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Clause 1—(Application For Adjustment Of Debtor's Affairs)

Volume 411: debated on Monday 4 June 1945

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6.28 p.m.

I beg to move, in page 1, line 11, after "incurred", insert:

"or that his assets are worth preserving and that an adjustment on the part of his creditors whether by reducing or postponing payment of their debts or otherwise compromising the same will be of ultimate advantage to themselves as well as to the applicant."
I hope the Lord Advocate will be able to accept some of these Amendments on the Order Paper, because I am of opinion that they will not merely clarify some parts of the Bill, but will also bring within its scope a larger number of people than it at present sets out to include. The purpose of this Amendment is to prevent a debtor company from being put into an awkward situation whereby it is likely to lose not merely moneys, but also property, and machinery within such property, through being in debt. We must bear in mind that this Bill ought to have been brought in three years ago, following the English Bill of a similar nature. Since then there has been, to my knowledge, at least one company which has suffered grievously because of the delay on part of the Scottish Office in following up the English Act with this Measure.

I do not think the hon. Member quite realises how wide the terms of the Bill are already, and I suggest to him that the objects of this Amendment are already met by Clause 3 of the Bill, and in particular by Sub-section 2 (e and f). Those paragraphs provide:

(e) for postponing the payment of the debts or any of them for such period as the court thinks fit;
(f) for postponing the realisation for such period as the court thinks fit of property which it would be unreasonable to realise immediately owing to its temporary depreciation in value or for any other sufficient cause.
It seems to me that those provisions which allow very great elasticity for delaying the realisation or postponing the debts, really meet the point, which is a very real one, that the hon. Member has in mind. My only reason for being unable to accept the Amendment is that the hon. Member's objects are already adequately met.

Does the Lord Advocate mean that the case about which he and I have already had discussions on the Floor of the House will be brought within the scope of the provisions which he read to the Committee?

No, because they would not have been brought within the scope of the Amendment. We have had all this out twice before in the House, and I did not intend to go into the matter again. I expressed my view clearly on the last occasion. There is nothing in the Bill which would have appealed to the hon. Gentleman's friends as being valuable to them, and I do not think there is anything in his Amendment which would avail them in any way. On the last occasion I said that in my view the circumstances of the case did not come within the scope of the Bill. It was possible for the hon. Gentleman's friends to apply for relief under the Bill, but they would not have got anything that made it worth their while under the principles of the Bill.

Am I to take it, then, that this Bill does not apply to certain companies which, because of war circumstances, have been placed in a very difficult position already, and that there is no possibility of that particular firm being able to get out of its difficulties by an amending Act which will take other companies out of their difficulties? The Lord Advocate will remember that in the Debate when the other Bill was introduced less than a year ago, the feeling of the House was so strongly against him that one hon. Member, who had been a Minister, declared that if he were to bring in a Bill of Indemnification and explain the reason for its being brought in with regard to this company, it would be carried by a majority of Members, because they would be sympathetic to the company. The Lord Advocate now brings forward a Bill which does not fit the purpose at all, after leaving the whole matter, as it affects Scottish firms, till almost four years after an Act was passed to give security to English firms. The whole matter is disgusting.

If the hon. Member wants to reopen the matter, I must ask the Committees indulgence for a few minutes. The facts of the case which the hon. Member has in mind are as follow. The hon. Member's friends—

They are not my friends. It is merely a firm in my constituency to whom I wish justice to be done.

Three of the hon. Member's constituents came up to the House of Lords. Two of them failed on the merits of the case, and the third might have had a case if, not this Bill, but another Measure altogether—the Courts (Emergency Powers) Act—had been brought up to date. I say they might have had a case, because it is by no means certain that they would have had one. Let us assume for a moment that they would have had a case—a big assumption. Then, all that they lost by reason of not having this Act to fall back upon was the costs which they were required to pay for their unsuccessful appeal. That appeal covered a multitude of other things as well as this point. That is by the way. They have suffered no other prejudice of other sort or kind financially, apart from the order to pay costs. If that order is still out against them, they are entitled to consider this new Bill and, if they think it worth their while, to ask for a scheme or arrangement with their creditors in order that those costs may be brought into the general picture. But from what I know of the case, I should not have thought it was likely to pay them to take that line, although they are free to do so. They must say whether they want to come in or not.

Am I to understand that firms which have not been protected up to now, and will not be protected until this Bill becomes an Act, may in some cases not come within the protection afforded by the Bill, although under the war circumstances mentioned in the Bill they had suffered damage, either financially or in other ways? Am I to take it that these firms still remain outside the Bill?

I cannot make it plainer to the hon. Member. Everybody is entitled to come in if he wants to do so and is affected by war circumstances in the manner provided in Clause 1, but it may not pay a person to come in because he may not get any very great advantage out of coming in. It is for him to consider whether or not he will get an advantage.

Amendment negatived.

I ought to tell the hon. Member for Govan (Mr. Maclean) that the next Amendment in his name—in page 1, line 26—if he wishes to move it, will come in Clause 3, page 4, line 36.

Clause ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

CLAUSE 3 ( Provisions of schemes.)

I beg to move, in page 4, line 36, at the end, insert:

"(c) in the case of a private company within the meaning of the Companies Act, 1929, for the settlement of debts by the issue of shares and/or debentures in such company or for the reorganisation of the capital structure of such company in order to provide shares or debentures in satisfaction in whole or in part of such debts."

This Amendment, which refers to private companies, suggests that there are circumstances where it would be proper that the creditors of the company should take payment either by way of an issue of debentures or by way of a further issue of shares. So far as debentures are concerned, the matter is already covered by the terms of the Clause, because under Sub-section (2, c) the granting of security is included in the methods of drawing up a scheme, and a debenture is nothing but a security. So far as shares are concerned, the matter is a little bit different. If all the parties agree that a further issue of shares to the creditors is a proper way of clearing up the matter, they are free to agree to that as the Bill stands, but we do not think it would be desirable to allow a further issue of shares to be forced upon an unwilling private company. It would be extremely embarrassing if a scheme of that sort had to be drawn up, particularly in view of the fact that there are very often in private companies severe restrictions about the entry of new shareholders without the consent of the directors. Therefore, I think the matter ought to remain as it now stands in the Bill. Debentures may be issued by agreement, or under a scheme which is prepared failing an agreement. So far as shares are concerned, they ought only to be issued by general agreement and ought not to be forced upon an unwilling company.

Amendment negatived.

Clause ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

CLAUSE 5.—( Protection and vesting orders.)

I beg to move, in page 6, line 2, after "any," insert "civil."

It has been suggested to us that the existing terms of the Clause are rather wide and that the words "any proceedings" might include proceedings in the nature of criminal proceedings where a penalty is called for. There is no intention to protect people from proceedings of that kind, and accordingly, I am moving to insert the word "civil" to make clear the object of the provision.

Amendment agreed to.

I beg to move, in page 6, line 3, after "property," insert "in respect of any provable debt."

Under the Clause it might be thought that a protection order operated so as to protect the debtor against debts subsequently incurred after the order. We do not think that is right. The protection order ought to be a standstill order for anything that has occurred before its date, but if the debtor incurs other obligations afterwards, the law should take its ordinary course.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 6 to 12 ordered to stand part of the Bill.

CLAUSE 13.—( Appointment and remuneration of trustees.)

I beg to move, in page 10, line 23, at the end, insert:

(2) There shall be paid to any such trustee such remuneration and expenses as the Treasury may determine and such remuneration and expenses shall be defrayed out of moneys provided by Parliament.

This is a Privilege Amendment.

It is not on the Order Paper. It is a Privilege Amendment, and is already in the Bill.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clauses 14 to 18 ordered to stand part of the Bill.

CLAUSE 19.—( Exemption from stamp duties and court dues.)

I beg to move, in page 12, line 1, to insert:

"(1) Where a protection or vesting order is made, or an adjustment scheme is approved, under this Act—
  • (a) every deed, conveyance, assignation or other instrument relating solely to property which was the property of the debtor at the date of the protection order or of the approval of the scheme and which, after the execution of the instrument, is or remains his property or the property of a trustee appointed under the order or for the purposes of the scheme;
  • (b) every writ, order, certificate, affidavit, bond or other instrument required for the purposes of the liabilities adjustment proceedings;
  • shall be exempt from stamp duties."

    This also is a Privilege Amendment.

    Amendment agreed to.

    Clause, as amended, ordered to stand part of the Bill.

    Remaining Clauses ordered to stand part of the Bill.

    NEW CLAUSE.—( Proceedings to take place in camera.)

    The proceedings in any application under this Act shall take place in camera and all diligence or execution at the instance of any creditor shall be suspended and sisted on the presentation of a petition to the court.—[ Mr. Maclean.]

    Brought up, and read the First time.

    There are two points on this Clause. The first is that proceedings should take place in camera, and the second is a provision with regard to diligence or execution being suspended. With regard to proceedings being in camera, we do not think we can accept that. There are arguments on both sides but what influences us is this. We are depending, under the terms of the Bill, on the debtor giving a full and true account of his liabilities. As long as everything is to come out ultimately into the open, it is unlikely that debtors will attempt to leave out part of their liabilities. They will gain no great advantage if they do so, and they may cause a great deal of trouble. If proceedings are in camera, there is a certain temptation not to be too candid, and it is really for that reason that we think it would be undesirable that these proceedings should take place behind closed doors. With regard to suspending, diligence, I think the matter is almost covered already, because, under Clause 17 if any creditor tries to exercise his rights against a debtor, who might plead the terms of this new Bill but has not yet done so, he can be stopped and, under Clause 5, once the debtor has come into court and asked for protection he can also ask for a protection Order, which would stop the kind of thing the hon. Member has in mind. We think we have covered the whole ground that the hon. Member has in view, and this half of the Clause is unnecessary while the other half might lead to abuse.

    Motion and Clause, by leave, withdrawn.

    Bill reported, with Amendments; as amended, considered.—[ King's Consent signified.]

    6.50 p.m.

    Motion made, and Question proposed, "That the Bill be now read the Third time."

    The Bill provides for the setting up of an honest broker to negotiate and settle between the two parties, the assumption being that the debtor will always be the person who is in difficulties. Is there anything in the Bill to cover the point when the creditor is in difficulties? Both parties might be "broke," and it might be rather more difficult if both have suffered from the war.

    There is no specific provision to that effect but what we intend, and I think what we provide, is that the broad equities of the situation will be considered. In the first place, the duty of the official appointed is to try to get agreement. Plainly, at that stage the equities on all sides must be considered. If that fails, the trustee has to prepare a scheme. Again, it is his duty to consider the equities. I do not think there is any serious risk of embarrassment in the way the hon. Member suggests.

    Question put, and agreed to.

    Bill accordingly read the Third time, and passed.