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Clause 20—(Supplemental Provisions)

Volume 643: debated on Tuesday 27 June 1961

The text on this page has been created from Hansard archive content, it may contain typographical errors.

1.0 a.m.

I beg to move, in page 22, line 6, to leave out "dispense with the consent" and to insert:

"give the necessary consent in place of that other person"
Subsection (1) gives a person who is served with a notice to do something under this part of the Bill and finds he needs the consent of some other person to carry out that work the right to apply to the county court if that other person refuses consent. As the subsection stands, what the county court may do is to dispense with that consent, but it may be that the person desiring to carry out the work needs to enter and to go on to the premises. Dispensing with consent is insufficient in such cases. The county court could give consent itself and deem consent to have been given. Therefore, for the words "dispense with the consent" we want to substitute the words
"give the necessary consent in place of that other person".
That would solve that problem.

My right hon. Friend suggests that the words proposed by my hon. Friend improve the drafting of the Bill and remove any shadow of doubt. He hopes that the House will accept the Amendment.

Amendment agreed to.

I beg to move, in page 22, line 33, after "capacity", to insert:

"or any responsible shareholder of the body corporate"

It may also be convenient with this to take the Amendments in page 22, line 35, at end add:

In the case of a body corporate which is a company under the control of not more than five persons within the meaning of section two hundred and fifty of the Income Tax Act, 1952, each of those persons shall for the purposes of this section be deemed to be an officer of the body corporate.
In page 23, line 3, at end insert:
"or, as the case may be, was not a responsible shareholder"
and In page 23, line 15, at end insert:
(7) For the purpose of this section "responsible shareholder" means a person who by virtue of his beneficial ownership of shares of a body corporate, whether or not his name appears on the register of shareholders, exercises or is entitled to exercise directly or indirectly, control of the body corporate.

That would be very helpful.

Clause 20 (4) has some valuable proposals and says:
Where an offence punishable under the foregoing provisions of this Part of this Act which has been committed by a body corporate is proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate, or any person purporting to act in any such capacity, he as well as the body corporate shall be deemed to be guilty of that offence…
In Committee, I moved an Amendment to add sharehokiens to that list because of the special problem created by a number of fly-by-night companies which take over property and often transfer it rapidly from one company to another, or suddenly go into liquidation and so on. It is very useful that the directors and managers of such a company should be held personally responsible and I do not quarrel with that, but one is faced with the problem of the shareholder who dominates the company, but who has the wisdom to slide out of responsibility as an officer of the company and put in a woman or man of straw to take responsibility.

In Committee I made the point that my wording would probably not meet the problem of the case where shares were in the names of nominees and, with his usual skill, the Parliamentary Secretary agreed with me and used that argument for riding off the whole issue. However, he said that he would have another look at it and I am sorry that he has not done anything about it.

We had another look at it and we have put forward two alternative ways in which this matter might be tackled. We offer them to the Government in the most helpful spirit. Apparently, they have not our skill in these matters and have not been able to do their own homework, so we shall be delighted to lend them ours. I am afraid that my explanation of our two methods involves a pleasant meander through the Income Tax Act, 1952, which, at one o'clock in the morning, will not be universally popular with hon. Members.

The first proposal which we put forward is simply to define a responsible shareholder in the body corporate. We take that as a term of art and give the definition as being a person who was
…the beneficial ownership of shares of a body corporate, whether or not his name appears on the register of shareholders, exercises or is entitled to exercise directly or indirectly, control of the body corporate."
That limits the responsibility to a shareholder who is in control of the company. It does not mean even a substantial shareholder who is not in control.

The other method is to go to the Income Tax Act, 1952, where it deals with what might be called the small family company, formed in order to avoid Surtax. At some stage in the proceedings I must point out that there is a small misprint in our Amendment as it appears on the paper in the name of my hon. Friend the Member for Fulham (Mr. M. Stewart). Three letters have been missed out, so that there is reference to Section 250 instead of Section 256 of that Act.

That Section is most interesting in the context about which we are speaking, because it deals with the problem of a company under the control of not more than five persons, and that is likely to be the sort of company we are talking about. We are not talking of the reputable public company which has a large number of shareholders. We are concerned with a company which may well be bogus in design, and so the limit of five persons in control comes near the mark. This decides the whole problem of who is in control. This Section of the 1952 Act states,
"…five or fewer persons together exercise, or are able to exercise, or are entitled to acquire, control, whether direct or indirect, over the company's affairs, and in particular…the greater part of the share capital or voting power of the company…"
Fascinating stuff, Mr. Speaker, and it is about a matter which is very relevant to what we are now considering. It goes on to define a relative as a
"husband, wife, ancestor, lineal descendant, brother or sister…"
and states that
"a person shall be deemed to be a nominee of another person if, whether directly or indirectly, he possesses on behalf of that other person, or may be required to exercise on the direction of or on behalf of that other person, any right or power which, by virtue of any of the provisions of this section, is material in determining whether a company is or is not to be deemed to be under the control of not more than five persons."
This, again, is fascinating, and it might well be very relevant to what we are discussing.

The alternative proposal is, instead of simply defining the controlling shareholder where there is a company under the, control of five persons, or fewer, within the meaning of the Income Tax Act, each of these people should be deemed to be an officer. If by neglect an offence is committed, any of them shall be held responsible. If they are not responsible, then they would not be liable, any more than an officer of the company would be.

We have put forward two alternative proposals which we say would be extremely valuable. I know that the Parliamentary Secretary has said that if one was brutal enough to the "front men" one might get a kind of seller's market in the "front men" and shareholders in the background would not be able to do anything about it. That is a brutal way of going about this. We have dealt with this in an earlier Amendment about acquisition and the brutal attitude of the Government towards landlords and being prepared to imprison them. I think that it would be a cumbersome way to do it, to go on chasing these companies round the place and imprisoning their representatives.

It sounds clever, but it would be an extremely laborious business and would, as I said on an earlier Amendment, often cause great hardship to the tenants while this performance was going on. I therefore think that one or the other of these methods would be a useful way of getting at the people who are in effective control of the house.

Hon. Gentlemen opposite have been assiduous and ingenious in trying to crack this nut. My right hon. Friend sympathises with their objective of trying to catch a manipulating and controlling shareholder who hides behind a screen of officers who will be the people to take the rap under this Bill. I have to tell the House that there are grave difficulties in either of the approaches suggested by hon. Gentlemen, but I have to add some words of comfort, because to some extent their efforts are unnecessary.

First, to dispose of the Amendment in page 22, line 35. It is true that the Commissioners of Inland Revenue can do a certain amount to penetrate the screen of nominees behind which a controlling shareholder may hide. The Commissioners of Inland Revenue have a considerable staff for this purpose, and it is doubtful whether local authorities could operate in this way.

As the hon. Gentleman recognised, there is the difficulty that the beneficial shareholder, the person at whom these Amendments are directed, can hide behind successive screens of nominees and so make it all the more difficult to catch up with him. I confess that the attempt to make a shareholder, even if he is quite overt and does not screen himself in this way, responsible for neglect in any way, is bound to fail. The House will remember that this is an attempt to extend the consent, connivance or neglect of any officer to the controlling shareholder.

A shareholder has no duty to operate the company, and therefore he cannot be said to be guilty of neglect in any sense since there is no duty which he can neglect. On the other hand, if a local authority can show that a controlling shareholder has consented or connived to any action which by this legislation is a criminal offence, then by that fact alone, without any writing in of Amendments, the local authority can presumably catch him as an accessory or for aiding and abetting.

That is very nearly the only legal comfort I have for the hon. Gentleman. When I say the only legal comfort, the other comfort I have for him is what he mentioned, namely, that when this Bill bites on the officers who operate companies of this sort there will be a rapid dwindling of the number of people who will be willing to serve as such officers in future. Consequently, the manipulating controlling shareholder will have more and more to take the rap himself, and my right hon. Friend hopes that by that means the purpose of hon. Gentlemen will be achieved.

I must warn the House that this series of Amendments as at present drawn will not achieve their purpose, and for those reasons I hope that hon. Gentlemen will not press them.

Amendment negatived.

1.15 a.m.

I beg to move, in page 23, line 3, at the end to insert:

(6) Section one hundred and fifty-nine of the principal Act (which confers powers of entry for the purposes mentioned in that section) shall apply to entry for the purpose of ascertaining whether there has been a contravention of any regulation or direction made or given under the foregoing provisions of this Part of this Act, but so much of that section as requires notice to be given of the intended entry shall not apply to entry for the purpose mentioned in this subsection.
This Amendment gives effect to a promise I made in Committee to introduce an Amendment which would make it certain that local authorities had adequate powers of entry for the purpose of ascertaining whether there had been any contravention of requirements or regulations made under Clause 13 and applied to houses by orders under Clause 12, or any contravention of a direction made under Clause 18. The Amendment provides a power of immediate entry for those purposes. It seems to the Government that there should be a power of immediate entry in this case, because it is desirable that an officer of a local authority can go in without delay to make sure whether the regulations or directions are being complied with, and the possibility of making sure of that might be weakened or invalidated if there were an obligation to give twenty-four hours' notice.

It has appeared to the Government, on examination, that an additional power of this kind is desirable, but in the view of the Government it should be confined to cases where there is a regulation or a direction in force. That is why the Amendment is drafted as it is.

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

I beg to move, as an Amendment to the proposed Amendment, after "ascertaining", to insert:

"whether a house is let in lodgings or occupied by more than one family; how many individuals and households are accommodated in it or".
In some ways the Government Amendmentment is more drastic than the new Clause we moved in Committee. As far as I understand it, it removes all requirement to give notice and all need to apply for a warrant. We took our precedent from the Public Health Act for applying for a warrant for entry without notice. As I understand it, the right hon. Gentleman is dispensing with that. In other words, this is a very smart invasion of an Englishman's home. I do not quarrel with that particularly, because if he does not think a warrant is necessary I am a little surprised, but it will make for more efficient enforcement.

But in the other respect the Amendment does not go as far as our proposal did. We are very worried about the problem of discovering which houses should be subject to the provisions of the Measure—which should have an order made in respect of them and in which case there should be a direction, and so on. The Bill may deal with the glaring cases, about which everybody knows; it may operate fairly smoothly in the first few months. But thereafter it will tend to become a dead letter, because it will be comparatively easy to evade it.

The simplest and most obvious case is that where it is known pretty notoriously that a house has ten or twelve people living in a room. No order has been made, and no direction given. It may be a matter of mere rumour or complaint, without direct evidence. A public health inspector or enforcement officer may visit the premises, but the twenty people will not be there on the night when he arrives; they will have disappeared, but they will return the next night. There is nothing in this extension of the provisions of the Bill which enables that kind of case to be dealt with. That seems to us to be playing with the problem. Unless the Government are prepared to take seriously the problem of how one finds the cases which require the attention of this part of the Bill, it will deal only with the obvious cases and relapse into being a dead letter. We move this Amendment to bring out that point. I hoped that the right hon. Gentleman would say that this aspect had been inadvertently overlooked, but apparently it is a case not of oversight but of neglect, and I am sorry that he has made this considerable blunder.

Perhaps the hon. Member for Widnes (Mr. MacColl) and I were slightly at cross-purposes, because he was arguing that the Government Amendment went further than the new Clause which had been moved in Committee by the Opposition, whereas the Government Amendment singles out one particular set of circumstances and says that where it is desirable there should be power of immediate entry. That is the case where there is a direction or regulation in force.

It is not a question of an officer of the local authority wandering round and seeing a house and thinking that he would like to walk straight in. Where the manager or occupier is under certain obligations already, it seems to the Government that without the power of immediate entry it might be very difficult to make certain that these regulations or directions were being complied with. But the Government certainly would not be disposed to go as far as the hon. Member wishes and give a statutory right of immediate entry in any form to any house simply in order to find out whether it is in multiple occupation and how many people are living in it.

The local authorities have the power of Section 159 of the 1957 Act, and in my Department we have never had complaint from local authorities that those powers are inadequate for the purpose of survey and examination to determine whether any of the statutory powers ought to be exercised in respect of a particular house.

That is almost entirely in cases where there is a structural defect. One cannot alter the angle of light or the size of a room in twenty-four hours, but one can alter the number of people sleeping in that room.

But the local authority ought not to need a power of immediate entry to discover whether a house is occupied by more than one family. It is reasonable that it may wish to find out, but there is no reason why it should not give twenty-four hours' notice before entering.

The hon. Member's Amendment also contains the words
'how many individuals and households are accommodated …"
Possibly he may be thinking of the old form of Clause 12 rather than the new form, because we are not proposing in the Bill, as amended, that the actual number of individuals should be the vitally relevant piece of information. What has to be ascertained is whether the house is let in lodgings or occupied by more than one family; and, if it is, whether through some failure of management it is desirable that the regulations should be made applicable to it. As I was saying, these powers of entry under the 1957 Act for the purpose of survey and examination are found adequate by local authorities and there is no reason why they should not be adequate for ascertaining whether a house is let for lodgings or occupied by more than one family. Everything has to start from that. If the house does not comply with those conditions, it does not become subject to the provisions of Part II of the Bill.

I must advise the House that it would be reasonable and not going too far to introduce the immediate power of entry as embodied in the Government Amendment, provided that it is confined to those houses already subjected to regulations or directions. But I could not advise the House to accept the hon. Member's Amendment to the proposed Amendment which, in the view of the Government, would go far too far. It is the Government's view that the existing power of entry under Section 159 of the 1957 Act is quite sufficient for the purpose of ascertaining whether the house actually comes within the conditions laid down in Part II of the Bill.

Amendment to the proposed Amendment negatived.

Proposed words there inserted in the Bill.