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Disgorgement

Volume 979: debated on Tuesday 26 February 1980

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

'Any person who contravenes the provisions of sections 65 or 66 of the Act shall be deemed to be a trustee of the company in respect of any profit which he may take as a result of such contravention'.—[Mr. Archer.]

Brought up, and read the First time.

With this it will be convenient to take the following amendments:

No. 114, in clause 68, page 81, line 39, leave out subsection (3).

No. 115, in page 81, line 41, at end insert

'but the obligation to comply with these sections are duties owed to any person who may suffer loss by a contravention of them and any breach of such duty is actionable accordingly subject to the defences and other incidents applying to actions for breach of statutory duty'.

We have on occasion debated, as we shall debate tomorrow, provisions that make it a criminal offence to make an improper profit by insider dealing. However, the question arises whether the offender should be permitted to bury his ill-gotten gains so that when his sentence is served and the heat is off he may return, dig them up and enjoy them. The Opposition believe that if the offender and gains are identified he should be made to disgorge them. It is not a unique proposal. There are many situations in which the criminal courts have power, after a conviction, to order restitution of the loot.

In Committee my hon. Friend the Member for Swansea, East (Mr. Anderson) pointed to section 35(2) of the Restrictive Trade Practices Act 1976, which provides that
"the obligation to comply with that paragraph is a duty owed to any person who may be affected by a contravention of it and any breach of that duty is actionable accordingly subject to the defences and other incidents applying to actions for breach of statutory duty."
The author of an article on insider trading in the Law Society's Gazette of 6 February argues that as the real purpose of the insider provisions is to prevent a general undermining of confidence among investors, the question of restitution to the individual who suffered is of secondary importance. I am not sure that I follow that argument, even given the premise. One way of bolstering the confidence of investors, surely, is to assure them that they will not be left, directly or indirectly, to bear their individual losses. One way to deter wrongdoers from undermining these operations is to persuade them that they will not be allowed to retain their profits.

The principle appears to us to be so clearly what justice requires that we waited to see what was the Government's objection to our proposals. The explanation of the Minister of State in Committee was admittedly rather different from the objection advanced by the learned author of the Law Society's Gazette article. The Minister said that the difficulty was to link the person who made the profit with the person who made the loss. The question that the hon. Gentleman asked was, how does one show that a person is poorer by the amount represented by the profit?

Our first answer is fairly simple and obvious. Why not permit the victim to recover if he can establish that he has suffered a loss and that it is related to the wrongdoer's gain? When such a relationship cannot be established, there need be no cause of action. The Government seemed to go out of their way to reject that solution even where a relationship could be established between the loss and the gain. In Clause 68(3) the Government provide that
"No transaction shall be void or voidable by reason only that it was entered into in contravention of section 65 or 66 above".
Our amendment No. 114 proposes simply to delete those words and, having provided a clean sheet, to substitute the words in our amendment No. 115. That is one possible solution to the difficulty. We would want to provide that if someone can establish that there is a wrong by an indentifiable wrongdoer, that there is a loss suffered by an indentifiable victim and that there is a clear relationship between them, the wrongdoer should have to disgorge his loss to the victim. We accept that if he cannot relate the loss to the profit, that provision will not apply. Not everyone in every situation will be able to establish a cause of action. That does not seem to be a reason for denying the remedy to someone who can establish it. Often, the victims of accidents leading to personal injuries find difficulty in establishing a right to compensation. No one suggests that the answer to the problem is to abolish the right of action for damages for personal injury.

If that solution does not commend itself to the Government, we are not dismayed. As in the last debate, we have an alternative solution. I hope that we shall not be criticised again for putting forward alternative solutions and that it will not be suggested that this represents a weakness in either of them. Our alternative solution is to suggest that the wrongdoer should be compelled to disgorge his loot to the company. That is the purpose of new clause 10, which we see as an alternative to amendments No. 114 and No. 115.

In Committee the Minister of State objected that the company might not have suffered any identifiable loss. He said that disgorgement would simply be a windfall to the company. We make two answers to that argument. First, we believe that the company is always damaged by insider dealing. It is damaged in its reputation and in its future dealings. It is damaged in the credit that people are prepared to offer to it and the confidence that they are prepared to repose in it.

We are comforted by the support of the New York court of appeal in the case of Diamond and Oreamund in 1969 quoted in Committee by my hon. Friend the Member for Hackney Central (Mr. Davis). In that case, it was said, admittedly obiter, that insider dealing inevitably undermined public regard for a company's shares. A company simply would not be receiving a clear profit or an undeserved windfall. It would be compensated for a loss even if it were not a readily quantifiable loss.

9.45 pm

Secondly, if the offender is seen as a trustee for the company, it does not matter much whether or not the company has suffered a loss. If a trustee uses his position to make a profit for himself, normally the beneficiary is entitled to that profit. It is not a question of compensating the beneficiary for a loss. The question is, who should benefit from the profit? We are fortified by the fact that that was pointed out in Committee by the right hon. Member for Crosby (Sir G. Page). That is what the clause seeks to provide.

If someone offends against the insider provisions, we see no reason why he should pay the penalty but still retain his swag. Those are our arguments. We have not yet heard the arguments against.

As the right hon. and learned Member for Warley, West (Mr. Archer) said, we debated these subjects in Committee. I expressed the view in Committee that I was not opposed to sensible, workable, civil remedies if they could be properly defined, but I pointed out that the Government had decided that insider dealing was a public wrong and that the right remedy lay in making it a criminal offence and seeking punishment through the criminal law.

I did not offer my statement about sensible, workable remedies as a way of getting out of the Committee stage; I made it as an offer to the right hon. and learned Gentleman and I looked forward to seeing how he and his colleagues would respond to it on Report. Their attempt to produce sensible, workable remedies has strengthened my conviction that we are right to treat insider dealing as a criminal offence, because I do not think that the remedies proposed by the right hon. and learned Gentleman are sensible. By the time I have explained my reasons for that remark, I hope that he will agree with me.

I know that in some countries there has been an attempt to link civil remedies with the criminal law in this area. While we must not turn our backs on the experience of other countries, I do not think that because other people do it it is necessarily right or valid in the circumstances of our company law.

The main case is clause 65, which covers insider dealing in relation to stock exchange transactions. As I said in Committee, in practical terms it is not possible to link buyers and sellers in a meaningful way so as to provide for civil remedies. In stock exchange transactions it is the jobber who makes the market and people are dealing not directly with each other but through the jobber. It is therefore difficult to forge a direct link between the person who sold a block of shares and the person who bought that block of shares, because the shares have been through the market and through the jobber's hands in the interval. That is one of the difficulties of linking up the two parties to the transaction in clause 65.

The Goverment's approach to the problem is to say that they agree that this should be a criminal offence and the punishment should be, first, the possibility of prison and, secondly, the possibility of a substantial fine, so that there is a way of robbing the person who makes the profit and of putting the proceeds into the Exchequer for the benefit of the public, because we believe that it is an offence against the public rather than against the individual.

That is the heart of the matter. The legislation contains all the powers needed to make criminal sanctions an effective penalty. The person who makes a gain—which will become an illegal gain if the Bill becomes law—cannot put away his profits and serve his time in gaol in the happy knowledge that the profits are waiting for him. We have built into the law the ability for the courts to strip him of that profit and to ensure that he does not benefit financially from his activities.

There is a difficulty in linking the criminal with the person from whom he has made the gains. The way round the problem is to treat it as a criminal offence and to take away the profit by means of a fine.

It is against that background that I turn to the new clause. It operates as an extension of the existing equitable rules. It is established in cases such as Boardman v. Phipps that those who have a fiduciary duty of good faith to a company, such as directors, employees and certain professional advisers, have to account to the company for any profit that they make by reason of the information belonging to the company that they possess, and that it is a duty to account for profits made and not a liability to pay damages for loss.

Frequently, in insider dealing cases the company will suffer no loss as it cannot deal in its own shares. The hon. Member for Hackney, Central (Mr. Davis) attempted to argue in Committee that the company suffers a loss because an insider deal damages the company's name and reputation and undermines public regard for the company's securities. He demonstrated the extent of his knowledge by quoting an obiter dictum in the New York court of appeal in 1969.

There have been more solid foundations on which to build a major case for a change in the law. A chance remark made in a relatively minor court in New York 11 years ago, which nobody else has seen fit to take up or develop, was held up by the hon. Gentleman as a major reason why we should make a change in our law. I have found more convincing cases.

The Minister's extraordinary arrogance is quite uncharacteristic of him. It is an impertinence. A reputable court of appeal in New York considered the matter. It was not a chance remark but a highly considered judgment. The hon. Gentleman should not get away with that sort of rubbish.

One of my hon. Friends put his finger on the matter by saying that the hon. Member for Hackney, Central was showing off. I am sure that it was an earth-shattering event when the judge made his obiter dictum 11 years ago, but no one other than the hon. Gentleman appears to have been moved by it.

If my hon. Friend the Member for Hackney, Central (Mr. Davis) and I withdraw the reference to the New York court of appeal, will the Minister accept that our statement was patently, self-evidently, obvious?

The hon. Gentlemen deny themselves the only support that they have found to date. The new clause is based on the present law, but it goes far beyond that. It talks of a "trustee for the company" without specifying which company.

I cite a simple case that could arise under clause 65(2). A person connected with company A—perhaps its managing director—knows that it is about to make a takeover bid, well above the market price, for company B. He buys shares in company B to make an improper profit for himself. Is he to be a trustee for company A, the company with which he is connected, or company B, the company in whose securities he dealt? Th new clause is silent on that question. I suggest that that is a major defect in it.

Again, the new clause covers contraventions of clause 66, which deals with Crown servants. Let us suppose that a Crown servant knows that certain duties are to be removed from, say, tobacco and he buys the shares of a tobacco company before the announcement. The new clause would make him a trustee of his profits, not for the Crown whose information he had misused but for the company whose shares he had bought. That cannot be right.

The new clause talks of
"profit which he may take".
But what happens if he is dealing as an agent for a family trust of which he is not a beneficiary? Is there to be no obligation to account because he himself has taken no profit? Again, the new clause seems to have no application if he counsels a person to deal, although counselling is an offence. Similar arguments apply in the case of procuring and passing information.

I suggest that the right hon. and learned Gentleman forgets about the New York court of appeal and realises that, even if one strips him of that most valuable evidence and support, the new clause is defective for the reasons that I have just given.

Amendment No. 114 proposes the omission of clause 68(3). That subsection provides:
"No transaction shall be void or voidable by reason only that it was entered into in contravention of section 65 or 66 above."
We thought very carefully about the amendment, but we think that it would cause total and utter chaos in the markets. I should like to explain why. Person A sells shares to person B. Person B does not know that any offence has been committed, person A being the insider. He passes on the shares to person C. That person has quite legitimately dealt in the shares. If the amendment were to be accepted, the whole transaction would have to be unscrambled, and person C, a bona fide purchaser for value, could, through no fault of his own, find himself involved in a voidable transaction. I suggest that such uncertainty introduced into the markets would cause chaos and confusion. In truth, that is why subsection (3) was inserted.

We believe that it is wrong that an innocent third party should be affected if he has made a perfectly straightforward transaction. Therefore, we believe that subsection (3) was properly inserted in the Bill and that if it were omitted it would do considerable damage. From the way in which the right hon. and learned Gentleman is nodding—I hope that I read him right—I take it that our objections are valid.

As the hon. Gentleman has referred to the way in which I was inclining my head, I should point out that we could restore subsection (3) without affecting the validity of the rest of our argument.

As the amendment seeks to remove subsection (3)—and that is the issue which we are debating—I am glad to have the right hon. and learned Gentleman's agreement that it should stay in the Bill.

As a result, I can move on to amendment No. 115, which is the final amendment in this group. It arises from a point which the hon. Member for Swansea, East (Mr. Anderson) raised in the debate when he talked at some length and interestingly about the provisions of section 35(2) of the Restrictive Trade Practices Act 1977. I have already explained why we feel that this attempt to introduce civil remedies into this area of insider dealing is one of which we do not approve.

However, I should like to deal with the specific point which I regard as a major defect in the hon. Gentleman's thinking and in his trying to equate the restrictive practices legislation with the insider dealing legislation. On conviction, the court has the power to impose an unlimited fine. Thus, there is a clear, effective means for ensuring that the insider is deprived of his illicit profits.

By contrast, section 35(2) of the Restrictive Trade Practices Act provides civil remedies for breach of duty, after specifically ruling out criminal sanctions. That underlines the major difference between those two cases. Under the restrictive practices legislation, criminal sanctions are ruled out and civil law is pointed to as the right course for seeking a remedy.

It being Ten o'clock, the debate stood adjourned.

Ordered,

That, at this day's sitting, the Companies Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr. Berry.]

Question again proposed, That the clause be read a Second time.

We have specifically said that criminal sanctions should be the right approach. We have pointed in that direction. To that extent, the two cases are different, and I do not think that the restrictive practices legislation is as relevant as the hon. Member for Swansea, East indicated in Committee.

For the reasons that I have explained, we have firmly reached the conclusion that insider dealing is an offence against the public and, therefore, the correct penalty for it is a criminal sanction and conviction in serious cases, with substantial fines. We believe that there are practical difficulties of the sort that I have outlined in seeking to line up civil sanctions and civil rights with those criminal sanctions. I urge the House to reject the Opposition's proposal.

The Minister concluded his remarks by citing my attempt to import the formula into the Restrictive Trade Practices Act 1976 in an attempt to find a proper formula for civil remedy. He said that it was inappropriate, because criminal sanctions were expressly ruled out in that Act. In his view there were adequate criminal remedies under the insider trading provisions put forward by the Government. I suggest that that is not so, and I hope to show that the formula on which the Government rely—that there are adequate criminal remedies available—is open to doubt.

The Committee then discussed the general area of disgorgement and civil remedies, and the question of whether civil remedies might have been even more appropriate and more effective than the criminal remedies that the Government proposed. In clause 68 (3), the Government have expressly ruled out civil remedies by making such transactions neither void nor voidable. One might almost say that the Government do not accept that there is a problem in respect of civil remedies. By contrast, the Opposition have sought to provide for civil remedies by way of assistance by every possible formula—either by way of the Restrictive Trade Practices Act, by using the formula of breach of statutory duty from that Act, or by using the concept of a trustee, which the Minister has expressly excluded.

Essentially, the Minister's argument was that the offence of insider dealing is by its nature a public offence, and therefore the remedy must be via criminal law. We must therefore ask ourselves whether the criminal sanctions that are proposed by the Government are sufficient to make insider dealing a practice that is not worthwhile.

The whole basis of the Government's approach rests on their assumption that criminal sanctions are an effective remedy. I hope to show that there are considerable deficiencies in compensation in criminal cases, which might lead one to suspect that the Government have not properly thought through the difficulties.

For example, if an offence of insider dealing is committed on many occasions there may in a criminal indictment be a specimen count. One knows that compensation has to be linked to a specific offence that is proved or admitted. Hence, if there are several counts in an indictment, some of which will almost certainly be stronger than others, leading counsel may well advise that a plea be accepted perhaps to one of these counts, particularly when the Government have created an enormous obstacle race towards the possibility of any successful criminal prosecution. With that offer, leading counsel, seeing the possibility of a plea on the most strong of several counts that may be in the indictment, will almost certainly heave a mighty sigh of relief and accept the one, feeling that the chance of succeeding on the others is remote and that he might possibly even not succeed on that one if he pressed ahead with the prosecution. It may suit the Crown to do so, if only to obtain at least one conviction. The unlikelihood of a conviction was mentioned earlier, given the extremely technical nature of the offence that the Government have set out and the general desire to simplify proceedings.

A further difficulty, which I suspect the Government have not thought through in their total reliance on criminal proceedings, is that the defendant may not accept offences to be taken into consideration, or the evidence may well not be sufficient for such offences to stick. If that is so, and since compensation in criminal cases must relate specifically to offences that are proved or admitted, there will be no possibility of compensation in respect of those matters that might well have been taken into consideration.

A further factor, which again I suspect the Government have not properly thought through, is the difficulty of obtaining compensation in the criminal courts in any event. I do not need to underline the problem at length, but on numerous occasions the Court of Appeal has said that the criminal courts are not the proper courts for compensation, save in the most straightforward of cases. Powers are available under the Powers of Criminal Courts Act 1973, section 35.

However, it has been underlined again and again by the Court of Appeal that these powers of compensation in criminal cases are a quick and simple machinery that should only be used when dealing with claims in straightforward cases. There is ample authority to support that, and I rely on the case of Daly, reported in 1974, 1 All England, at page 290, and the case of Lester, reported in the Criminal Appeal Reports 144, at page 146.

Further, the Court of Appeal has said that the loss or damage must fairly stem from the offence, and the court should hesitate to embark on any investigation of complicated issues of fact. The authority for that is the case of Kneeshaw, reported in 1973, 1 All England, at page 89.

By their nature these prosecutions in respect of insider dealing must be complicated issues of fact. That underlines the shaky basis on which the Government rest in suggesting that compensation can adequately be dealt with by means of the criminal law. We should therefore conclude that compensation cannot be pursued as effectively as the Government have maintained through the criminal courts.

What are the positive advantages of a civil remedy? The very nature of the standard of proof in civil proceedings is an advantage. One need look only at the clauses that follow clause 65 in order to realise the virtual impossibility of successful prosecution. In criminal cases the burden of proof means that the case must be proved beyond all reasonable doubt. That will scupper any chance of success in the criminal courts. However, in civil proceedings the standard of proof falls upon the balance of probabilities. It is therefore more likely that a defaulter will have to disgorge that which he has improperly obtained.

Civil proceedings are more appropriate to the insider trading provisions. That is emphasised by the self-interest factor. The only appropriate trigger mechanism for bringing a case of insider dealing to the attention of the courts is that of the aggrieved individual's self-interest. If he finds that he may gain as a result of bringing it to the attention of the authorities he will do so. He will recognise the impossibility of successful prosecution under criminal law. He is likely to cooperate with the authorities only if civil proceedings are involved, where a different standard of proof is used.

Does the hon. Gentleman agree that civil remedy might give rise to an excess of highly undesirable litigation?

That is a possible objection. One does not know. If litigation were vexatious or frivolous the court would have remedies to stop it. However, if insider dealing is wrong, it should be stopped. We should therefore provide a proper remedy. The Government have not provided a proper remedy with which to attack this practice.

If the Minister wishes to look at the balance of consideration between civil and criminal proceedings, he should examine sections 48 and 49 of the Companies Act 1948. I also commend him to examine section 54 of that Act. That section refers to purchasing shares. There is a civil remedy that a director must recoup the company for any loss. If we say, as we do, that insider dealing is wrong, why should there not be a civil sanction?

The Minister was very scathing about the United States court of appeal.

Is the Canadian Parliament worthy of any more respect? I only pray that the the term of office of the previous Conservative Government in Canada will be reflected in Britain.

10.15 pm

The Canadian Dominion Companies Act 1952 makes it an offence for a director to speculate in any of the company's securities. I accept that it is not wholly clear whether a civil remedy is available in those circumstances, but in Canada it was accepted that these provisions were inadequate. The Kimber committee was appointed, which recommended that it was improper for an insider to use confidential information in order to make profits by trading in his company's securities. The committee recommended that there should be full and public disclosure of all transactions effected by insiders in their companies' securities, and, more important, that there should be remedies for failure to make disclosures, and rights of action for the company concerned and the shareholders in respect of certain improper transactions.

These recommendations of the Kimber committee were enacted by the Securities Act 1966 and, in the province of Ontario, by similar provisions in the Ontario Corporations Act. Thus, in addition to disclosure provisions comparable to those in the Companies Act 1967, the Canadian Act provides that if an insider makes use of any confidential information for his own benefit or advantage, which, if generally known, might reasonably be expected to affect the price of the shares, he must compensate any person or company for loss suffered as a result of that transaction, unless that person knew or should have known of the information. In addition—and this is the relevant aspect of our new clause concerning the trustee provision—he is accountable to his company for any benefit or advantage that he has gained through the use of such information. Having been so scathing about a New York appellate court, perhaps the Minister, who is a Commonwealth man, will have more respect for a Dominion court in this case.

Who should have the benefit? One accepts that there are real difficulties in civil remedies. One must consider the effect of saying whether the company as such has suffered a loss, and the danger that the offending insider might be a substantial shareholder in the company and therefore might indirectly gain from any compensation that might be obtained from the company. There are difficulties too, following the rule in Foss and Harbottle, of shareholders taking action. This is a real problem, which the Government have not fully taken on board. The problem has not been solved by the Government's proposals, which rely wholly on the criminal remedy. We believe that they have not fully thought through the drawbacks that inevitably result from that dependence.

I wish to give limited support to the proposal made by the hon. Member for Swansea, East (Mr. Anderson). If one looks at the concept of insider dealing one sees at once that the objectionable aspect of such dealing is that it is an abuse of a fiduciary relationship. If one looks at section 66 one sees that what is described is essentially a fiduciary relationship.

The courts have long recognised that people who abuse a fiduciary relationship should have to account for what the law calls their secret profit. This arises in many fields. For example, if an employee misuses his employer's money and makes a secret profit he is liable at law to account for that profit to his employer. Similar considerations apply to a trustee who misuses a beneficiary's money and makes a secret profit. He is liable to account to the trust. Therefore, there are very good precedents. I find it rather difficult to distinguish between the principles advanced by Labour Members on this matter and the principle that the courts have long applied to cases where a fiduciary relationship has been abused.

Does my hon. Friend agree that there is a difficulty in deciding what is a fiduciary relationship? In suggesting that the person in question should be a trustee of the company, new clause 10 is not anywhere near touching the core of the problem.

I do not agree with that, though it is an interesting point. If one examines the categories of people who may not embark on what we have described as insider dealing, I think that with all of them the relationship that exists between them and the company to whose information they are privy is essentially a fiduciary relationship. Therefore, I believe that it is unwise to ignore existing precedent which justifies the proposals being made by Labour Members. I must also say—

Has my hon. Friend read the proposals being made by the Opposition? We are not discussing the general question whether we ought to be thinking of making changes. We are discussing specific proposals on Report for changing the Bill. None of the three suggestions that have been outlined stands up. I hope that that is the point to which my hon. Friend will address his mind.

My hon. Friend the Minister is getting a little impatient. The point that I am making is that we must recognise that there is merit in what Labour Members are saying. We must look at the precedent and consider the likely effects and then decide whether the proposals are good or bad.

I believe that there is a great deal of merit in the proposals, and what I was about to say to my hon. Friend was not that I will vote against him today but rather that he would be wise to look at this matter afresh. I find the argument attractive. I was about to conclude, before I was interruped, by saying that one of the most attractive features of the argument put forward by the Opposition is the deterrent effect. I entirely agree with the hon Member for Swansea, East on that point.

I entirely adopt the remarks of the hon. Member for Grantham (Mr. Hogg). There is a real issue here and it was incumbent upon the Government to grapple with it. They have declined to do so and are relying upon criminal sanctions exclusively. My hon. Friend the Member for Swansea, East (Mr. Anderson) has already explored that argument and dealt most effectively with the difficulty about whether such sanctions are an appropriate deterrent.

The Minister was uncharacteristically arrogant and dismissive about these points, which were also made emphatically in Committee by the right hon. member for Crosby (Sir G. Page). By implication, therefore, the Minister was being dismissive of the remarks of his right hon. Friend as well. That attitude is without justification. There is a problem here, and it is no use the Minister's

Division No. 197]

AYES

[10.24 pm

Anderson, DonaldDouglas-Mann, BruceHoram, John
Archer, Rt Hon PeterDuffy, A. E. P.Howells, Geraint
Beith, A. J.Dunn, James A. (Liverpool, Kirkdale)Hudson Davies, Gwilym Ednyfed
Benn, Rt Hon Anthony WedgwoodDunnett, JackHughes, Robert (Aberdeen North)
Bennett, Andrew (Stockport N)Dunwoody, Mrs GwynethHughes, Roy (Newport)
Booth, Rt Hon AlbertEadie, AlexJanner, Hon Greville
Brown, Hugh D. (Proven)Eastham, KenJones, Rt Hon Alec (Rhondda)
Brown, Ron (Edinburgh, Leith)Edwards, Robert (Wolv SE)Jones, Barry (East Flint)
Callaghan, Jim (Middleton & P)Ellis, Raymond (NE Derbyshire)Kilroy-Silk, Robert
Campbell-Savours, DaleEllis, Tom (Wrexham)Lambie, David
Carmichael, NeilEvans, Ioan (Aberdare)Lamborn, Harry
Carter-Jones, LewisEvans, John (Newton)Lamond, James
Clark, Dr David (South Shields)Ewing, HarryLeighton, Ronald
Cocks, Rt Hon Michael (Bristol S)Field, FrankLewis, Ron (Carlisle)
Cohen, StanleyFletcher, L. R. (Ilkeston)Lofthouse, Geoffrey
Conlan, BernardFletcher, Ted (Darlington)Lyons, Edward (Bradford West)
Cook, Robin F.Foster, DerekMabon, Rt Hon Dr J. Dickson
Cowans, HarryFoulkes, GeorgeMcCartney, Hugh
Craigen, J. M. (Glasgow, Maryhill)Fraser, John (Lambeth, Norwood)McGuire, Michael (Ince)
Cryer, BobFreeson, Rt Hon ReginaldMcKay, Allen (Penistone)
Cunliffe, LawrenceGilbert, Rt Hon Dr JohnMcKelvey, William
Cunningham, George (Islington S)Ginsburg, DavidMacKenzie, Rt Hon Gregor
Dalyell, TamGourlay, HarryMaclennan, Robert
Davies, Ifor (Gower)Graham, TedMcMahon, Andrew
Davis, Clinton (Hackney Central)Hamilton, James (Bothwell)McNamara, Kevin
Davis, Terry (B'rm'ham, Stechford)Hamilton, W. W. (Central Fife)Marshall, David (Gl'sgow, Shettles'n)
Dean, Joseph (Leeds West)Harrison, Rt Hon WalterMarshall, Jim (Leicester South)
Dempsey, JamesHaynes, FrankMason, Rt Hon Roy
Dewar, DonaldHeffer, Eric S.Maynard, Miss Joan
Dixon, DonaldHolland, Stuart (L'beth, Vauxhall)Mikardo, Ian
Dobson, FrankHome Robertson, JohnMillan, Rt Hon Bruce
Dormand, JackHomewood, WilliamMiller, Dr M. S. (East Kilbride)
Douglas, DickHooley, FrankMitchell, R. C. (Soton, Itchen)

hiding behind the argument of defective draftsmanship.

The Government should put forward their own propositions. The situation demands that the Government should act but the Minister has been so idle and inert over this problem—or too busy with the 150 amendments correcting his own mistakes—that he has missed this important issue altogether. In view of the totally unsatisfactory way in which the Government have dealt with this argument the Minister has earned our contempt for the way in which he has dealt with the matter and his dismissive attitude towards the New York court of appeal. There will be another obiter dicta dealing with that in due course.

The Minister totally ignores the experience of United States federal law, the Canadian experience and the New South Wales Securities Industry Act, all of which have dealt with these matters. Perhaps there were difficulties, but we tried to deal with them. The Government have chosen not to try at all. For that reason we believe that we are right in seeking to force a Division on this matter.

Question put:

The House divided: Ayes 140, Noes 194.

Morris, Rt Hon Charles (Openshaw)Robertson, GeorgeThomas, Jeffrey (Abertillery)
Morton, GeorgeRooker, J. W.Thomas, Dr Roger (Carmarthen)
Moyle, Rt Hon RolandRoss, Ernest (Dundee West)Wainwright, Edwin (Dearne Valley)
Oakes, Rt Hon GordonRoss, Stephen (Isle of Wight)Walker, Rt Hon Harold (Doncaster)
Orme, Rt Hon StanleySever, JohnWelsh, Michael
Palmer, ArthurSilkin, Rt Hon John (Deptford)White, Frank R. (Bury & Radcliffe)
Parker, JohnSilverman, JuliusWilliams, Rt Hon Alan (Swansea W)
Parry, RobertSmith, Cyril (Rochdale)Wilson, Rt Hon Sir Harold (Huyton)
Pavitt, LaurieSmith, Rt Hon J. (North Lanarkshire)Winnick, David
Penhaligon, DavidSoley, CliveWoodall, Alec
Powell, Raymond (Ogmore)Spearing, NigelWoolmer, Kenneth
Prescott, JohnSpriggs, LeslieYoung, David (Bolton East)
Race, RegStallard, A. W.
Rees, Rt Hon Merlyn (Leeds South)Steel, Rt Hon DavidTELLERS FOR THE AYES:
Richardson, JoStoddart, DavidMr. Donald Coleman and
Roberts, Ernest (Hackney North)Thomas, Dafydd (Merioneth)Mr. James Tinn.

NOES

Adley, RobertGoodhew, VictorMudd, David
Aitken, JonathanGoodlad, AlastairMurphy, Christopher
Alexander, RichardGorst, JohnMyles, David
Ancram, MichaelGow, IanNeale, Gerrard
Arnold, TomGower, Sir RaymondNeedham, Richard
Aspinwall, JackGray, HamishNelson, Anthony
Atkinson, David (B'mouth, East)Grieve, PercyNeubert, Michael
Baker, Nicholas (North Dorset)Griffiths, Peter (Portsmouth N)Newton, Tony
Benyon, Thomas (Abingdon)Gummer, John SelwynNormanton, Tom
Berry, Hon AnthonyHamilton, Hon Archie (Eps'm&Ew'll)Page, Rt Hon Sir R. Graham
Best, KeithHamilton, Michael (Salisbury)Page, Richard (SW Hertfordshire)
Bevan, David GilroyHampson, Dr KeithParkinson, Cecil
Biggs-Davison, JohnHaselhurst, AlanPatten, Christopher (Bath)
Blackburn, JohnHavers, Rt Hon Sir MichaelPattie, Geoffrey
Blaker, PeterHawkins, PaulPercival, Sir Ian
Body, RichardHeddle, JohnPorter, George
Bonsor, Sir NicholasHicks, RobertPowell, Rt Hon J. Enoch (S Down)
Boscawen, Hon RobertHiggins, Rt Hon Terence L.Price, David (Eastleigh)
Braine, Sir BernardHogg, Hon Douglas (Grantham)Proctor, K. Harvey
Bright, GrahamHooson, TomRenton, Tim
Brinton, TimHordern, PeterRhys Williams, Sir Brandon
Brocklebank-Fowler, ChristopherHowell, Ralph (North Norfolk)Ridsdale, Julian
Brotherton, MichaelHunt, David (Wirral)Rifkind, Malcolm
Brown, Michael (Brigg & Sc'thorpe)Hunt, John (Ravensbourne)Roberts, Michael (Cardiff NW)
Browne, John (Winchester)Hurd, Hon DouglasRoberts, Wyn (Conway)
Bruce-Gardyne, JohnJessel, TobyRossi, Hugh
Buchanan-Smith, Hon AlickJopling, Rt Hon MichaelSainsbury, Hon Timothy
Buck, AntonyKaberry, Sir DonaldSt. John-Stevas, Rt Hon Norman
Budgen, NickKellett-Bowman, Mrs ElaineShaw, Michael (Scarborough)
Bulmer, EsmondKimball, MarcusShepherd, Colin (Hereford)
Butler, Hon AdamKing, Rt Hon TomSilvester, Fred
Cadbury, JocelynKnight, Mrs JillSkeet, T. H. H.
Carlisle, John (Luton West)Knox, DavidSpeed, Keith
Chalker, Mrs LyndaLamont, NormanSpeller, Tony
Channon, PaulLang, IanSpicer, Jim (West Dorset)
Clark, Hon Alan (Plymouth, Sutton)Lawrence, IvanSpicer, Michael (S Worcestershire)
Clarke, Kenneth (Rushcliffe)Lawson, NigelSproat, Iain
Cockeram, EricLe Marchant, SpencerSquire, Robin
Cope, JohnLennox-Boyd, Hon MarkStainton, Keith
Costain, A. P.Lester, Jim (Beeston)Stanley, John
Cranborne, ViscountLloyd, Peter (Fareham)Stevens, Martin
Critchley, JulianLoveridge, JohnStewart, Ian (Hitchin)
Crouch, DavidLyell, NicholasStradling Thomas, J.
Dean, Paul (North Somerset)McCrindle, RobertTebbit, Norman
Dickens, GeoffreyMacfarlane, NeilThompson, Donald
Dorrell, StephenMacGregor, JohnThornton, Malcolm
Douglas-Hamilton, Lord JamesMacKay, John (Argyll)Townend, John (Bridlington)
Dover, DenshoreMarlow, TonyTrippier, David
Dunn, Robert (Dartford)Mates, MichaelVaughan, Dr Gerard
Dykes, HughMather, CarolWakeham, John
Eggar, TimothyMawby, RayWalker, Rt Hon Peter (Worcester)
Eyre, ReginaldMawhinney, Dr BrianWalker, Bill (Perth & E Perthshire)
Fairbairn, NicholasMellor, DavidWaller, Gary
Fairgrieve, RussellMeyer, Sir AnthonyWard, John
Faith, Mrs SheilaMiller, Hal (Bromsgrove & Redditch)Wells, Bowen (Hert'rd & Stev'nage)
Fenner, Mrs PeggyMills, Iain (Meriden)Wheeler, John
Finsberg, GeoffreyMiscampbell, NormanWickenden, Keith
Fisher, Sir NigelMitchell, David (Basingstoke)Wilkinson, John
Fletcher-Cooke, CharlesMoate, RogerWinterton, Nicholas
Fowler, Rt Hon NormanMolyneaux, JamesWolfson, Mark
Fraser, Peter (South Angus)Montgomery, FergusYoung, Sir George (Acton)
Fry, PeterMoore, JohnYounger, Rt Hon George
Gardner, Edward (South Fylde)Morgan, Geraint
Garel-Jones, TristanMorris, Michael (Northampton, Sth)TELLERS FOR THE NOES:
Gilmour, Rt Hon Sir IanMorrison, Hon Charles (Devizes)Mr. David Waddington and
Glyn, Dr AlanMorrison, Hon Peter (City of Chester)Mr. Peter Brooke.

Question accordingly negatived.