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Clause 41—(Groups Of Companies)

Volume 531: debated on Tuesday 27 July 1954

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Lords Amendment: In page 32, line 38, leave out from "group" to end of line 44 and insert:

"occupation by another member of the group, and the carrying on of a business by another member of the group, shall be treated for the purposes of section twenty-three of this Act as equivalent to occupation or the carrying on of a business by the member of the group holding the tenancy; and in relation to a tenancy to which this Part of this Act applies by virtue of the foregoing provisions of this sub-section—"

I beg to move, "That this House doth agree with the Lords in the said Amendment."

This is a drafting Amendment.

To describe an Amendment which covers some 10 lines and deals with the situation in which groups of companies carry on business in common, and certain complicated inter-company transactions take place, as a drafting Amendment, without a word in explanation, seems to be treating the matter a little bit sketchily. I hope that the Solicitor-General will tell us what the Amendment does. It makes a substantial difference as far as the number of words is concerned in the Bill. I do not suspect anything sinister, but I would like to know what this change does.

Following our practice, and not through any lack of desire of my right hon. and learned Friend to do it, may I help the right hon. and learned Gentleman? This Amendment is required because of the changes that were made in this House in Clause 23 and, in particular, the insertion of subsection (4) of Clause 23, which the right hon. and learned Gentleman will remember.

Clause 41 deals with groups of companies and at present provides that the tenancy is within Part II if it is vested in one member of the group and the premises are occupied for business purposes by another member of the group.

We discussed that on Committee stage. The result of subsection (4) of Clause 23 is that occupation for business purposes is no longer, in all cases, enough to bring the tenancy into Part II, and the subsection excludes certain cases where the business use is in breach of the covenant. The Amendment makes the necessary change in the wording of Clause 41.

Question put, and agreed to.

Lords Amendment: In page 33, line 4, leave out "and".

I beg to move, "That this House doth agree with the Lords in the said Amendment."

Perhaps, I can deal with this Amendment and the next one at the same time, because they are linked together. The second Amendment corrects a small defect in Clause 41. The House will remember that the object of Clause 41 is to put groups of companies as a whole in the same position as a single company, and the Clause as it now stands fails to achieve this object in one respect.

Clause 26 confers the right on the tenant of business premises to take the initiative in having the tenancy replaced by a new tenancy. The right is confined to the tenant under a tenancy which was granted for a term exceeding one year. Where such a tenancy comes to an end after the Bill has become law, it will be automatically continued under Part II, and the tenant's right to make a request for a new tenancy is preserved by subsection (1) of Clause 26.

Where, however, a tenancy was granted for a term of years and the term expires before the coming into operation of the Bill, the law implies that if the tenant retains possession and the landlord accepts rent a new tenancy from year to year is thereby created. Such a new tenancy would not be within the terms of Clause 26 (1), and therefore would not give rise to a right to request a new tenancy under Part II but for paragraph 4 of the Ninth Schedule. In other words, paragraph 4 secures that the tenant who holds over after a fixed term tenancy comes to an end will have the right conferred by Clause 26, irrespective of whether the fixed term tenancy came to an end before or after the coming into operation of the Bill.

The notion of the tenant holding over is expressed in subparagraph (c) of paragraph 4 as a requirement that the tenant under the current tenancy must be the same as, or a successor in business to, the tenant under the fixed term tenancy. It is at this point that a group of companies requires special treatment. If, for instance, after the expiry of the fixed term and before the passing of the Bill a new subsidiary was formed for the purpose of holding all the land belonging to the group and the tenancy was then assigned to that new subsidiary, the requirement that the tenant must be the same would not be fulfilled unless the change of tenant were ignored. The same would apply if the fixed term tenancy was vested in the subsidiary and the subsidiary was for some reason dissolved after the expiry of the term. By ignoring the change of tenant in such cases, the Amendment secures the benefit of paragraph 4 of the Ninth Schedule to a group of companies.

Question put, and agreed to.

Further Lords Amendment agreed to:

In page 33, line 7, at end insert:

"and (c) an assignment of the tenancy from one member of the group to another shall not be treated as a change in the person of the tenant."