HL Deb 23 October 1985 vol 467 cc1229-35

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, 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?

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 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—

  1. (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
  2. (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 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.