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Enterprise Bill

Enterprise Bill

Column Number: 659

Standing Committee B

Tuesday 14 May 2002


[Mr. Nigel Beard in the Chair]

Enterprise Bill

4.30 pm


    That the Order of the Committee [16th April] relating to programming, as amended [1 May] be amended as follows:—

    for paragraphs (6) and (7) there is substituted—

    (6) the proceedings on Clause 239, Schedules 16 and 17, Clauses 240 and 241, Schedule 18, Clauses 242 to 245, Schedule 19, Clause 246, Schedules 20 and 21, Clauses 247 to 252, Schedule 22, Clauses 253 to 257, Schedule 23, Clauses 258 to 264, Schedule 24, Clauses 265 and 266, Schedules 25 and 26, Clauses 267 to 269, New Clauses, New Schedules and remaining proceedings on the Bill shall (so far as not previously concluded) be brought to a conclusion at 5 pm on Thursday 16th May.—[Mr. Pearson.]

Schedule 19, as amended, agreed to.

Clause 246 ordered to stand part of the Bill.

Schedule 20

Schedule 4A to Insolvency Act 1986

Mr. Mark Field (Cities of London and Westminster): I beg to move amendment No. 431, in page 286, line 13, after 'knew', insert

    'or ought to have known'.

The Chairman: With this we may take amendment No. 450, in

page 286, line 13, after 'debts', insert

    'or ought to have concluded that he was unable to pay his debts'.

Mr. Field: Schedule 20 refers to elements of section 246. Our concern is that there should be not merely a subjective, but an objective reasonableness test. That would tie in with the fairly well known wrongful trading provisions of section 214 of the Insolvency Act 1986. There should be some parallel between those provisions, which have an important part to play and form the basis of the post-discharge restrictions, and the schedule. If the current wording is maintained, there is a risk that a person who is bankrupt will be simply able to deny that he knew that he was unable to pay his debts, and if he could show that he was reasonable to hold that belief at the time, there would be no objective test of whether it was reasonable for him to do so.

I should be interested to know why the form of wording in the schedule was used, because there seem to be parallels between the sorts of test that should apply to post-discharge restrictions and those in the current legislation relating to wrongful trading. Is there any reason why there should be less of a burden on a bankrupt in that regard? I shall allow the Under-Secretary to have her say.

The Parliamentary Under-Secretary of State for Trade and Industry (Miss Melanie Johnson): My say will be brief, but I can help the hon. Gentleman. The amendments do not work well together as a pair. However, the sentiments behind each one are valid. I

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ask the hon. Gentleman to withdraw the amendment because I accept that his points are well made and I am happy to reconsider the matter to see whether we should table an appropriate amendment to give effect to his suggestion.

Mr. Field: On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Field: I beg to move amendment No. 522, in page 286, line 28, leave out from 'also' to end of line 29 and insert

    'in particular, consider whether the bankrupt had a bankruptcy order made against him at some time during the period of six years ending'.

The amendment is a relatively minor one. It would catch not only undischarged bankrupts but those against whom bankruptcy orders had been made, thereby introducing a stricter test. Will the Under-Secretary give us some guidance on the Government's position? They may be using a more certain test, but it does not provide the protection that we would want in the schedule.

Miss Johnson: I cannot help the hon. Gentleman to any great degree, as the amendment would require that the earlier bankruptcy must have commenced some time in the six-year period for the court to be able to take it into account. That would mean that unco-operative bankrupts could not have their earlier bankruptcy considered, as the order would have been made some time outside the six-year period, probably as a result of their unco-operative activity.

The amendment is undesirable. We want to reduce the stigma for bankrupts, including those who may have failed before, as long as there is not misconduct. However, the period in question should apply to all undischarged bankrupts and not restrict the measure to those made bankrupt during the period in question. Under the new provision, those who were previously bankrupt could have the earlier bankruptcy considered in bankruptcy restrictions order proceedings, when the previous bankruptcy was within seven years. If the discharge was suspended, that time could be longer.

It is right to include those who have not co-operated with the official receiver, but the amendment would rule them out of consideration if the bankruptcy order fell outside the six-year period. That is why we are resisting the amendment.

Mr. Field: That is not the intention of the amendment. The Under-Secretary gave the example of an unco-operative bankrupt, but the order would be ongoing and would be caught within the six-year timetable, even if the individual did not co-operate. On the basis that the amendment does not seem to have scintillated the rest of the Committee enough to persuade hon. Members to join the debate, I shall not try to continue our discussion. I hope that we have made our point and we may return to the issue at a later stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Field: I beg to move amendment No. 560, in page 287, leave out lines 11 to 14 and insert—

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    '5 (1) This paragraph applies to any person who—

    (a) is an undischarged bankrupt who is not subject to a bankruptcy restrictions order, or

    (b) is a former bankrupt in respect of whom there is a pending application for a bankruptcy restrictions order.'.

The Chairman: With this it will be convenient to discuss the following amendments: No. 561, in page 287, line 17, leave out 'the' and insert 'an'.

No. 562, in page 287, line 18, leave out 'will' and insert 'would'.

No. 563, in page 287, line 26, at end insert—

    '( ) where the order is made by virtue of sub-paragraph (1)(a), if more than twelve months elapses without an application for a bankruptcy order being made,'.

Mr. Field: The amendment was suggested by PricewaterhouseCoopers, the accountancy firm. The main point is made in the lead amendment, with the other three amendments running concurrently with it.

The amendment would allow the official receiver to be in the position to apply for an interim bankruptcy order in circumstances that he considered appropriate, to protect the public interest while he or she completed the investigation necessary to enable the official receiver to decide whether to apply for a bankruptcy order. The idea is that a little more time is effectively bought, and a stronger, slightly easier and more certain test is provided.

The matter is technical, and an accountancy body has advised us on it. One of our concerns about the schedule is that there will be insufficient opportunity for the protection of the public interest if, in a complicated bankruptcy, there is no opportunity to apply for an interim order when appropriate. There may be a delay in such a situation, which would result in the public interest not being protected.

Miss Johnson: The Bill provides that interim bankruptcy restrictions orders can be made only as a consequence of an application for a substantive BRO. The amendments seek to break the consequential link and provide for separate applications for substantive and interim BROs.

The amendments do not make sense, because paragraph 5(2) of the schedule, which deals with the application for the interim BROs, requires that

    ''there are prima facie grounds to suggest that the application for''

a substantive BRO would be successful, and that

    ''it is in the public interest to make''

that order. If one has to be in a position to establish a prima facie case—and the court is unlikely to grant an interim order otherwise—there is no reason why the application for a substantive BRO cannot be made at the same time. If such an application were not made, one would risk criticism for undue delay. That is why the provisions on the interim BROs are drafted as they are.

The purpose of the interim orders is to prevent delays in serious cases between the application for the BRO and the court hearing, during which time the bankrupt is otherwise subject to no restrictions;

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therefore, the public is not protected if he or she has been discharged from bankruptcy in the meantime. That is why I resist the amendment.

Mr. Field: Will the Under-Secretary guide us some more on the nature of the delays? We are all at one, in the sense that we effectively want to cover the vacuum that may occur between the official receiver making the application and a bankruptcy order being granted. We want to ensure full protection in that period. From what she said, I appreciate that a BRO will not be granted unless there is a strong prima facie case. Obviously, that is the basis on which an interim bankruptcy order would be granted in any event.

I hope that the Under-Secretary understands our concerns, which we raise on behalf of business interests that are worried that there may be a gap. Will she give us some comfort as to how the process will work and what the likely delays will be? On that basis, does she regard the protection that we are seeking as illusory or unlikely to be necessary in a practical sense?

Miss Johnson: The point of the interim BRO is precisely to ensure proper protection and that there is no gap, so I share the hon. Gentleman's concern that we need to make that work. That is why the provision is drafted as it is. The gap will arise because arrangements may need to be made before the court hearing. As for applying for an interim order, it would not be good to go to court to argue for an interim BRO without a prima facie case. But, as we have made provision for in the Bill, if a prima facie case can be made, it would be perfectly reasonable to go for a substantive BRO.

4.45 pm


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