Security Interests (Hansard, 24 April 1991)

§ Mr. Lilley

Yes. Professor Diamond's report was published in January 1989. Part II recommended a radical reform of the law on security interests. The recommendations were numerous and covered complex issues where changes to the law could have significant implications for the raising of business finance. We therefore allowed an extended period of public consultation.

A clear majority of those representing interests governed by English law argued against major reform. Reform would be complex and, in view of the proposed registration arrangements, potentially costly to the Government and business. It could be contemplated only if there was a strong commercial justification. That did not emerge from the consultation and I have therefore decided not to accept the recommendations in part II of the report for England and Wales. However, the report served a useful purpose in airing these important issues.

Some of those responding to the consultation supported some limited changes to the law relating to security interests and the acquiring of title to goods and I am giving these suggestions further consideration.

There was, on the other hand, a call for action to facilitate the granting of security interests in Scotland. Scots security law differs from English law in that it is impossible, except in limited circumstances, to create an adequate and workable security over moveable property without the creditor taking possession. Respondees to the consultation argued that this puts Scottish business at a severe disadvantage. This is clearly an issue which needs to be explored further. The Department's Scottish solicitors will therefore prepare a draft of a Bill introducing new forms of security over moveables into Scots law which will form the basis of further public consultation. The draft should be ready for consultation in about 12 months' time.