AIRCRAFT AND SHIPBUILDING INDUSTRIES BILL: HYBRIDITY (Hansard, 6 October 1976)

§ Lord PEART

The Government have carefully examined the points raised on Schedule 2 of the Aircraft and Shipbuilding Industries Bill in the Second Reading debate on 28 September and have re-checked the facts as set out in the appropriate company accounts confirming these as necessary with the companies concerned. As a result the Government arc satisfied that Schedule 2 of the Bill as it stands is correctly drafted and that no amendments to the Schedule are necessary. The detailed reasons are as follows.

Qualifying Conditions for Shiprepairing Companies

1. To qualify for inclusion in the Bill as a shiprepairing company a company must satisfy three criteria as set out in paragraph 3 of Part II of Schedule 2 to the Bill. These three criteria are in effect as follows—

A. The company must have been engaged in the business of repairing, 1482 refitting or maintaining ships on July 3 1974.
B. On that date the company must have been entitled to an interest in possession in or a licence to occupy a dry-dock or graving dock.
C. Its turnover as stated or otherwise shown in its accounts for "the relevant financial year" must have exceeded £3.4 million. Alternatively, if its own turnover did lot exceed this sum, then the turnover of "associated shiprepairing companies" in respect of their "relevant financial years" aggregated with its own turnover for its "relevant financial year" must have exceeded £3.4 million.

The "relevant Financial year"

2. The "relevant financial year means the financial year of the company for which the accounts were last laid before the company in general meeting before July 31 1974.

"Associated Shiprepairing Companies"

3. A company is an "associated ship-repairing company" of a company if—

A. on July 31 1974 both companies were members of the same group of companies; and
B. if it was engaged in the business of repairing, refitting or maintaining ships at the end of its own "relevant financial year".

4. An "associated shiprepairing company" need not be one which is named in the Schedule nor need it hive a dry-dock.

Criticisms made in relation to shiprepairing companies

5. The shiprepairing part of Schedule 2 has been criticised on two grounds, firstly that certain companies listed in the Schedule (Scott Lithgow Drydocks Limited, J. B. Howie Limited and Western Shiprepairers Limited) should not have been listed, bəcause they do not meet the qualifying conditions; secondly that certain companies not listed in the Schedule (Humber St. Andrews Engineering Company Limited and Richards (Shipbuilders) Limited) meet the qualifying conditions but have not been listed.

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Scott Lithgow Drydocks Limited

6. In the case of Scott Lithgow Dry-docks Limited, the only condition which this company is said not to have fulfilled is that relating to turnover. The company's turnover for the year ended December 29 1972 is stated in its accounts to have been £3,403,118. These accounts were laid before the company in general meeting on June 11 1973. They were the last accounts laid before the company in general meeting before July 31 1974, and are therefore the accounts for the "relevant financial year". The turnover of £3,403,118 is therefore the relevant turnover for the purpose of deciding whether the company should be included in the Schedule. The accounts for the next year, the year ended December 28 1973, were not laid before the company until after July 31 1974. These facts have been confirmed by the company and are made clear by the documents contained in the company's public file in Edinburgh. Scott Lithgow Drydocks Limited is therefore correctly included among the ship-repairing companies in Schedule 2.

J. B. Howie Limited and Western Ship-repairers Limited

7. Here again, in the case of these two companies, the only condition which they are said not to have fulfilled is that relating to turnover.

8. In the case of J. B. Howie Limited, its turnover for the relevant financial year was nil. In the case of Western Ship-repairers Limited it was £1,735,243.

9. However both these companies were on July 31 1974 members of the same group of companies as Cammell Laird (Ship-repairers) Limited. All three were subsidiaries of The Laird Group Limited.

10. The accounts of Cammell Laird (Shiprepairers) Limited for the year ended December 31 1972 were laid before it in general meeting in September 1973. These accounts were the last laid before the company in general meeting before July 31 1974, and are therefore the accounts for its "relevant financial year". The turnover is stated in these accounts to have been £5,204,275.

11. At the end of 1972 Cammell Laird (Shiprepairers) Limited was engaged in the business of repairing, refitting or 1484WA maintaining ships. We have had confirmation from the company that this was in fact the case.

12. Cammell Laird (Shiprepairers) Limited is not included among the companies in Schedule 2 because it was not entitled to an interest in possession in or a licence to occupy a dry-dock or graving dock on July 31, 1974. However because it was on that date a subsidiary of The Laird Group Limited, and also an "associated shiprepairing company" within the meaning of paragraph 3(1)(c) of Part II of Schedule 2, its turnover of £5,204,275 has to be aggregated with the nil turnover of J. B. Howie Limited and the £1,735,243 turnover of Western Ship-repairers Limited which gives each of them the qualifying turnover in excess of £3.4 million. There is no doubt therefore that both of them are correctly included in the Schedule.

Humber St. Andrews Engineering Company Limited

13. In the information passed to the Government by Lord Campbell of Croy on September 28, 1976, it is suggested that Humber St. Andrews Engineering Company Limited ought to have been included in Schedule 2 as a shiprepairing company on the ground that it is an acknowledged shiprepairer "and on July 31, 1974 was working on two ships in dry-dock at Hull". It is also said that its turnover together with the turnover of certain associated shiprepairing companies exceeded £3.4 million. Finally it is said that it is quite clear that the Government ignored in this context the turnover of one of these companies; namely, A. F. Engineering (Scotland) Limited.

14. This is not correct. The Government have always recognised that the turnover figure of £3.4 million was exceeded in relation to Humber St. Andrews Engineering Company Limited and its associated shiprepairing companies. Humber St. Andrews Engineering Company Limited was not listed in Schedule 2 because on July 31,1974 it was not entitled to an interest in possession in or a licence to occupy a dry-dock or graving dock. This has been confirmed to us by its parent company, British United Trawlers Limited.

15. It may be the fact that on July 31, 1974 the company was working on two 1485WA ships in a dry-dock. But the Government have been assured by British United Trawlers Limited that on and about that date Humber St. Andrews Engineering Company Limited had no dry-dock of its own. If dry-dock facilities were necessary for the repair of a ship these facilities would be arranged by the shipowner, and the company would, when the ship was in the dry-dock, send its employees to the dry-dock to do the repair work on the ship. It follows therefore that the company was not entitled to any interest in possession in or a licence to occupy a dry-dock on the relevant date, even though it may have had its workmen working on a ship which was in a dry-dock. It was therefore correct to exclude Humber St. Andrews Engineering Company Limited from the Schedule.

Richards (Shipbuilders) Limited

16. In the information passed to the Government by Lord Campbell of Croy it is suggested that Richards (Shipbuilders) Limited ought also to have been included in the Schedule as a shiprepairing company. It is said that on July 31, 1974 this company was an acknowledged shiprepairer and had a dry-dock, and that though its turnover for the relevant financial year was only £2,880,000, this turnover could be aggregated with a £5,816,000 turnover of another company; namely, Sugar Line Limited.

17. It is correct that Richards (Shipbuilders) Limited was engaged in the business of shiprepairing on July 31, 1974, in addition to the business of shipbuilding; it is also correct that it owned a dry-dock on that date, and that its turnover for the relevant financial year was in fact £2,880,000.

18. On July 31, 1974 Sugar Line Limited was a member of the same group of companies as Richards (Shipbuilders) Limited, and the turnover of Sugar Line Limited for the relevant financial year was £5,816,000. But Sugar Line Limited was not engaged in the business of repairing, refitting or maintaining ships at the end of the relevant financial year. For this reason its turnover for that year should not be aggregated with that of Richards (Shipbuilders) Limited. The principal activity of Sugar Line Limited during that year was the operation of a fleet of deep-sea bulk carriers.

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19. The "relevant financial year" of Sugar Line Limited is the year ended September 29 1973. This is because the accounts for that year were laid before the company in general meeting or. January 7 1974, and were the last to be so laid before July 31 1974. In these accounts the turnover is expressly stated to be the "total amount receivable by the company in respect of the gross freights". This wording excludes the possibility of there having been any turnover in respect of any business other than shipowning.

20. It is true, however, that Sugar Line Limited has a subsidiary which at one time undertook the repair of ships. This company is Clyde Wharf Limited.

21. The accounts of Clyde Wharf Limited for the year ended September 29 1973 were laid before the company in general meeting on January 7 1974. These were the last accounts to be so laid before July 31 1974. So the year ended September 29 1973 was the "relevant financial year" of Clyde Wharf Limited.

22. Clyde Wharf Limited sold its premises and ceased trading on March 31 1973. So at the end of the relevant financial year it was not engaged in any business. Consequently it was not engaged in the business of shiprepairing at the end of the relevant financial year and so is not an associated shiprepairing company of Richards (Shipbuilders) Limited. It follows from this that its turnnover for the year ended September 29 1973 of £300,559 cannot be aggregate with that of Richards (Shipbuilders) Limited.

23. When Clyde Wharf Limited ceased trading at the end of March 1973 its ship repair section was transferred to Sugar Line Limited. But the Government have the assurance of Tate & Lyle Limited, the holding company of Sugar Line Limited and of Richards (Shipbuilders) Limited, that while Sugar Line Limited's ships have been repaired from time to time by Sugar Line Limited, and by others outside the Tate & Lyle Group, Sugar Line Limited did not at any time during the financial year ended September 29 1973 hold itself out as a shiprepairer, or in fact repair, refit or maintain the ships of any other person, whether within the Tate & Lyle Group or otherwise. It follows that Sugar Line 1487WA Limited was not engaged in the business of repairing, refitting or maintaining ships at the end of that year.

24. For this reason it would be wrong to aggregate the turnover of Sugar Line Limited with that of Richards (Shipbuilders) Limited.

25. The Government also have the assurance of Tate & Lyle Limited that although at July 31 1974 that company had a number of other subsidiaries, in addition to those already mentioned, engaged in various activities including shipowning, none of these other subsidiaries during any relevant financial year repaired, refitted or maintained ships for any person other than itself, or held itself out as a shiprepairer.

26. In these circumstances Richards (Shipbuilders) Limited should not be included among the shiprepairing companies in Schedule 2 to the Bill.