Contracts (Rights of Third Parties) Bill [H.L.] (Hansard, 14 June 1999)

§ Lord Hacking

My Lords, perhaps I may intervene briefly before the Bill passes from this House. In doing so, I renew my congratulations to my noble and learned friend not only on bringing forward this important law reform, which has been in the wings for more than 100 years, but also on guiding it through your Lordships' House. I hope that the noble and learned Lord can hear what I am saying because a number of noble Lords are now leaving the Chamber and it is a little noisy.

I repeat to my noble and learned friend that this is a good Bill and a good measure to have brought forward. However, I have continued concerns that both the legal 12 profession and the judiciary will have difficulty in construing the Bill, particularly the terms under which a third party takes its benefit.

Perhaps I may briefly remind your Lordships of Clause 1(4) which reads: This section does not confer a right on a third party to enforce a term of a contract otherwise than subject to and in accordance with any other relevant terms of the contract". That will not be difficult for the legal profession and the judiciary if the promisor and the promisee in the contract spell out in detail the terms under which the third party is to take its benefit. It may be that there will be difficulties if, in the contract, the promisor and promisee agree that not only disputes between themselves should be adjudicated by arbitration but also those between themselves and the third party should be adjudicated by arbitration. Here again my noble and learned friend has come to the rescue. He tabled an amendment in response to representations that I made that a third party will be able to use the arbitration clause in a dispute if it so wishes.

However, in other circumstances, when the promisor and the promisee do not set out in the contract the terms under which the third party is to take the benefit, the difficulty will be how and under what terms the third party receives its benefit. I had a solution which I proffered in the form of tabled amendments on Report; but, my noble and learned friend thought that I was going too far. I certainly received no support from any quarter in the House and I had the noble Lord, Lord Renton against me. That was a little disappointing as I have been his apostle on law reform for years and I thought that I was being his apostle in tabling those amendments.

My solution was that unless the contrary was expressed in the contract, the third party should take his benefit under the same terms as existed between the promisor and the promisee in the contract. As I indicated just now, my amendment was rejected. My noble and learned friend felt that I was taking the matter too far and that the amendment would infringe the freedom of contract.

I therefore ask my noble and learned friend if he could give assistance. He has already kindly indicated that he will look afresh at the Explanatory Notes to the Bill and see if they can be expanded. At the moment, as my noble and learned friend knows, they are somewhat bald in the assistance that they give to Clause 1(4). They read as follows: Subsection (4) clarifies subsection (1). The teen being enforced should not be construed in isolation from the rest of the contract". That is somewhat bald. I should be grateful if my noble and learned friend could think of ways in which the Explanatory Notes could be expanded. I am perfectly well aware that concerns have been expressed about the use of explanatory notes. If, for example, an explanatory note was contrary to the terms of a Bill, now a statute, or went further than just giving guiding notes, of course it should have no influence on the courts. However, I believe here it would be of great value in giving guidance to the judiciary, and to the legal profession who are asked to construe these measures, if the 13 guidelines in the Explanatory Notes could be further developed. I should be grateful to have some assistance oil that from my noble and learned friend.

As the Bill now leaves your Lordships' House, perhaps I may ask my noble and learned friend what further plans he has to bring forward other Bills based on Law Commission reports. As he will recall, one of his noble and illustrious predecessors, the noble and learned Lord, Lord Gardiner, set up the Law Commission. If I remember rightly, the noble and learned Lord, Lord Scarman, was its first chairman. The Law Commission has produced a number of reports over the years. However, the number which have been neglected and have not found their way into statutory reform is disappointing. I know that the noble and learned Lord, Lord Wilberforce, expressed that view. My noble and learned friend indicated that he wishes to bring forward more measures based on the recommendations of the Law Commission. I should be grateful, therefore, if he could give some further indication of his plans in that respect.

Finally, perhaps I may personally thank the noble and learned Lord for accepting so many of the amendments that I have tabled. I have never had so many amendments accepted by any government minister, let alone by the noble and learned Lord the Lord Chancellor. I am flattered and extremely grateful to him. I wish the Bill all good speed through the other place and congratulate my noble and learned friend on bringing it forward.

§ The Lord Chancellor

My Lords, I am grateful to the noble Lord, Lord Hacking, for his supportive observations and for his contribution during the passage of the Bill, upon which he has just remarked. That certainly led to some important improvements. I should also like to thank other noble Lords who participated in the proceedings, including the noble and learned Lord, Lord Wilberforce, the noble Lords, Lord Meston and Lord Renton, and my noble friend Lord Howie of Troon.

Perhaps I was unwise to concede so much to the noble Lord, Lord Hacking, because, as a result, I appear not to have satisfied him entirely and perhaps to have whetted his appetite. However, I am grateful for his appreciation for what I agreed to.

The reform effected by the Bill has been widely welcomed. I should take the opportunity to express my gratitude to the Law Commission for the excellence of the report on which the Bill is based. I am grateful to Professor Burrows for his continued assistance during the passage of the Bill through your Lordships' House. It is primarily thanks to the Law Commission and to your Lordships that this valuable and well-polished piece of law reform is able to begin its journey to another place.

The noble Lord, Lord Hacking, raised a particular point about the benefits conferred on third parties which third parties will be able to enforce when the Bill passes into law. The principle of the Bill is that third parties have the right to enforce the benefits, to which otherwise 14 they would not be entitled, which the parties to the contract have agreed they should receive. So, the extent of the benefit will depend upon the terms of the contract and, as ever, that will be a matter for the courts, as a court of construction, to determine.

My noble friend asked questions about Law Commission reports generally. First, I believe that we are doing rather well this Session. Two Bills from the Law Commission are going through; that is, this Bill and the Trustee Delegation Bill. No one is more supportive than I am in endeavouring to get upon the statute book as quickly as possible Law Commission reports and draft Bills which are plainly beneficial and uncontroversial. However, it is very often asserted of Law Commission reports that they are not controversial when your Lordships' House disagrees Typical areas in which the Law Commission has been very busy in times past and no doubt will be busy in the future, are family law, divorce law and the criminal law Quite frankly it can be asserted as often as those who support the proposition choose that what they propose is uncontroversial. Your Lordships will not find it uncontroversial; your Lordships will. find it highly controversial and such legislation has to take its place in the competition for scarce parliamentary time.

However, I am endeavouring to take certain initiatives and the Law Commission's recent practice of producing a policy paper in advance of the final report is greatly welcomed because it enables the Government better to plan ahead. I am also seeking to give a new priority to establish, through discussion between government departments, priorities in relation to areas in which Law Commission work could more usefully be focused; in particular, areas where the Government would be likely to desire to legislate.