AS AN AMENDMENT TO COMMONS AMENDMENT NO. 129 (Hansard, 7 November 1989)

§ Lord Lloyd of Kilgerran
My Lords, we now come to an amendment to the long Commons Amendment No. 129. As I glanced through that long amendment my eye caught on the words "intellectual property" and "goodwill". It was inevitable that I should study the amendment rather carefully. The object of my amendment is to ask the Minister whether he can explain what is meant by "intangible moveable property" in relation to goodwill or even intellectual property.
In my view, those words are confusing and totally unnecessary. It is rather late in the evening to start a consideration of what is meant by "goodwill". I had the privilege of discussing in the courts at great length what is meant by "goodwill". I remember appearing before the late Mr. Justice Dankwerts when he interrupted me. He said that he used to buy his cigarettes in a tobacconist's shop where there was a very charming girl who served him. He asked me what part of the goodwill that lady represented in relation to the sale of cigarettes in the shop.
I can understand a charge requiring registration in relation to goodwill alone but I do not understand it when goodwill is defined as "intangible movable property" and I believe that some confusion arises. The same goes for intellectual property. Intellectual property is property. Why call it "intangible movable property"? In the hope that I shall be 667 shown to be wrong or have misunderstood the meaning of those words, I beg to move.

§ Lord Williams of Elvel
My Lords, I too have the same problem as the noble Lord, Lord Lloyd of Kilgerran, on the new Section 396 in the Companies Act. I have an even greater problem than he does because as a banker I have never understood how one can charge goodwill. I have asked various banking and accounting friends about this and nobody has come up with a satisfactory answer to how one can charge goodwill.
If one cannot charge goodwill, which is a concept that varies depending upon which accounting procedure and which method of writing off are adopted, clearly it cannot be registrable as a charge. My Amendment No. 129B seeks a government explanation of how on earth anybody can charge goodwill and therefore register that charge.
I do not wish to bore your Lordships with an explanation of how goodwill is treated in accounting terms in various conventions in various parts of the world including the European Community. I do not wish to bore your Lordships with the normal definition of goodwill that is used by bankers when they charge assets. I just wish that the Government would come forward with some definition that any serious banker, accountant or corporate lawyer can accept.

§ Lord Trefgarne
My Lords, the phrase "intangible movable" is straightforward if read in context. Section 396(1) deals first in paragraph (a) with land or immovable property. It then deals in paragraph (b) with goods, which are defined as tangible movable property. Finally, in paragraph (c) it deals with intangible movable property of certain specified sorts. It therefore makes clear that the primary categorisation in logical sequence is into immovable and movable property. Movable property is in turn divisible into tangible movables and intangibles. We believe that practitioners will find this definition useful in ascertaining which types of property are subject to the requirements of these provisions. As I understand it, practitioners are also content with this form of words. I do not think that we should spend too much time on points that might have been made at Committee stage but were not.
The noble Lord referred to Amendment No. 129C during his remarks. If he prefers that I do not deal with it now, I am happy not to do so.

§ Lord Lloyd of Kilgerran
My Lords, before the noble Lord sits down, can he help me further? So far he has made me more confused than I was as to the meaning of the words. Has he an example of what is an intangible movable property?

§ Lord Trefgarne
My Lords, these are very difficult items to define. However, if the noble Lord will refer 668 to the careful words that I produced a few moments ago, I hope that he will find the matter rather clearer.

§ Lord Lloyd of Kilgerran
My Lords, before the noble Lord sits down again, he expressed the hope that I may find the matter clearer, but he is very optimistic. I am even more confused. However, I am very glad that at this late stage I was able to produce a laugh in the Chamber.
There is little further that I can say, except to say to the noble Lord, Lord Williams, that in my experience I have heard of charges being made on goodwill. In that way one estimates what one's goodwill is. The estimate may be wrong by a factor of several hundred per cent. but one can say, "My goodwill is an asset of £x million". Let us take the example of Pepsi Cola, with which I was involved. We had to try to assess what its goodwill was. It was in millions of dollars. Having assessed it, one can then put it in the accounts as a charge. I do not know whether the noble Lord, Lord Williams, wishes to say anything before I sit down.

§ Lord Williams of Elvel
My Lords, before the noble Lord sits down, I crave the leave of the House as always. I am afraid that in a sense we have to adopt Committee procedure.

§ Lord Trefgarne
Order!

§ Lord Mottistone
My Lords, why do we have to adopt Committee procedure? This is not the Committee stage of a Bill. For a long time I have been hearing noble Lords opposite putting points across as though we were in Committee. We are not; we are considering Commons amendments. As I understand it, the procedure in this House is that we do not spend our time bothering about small details when we are doing that. Such consideration comes earlier in the Bill in both Houses of Parliament. We waste time if we do so.

§ Lord Lloyd of Kilgerran
My Lords, before the noble Lord, Lord Mottistone, sits down, he referred to wasting time. This is the first time that goodwill and intellectual property have been mentioned in the Bill, so far as I understand.
I have looked at the old Section 396 in the 1985 Act and those words do not appear. The wording is totally different. The Government have taken out 42 or 43 clauses, inserted other clauses and said, "They are just summarising; they are pretty well the same as the original". But the wording is totally different. In my view it is therefore perfectly proper that when the noble Lord, Lord Williams, says that he has never heard of a charge in this context I should say that I have heard of a charge. We are trying to be helpful on a very important matter. Goodwill and intellectual property are very valuable assets in companies. We must be at least pragmatic and practical at some time during the course of the evening.
I do not quite know where I stand on my enthusiasm for intellectual property. However, as the Minister cannot give any examples, I must await yet another Bill before we amend this provision. In 669 these circumstances, I beg leave to withdraw the amendment.