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No. 16, in page 59, line 31, in schedule 2, at end insert
Government amendments Nos. 17 and 18.
Mr. Mitchell: We now come to the guts of the Opposition's concerns about the Bill: investigations and the powers of investigators. I draw the attention of the House to amendments Nos. 1 and 20, in which we argue that the Secretary of State must have "good reason".
Clause 21 reformulates section 447 of the Companies Act 1985 and excludes the requirement under that section for the Secretary of State to act only if he thinks there is good reason to do so. The amendments propose alternative forms of words but which have the same intention: to maintain in section 447 an express requirement for the Secretary of State to act only where it appears to him or her that there is good reason to do so.
Amendment No. 1 adopts the form of words found in section 167(1) of the Financial Services and Markets Act 2000, which provides for the Financial Services Authority's power to appoint persons to carry out general investigations. Amendment No. 20 retains the form of words in section 447 of the 1985 Act. A similar amendment was proposed and defeated in the other place on 22 March and was proposed and debated in the Standing Committee on 16 September. I subsequently withdrew it, to give the House an opportunity of considering the proposal further today.
The Government's answer throughout has been doggedly to maintain that those words are superfluous and add nothing to the requirements imposed by general administrative law. In Committee, the Minister suggested further reasons for the Government's refusal to adopt such an amendment. First, she suggested that there is a thorough approach to vetting complaints that give rise to investigations under section 447 of the 1985 Act, which will not change if those words are omitted. Secondly, she suggested that the courts have never given any special meaning to the words, which she described as
"a somewhat antiquated expression with no transparent, obvious and precise meaning."
"could, over time, produce a result that we do not want to achieve by narrowing or widening the circumstances in which the power can be used." ."[Official Report, Standing Committee A, 16 September 2004; c. 89.]
I am sorry to tell the Minister that neither my colleagues nor I found those arguments remotely convincing. There are compelling answers to those points and strong, positive reasons to accept one or other of the amendments.
I challenge the Minister's assurance that the approach to vetting will not change if the words are omitted. That is dangerous speculation on her part. In fact, the thorough and admirable vetting procedures to which she referred that are carried out in practice by the Secretary of State's officials at the companies investigation branch of the Department of Trade and Industry have come about precisely because section 447 of the 1985 Act has hitherto contained the words.
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The officials who carry out the vetting procedures will have at the forefront of their minds at every stage these questions: "Is there good reason to take the step that I am contemplating? What is that good reason? How do I express it? Can I justify it if challenged?" That is why the vetting procedures have evolved in the way that they have. No one can assert with confidence that rigour will be maintained in the future, as it has been in the past, if those important words simply vanish from the lexicon of that section, new and challenging situations develop or budgetary constraints begin to bite on the Department's budget. The words are not surplus. The discipline imposed on officials by the inclusion of explicit words of limitation in a section under the authority of which they propose to act is a powerful, positive justification for adopting the amendment.
The criticism of the words "good reason" by the Minister as "antiquated" and lacking transparency or precise meaning was rather surprising. The same so-called antiquated and precise phrase has been incorporated in the parallel section 167 of Financial Services and Markets Act 2000legislation enacted by the Government in the past four years. Something that happened four years ago is surely not yet to be relegated to antiquity, even if four years certainly feels like a very long time under this Government. The words were included because they have a real context.
The Government have not suggested that developments in administrative law have now made redundant words that were, by necessary implication, considered essential and not superfluous in 2000. The Minister conceded on two occasions in CommitteeI draw her attention to columns 88 and 102that the Secretary of State will have to give sound reasons for using the powers. She is right: let the clause say so expressly to stand as a reminder and a check.
The Government argue that the words have not been judicially defined and may later be construed as unexpectedly to narrow or, indeed, widen the powers intended, but they are missing the bigger picture. It may be that the words have never been subjected to judicial interpretation because their plain and natural meaning is clear enough. For example, where wording that contains the notion of reasonableness has been considered, the courts have recognised the fact that what is or is not reasonable will depend on the facts in any case. It is plain beyond argument that a similar approach will attach to any consideration of what is or is not a good reason to act.
The Minister makes the criticism that the phrase is not precisely defined, but that dodges the real question that it is incumbent on the Government to introduce legislation that precisely defines the powers and discretions given to Ministers and their officials. Even without attempting to pre-empt any judicial interpretation, I suggest that the more obvious and more serious risk of unexpected and undesirable consequences of interpretation springs from the Government's refusal to incorporate the words suggested in the amendment. The reason is plain to see: the requirement for good reason to act appears in other closely analogous provisions in other Acts and, crucially, in similar provisions in the Companies Act 1985.
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Leaving such words out of proposed new section 447 of the Companies Act 1985 represents a great risk. The courts will be induced to conclude that Parliament's intention was for the provision to confer far wider executive power or discretion on the Secretary of State than that enjoyed under analogous provisions that are expressly constrained by the "good reason" requirement. If that is the Government's intention, let that be expressed, exposed to debate and set out in the Bill. The power should not be expanded on by stealth.
I shall cite the analogous provisions to which I referred. First, under the heading "Appointment of persons to carry out general investigations", section 167(1) of the Financial Services and Markets Act 2000as enacted by the Governmentwhich is the exact counterpart to section 447 of the Companies Act 1985, states:
"If it appears to the Authority or the Secretary of State . . . that there is good reason for doing so, the investigating authority may appoint one or more competent persons to conduct an investigation on its behalf".
"Where it appears to the Secretary of State that there is good reason to do so, he may appoint one or more competent inspectors".
"If it appears to the Secretary of State that there is good reason to investigate the ownership of any shares in or debentures of a company and that it is unnecessary to appoint inspectors for the purpose, he may require any person"
The Government seem to rely on general administrative law as the bedrock of the limitations on the Secretary of State's powers, but administrative law is a fluid discipline and the legislature has no control on its development. By leaving out the words "good reason", yet not inserting any other words of limitation, the Government are denying themselves and the legislature a voice in defining the scope of law. They are replacing bedrock with shifting sands, and more importantly they are failing to address the fundamental question of the intended effective limit on the Secretary of State's powers. It is worth remembering that if words are interpreted as narrowing the power that Parliament intends to confer, the remedy is in our own hands. However, if a power is conferred by statute that is far wider than that intended, it creates a licence for future abuse.
There is a further compelling and positive reason to include such words in new section 447. They would act as a signpost to not only officials, but a lay person or company director who was the object of the exercise of the powers. The corollary of the Government's position is that an onus will be placed on an individual either to have knowledge of, or to obtain legal advice on, the complex area of administrative law. It is right that legislation should be internally comprehensible to the man in the street as well as practitioners at the administrative Bar, so it would be unfair to pass legislation that would impose such a burden. Given that the Executive could subject companies and individuals to intrusive action, the Bill should plainly set out the Secretary of State's obligation to act for good reason.
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Amendments Nos. 12 and 15, which address relevant premises, characterise the amendments that I have tabled to clauses 23 and 24. Those clauses will insert new sections 453A, 453B and 453C in the 1985 Act, thus conferring on inspectors and investigators the entirely new power to require entry to, and to remain on, relevant premises. Relevant premises are defined in proposed new section 453A(3) as
"premises which the inspector or investigator believe are used (wholly or partly) for the purposes of the company's business."
The provision will broaden for the first time the powers of inspectors and investigators by permitting them to enter into and remain on domestic and residential premises. Section 448 of the 1985 Act provides that investigators and inspectors must obtain a warrant before they are able to enter any premises.
The amendments would require inspectors and investigators to get a warrant before entering and remaining on residential premises. Their purpose is to restrict the possible abuse of the broad and largely unfettered power of entry and to control its impact in situations in which domestic or family circumstances overlap with company activity. In reality, they would preserve the status quo for residential property without restricting the powers to enter and remain on separate company premises. A similar amendment was moved and debated in Committee. Regrettably, it was rejected by the Government. I hope to be more fortunate in attracting the Minister's support this time.
The matter is of real concern. Investigations pursuant to the powers conferred by section 447 of the 1985 Act are frequently targeted at small businesses. Such businesses often trade from, or have a registered office at, the director's home address, or they use domestic premises for storage if space at trading premises is constrained. No one disputes that there may be cases in which it will be necessary, in order not to frustrate the purposes of an investigation, to have access to premises that may be of mixed use. However, the power to enter into and to remain on company premises is highly intrusive. How much greater is the intrusion and how much more carefully must we tread if the power is to be operated in respect of domestic property, which means an individual's or a family's home?
As drafted, the Bill allows the Secretary of State to appoint an official, although she has no need to show good reason for doing so. That authorisation will be made as a matter of course at the beginning of every investigation, whether it is necessary or not. The official will be empowered to enter into commercial or domestic premises merely because he thinks that that will materially assist him. No mechanism requires him to explain why he has come to that conclusion.
The official can remain on the premises without limit of time so long as he continues to think in that way, although no one can know if and when he may change his mind or exceed his right to remain. He may be accompanied by one person or as many as he sees fit. Further, there is no requirement that there should be a lack of co-operation before the powers are exercisable, contrary to what the Minister appeared to understand in
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Committee. That is a chilling prospect and it would be an abdication of Parliament's function to protect the citizen to allow a Bill in this form to be passed without better restraints against abuse.
The Government were exhorted in Committee to consider the amendment in that context by no less than a distinguished former Labour Minister, the hon. Member for Stoke-on-Trent, Central (Mr. Fisher). He said:
"All these amendments say that Parliament must think carefully about the way that we word powers given to civil servants. Because the Minister has total confidence in her carefulness, reasonableness and intelligence, and in the carefulness, reasonableness and intelligence of her ministerial colleagues, she knows that she and they will not abuse these powers. But we always legislate not just for the Ministers who will introduce the powers, but for future Ministers, who often act in very different circumstances. Future Governments may have very different intentions and different pressures on them.
We all know from bitter experience in recent years that the thing that most undermines confidence in Parliament and most leads Parliament to take bad decisions is Ministers' sense that something has to be done in response to a particular crisis. In those circumstances, the hon. Gentleman's warnings"
"about the powers that are delegated to civil servants are very important."
"The hon. Gentleman"
"was careful to heap praise on the Minister and the Secretary of State for being reasonable people. He was genuine in that. These are reasonable Ministers and we can be confident that they will not allow their civil servants to abuse these powers. But I hope that between now and consideration on Report the Minister will consider the wording and perhaps devise some small but crucial amendments to some of these powers to ensure that we retain ministerial control over some powers in the Bill so that they cannot inadvertently be misused in different circumstances in the future."[Official Report, Standing Committee A, 16 September 2004; c. 10001.]
Those were not the words of Members of the Conservative Front Bench or, indeed, of the Liberal party, who would agree with them; they were the words of an experienced former Labour Minister and express succinctly and eloquently the powerful argument that we are trying to make.
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