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30 Oct 2002 : Column 951—continued

Mr. Hoban: My right hon. Friend the Member for East Yorkshire (Mr. Knight) suggested that, under Lords amendment No. 241, a belligerent creditor could put pressure on an administrator to settle his debt early. However, would not Lords amendment No. 242 provide

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a means by which a creditor could become an irritant to a liquidator? Could not a creditor start to make noises about making claims to the court, saying that the administrator was not performing his functions as quickly or as efficiently as reasonably practicable? So there could be opportunities for the creditor and the administrator to play off against each other to reach a good deal.

Mr. Djanogly: I thank my hon. Friend for his worthwhile comments. The instances could vary, and it would be most helpful if the Minister could provide an explanation. Other hon. Members and I raised concerns in Committee relating to the ability to question the administration costs that could be involved.

Mr. Tony McWalter (Hemel Hempstead): It is as though we are back in Committee talking about all the problems that might arise with lousy administrators. Does the hon. Gentleman agree that the whole object is to try to ensure that other companies are not pulled down when a company goes bust? That should not happen unnecessarily if the administrator has the power to make such judgments.

Mr. Djanogly: The point of administration is that the company has the best possible chance of survival. The administrator will come in, and he has powers to let staff go and to run the company in place of the directors. However, when he has been appointed, the company is very often at his mercy in cost terms.

It is interesting that most administrations end in liquidation. The Bill may change that—that was one of the purposes of the Government's changing the administration process—but one of the main reasons why companies are finally forced into liquidation is often that, once administrators are involved, they are very expensive and that the money ends up in their pockets instead of going to the creditors.

Mr. McWalter: I obviously did not make myself clear. I was talking not about companies in administration but about other companies that want administrators to carry out their jobs in such a way as to rescue them from the difficulties that they may face if the first company goes under completely. That was the point that I was trying to make.

Mr. Djanogly: The hon. Gentleman makes a fair point in so far as the implications of an administration may be that the company continues to trade, so its creditors will benefit to the extent that they will not be pushed under by the fact that the first company does not survive, although that is not always the case in practice.

8.45 pm

Mr. Greg Knight: The hon. Member for Hemel Hempstead (Mr. McWalter) has made a telling point. We should have concerns not only for other companies that may be pulled down but for other small businesses that are not incorporated, such as the sole trader or the man who runs a corner shop and who may lose his livelihood as a result of these provisions. Lords amendment No. 242, for example, states:

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Is there not a case for saying that anyone aggrieved in this process may apply—for example, someone who is not a creditor or a member of a company but an unsecured creditor who may lose his business? Those are serious matters.

Mr. Djanogly: Indeed they are, and I thank my right hon. Friend for making that point. The situation is serious, and, to that extent, I would be most appreciative if the Minister could reply to our points.

Miss Melanie Johnson: I am enormously grateful to Opposition Members for their questions on these matters.

First, I want to respond to the question asked by the right hon. Member for East Yorkshire (Mr. Knight). Lords amendment No. 161, to which he referred, was brought forward by his noble Friends in another place in response to the debate. I am not sure how his paranoia is progressing—I think he described himself as paranoid, or used words to that effect—and I do not know whether telling him that his noble Friends were responsible for the amendment will help or hinder his condition, but I offer that as a reassuring titbit.

Mr. Knight: I am grateful to the Minister. I have never described myself as paranoiac—I think that I said that I was suspicious by nature, which is slightly different. My party colleagues in another place have made several improvements to the Bill. The context of my question to the Minister was whether those changes went far enough. Is she satisfied that Lords amendment No. 161 contains sufficient safeguards to prevent the sort of harm that I fear?

Miss Johnson: I think I entirely understood the right hon. Gentleman's remarks, and I note that I should have described him as suspicious by nature. To reassure him, only the court can disapply the prescribed part. In response to his point about so-called fat-cat liquidators, the court will be able to consider whether the office holder fees are fair and reasonable. The office holder will have to make the case to the court that it should make the order sought. It will therefore be for the court to consider the reasonableness of what is being laid before it. I hope that that reassures even a right hon. Gentleman of suspicious mind.

On the points made by the hon. Member for Cities of London and Westminster (Mr. Field), I reiterate our thanks to the City of London Law Society, particularly in relation to Lords amendments Nos. 162 and 163, and, no doubt, in relation to other work that it did on improving various aspects of the Bill. I hope that our thanks will be passed on. On Crown preference and the issues that he raised in relation to the football sector and related difficulties, the revenue departments have assured us that, in pursuing outstanding debts after abolition of preference, they will continue to offer help and support to vulnerable businesses facing genuine temporary difficulties. That includes support for business rescues via voluntary arrangements and for companies in administration. It must be remembered that the Crown Departments will not lose out

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altogether, because they will benefit from money becoming available to all other creditors. The provision covers the issues that the hon. Gentleman raised.

Mr. Hoban: The Minister has partly reassured Conservative Members who expressed concerns about early triggering. She referred to formal voluntary liquidation and administration, but I am particularly concerned about the informal arrangements that the Crown Departments might reach with a football club or an IT company. What guidance have they issued to show that they will continue to be as sympathetic to businesses as they were before the abolition of Crown preference?

Miss Johnson: I do not have any guidance in front of me, but I have placed on record the fact that we have been assured about the way in which the Crown Departments will deal with such matters. I hope that the House will accept that assurance.

The hon. Member for Huntingdon (Mr. Djanogly) asked about time scales and the six-month extension. This part of the Bill was subject to consultation following the Lords Committee, and the amendments were tabled to reflect the outcome of those discussions.

Mr. Djanogly: Will the Minister give the House an explanation of the outcome of those consultations?

Miss Johnson: I cannot respond in detail to that point, but I shall see what I can do to deal with the matter.

On the point about belligerent creditors, simple belligerence will not allow the administrator to pay. The payment must assist the purpose of administration. For example, it could be used to pay the supplier of something that the administrator could not obtain from any other supplier. The administrator must believe that payments will achieve the purposes of administration.

Mr. Knight: The Minister has been generous in giving way, and I appreciate that. I am heartened by what she has just said. Is she arguing that an administrator or liquidator could not say that time taken up corresponding with a vexatious unsecured creditor was not assisting the administration and that to pay that person off would assist the process? Does she confirm unequivocally that the administrator or liquidator could not use that as a reason?

Miss Johnson: It is difficult to comment without knowledge of individual cases. The right hon. Gentleman seeks an assurance in relation not to the Bill but to the judgments taken on individual cases by those qualified to interpret or discharge the provisions in the Bill.

To return to the point made by the hon. Member for Huntingdon, the outcome of the consultation is reflected in the time scales as amended. I hope that that point meets his concerns, and that the House will agree to the amendments.

Lords amendment agreed to.

Lords amendments Nos. 162 to 165 agreed to.

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Clause 256

Repeal of Certain Bankruptcy Offences

Lords amendment: No. 166, page 180, line 29, after Xby" insert Xwritten"

Miss Melanie Johnson: I beg to move, That this House agrees with the Lords in the said amendment.

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