AMENDMENT TO COMMONS AMENDMENT NO. 73 (Hansard, 23 October 1985)

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.

§ 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.