Prescription (Scotland) Bill (Hansard, 13 May 1987)

§ Lord Sanderson of Bowden
My Lords, I beg to move that the Bill be now read a second time.
709 This Bill is a small but important measure introduced in another place by the honourable Member for Strathkelvin and Bearsden. Before I deal with the detailed provisions of the Bill now before the House, I must take the important step of declaring an interest since I hold a position as a director of Clydesdale Bank plc. As I hope to make clear, however, the provisions of the Bill which I move are not designed to benefit solely institutions such as a bank but rather are designed to protect the interests of all creditors. I can confidently assure the House, therefore, that in promoting this Bill I do not in any way seek to forward my own or my bank's pecuniary interests. With that assurance, I now go on to deal with the Bill itself.
The main purpose of the Bill is to amend the law of prescription in Scotland to correct an anomaly resulting from the combined effects of the Bankruptcy (Scotland) Act 1985 and the Insolvency Act 1986. It may be helpful to your Lordships if I remind the House that the law of prescription in Scotland is the law relating to the periods of time after which rights and obligations are extinguished and cannot be enforced.
The Bankruptcy (Scotland) Act and the Insolvency Act had the effect of repealing the enactment which provided that the presentation of, or the concurring in, a petition for the winding up of a company or the submission of a claim by a creditor in the liquidation of a company interrupted the running of prescription (or the time limits) on the debt claimed. This interruption was achieved by Section 9(1)(b) of the Prescription and Limitation (Scotland) Act 1973. However, the combined effects of the Bankruptcy (Scotland) Act and the Insolvency Act have resulted in creditors requiring to raise a court action to preserve their entitlement to their debt.
These effects have been twofold. From 1st April 1986 until 29th December 1986 only the submission of a claim in a winding up (and not the petition for winding up) had the effect of interrupting prescription. The anomaly arises in the case of a claim by a creditor in liquidation only in liquidations commenced after 29th December 1986 when the Insolvency Act came into force.
What should have happened is that when the relevant section of the Companies Act 1985 was repealed on 29th December 1986 by Part II of Schedule 10 to the Bankruptcy (Scotland) Act and by Schedule 12 to the Insolvency Act, Section 9(1)(b) of the 1973 Act should have been amended in the way now proposed in this Bill.
Clause 1(1) of the Bill amends Section 9(1) of the 1973 Act by adding to the definition of what is a "relevant claim" for the purposes of interrupting the running of prescription after which the debt claimed is extinguished and cannot be pursued. It provides that a relevant claim should include the presentation of, or the concurring in, a petition for the winding up of a company or the submission of a claim in a liquidation in accordance with the Insolvency (Scotland) Rules 1986 made under Section 411 of the Insolvency Act 1986. Clause 1(2) repeals in Section 9(1)(b) of the 1973 Act the references to the now repealed Section 613 of the Companies Act 1985, which I mentioned earlier.
710 Clause 1(3) makes the amendment to Section 9(1)(b) of the 1973 Act retrospective, or I should perhaps more correctly say retroactive, so that it covers expressly any claim which has been submitted in a liquidation which commenced on or after 29th December 1986. This is an important point. It will ensure that the submission of a claim will always have had the effect of interrupting prescription and will avoid the need for creditors to resubmit claims in order to derive any benefit from the Bill. The Bill therefore preserves rights. It does not take away any vested right. It is not considered necessary to make the Bill retroactive all the way back to 1st April 1986 because, as a practical matter, the submission of a claim in a liquidation would have protected any creditor who petitioned, or who concurred in a petition for the winding up of a company.
I appreciate that this Bill, however small, contains technical and complex provisions. It is important, however, that it restores the position to what it should always have been and I commend it to the House.

§ Baroness Ewart-Biggs
My Lords, rather unexpectedly it has fallen to me to respond to the noble Lord. I fear that I do not consider myself to be a great expert on this subject. However, I have listened most carefully to what the noble Lord has said; and everything he has said seems entirely logical and acceptable. Therefore, on behalf of my noble friend Lord Carmichael of Kelvingrove I should like to support the noble Lord in his Bill.

The Earl of Dundee
My Lords, we are grateful to the noble Baroness for intervening on behalf of her noble friend. I am sure noble Lords will wish to join with me in thanking the noble Lord, Lord Sanderson of Bowden, for his very clear explanation of this complex matter. We are indebted to him for this, and also to the honourable Member for Strathkelvin and Bearsden who introduced the Bill in another place. As we have heard the Bill will restore and preserve rights which would otherwise have been lost because of an anomaly. For that reason it is welcome, and from this Bench I commend it to your Lordships.

§ Lord Sanderson of Bowden
My Lords, I thank the noble Baroness for her very swift reply and the Minister for his comments. I believe that the Bill will put something right which has gone wrong; and I am sure those affected will be grateful to see the Bill passed.