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Column 37obtaining any useful assurance or decision about the future of the company from first the receivers, Robson Rhodes, and latterly the liquidators, Arthur Andersen.
I will tell you how we did it, Mr. Deputy Speaker ; it was not necessarily the recommended course of action. Early in the dispute the work force occupied the factory. They were taken to court and a writ was served on them to vacate the premises. They did so and then set up a picket line on the gate.
The only thing that we had going for us in all those negotiations was that Arthur Andersen & Co. knew that if we did not reach some accommodation a picket would immediately have been mounted on the gate. That is not necessarily the best way to deal with matters, but if a group of workers who feel that they can take over the company are reduced to that, inevitably they will take such action. It should not be like that. Let me explain what I think should happen. For the benefit of the people who work for the company, whether they are managers or employees, and for the benefit of the economy, there should be a duty to try to achieve employee ownership or management ownership, or a combination of ownership, which may involve direct investment from entrepreneurs, before other options are considered.
I move on to my third example. After the experience with Pendletons, otherwise known at various times as Lyons Maid and Clarke Foods, I made an attempt, with two Conservative councillors, to do a rescue operation concerning a firm called J. De Roma. It was a short-lived attempt. After a couple of weeks, it drifted into sand. The first thing that happened was that, after a few weeks, the receiver sold off the blueprint for the product--a chill cabinet in which the National Blood Transfusion Service used to store blood--to a company in Warwickshire, so that there was no product left. All that that company had to do was to employ one of the engineers who knew the manufacturing process of the cabinets, and he bought the business. I think that that was grossly negligent on the part of the receiver. The whole business, complete with the work force and their skills, could have been sold if more time had been given. It may even have been bought by the work force. Yet all the receiver did was to sell off the blueprints, fairly cheaply. The purchasing company simply recruited one engineer and had a going concern.
There is much potential for legislation instructing receivers first to attempt to get something going on the basis of the existing business, or part of that business, involving the local management and employees. Perhaps a quarter of the 2,000 companies that go into receivership could be saved by such means. At the moment, I doubt that 1 per cent. are saved by those means. For the good of the economy, and of people who work in companies who find themselves in such a position, there is a strong case for an amendment to the Bill.
My hon. Friend the Member for Middlesbrough and I tried to table a new clause to the Bill, which would have succeeded in putting that duty into the Bill. Having consulted the Clerks, I realise that the scope of the Bill is perhaps too narrow for that new clause to have been accepted. However, I hope that in the near future--even perhaps as a result of a conversion today--the Minister will seriously consider my arguments. I have good cause for believing that the economy as a whole--never mind
Column 38those who work in firms that go into liquidation--could benefit from reorientation of the way in which receivers function.
Mr. Bell : With the leave of the House, may I say that I am grateful for the opportunity to sum up some of the points that have been made for the Minister and to follow up on the speech of my hon. Friend the Member for Knowsley, North (Mr. Howarth). My hon. Friend argued, from his own experience, the importance and significance of employee share ownership schemes and schemes of that nature, in which the worker in the place of work participates in addition to drawing a salary.
It has always been the policy of the Opposition to extend protection and participation for workers in their place of work. We thought years ago that that protection and participation would come through nationalisation, which was perceived to be the simplest route to common ownership. One takes over an industry and, once it belongs to the state, the workers obtain the protection and participation that they had sought for years. Tomorrow we shall sit down and privatise, or go through the final stages of, the privatisation of our coal mines. We shall see the consequences of 14 years of Conservative Government on nationalised industry and the fact that a new Labour Government will have to find new concepts of common ownership. I am grateful to my hon. Friend the Member for Knowsley, North for drawing the House's attention to that matter.
The speech by the hon. Member for Tynemouth (Mr. Trotter) was useful in that he had served on the Committee that discussed the previous Insolvency Bill. I should point out that Mr. Justice Harman's judgment was considered to be obiter dicta only before the court. The hon. Gentleman referred to the Committee proceedings of the House, but those have no status in law and a judge in a court of law could not rely on them.
Great play has been made of the question of an appeal to the House of Lords against a Court of Appeal judgment. I noticed that the Minister was careful to say "may" appeal because the Court of Appeal has refused leave of appeal to the House of Lords and it is a question whether the matter can be included in another motion elsewhere. It is not entirely clear that an appeal to the House of Lords is possible.
My hon. Friend the Member for Morley and Leeds, South (Mr. Gunnell) referred to RSF Doncaster, which was helpful. The hon. Member for Gordon (Mr. Bruce) referred to Leyland DAF. The case of Swan Hunter is dear to my heart, so I see the significance in pushing the Bill through quickly tonight. We have discussed the consequences of it not being retrospective. In the Paramount case alone, some £600,000 may fall on the receivers' shoulders if the law or its interpretation is not changed tonight. Other cases may be lined up, depending on the statute of limitations, whether it tolls and whether the facts are different in those cases. Nevertheless, because there will be a great deal of uncertainty throughout the profession of insolvency practitioners, we shall return to that matter in Committee. Some of the points that have been made show that we need a proper overhaul of the Insolvency Act 1986 and this may be a first shot at that. Although we wish the Bill well, we shall not leave the subject of insolvency to lie on the table, as it has done for so long. Obviously, the Minister is
Column 39aware of his Department's consultation paper and the fact that the consultation process comes to an end on 31 March. At that time, we shall seek some rapid conclusions from his Department.
Mr. Neil Hamilton : It would have been easy for Opposition Members to turn this into a general debate on the state of the economy as reflected in the problems of insolvent companies. I congratulate them on resisting the temptation to trivialise the issue so that we can concentrate on the serious points in the Bill.
Many points have been raised by the hon. Members for Middlesbrough (Mr. Bell), for Gordon (Mr. Bruce), for Morley and Leeds, South (Mr. Gunnell) and for Knowsley, North (Mr. Howarth) and by my hon. Friend the Member for Tynemouth (Mr. Trotter), who is, at this moment, meeting people who have come to lobby Parliament about Swan Hunter, which is important to his constituency. Most of the points have concentrated on retrospection, with which we shall deal shortly in Committee. I hope that it will be for the convenience of the House if I deal with those points in that context rather than repeat myself. Various points were made about phoenix companies. I appreciate the public concern about the phoenix problem but we must act in a way that reflects due process. It is far from being the case that all collapses involve a degree of moral turpitude on the part of company directors. That matter was dealt with in detail during the passage of what became the Insolvency Bill 1986, when the approach, which is often enjoined upon me, of seeking to prevent company directors from going back into business after their companies have collapsed was decisively rejected by the House. Such an approach would be a slur on the vast majority of company directors whose companies fail not for reasons of design on their part. Were we to prevent company directors from continuing in business because they had been involved in a company that had unfortunately failed through no fault of theirs, it would be not only a significant injustice towards those individuals but no good for the economy in general.
Nevertheless, some draconian powers are available to us under current company and insolvency legislation, which enables us to fasten on those who are guilty of misfeasance. Naturally, we must prove to the satisfaction of a court that they have acted in a way of which the law disapproves. Those matters are often difficult to prove and suspicions remain, which gives rise to the public's feeling of resentment that certain individuals can take advantage of what are regarded as loopholes in the law. I do not regard them as loopholes, although I hope that we shall always catch wrongdoers and punish them for their acts. We all know that, in the nature of things, it is impossible to do that in every case, hard as we try. We must ensure that the business environment precludes such activities. Where they take place none the less, we must ensure that we have the means of bringing them to book if possible. We must beware of throwing the baby out with the bath water. To get at one problem, we may create many others.
The hon. Member for Morley and Leeds, South asked about the meaning of adoption. I shall put my view on record so that he can read it in due course. If he then still has questions, I shall be pleased to try to deal with them.
Column 40Adoption of a contract means that a person procures the performance of a contract. In effect, therefore, the person refrains from repudiating it. In such circumstances, the person can be said to adopt the contract. A contract may be adopted by words--"express" adoption--or by conduct--"implied" adoption. The conduct constituting the adoption may be payment of wages, for example. It is impossible to be exhaustive and I do not wish to go into the full ramifications of the meaning of a term that might fall to be decided by a court in an individual case. I hope that my statement will help the hon. Gentleman.
The hon. Member for Middlesbrough was rather hard on me and my Department in respect of the length of time that we have taken to deal with this difficulty, which became acute only with the Court of Appeal's decision a short time ago. It is not true to say that the situation was identified back in 1987. It was addressed by the High Court in February 1987 in the Specialised Mouldings case. The result of the court's consideration seemed to provide a practical solution, if there was a problem at all. The problem with which we are dealing today is that the Court of Appeal took a different view. Hence, we are seeing a development of the law, which is why we are dealing with the problems in the Bill today.
I hope that I have dealt with the points that will not arise again in Committee. I am grateful to hon. Members of all parties for facilitating the passage of the Bill. I almost forgot the point made by the hon. Member for Knowsley, North. The one person whom he did not congratulate on the insolvencies in his constituency was himself. I know how hard he and the hon. Member for Knowsley, South (Mr. O'Hara), who is also present, have worked in the interests of their constituents, especially in the Pendletons case in which I was invited to participate. I am sorry that, in the event, it was not possible to save the jobs that they worked so hard to save. The argument about special treatment for employee share ownership schemes is not wholly open and shut. Although it is not relevant for the purposes of this Bill, the hon. Member for Middlesbrough asked me to give serious consideration to the argument. He knows that I shall always consider seriously any points that are put forward in good faith and schemes that might save companies that would otherwise fail. Particularly as the Minister with responsibility for the north-west and as the representative of a constituency not far from that of the hon. Gentleman, I am as interested as he is in saving jobs in the region and in facilitating improvement of the local economy. Thus, I shall be very happy to consider any points that the hon. Gentleman cares to raise in another context. As he accepted, it would not be appropriate, in the context of the Bill, to go too far down that avenue.
I am grateful to hon. Members on all sides for facilitating the speedy passage of the Bill and I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Bill committed to a Committee of the whole House.-- [Mr. Conway.] Bill immediately considered in Committee.
The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse) : With this, it will be convenient to discuss the following amendments : No. 2, in clause 2, page 3, line 16, leave out 15th March 1994' and insert 31st December 1986'.
No. 3, in clause 3, page 4, line 11, leave out 15th March 1994' and insert 31st December 1986'.
No. 4, in schedule 1, page 6, line 31, leave out 15th March 1994 and insert 31st December 1986'.
Mr. Bell : These are probing amendments. We wish to elicit from the Minister a further and more detailed response based upon the statement made by the President of the Board of Trade on 14 March, which set out his own concern, and the concerns set out today by the Minister. We have had some clarification of the Minister's thinking. My understanding of what he told the House is that there is no wish on the part of the Executive to overturn the decision of the Law Lords--a matter to which I have referred briefly. At present, there is no provision to allow an appeal against a decision of the Court of Appeal to be sent to the Law Lords.
It emerged from a short exchange with the hon. Member for Tynemouth (Mr. Trotter) during the Select Committee's transactions that there was some concern among Committee members as to the wording--which ended up being included in the Bill--of contracts of employment. The Minister--quite rightly, in his view--took me to task slightly on the question of whether the Government had known about this interpretation difficulty. In the analysis contained in "Halsbury's Laws of England" the interpretive note contains this clear statement :
"There is room for some legislative revision here."
The point is that it was clear to practitioners and to lawyers that there was something askance in that interpretation. The hon. Member for Tynemouth, with his knowledge of the specific subject, seemed to confirm that if there were a weakness that could lead to difficulties in a court of law, that fact would be sufficient to justify making the clause retrospective to 31 December 1986. We have shown the mischief of the law. It is not a question of interpretation of judgments from either the High Court or the Court of Appeal, which, in my view, delivered sound judgments on the facts before them. The misfortune arises in the terms of the law.
That was pointed out to the Government when they were looking at the decision in the case of Nicoll v. Cutts, concerning payment of workers by the administrative receiver. Section 44(1)(b) of the Insolvency Act 1986 was then proposed. The petitioners tried to persuade the Government not to go along that line as it was clearly a case of taking a cannon to shoot a mouse. It was not necessary to modify the entire law of the land on the basis of one judgment. As to Mr. Justice Harman's interpretive decision concerning the meaning of the law, administrative
Column 42receivers took the matter to him. For an analysis under section 35 of the Insolvency Act 1986, they went to court and asked for clarification. It is clear that at that time the law required clarification. It is clear that the intention of the legislation had not been realised. It was argued that, whatever may or may not have been the intention of the legislator, the wording in the Insolvency Act 1986 constituted no change in the existing law. Therefore, it was clear to the practitioners that the 1986 Act was supposed simply to embody what had already come about in the practice of the profession. Since the passage of the 1986 Act, we have seen the receivers' letter--approved by Mr. Justice Harman--to the work force simply washing their hands of the employment contract and not adopting it. In an entirely non-partisan spirit, we say that the law contained something that needed to be rectified. We are simply trying to amend the law in the light of decisions by the High Court and of the Court of Appeal. Our view is that the defect lies at the heart of the 1986 Act and that there should therefore be retrospection. The power that makes the House of Commons sovereign is its ability to pass retrospective legislation. It would certainly be wrong to pass retrospective legislation of a political nature, but this is not a political matter. That being the case, I submit that the Government should accept the amendment.
Mr. Malcolm Bruce : I was moved to table the amendment in conjunction with the hon. Members for Middlesbrough (Mr. Bell) and for Tynemouth (Mr. Trotter) partly by something that I read in The Independent this morning and a consequential telephone call I made to the Confederation of British Industry. I was also prompted by a question that the hon. Member for Elmet (Mr. Batiste) put to the President of the Board of Trade following the right hon. Gentleman's statement last Monday. The relevant remarks may be found in column 618 of Hansard . The President referred to the clear problem that the Paramount Airways decision raised in relation to all the cases of the past seven years. The amendment would eliminate that problem by making it clear from the outset that the practice established in the Specialised Mouldings case was the intention of the law and that that was the practice that would be the test of any disputes that might subsequently arise.
As the situation stands at the moment, there is clear concern. Howard Davies of the Confederation of British Industry says that, in his view, accountancy firms could face claims of up to £1 billion, even allowing for the Bill going through all its stages in both Houses of Parliament within the next two days. That is a substantial figure for claims for which, as things stand, the legislation does not appear to provide a solution. It is not surprising that Mr. Davies says that amendments such as the one that we are proposing would deal with the problem in a fairly straightforward way. I should like to make it clear that we are all gravely concerned about retrospective legislation. Other members of my party and I have often railed against Governments who have attempted such legislation. It is not something to be done lightly. The hon. Member for Middlesbrough said that this was a probing amendment, but I hope that the Minister realises that an important point is at issue here, and one that needs dealing with.
The difference between the Bill and contentious retrospective legislation is that this does not present us with serious practical problems. If the amendment were
Column 43incorporated, that would be as much as to say that the practice adopted by the professionals as a result of the Specialised Mouldings ruling has in effect been the state of the law since that case--in which case, all claims that might arise as a result of the Paramount Airways decision would fall, and no one would waste time making them.
The hon. Member for Middlesbrough, who knows more about these matters than I do, has already said that the avenue of going to the House of Lords may not be open in this case, although it is being referred to as a possibility. Even if it is opened up, it may not solve the problem. It will leave great uncertainty lingering over the profession for many months to come.
The problem cannot be shrugged off. Although the Minister has been clearly told that we do not intend to push the amendment, I hope that he will recognise that the issue is a live one. I am reliably advised that it will also be raised in another place, probably by Lord Reay. Everyone dealing with the matter is looking for a clear statement. One of the problems appears to be that the Paramount Airways ruling, relating as it did to what seemed an acceptable practice, has been deemed a sham : it is being ignored. Unless an administrator or receiver dismisses the work force and then re-employs them on new contracts within 14 days, he can be held liable for all previous contractual commitments, and 14 days is often far too short a time to make such a decision.
If the Court of Appeal ruling in the case of Paramount Airways is correct, that implies that there was something wrong with the law in the first place. An amendment such as this would effectively deal with that problem by admitting that the law was badly drafted, but that the intention and practice have been clear until the latest ruling. We should now be able to put that to rest. The House has now made it abundantly clear how it wants such matters to be conducted in future and how they should have been conducted in the past. Thereupon £1 billion in claims, and all the uncertainty and threats of liquidation that go with them, can be put to one side.
I do not envy the Minister his task. I know that any statement that he may make in response to a debate such as this cannot of itself resolve the issue. Nevertheless, I hope that he will recognise the fact that people want clear guidance.
Mr. Neil Hamilton : It is true that the Court of Appeal, in the case of Paramount Airways, has refused leave to appeal to the House of Lords, but it is always possible for the House of Lords, of its own motion, to allow an appeal. I have no idea whether there will be an appeal in this case ; it therefore remains possible that the House of Lords will take a view different from the Court of Appeal's. It would be wrong to speculate on the outcome, and I do not propose to do so.
I understand that these are serious issues, and I assure Opposition Members who have spoken that I appreciate their arguments. I have not yet had the chance to read the article in The Independent to which the hon. Member for Gordon (Mr. Bruce) referred, as I have been working all day and have had little chance to catch up with the news--but I shall certainly read it and give more thought to the arguments in it.
Column 44I have always been a strident critic of retrospective legislation. On more than one occasion, in fact, I have made common cause with the Liberal party in this respect, not least in Finance Bill Committees, where the hon. Member for Middlesbrough (Mr. Bell) may even have supported me once in opposing retrospective tax legislation-- before I joined the Government, of course.
This argument has always interested me. As hon. Members have said, the point came up during questions following the statement by my right hon. Friend the President last Monday. The hon. Member for Gordon referred to a question by my hon. Friend the Member for Elmet (Mr. Batiste). There is a distinction that can be drawn between retrospective legislation and the impact of decisions in the courts. My hon. Friend the Member for Elmet asked my right hon. Friend whether he agreed that one of the problems with judge-made law was that it is retrospective. Now, constitutional purists will say that judge-made law is not retrospective because judges are only declaring a position as it has always been, even though the question has not been tested before.
In a sense, that is what we are dealing with today. It is likely that, following the Specialised Mouldings case of seven years ago, matters remained open to argument. The fact is that that case was on application for directions from the courts, so it was not speculating on the legal position in a way that could give rise to a precedent on which practitioners could then rely. Consequently, if there has been any doubt in the minds of practitioners, it has been because the law has not been authoritatively declared before. That in turn is qualitatively different from changing the law to give it an effect different from the one it has always been held to have.
In this legislation we are asked--I invite the House--to change the law for the future from that which the judges have now declared it to be, subject to an appeal to the House of Lords. My right hon. Friend clearly said, in answer to a number of interrogators last Monday, that we were not seeking to change the law retrospectively. To the best of my recollection, when the hon. Member for Livingston (Mr. Cook) spoke on Monday, he implied that he would oppose the retrospective application of this Bill, because he raised the case of the Paramount workers themselves. Although he did not explicitly state why he had done so, I took his meaning to be that he did not want us to change the law retrospectively in such a way as to disadvantage those who might otherwise have claims. I may have misunderstood him ; perhaps this is another ambiguity which has been introduced into our proceedings and which needs to be resolved. Perhaps the hon. Member for Middlesbrough can resolve it. We must recognise the fact that if we change the law with retrospective effect, we will change the rights and obligations of certain individuals. Some will benefit, others will be disadvantaged. It is a difficult balance to strike. My own prejudice is against retrospection in legislation on constitutional grounds, which, I am sure, will appeal to the hon. Member for Gordon.
In general, I do not think it would be right retrospectively to affect entitlements acquired before 15 March, the day after the President's statement last week, so each case will have to be considered by receivers on the facts. That is not to say that I do not recognise the genuine fears expressed by Opposition Members in respect of claims that might arise for closures during the period 1986 to 1994. It is obvious that there must be some risk of
Column 45claims, although it is difficult to say how many, and for how much. But we must recognise that many businesses were saved, with the result that employees continued with re-emerging businesses. It is unlikely that claims will arise from those cases, although there are some spectacular claims in this morning's newspapers, as the hon. Member for Gordon said. Those cases will have to be dealt with on the facts, and it would be wrong of me to speculate about them. One always has to walk a tightrope in such cases. One appreciates that those who might be disadvantaged as a result of changing the law with retrospective effect will be just as loud in their protestations as those inviting us to make the retrospective changes. One cannot decide what is the right thing to do simply by counting how much money is involved on each side and favouring those who have the greater claim. No one would accept that that would be a sensible way to proceed. All I can do this afternoon is to seek refuge in the forceful argument that every time we introduce retrospective legislation, and therefore disturb the relationship that the courts have declared exists between parties, we make it easier the next time that we are invited or tempted to introduce it. But we should do it sparingly.
The hon. Member for Middlesbrough (Mr. Bell) referred to the Burmah Oil case. I well remember it from my constitutional law lectures many years ago. It resulted in the War Damage Act 1965. To its shame, the Conservative party, which was then in opposition, did not vote against or oppose the Act, although some hon. Members--among whom I would have been counted had I been here in those days--voted against the Bill, which was a pernicious measure. It disturbed the rights of individuals as declared, not by the Court of Appeal, but by the House of Lords, so there was no prospect of appeal. I imagine that the Act was passed principally at the behest of the Treasury, which otherwise would have had substantial claims laid at its door.
Although I am a great believer in constraining public expenditure, such constraint is not tolerable if it causes injustice to individuals, particularly if that injustice arises in circumstances that could not be foreseen.
The Burmah Oil case is not an inspiring example to justify retrospective legislation. I recognise that there is an argument for retrospection. I do not claim that there is is an open-and-shut or a black-and-white case. Ultimately, we should decide on the basis of the balance of advantage. So far, I am not persuaded that the arguments are overwhelming. It is always easy, on the basis of speculative articles in newspapers, to conjure demons that are not there or to exaggerate their importance.
Inevitably, as no one can be sure what the position is, we are dealing with speculative matters. If it appears that there is a serious problem, in this case or any other, the Government--being flexible and open to reasoned argument, as I am in particular--are prepared to consider it. I am not yet persuaded that there is a case to answer, but I shall always listen to those who feel that I am wrong.
As the hon. Member for Gordon said, the matter may be discussed again in another place. I have not yet been translated to that place, so I shall not participate in that debate. I am grateful for the presence of my right hon. Friend the President of the Board of Trade, although it is intimidating to have noticed him only at this stage. I am sure that all hon. Members present would like to congratulate him on the celebration of his birthday today.
Column 46I hope that I have said enough to convince hon. Members that it would not be right at this moment to apply the Bill's provision retrospectively because we could not be certain who might benefit and who might be disadvantaged. Unless we could decide that with some precision, it would not be correct for us to apply the legislation retrospectively.
Mr. Bell : I am grateful to the Minister for giving us a greater in- depth insight into the thinking of the Ministry than we had during the Second Reading debate. That is understandable because he knew that the Bill would be going into Committee.
I am grateful to him for reminding me of the words of my hon. Friend the Member for Livingston (Mr. Cook) on 14 March, in column 616 of Hansard . He was putting a specific question to the President of the Board of Trade on the legal rights of Paramount Airways employees, who were the subject of the Court of Appeal decision. He sought an assurance that others who had benefited from receivership would not see those benefits diminish. That clarifies my hon. Friend's position. We tabled a probing amendment to elicit a response from the Minister, which we have had.
In his comments on Burmah Oil, the Minister showed his free-market thinking. As he and I know, since we were probably studying at the same time, in 1964 the Government had a majority of four. Notwithstanding that majority, the House reversed the Law Lords decision on Burmah Oil. That decision shows that the House felt that a clear public interest was involved, but things have moved on since then.
The Minister told us--this is my interpretation--that the Court of Appeal decision is not a retrospective judgment, but one that is effective from the time that it was made. It is not retrospective or retroactive. Therefore, the size of claims that are being touted--I say that in the friendliest sense--in today's newspapers are not likely to occur. In any event, the decision in each case will depend on the facts of that case and on the statute of limitations' tolling. Dean Inge said many years ago :
"I have had a great many problems, most of which never happened". With that in mind, I shall not move amendments Nos. 2, 3 and 4 and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn .
Question proposed, That the clause stand part of the Bill.
"in respect of services rendered wholly or partly after the adoption of the contract."
Why are the words "or partly" included ? What would be the effect of that section if those words were not present ? New subsection (8) relates to qualifying liability. Clause 2 inserts subsection (2B) into section 44 of the Act and clause 3 amends section 57 of the Act by inserting a new subsection (2B). There seem to be differences in the wording used in lines 24 and 35 and in the new subsection
Column 47(2B). Does the Minister have any explanation for the differences, given that all the clauses are designed to do the same thing ?
Mr. Gunnell : Compare page 2, line 8 of the Bill with line 30 in clause 2(2). The wording is different. Technical practitioners want to know whether there is any significance in the difference in wording in respect of the qualifying liability and its extent. There is a difference, which technicians do not quite understand. I thought that the Minister might be able to put them right.
Mr. Hamilton : I think that it is not only the technicians who do not understand. I am afraid that I am not able, off the top of my head, to answer the hon. Gentleman's latter point, although there does not appear to be a discrepancy in the meaning of the words in clause 1(8),
"so much of any qualifying liability"
and the words in clause 2 (2),
"to the extent of any qualifying liability".
I shall certainly take advice from my lawyers and I will write to the hon. Gentleman to ensure that the matter is put beyond doubt. The hon. Gentleman also asked about subsection (6)(b), and the words
"in respect of services rendered wholly or partly after the adoption of the contract."
I do not think that there is any ambiguity or difficulty in that wording. The new section 19(7) of the amended Act defines a qualifying liability as
"a liability to pay . . . wages or salary",
or pension contribution, in respect of services rendered by the employee, whether
"wholly or partly after the adoption of the contract."
Accordingly, any liabilities arising under a contract of employment that do not fall within that description will rank as unsecured claims against the company. The provision is included simply for purposes of completeness : part performance of a contract in itself gives rise to a liability, and the drafting of the legislation must reflect that.
Employees may well be employed for only part of a period of receivership, rather than the whole period. The wording would aptly cover those circumstances as well.
I hope that I have been able to answer the hon. Gentleman's questions. If not--ah, I have been handed a piece of paper : the seventh cavalry has arrived. I am told that there is no difference in substance between the new section 19(8) and the new section 44(2B), although they are cast in slightly different terms for technical reasons. I shall ask what those technical reasons are, and whether there is any justification for them ; and I shall ensure that the hon. Gentleman is informed of the result of my inquiries.
Question put and agreed to.
Clause 1 ordered to stand part of the Bill.
Clauses 2 to 5 ordered to stand part of the Bill.
(1) Section 37 of the Insolvency Act 1986 (personal liability of receiver or manager appointed under powers contained in an instrument for certain contracts) shall be amended as provided by sub-sections (2) and (3) below.
(2) In sub-section (1)(a) (liability for contracts of employment adopted by him in performance of his functions) after "provides) and" there shall be inserted ", to the extent of any qualifying liability, ".
(3) After sub-section (2) there shall be inserted
"(2A) for the purposes of sub-section (1)(a), a liability under a contract of employment is a qualifying liability if
(a) it is a liability to pay a sum by way of wages or salary or contribution to an occupational pension scheme,
(b) it is incurred while the receiver or manager is in office, and (c) it is in respect of services rendered wholly or partly after the adoption of the contract.
(2B) Where a sum is payable in respect of a liability which is a qualifying liability for the purposes of sub-section (1)(a) is payable in respect of services rendered partly before and partly after the adoption of the contract, liability under sub-section (1)(a) shall only extend to so much of the sum as is payable in respect of services rendered after the adoption of the contract. (2C) For the purposes of sub-section (2A) and (2B)
(a) Wages or salary payable in respect of the period of holiday or absence from work through sickness or other good cause are deemed to be wages or (as the case may be) salary in respect of services rendered in that period, and
(b) A sum payable in lieu of holidays is deemed to be wages (or as the case may be) salary in respect of services rendered in the period by reference to which the holiday entitlement arose.
(2D) In sub-section (2C)(a), the reference to wages or salary payable in respect of a period of holiday includes any sums which, if they had been paid, would have been treated for the purposes of the enactments relating to social security as earnings in respect of that period.".
(4) This section shall have effect in relation to contracts of employment adopted on or after the 15th March 1994.'-- [Mr. Malcolm Bruce.]
Brought up, and read the First time.