at any time release a person from an obligation imposed on him under subsection (1) or (2) above; or

  (b) either when giving the notice mentioned in subsection (4) above or subsequently, extend the period so mentioned;

  and where the administrative receiver has refused to exercise a power conferred by this subsection, the court, if it thinks fit, may exercise it.
  (6) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he shall be liable—

  (a) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, to a daily default fine not exceeding one-tenth of the statutory maximum;

  (b) on conviction on indictment, to a fine.")

  133 Clause 46, page 31, line 37, leave out '14' and insert '28'.
  139 Clause 47, page 32, line 27, leave out from beginning to end of line 29 on page 33 and insert—
  ("Company's statement of affairs
  "482.—(1) Where a receiver of a company is appointed, the receiver shall forthwith require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.
  (2) A statement submitted under this section shall be verified by affadavit by the persons required to submit it and shall show—

  (a) particulars of the company's assets, debts and liabilities;

  (b) the names and addresses of its creditors;

  (c) the securities held by them respectively;

  (d) the dates when the securities were respectively given; and

  (e) such further or other information as may be prescribed.

  (3) The persons referred to in subsection (1) above are—

  (a) those who are or have been officers of the company;

  (b) those who have taken part in the company's formation at any time within one year before the date of the appointment of the receiver,

  1215

  (c) those who are in the company's employment, or have been in its employment within that year, and are in the receiver's opinion capable of giving the information required;

  (d) those who are or have been within that year officers of or in the employment of a company which is, or within that year was, an officer of the company;

  and in this subsection "employment" includes employment under a contract for services.
  (4) Where any persons are required under this section to submit a statement of affairs to the receiver they shall do so (subject to subsection (5) below) before the end of the period of 21 days beginning with the day after that on which the prescribed notice of the requirement is given to them by the receiver.
  (5) The receiver, if he thinks fit, may—

  (a) at any time release a person from an obligation imposed on him under subsection (1) or (2) above; or

  (b) either when giving the notice mentioned in subsection (4) above or subsequently extend the period so mentioned,

  and where the receiver has refused to exercise a power conferred by this subsection, the court, if it thinks fit, may exercise it.
  (6) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he shall be liable to a fine and, for continued contravention, to a daily default fine."
  These amendments deal with the submission of a company's statement of affairs and notification of the receiver's appointment. Their main purpose is to achieve consistency between the provisions concerning statements of affairs in the administrator procedure, in receiverships, and in compulsory winding-up, and bring the time limit for notification of the receiver's appointment into line with the equivalent provisions for administrators.
  Amendment No. 117 makes the submission of a statement of affairs to the administrative receiver compulsory. This is because of its importance in helping the administrative receiver, who will frequently be continuing to trade, to assess the position of the business. This differs from the provisions in a compulsory winding-up where in most cases trading has ceased and the official receiver may at his discretion dispense with the requirement for a statement of affairs to be prepared.
  The time limit for the submission of the statement of affairs remains 21 days but the new clause enables the administrative receiver to extend the period within which it must be submitted without leave of the court. It also enables the administrative receiver to release a person from an obligation to submit a statement of affairs if, having given notice to that person to do so, he subsequently discovers that the person is unable to comply.
  If the administrative receiver has either refused to extend the time limit or release a person from his obligation the parties concerned may apply to the court to extend the limit or release the person from that obligation if it thinks fit. Amendment No. 139 achieves the same effect in relation to receivers in Scotland.
  Amendment No. 109 puts into effect the time limit recommended by the review committee within which the receiver must advise all known creditors of his
  1216
  appointment unless otherwise directed by the court, and Amendment No. 133 amends the equivalent Scottish receivership provision. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 109.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  110–120 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 110 to 120 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 110 to 120.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  121 Page 29, line 13, at end insert—
  '(5A) Nothing in this section shall be taken as requiring any such report to include any information the disclosure of which would seriously prejudice the carrying out by the administrative receiver of his functions.'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 121. In speaking to that amendment, I should like to speak also to Amendment No. 142:
  142 Clause 48, page 35, line 4, at end insert—
  '(5 A) Nothing in this section shall be taken as requiring any such report to include any information the disclosure of which would seriously prejudice the carrying out by the receiver of his functions'.
  Both amendments deal with the information which the administrative receiver in England and Wales and the receiver in Scotland provides to creditors in his report. These amendments will enable the administrative receiver to exclude information which might be commercially sensitive and likely to prejudice amounts realised on the sale of assets to the detriment of the company's creditors as a whole. I beg to move.
  Moved, That this House do agree with the Commons in their amendment No. 121.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMDENDMENTS
  122 to 128A [Printed above.]
  9.30 p.m.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 122 to 126, Amendment No. 127, as amended by my Amendment No. 127A, and Amendment No. 128, as amended by my Amendment No. 128A.
  Moved, that this House do agree with the Commons in their Amendments Nos. 122 to 126 and Amendments Nos. 127 and 128 as amended by Amendments Nos. 127A and 128A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT No. 128
  128B [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally Amendment No. 128B as a consequential amendment to the Bill.
  Moved, That this House do agree with Amendment No. 128B.—(Lord Lucas of Chilworth.)
  On Question, Amendment agreed to.

  COMMONS AMENDMENT
  129 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 129.
  Moved, That this House do agree with the Commons in their Amendment No. 129.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT NO. 129
  129A [Printed above]
  Lord Lucas of Chilworth: My Lords, I beg to move formally Amendment No. 129A as a consequential amendment to the Bill.
  Moved, That this House do agree with Amendment No. 129A—(Lord Lucas of Chilworth.)
  On Question, Amendment agreed to.

  COMMONS AMENDMENTS
  130 to 134 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 130 to 134.
  Moved, That this House do agree with the Commons in their Amendments Nos. 130 to 134.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT NO. 134
  134A [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally Amendment No. 134A as a consequential amendment to the Bill.
  Moved, That this House do agree with Amendment No. 134A.—(Lord Lucas of Chilworth.)
  On Question, Amendment agreed to.

  COMMONS AMENDMENTS
  135 to 145 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 135 to 145.
  Moved, That this House do agree with the Commons in their Amendments Nos. 135 to 145.—(Lord Lucas of Chilworth.)
  On Question. Motion agreed to.

  COMMONS AMENDMENTS
  146 Clause 52, page 37, line 21, after first 'as' insert 'liquidator or'.
  147 Clause 53, page 38, line 33, at end insert—
  '(1 A) It shall be the duty of the liquidator of a company which is being wound up by the court in England and Wales, if he is not the official receiver—

  (a) to furnish the official receiver with such information;

  (b) to produce to the official receiver, and permit inspection by the official receiver of, such books, papers and other records; and

  (c) to give the official receiver such other assistance,

  as the official receiver may reasonably require for the purposes of carrying out his functions in relation to the winding up.'.
  Lord Lucas of Chilworth: My Lords, I beg to move Amendments Nos. 146 and 147. In speaking to these two amendments I should like also to speak to Amendments Nos. 154, 160, 164, 197,201,206. 207, 209, 278, 289, 291 to 293, 295, 296, 306, 310 to 314, 347 to 353, 444, 464, 483, 522, 545 and 554.
  154 Clause 58, page 42, line 20, leave out 'court' and insert 'Secretary of State'.
  160 Clause 63, page 46, line 11, after'56(4)(a)'insert 'or 57(1)'
  164 Clause 64, page 47, line 27, leave out from 'resigned' to end of line 28 and insert ', such time as may be prescribed;'.
  197 Clause 70, page 54, line 1, leave out from 'resigned' to end of line 3 and insert ', such time as may be prescribed.
  201 Clause 74, page 56, line 27, leave out subsections (4) and (5).
  206 Clause 81, page 62, line 11, leave out 'of the persons mentioned in subsection (2) below' and insert 'person
  207 Page 62, line 18, leave out subsection (2).
  209 Clause 82, page 63, line 32, leave out 'goes into liquidation in England and Wales' and insert 'is being wound up by the court—

  (a) as if the persons referred to in subsection (2) above included any person who has acted as liquidator, administrator or administrative receiver of the company; and

  (b) where the court is in England and Wales.'.

  278 Clause 115, page 94, line 37, at end insert—
  '(4A) Where an interim receiver has been appointed under this section the debtor shall give the interim receiver such inventory of his property and such other information, and shall attend on the interim receiver at such times, as the interim receiver may for the purpose of carrying out his functions under this section reasonably require.'.
  289 Clause 127, page 102, line 20, after 'or' insert ', otherwise than under section 126(4) above,'.
  291 Clause 128, page 103, line 32, leave out from 'resigned' to end of line 33 and insert ', such time as may be prescribed;'.
  292 Clause 129, page 104, line 19, leave out ' 130(3)' and insert '142(8)'.
  293 Clause 130, page 105,line 10,leaveoutsubsections(2) and (3).
  295 Clause 131, page 106, line 3, leave out 'court' and insert 'Secretary of State'.
  296 Clause 134, page 107, line 24, at end insert—
  '(2A) It shall be the duty of the trustee, if he is not the official receiver—

  (a) to furnish the official receiver with such information;

  (b) to produce to the official receiver, and permit inspection by the official receiver of. such books, papers and other records; and

  1219

  (c) to give the official receiver such other assistance, as the official receiver may reasonably require for the purpose of enabling him to carry out his functions in relation to the bankruptcy.'.

  306 Clause 142, page 113, line 41, after 'and' insert ', in respect of the bankrupt's estate, on'.
  310 Page 114, line 8, at end insert 'and, subject to the preceding provisions of this Part, the trustee shall summon such a meeting if he is requested to do so by a creditor of the bankrupt and the request is made with the concurrence of not less than one-tenth, in value, of the bankrupt's creditors (including the creditor making the request)'.
  311 Clause 143, page 114, line 21, leave out from 'which' to 'is' in line 22.
  312 Page 114, line 28, after 'bankrupt', insert 'and his estate'.
  313 Page 114, line 35, at end insert—
  '(3A) A notice of disclaimer shall not be given under this section in respect of any property that has been claimed for the bankrupt's estate under section 136 or 137 above except with the leave of the courts.'.
  314 Page 114, line 36, leave out subsections (4) and (5).
  347 Clause 174, page 141, line 5, after 'is' insert ', or any books, papers or records relating to the bankrupt's estate or affairs which are,'.
  348 Page 141, line 6, at end insert 'who is required to deliver the property, books, papers or records to the official receiver or trustee'.
  349 Page 141, line 9, after 'estate' insert' or any books, papers or records relating to the bankrupt's estate or affairs'.
  350 Page 141, line 10, leave out 'any such property' and insert 'anything that may be seized under the warrant'.
  351 Page 141, line 11, leave out 'any such property' and insert 'anything that may be so seized'.
  352 Page 141, line 14, after 'is' insert 'or any books, papers or records relating to the bankrupt's estate or affairs are'.
  353 Page 141, line 17, after 'property' insert 'books, papers or records'.
  444 Schedule 4, page 175, line 10, after '50' insert '53(1A)'.
  464 Schedule 5, page 179, line 13, leave out paragraph 25.
  483 Schedule 6, page 182, line 43, at end insert 'and, in the case of any requirement imposed under section 134(2A) of this Act, provision conferring power on the court to make orders for the purpose of securing compliance with that requirement'.
  522 Schedule 7, page 195, line 9, at end insert—
  '(1A) In section 55(5) (creditors' meetings etc. in winding up of company with long term business), for the words "subsections (1) to (3) of section 540" there shall be substituted the words "subsection (3) of section 540".'.
  545 Schedule 9, page 203, line 2, column 3, leave out from '540,' to end of line 4, and insert 'subsections (1) and (2)'.
  554 Page 204, line 37, column 3, after 'sections' insert '55(5),'.
  This group of amendments relates to liquidators and trustees and their powers, duties and responsibilities. As your Lordships will know, in the Bill we have sought to provide insolvency practitioners with greater powers to assist them in carrying out their duties, together with further protection for creditors regarding their ability to require meetings and obtain information on the administration of the estate.
  These amendments, some of which are merely re-enactments of existing legislation, provide additional powers for liquidators and trustees to facilitate their administration of insolvent estates together with further responsibilities imposed on them with regard to their duties and also the provision of information to creditors and the official receiver.
  If any of your Lordships would like me to give a detailed explanation of any one of the particular amendments that I have enumerated, of course I shall be glad to do so. Meanwhile, I beg to move.
  Moved, That this House do agree with the Commons in their Amendments Nos. 146 and 147.—(Lord Lucas of Chilworth).
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  148 Clause 54, page 39, leave out 'or under the 1985 Act'.
  149 Page 39, line 27, leave out 'one-half and insert 'one-quarter'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 148 and 149.I should like to speak also to Amendments Nos. 151 to 153, 155, 159, 161, 163, 283, 290, 294, 474, 532 and 536.
  151 Clause 56, page 41, line 12, leave out 'director'.
  152 Clause 58, page 41, line 39, at end insert ': and the liquidator of a company who is not the official receiver shall summon such a meeting if he is requested, in accordance with the rules, to do so by one-tenth, in value, of the company's creditors'.
  153 page 41, line 40, leave out subsection (3).
  155 Clause 59, page 42, line 38, leave out 'one-half and insert 'one-tenth'.
  159 Clause 63, page 45, line 42, leave out subsection (3).
  161 Page 46, line 16, leave out 'one-half and insert 'one-quarter'.
  163 Clause 64, page 47, line 15, leave out 'or by a general meeting of the company's contributories'.
  283 Clause 123, page 100, line 6. leave out 'one-half and insert 'one-quarter'.
  290 Clause 127. page 102, line 24, leave out 'one-half and insert 'one-quarter.
  294 Clause 130. page 105. line 21, leave out subsection (4).
  474 Schedule 5, page 180, line 28, at end insert—
  '35A. In section 651(1) (power of court, within two years of dissolution of company, to declare dissolution void), for the words "2 years" there shall be substituted the words "12 years".'.
  532 Schedule 8, page 197, line 49, at end insert—
  '(2A) where a winding up by the court in England and Wales has commenced or is treated as having commenced before the coming into force of section 54 of this Act, the official receiver may, at any time when he is liquidator of the company apply to the Secretary of State for the appointment of a person as liquidator in place of the official receiver, and on any such application the Secretary of State shall either make an appointment or decline to make one.'.
  536 Page 200, line 27, at end insert—
  'Appointment of trustee by Secretary of State 12A. Where a person was adjudged bankrupt before the bankruptcy commencement date or is adjudged bankrupt on or after that date on a petition presented before that date, the official receiver may at any time when he is the trustee of the bankrupt's estate apply to the Secretary of State for the appointment of a person as trustee instead of the official receiver; and on any such application the Secretary of State shall either make an appointment or decline to make one.'.
  All these amendments constitute a package dealing with various matters relating to the appointment of liquidators, trustees and their committees and the period within which the dissolution of a company can be declared void. Many of these amendments are quite simply drafting or technical in nature, but I should like

  1221
  to draw the attention of your Lordships to the following groups of amendments which deal with the ability of creditors to requisition meetings in insolvency proceedings. Amendments Nos. 149, 161, 283 and 290 reduce from one half to one quarter the proportion of creditors required to requisition meetings for the purpose of appointing or, in certain cases where an appointment has been made by the Secretary of State or the court, removing a liquidator or trustee in bankruptcy. These amendments were made by the Government in the light of comments made in another place that the proportion of 50 per cent. was too high and that it would in fact be unduly restrictive on the ability of creditors to requisition meetings.
  Secondly, Amendments Nos. 153, 155 and 294 reduce from one-half to the normal one-tenth the value of creditors that is required to requisition a meeting to appoint a committee in insolvency proceedings. Amendment No. 153 relates to Clause 58, as regards winding up by the court in England and Wales, and Amendment No. 155 relates to Clause 59, regarding winding up by the court in Scotland. Amendment No. 294 is in respect of Clause 130 and bankruptcy proceedings in England and Wales.
  Finally, Amendment No. 474 extends from two to 12 years the period within which a dissolution of a company under Section 651 of the Companies Act 1985 can be declared void by the court. This extension is aimed at protecting persons who may subsequently discover that they have a claim against the company, possibly for industrial injuries and for which they may need to revive the company so that it may be joined in any possible action against the company's insurers.
  I hope that these amendments will find favour with your Lordships. Again, if any noble Lord wishes me to explain in more detail any amendments to which I have not addressed myself, then of course I shall be happy to do so. Meanwhile, I commend this group of amendments to your Lordships' House.
  Moved, That this House do agree with the Commons in their Amendments Nos. 148 and 149. (Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  150 Clause 55, page 40. line 28, after ' person ' insert '(who may be the person who is the interim liquidator)'.
  Lord Cameron of Lochbroom: My Lords, I beg to move that the House do agree with the Commons in their Amendment No. 150, and for the convenience of the House 1 should like to speak also to Amendments Nos. 156 to 158, 162, 165 to 172, 198, 405 and 511.
  156 Clause 61, page 45, line 2, leave out from 'dissolved' to end of line 3 and insert 'in accordance with this section.'.
  157 Page 45, line 6, leave out 'record the company's dissolution' and insert 'forthwith register it and, at the end of the period of three months beginning with day of its registration, the company shall be dissolved.
  (3A) The court may, on an application by any person who appears to the court to have an interest, order that the date at which the dissolution of the company is to take effect shall be deferred for such period as the court thinks fit.
  (3B) It is the duty of the person on whose application an order is made under subsection (3A) above, within seven
  1222
  days after the making of the order, to deliver to the registrar of companies such a copy of the order as is prescribed.'.
  158 Page 45, line 11, at end insert—
  '(5) If a person without reasonable excuse fails to deliver a copy as required by subsection (3B) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum, and for continued contravention, to a daily default tine not exceeding one-fiftieth of the statutory maximum
  162 Clause 63, page 46, line 28, leave out 'forthwith vacate office' and insert 'vacate office when the dissolution of the company takes effect in accordance with that section
  165 Clause 64, page 48, line 3, at end insert—
  '(7) In the application of this section to a case where the order or winding up has been made by the court in Scotland, the references to a determination by the Secretary of State as to the time from which a person who has ceased to be liquidator shall have his release shall be construed as references to such a determination by the Accountant of Court.'.
  166 Clause 65, page 48, line 8, leave out 'subsection)' and insert 'subsections (2) and (3A)'.
  167 Page 48, line 18, at end insert—
  '(3A) Subsection (2) above shall not apply in a case where the winding-up order was made by the court in Scotland, but in such a case the court may, on an application by any person appearing to the court to have an interest, order that the date at which the dissolution of the company is to take effect shall be deferred for such period as the court thinks fit.'.
  168 Page 48, line 20, leave out 'or'.
  169 Page 48, line 22, after 'determined', insert 'or on whose application an order is made under subsection (3A) above'.
  170 Page 48, line 23, leave out 'or'.
  171 Page 48, line 23, after 'appeal', insert 'or the making of the order'.
  172 Page 48, line 24, leave out 'or determination' and insert 'determination or order'.
  198 Clause 70, page 54, line 14, at end insert—
  '(2A) In the application of subsection (2) above to the winding up of a company registered in Scotland, the references to a determination by the Secretary of Slate as to the time from which a person who has ceased to be liquidator shall have his release shall be construed as references to such a determination by the Accountant of Court'.
  405 Clause 211, page 165, line 13, at end insert—
  (ba) section 88;'.
  511 Schedule 7, page 189, line 31, at end insert—
  'The Conveyancing and Feudal Reform (Scotland) Act 1970
  15B. In Schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970 (the standard conditions of a security), in standard condition 9(2)(b), for the words from "or an order" to "1925" there shall be substituted the words "or his estate falls to be administered in accordance with an order under section 203 of the Insolvency Act 1985".'.
  All these amendments relate to Scottish provisions in the Bill. They reflect the differences in insolvency law and administration between the two countries. 1 shall be happy to deal with any other amendments if your Lordships wish, but I would draw your attention to certain amendments. Amendments Nos. 156 to 158, 162 and 166 to 172 form a package which ensures that the provisions relating to the dissolution of companies in Scotland harmonise with those in England and Wales except for administrative reasons which make the court rather than the Secretary of State capable of dealing with applications for the dissolution to be deferred.
  Amendment No. 405 disapplies in relation to Scotland the provisions of Clause 88 which concern the unenforceability of liens in corporate insolvency. Clause 88 is the corporate insolvency equivalent of the present provision regarding liens in an English bankruptcy which is restated in Clause 161 of the Bill. It provides that any lien is completely unenforceable against an office holder unless the lien is on the documents which give a title to property and which are held as such.
  Insolvency practitioners in England and Wales have welcomed Clause 88 of the Bill and its harmonising effect with the law of bankruptcy in England and Wales. They see that as a positive benefit and aid in maximising realisation for creditors.
  But it has been pointed out in previous debates in your Lordships' House that the bankruptcy law in Scotland is different from that in England and Wales. The Bankruptcy (Scotland) Bill re-enacts the Scottish provisions in this respect and has the effect of allowing the holder of a lien to be paid his outstanding charges on the basis of a first charge out of a bankrupt's estate. There are many examples of the underlying laws of the two jurisdictions being different to an extent that requires different treatment in the legislation relating to companies. In the context of insolvency Sections 612 and 613 of the Companies Act 1985 at present apply different provisions of the bankruptcy legislation of each jurisdiction to winding up in England and Wales and in Scotland respectively.
  After due consideration, we have formed the opinion that in the area of liens in relation to insolvency it is more appropriate for a consistent set of provisions to apply in Scotland, on the one hand, and in England and Wales, on the other. This amendment therefore disapplies Clause 88 in its application to Scotland to enable the insolvency rules to apply the relevant provisions of the Bankruptcy (Scotland) Bill to windings up in Scotland. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 150.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  151 to 172 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg formally to move that this House do agree with the Commons in their Amendments Nos. 151 to 172 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 151 to 172.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  173 Before Clause 66, insert the following new clause:
  ("No liquidator appointed or nominated by company in voluntary winding up.
  .—(1) This section applies where, in the case of a voluntary winding up, no liquidator has been appointed or nominated by the company.
  (2) The powers of the directors of the company shall not be exercised, except with the sanction of the court or
  1224
  (in the case of a creditors' voluntary winding up) so far as may be necessary to secure compliance with section 68 below, during the period before the appointment or nomination of a liquidator of the company.
  (3) Subsection (2) above does not apply in relation to the powers of the directors of the company—

  (a) to dispose of perishable goods and other goods the value of which is likely to diminish if they are not immediately disposed of; and

  (b) to do all such other things as may be necessary for the protection of the company's assets.

  (4) If the directors of the company without reasonable excuse fail to comply with this section, they shall be liable on summary conviction to a fine not exceeding the statutory maximum'.").
  174 Clause 66, page 48, line 44, leave out 'and'.
  175 Page 49, line 2, leave out 'local'.
  176 Page 49, line 6, at end insert 'and

  (d) during the period before the day on which the creditors' meeting is to be held, furnish creditors free of charge with such information concerning the affairs of the company as they may reasonably require;

  and the notice of the creditors' meeting shall state the duty imposed by paragraph (d) above'.
  177 Page 49, leave out lines 8 to 19 and insert—

  '(a) make out a statement in the prescribed form as to the affairs of the company;'.

  178 Page 49, line 20, leave out 'and that list'.
  179 Page 49, line 22, at end insert—
  '(3A) The statement as to the affairs of the company shall be verified by affidavit by the liquidator and shall show—

  (a) particulars of the company's assets, debts and liabilities;

  (b) the names and addresses of the company's creditors;

  (c) the securities held by them respectively;

  (d) the dates when the securities were respectively given; and

  (e) such further or other information as may be prescribed.'.

  180 Page 49, line 25, leave out 'duties imposed by subsections (2)(c) and (3)(c)' and insert 'duty imposed by subsection (2)(c)'
  181 Page 49, line 40, at end insert '; and, accordingly the winding up shall become a creditors' voluntary winding up and any appointment made or committee established by the creditors' meeting shall be deemed to have been made or established by the creditors' meeting so mentioned.
  (6A) Where the creditors' meeting is held three months or less before the end of the first year from the commencement of the winding up, nothing in section 594 of the 1985 Act (as applied by subsection (6) above) shall require the liquidator to summon a meeting of creditors at the end of that year.'.
  182 Page 50, line 2, leave out 'subsections (2) and (3) above' and insert 'this section'.
  183 Clause 67, page 50, line 26, after '(2)' insert 'or (3)'.
  184 Page 50, line 28, after '(4)' insert 'or (4A)'.
  185 Page 50, line 38, leave out 'subsection (2), (4) or (5) above' and insert 'this section'.
  186 Clause 68, page 51, line 4, leave out 'the day, or the day next following' and insert 'a day not later than the fourteenth day after'.
  187 Page 51, line 9, leave out from 'creditors' to 'and* in line 10 and insert 'not less than seven days before the day on which that meeting is to be held'.
  188 Page 51, line 12, leave out 'local'.
  189 Page 51, line 17, leave out subsection (3) and insert—
  '(3) The notice of the creditors' meeting shall state either—

  (a) the name and address of a person qualified to act as an insolvency practitioner in relation to the company

  1225
  who, during the period before the day on which that meeting is to be held, will furnish creditors free of charge with such information concerning the company's affairs as they may reasonably require; or

  (b) a place in the relevant locality where, on two business days stated in the notice and falling before the day on which that meeting is to be held, a list of the names and addresses of the company's creditors will be available for inspection free of charge.'.

  AMENDMENT TO COMMONS AMENDMENT No. 189
  189A Line 9, leave out ("two business days stated in the notice and falling") and insert ("the two business days falling next")

  COMMONS AMENDMENTS
  190 Clause 68, page 51, leave out lines 27 to 38 and insert—

  '(a) make out a statement in the prescribed form as to the affairs of the company;'.

  191 Page 51, line 39, leave out 'and that list'.
  192 Page 51, line 43, at end insert—
  '(4A) The statement as to the affairs of the company shall be verified by affidavit by some or all of the directors of the company and shall show—

  (a) particulars of the company's assets, debts and liabilities;

  (b) the names and addresses of the company's creditors;

  (c) the securities held by them respectively;

  id) the dates when the securities were respectively given; and

  (e) such further or other information as may be prescribed.'.

  193 Page 52, line 4, leave out '(4)(c)' and insert '(3)(b)'.
  194 Page 52, line 17, after '(2)' insert 'or (3)'.
  195 Page 52, line 19, after '(4)' insert 'or (4A)'.
  196 Page 52, line 21, leave out 'that subsection' and insert 'subsection (4) above'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 173 to 188, 189 (as amended by my Amendment No. 189A) and 190 to 196.
  At the same time, I would ask your Lordships' permission to speak to Amendments Nos. 465 to 469, 471, 519, 546, 547 and 553.
  465 Schedule 5. page 179, line 42, at end insert—
  '29A. In section 584(1) (general company meeting at each year's end), for the words "section 586" there shall be substituted the words "section 66(6) of the Insolvency Act 1985".'.
  466 Page 180, line 1, leave out from beginning to 'there' in line 2 and insert—

  '(1) Section 590 (appointment of committee of inspection) shall be amended as follows.

  (2) For subsection (1)'.

  467 Page 180, line 7, at end insert—

  '(3) In subsection (3), for the words "committee of inspection" there shall be substituted the words "committee established under this section".

  (4) In subsection (5), for the words "committees of inspection there shall be substituted the words "such committees".'.

  468 Page 180, line 10, leave out '58 or 59 of the Insolvency Act 1985' and insert '590'.
  469 Page 180, line 14, leave out '58 or 59 of the Insolvency Act 1985' and insert '590'.
  471 Page 180, line 18, leave out '58 or 59 of the Insolvency Act 1985' and insert '590'.
  519 Schedule 7, page 193, line 36, leave out from '(corporate),' to end of line 39 and insert 'after paragraph (b) there shall be inserted the words "or

  (c) on the holding of a creditors' meeting summoned under section 66 of the Insolvency Act 1985 (effect of insolvency on members' voluntary winding up);".'.

  546 Schedule 9, page 203, line 30, column 3, at end insert 'Section 586'.
  547 Page 203, line 33, column 3, at end insert Section 589(5)'.
  553 Page 204, line 27, column 3, at end insert '583(2), 588(5)'.
  All these, amendments are concerned with improving the practical effectiveness of the provisions of the Bill relating to a voluntary wind-up. Clauses 66 to 68 strengthen the existing legislation in this area of corporate insolvency and close the loopholes which currently exist and which are used by what in our discussions on this Bill we have come to call the cowboy directors and the rogue liquidators to the disadvantage of the general body of creditors. It should permit the exponent of the phoenix syndrome to operate with considerable effect.
  9.45 p.m.
  Your Lordships are aware that there is no direct official involvement in a voluntary liquidation, the matter being a private one between the company, the creditors and the practitioner concerned. Therefore, it is natural that practitioners should have considered in depth the practicalities involved in the operation of these clauses. Detailed comment was in fact received from many practitioners in England and Wales, and also in Scotland. Whilst appreciating and having approval of the underlying intentions behind the clauses, they made several detailed suggestions on the amendments with a view to ensuring that the provisions would operate effectively in practice
  In the light of their comments, we reconsidered Clauses 66 to 68 and introduced these amendments in the other place in the confidence that they would both improve the effectiveness of the provisions while at the same time maintaining the level of protection and degree of information that we wished to give to creditors. Commons Amendment No. 189 ensured that on receipt of notice of a meeting of creditors to wind up a company voluntarily creditors could either obtain information about the company from a recognised insolvency practitioner or, alternatively, could inspect the list of the company's creditors. This assists creditors in preventing unscrupulous directors from ensuring the appointment of a liquidator of their own choice. Representations have been made that directors could defeat the purpose of paragraph (h) by stating in the notice the two days immediately after the date on which the notices are sent out. In view of the time necessary to receive notices through the post, creditors often would not receive sufficient notice to enable them to inspect the list.
  Amendment No. 189A overcomes this problem by stating that the notice, which must be sent out at least seven days before the meeting of creditors, is to state where the list of creditors may be inspected during the two business days falling next before the date of the

  1227
  meeting. I repeat that I would be happy to go into any detail noble Lords might wish with regard to the other amendments in this package to which I have not directly referred, but I commend this package of amendments from another place to your Lordships.
  Moved, That this House do agree with the Commons in their Amendments Nos. 173 to 196, as amended by Amendment No. 189A—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  197 to 204 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 197 to 204.
  Moved, That this House do agree with the Commons in their Amendments Nos. 197 to 204—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  205 After Clause 80, insert the following new clause—
  (" Supplies by utilities: Part II.
  .—(1) If a request is made by or with the concurrence of the office holder for the giving after the relevant date of any of the supplies mentioned in subsection (2) below, the supplier—

  (a) may make it a condition of the giving of the supply that the office holder personally guarantees the payment of any charges in respect of the supply; but

  (b) shall not make it a condition of the giving of the supply, or do anything which has the effect of making it a condition of the giving of the supply, that any outstanding charges in respect of a supply given to the company before the relevant date are paid.

  (2) The supplies referred to in subsection (1) above are—

  (a) a supply of gas by the British Gas Corporation;

  (b) a supply of electricity by an Electricity Board (within the meaning of the Energy Act 1983);

  (c) a supply of water by statutory water undertakers or, in Scotland, a water authority within the meaning of the Water (Scotland) Act 1980;

  (d) a supply of telecommunication services (within the meaning of the Telecommunications Act 1984) by a public telecommunications operator (within the meaning of that Act).

  (3) In subsection (2) above the reference to telecommunication services does not include a reference to services consisting in the conveyance of cable programmes, that is to say programmes included in cable programme services (within the meaning of the Cable and Broadcasting Act 1984).
  (4) For the purposes of this section "the relevant date" is whichever is applicable of the following dates, namely—

  (a) the date on which the company went into liquidation;

  (b) the date on which the administration order was made;

  (c) the date on which the administrative receiver was appointed or if he was appointed in succession to another administrative receiver, the date on which the first of his predecessors was appointed;

  (d) the date on which the provisional liquidator was appointed; and

  (e) the date on which the composition or scheme was approved by the meetings summoned under section [Summoning of meetings] above.".)

  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 205, and at the same time I should like to speak to Amendment No. 357.
  357 Before Clause 179, insert the following new clause:
  ("Supplies by utilities: Pan III.
  .—(1) This section applies where on any day ("the relevant day")—

  (a) a bankruptcy order is made against an individual or an interim receiver of an individual's property is appointed;

  (b) a composition or scheme proposed by an individual is approved under Chapter I of this Part; or

  (c) a deed of arrangement is made for the benefit of an individual's creditors;

  and in this section "the office holder" means the official receiver, the trustee in bankruptcy, the interim receiver, the supervisor of the composition or scheme or the trustee under the deed of arrangement, as the case may be.
  (2) If a request falling within subsection (3) below is made for the giving after the relevant day of any of the supplies mentioned in subsection (4) below, the supplier—

  (a) may make it a condition of the giving of the supply that the office holder personally guarantees the payment of any charges in respect of the supply; but

  (b) shall not make it a condition of the giving of the supply, or do anything which has the effect of making it a condition of the giving of the supply, that any outstanding charges in respect of a supply given to the individual before the relevant day are paid.

  (3) A request falls within this subsection if it is made—

  (a) by or with the concurrence of the office holder; and

  (b) for the purposes of any business which is or has been carried on by the individual, by a firm or partnership of which the individual is or was a member or by an agent or manager for the individual or for such a firm or partnership.

  (4) The supplies referred to in subsection (2) above are—

  (a) a supply of gas by the British Gas Corporation;

  (b) a supply of electricity by an Electricity Board (within the meaning of the Energy Act 1983);

  (c) a supply of water by statutory water undertakers;

  (d) a supply of telecommunication services (within the meaning of the Telecommunications Act 1984) by a public telecommunications operator (within the meaning of that Act).

  (5) In subsection (4) above the reference to telecommunication services does not include a reference to services consisting in the conveyance of cable programmes, that is to say programmes included in cable programme services (within the meaning of the Cable and Broadcasting Act 1984).")
  There two amendments introduce new clauses which give effect in cases of corporate and individual insolvency to the commitment made by the Government in November last year to introduce legislation dealing with the position of the essential utilities on insolvency. The new clauses provide that the major utilities listed shall not make it a condition of providing a supply to an insolvency practitioner who is a liquidator, provisional liquidator, administrator or administrative receiver, or, in the case of individuals, a trustee in bankruptcy, an interim receiver, a trustee under the deed of arrangement or a supervisor under a corporate or individual voluntary arrangement, that any charges unpaid at the date of appointment must be met.
  This has the effect of placing the practitioner in the position of a new customer with the same right to supply as any other new customer. These rights are

  1229
  statutory in the case of the gas, electricity and water industries, and in the case of public telecommunications operators they derive from the licence granted to them by the Office of Telecommunications.
  In future any practitioner refused supply either by way of an outright dismissal of a request for supply or by way of a condition that all, or part of, unpaid pre-insolvency debts must first be repaid, will be unable to pursue a legal remedy to ensure that supplies are provided. Naturally, I would expect that this will only rarely be necessary once the new legislation is understood.
  In return for the new rights granted to practitioners, the utilities will be entitled to ask them to guarantee payment for post-insolvency supplies. This will not, of course, be necessary in most cases but it will provide protection where there are genuine worries on the part of utilities. In adding those last few remarks, I have no wish at all to pre-empt anything that the noble Lord, Lord Bruce of Donington, may wish to say when he puts before your Lordships his amendment No. 205A. I did feel, however, that it tidied up my explanation of what my two amendments sought to achieve. I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 205.—(Lord Lucas of Chilworth.)

  AMENDMENT TO COMMONS AMENDMENT No. 205
  205A In subsection (1)(b) at end insert ("or fail to supply otherwise than on its normal terms, without special deposits being required or special tariffs imposed")
  Lord Bruce of Donington: My Lords, I am grateful to the noble Lord. I beg to move the amendment standing in my name, No. 205A, and wish simultaneously to speak to Amendment No. 357A, which also deals with the position of the individual as distinct from the corporation.

  AMENDMENT TO COMMONS AMENDMENT No. 357
  357A In subsection (2)(b), at end insert—
  ("or fail to supply otherwise than on its normal terms, without special deposits being required or special tariffs imposed")
  The purpose of the amendment is simple. It is to close a possible loophole where these circumstances arise. While honouring a statutory obligation not to cut off supplies, statutory undertakers might conceivably get round it. Indeed, some have adopted this course in the past by agreeing to continue the supply of the service but nevertheless imposing special deposits or going on to a new tariff. There is nothing in the law, as I see it, that prevents them from doing that. The amendment endeavours to close the loophole. I do not think that they should object to it particularly as, under the Bill, they are able to obtain redress against a liquidator or receiver in respect of anything supplied after the date of his appointment. I hope therefore that the Government may be able to accept the amendment.
  I am given to understand, although I do not see it anywhere in the new clause, that the position is covered, in effect, by the existence of a new contract. I fail to see the logic of that. If that is the contention,
  1230
  I would have thought that in the case of a new contract being entered into in order to secure continuity of supply, the question of connection charges, artificial or otherwise, might be imposed without anything in this Bill preventing that. I hope therefore that the noble Lord will see fit to accept this amendment.
  Moved, that Amendment No. 205A be agreed to.—(Lord Bruce of Donington.)
  Lord Lucas of Chilworth: My Lords, I am grateful to the noble Lord, Lord Bruce of Donington, for explaining the purpose of his amendment. He will recall that he and I discussed this matter when he expressed his fears that the practitioner might be put in a disadvantageous position. The noble Lord is proposing in his amendment that special deposits should not be required as a condition of supply to a practitioner—what one might call a re-supply. However, it seems to us quite reasonable and quite legitimate for an industry to require a deposit where there might be some concern about a customer's ability to pay. It is therefore perhaps not unjust that the same principle should apply in the case of an insolvency practitioner seeking a supply as would apply in the case of any other new customer.
  It is difficult to envisage a circumstance in which that might apply. However, for argument's sake suppose that I was the signatory to a contract with a public utility and failed in my house to meet my obligations and they cut off the supply and said. "Yes, you can have a new supply. I'm sorry, there is a reconnection charge, and we shall want a quarter's deposit" or something of that nature. I say, "No. no; it is my wife in fact who will be the signatory to the contract". They say, "Well, she is a charming lady and we are sure she will meet her obligations. However, the household have failed to do so. We have no good reason to suppose that just because there is a different signatory you—the household, the company—might not find yourself in similar difficulties in these circumstances". It is not unreasonable for the supplying company to ask for special conditions. That is not a tariff surcharge but conditions for the supply. That is how we feel about this matter.
  I certainly agree with the noble Lord, Lord Bruce, that any imposition of a special tariff would most certainly be quite contrary to the spirit of what the provisions intend; and any tariff that is so designed to recoup post-insolvency charges is already caught by subsection (1)(b) of the new clause which is introduced by Amendment No. 205 to which I have just addressed myself. In cases of individual bankruptcy that position is taken care of by subsection (2) (b) of Amendment No. 357.
  I am not suggesting that my explanation would necessarily totally satisfy the noble Lord, whose doubts I fully appreciate. Nevertheless we feel, having given it a good deal of consideration, that the Bill provides for meeting the practitioner's requirement of supplies and provides for satisfying legitimate feelings that a supplying company may have. On those grounds, I am afraid I am not able to accept the amendment. In the hope that the noble Lord will withdraw it I hope that it will not be necessary for me to ask the House to reject it.
  Lord Bruce of Donington: My Lords, I am greatly disappointed in the reply of the noble Lord about this. By the very nature of his own argument he sought to justify under certain circumstances the utility requiring a special deposit. He sought to justify it in certain circumstances as being a very prudent thing for them to do. As an example he was kind enough to lift a curtain on a scene of domestic bliss affecting one person and his wife. In this case he was kind enough to use himself as an example. This has no relevance to commercial reality. It is not unusual to have a business, for example, heated by electricity. The advertisements of the Central Electricity Generating Board and the supply boards are very persuasive these days in saying how very efficient electricity is, and a number of people have been persuaded, including factories.
  One has a factory which is in this particular difficulty and somebody here is appointed. The utility knows very well—particularly if this takes place in winter—that it has a powerful weapon in its hands because workers cannot work in a factory if they are freezing. Therefore it is vital for the undertaking that the supply continues. No limit is set as to the special deposit that might be required by treating them as a new client. The supply authority is in a position of unique blackmail. It can ask for a payment of £1,000 or £2,000 as a special deposit for the continuation of the supply, otherwise the workers cannot work in the factory. That is not the purpose; that is not the way in which to achieve a balance as between the practitioner on the one hand and the supply service on the other.
  10 p.m.
  I thought that I understood the intention of the Bill, the noble Lord was kind enough to give some moral sanction to what I was saying. He agreed with the morality of it, but he did not like to reduce his morals to words. That is what I am asking him to do.
  A receiver, whoever he may be, is required to give specific undertakings in relation to supply after the date of his appointment. The Bill requires him to do that and to treat it as priority. Therefore he is quite certain of getting his money after the date of the appointment. That ought to be an advantage to him.
  Knowing that, and with full provision for him to be entitled to full reimbursement in respect of supplies of the particular service after the date of the appointment, he should not, as a means of getting some part of the money that is in arrears and which he may have to prove in the normal way as a creditor, load his prices. He should not make demands for specific deposits. In the words of the amendment:
  "or fail to supply otherwise than on its normal terms, without special deposits being required or special tariffs imposed".
  I submit that that perfectly reflects the purposes of the Bill as expressed to the House by the noble Lord. What is wrong with it? The suppliers are at no risk in regard to the supplies that are made after the date of the appointment. Under the terms of the Bill they have specific guarantees in relation to that; they have a personal liability for it. What can be the purpose of the levying of a special deposit or changing the tariff rates other than seeking to recoup something that happened before the date of the appointment?
  1232
  I should have thought that the noble Lord's department, even its draftsmen and its parliamentary counsel, who I understand have an ultimate right of direct appeal to the Prime Minister, would have understood that. I am very disappointed at the noble Lord on this. I should have thought that it could easily be accepted. However, it is one example of the circumstances that are bound to arise when inadequate time is given for the examination of the Bill as a whole once it has been through the mill of the Lords and the Commons. It is a complete justification for the representations that I felt constrained to make before this series of debates started this afternoon. I am most disappointed. I cannot withdraw the amendment. In view of my undertaking to the noble Lord, I cannot divide the House on it; but I cannot withdraw the amendment.
  Lord Mishcon: My Lords, if I may, I shall make an appeal to the Minister following on what my noble friend Lord Bruce of Donington has just said. I do not want to repeat anything that my noble friend has said. That would be a waste of the time of the House. I want to make a fresh point arising out of what he has just said.
  If we leave this matter without the amendment, the position is a very dangerous one, and I do not know whether the Minister realises it. The position is that the noble Lord the Minister has himself said, in giving an example—and this is on the official record—that he would have thought it was perfectly proper to have an analogous set of circumstances where there could be a husband who has not paid, a wife who is supposed to be the new contractor, and the utility company, perfectly properly, imposing special terms.
  He then said, as I understood it—but he had better correct it if I am wrong—that that would be the sort of case where, in the instance covered by his new clause as put forward by the Commons and my noble friend's amendment, it would be perfectly proper for a utility company to charge a special deposit and a special refixing charge. If that is on the record then the utility company is entitled, by quoting the noble Lord the Minister, to do exactly what my noble friend's amendment wishes to stop and, as I understood it, the noble Lord the Minister wishes to stop.
  If there is in the normal terms a provision that there has to be, for example, a refixing charge, then I would have said it was perfectly proper for the refixing charge, because it is part of the normal terms, to be paid by the receiver, the trustee or whoever it may be in order to get his supply. If there is in the normal terms a deposit which has to be imposed, I can understand the Minister's point.
  My noble friend's amendment carries with it the definite terms "special deposits being required", and he is blocking a hole which undoubtedly exists—and the hole is made larger and not smaller by the Minister's own remarks. I ask the Minister, in the circumstances, since no harm at all could be done by admitting this amendment, to admit the amendment because, I repeat, it can only do good. It can only block a hole; and from what the Minister has said, he is walking into a dangerous situation.
  Lord Lucas of Chilworth: My Lords, I feel I ought to respond. In attempting to make our feeling clear I seem to have clouded the issue. We are not looking for special deposits. We are suggesting that where a supply has been curtailed by virtue of a company's failure to pay and the administrator asks for a reconnection, he is to be treated by the utility, the supplying company, as dealing with a new customer. In the position of a new customer the supplier has properly, I suggest, to take into account any factors relevant to the supply of that product. If he says, "You are a new customer; I want a quarter's assessed payment", that is not unreasonable. But the Bill provides that in no way can a special deposit be charged, nor a special tariff rate which in any way suggests that there can be, by virtue of that, a recoupment of amounts previously owing. I do not think that the analogy I drew is so very different from the real situation which the noble Lord suggested.
  I have to say finally that we gave proper and deep consideration to this suggestion by the noble Lord, Lord Bruce of Donington, since he was—and I am most grateful to him—kind enough to discuss with me exactly what he wanted and the kind of situation he envisaged. I promise him that there is no question of parliamentary draftsmen holding sway. He spoke to me, I gave this my consideration, and I felt that the point he was making was not justifiable as expressed in this amendment.
  Lord Bruce of Donington: My Lords, before the noble Lord passes from that point, he said that special deposits were provided for in the Bill. Where?
  Lord Lucas of Chilworth: No, my Lords; I did not.
  Lord Bruce of Donington: Yes, my Lords, that is exactly what the noble Lord said: that special deposits were already covered in the Bill; that there were safeguards. I am asking: where in this clause?
  The fact is that in the circumstances outlined by my noble friend Lord Mishcon, where, for example, there is a reconnection charge, there is no objection to this as long as the reconnection charge is the normal reconnection charge. It is normality that we are seeking to establish by this amendment, so that nothing is done in respect of the administrator (or whoever is appointed) that would not be done in the normal course of events. There is no question. The noble Lord even compounded my fears on this by saying that in certain circumstances it might be reasonable having regard to the history of the supplier and, possibly, due to the financial circumstances. He hinted that it would be reasonable. It is exactly these special circumstances that this amendment seeks to eliminate.
  I willingly concede—and I am grateful to the noble Lord for his courtesy—that we have discussed this matter. If he and I had not discussed this Bill at some length together, the House would not have a prospect of concluding the proceedings tonight. The noble Lord will recall, since he has revealed my discussions with him, that I entered a caveat at the time and said that 1 would return to this matter in the House, which I have done, in the hope that the sheer logic of the position (which I am sure he understands) will have
  1234
  penetrated those in his department, who do not appear to have a clue what I am talking about.
  Lord Lucas of Chilworth: My Lords, I assure the House that we have perfect clues as to what the noble Lord is talking about. I suspect that wittingly or unwittingly the noble Lord seeks to turn my own words upon myself, because when I was referring to special deposits I did not say that the Bill provides for special deposits. In fact, I have sought to explain that special payments cannot be levied. If the administrator is a new customer, then those charges, which it is the practice of the supplying company to levy, can be levied in this case. I then said that any special tariff or special charge is not allowed by the Bill.
  Lord Mishcon: Where, my Lords?
  Lord Lucas of Chilworth: My Lords, if the noble Lord will turn to page 54 of the Marshalled List, under Amendment No. 205, as I sought to describe in introducing this amendment, after Clause 80 we have to insert a new clause. That reads:
  "If a request is made by or with the concurrence of the office holder for the giving after the relevant date of any of the supplies mentioned in subsection (2) below, the supplier—

  (a) may make it a condition of the giving of the supply that the office holder personally guarantees the payment of any charges in respect of the supply; but

  (b) shall not make it a condition of the giving of the supply, or do anything which has the effect of making it a condition of the giving of the supply, that any outstanding charges in respect of a supply given to the company before the relevant date are paid."

  Those are the special conditions.
  If the noble Lord seeks to set aside the utility's right to treat the office holders as a new customer, which is what I think in effect he is asking the House to do by virtue of his amendment, I have to say categorically that I cannot agree with him because it is a new customer. He is a new customer by virtue of his taking office. If it is the practice of the supplying company under certain circumstances to impose a condition, whether it is a reconnection charge or a quarter's deposit, on a new customer, then that is perfectly right and proper. This amendment seeks to set that aside and I do not think that we can agree with it.
  With the greatest respect to noble Lords who I see wish to speak again to this, I have to say that I am happy to listen to anything but I really think that I have exhausted my repertoire on this. I am happy to listen, but at this stage I have to say that I shall do my best to give further answers but I think that I have done everything I can.
  10.15 p.m.
  Lord Mishcon: My Lords, most dramatic companies find that they have a small repertoire, a medium-sized repertoire or a large one. The noble Lord the Minister will forgive me if I say that he comes into the first category in this instance.
  There is no point in our continuing an argument. The noble Lord the Minister has been most courteous, but being met merely with courtesy does not help us. There is no point in his just declining to see the argument that is put forward and quoting words from the amendment which do not mean what he says they

  1235
  mean. There is only one thing that is forbidden in the amendment which is the Commons amendment. What is permitted is a guarantee. What is not permitted is making it a condition of the giving of the supply, or doing anything which has the effect of making a condition of the giving of the supply, that the outstanding charges before the relevant date are given.
  Our amendment merely says this: "Utility company, what you cannot do is to say, 'The company was in liquidation. You are the liquidator', or 'the man was a bankrupt. What we are going to do here, in the circumstances, is to ask for a very special deposit because we really do not know the extent of the estate and we really do not know you, although you are a member of a profession which is allowed to be a liquidator or a trustee. We are, in your instance, making it a special deposit requirement' ".
  I shall give the noble Lord the Minister an example. They may even say, "You can have the special deposit back again at the end of a time". That would not be anything peculiar because, after all, they are allowed to ask for a guarantee. They may not even take the deposit once and for all against charges; they may say, "We are perfectly prepared to make it a repayment."
  What we are saying is that we do not want, and the noble Lord the Minister and the Government do not want, the supply of this vital utility to be denied because of anything outside normality that is demanded. All the Minister has to say is this: "Of course I do not want a special deposit and of course I do not want anything special to be done by way of tariff'. He says all that; but, if I may say so, because of some instinct within him or because of some inspiration he has from elsewhere, what he is saying is, "Although I agree with all that, I am not going to have it put in the Bill—in spite of the fact that I agree with it". If it is tautologous, if it is otiose because he has already in the clause what he thinks this amendment is doing, what harm is there in the amendment going through? It only means what the Minister has asked us to say the Commons amendment means.
  I hope that out of whatever size repertoire the Minister has of answering back, he will find one sentence included in that repertoire, which is that this amendment can do no harm and it is accepted.
  Lord Meston: My Lords, perhaps I may echo that. I cannot help feeling that we are falling over the words, "normal", "reasonable" and "special", and banging our toes in the process. If a special payment is required in the sense of an extra payment but it is required as part of the normal terms, not only is that reasonable but it seems to me to be in the spirit of what both noble Lords wish.
  On Question, amendment to the amendment negatived.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  206 to 209 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments 206 to 209 as consequential to the Bill.
  Moved, That this House do agree with the Commons in their Amendments Nos. 206 to 209—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  210 Clause 84, page 65, line 44, at end insert—
  '(2A) The court shall not make an order under this section in respect of a transaction at an undervalue if it is satisfied—

  (a) that the company which entered into the transaction did so in good faith and in the ordinary course of its business; and

  (b) that at the time it did so there were reasonable grounds for believing that the transaction would benefit the company.'.

  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 210. This amendment was made in order to provide a defence in circumstances where a transaction was at an undervalue but was nevertheless in the best interests of the company. For instance, as part of a rescue operation a company might sell off surplus stock more cheaply than usual because it is more important to the company at that time to obtain cash quickly than to realise the maximum price over an extended period.
  We have received representations from the Law Society that, notwithstanding the amendments, genuine transactions for the benefit of the company, such as in the example I have given, might still fall foul of the undervalue transaction provisions, because the courts might construe the term "ordinary course of business" as meaning only normal day-to-day transactions and not as extending to one-off transactions in special circumstances. The noble Lord Lord Mishcon, was kind enough to discuss this matter quite briefly a short while ago and I am most grateful to him for drawing the matter to my attention. He will be speaking, no doubt, to his own amendment a little later, but pehaps I may mention Amendment 210A.

  AMENDMENT TO COMMONS AMENDMENT No. 210
  210A Line 5, leave out ("in the ordinary course of) and insert ("for the purpose of carrying on").
  Amendment No. 210A alters the terminology of Commons Amendment 210 to ensure that there is no doubt that all relevant circumstances are covered. I commend Commons Amendment No. 210 to the House and beg to move that amendment and Amendment No. 210A.
  Moved, That this House do agree with the Commons in their Amendment No. 210, as amended by Amendment No. 210A.—(Lord Lucas of Chilworth.)

  AMENDMENT TO COMMONS AMENDMENT No. 210
  210ZA Line 2, after ("section") insert ("unless it is satisfied that it would be fair and reasonable in all the circumstances to do so and shall not make any order under this section").
  Lord Mishcon: My Lords, perhaps I may immediately thank the noble Lord the Minister for his courtesy in the way in which he referred to Amendment 210A, which now appears before the House. I shall not use this analogy again, I promise, for the House will get fed up with it; but in his repertoire

  1237
  he certainly has courtesy and understanding on some amendments and, indeed, he had it on this occasion.
  I now move 210ZA. I know the noble Lord the Minister and the House will greet this amendment with the amount of respect that it deserves, not because it is moved by me, but because it is inspired by the Law Society's company law committee after considerable correspondence and courteous discussions with the noble Lord the Minister's department. The purpose of this amendment is to give the court the discretion which lawyers feel—I ought to say "some lawyers feel", in case there is any difference of opinion that the noble Lord the Minister is going to express as a result of advice he has received—that the court is not given by the present wording.
  The word here is "shall". Your Lordships will see that the court shall make an order to put things right in the case of fraudulent preference or transactions at undervalue; or the court shall not make an order. The operative word at the present time is, of course, "shall". Just in case there is any doubt about this in your Lordships' reading of the whole of the Bill, may I make the point very quickly that Clause 9—and of course I am referring always to No. 127 when I talk about the Bill—when dealing with responsibility for wrongful trading, in regard to the court, uses the word "may" and not "shall". Clause 12, when dealing with the summary remedy against delinquent directors and liquidators, uses the word "may" and not "shall". Clause 13, which concerns the power to make an administration order, contains the word "may" and not "shall". Also, in Clause 191, transactions defrauding creditors, the word used is "may" and not "shall".
  It is particularly desirable that the court should have a discretion under Clause 84. Where the transaction involves a person who is connected with the company, the onus of proof under the Bill is reversed and the connected person has to prove, in the case of an undervalue transaction, that the company was not insolvent at the time of the transaction and, in the case of a preference, that the company was not influenced by a desire to prefer.
  There is in Clause 91(6) an extremely wide definition of "person connected". It relates to, but is wider than, the definition of "an associate" in Clause 207, and the onus of proof may be reversed in the case of a significant number of people who had little actual connection with the company, and who may have little evidence available to them with which to rebut the assumption. It is very important to remember that the court, in circumstances like these and in others, that I and the House can well envisage, may wish to be lenient towards certain defendants in that position.
  I could quote, though I will not at this hour, certain correspondence which has taken place with the Department of Trade and Industry. Indeed, there is a letter—and I am sure that your Lordships and the Minister will take this from me—in which the department acknowledges that the court should have a discretion. The real issue is that the department seems to feel, in spite of the word "shall", that the court has a discretion. There are a number of lawyers who take the view that it certainly has not, by virtue of the word "shall". This amendment makes it absolutely clear
  1238
  that the court has a discretion. The court should have it and I hope that the amendment suggested by the Company Law Committee of the Law Society will be agreed to. I beg to move.
  Lord Lucas of Chilworth: My Lords, I am very grateful for the remarks of the noble Lord, Lord Mischon. Certainly the Law Society have made a number of points in connection with these clauses and we have been able to accommodate some of their points through amendments; but I have to say that there are some points on which we are still unable to agree, and I have to say that this is one of them.
  With Amendment No. 210 to Clause 84, I think it is clear that subsection (3) exempts a very wide range of transactions, and that anything which is still caught by the provisions should be made the subject of a court order under this clause. I should emphasise that in considering what order to make, the court can take extenuating circumstances into account and may make an order varying from full restitution, on the one hand, to what amounts, on the other, to a nominal acknowledgement that a transaction at an undervalue has taken place.
  With regard to preferences, these are absolutely void under the present law and are liable to be repaid whether or not the recipient was a completely innocent party. Under Clause 84, the court has a similar discretion in relation to transactions at an under value, in that it can adjust the amount of restitution ordered to suit the circumstances of the case.
  10.30 p.m.
  It remains our view that if the court finds that there has been a preference or a transaction at an undervalue which is not exempted under the defences contained in Clauses 84 and 85, this should be acknowledged by the court making an order to that effect, even if the court orders only nominal restitution. It may be important in establishing the conduct of the directors, as the giving of preferences and entering into transactions at an undervalue are matters to be taken into account when considering the potential unfitness of directors to take part in company management. Your Lordships may wish to refer to the new schedule added to the Bill by Commons Amendment No. 415.
  If a director has caused the company to give preferences or enter into undervalue transactions for an ulterior motive unknown to the recipient, this could also amount to misfeasance on the part of the directors and any claim launched against him by the liquidator may rest on whether or not such preferences were given or transactions entered into, even if the recipients were wholly innocent and the restitution is purely nominal.
  I am not a lawyer. That is the advice that I have been given. I understand that the Law Society would prefer it if the court had an absolute discretion not to make an order under the clause, but we do not agree here and we do not agree that the court, on finding a preference or an undervalue transaction proved, should have the option of making no order at all unless one of the specific exemptions provided by the clause applies. With that explanation I hope that the noble Lord, Lord Mishcon, may feel that the views expressed

  1239
  in his amendment have been properly considered, but this I have to say is the outcome of the consideration.
  Lord Mishcon: My Lords, I hesitate to keep the House at this hour by further argument but I do want to make a plea to the noble Lord the Minister. He realises that he is dealing with respresentations made by a very responsible body who have taken a very leading part in the discussions on this Bill and who have been indulging in very helpful conversations with the noble Lord's department, which has very often availed itself of the advice tendered by the Law Society.
  With great respect, the noble Lord has not answered the point. He has not dealt with the fact that discretion, in spite of all the other serious matters that I mentioned, had been given to the court. But worse than that, he says that there is definitely a discretion for the court to take the view that it need not restore the company to precisely the position in which it would have been; it has a discretion to make a nominal order or something of that kind. I would ask the Minister as a layman in these matters, if I may respectfully so call him, to follow me in this because it only needs a layman's common sense; it does not need a lawyer's specialised knowledge. Will he kindly look with me at Clause 84(1)(b), the very subsection to which he referred. I ask him not as judicial authority but as a layman to read the words with me:
  "the court shall, on such an application, make such order as it thinks fit"——
  to do what?
  "for restoring the position to what it would have been if the company had not entered into that transaction or, as the case may be, had not given that preference".
  What does that mean? It means that the court must in fact make an order—it can do it in such terms as it thinks fit—which has the effect of putting the company in the position in which it would have been if the company had not entered into the transaction or, as the case may be, had not given that preference.
  This is the problem. The Minister says, "I am willing to give the court the discretion to make a halfway order, or a quarter-way order, or a nominal order", but there is a body of lawyers which says that the court does not have that discretion. My amendment clearly gives the court that discretion. If the Minister is advised that it is proper that the court should have the discretion to go half-way, quarter-way, or nominally, but there is a body of lawyers which for very good reasons—the noble Lord has followed me as I read the subsection—takes the view that the court is limited, if it finds that the exceptions do not apply, to putting the company back into the same position without being able to go half-way, quarter-way or a nominal way, what possible answer can there be for refusing the amendment?
  Lord Lucas of Chilworth: My Lords, the noble Lord, Lord Mishcon, quite properly described me as a layman in these matters. He also stated that there was a body of lawyers who felt that the court did not have discretion. I am advised by a body of lawyers, and I am assured that the court does have that discretion. I have sought to explain to your Lordships how we view the position.
  1240
  I have to say that I cannot depart from that understanding. I have to say that we feel that we are maintaining the current position in law. The court shall only make such an order if it thinks fit. It may not order a total restoration of the position if it does not see fit so to do.
  My understanding as a layman is that that provision gives the court all the option that it requires. I ask the noble Lord to accept that the advice I have received, although it may be different from that which he obtained, is equally good advice. There are always two sides when two lawyers come to consider a situation. We believe that the advice we have received is correct in this context.
  Lord Mishcon: My Lords, if two lawyers give a different opinion their aim is a common aim and usually a compromise is reached. I regret that the noble Lord the Minister has presumably been advised not to accept a compromise which obviously affects the very intention that he has expressed. I hope that the Minister's department—and I say this with very great respect—will not come to regret, as the result of a judicial statement at some future time, that at twenty-two minutes to eleven at night the Minister was not able to accommodate the Law Society on this amendment. I hope that situation does not arise. If it does, I hope that the noble Lord's memory will reflect the discussion that has taken place on this amendment.
  The Deputy Speaker (Lord Airedale): My Lords, does the noble Lord seek to withdraw his amendment?
  Lord Mishcon: My Lords, I do not seek to withdraw it but I have no alternative.
  Amendment No. 210ZA, as an amendment to Amendment No. 210, by leave, withdrawn.
  Lord Lucas of Chilworth: My Lords, I beg to move Amendment No. 210, as amended by Amendment No. 210A, to which I spoke earlier.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  211 Page 66, leave out lines 26 to 40 and insert—
  '(7) Subject to subsection (7A) below, the time at which a company enters into a transaction at an undervalue or gives a preference is a relevant time for the purposes of this section if the transaction is entered into or the preference is given—

  (a) in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company, at a time in the period of two years ending with the commencement date; or

  (b) in the case of a preference which is not such a transaction and is not so given, at a time in the period of six months ending with that date; or

  (c) in either case, at a time between the presentation of a petition for the making of an administration order in relation to the company and the making of such an order on that petition.

  (7A) Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection (l)(a) or (b) above, that time shall not be a relevant time for the purposes of this section unless the company—

  (a) is unable to pay its debts within the meaning of section 518 of the 1985 Act at that time; or

  1241

  (b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;

  but the requirements of this subsection shall be presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a company with a person who is connected with the company.'
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 211, and I should like to speak also to Amendments Nos. 211 A, 212 to 214, 217, 333 to 334, 457, 458, 458A, 478 and 531:

  AMENDMENT CONSEQUENTIAL ON COMMONS AMENDMENT NO. 211
  211A Page 67, line 9, at end insert—
  ("(8A) For the purposes of this section a person who is connected with a company by reason only of being its employee shall be deemed not to be connected with the company.")

  COMMONS AMENDMENTS
  212 Page 67, line 2, leave out second 'administration order' and insert presentation of the petition on which the administration order was made'.
  213 Page 67, leave out lines 7 to 9.
  214 Clause 87, page 69, line 36, leave out 'within the relevant period' and insert 'at a relevant time'.
  217 Page 70, leave out lines 7 to 22 and insert—
  (2) Subject to subsection (3) below, the time at which a floating charge is created by a company is a relevant time for the purposes of this section if the charge is created—

  (a) in the case of a charge which is created in favour of a person who is connected with the company, at a time in the period of two years ending with the commencement date;

  (b) in the case of a charge which is created in favour of any other person, at a time in the period of twelve months ending with that date; or

  (c) in either case, at a time between the presentation of a petition for the making of an administration order in relation to the company and the making of such an order on that petition.

  (3) Where a company creates a floating charge at a time mentioned in subsection (2)(b) above and the person in favour of whom the charge is created is not connected with the company, that time shall not be relevant time for the purposes of this section unless the company—

  (a) is unable to pay its debts within the meaning of section 518 of the 1985 Act at that time; or

  (b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the charge is created.

  (3A) For the purposes of subsection (2) above the commencement date is—

  (a) in a case where this section applies by reason of the making of an administration order, the date of the presentation of the petition on which the order was made; and

  (b) in a case where this section applies by reason of a company's going into liquidation, the date of the commencement of the winding up.'.

  333 Clause 153, page 124, line 41, leave out subsection (7) and insert—
  '(7) Subject to subsections (7A) and (9) below, the time at which an individual enters into a transaction at an undervalue or gives a preference is a relevant time for the purposes of this section if the transaction is entered into or the preference is given—

  (a) in the case of a transaction at an undervalue, at a time in the period of five years ending with the day of the presentation of the bankruptcy petition on which that individual is adjudged bankrupt;

  1242

  (b) in the case of a preference which is not a transaction at an undervalue and is given to a person who is an associate of that individual, at a time in the period of two years ending with that day; and

  (c) in the case of a preference which is not a transaction at an undervalue, at a time in the period of six months ending with that day.

  (7A) Where an individual enters into a transact ion at an undervalue or gives a preference at a time mentioned in paragraph (a) or (b) of subsection (7) above, not being, in the case of a transaction at an undervalue, a time less than two years before the end of the period mentioned in the said paragraph (a), that time shall not be a relevant time for the purposes of this section unless the individual—

  (a) is insolvent at that time; or

  (b) becomes insolvent in consequence of the transaction or preference;

  but the requirements of this subsection shall be presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by an individual with a person who is an associate of his.'.

  AMENDMENT TO COMMONS AMENDMENT No 333
  333A Line 20, leave out ("or (b)") and insert (", (b) or (c)")

  AMENDMENTS CONSEQUENTIAL ON COMMONS AMENDMENT No. 333
  333B Page 125, line 13, leave out ("(7)") and insert ("(7A)")
  333C Page 125, line 15, at end insert—
  ("(11) for the purposes of this section a person who is an associate of an individual by reason only of being his employee shall be deemed not to be an associate of that individual.")

  COMMONS AMENDMENTS
  334 Page 125, line 14, leave out from 'if to end of line 15 and insert '—

  (a) he is unable to pay his debts as they fall due; or

  (b) the value of his assets is less than the amount of his liabilities, taking into account his contingent and prospective liabilities.

  (9) A transaction entered into or preference given by a person who is subsequently adjudged bankrupt on a petition under section on 102(1)(d) above shall be treated as having been entered into or given at a relevant time for the purposes of this section if it was entered into or given at any time on or after the date specified for the purposes of this subsection in the criminal bankruptcy order on which the petition was based.

  (10) No order shall be made under this section by virtue of subsection (9) above where an appeal is pending (within the meaning of section (Petition based on criminal bankruptcy order) above) against the individual's conviction of any offence by virtue of which the criminal bankruptcy order was made.'.

  457 Page 178, line 30, leave out from beginning to 'after' in line 31 and insert—

  '(1) Section 518 (definition of inability to pay debts) shall be amended as follows.

  (2) In subsection (1)(a)'.

  458 Page 178, line 32, at end insert—
  (3) In subsection (1)(d), for the words from "and, in determining" onwards there shall be substituted the words "as they fall due".
  (4) After subsection (1) there shall be inserted the following subsection—
  "(1A) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.'.'.

  AMENDMENT TO COMMONS AMENDMENT No. 458
  458A Line 2, leave out ("subsection (l)(d)") and insert ("subsection (l)(e)")

  COMMONS AMENDMENTS
  478 Page 181, line 18, at end insert—
  '42—(1) In section 669 (inability of unregistered company to pay debts), at the end of paragraph (d) there shall be inserted the words "as they fall due".
  (2) That section, as amended by sub-paragraph (1) above, shall be re-numbered as subsection (1) of that section and after that provision as so re-numbered there shall be inserted the following subsection—

  "(2) An unregistered company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.".'.

  531 Page 197, line 29, leave out '41' and insert '42'.
  These amendments concern the definition of "insolvency", and many of the other amendments in this group therefore flow from Amendments Nos. 457, 458 and 478. During the passage of this Bill through your Lordships' House the point was made by the noble Lord, Lord Mishcon, that there was uncertainty of meaning and inconsistency between the various uses of the terms "solvency" and "insolvency" in the Bill. A review was undertaken and these amendments were made in another place in order to resolve those uncertainties and inconsistences.
  The amendments clarify the circumstances in which companies may be wound up by the court. The intention is to give effect to existing case law and to remove any doubts which may linger that a company, whether registered or unregistered, may be wound up either where it is unable to pay its debts as and when they fall due—sometimes referred to as "commercial insolvency"—or alternatively where it fails "the balance sheet test"; that is to say, where its assets are exceeded by its liabilities, including contingent and prospective claims. Amendment No. 458A, the amendment to Commons Amendment No. 458, corrects an earlier drafting error.
  Amendments Nos. 211, 213, 217, 333 and 334 make corresponding revisions to the definition of the term "insolvency" in Clause 84 (transactions at an undervalue and preferences (England and Wales)) and in Clause 153 (transactions at an undervalue and preferences (individuals)), and introduce it for the first time, in Clause 87 (avoidance of certain floating charges), to provide that both "commercial insolvency" and "balance sheet tests", as above, are applied.
  The two amendments to Commons amendments (Nos. 211A and 333C) have been made in response to representations made by insolvency practitioners and the Law Society in that, as Clauses 84 and 153 are drafted, employees are treated as connected persons or associates for the purposes of setting aside preferences and undervalue transactions. The point was made that this meant, in theory at least, that the receipt of wages in the period of two years before the making of a winding-up or administration order could be attacked as a preference under these clauses (indeed, that creditors might require the liquidator or administrator to attack them) and that the burden of proving that there was a preference and that the company was solvent would be placed on the employees, and that this was an unfair burden. We accept the force of these arguments and accordingly have brought forward
  1244
  these amendments for the purpose of Clauses 84 and 153.
  Amendment No. 531 is consequential on Amendment No. 478, and Amendments Nos. 212 and 214 are of a purely technical nature. The two remaining amendments to Commons amendments, Nos. 333A and 333B, are consequential only. I accordingly commend these amendments to the House.
  Moved, That this House do agree with the Commons in their Amendment No. 211.—(Lord Lucas of Chilworth.)
  The Deputy Speaker: My Lords, the Question is, That this House do agree with the Commons in their Amendment No. 211, to which three amendments have been set down. Amendment No. 211ZA, Lord Mishcon.

  AMENDMENTS TO COMMONS AMENDMENT No. 211
  211ZA* Line 20, after ("unless") insert ("any of the directors of the company knows, or ought to have concluded, that")
  Lord Mishcon: My Lords, in moving Amendment No. 211ZA, with the permission of the House I shall also speak to Amendments Nos. 211ZB and 211ZC.
  211ZB* Line 23, leave out ("becomes") and insert ("will become")
  211ZC* Line 29, at end insert ("Subsections (4) and (5) of section 9 (responsibility for company's wrongful trading) shall apply for the purposes of this subsection as they apply for the purposes of section 9(2) above.")
  May I at once thank the noble Lord the Minister for what he said in regard to the matters raised by the Law Society and, I believe, in some cases, also by other bodies. I thank him very much for having taken note of what was said by those organisations and for the accommodation he has made to them.
  The amendments to which I am speaking relate to Clause 84 and the absence in that clause, as we see it, of the clarity that there should be in regard to what the lawyers call the mens rea element; namely, the guilty intent element.
  Again, this is the view of the Law Society's Company Law Committee and I again ask for the respect which I am sure your Lordships and the Minister would want to pay to that committee.
  10.45 p.m.
  I believe that it is no secret that the Department of Trade and Industry has more than once indicated to the bodies which have made representations to it, and certainly to the Law Society's Company Law Committee, that in the department's view the effect of Clause 84 is that any undervalued transaction or preference, if it is capable of being avoided under the section, must have been made at a time when the directors were conscious of impending failure, that is, that they "have in mind that all the company's creditors will not be paid in full".
  It is the view of the Law Society's Company Law Committee that it is very doubtful whether that interpretation is actually sustainable, given the Bill's present wording. I understand that the department relies on Clause 84(4), which provides that, in deciding to make a preference, the company must have been

  1245
  influenced by a desire to produce, in relation to the person who is preferrred,
  "the effect mentioned in subsection 3(b) above".
  That effect is,
  "putting the person into a position which, in the event of the company going into insolvent liquidation, will be better than the position he would have been in".
  This provision postulates a hypothetical liquidation and does not relate to any actual expected liquidation. Any payment to a creditor will put him in a better position than he would be in a hypothetical liquidation, and there is and must be a strong argument that any payment to a creditor would have been made by a company as a result of its being influenced by a desire to put him into such a position.
  The second reason, if I may say so for the necessity of this amendment, is that for the purposes of ascertaining whether a transaction may be challenged under the section, the relevant time is expressed in subsection (7)(a), as amended by the other place, by reference to whether the company was, or following the transaction would become, insolvent. There is, however, no requirement that the directors should have any reason to suspect insolvency.
  The problems are compounded by the fact that one of the tests of insolvency is a balance-sheet test—that is, whether the value of the assets of the company exceed its liabilities. There is no guidance as to how the assets are to be valued or the liabilities assessed. Therefore it might very well be that, with the benefit of hindsight, a company's net assets are seen to have been worth less than its liabilities at a particular time, although the directors had no reason to suspect it at the time when they looked at that balance-sheet.
  The committee's suggested amendments, which I am putting before this House, seek to meet these problems by imposing a requirement that a director knows about the insolvency or ought to have concluded that the company was or would be insolvent. As your Lordships will see, the amendment also incorporates the tests in Clause 9—which is the clause that deals with wrongful trading—as to what a director ought to know or conclude. I beg to move.
  Moved, that this House do agree with the Commons in their Amendment No. 211ZA.—(Lord Mishcon.)
  Lord Milne: My Lords, before we leave this block of amendments, may I say that I had considerable discussion with one of the accounting bodies today on the telephone just before coming to your Lordships' House on the question of Commons Amendment No.458? It feels that clarification is required on this amendment.
  The point of the Commons amendment is to expand the definition of insolvency in Section 518 of the Companies Act 1985. The first part of the amendment to Schedule 5, on page 178, line 32, (Bill No. 127), effectively deletes the words in brackets in Section 518(1)(e) of the Act, inserting, "as they fall due", at the end. That has the effect of confirming the first part of the definition as being on a cash flow basis, whereby both positive and negative flows may be matched and solvency or otherwise diagnosed.
  But the introduction of new subsection (1A) is a further test on a valuation basis which is static at a
  1246
  moment in time. The institute feels that the inclusion of contingencies and prospective liabilities at a point in time, without taking into account anything on the other side of the equation, extends the definition of insolvency to a quite unreasonable degree. It appears already to have made representations, but it feels that its point has not been taken.
  Lord Lucas of Chilworth: My Lords, I am grateful to the noble Lord, Lord Mishcon, for explaining his amendment, and also to the noble Lord, Lord Milne, for putting his point. If I may, I shall come to it in the order in which we are proceeding. That is not to imply any criticism.
  I have to say at the outset that I am not able to agree with the noble Lord, Lord Mishcon. I listened carefully to what he had to say, but I do not think that there is any doubt about the necessity for a preference to be shown to have been given; in other words, for there to have been an intention to give that preference. The insolvent liquidation mentioned in Clause 84(4) is hypothetical. It must be so, as by definition no liquidation can yet have occurred. But what the company must have in mind when making the payment, or doing any other thing that might give rise to a preference, is that in its doing so the recipient will be better off than his fellow creditors in a liquidation.
  The company must also be influenced by the desire to produce that effect. The provision requires that the company must intend that the consequences of its course of action occur, in other words, it must contemplate that a liquidation, from the effects of which its action will save the preferred creditor, will take place. The provision will be activated only if an actual liquidation takes place in the time period, and it is unlikely that the necessary state of mind will occur unless the directors knew that there was no hope of paying the other creditors in full.
  As the noble Lord, Lord Mishcon, himself said, it has been suggested to the department that the clause ought to refer to circumstances where the directors knew, or ought to have known, that the company was insolvent. In our view, knowledge of insolvency or impending insolvency must be present for the company to be influenced by the desire to create a preference. I would suggest that any reference to circumstances about which the directors ought to have known is inconsistent with the provisions of this clause. If the directors did not know the company was so badly off that it would not be able to pay its other creditors in full, they could not possibly be influenced by a desire to create a preference even if as prudent men they ought to have known what the circumstances truly were.
  We are in fact really satisfied that the clause clearly and effectively establishes the necessity of a desire on the part of the directors to create a preference for a payment or another benefit to become a preference. It is upon those grounds that I invite the noble Lord to withdraw his amendment.
  The noble Lord, Lord Milne, discussed the words,
  "taking into account its contingent and prospective liabilities".
  Of course this has a very long history. These words first appeared in the Life Assurance Companies Act 1870, I am advised, and in the Companies Act 1907 They

  1247
  have remained in the Companies Act and are now contained in the Act of 1985. They are necessary to ensure that the court, when considering whether or not a company is insolvent, can have regard not only to liabilities presently due, but also to contingent and prospective liabilities. Commons Amendment No. 458 gives effect to the way in which the courts have interpreted Section.518 of the Companies Act; that was previously Section 227 of the 1948 Act. We are not seeking to amend the law by this amendment; merely to give effect to that interpretation by the courts, namely, that Section 518 contains both a cash flow and a balance sheet test.
  I take this opportunity of reassuring the noble Lord that the courts have not interpreted Section 518 as meaning that all contingent and prospective liabilities have to be brought into account. I can do no better than quote from the decision of Mr. Justice Nourse in re Bond Jewellers, when he said, and I quote:
  "What I am required to do is to take into account the contingent and prospective liabilities. That cannot mean that I must simply add them up and strike a balance against assets. In regard to prospective liabilities, I must principally consider whether, and if so when, they are likely to become present liabilities."
  The courts are not under a duty to make a winding-up order under Section 518 as it stands at present, nor will they be under such a duty under Section 518 as it is proposed to be amended by this Amendment No. 458. The courts do have a discretion whether or not to make an order and it is vital that in exercising that discretion they have regard to contingent and prospective liabilities in the manner I have described, which merely expresses quite clearly the current law and practice in the matter. I hope that will be helpful to the noble Lord, Lord Milne.
  I do apologise to the House for having to cover perhaps rather a wide area on one or two points which have been put to me.
  11 p.m.
  Lord Bruce of Donington: My Lords, I am sorry that the noble Lord cannot follow and cannot agree with the amendments which have been put forward by my noble friend Lord Mishcon. It seems to me that, when relying on value of assets and of liabilities and stipulating that a company shall be insolvent if the value of its assets is lower than the value of its liabilities, some important considerations are very often forgotten. Value implies a judgment by someone. It is not merely an entry in a book. Were it to be a question of book value, that is a definite term. It is a value to be ascribed to an asset or a series of assets put down in the company's primary books of account as Section 221 of the Companies Act 1985 requires to be done. That is one value. The amendments put forward by the Commons do not stipulate which type of value. They leave the matter open.
  There is another kind of value. There is a break-up value. Is a director going to be called into account because at a given date the value of the assets at a break-up value is much less than the value of the liabilities, whereas the value of the assets assessed on a going concern basis may be higher than the liabilities? On this neither the Commons amendments nor the Government nor anyone else, afford us any guidance
  1248
  at all. It is very dangerous that these words should be left in without the safeguards that have been brought forward by my noble friend Lord Mishcon.
  Reverting to the term to which attention was drawn by the noble Lord, Lord Milne, himself a distinguished accountant, what are prospective liabilities? It is not a term known in professional accountancy. Contingent, maybe. And how does one assess a contingent liability in relation to determining whether a firm is insolvent or not? I give an example. A firm with a surplus of assets on the basis of a going concern over its liabilities nevertheless has a writ issued against it for damages in respect of some alleged omission on its behalf. Let us say that a statement of claim goes in, in the sum of a quarter of a million pounds, whereas the surplus of the assets above the liabilities, assessed on a going concern basis, is perhaps only £100,000. A statement of claim goes in for £250,000, or maybe half a million, or even perhaps a million. Is it a contingent or prospective liability to which the courts have to have regard?
  It is all very well for the noble Lord to say that this gives any flexibility at all. The judge cannot form a view and, if he does form a view, he cannot articulate as to whether that statement of claim is going to succeed or not. If he did state that he thought the contingent liability would materialise to its full extent he would be pre-judging the case which had still to be considered on the basis of the statement of claim and after all the interrogatories, the discovery and so on, and the actual hearing of the case in court. How can a judge assess, or have regard to, a contingent liability expressed in those terms? He cannot. The whole concept of bringing prospective liabilities into an assessment of a company's solvency on an asset liability basis is thoroughly unsound and would be condemned, not only by the Law Society but by any reputable professional body of accountants in the United Kingdom or elsewhere. It is wrong that it should remain.
  I therefore hope that better counsels will prevail and that the noble Lord will see fit to accept the amendments of my noble friend; and also in due course take further account of the representations that have been made by my noble friend Lord Milne.
  Lord Lucas of Chilworth: I gather that I have probably satisfied the noble Lord, Lord Milne, since he does not want to reply further. I very much regret that I have not been able to satisfy noble Lords opposite. I am not an accountant, as the noble Lord knows. I respect always his experience and knowledge of matters of his kind. However, I have to say to him on this occasion that if he sought to confuse me with the hypothetical situations which he envisages under which assets may be valued this way and that, he did not do so because I think in fact that he was deliberately trying to lead me into admitting something which he knows very well I neither have the authority nor indeed the desire to admit.
  I remind the noble Lord that the way in which assets are valued is deliberately not specified either under the present law or under the Bill; and the courts have never applied rigid accounting rules in this area.
  I have already explained that the term "prospective liabilities" has been in the legislation for over a

  1249
  century. I hope that the noble Lord, Lord Bruce of Donington, will not tempt me further this evening in this area.
  Lord Bruce of Donington: My Lords, I am very disappointed in the noble Lord in this regard. I have to dispute his last statement that the law itself has never stipulated any way, and the decided case laws never determined, the basis of valuation that should be used. This I am afraid is contrary to legal practice, as anybody knows who has studied the various taxation cases in which the valuation of stocks, for example, has to be taken into account. There are a number of cases of which I am quite sure the learned lawyer in his box will be aware—at least those in the Treasury ought to be aware—where repeated reference has been made in decided cases both in the original court and in the Court of Appeal to good commercial practice and to accounting standards. Reference is repeatedly made to those basic methods of valuation which have been established and accepted by the courts by common consent enshrined in the various SSAPs which have been agreed by the accountancy profession. It is not as though the courts are without guidance and have made no determination as to the method of valuation used in the case of assets.
  Lord Mishcon: My Lords, I am most grateful to my noble friend Lord Bruce of Donington for the way in which he has supported this amendment. Again I hope that the Minister would not have cause to regret the fact that this amendment was not accepted because of of the doubts that will be cast in the future on the interpretation of this section. However, I have no alternative in all the circumstances, bearing in mind the stage we have reached and the Minister's response, but to ask the leave of the House to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 211ZB and 211ZC not moved.]
  On Question, Motion agreed to.

  AMENDMENT TO COMMONS AMENDMENT No. 211
  211A [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move Amendment No. 221A as a consequential amendment to the Bill.
  Moved, that this House do agree with Amendment No. 211A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMMONS AMENDMENTS
  212 to 214 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 212 to 214 en bloc.
  Moved, that this House do agree with the Commons in their Amendments Nos. 212 to 214 en bloc—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  215 Page 70, line 1, after 'goods' insert 'or services'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in the said amendment. In speaking to Amendment No. 215, I should also like to speak to Amendments Nos. 216 and 218 to 221.

  COMMONS AMENDMENTS
  216 Page 70, line 6, after 'goods' insert 'or services'.
  218 Page 70, line 24, after 'goods' insert 'or services
  219 Page 70, line 25, leave out equal to the price' and insert 'in money'.
  220 Page 70, line 27, after 'goods' insert 'or services'
  221 Page 70, line 28, leave out 'price' and insert 'the consideration'.
  These amendments fulfil the Government's undertaking, which was given to the noble Lord, Lord Mishcon, during the Bill's earlier passage through your Lordships' House, and it extends the scope of Clause 87(1)() of the Bill to include, in addition to money paid or goods supplied, the supply of services to the company.
  The other amendments to the clause provide an objective test for the value of the services so provided. I beg to move.
  Moved, that this House do agree with the Commons in their Amendment No. 215.—(Lord Lucas of Chilworth.)

  AMENDMENT IN LIEU OF COMMONS AMENDMENT NO. 215
  215A The Lord Bruce of Donington to move, That this House do disagree with the Commons in their Amendment Aft) 215, but propose the following amendment in lieu thereof:
  215B Page 70, lien 1, leave out ("supplied, to") and insert ("or services supplied, to or for")
  Lord Bruce of Donington: My Lords, I beg to move that the House do disagree with the Commons in their Amendment No. 215, but propose Amendment No. 215B in lieu thereof. This amendment has been made in order to assist in the clarification of a particular subsection of Clause 87 in Bill No. 127. Bill No 127, which is the Bill which has come from the Commons, says at Clause 87(1):
  "Subject to the provisions of this section a floating charge on the company's undertaking of property created within the tolerance period is invalid except to the extent of the aggregate of—

  (a) the value of so much of the consideration for the creation of the charge as consists of money paid, or goods supplied".

  Amendment No. 215, moved by the noble Lord, inserts the word "services". The amendment that I seek to make is an endeavour to help the noble Lord in clarifying the position further because it does not deal with amounts paid for or on behalf of the company. Payment of a cheque by a bank is not a payment to a customer; it is for a customer.
  The amendment is essentially not to prejudice the floating charge given normally to secure current cheque accounts. That is the reason for the insertion, in substitution for the words in the original Bill, and in the amendment, of the words "or services supplied, to or for". Having clarified that position, I hope that the noble Lord will see the force of it and will see his way to accept the amendment.
  Moved, That this House do disagree with the Commons in Amendment No. 215 and propose Amendment No. 215B in lieu thereof.—(Lord Bruce of Donington.)
  The Deputy Speaker: My Lords, the Question is that the House do disagree with the Commons in their Amendment No. 215 and do propose Amendment No. 215B in lieu thereof.
  11.15 p.m.
  Lord Lucas of Chilworth: My Lords, it has been established in the 1965 case of the Yeovil Glove Company Ltd. and Thomas Mortimer Ltd. that, where a company instructs a third party to make a payment to a creditor of the company, then the payment is deemed to have been paid to the company. The provisions of Clause 87 in no way alter the existing legislation and our initial view was, in the light of case law, that there was no need to deal with the matter in the clause. We have, however, reconsidered the position in the light of the noble Lord's amendment and now conclude that there is no overriding objection to specifying the position in the statute.
  I regret, however, that I am not able to accept the noble Lord's amendment, because to include it would suggest that we are in some way seeking to change the existing case law by going further and providing that any payment made for the company, even where it is not made to extinguish an existing debt of the company, will constitute good consideration. We do not think it desirable to go this far, and I am not really sure that the noble Lord in fact intended it to do so. I would ask the noble Lord to withdraw his amendment and accept instead the Government Amendments 221A to 221D inclusive.

  AMENDMENTS CONSEQUENTIAL ON COMMONS AMENDMENTS Nos. 215, 216 AND 218 TO 221
  221A Page 70, line 2, after ("charge") insert—
  ("(aa) the value of so much of that consideration as consists of the discharge or reduction, at the same time as, or after, the creation of the charges, of any debt of the company;").
  221B Page 70, line 4, after ("paragraph (a)") insert ("or (aa)").
  221C Page 70, line 6, leave out ("or").
  221D Page 70, line 6, at end insert ("or the debt was so discharged or reduced").
  These amendments achieve the purpose aimed at by the noble Lord's amendment and are specifically related to the discharge by the relevant third party of an exisitng debt owed by the company. I hope that the noble Lord will be able to accept what I have said, and I hope that he will accept my grateful thanks for drawing this matter to our attention. He also raised the question of the floating charges in respect of such consideration. I do not know whether he would like me to deal with that point, or whether he added that in support of the argument rather than as a special issue.
  Lord Bruce of Donington: My Lords, I am sorry that the noble Lord cannot accept the amendment, although he cited the case law in support of it. Apparently he is reluctant to enshrine in the statute something that is already established in the case law he cited. I am not prepared to argue with him at all about
  1252
  it. I intended to help him. If he does not need the help, it can rest where it is. I beg leave to withdraw the amendment.
  Amendment to the Motion, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  216 to 221 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg leave to move that this House do agree with the Commons in their Amendments Nos. 216 to 221.
  Moved, That this House do agree with the Commons in their Amendments Nos. 216 to 221.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENTS CONSEQUENTIAL TO COMMONS AMENDMENTS Nos. 215, 216 AND 218 TO 221
  221A to 221D. [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with Amendments 221A to 221D as consequential amendments to the Bill.
  Moved, That this House do agree with Amendments Nos. 221A to 221D.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  222 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment 222.
  Moved, That this House do agree with the Commons in their Amendment No. 222.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  223 Clause 89, page 71, line 18, after 'Act' insert 'or corresponds to provision contained immediately before the coming into force of this section in rules made, or having effect as if made, under section 663(1) or (2) of the 1985 Act'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 223. In speaking to this I should like to include Amendments Nos. 362, 426, 427, 429, 431 to 433, 435 and 435A, 436 and part of 440, 441, 456, 479 to 482, and 484 to 494.
  362 Clause 186, page 147, line 33, after 'Act' insert 'or corresponds to provision contained immediately before the coming into force of this section in rules made under section 132 of the Bankruptcy Act 1914'.
  426 Schedule 4, page 172, line 30, at end insert—
  'Courts
  Provision for supplementing, in relation to the insolvency or winding-up of companies, any provision made by or under section 512 of the 1985 Act (jurisdiction in relation to winding-up).'.
  427 Page 172, line 44, after 'enactment' insert 'or subordinate legislation'.
  429 Page 173, line 25, at end insert—
  (ca) provision for requiring a person who is or has been an officer of the company to attend a meeting;'.
  431 Page 173, line 51, at end insert—
  '9A. Provision as to the debts that may be proved in a winding-up, as to the manner and conditions of proving a debt and as to the manner and expenses of establishing the value of any debt or security.'.
  432 Page 174, line 9, leave out 'the official receiver'.
  433 Page 174, line 18, leave out 'are held in' and insert 'have been paid into'.
  435 Page 174, line 31, leave out from 'creditor' to end of line 32 and insert 'or such a committee as is mentioned in paragraph 8 above to be supplied (on payment in prescribed cases of the prescribed fee) with such information and with copies of such documents as may be prescribed.'.

  AMENDMENT TO COMMONS AMENDMENT NO. 435
  435A Line 2, after ("insert '") insert (", member or contributory").
  436 Page 174, line 33, leave out from 'which' to end of line 34 and insert 'public examinations under section 52 of this Act and proceedings under section 83 of this Act are to be conducted, as to the circumstances in which records of such examinations or proceedings are to be made available to prescribed persons and as to the costs of such examination and proceedings'.
  440 [Printed above.}
  441 Page 175, line 4, leave out 'his functions by' and insert 'the functions of.
  456 Schedule 5, page 178, line 17, at end insert—
  '17A. In section 222(4) (obligation to preserve, accounting records), for the words from "direction" onwards there shall be substituted the words "provision contained in rules made under section 89 of the Insolvency Act 1985" '.
  479 Schedule 6, page 182, line 2, leave out 'provision of and insert 'enactment contained in, or subordinate legislation made under.'.
  480 Page 182, line 12, at end insert ', including any such provision as is specified in relation to the trustee of a bankrupt's estate in paragraph 20 or 26 below.
  Receiver or manager
  9A. Provision as to the manner in which the official receiver is to carry out his functions as receiver or manager of a bankrupt's estate under section 116 of this Act, including any such provision as is specified in relation to the trustee of a bankrupt's estate in paragraph 20 or 26 below.'.
  481 Page 182, line 17, leave out 'a bankrupt's'.
  482 Page 182, line 32, at end insert—
  (ca) provision for requiring a bankrupt or debtor to attend a meeting;'.
  484 Page 183, line 1, leave out from 'bankruptcy' to end of line 3 and insert ', as to the manner and conditions of proving a debt and as to the manner and expenses of establishing the value of any debt or security.'.
  485 Page 183, line 11, leave out 'the official receiver'.
  486 Page 183, line 20, at end insert—
  '21 A. Provision as to the fees, costs, charges and other expenses that may be incurred for any of the purposes of Chapter I of Part III of this Act or in the administration of any composition or scheme approved under that Chapter.'.
  487 Page 183, line 21, leave out paragraph 22.
  488 Page 183, line 31, leave out from 'creditor' to end of line 32 and insert 'or a committee established under Section 130 of this Act to be supplied (on payment in prescribed cases of the prescribed fee) with such information and with copies of such documents as may be prescribed.'.
  489 Page 183, line 33, leave out from 'which ' to end of line 34 and insert 'public examinations under Section 119 of this Act and proceedings under Section 175 of this Act are to be conducted, as to the circumstances in which records of such examinations and proceedings are to be made available to prescribed persons and as to the costs of such examinations and proceedings'.
  490 Page 183, line 37, after 'estate' insert 'or the supervisor of a composition or scheme approved under Chapter I of Part III of this Act'.
  491 Page 183, line 39, at end insert 'and'.
  492 Page 183, line 41, leave out from 'estate' to end of line 45 and insert 'or the supervisor of such a composition or scheme'.
  493 Page 183, line 45, at end insert—
  '26A. Provision as to the manner in which the trustee of a bankrupt's estate is to act in relation to the books, papers and other records of the bankrupt, including provision authorising their disposal.'.
  494 Page 184, line 4, leave out from 'to' to end of line 5 and insert 'the carrying out of the functions of an interim receiver appointed under Section 115 of this Act of the official receiver while acting as a receiver or manager under Section 116 of this Act or of a trustee of a bankrupt's estate.'.
  This package of amendments relates to Schedules 4 and 6 to the Bill, which respectively provide for matters capable of inclusion in company and individual insolvency rules. The amendments either provide for the re-enactment of existing provisions of the Companies Act 1985, the Bankruptcy Act 1914 or the existing body of rules, or they expand upon those provisions to ensure greater clarity and sufficient authority for the necessary rule-making powers. There is one amendment, however, to Commons Amendment No. 435, which expands the rule-making power, which, as currently drafted, is too restrictive. I commend these amendments to your Lordships.
  I am aware that the extensive use of secondary legislation has been criticised during the course of the Bill's progress. Many of the matters contained in the current primary legislation on bankruptcy and winding up would nowadays be included in secondary legislation, being mainly procedural matters which supplement the principal provisions of the insolvency code rather than setting out basic principles. The Bill accordingly removes such matters from primary legislation, enabling them to be prescribed by rules. It can be seen from the present insolvency rules that the moves in this direction were already being made when the rules relating to winding up were revised following the passing of the Companies Act 1948. For example, provisions relating to meetings and proofs of debt, which appear in the first and second schedules to the Bankruptcy Act 1914, can only be amended by further primary legislation. These are largely not included in the primary legislation relating to the winding up of companies. Instead, they appear in the companies winding up rules of 1949 and can, as a result, be more easily amended to cope with changes in circumstances in both commercial and judicial practice.
  A source of frustration to the Insolvency Rules Advisory Committee established under the 1976 Act has in the past been the inability to harmonise and modernise the various procedures in both bankruptcy and winding up codes. In its report the review committee criticised the numerous inconsistencies between the two sets of rules; that is, bankruptcy and winding up. Indeed, within the winding up code itself there are differences between the equivalent rules for voluntary winding up and winding up by the court. I take this opportunity of assuring the House that we are doing everything possible to iron out these inconsistencies. This means that on occasions we have

  1255
  had to take a provision from the current primary legislation because its winding up or bankruptcy counterpart is already to be found in the rules. Of course, it would be possible for such provisions to be contained in the Bill, and this may at first glance seem to present a preferable course. But we are not considering just a handful of matters. There are numerous instances of such provisions, and if the Bill had been used to deal with all of them I think it would have been clogged with detailed procedural provisions which are more properly placed in secondary legislation.
  The rules made by the Lord Chancellor, with the concurrence of the Secretary of State, are subject to the scrutiny of the Insolvency Rules Advisory Committee, which has recently completed a comprehensive review of all the present rules. New rules for both bankruptcy and winding up will be prepared to complement the new legislation using as a base the revised rules which are the product of that committee's labours. The new rules will continue to be vetted by the committee and the Lord Chancellor will take the committee's advice before making the rules.
  Under the present law rules relating to insolvency are made by the Lord Chancellor and laid before Parliament after they have been made. However, the Bill introduces an element of parliamentary control which is not available at present by making the rules subject to annulment by resolution of either House of Parliament.
  I commend these amendments to your Lordships. Of course, I am available to answer in detail any particular point which is not sufficiently covered by the generality of my remarks.
  Moved, That this House do agree with the Commons in their Amendment No. 223. [Lord Lucas of Chilworth.]
  Lord Bruce of Donington: My Lords, the noble Lord has been kind enough to go into some detail about the process that is to be adopted in the formulation of the secondary legislation to which he has referred. I do not wish to question him in any detail about that. Indeed, I am most anxious, as I am sure he is, to make further and speedy progress with the Bill. Perhaps I may ask him for his assurance that these rules will be open to public discussion before Clause 236 of the new Bill is brought into operation, activating those parts of the Bill to which the rules refer. I think it would be desirable that the secondary legislation is published, proved and argued about before the actual date which Clause 236 envisages for the coming into operation of the respective primary legislation. I take it I have the noble Lord's assurances as to that; it would seem to follow almost automatically.
  While I am on my feet, perhaps I may say that I think I speak for most noble Lords who have sat most patiently here when I reiterate that we are anxious to proceed with the utmost expedition with the remainder of the amendments that are due for discussion today.
  Lord Lucas of Chilworth: My Lords, I am happy to give the noble Lord, Lord Bruce the assurance he seeks with regard to that publication of rules.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  224 to 236 [Printed above.]

  AMENDMENT TO COMMMONS AMENDMENT NO. 236
  236A [Printed above].
  237 to 241 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg formally to move Amendments Nos. 224 to 236, as amended by Amendment No. 236A on the supplementary list, and 237 to 241.
  Moved, That this House do agree with the Commons on their Amendments Nos. 224 to 236, as amended by Amendment No. 236A, and Amendments Nos. 237 to 241.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  242 Clause 102, Page 83, line 19, leave out 'or'.
  243 Page 83, line 23, at end insert '; or
  (d) where a criminal bankruptcy order has been made against the individual, by the Official Petitioner or by any person specified in the order in pursuance of section 39(3)(3/4) of the Powers of Criminal Courts Act 1973.'.
  244 Page 83, line 24, leave out 'such an' and insert 'a bankruptcy'.
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 242 to 244 en bloc. I should like to speak also to Amendment Nos. 246, 248, 257, 265, 266, 269, 281, 282, 284, 286, 288, 327, 368 to 373; 396, 512, 556 and 563.

  COMMONS AMENDMENTS
  246 Page 83, line 41, leave out from 'is' to end of line 5 on page 84 and insert 'entitled to present a petition under two or more paragraphs of subsection (1) above, the petition shall be treated for the purposes of this Part as a petition under such one of those paragraphs as may be specified in the petition'.
  248 Page 84, line 11, at end insert—
  '(6) Without prejudice to subsection (5) above, where a petition under paragraph (a), (b) or (c) of subsection (1) above in respect of an individual is pending at a time when a criminal bankruptcy order is made against him, or is presented after such an order has been so made, the court may on the application of the Official Petitioner dismiss the petition if it appears to it appropriate to do so.'.
  257 Page 85, line 36, at end insert—
  '(6A) A debt shall not be regarded for the purposes of this section as a debt for a liquidated sum by reason only that the amount of the debt is specified in a criminal bankruptcy order.'.
  265 After Clause 107, insert the following new clause:
  ("Petition based on criminal bankruptcy order.
  .—(1) Subject to subsection (5) of section 102 above, the court shall make a bankruptcy order on a petition under subsection (1)(d) of that section, on production of a copy of the criminal bankruptcy order on which the petition is based, unless it appears to the court that the criminal bankruptcy order has been rescinded in consequence of an appeal.
  (2) Subject to the provisions of this Part, the fact that an appeal is pending against any conviction by virtue of which a criminal bankruptcy order was made shall not affect any proceedings on a petition under section 102(1)(d) above based on that order.

  1257
  (3) For the purposes of this section an appeal against a conviction is pending—

  (a) in any case, until the expiration of the period of twenty-eight days beginning with the date of conviction;

  (b) if notice of appeal to the Court of Appeal is given during that period and during that period the appellant notifies the official receiver thereof, until the determination of the appeal and thereafter for so long as an appeal to the House of Lords is pending within the meaning of section 40(5) of the Powers of Criminal Courts Act 1973")

  266 Clause 108, page 89, line 9, leave out 'has' and insert 'was adjudged bankrupt on a petition under section 102(1)((d) above or who had'.
  269 Clause 111, page 91, line 23, at end insert—
  '(1A) The court may annul a bankruptcy order made against an individual on a petition under paragraph (a), (b) or (c) of subsection (1) of section 102 above if it at any time appears to the court, on an application by the Official Petitioner—

  (a) that the petition was pending at a time when a criminal bankruptcy order was made against the individual or was presented after such an order was so made; and

  (b) no appeal is pending (within the meaning of section (Petition based on criminal bankruptcy order) above) against the individual's conviction of any offence by virtue of which the criminal bankruptcy order was made;

  and the court shall annul a bankruptcy order made on a petition under paragraph (d) of that subsection if it at any time appears to the court that the criminal bankruptcy order on which the petition was based has been rescinded in consequence of an appeal.'.
  281 Clause 119, page 97, line 35, at end insert 'and, in the case of an individual adjudged bankrupt on a petition under section 102(1)(d) above, the Official Petitioner;'.
  282 Clause 122, page 99, line 23, after 'made', insert 'otherwise than on a petition under section 102(1)(d) above'.
  284 Clause 125, page 100, line 35, after 'Chapter' insert 'other than section 126(1) below'.
  286 Clause 126, page 101, line 17, after '(1)', insert 'Where a bankruptcy order is made on a petition under section 102(1)(d) above, the official receiver shall be trustee of the bankrupt's estate.
  (1A)'.
  288 Clause 127, page 102, line 13, at end insert—
  '(1A) Where the official receiver is trustee of a bankrupt's estate by virtue of section 126(1) above, he shall not be removed from office under this section.'.
  327 Page 119, line 20, at end insert—
  '(9) Where the bankruptcy order was made on a petition under section 102(1)(d) above, no distribution shall be made'.
  368 Clause 190, page 149, line 23, leave out from 'any' to 'to' in line 26 and insert 'of the following—

  (a) any debt or liability to which he is subject at the commencement of the bankruptcy;

  (b) any debt or liability'.

  369 Page 149, line 31, leave out 'and' and insert—

  '(c) any amount specified in pursuance of section 39(3)(c) of the Powers of Criminal Courts Act 1973 in any criminal bankruptcy order made against him before the commencement of the bankruptcy; and

  (d)'.

  370 Page 150, line 9, after 'owed' insert '(being, in the case of an amount falling within paragraph (c) of the definition of
  1258
  "bankruptcy debt", the person in respect of whom that amount is specified in the criminal bankruptcy order in question)'.
  371 Page 150, line 14, leave out 'presented'.
  372 Page 150, line 15, at end insert—
  ' "criminal bankruptcy order" means an order under section 39(1) of the Powers of Criminal Courts Act 1973.'.
  373 Page 150, line 24, leave out 'presented'.
  396 After Clause 200, insert the following new clause:
  (" Official Petitioner.
  .—(1) There shall continue to be an officer known as the Official Petitioner for the purpose of discharging, in relation to cases in which a criminal bankruptcy order is made, the functions assigned to him by or under this Act; and the Director of Public Prosecutions shall, by virtue of his office, continue to be the Official Petitioner.
  (2) The functions of the Official Petitioner shall include the following functions, namely—

  (a) to consider whether, in a case in which a criminal bankruptcy order is made, it is in the public interest that he should himself present a petition under section 102(1)(d) above;

  (b) to present such a petition in any case where he determines it is in the public interest for him to do so;

  (c) to make payments, in such cases as he may determine, towards expenses incurred by other persons in connection with proceedings in pursuance of such a petition; and

  (d) to exercise, so far as he considers it in the public interest to do so, any of the powers conferred on him by or under this Act.

  (3) Any functions of the Official Petitioner may be discharged on his behalf by any person acting with his authority.
  (4) Neither the Official Petitioner nor any person acting with his authority shall be liable to any action or proceeding in respect of anything done or omitted to be done in the discharge, or purported discharge, of the functions of the Official Petitioner.
  (5) In this section "criminal bankruptcy order" means an order under section 39(1) of the Powers of Criminal Courts Act 1973.")
  512 Page 191, line 8, at end insert—
  'The Powers of Criminal Courts Act 1973
  20A. In section 39(3)(d) of the Powers of Criminal Courts Act 1973 (criminal bankruptcy orders against convicted persons), for the words from the beginning to "being" there shall be substituted the words "for the purposes of section 153(9) of the Insolvency Act 1985".'.
  556 Page 206, line 4, at end insert—

  '1973 c.62

  The Powers of Criminal Courts Act 1973.

  Section 39(5). Schedule 2.'

  563 Page 207, line 7, at end insert—

  '1973 c.62.

  The Powers of Criminal Courts Act 1973.

  Section 41.

  These amendments introduce into the structure of the bankruptcy code of the Bill provisions relating to criminal bankruptcy along similar lines to the provisions contained in the Powers of Criminal Courts Act of 1973.
  Moved, That this House do agree with the Commons in their Amendments Nos. 24? to 244.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.
  245 Page 83, line 30, leave out 'twelve months' and insert 'three years'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 245. I should like also to speak to

  1259
  Amendments Nos. 247, 249 to 256, 258 to 264, 392 to 394, part of 410, 459, 568 and 569.
  247 Page 84, line 5, at end insert—
  '(4A) A bankruptcy petition shall not be withdrawn without the leave of the court.'.
  249 Clause 103, page 84, line 22, leave out 'them' and insert 'the debts'.
  250 Page 84, line 25, leave out second 'and'.
  251 Page 84, line 26, leave out 'them' and insert 'the debts'.
  252 Page 84, line 28, at end insert 'and
  '(d) there is no outstanding application to set aside a demand served for the purposes of subsection (3)(a) or (4) below in respect of the debt or any of the debts.'.
  253 Page 84, line 32, after first 'the' insert 'petitioning'.
  254 Page 84, line 35, leave out 'petitioning'.
  255 Page 84, line 40, leave out 'creditor' and insert 'petitioning creditor, or one or more of the petitioning creditors'.
  256 Page 85, line 4, after first 'the' insert 'petitioning'.
  258 Clause 105, page 87, line 2, leave out subsection (3).
  259 Clause 106, page 87, line 12, leave out 'and'.
  260 Page 87, line 17, at end insert 'and
  (d) that it would be appropriate to appoint a person to prepare a report under subsection (3) below'.
  261 Page 87, line 19, leave out '(c)' and insert '(d)'
  262 Page 87, line 20, leave out 'may' and insert 'shall'.

  CONSEQUENTIAL AMENDMENT TO THE BILL
  [Consequential on Commons amendments Nos. 259 to 262]
  262A Page 88, line 8, after ("(b)") insert (" or (d)")
  263 Clause 107, page 88, line 22, leave out 'presented'.
  264 Page 88, line 39, leave out 'presented'.
  392 Clause 196, page 157, line 7, leave out 'In section 18(1)' and insert 'For subsection (1) and (2) of section 18'.
  393 Page 157, line 9, leave out from 'England)' to first 'of in line 19 and insert 'there shall be substituted the following subsections—
  "(1) On a petition presented by the Bank by virtue of this section, the court having jurisdiction under the Companies Act 1985 may wind up a recognised bank or licensed institution under that Act if—

  (a) the institution is unable to pay its debts within the meaning of section 518 of that Act; or

  (b) the court is of the opinion that it is just and equitable that the institution should be wound up;

  and for the purposes of such a petition an institution which defaults in an obligation to pay any sum due and payable to a depositor shall be deemed to be unable to pay its debts as mentioned in paragraph (a) above.
  (2) If a petition is presented by the Bank by virtue of this section for the winding up of a recognised bank or licensed institution which is a partnership (whether limited or not), the court has jurisdiction, and the Companies Act 1985 has effect, as if the institution concerned were an unregistered company within the meaning of Part XXI of that Act."
  (1 A) For subsection (4) of that section there shall be substituted the following subsection—

  "(4) In its application to Northern Ireland, this section shall have effect—

  (a) with the substitution of a reference to the Companies Act (Northern Ireland) 1960 for any reference to the Companies Act 1985;

  (b) with the substitution of a reference to section 211 of the said Act of 1960 for the reference to section 518 of the said Act of 1985;

  (c) with the substitution of a reference to Part IX of the said Act of 1960 for the reference to Part XXI of the said Act of 1985; and

  1260

  (d) with the insertion in subsection (2) after the words 'whether limited or not)' of the words 'then, notwithstanding section 348(d) of the Companies Act (Northern Ireland) 1960 (exclusion of partnerships etc. having less than eight members)'."

  (2) In subsection (2) of section 19'.
  394 Page 157, line 23, leave out from second 'any' to end of line 25 and insert 'provision of Parts XVIII to XXI of the Companies Act 1985 or any provision (other than section 83) of Part II of the Insolvency Act 1985; or".
  (3) In subsection (8) of that section, for paragraph (a) there shall be substituted the following paragraphs—

  "(a) for the reference in subsection (2) to Parts XVIII to XXI of the Companies Act 1985 there shall be substituted a reference to Parts V, VI and IX of the Companies Act (Northern Ireland) 1960;

  (aa) for any reference in subsection (5) to section 432 or 442 of the said Act of 1985 there shall be substituted respectively a reference to section 159 or 165A of the said Act of 1960;".'

  410 [Printed above.]
  459 Page 178, line 32, at end insert—
  '21 A. In section 519(1) (presentation of application for winding up), after the words "by the company" there shall be inserted the words "or the directors".'.
  568 Page 207, line 50, column 3, leave out 'and'.
  569 Page 207, line 52, column 3, at end insert ' and to sections 18 and 19(8)(a) of the Banking Act 1979'.
  All these amendments introduce and integrate into the structure of the bankruptcy code of the Bill provisions relating to criminal bankruptcy along similar lines to provisions contained in the existing legislation, that is to say, Sections 39 to 41 and Schedule 2 to the Powers of Criminal Courts Act of 1973. I beg to move.
  Moved, that this House do agree with the Commons in their Amendment No. 235.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  246–262 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 246 to 262.
  Moved, That this House do agree with the Commons in their Amendments Nos. 246 to 262 en bloc.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.
  Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 262A:
  262A [Printed above.]
  The noble Lord said: I beg to move that the House agree with my Amendment No. 262A as consequential to the Bill.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  263 to 266 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 263 to 266 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 263 to 266.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  267 Clause 110, page 90, line 29, leave out from 'not' to end of line 33 and insert 'release a bankrupt from any liability in respect of a fine or other penalty imposed for an offence or from any liability under a recognisance except, in the case of a penalty imposed for an offence under any enactment relating to the public revenue or of a recognisance, with the consent of the Treasury.'.

  AMENDMENT TO COMMONS AMENDMENT No. 267
  267A Line 3, leave out ("or other penalty").
  Lord Lucas of Chilworth: My Lords I beg to move that this House do agree with the Commons in their Amendment No. 267, as amended by 267 A. If I may, I should like to speak briefly to Amendments Nos. 280 and 302.
  280 Clause 118, page 97, leave out lines 1 to 4 and insert '; and the court shall consider that report before determining what order (if any) to make under that section'.
  302 Clause 138, page 110, line 2, leave out from 'and' to end of line 4 and insert, ', if made before, shall not have effect after his discharge except—

  (a) in the case of a discharge under section 108(2)(a) above, by virtue of a condition imposed under section 109(2)(c) above; or

  (b) in the case of a discharge under section 108(2)(b) above, by virtue of a provision of the order requiring it to continue in force for a period ending after the discharge but no later than three years after the making of the order.'.

  These amendments extend the nature of the debts from which a bankrupt is not released on his discharge to include fines and penalties imposed in respect of criminal offences. It also gives power to prescribing the rules for other debts being debts not claimable in bankruptcy which will not be released on discharge. The power has been taken principally to enable provision to be made in relation to any future legislative developments which give rise to debts from which it is considered a bankrupt should not be released on his discharge. In addition, there are certain personal rights, for example, a claim for damages for defamation of character which do not vest in the bankrupt's trustee.
  There are three new amendments relating to the discharge of bankrupts: those connected with Commons Amendment 267, which insert a definition of the word "fine" for the sake of consistency with other legislation. The amendment consequential on the Commons Amendment 268 inserts a consequential reference as the Commons Amendment added a new subsection to Clause 10. I commend these amendments to your Lordships.
  Moved, That this House do agree with the Commons in their Amendment No. 267 as amended by Amendment No. 267A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  CONSEQUENTIAL AMENDMENT TO THE BILL
  [Consequential on amendment 267 A]
  267B Page 91, line 13, at end insert—
  (" " fine" has the same meaning as in the said Act of 1980;")
  Lord Lucas of Chilworth: I beg to move Amendment No. 267B as consequential to the Bill.
  On Question, amendment agreed to.

  COMMONS AMENDMENT
  268 Clause 110, page 90, line 42, at end insert—
  '(5A) Discharge from bankruptcy shall not release a bankrupt from such other bankruptcy debts, not being debts provable in his bankruptcy, as are prescribed.'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 268.
  Moved, That this House to agree with the Commons in their Amendment No. 268.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed.
  Lord Lucas of Chilworth Lord Lucas of Chilworth moved Amendment No. 268A:

  AMENDMENT CONSEQUENTIAL ON COMMO\S AMENDMENT No. 268:
  268A Page 90, line 13, leave out ("(5)") and insert ("(5A)")
  The noble Lord said: My Lords, I beg to move this amendment as consequential to the Bill.
  On Question, amendment agreed to.

  COMMONS AMENDMENTS
  269 to 284 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 269 to 284 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 269 to 284.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  285 Clause 125, page 101, line 15, leave out 'that section' and insert 'this Part'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with Commons Amendment No. 285, and I should like to speak briefly to Amendments Nos. 287, 326, 360, 400, 452, 475. 495 to 498, 502 to 509, 513, 520, 523, 524, 533, 541. 542, 551, 552, 557, 559 to 561 and 567.
  287 Clause 126, page 102, line 7, leave out 'that section' and insert 'this Part'.
  326 Clause 147, Page 119, line 12, leave out 'supervisory committee' and insert 'committee established under section 130 above'.
  360 Clause 184, page 147, line 11, leave out 'supervisory committee' and insert 'committee established under section 130 above'.
  400 Clause 208, leave out Clause 208.
  452 Schedule 5, page 177, line 38, after 'substituted' insert 'the words'.
  475 Page 180, line 46, at end insert 'the words'.
  495 Schedule 7, page 184, line 12, at end insert—
  'The Bills of Sale Act (1878) Amendment Act 1882 1. In section 11 of the Bills of Sale Act (1878) Amendment Act 1882 (local registration of bills of sale), for the words "the London bankruptcy district as defined by the Bankruptcy Act 1869" and the words "the said London bankruptcy district" there shall be substituted, in each case, the words "the London insolvency district".'.
  496 Page 184, leave out lines 13 to 25.
  497 Page 185, line 19, at end insert—
  '(10) In section 30(1) (interpretation), for the words "the Bankruptcy Act 1914" there shall be substituted the words "the Insolvency Act 1985".'.
  498 Page 185, line 19, at end insert—
  'The Settled Land Act 1925
  2A. In section 103 of the Settled Land Act 1925 (legal estate in settled land not to vest in trustee in bankruptcy of estate owner), for the words from the beginning to "an" there shall be substituted the words "For the purposes of determining, where the estate owner of any settled land is bankrupt, whether the legal estate in the settled land is comprised in, or is capable of being claimed for, the bankrupt's estate, the legal estate in the settled land shall be deemed not to vest in the".'.
  502 Page 188, line 21, leave out 'is' and insert 'has been'.
  503 Page 188, line 23, leave out 'is' and insert 'has been'.
  504 Page 188, line 24, leave out 'is' and insert 'has been'.
  505 Page 188, line 33, leave out 'dies or is' and insert 'has died or has been'.
  506 Page 188, line 35, leave out 'is' and insert 'has been'.
  507 Page 188, line 36, leave out 'is' and insert 'has been'.
  508 Page 188, line 39, after 'representatives' insert 'or the person who is for the time being'.
  509 Page 188, line 44, leave out ', bankruptcy order, approval or appointment as aforesaid' and insert 'or, as the case may be, the date on which he became trustee or supervisor'.
  513 Page 191, line 29, at end insert—
  '(3A) In paragraph 2(2), for the words "in a case where the relevant event took place on or after the day of the passing of the Social Security Act 1985" there shall be substituted the words "in any other case".'.
  520 Page 194, leave out lines 38 to 44.
  523 Page 195, line 43, at end insert—
  'The Housing Act 1985
  35.—(1) The Housing Act 1985 shall be amended as follows.
  (2) In paragraph 3(4) of Schedule 19 (suspension of condition as to residence), for the words "is administered in bankruptcy under section 130 of the Bankruptcy Act 1914" there shall be substituted the words "falls to be administered in accordance with an order under section 203 of the Insolvency Act 1985".
  (3) In paragraph 5(3) of that Schedule (conditions affecting house purchased by means of advance), for the words "being administered in bankruptcy under section 130 of the Bankruptcy Act 1914" there shall be substituted the words "falling to be administered in accordance with an order under section 203 of the Insolvency Act 1985".'.
  524 Page 195, line 43, at end insert—
  'The Administration of Justice Act 1985
  36. Insertion 16(1)(g) of the Administration of Justice Act 1985 (conditional licences), for the words "and having obtained his discharge" there shall be substituted the words "and discharged".'.
  533 Schedule 8, page 198, line 26, leave out 'in the 1985 Act to a winding-up order' and insert 'to a winding up'.
  541 Schedule 9. Page 202. line 20. at end insert—

  '37 & 38 Vict. C.42.

  The Building Societies Act 1874.

  In section 32, the words "under the supervision of the court".

  6 & 7 Eliz. C.45.

  2 The Prevention of Fraud (Investments) Art 1958.

  In section 4, in subsections (2X6) and (4)(a), the words "or under the supervision of.

  1975 C.75.

  The Policyholders Protection Art 1975.

  In section 5(2), the words "or subject to the supervision of'.'.

  542 Page 202, line 20, at end insert—

  '1982 c.50.

  The Insurance Companies Act 1982.

  In section 57(1), the words "or under the supervision of'.'.

  551 Page 204, line 17, column 3, leave out 'Part II of Schedule 16' and insert 'Schedule 16, in Part I, the second paragraph and in Part II'.
  552 Page 204, line 19, column 3, leave out 'and "or 609" ' and insert 'the words "or 609" and the words from "or appointing" onwards'.
  557 Page 206, line 10, column 3, at end insert 'Section 13A(2)(6).'.
  559 Page 206, line 37, at end insert—

  '1985 c.00

  The Housing Act 1985.

  Section 121(1)(b)'.

  560 Page 206, line 37, at end insert—

  '1985 c.00

  The Administration of Justice Act 1985.

  In section 16(1)(f), the words "or while a receiving order is in force against him". Section 17(2)(b).'.

  AMENDMENT TO COMMONS AMENDMENT No. 560
  560A Line 3, after ("receiving order") insert ("in bankruptcy")

  COMMONS AMENDMENTS
  561 Page 206, line 43, column 3, leave out '41 and' and insert '40 to'.
  567 Page 207, line 45, column 3, at end insert—'Section 666(7)'.
  This group of amendments consists of consequential amendments, made necessary as a result of other amendments made in relation to other legislation. I do ask your Lordships to accept from me that these are all consequential and are necessary for the proper drafting of the Bill, but of course if noble Lords would wish me to go into detail I should be happy so to do.
  Moved, That the House do agree with the Commons in their Amendment No. 285.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  286 to 299 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 286 to 299, as consequential.
  Moved, That the House do agree with the Commons in their Amendments Nos. 286 to 299.(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENTS CONSEQUENTIAL ON COMMONS AMENDMENTS NO. 299
  299A, 299B, 299C [Printed above]
  Lord Lucas of Chilworth: My Lords, I beg to move these amendments, which are consequential amendments to the Bill.
  On Question, amendments agreed to.

  COMMONS AMENDMENTS
  300 to 303 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 300 to 303 inclusive.
  Moved, that the House do agree with the Commons in their Amendments Nos. 300 to 303.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  304 Clause 141, page 111, line 29, leave out 'the principal residence of the bankrupt or of and insert 'a dwelling house which is occupied by the bankrupt or by'.
  305 Page 111, line 31, after 'unable' insert 'for the time being'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with Commons Amendments Nos. 304 and 305. I should like to speak also to Nos. 315 to 322, 329 to 332, 374 and 558.
  315 Page 115, line 42, at end insert—
  '(8A) Without prejudice to subsection (7) above, the disclaimer of any property in a dwelling house shall not take effect unless a copy of the disclaimer has been served (so far as the trustee is aware of their addresses) on every person in occupation of or claiming a right to occupy the dwelling house and either—

  (a) no application under section 144 below is made with respect to that property before the end of the period of fourteen days beginning with the day on which the last notice served under this subsection was served; or

  (b) where such an application has been made, the court directs that the disclaimer shall take effect.'.

  316 Clause 144, page 116, line 18, leave out 'or'.
  317 Page 116, line 21, at end insert 'or

  (c) where the disclaimed property is property in a dwelling house, any person in occupation of or claiming a right to occupy the dwelling house.'.

  AMENDMENT TO COMMONS AMENDMENT No. 317
  317A Line 3, leave out ("in occupation of or claiming a right") and insert ("who at the time when the bankruptcy petition was presented was in occupation of or entitled")

  COMMONS AMENDMENTS
  318 Page 116, line 27, leave out 'or'.
  319 Page 116, line 29, at end insert 'or

  (c) where the disclaimed property is property in a dwelling house, any person in occupation or of entitled to occupy the dwelling house.'.

  AMENDMENT TO COMMONS AMENDMENT No. 319
  319A Line 3, after ("person") insert ("who at the time when the bankruptcy petition was presented was").

  COMMONS AMENDMENTS
  320 Page 116, line 35, leave out 'claiming under the bankrupt as underlessee or mortgagee'.
  321 Page 117, line 5, leave out 'claiming under the bankrupt as underlessee or mortgagee'.
  322 Page 117, line 16, leave out from 'person' to 'declines' in line 17.

  COMMONS AMENDMENTS
  329 Clause 150, page 121, line 18, leave out, 'the principal residence of the bankrupt or of and insert 'a dwelling house which is occupied by the bankrupt or by'.
  330 Before Clause 153, insert the following new clause:
  ("Rights of occupation etc. of bankrupt's spouse.
  .—(1) Where a spouse's right of occupation under the Matrimonial Homes Act 1983 are a charge on the estate or interest of the other spouse or of trustees for the other spouse and the other spouse is adjudged bankrupt—

  (a) the charge shall continue to subsist notwithstanding the bankruptcy and, subject to the provisions of that
  1266
  Act, shall bind the trustee of the bankrupt's estate and persons deriving title under that trustee; and

  (b) any application by that trustee for an order under section 1 of that Act shall be made to the court having jurisdiction in relation to the bankruptcy.

  (2) Where a person and his spouse or former spouse are trustees for sale of a dwelling house and that person is adjudged bankrupt, any application by the trustee of the bankrupt's estate for an order under section 30 of the Law of Property Act 1925 (powers of court where trustees for sale refuse to exercise powers) shall be made to the court having jurisdiction in relation to the bankruptcy
  (3) On such an application as is mentioned in subsection (1) or (2) above the court shall make such order under the said section 1 or the said section 30 as it thinks just and reasonable having regard to the interests of the bankrupt's creditors, to the conduct of the spouse or former spouse so far as contributing to the bankruptcy, to the needs and financial resources of the spouse or former spouse, to the needs of any children and to all the circumstances of the case.
  (4) Where such an application is made after the end of the period of one year beginning with the first vesting, under Chapter V of this Part, of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors out-weigh all other considerations.")

  AMENDMENTS TO COMMONS AMENDMENT No. 330
  330A Line 2, at beginning insert—
  (" ( ) Nothing occuring in the period to which section 113 above applies shall be taken as having given rise to any rights of occupation under the Matrimonial Homes Act 1983 in relation to a dwelling house comprised in a bankrupt's estate.")
  330B Line 3, leave out (" Matrimonial Homes Act ") and insert ("said Act of)
  330C Line 10, leave out (" by that trustee")
  330D Line 27, at end insert ("other than the needs of the bankrupt")

  COMMONS AMENDMENT
  331 Before Clause 153, insert the following new clause:
  ("Rights of occupation of bankrupt.
  .—(1) This section applies where a person—

  (a) who is entitled to occupy a dwelling house by virtue of a beneficial estate or interest; and

  (b) with whom any children have their home, is adjudged bankrupt.

  (2) Whether or not the bankrupt's spouse (if any) has rights of occupation under the Matrimonial Homes Act 1983—

  (a) the bankrupt shall have as against the trustee of his estate and persons deriving title under that trustee the same rights of occupation under that Act as a person who fell within subsection (3) below would have and

  (b) subject to the provisions of this section, that Act shall apply accordingly.

  (3) This subsection applies to a person if—

  (a) that person is the spouse of the bankrupt;

  (b) that person is not entitled to occupy the dwelling house by virtue of a beneficial estate or interest;

  (c) that person married the bankrupt immediately before the commencement of the bankruptcy; and

  (d) the dwelling house is a matrimonial home of the bankrupt and that person.

  (4) Any application by the trustee of the bankrupt's estate for an order under section 1 of the said Act of 1983 shall be made to the court having jurisdiction in relating to the bankruptcy.
  (5) On such an application as is mentioned in subsection (4) above the court shall make such order under the said section 1 as it thinks just and reasonable having regard to the interests of the creditors, to the

  1267
  bankrupt's financial resources, to the needs of the children and to all the circumstances of the case other than the needs of the bankrupt.
  (6) Where such an application is made after the end of the period of one year beginning with the first vesting, under Chapter V of this Part, of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.")

  AMENDMENTS TO COMMONS AMENDMENT No. 331
  331A Line 2, leave out from ("where") to end of line 6 and insert—

  ("(a) a person who is entitled to occupy a dwelling house by virtue of a beneficial estate or interest is adjudged bankrupt; and

  (b) any persons under the age of eighteen with whom that person had at some time occupied that dwelling house had their home with that person at the time when the bankruptcy petition was presented and at the commencement of the bankruptcy.")

  331B Leave out Unes 9 to 24, at insert—

  ("(a) the bankrupt shall have the following rights as against the trustee of his estate—

  (i) if in occupation, a right not to be evicted or excluded from the dwelling house or any part thereof, except with the leave of the court;

  (ii) if not in occupation, a right with the leave of the court to enter into and occupy the dwelling house; and

  (b) the bankrupt's rights shall be a charge, having the like priority as an equitable interest created immediately before the commencement of the bankruptcy, on so much of the estate or interest in the dwelling house as vests in the trustee.

  (3) The Matrimonial Homes Act 1983 shall have effect, with the necessary modifications, as if—

  (a) the rights conferred by paragraph (a) of subsection (2) above were rights of occupation under that Act;

  (b) any application for leave such as is mentioned in that paragraph were an application for an order under section 1 of that Act; and

  (c) any charge under paragraph (b) of that subsection on the estate or interest of the trustee were a charge under that Act on the estate or interest of a spouse.

  (4) Any application for leave such as is mentioned in subsection (2)(a) above or otherwise by virtue of this section")

  COMMONS AMENDMENT
  332 Before Clause 153, insert the following new clause:—
  ("Payments in respect of premises occupied by bankrupt
  . Where any premises comprised in a bankrupt's estate are occupied by him (whether by virtue of section [Rights of occupation of bankrupt] above or otherwise) on condition that he makes payments towards satisfying any liability arising under a mortgage of the premises or otherwise towards the outgoings of the premises, the bankrupt shall not, by virtue of those payments, acquire any interest in the premises.")
  374 Page 150, line 25, at end insert—
  ' "dwelling house" includes any building or part of a building which is occupied as a dwelling and any yard, garden, garage or outhouse belonging to the dwelling house and occupied with it;'.
  558 Page 206, line 33, at end insert—
  '1983 c. 19 The Matrimonial Homes Act 1983. Section 2(7).'
  This group of amendments is the Government's response to the representations made on the treatment of the family home where bankruptcy occurs. When the Bill was previously before your Lordships, the House debated on two occasions the desirability of reviewing the present position as regards the
  1268
  bankrupt's home. Many of your Lordships made very valuable contributions to those debates: in particular, perhaps I might mention the noble and learned Lord, Lord Denning, and the noble Lords, Lord Meston and Lord Bruce of Donington.
  Although the Bill is largely of a technical nature, this is an area where we are dealing, more than anything, with the social aspects of bankruptcy and the need to allow a bankrupt and his family time to adjust to changed circumstances so that they may make proper arrangements for their future.
  I undertook both in Committee and on Report that the Government would bring forward amendments in the other place to deal with these matters. Here your Lordships have those amendments, together with some new ones, which largely clarify the drafting of the new clause. I have indicated that this matter has been debated at length and my department has consulted with a number of professional bodies and other interested organisations. Although there was no clear consensus of opinion arising from those consultations, useful suggestions were made and they have been included in the proposals. Although the question of the family home as considered by the review committee and debated in your Lordships' House was concerned with properties in which the bankrupt's interest could be sold, we have also sought to provide protection to the family where the bankrupt's interest in the property in question is of no value to the estate by enabling the spouse, or, in circumstances where he has custody of children, the bankrupt himself, to apply for a vesting order on a disclaimer by the trustee.
  The amendments represent a compromise between two conflicting interests, and in our view achieve a reasonable balance between the rights of the creditor, who can only look to the bankrupt's assets for payments of his debt, and those of the family, who will normally be able to remain in the property concerned for a reasonable period so as to give them an opportunity to adjust to their changed circumstances and make arrangements either for the alternative accommodation or for the buying out of the bankrupt's interest in the property.
  There are eight new amendments to these provisions which largely improve the drafting of the clauses in relation to the matrimonial home in a bankruptcy. Certain substantive changes are made, and I shall comment briefly on the two main changes. First, the provisions relating to occupational rights of the bankrupt himself are amended and make it clearer that only persons under 18 at the relevant date are to be taken into account by the court; secondly, the relevant "qualifying" date for circumstances to be taken into account by the court in connection with both the new clauses and the rights conferred on occupants in connection with a disclaimer is specified as that of the bankruptcy petition, thus ensuring that the bankrupt cannot after that date but before he actually becomes bankrupt manoeuvre himself into an artificially advantageous position.
  I am happy to speak to the other, more detailed provisions if any noble Lord thinks that I have not sufficiently covered them in these general remarks. I commend the Commons amendments to your Lordships.
  Moved, That this House do agree with the Commons in their Amendments Nos. 304 and 305.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  306 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 306.
  Moved, That this House do agree with the Commons in their Amendment No. 306.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  307 Page 114, line 2, after 'Part' insert'—

  (a) disposes of any property comprised in the bankrupt's estate to an associate of the bankrupt; or

  (b) '.

  308 Page 114, line 3, leave out 'and' and insert 'he shall, if.
  309 Page 114, line 4, leave out 'he shall'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 307 to 309.1 shall speak briefly to those amendments, and should like to include Amendments Nos. 460 to 463, 470 and 472.
  460 Schedule 5, page 179, line 5, after 'Act' insert '—

  (a) disposes of any property of the company to a person who is connected with the company within the meaning of Part II of the Insolvency Act 1985); or

  (b) '.

  461 Page 179, line 7, leave out 'and' and insert 'he shall, if
  462 Page 179, line 8, leave out 'the Insolvency Act 1985' and insert 'that Act'.
  463 Page 179, line 8, leave out 'he shall'.
  470 Page 180, line 16, leave out 'In section 598(1)' and insert '(1) In subsection (1) of section 598'.
  472 Page 180, line 19, at end insert—
  '(2) After subsection (4) of that section there shall be inserted the following subsection—

  "(4A) Where the liquidator in exercise of the powers conferred on him by this Act disposes of any property of the company to a person who is connected with the company (within the meaning of Part II of the Insolvency Act 1985), he shall, if there is for the time being a committee established under section 590 above, give notice to the committee of that exercise of his powers."

  These amendments impose upon trustees and liquidators in bankruptcy and winding-up proceedings a duty to inform their committees of any disposal of the bankrupt's or company's property to a person who is connected with the insolvent person or company. The amendments will help to prevent the abuse that can sometimes arise, particularly in relation to voluntary liquidations, of the sale of the company's assets to persons connected with the company, notably the directors, at a low price. The directors then carry on effectively what is the same business, while leaving the liabilities in the insolvent company.
  I beg to move that this House do agree with the Commons in their Amendments Nos. 307 to 309.
  Moved, That this House do agree with the Commons in their Amendments Nos. 307 to 309.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  310 to 333A [Printed above.]
  11.45 p.m.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 310 to 317 as amended by Amendment No. 317A; Amendments Nos. 318 to 319 as amended by Amendment No. 319A; Amendments Nos. 320 to 330 as amended by Amendments Nos. 330A, 330B, 330C and 330D; Amendment No. 331 as amended by Amendments Nos. 331A and 331B, and Amendments Nos. 332 and 333 as amended by Amendment No. 333A.
  Moved, that this House do agree with the Commons in their Amendment Nos. 310 to 317 as amended by Amendment No. 317A; Amendments Nos. 318 to 319 as amended by Amendment No. 319A; Amendments Nos. 320 to 330 as amended by Amendments Nos. 330A, 330B, 330C and 330D; Amendment No. 331 as amended by Amendments Nos. 331A and 331B, and Amendments Nos. 332 and 333 as amended by Amendment No. 333A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  CONSEQUENTIAL AMENDMENTS
  333B and 333C [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move Amendments Nos. 333B and 333C as consequential amendments to the Bill.
  Moved, That Amendments Nos. 333B and 333C be agreed to.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  334 to 336 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with their Commons in their Amendments Nos. 334 to 336 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 334 to 336.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  337 Clause 166, page 136, line 10, after 'causes' insert to be made'.
  338 [Printed above.]
  339 Page 136, line 15, leave out 'bankruptcy order was made)' and insert 'commencement of the bankruptcy'.
  340 Clause 168, page 137, line 28, after 'engages' insert '(whether directly or indirectly)'.
  341 Page 137, line 33, after 'to' insert '—

  (a)'

  342 Page 137, line 35, at end insert 'and

  (b) a case where he is paid in advance (whether in money or otherwise) for the supply of goods or services.'.

  343 Clause 170, page 138, line 38, leave out from beginning to 'in' in line 42 and insert 'The bankrupt shall be guilty of an offence if he has—

  (a)'

  344 Page 139, line 1, leave out from 'speculations' to 'between' in line 3 and insert 'or
  345 Page 139, line 5, leave out 'such gambling or' and insert 'gambling or by rash and hazardous'.
  346 Clause 171, page 139, line 19, after ' 168(1)' insert 'or (3)'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 337 to 346. In speaking to these, I wish to speak also to Amendment No. 473:
  473 Page 180, line 19, at end insert—
  34A. After subsection (1) of section 625 (transactions in fraud of creditors) there shall be inserted the following subsection—
  "(1A) A person shall not be guilty of an offence under this section—

  (a) by reason of conduct constituting an offence under subsection (l)(a) above which occurred more than five years before the commencement of the winding-up; or

  (b) if he proves that, at the time of the conduct constituting the offence, he had no intent to defraud the creditors of the company."

  34B. In section 626(1)(d) (failure to inform liquidator that false debt has been proved), for the words "for the period of a month to inform the liquidator of it" there shall be substituted the words "to inform the liquidator as soon as practicable".'.
  These amendments relate to various offences which may be committed under the Bill and are mainly technical in nature, giving greater consistency to various provisions and seeking to eliminate certain loopholes for which the existing legislation does not adequately cater.
  Moved, That this House do agree with the Commons in their Amendments Nos. 337 to 346.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  347 to 356 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 347 to 356 en bloc. These amendments are consequential.
  Moved, That this House do agree with the Commons in their Amendments Nos. 347 to 356.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  357 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 357.
  Moved, That this House do agree with the Commons in their Amendment No. 357.—(Lord Lucas of Chilworth.)
  [Amendment No. 357A not moved.]
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  358 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 358.
  Moved, That this House do agree with the Commons in their Amendment No. 358.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  359 Leave out Clause 182.
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 359. With the leave of the House I shall speak also to Amendments Nos. 382, 383, 383A to 383L, 406, 409, 411,412, 412A, 521, 555, 562 and 564 to 566.
  382 Clause 191, page 153, line 39, leave out subsection (8).
  383 After clause 191, insert the following new clause:
  ("Co-operation between courts exercising jurisdiction in relation to insolvency law.
  .—(1) An order made by a court in any part of the United Kingdom in the exercise of jurisdiction in relation to insolvency law shall be enforced in any other part of the United Kingdom as if it were made by a court exercising the corresponding jurisdiction in that other part.
  (2) Without prejudice to subsections (3) and (4) below, nothing in subsection (1) above shall require a court in any part of the United Kingdom to enforce, in relation to property situated in that part, any order made by a court in any other part of the United Kingdom.
  (3) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory.
  (4) For the purposes of subsection (3) above a request made to a court in any part of the United Kingdom by a court in any other part of the United Kingdom or in a relevant country or territory shall be authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction; and in exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.
  (5) Section 38 of the Criminal Law Act 1977 (execution of warrant of arrest throughout the United Kingdom) shall apply to a warrant which, in exercise of any jurisdiction in relation to insolvency law, is issued in any part of the United Kingdom for the arrest of a person as it applies to a warrant issued in that part of the United Kingdom for the arrest of a person charged with an offence.
  (6) In this section "insolvency law" means—

  (a) in relation to England and Wales, provision extending to England and Wales and made by or under this Act or Parts XIX to XXI of the 1985 Act;

  (b) in relation to Scotland, provision extending to Scotland and made by or under this Act, Parts XVIII to XXI of the 1985 Act or the Bankruptcy (Scotland) Act 1985;

  (c) in relation to Northern Ireland, provision made by or under the Bankruptcy Acts (Northern Ireland) 1857 to 1980, Part V, VI or IX of the Companies Act (Northern Ireland) 1960 or Part IV of the Companies (Northern Ireland) Order 1978;

  (d) in relation to any relevant country or territory, so much of the law of that country or territory as

  1273
  corresponds to provisions falling within any of the foregoing paragraphs.

  (7) In this section "relevant country or territory" means—

  (a) any of the Channel Islands or the Isle of Man; or

  (b) any country or territory designated for the purposes of this section by the Secretary of State by order made by statutory instrument."

  AMENDMENTS TO COMMONS AMENDMENT NO. 383
  383A Line 7, leave out from beginning to ("shall") in line 8 and insert ("; but, without prejudice to the following provisions of this section, nothing in this subsection").
  383B Line 11, at end insert—
  ("(2A) The Secretary of State, with the concurrence in relation to property situated in England and Wales of the Lord Chancellor, may by order make provision for securing that a trustee or assignee under the insolvency law of any part of the United Kingdom has, with the such modifications as may be specified in the order, the same rights in relation to any property situated in another part of the United Kingdom as he would have in the corresponding circumstances if he were a trustee or assignee under the insolvency law of that other part.").
  383C Line 25, at end insert—
  ("(4A) Where a person who is a trustee or assignee under the insolvency law of any part of the United Kingdom claims property situated in any other part of the United Kingdom (whether by virtue of an order under subsection (2A) above or otherwise), the submission of that claim to the court exercising jurisdiction in relation to insolvency law in that other part shall be treated in the same manner as a request made by a court for the purposes of subsection (3) above.").
  383D Line 32, at end insert—
  ("(5A) Without prejudice to any power to make rules of court, any power to make provision by subordinate legislation for the purpose of giving effect in relation to companies or individuals to the insolvency law of any part of the United Kingdom shall include power to make provision for the purpose of giving effect in that part to any provision made by or under the preceding provisions of this section.
  (5B) An order under subsection (2A) above shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.").
  383E In subsection (6)(d), after ("as") insert ("substantially").
  383F Line 49, at end insert ("and references in this subsection to any enactment include, in relation to any time before the coming into force of that enactment, references to the corresponding enactment in force at that time.").

  AMENDMENTS CONSEQUENTIAL ON COMMONS AMENDMENT No. 383 AS PROPOSED TO BE AMENDED
  383G Page 161, line 36, leave out from ("property") to second ("and") in line 37 and insert ("wherever situated").
  383H Page 165, line 29, at end insert ("Irish Bankrupt and Insolvent Act 1857, the").
  383I Page 206, line 40, at end insert—

  ("20 & 21 Vict. c. 45.

  The Irish Bankrupt and Insolvent Act 1857.

  Sections 73 to 75. In section 269, the words "in the United Kingdom, or in any of the dominions of Her Majesty,", the words from "within the times" to "United Kingdom," (in the second place where it occurs) and the words

  1274

  from ", and, as regards" onwards.

  In section 305, the words "either in Ireland or Great Britain" and the words from "provided" onwards.

  In section 312, the words ", in England, Scotland, or Ireland,".

  In section 320, the words ", either in Ireland, England, or Scotland,".

  In section 370, the words "in the United Kingdom of Great Britain and Ireland".

  In section 410, the words ", except where the same are expressly mentioned".").

  383J Page 206, line 43, column 3, at beginning insert—

  ("In section 2, the words ", except in so far as same is expressly provided,".").

  383K Page 206, line 43, column 3, at end insert—

  ("In section 65, the words "in force in am part of the United Kingdom, or in any part of the dominions of Her Majesty,".

  In section 121(7), the words "in force in any part of the United Kingdom or in any of the dominions of Her Majesty,".").

  383L Page 207, line 55, at end insert—
  (" Northern Ireland Legislation

  1960 c. 22.

  The Companies Act (Northern Ireland) 1960

  Section 246.")

  COMMONS AMENDMENTS
  406 Clause 211, page 165, line 15, leave out 'except subsection (8)'.
  409 Page 165, leave out line 25 and insert—

  '(a) section (Co-operation between courts exercising jurisdiction in relation to insolvency law);'.

  411 Page 165, line 29, after 'and' insert 'Part IV of'.
  412 Page 165, line 31, leave out 'and the Bankruptcy Act 1883' and insert 'the Bankruptcy Act 1883, the Bankruptcy Act 1914, the Criminal Law Act 1977 and the Civil Jurisdiction and Judgments Act 1982'.

  AMENDMENT TO COMMONS AMENDMENT No. 412
  412A Line 3, leave out ("and the Civil Jurisdiction and Judgments Act 1982") and insert (", the Civil Jurisdiction and Judgments Act 1982, section 570 of the Companies Act 1985 and the Companies Act (Northern Ireland) 1960.").

  COMMONS AMENDMENTS
  521 Schedule 7, page 195, line 6, at end insert—
  'The Civil Jurisdiction and Judgments Act 1982
  32A After paragraph (b) of section 18(3) of the Civil Jurisdiction and Judgments Act 1982 (judgments to which provisions relating to the enforcement of judgments within the United Kingdom do not apply), there shall be inserted the following paragraph—

  "(ba) a judgment given in the exercise of jurisdiction in relation to insolvency law within the meaning of section (Co-operation between courts exercising jurisdiction in relation to insolvency law) of the Insolvency Act 1985;".'

  555 Schedule 9, page 205, line 2, column 3, at end insert sections 121 to 123'.
  562 Page 207, line 3, at end insert—

  '4 and 5 Geo. 5 c. 59.

  The Bankruptcy Act 1914.

  Sections 121 to 123.'

  564 Page 207, line 23, at end insert—

  '1977 c.45

  The Criminal Law Act 1977.

  Section 38(5).'.

  565 Page 207, line 36, at end insert—

  '1982 c.27

  The Civil Jurisdiction and Judgments Act 1982.

  In section 18(3)(c), sub-paragraphs (i) and(ii).'.

  566 Page 207, line 42, column 3, at beginning insert 'Section 570.'.
  Amendment No. 383 introduces a new clause which creates within the United Kingdom a complete system of reciprocal enforcement of judicial orders in respect of bankruptcy, winding up, receivership and the new administration order procedure. Furthermore, United Kingdom and other relevant courts will be able to assist each other in the field of insolvency law and by applying rules of private international law determine the law which it is most appropriate to apply when matters arise in an insolvency which involves more than one of the the insolvency jurisdictions in the United Kingdom.
  I particularly mention Amendments Nos. 383A to 383D and 383F to 383L. These are new amendments which are being made to assist the working of the clause. They have been made following consultation between authorities of the three United Kingdom jurisdictions. The other amendments are also aimed to that end.
  Moved, That this House do agree with the Commons in their Amendment No. 359.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  360 to 382 [Printed above.}
  Lord Cameron of Lochbroom: My Lords, I beg to move formally that this House do agree with the Commons in their Amendments Nos. 360 to 382, en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 360 to 382.—(Lord Cameron of Lochbroom)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  383 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move formally that the House do agree with the Commons in their Amendment No. 383 as amended by Amendments Nos. 383A to 383D.

  AMENDMENTS TO COMMONS AMENDMENT No. 383
  383A to 383D [Printed above.]
  Moved, That the House do agree with the Commons in their Amendment No. 383 as amended by Amendments Nos. 383A to 383D.—(Lord Cameron of Lochbroom.)
  The Deputy Speaker: The Question is that this House do agree with the Commons in their Amendment No. 383 as amended by Amendments Nos. 383A to 383D; to which there are Amendments Nos. 383E and 383F.
  [Amendment No. 383E not moved.]

  AMENDMENT TO COMMONS AMENDMENT No. 383
  383F [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg formally to move Amendment No. 383F.
  Moved, That this House do agree with Amendment No. 383F as an amendment to Commons Amendment No. 383.—(Lord Cameron of Lochbroom.)
  On Question, amendment agreed to.
  On Question, Motion agreed to.

  AMENDMENTS TO COMMONS AMENDMENT No. 383
  383G to 383L [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move formally Amendments Nos. 383G to 383L as consequential to the Bill.
  Moved, That this House do agree with Amendments Nos. 383G to 383L as consequential on Commons Amendment No. 383 as proposed to be amended.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  384 and 385 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move formally that this House do agree with the Commons in their Amendments Nos. 384 and 385.
  Moved, That this House do agree with the Commons in their Amendments Nos. 384 and 385.—(Lord Cameron of Lochbroom.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  386 [Printed above.]
  Lord Cameron of Lochbroom: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 386.
  Moved, That this House do agree with the Commons in their Amendment No. 386.—(Lord Cameron of Lochbroom.)

  LORDS AMENDMENT IN LIEU OF COMMONS AMENDMENT No. 386
  386A Lord Bruce of Donington to move, That this House do disagree with the Commons in their Amendment No. 386, but propose the following amendment in lieu thereof
  386B Page 155, line 17, leave out from second ("certificate") to end of line 22 and insert ("attaching a copy of an order of the court giving the official receiver, official assignee, liquidator or administrator leave to apply to the registrar following an application to the court for directions in that regard")
  Lord Bruce of Donington: My Lords, I beg to move the amendment standing in my name. The purpose of this amendment is to establish a position where access

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  to the register is access to highly confidential information. We think that a judge should decide whether or not to allow the application, and not just any insolvency practitioner. I beg to move.
  Moved, That this House do disagree with the Commons in their Amendment No. 386, but propose Amendment No. 386B in lieu thereof.—(Lord Bruce of Donington.)
  Lord Lucas of Chilworth: My Lords, I do not want to take up too much time but I have to say that I regret that I am in fact not able to accept the amendment of the noble Lord. Clause 193 was introduced in your Lordships' House during the Report stage of the Bill and gives effect to the recommendation contained in paragraph 794 of the review committee's report. The introduction of the new clause received your Lordships' full support. Indeed, the noble Lord, Lord Bruce of Donington, said (and I am grateful to him):
  "We on this side of the House entirely support the insertion of the new clauses".
  That was in Hansard, col. 193, on 2nd April 1985.
  It is true that the scope of the clause was extended by Government Amendments Nos. 385 to 388 in the other place to include inspection of the land register by the official assignee for and trustees, liquidators and administrators in Northern Ireland. However, the purpose of the clause remains exactly as it was upon its introduction.
  The amendment tabled by the noble Lord would provide that inspection of the land register in England and Wales could only be carried out with the prior leave of the court. If the Government were to accept this amendment, in our view it would seriously lessen the effectiveness of the new provision. For instance, one of the present exceptions to the normal land registry rules about inspection in England and Wales is that contained in Section 112A of the Land Registration Act 1925, and inserted into that Act by Schedule 5(b) of the Administration of Justice Act 1982. This empowers the Official Receiver or trustee or liquidator to obtain a court order for inspection of the register if he can sign a declaration to the effect that he believes that a criminal offence has been committed in relation to the property concerned.
  However, it is often only after relevant information has been obtained and inquiries have been made that such a declaration can be signed. In addition, obtaining a court order can prove to be troublesome and expensive, and it is often in the cases where the insolvent estate is completely without funds that information is required but cannot be obtained.
  If the procedure suggested by the amendment of the noble Lord, Lord Bruce of Donington, were to be followed, and if the application to the court involved only the relevant office holder, the court would be unlikely to refuse his application if he made a statement equivalent to the certificate required by subsection (2) of new Section 112AA of the Land Registration Act. If it is intended that other parties should be entitled to be heard on the application, that would presumably involve bringing in the registered owner of the property; but he cannot be identified without inspection of the register, and a vicious circle is so created.
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  As I have said, that provision in the Bill follows that which was recommended by the review committee. We have received no criticism of the clause from any other quarter. I hope that after that explanation the noble Lord will agree with me that his amendment is not as necessary as perhaps he thought it was.
  12 midnight
  Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord for his explanation. He has taught me a lesson. It has always been my practice in political and social life to believe that my first thoughts were correct—immediate instinct. On this one occasion, where I presumed to think that 1 had previously been wrong I find that I was right after all. I am obliged to the noble Lord for pointing out the fact and showing how dangerous it is to have second thoughts. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  387 and 388 [Printed above.]

  AMENDMENTS TO COMMONS AMENDMENT No 388
  388A Line 3, leave out ("in") and insert ("for")
  388B Line 4, leave out ("in") and insert ("for")

  COMMONS AMENDMENT
  389 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 387 and 388 (as amended by Amendments Nos. 388A and 388B) and 389 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 387 to 389 en bloc, as amended by Amendments Nos. 388A and 388B.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  390 Clause 195, page 155, line 40, at end insert—
  '(1A) In subsection (1) (conditions of payment), after paragraph (a) there shall be inserted the following paragraph—"(aa) that the employment of the employee has been terminated; and".'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 390.
  Moved, That this House do agree with the Commons in their Amendment No. 390.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  391 to 394 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 391 to 394 en bloc. These are consequential amendments.
  Moved, That this House do agree with the Commons in their Amendments Nos. 391 to 394 en bloc.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  395 After Clause 197, insert the following new clause:
  ("Disabilities on revocation of administration order against individual
  .(1) Where a person fails to make any payment which he is required to take by virtue of an administration order under Part VI of the County Courts Act 1984, the court which is administering the estate of that person under that order may, if it thinks fit, revoke the administration order and make an order directing that this section shall apply to that person for such period, not exceeding two years, as may be specified in the order.
  (2) A person to whom this section applies by virtue of an order under subsection (1) above shall not, except with the leave of the court which made that order, act as director or liquidator of, or directly or indirectly take part or be concerned in the promotion, formation or management of, a company (within the meaning of section 1 above.
  (3) A person to whom this section so applies shall not—

  (a) either alone or jointly with another person, obtain credit to the extent of the amount prescribed for the purposes of section 168(l)(a) above or more; or

  (b) enter into any transaction in the course of or for the purposes of any business in which he is directly or indirectly engaged.

  without disclosing the fact that this section applies to him to the person from whom he obtains the credit or, as the case may be, with whom the transaction is entered into.
  (4) The reference in subsection (3) above to a person obtaining credit includes a reference to—

  (a) a case where goods are bailed or hired to him under a hire-purchase agreement or agreed to be sold to him under a conditional sale agreement; and

  (b) a case where he is paid in advance (whether in money or otherwise) for the supply of goods or services.

  (5) A person who contravenes this section shall be guilty of an offence and liable—

  (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;

  (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.")

  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 395. I should also like to introduce at this time Amendments Nos. 395A, 407 and 407A.

  AMENDMENT TO COMMONS AMENDMENT NO. 395
  395A Page 206, line 21, column 3, at end insert—

  ("In section 12(1) the words "and section 11 above".")

  407 Clause 211, page 165, line 17, leave out '(f) sections 197' and insert—
  '(ea) section 197;
  (eb) section (Disabilities on revocation of administration order against individuals) (2) to (5);
  (f) sections 198'

  AMENDMENT TO COMMONS AMENDMENT NO. 407
  407 A Line 4, leave out ("(2) to (5)") and insert ("(1)")
  The new clause effectively replaces Section 11 of the Insolvency Act 1976, which is repealed in Schedule 9
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  to the Bill. It provides a remedy for the court against those who deliberately abuse one administration order procedure simply to use it as a delaying technique to their creditors. Amendment No. 395A inserts a repeal consequentially required as a result of the repeal of Section 11 of the Insolvency Act 1976 and its replacement by the new clause introduced by Amendment No. 395. Amendment No. 407 seeks to disapply parts of the new clause in relation to Scotland. It is, unfortunately, incorrect, and Amendment No. 407A corrects that amendment.
  Moved, That this House do agree with the Commons in their Amendment No. 395.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  395A [Printed above.]
  The Deputy Speaker (Lord Airedale): Amendment No. 395A has already been spoken to.
  Lord Lucas of Chilworth: I beg to move.
  Moved, That this House do agree with the Commons in their Amendment No. 395A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  396 to 414 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendments Nos. 396 to 406, 407 (as amended by Amendment No. 407A), 408 to 411, 412 (as amended by Amendment No. 412A), 413 and 414, and deal with Amendment No. 414A as a consequential amendment.
  Moved, That this House do agree with the Commons in their Amendments Nos. 396 to 414, as amended by Amendments Nos. 407A and 412A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  AMENDMENT CONSEQUENTIAL ON COMMONS AMENDMENT No. 414
  414A [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally Amendment No. 414A as a consequential amendment to the Bill.
  Moved, That Amendment No. 414A be agreed to.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  415 to 417 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 415 to 417 en bloc.
  Moved, That the House do agree with the Commons in their Amendments Nos. 415 to 417.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  418 Schedule 3, page 169, line 19, leave out from beginning to 'the' in line 20 and insert 'is referable to'.
  419 Page 169, leave out lines 21 and 22 and insert 'the relevant date'.
  420 Page 170, line 24, at end insert—
  '6. So much of any amount which—

  (a) is ordered, whether before or after the relevant date, to be paid by the debtor under the Reserve Forces (Safeguard of Employment) Act 1985; and

  (b) is so ordered in respect of a default made by the debtor before that date in the discharge of his obligations under that Act,

  as does not exceed such amount as may be prescribed by order made by the Secretary of State'.
  421 Page 171, line 15, leave out 'in respect of which any value added tax is due' and insert 'to which any value added tax is attributable'.
  422 Page 171, line 17, leave out 'twelve' and insert 'six'.
  423 Page 171, line 24, at end insert 'and in this paragraph "prescribed" means prescribed by regulations under the Value Added Tax Act 1983'.
  424 Page 172, line 23, leave out '(5) An order under paragraph 5' and insert—
  '4.—(1) An order under paragraph 5 or 6'.
  425 Page 172, line 26, after '5' insert 'or 6'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in Amendments Nos. 418 to 425 en bloc.
  Moved, That this House do agree with the Commons in their Amendments No. 418 to 425—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  426 to 435A [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally Amendments Nos. 426 to 435 as amended by Amendment No. 435A. These are consequential.
  Moved, That the House do agree with the Commons in their Amendments Nos. 426 to 435 as amended by Amendment No. 435A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  436 to 438 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move formally that the House do agree with the Commons Amendments Nos. 436 to 438. These are consequential.
  Moved, That the House do agree with the Commons in their Amendments No. 436 to 438.
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  439 Page 174, line 43, leave out paragraph (d) and insert—
  (d) the issue by the administrator or administrative receiver of a company of such a certificate as is mentioned in section 22(3)(b) of the Value Added Tax Act 1983 (refund of tax in cases of bad debts) and the supply of copies thereof to creditors of the company.'.
  440 to 445 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment Nos. 439 and with Amendments Nos. 440 to 445 en bloc.
  Moved, That this House do agree with the Commons in their Amendments Nos. 439 to 445 en bloc.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENT
  446 Page 176, line 6, at end insert—
  '(3) After subsection (5) of that section there shall be inserted the following subsection—
  "(5A) Where the court makes a declaration under subsection (2) above in relation to a person who is a creditor of the company, it may direct that the whole or any part of any debt owned by the company to that person and any interest thereon shall rank in priority after all other debts owned by the company and after any interest on those debts.".'.
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with the Commons in their Amendment No. 446.
  Moved, That this House do agree with the Commons in their Amendment No. 446.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  447 to 539 [Printed above.]
  Lord Lucas of Chilworth: I beg to move that this House do agree with the Commons in their Amendments Nos. 447 to 539 en bloc as amended by Amendments Nos. 451A and 458A. I should mention in passing that in Amendment No. 523 the reference to Schedule 19 should in fact read Schedule 18. I beg to move.
  Moved, That the House do agree with the Commons in their Amendments 447 to 539 en bloc as amended by Amendments Nos. 451A and 45 8 A.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  CONSEQUENTIAL AMENDMENT
  539A [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that this House do agree with Amendment No. 539A. It is a consequential Amendment to the Bill.
  Moved, That Amendment No. 539A be agreed to.—(Lord Lucas of Chilworth.)
  On Question, Motion agreed to.

  COMMONS AMENDMENTS
  540 to 569 [Printed above.]
  Lord Lucas of Chilworth: My Lords, I beg to move that the House do agree with the Commons in their Amendments Nos. 540 to 560 as amended by Amendment No. 560A, and Commons Amendments Nos. 561 to 569 en bloc.
  Moved, That the House do agree with the Commons in their Amendments Nos. 540 to 560 as

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  amended by Amendment No. 560A, and Commons Amendments Nos. 561–569.—(Lord Lucas of Chilworth.) On Question, Motion agreed to.
  House adjourned at ten minutes past midnight.