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Clause 3—(Termination Of Certain Long-Term Contracts Transferred To The Board)

Volume 463: debated on Monday 28 March 1949

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I beg to move, in page 2, line 24, to leave out "the."

It may be for the convenience of the House to discuss with this Amendment a series of other Amendments which are all drafting Amendments to achieve a comparatively small alteration in the text. I mean the Amendments to page 3, lines 12, 19, 26, 35, 37, 44, and 45, and page 4, line 26. They all hang together, and are designed to remove a doubt, which was felt in particular by the hon. Member for South Hendon (Sir H. Lucas-Tooth). He felt some concern as to the exact meaning of the word "provisions" in subsection (2) of the Clause. This series of Amendments is designed to put it beyond doubt that the provisions there referred to, which can be the subject of a notice of determination, are the same provisions referred to in subsection (1).

This series of Amendments goes some way to meet the comments we had to make on the subject of the drafting of this Clause. The next Amendment, an Opposition Amendment, which is, I believe, to be called, is closely allied with this one. We welcome this series of Amendments as far as it goes, and I should like to thank the right hon. and learned Gentleman for having put the Amendments down.

Amendment agreed to.

I beg to move, in page 2, line 28, to leave out, "or include terms which provide."

This Clause gives power to the National Coal Board to put an end to certain contracts. They are expressed to be long-term contracts, and I think there is no doubt from what we have heard that they will all be contracts of an important character. They are not trifling contracts, but ones which deal with large supplies and which will often be complicated. I am grateful to have the opportunity of raising this matter again. I raised it in Committee. The Government indicated that they had some sympathy with the purpose for which I raised the matter, and I hope they will now indicate that they will accept the Amend- meat, or, at any rate, that they will consider making further Amendments themselves at a later stage.

In a sense the Amendment is a drafting Amendment, but I think it does raise the main issue which we raised upstairs, in that the difficulty which we feel about this Clause as a whole is that we do not know what the Government really intend by the Clause. Our real difficulty is that we have no information. We have been dealing with this Clause completely in the realm of hypothesis. The Minister, the Solicitor-General and the Parliamentary Secretary have all from time to time muttered—that is the only suitable word, I think—something about "bad contracts," at which, if we knew the particulars, we should hold up our hands in horror, and with which the Coal Board ought not to be burdened, but might be burdened for many years to come.

But we have heard no particulars of those contracts. I am not suggesting that it is the duty of the Government necessarily to give us a schedule showing the dates and the parties and all the rest of it, but if the Government are asking for powers as wide as the powers which appear to be taken by this Clause, it is at least their duty to tell us something of the number of contracts that they think will be affected by this Clause, and to give us some sort of idea about the size and the general nature of these contracts.

I should like the Minister to tell us—I do not say precisely, because he may not know precisely—but in round figures how many contracts have been brought to his attention by the National Coal Board upon which he thinks that they will wish to use this Clause. Is it of the order of two or three? Is it ten or a dozen? Is it one hundred or hundreds? Or is it thousands? We have no idea. We have never been given that information.

I think before the House passes a Clause of this kind we should be given some indication of what the Government have in their minds. In the meantime the position is entirely at large, and we do not know what the Clause is really aimed at. I think that we can say that, in view of the fact that the contracts are long-term, they will normally be heavy and complicated, and that they will contain a number of terms. In the ordinary way the long-term contract, which will have been taken over by the National Coal Board under the terms of Section 7 of the principal Act, will be a contract involving the supply of various goods and services from one party to the other, and, possibly, compensating money payments, and so on. One can only speculate. In any particular case a contract of that kind may involve the supply of coal, perhaps—I am talking of the original contract—by the colliery, a supply of steam or electricity by the colliery company to some other concern, and possibly the supply by that other concern of water or some other service to the colliery company.

I think the hon. Member is making a statement which cannot be sustained. The Minister in Committee upstairs did give the number of contracts. He said there were round about 40 which they desired to terminate.

I am grateful to the hon. Member for that interruption. I was in the Committee practically the whole time, but it so happens that that fact had escaped my notice. However, we may, perhaps, ask the Minister to confirm if that is still the position. I apologise if I have said anything to mislead the House. Speculating as to the nature of the contracts—and.we have nothing to indicate the general nature of the contracts —I am assuming that they will be of the kind which I have described, involving a number of sales of services as between the parties involved.

Our attitude on this side of the House is this. There may be contracts which, in view of the nationalisation of the coalmines and in all the circumstances, it would be desirable to have terminated on payment of fair compensation. If we were given specific examples we could express our views on those examples. I am not denying that there could not be such contracts, but what we say is that if any such contract were brought forward, it should be up to the National Coal Board either to put an end to the whole of that contract or to put an end to a very precisely defined part of that contract.

7.0 p.m.

It must be remembered that however onerous the contract may be against the other party to the contract the other party has no option in the matter at all. It is the National Coal Board alone which is to be given the power to bring to an end any of these contracts or parts of contracts. In these circumstances, we feel that it should not be left to the National Coal Board to pick and choose between the various parts of a contract because that would be unfair.

In the example which I gave, it may well be that a part of the contract for the supply of coal falls within the general terms of the Clause. It should be only open to the National Coal Board to say that the whole of the contract must be put an end to, or, alternatively, only so much of it as precisely falls within the meaning of the Clause. The words in the Clause by implication enable the National Coal Board to choose, because the Clause says:
"This section applies to the provisions of any contract…being provisions—
(a) which provide, or include terms which pr ovide,"—
That is to say, the National Coal Board can take any part of a contract they please, and, so long as it includes one small part which falls within the meaning of the rest of the Clause, they can say that that part comes within the provisions of "terms which provide" and, in that way, they can take as much or as little of the contract as they please in order to bring it to an end. We think that that is quite unfair.

We wished in an Amendment moved upstairs to give the other party to the contract the right to say to the National Coal Board, "If you are going to determine part of this contract, we are going to determine the rest of it." If an Amendment of that kind were included, there would be no unfairness in giving the National Coal Board the power to pick and choose as they please because there would be reciprocity. If we give the whole power to the Coal Board and to no one else, we must clearly state in the body of the Act what that power is, because it is wrong to allow the Coal Board to end part of a contract and at the same time to maintain the rest of the contract in force.

I hope that the House will realise that without the Amendment, we are enabling the Coal Board to throw off the trammels of any old contract falling within the Clause merely on the ground that it would interfere with them in the course of their duty; but however onerous that contract may be to some other concern, and however much it may interfere with that other concern in the course of carrying on their trade or activities, they will be given no option whatever and the contract will continue to run.

We have to see, however much the Government say that contracts ought to be dealt with in this way, that these contracts are extremely narrow in limit. I think that before we pass such a Clause as this we ought to get something more definite from the Government as to what they intend to do. The words which we seek to delete give the Coal Board a wide choice in the matter and that is why we object to them.

I beg to second the Amendment.

I would, in passing, like to refer to the intervention made by the hon. Member for Ince (Mr. T. Brown), in which he reminded us that the Minister said that there were probably about 40 of these contracts. That was really the only information which we were given. The Minister tried to make our flesh creep by reminding us of a contract for 1,000 tons of coal per year in perpetuity at 5s. a ton on a contract dated 1919, and I asked him:
"Would it be too much to ask the quality of the coal at this price?"
He said:
"I am afraid it would, at this stage."—[OFFICIAL REPORT, Standing Committee A, 3rd February, 1949; c. 319.]
The quality of the coal makes a tremendous difference because there are some sorts of coal for which if one got 5s. a ton in perpetuity one would be extremely lucky—sludges and slurries, etc.—which for many years between 1919 and the present day have been quite un-saleable. I regret that we were not given more information of that kind. I support what my hon. Friend has said about the power of the Coal Board to determine such parts of a contract as they wish. That seems to me to be quite unfair.

I hope to be able to satisfy the two hon. Members who have moved and seconded the Amendment, but I am afraid that we cannot see our way to advise the House to accept it. There were two points raised in support of the Amendment. The first was that sufficient information had not been given with regard to the contracts which the Government had in mind, and the second was that there was too much latitude left to the Board as to the provisions under which they could be terminated. With regard to the number of contracts, I am told there are about 40 which would come within the purview of the Clause. They fall into three broad categories.

There are, first, the contracts for the sale of coal. I could give some examples. The Minister gave an example upstairs which has been referred to again. If I may give another one, I shall do so without the use of names and only the use of initials. There is a case in which A will deliver coal to B and B will take from A all the coal required for the purpose of the business of B, which is to be delivered not more than 14 days after the receipt of the order. Unless otherwise agreed it consists of x and y type of coal, and in respect of any order given not less than 65 per cent. shall consist of x coal and of the remainder not less than 10 per cent. shall consist of y coal. That contract is to continue for a long period of time.

If I may be allowed to continue I should like to give one or two cases of these long-term contracts. I am not trying to make anyone's flesh creep by a description of these contracts. On the contrary, I am saying that the Coal Board is charged under Section 1 of the Coal Industry Nationalisation Act, 1946, with certain duties with which the House is familiar. These duties may make it necessary, if they are to be adequately discharged in the public interest, that a change should be made. For example, if particular pits are to be closed down or particular seams are not to be worked, the Coal Board finds itself in this position. If it is found, as it is, under terms of long-term contracts that the obligation which it assumes under those contracts will, in many cases, prevent it carrying out the type of reorganisation which I have just mentioned—for example, closing pits, or not working seams—the result may be that the Board will be seriously hampered in carrying out the statutory duties imposed upon them by the Coal Industry Nationalisation Act, 1946.

That is one type of long-term contract. I could give others. For instance, "C" agrees to supply from "S's" colliery all coal required for "D's" works—I use initials, although I could give the names —upon the same or as good terms at the pithead as the most favoured customer of "C" on a long-term contract which, if it has to be implemented for the whole period of its currency, may result—and, indeed, in the case of the Coal Board that may well be the case—in the Board being hampered in the execution of the duties placed upon them by Statute in carrying out measures of reorganisation which seem necessary for the purpose of discharging those duties.

The Solicitor-General has given two examples, for which I am grateful. Can he say whether those were all the terms of the contracts, or were they merely particular terms in much larger contracts dealing with a number of other questions? That is extremely important in connection with this Amendment.

The hon. Baronet has, I am certain, seen enough of these contracts to know that what I have just read out would not be all the terms of the contract. Quite obviously, there are long and complex contracts with a number of inter-related provisions. All I am trying to do is to give the gist of them and to underline and emphasise those characteristics which seem to call for notice under the terms of the Bill when the contracts are of long-term operation because by virtue of their long-term operation they interfere with the Coal Board in the discharge of their duties and prevent them, or may prevent them, from carrying out necessary measures of re-organisation.

There are then two other categories which correspond to the two other sub-paragraphs of paragraph (a). There are agency agreements, where, for example, a distributor is appointed to be the sole and exclusive agent for the disposal of the entire output of the products of colliery concerns for a period of 15, 20 or 21 years, with an option to the agent to extend for a further 21 or 25 years, or even indefinitely. That is another type of long-term contract the continuing provisions of which hamper the Coal Board in the discharge of its duties. There are contracts entered into long ago—I am not suggesting for a moment that they were entered into in contemplation or with the object of evading the Coal Industry Nationalisation Act—which because of their long-term operation have the effect I have indicated.

There is the third category of contracts embraced in this approximate number of 40 to which I have referred, in which are found restrictive covenants. The agreement generally deals with taking over the business and goodwill of a colliery concern so far as it relates to sales in a particular area, and the firm is sold with a covenant not to engage in business within the area. That is a long-term contract with a restrictive covenant, which will necessarily have the result of hampering the Coal Board in carrying out necessary changes for the performance of their duties.

Those are contracts that we had in mind. They are contracts differing in their scope and extent, but contracts of considerable complication, with various provisions in them. In those circumstances there are really only two alternatives before the Government: either to take no steps with regard to that and see the Coal Board hampered—and considerably hampered—in the carrying out of their duties, or to come to Parliament and ask for the powers sought by this Bill. The Government felt that the second of those alternatives was the appropriate course.

7.15 p.m.

The question really is—and this leads me to the second point made by the hon. Baronet—whether we have gone too far. His point is that we have enabled the Coal Board to pick and choose at will the provisions of a contract. Now, we have carefully avoided doing that. In our earlier discussions I deployed certain arguments, which I would not seek to repeat in detail because I think they must be fresh in the mind of the hon. Baronet. However, as other hon. Members were not then present, perhaps I may re-state my arguments quite shortly. We say that the Coal Board is to have the right to determine certain provisions. Now, what are those provisions? To find out what they are one has to look at Clause 3 (1), which says that these provisions must have three separate sets of characteristics. First, they must be long-term; in other words, they must be provisions whereof the operation cannot be determined by the Board before the end of the year 1951. Secondly, they must vest in the Coal Board under the provisions of Section 7 of the 1946 Act, taken in conjunction with the Second Schedule to that Act; that is to say, they must be, broadly speaking, "coal" contracts—if I may use a general and comprehensive term—describing what is referred to in the Schedule. Thirdly, they must be provisions which only do what is described in the three sub-paragraphs of paragraph (a), or they must include amongst their terms some terms which do.

If it can be said of the provisions that they fulfil all those three characteristics the Coal Board are then given only one right. They are not given the right to pick out of those provisions some provisions which they will determine and others which they will leave operative. They are given only the right to determine all those provisions lock, stock and barrel. I hope the hon. Baronet and his hon. Friend will agree that we have not been unreasonable in this. What we have done is to tell the Coal Board: "If you wish to exercise your right all these provisions must go; you cannot pick and choose amongst them." That is what we have carefully done in drafting this Clause, and for those reasons I hope the hon. Baronet will agree not only that the Amendment is unnecessary, but that its adoption would impair the effect of the Clause as it stands.

The speech of the Solicitor-General is one of the most blatant I have ever heard advocating the cancellation of contracts. It is a commonplace that in all contracts there are two sides. The whole of the right hon. and learned Gentleman's argument is that the Government have discovered that the former coalowners, who their opponents tell us are such very hard-headed business men, made a certain number of bad contracts. The Government now say, as I understand it, that the Coal Board must cancel these contracts if they are to carry out the duties laid upon them by the House of Commons. I hope I am not misrepresenting the right hon. and learned Gentleman. In other words, to put it even shorter, the Coal Board's duties are to make the industry pay and prosper.

To give the Coal Board power to revoke any contract entered into under certain headings, such as those in this Clause, is to do something quite wrong. Hon. Members opposite may talk very glibly about cancelling these old contracts, and they may say that these contracts are not in the interests of the Coal Board. But what about the other party to the contracts? These people have entered into these engagements and kept them faithfully. If the contracts turned against them, would they be able to go to the Coal Board and say, "We have a contract with you, and we must have the power to cancel it"? I do not think so.

My hon. Friend was quite right in drawing attention to the fact that the Government are openly advocating the cancellation of contracts made for particular purposes. It cannot be to the benefit of the Coal Board when it is known that this sort of thing is happening. If the Coal Board get the name of being a contract breaker it will not help them in their salesmanship capacity, especially when it comes to selling coal outside the country. I ask the Government whether it would not be better to stick to the old British tradition in our legislation. To use the power of the House of Commons to break these contracts does not add to our honour, and it is something I thoroughly dislike. I hope that my hon. Friends will also take the view that the breaking of contracts cannot be justified.

Despite the fact that the Government are not accepting this Amendment, we do not propose to divide the House but prefer to have a more general discussion on a later Amendment.

Amendment negatived.

Amendment made: In page 3, line 12. leave out "the."

Consequential Amendments made.

I beg to move, in page 4, line 31, at the end, to insert:

"(5) If in the case mentioned in paragraph (b) of subsection (2) of this section any question shall arise—
  • (a) which of the provisions of the contract are provisions to which this section applies; or
  • (b) as to any apportionments or adaptations made necessary by reason of the determination of some only of the provisions of the contract; or
  • (c) whether the continuance in force of provisions of the contract other than provisions to which this section applies would cause hardship to the purchaser agent or transferee;
  • such question shall in default of agreement be determined by arbitration under the principal Act and subsection (2) of section sixty-one of that Act shall apply accordingly."
    This Amendment is also concerned with the disruption of contracts. It raises the wider issue of the question of fairness. Provision is made in subsection (4) for arbitration in respect of those contracts which are to be put an end to by the action of the Coal Board. The compensation provided for is extremely limited in character; it is as to any question whether compensation is payable at all, and as to the amount of the compensation so paid. This Amendment seeks to put forward a number of other issues which are really important in connection with this arbitration. In the first place, there is the question of which of the provisions of the contract are provisions to which this Clause applies. No one can say that the Clause as drafted is a very easy Clause to understand, although we now have better particulars of the kind of contract to which it is intended this shall apply. The Solicitor-General, in reply to my interruption, pointed out that the contracts in question are likely to be of a highly complex character. It will be very difficult to disentangle these contracts when only part of them are to be terminated.

    The Amendment I am moving relates only to those contracts as are determined in subsection (2, a). The House will see that that is in the case of contracts comprising provisions other than provisions to which this Clause applies. It is only in the case where a contract is torn into parts by virtue of this Clause that arbitration is called for. Then there is the question of making the necessary apportionment or adaptations, which is a matter where dispute can very easily arise. I do not know the Government's intentions in this regard. Is it intended that where a contract is forcibly torn apart it shall rest solely with the Coal Board to say what apportionment or adaptations are to be made? It may be that "apportionment" is taken care of by the wording of subsection (4). Perhaps we can have assurance on that point.

    As regards adaptation, it is necessary to make some provision, and that should be done in the manner indicated by this Amendment. There is then the wider question of hardship. I submit that the Clause as drafted may produce some very grave instances of hardship. Obviously, to give a right to one party to put an end to the contract when a similar right is denied to the other party is something that is likely to create severe hardship. Obviously, in the class of case to which the Solicitor-General recently referred, the Coal Board will be ready to put an end to contracts which are onerous to them. I appreciate from the tenor of his remarks that it is not so much the burden of the contracts to which the Coal Board are objecting as the interference to the working of the National Coal Board.

    I think I am right in saying that if the Coal Board find themselves in the position of having a contract from which they derive a regular and steady benefit, it is most unlikely that they will be willing to put an end to it. Conversely, if they find a contract exceedingly onerous, they will look at it most carefully to see whether they cannot put an end to it under the terms of this Clause. In the case of the other party, they will have no opportunity at all, however burdensome the contract may be, to put an end to it. They may be supplying water, gas or electricity at 1929, 1920, 1914 or even 1900 prices, and be bound to continue to do so under the terms of the contract. There will obviously be very grave hardship. We cannot deal here with the class of case where the Coal Board take no action at all, but where the Coal Board do take action there should be some tribunal to see that the other party to the contract has his interests fairly looked after, and that he does not have torn away from him the one term in the contract available to him and be left obligations that may be very onerous indeed.

    I think I can fairly raise, in this connection, the way in which the Government propose to bring these contracts to an end. It will be seen in subsection (2) of the Clause that contracts are to be treated as if they have been frustrated within the meaning of the Frustrated Contracts Act, 1943. The effect of doing that, I suggest, would be to bring into operation the whole business of re- opening any contract which was determined ab initio.

    I raised this question in Committee, when the Solicitor-General said in reply that it was not the intention of the Government that these contracts should be re-opened. But there is no doubt at all that the effect of the Frustrated Contracts Act would be to re-open a contract. Now that the Government have had an opportunity of looking into the matter are they satisfied that there is no question of old payments being re-opened as a result of this Clause or, alternatively, if those old payments are re-opened, will they concede our Amendment and allow arbitration which will take into account the hardship as between the two parties to the contract? I ask the House to accept the Amendment.

    7.30 p.m.

    I beg to second the Amendment.

    It must be obvious to the Government that two wrongs do not make a right. The Coal Board have at present certain onerous contracts to fulfil—onerous not so much in the financial sense, but in the sense that they will disturb the working and the administration of the pits. It may be that in the national interest the burden of these contracts should be eased. We suggest that our Amendment provides a solution. Nobody else should be prejudiced while the Coal Board are getting themselves out of the difficulty. We believe that by a system of arbitration, hardship could be avoided.

    I think it would be within the spirit of your Ruling, Mr. Speaker, if I travelled fairly wide in reply to the arguments which have been addressed to the House. In dealing with the right to determine contracts we have sought to achieve justice in this way: As the hon. Member for South Hendon (Sir H. Lucas-Tooth) and the hon. and gallant Member for East Grinstead (Colonel Clarke) know very well, there are compensation provisions in this Clause which enable a party who has had his contract with the Board determined to receive compensation commensurate with the loss he has sustained as a result of that determination. There is full compensation subject to this: where there is a contract which, owing to its historical origin generally, has not been negotiated on a commercial basis, where it is, in substance, too favourable to the purchaser, transferee or agent, as the case may be—perhaps when it was originally negotiated, years ago, there was an interlocking shareholding, or something of the sort—the contract is reduced to the state that it would be in if it had been negotiated at arm's length. The compensation paid is for the commercial loss he has sustained, and not for the loss of the exceptional advantage which may have accrued to him because he has an exceptionally favourable contract.

    That is a matter which will have to be investigated; they vary. There are both categories of contract. We provide that an arbitrator shall determine compensation. The hon. Member for South Hendon and the hon. and gallant Member for East Grinstead say that if there is disagreement with the method we have provided the arbitrator should not merely determine quantum of compensation but should also be entitled to determine three other things, as set out in paragraphs (a), (b) and (c) of the Amendment.

    As I understand the position—you, Mr. Speaker, not having called the preceding Amendments, which deal with hardship and adaptations—there cannot be a case in which it would fall to any arbitrator to make a determination under paragraphs (b) and (c) of the Amendment and thus only (a) remains, which relates to the question whether the provisions of the contract are those to which the subsection applies. We have drawn the Clause in the form in which it is in the Bill because we think it would be more convenient for the parties that the question should go, in the first place, direct to the courts and not to the arbitrator. If a question arises between the purchaser, transferee and the Board whether the contract is one which is within the purview of the Clause as we have drawn it we believe that it should be for the court, in the first place, to decide that as a matter of law. It would be burdening the parties unnecessarily if that problem of law were submitted, in the first place, to an arbitrator who is appointed to assess the quantum. His determination would be likely to be subject to appeal to the court by way of case stated.

    Of course, we hope that in the great majority of cases it will be apparent, on any prima facie reading of the contract, whether it is one which comes within the Clause or not. If, unhappily, a dispute should develop between the parties it should not be the arbitrator who has to determine that in the first instance, but the court. It should be for the arbitrator to determine the amount of compensation once the court has decided it within the meaning of the Act.

    The hon. Member for South Hendon and the hon. and gallant Member for East Grinstead were concerned whether we had not by the wording we had used brought about a retrospective re-opening of the contracts right to the beginning. The hon. Member for South Hendon was concerned—if I may quote what he said upstairs—as to the possibility that these proceedings might result in the contracts in question being reopened back for some 10 or 15 years to the date when they were first entered into. I assured the hon. Member on that point upstairs, and I can assure him again, having considered the matter carefully, that that result will not ensue. If he would look at subsection (2), which deals with this question of frustration, he will see that the frustration is deemed to take effect only as between the Board on the one hand, and the purchaser, agent or transferee as the case may be, on the other. We have deliberately chosen these words in order to bring that about. If the vesting date is 1st January, 1947, and a notice of determination is given within the two years' period permitted by the Bill, the re-opening cannot take place in point of time beyond the date when the Coal Board became the substitute for a colliery concern as to the remaining period of the contract with the purchaser, agent or transferee. So the re-opening would only go back to that date and no further.

    There was an Amendment on the Order Paper in the names of hon. Gentlemen opposite which sought to remove references to the Law Reform (Frustrated Contracts) Act, 1943, and that point was referred to by the hon. Member for South Hendon in support of this Amendment. We thought it better, on reflection, to retain that reference in the Bill. If the provisions of the Act are retained they bring about a result, which is more equitable as between the parties than would be brought about if the matter were left to the common, as distinct from statutory, law. For that reason, in seeking to bring about the fairest issue in the event of a contract being determined, we seek to apply the provision of the 1943 Act, which, in effect, says that if one party has conferred any benefit under the contract the other must pay a reasonable sum for it. Supposing the former party conferred a benefit under the contract, he is entitled to say, "You shall not reopen to the extent of my not being entitled to recover a reasonable sum for the benefits I have conferred." As I pointed out, the Coal Board, in addition, compensate him for any loss which has eventuated as a result of the termination of the contract.

    We have carefully considered this matter and tried to do justice in the case. It is beside the mark to talk about the dishonourable breaking of contracts. What we are seeking to do is to put the Coal Board, as representing the public, into the position in which, if they find they cannot carry out their duties and are impeded because of a long-term contract of this sort, they can terminate the contract, upon a proper and fair distribution of the benefits on each side and fair compensation being awarded by the arbitrator, who, in addition, will see that justice is done. If the Board are to be disembarrassed of long-term contracts, it will be at the cost of paying compensation to the person who will suffer as a result of the giving of the notice.

    It was suggested that the purchaser, agent or transferee should have a correlative right in respect of any part of the contract which is not vested in the Coal Board under Section 7 of the 1945 Act. As was pointed out in the course of the discussion upstairs, that would be extremely difficult to bring about. Indeed, it would be an impossible situation, because that part of the contract would be part of the contract which still subsists between the purchaser, agent or transferee on the one side and the colliery concern on the other. Therefore, it would be impossible to give the purchaser, agent or transferee the right to determine that contract without giving the colliery concerned correlative rights, too, and we should have to introduce a whole set of further compensation provisions. It would be difficult to know exactly where we would land as a result of such successive provisions. In those circum- stances, I hope that the House will agree that, in dealing with this position, we have fairly met it, and that in the difficult circumstances an adequate measure of justice has been done to the persons who would be affected by any determinations of this sort.

    7.45 p.m.

    The House will be grateful to the right hon. and learned Gentleman for the way he has dealt with these difficult points, and we are glad to know that there will be no "jobbing backwards" beyond 1947. I am not going into the various legal points. Indeed, the drafting of this and the succeeding Clause is enough to terrify any layman from reading a Bill again. As we have been given latitude in our comments on the Clause, I should like to say that we on this side dislike any weakening in the sanctity of contracts in general, which is a very serious matter and which we believe should only be undertaken when there is really on alternative. One of the reasons why there is deterioration in affairs both at home and abroad is that the belief has gone round the world that contracts do not really matter. Indeed, we are suffering under one at the present time—the meat contract with the Argentine.

    Unless there is very real cause nothing that is contemplated in this Clause should be undertaken, because it makes an inroad into the principle of sanctity of contracts. There is one point which should be borne in mind—if these contracts, which it is now sought to terminate, had been a hindrance upon the profits of any of the pits when they were in operation under private enterprise so much less would have been the price by which the people, through the Government, purchased the pits. Therefore, there is no loss to the community by the running on of these contracts. The Parliamentary Secretary on the occasion of the Second Reading indicated that there were some horribly bad contracts, and that when the lid was taken off all sorts of nasty smells would come forth. Now we have learnt from the Solicitor-General in actual fact, that these contracts were proper contracts entered into—

    I did not go quite as far as that. I said I did not think they were all improper.

    We did not hear there was anything very serious about them except that they were very long-term contracts, and he was at pains to show that their long-term character made the carrying out of the obligations of the National Coal Board rather difficult. The Parliamentary Secretary during the Second Reading Debate called them peculiar contracts. He went on to say:

    "How can the Board assure that everyone gets a fair share of qualities and grades if they are committed to supplying 11,000,000 tons to specific individuals or firms?"—[OFFICIAL REPORT, 29th November, 1948; Vol. 458, c. 1649.]
    Prior to nationalisation there was no difficulty in supplying certain grades to certain individuals. Production and quality were at a high level, and it was a common practice for a firm or individual to contract for specific grades of coal from specific areas or specific pits. One of the companies with which I am connected had such a long-term contract, which finished about 1939, and which was profitable to both sides.

    One of the most bitter and serious complaints against the Coal Board by many firms is that they cannot get for their boilers types of coal to which previously they were accustomed and which enabled them to run their businesses most effectively. We hope the Minister and everybody concerned will encourage the Coal Board to get ahead with providing the types of coal that industry needs.

    The important point is that there are 40 contracts, mainly or mostly of a long-term nature. They do not appear to be very large. I should have thought that by a serious, concentrated effort, the National Coal Board, as reasonable people, could have made a working arrangement with the other parties to those contracts, without having to go through all this paraphernalia to allow the contracts to be broken. As the circumstances surrounding contracts change in ordinary business, reasonable people adjust their contracts accordingly. That process is going on in business every day and all day. The gravamen of my charge against the Ministry and against the Coal Board is that they have come to the House of Commons promoting a Bill and producing this extraordinary legal argument—I was going to say "absurdity"—which is difficult for the layman to understand. We shall get into all sorts of difficulties in carrying it out. The whole matter is most unfortunate.

    I am still unhappy about reciprocity, and it was apparent from the answer given by the Solicitor-General that he is unhappy about it, too. The position is getting so complicated that he did not see how it could be dealt with. That is another trouble we get into when we propose to break contracts instead of trying to deal fairly with people. I make a plea from this side of the House that we should regard contracts as sacred,

    Division No. 90.]

    AYES

    [7.55 p.m.

    Agnew, Cmdr. P. GGeorge, Maj. Rt. Hn. G. Lloyd (P'ke)Nicholson, G.
    Amory, D. HeathcoatGridley, Sir A.Nield, B. (Chester)
    Assheton, Rt. Hon. R.Hare, Hen. J. H. (Woodbridge)Ponsonby, Col. C. E.
    Baldwin, A. E.Harvey, Air-Comdre, A. V.Raikes, H. V.
    Birch, NigelHogg, Hon. Q.Ramsay, Maj. S.
    Bossom, A. C.Hudson, Rt. Hon. R. S. (Southport)Ropner, Col. L.
    Braithwaite, Lt.-Comdr. J. G.Hutchison, Col. J. R. (Glasgow, C.)Sanderson, Sir F.
    Bromley-Davenport, Lt.-Col. WJeffreys, General Sir G.Savory, Prof. D. L.
    Buchan-Hepburn, P. G. T.Jennings, R.Shepherd, W. S. (Bucklow)
    Bullock, Capt. M.Keeling, E. H.Spearman, A. C. M.
    Carson, E.Lancaster, Col. C. G.Stanley, Rt. Hon. O.
    Chanson, H.Langford-Holt, J.Stewart, J. Henderson (Fife, E.)
    Clarke, Col. R. S.Legge-Bourke, Maj. E. A. H.Stuart, Rt. Hon. J. (Moray)
    Conant, Maj. R. J. E.Lindsay, M. (Solihull)Touche, G. C.
    Cooper-Key, E. M.Low, A. R. W.Tartan, R. H.
    Crookshank, Capt. Rt. Hon. H. F. C.Lucas-Tooth, Sir HWakefield, Sir W. W.
    Cuthbert, W. N.MacAndrew, Col. Sir C.Walker-Smith, D
    Dodds-Parker, A. DMcCorquodale, Rt. Hon. M. S.Wheatley, Colonel M. J. (Dorset, E.)
    Donner, P. W.Macmillan, Rt. Hn. Harold (Bromley)White, Sir D. (Fareham)
    Drewe, C.Macpherson, N. (Dumfries)Williams, C. (Torquay)
    Dugdale, Maj. Sir T. (Richmond)Maitland, Comdr. J. W.Willoughby de Eresby, Lord
    Eccles, D. M.Manningham-Buller, R. E.Young, Sir A. S. L. (Partick)
    Foster, J. G. (Northwich)Marshall, D. (Bodmin)
    Fraser, Sir I. (Lonsdale.)Mellor, Sir J.

    TELLERS FOR THE AYES:

    Fyfe, Rt. Hon. Sir D. P. MMorrison, Rt. Hon. W. S. (Cirencester)Mr. Studholme and
    Brigadier Mackeson.

    NOES
    Adams, Richard (Batham)Colman, Miss G. M.Ganley, Mrs. C. S
    Alicn, A. C. (Bosworth)Cooper, G.George, Lady M. Lloyd (Anglesey)
    Allen, Scholefield (Crewe)Corbel, Mrs. F. K. (Camb'well, N.W.)Glanville, J. E. (Consett)
    Alpass, J. H.Cove, W. G.Greenwood, A. W. J. (Heywood)
    Attewele, H. C.Crawley, A.Grierson, E.
    Attlee, Rt. Hon. C. R.Dagger, G.Griffiths, D. (Rother Valley)
    Ayrton Gould, Mrs. B.Daines, PGriffiths, Rt. Hon. J. (Llanelly)
    Bacon, Miss A.Davies, Ernest (Enfield)Gunter, R. J.
    Barnes, Rt. Hon. A. J.Davies, Haydn (St. Pancras, S.W.)Hale, Leslie
    Barstow, P. G.Deer, G.Hamilton, Lieut.-Col. R
    Bartley, J. R.Diamond, JHannan, W. (Maryhill)
    Bechervaise, A. E.Debbie, W.Hardman, D. R.
    Benson, G.Dodds, N. N.Hardy, E. A.
    Berry, H.Driberg, T. E. N.Harrison, J.
    Bing, G. H. C.Dugdale, J. (W. Bromwich)Hastings, Dr. Somerville
    Blenkinsop, A.Dumpleton, C. W.Houghton, S G.
    Boardman, H.Ede, Rt. Hon. J. CHaworth, J.
    Bowden, Fig. Offr. H. W.Edelman, M.Henderson, Joseph (Ardwick)
    Brook, D. (Halifax)Edwards, Rt. Hon. N. (Caerphilly)Herbison, Miss M.
    Brooks, T. J. (Rothwell)Edwards, W. J. (Whitechapel)Hewitson, Capt. M
    Broughton, Dr. A. D. D.Evans, E. (Lowestoft)Hobson, C. R.
    Brown, T. J. (Ince)Evans, John (Ogmore)Holman, P.
    Bruce, Maj. D. W. T.Evans, S. N. (Wednesbury)Holmes, H. E. (Hemsworth)
    Burden, T. W.Ewart, R.Horabin, T. L.
    Butler, H W. (Hackney, S.)Farthing, W. JHughes, Emrys (S. Ayr)
    Chetwynd. G. R.Fletcher, E. G. M (Islington, E.)Hughes, H. D. (W'lverh'pton, W.)
    Cobb, F A.Follick, M.Hynd, H. (Hackney, C.)
    Cocks, F. SFoot, M. M.Irving, W. J. (Tottenham, N.)
    Collick, P.Forman, J. C.Isaacs, Rt. Hon. G. A.
    Collins, V. J.Gaitskell, Rt. Hon. H. T. N.Jeger, G. (Winchester)

    only to be interfered with by law as a very last resort. It is because we do not think that the Government have followed out every other method of getting out of these difficulties than that of coming to the House of Commons and asking leave by law to break contracts, that I am asking my hon. Friends to go into the Lobby against the Government on this Amendment and show their disapproval.

    Question put, "That those words be there inserted in the Bill."

    The House divided: Ayes, 72; Noes, 212.

    Jenkins, R. H.Paling, Rt. Hon. Wilfred (Wentworth)Taylor, R. J. (Morpeth)
    Jones, D. T. (Hartlepool)Paling, W. T. (Dewsbury)Thomas, D. E. (Aberdare)
    Jones, P. Asterley (Hitchin)Pargiter, G. A.Thomas, George (Cardiff)
    Keenan, W.Parker, JThomas, I. O. (Wrekin)
    Kendall, W. D.Parkin, B. T.Thomas, John R. (Dover)
    Kenyon, CPaton, J. (Norwich)Thorneycroft, Harry (Clayton)
    Kinley, J.Pearson, A.Thurtle, Ernest
    Kirby, B. VPoole, Cecil (Lichfield)Timmons, J.
    Lang, G.Porter, E. (Warrington)Titterington, M. F.
    Lavers, S.Porter, G. (Leeds)Tolley, L.
    Lee, Miss J.(Cannock)Proctor, W. T.Tomlinson, Rt. Hon. G.
    Leslie, J. R.Pryde, D. J.Turner-Samuels, M.
    Levy, B. W.Pursey, Comdr. H.Ungoed-Thomas, L.
    Lipson, D. L.Randall, H. E.Viant, S. P.
    Lipton, Lt.-Col. M.Ranger, J.Wadsworth, G.
    Lyne, A. W.Reeves, J.Wallace, G. D. (Chislehurst)
    McAdam, W.Reid, T. (Swindon)Warbey, W. N.
    McEntee, V. La T.Rhodes, H.Watkins, T. E.
    McGhee, H. G.Ridealgh, Mrs. M.Webb, M. (Bradford, C.)
    McKay, J. (Wallsend)Robens, A.Weitzman, D.
    Mackay, R. W. G. (Hull, N.W.)Roberts, Goronwy (Caernarvanshire)Wells, P. L. (Faversham)
    McLeavy, F.Roberts, W. (Cumberland, N.)Wheatley, Rt. Hn. John (Edinb'gh, E.)
    MacPherson, Malcolm (Stirling)Robertson, J. J. (Berwick)White, H. (Derbyshire, N.E.)
    Mainwaring, W. H.Robinson, K. (St. Pancras)Whiteley, Rt. Hon. W.
    Mallalieu, E. L. (Brigg)Ross, William (Kilmarnock)Wigg, George
    Manning, Mrs. L. (Epping)Royle, CWilcock, Group-Capt. C. A.
    Marquand, Rt Hon. H. A.Scollan, T.Willey, F. T. (Sunderland)
    Mathers, Rt. Hon. GeorgeShackleton, E. A. A.Williams, D. J. (Neath)
    Mayhew, C. P.Sharp, GranvilleWilliams, Ronald (Wigan)
    Medland, H. M.Shawcross, Rt. Hn. Sir H. (St. Helens)Williams, Rt. Hon. T. (Don Valley)
    Middleton, Mrs. L.Silverman, J. (Erdington)Williams, W. T. (Hammersmith, S.)
    Mikardo, IanSilverman, S. S. (Nelson)Williams, W. R. (Heston)
    Mitchison., G. R.Simmons, C. J.Willis, E.
    Monslow, W.Skinnard, F. W.Wills, Mrs. E. A.
    Morgan, Dr. H. B.Smith, C. (Colchester)Woodburn, Rt. Hon. A.
    Morris, Hopkin (Carmarthen)Solley, L. J.Yates, V. F.
    Moyle, A.Soskice, Rt. Hon. Sir FrankYounger, Hon. Kenneth
    Murray, J. D.Sparks, J. A.Zilliacus, K.
    Nichol, Mrs. M. E. (Bradford, N.)Stamford, W.
    O'Brien, T.Stewart, Michael (Fulham, E.)

    TELLERS FOR THE NOES:

    Oliver, G. H.Stross, Dr. B.Mr. Collindridge and
    Paget, R T.Taylor, H. B. (Mansfield)Mr. Popplewell.