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8.50 p.m.

Lord Wright of Richmond: My Lords, this has been an important and wide-ranging debate. I repeat what I said at the beginning; namely, I feel honoured at having been allowed to introduce it. I am extremely grateful to the many noble Lords who have spoken in this debate. We have had excellent speeches and two quite outstanding maiden speeches.

My colleague and fellow member of Chatham House, the noble Lord, Lord Beloff--indeed I think he can claim to be the senior member of Chatham House--paid me the implied compliment of having listened to every word I said, because he said he did not agree with a word of it! Perhaps I can return the compliment and say that I agreed very much with one point that he made. I hope it is proper for a Cross Bench Peer to make this remark. I share his disappointment that only five Members of the Government Benches felt able to take part in this debate. I think we would have benefited from more contributions from that source.

I would particularly like to thank and congratulate the Minister on the comprehensive, courteous and extremely skilful way in which she has summed up this debate. I thank her for her kind remarks to me. Although it is now--heavens!--nearly eight years since I retired from the Diplomatic Service I wish to express my warm appreciation for her kind and complimentary remarks and the reassurances that the Minister has given us about the Diplomatic Service and its resources.

As I have the Floor, I hope I may quickly raise one point which has really little to do with the European presidency, but it is a subject on which I have asked several questions over the past few years without getting very satisfactory replies. I wish to thank and congratulate the Minister on a Written Answer which she has given today to the noble Lord, Lord Wedderburn of Charlton, on the ratification of the additional protocols to the Geneva Conventions. I am glad to inform the House--if it is proper for me to do so--that the noble Baroness stated that,

I thank the noble Baroness for that.

I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.

        House adjourned at seven minutes before nine o'clock.

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Official Report of the Grand Committee on the Late Payment of Commercial Debts (Interest) Bill [H.L.]

Wednesday, 28th January 1998.

The Committee met at half-past three of the clock.

[The Deputy Chairman of Committees (Lord Ampthill) in the Chair.]

The Deputy Chairman of Committees (Lord Ampthill): Before I put the Question that the Title be postponed, it may be helpful to remind your Lordships of the procedure for today's Committee stage. Except in one important respect, our proceedings will be exactly as in a normal Committee of the Whole House. We shall go through the Bill clause by clause; noble Lords will speak standing; all noble Lords are free to attend and participate; and the proceedings will be recorded in Hansard.

The one difference is that the House has agreed that there shall be no Divisions in the Grand Committee. Any issue on which agreement cannot be reached should be considered again at the Report stage when, if necessary, a Division may be called. Unless, therefore, an amendment is likely to be agreed to, it should be withdrawn.

I should explain what will happen if there is a Division in the Chamber while we are sitting, an unlikely event this afternoon. This Committee will adjourn as soon as the Division bells are rung and will then resume after 10 minutes.

Title postponed.

Clause 1 [Statutory interest]:

The Earl of Home moved Amendment No. 1:

Page 1, line 9, at end insert--
("( ) Any liability to pay statutory interest shall give rise to a separate right of action which may be pursued irrespective of whether or not the qualifying debt to which it relates has been paid.").

The noble Earl said: In speaking to this first amendment I shall also speak to Amendments Nos. 21 and 22. Of all the clauses in this Bill this first clause is the one on which I find people feel most strongly. For most suppliers who are paid late it is vital to have the principal of the debt paid as quickly as possible, whereas any interest which may be forthcoming as a result of this Bill becoming law will, frankly, be regarded as a bonus.

Small suppliers will, I believe, be extremely reluctant to do anything to jeopardise the speedy receipt of the main debt, and will not take advantage of the right to statutory interest if they believe that, by claiming interest, the purchaser will be able to drag out the overall payment period while they argue over the amount of the interest. Many small companies will not have the resources, either human in terms of time and

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manpower or financial, to pursue claims themselves for statutory interest, and will therefore wish to assign or subcontract recovery of interest to others.

Learned lawyers may say that the current draft is unambiguous, but several bodies have made representations to me saying that it is not obvious. I do not believe that companies will necessarily interpret this phrase as giving them the right to assign, and I believe it is vital that this right is made crystal clear. I hope my proposed wording will clarify the point.

As far as Amendments Nos. 21 and 22 are concerned, they are further clarification of the earlier amendment. They make extra provision on the separation of the right of action on principal and interest. They are specifically addressed to ensuring that statutory interest is assignable, notwithstanding that the original qualifying debt no longer exists by virtue of having been paid. I beg to move.

Lord Meston: This amendment raises an important point, that of separating the right of action for the principal debt and for the interest. If there is any doubt about whether the Bill achieves that separation then this amendment, or something like it, should be accepted if only to remove that doubt completely. I believe I am right in saying that the original Law Commission report back in the 1980s felt that it was necessary to specify that there should be separate causes of action for the principal debt and for the interest. I have not had the opportunity to check that, or indeed whether it was reflected in the draft Bill attached to the Law Commission's report.

Be that as it may, it is important to have the matter beyond doubt, for a number of reasons: first, the question of assignment, to which the noble Earl, Lord Home, referred; secondly, the question of limitation periods and when they begin to run; and, thirdly, for the purposes of ascertaining whether a debt does or does not fall within a specific jurisdictional limit.

I am reinforced in my support for this amendment by the helpful paper produced by the Forum of Private Business, which makes the point that with any individual late paid debt the original debt will far outweigh any statutory interest due. Therefore, suppliers would be unlikely to place at risk the main debt to collect interest. The threat, however, of statutory interest being pursued at a later stage would, for a range of reasons, act as a powerful disincentive to late payment, without any action being taken to recover the interest. This would not be possible without clear separation of the two debts.

The Minister of State, Department of Trade and Industry (Lord Clinton-Davis): First of all, I welcome the noble Earl, Lord Home, to what I think is his first Committee stage, certainly in this place--I am not sure about the noble Lord, Lord Meston--and thank him for bringing forward this amendment by way of clarification.

We share the concern of both noble Lords that the Bill should provide a separate right of action for the interest. Indeed, that is a matter to which we have alluded in discussions which have taken place elsewhere.

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However, we have not sought to state this explicitly in the Bill as it is unnecessary to do so. The Bill creates a right to interest. Once that right has been created, then a supplier will be able to pursue an action in pursuit of the right. Such an action may be pursued regardless of whether the principal debt, from which the right arose, remains outstanding.

The noble Earl, Lord Home, may be aware that, technically, principal and interest form part of the same debt. Further, the right to statutory interest is dependent on the contract giving a right to the principal, to the extent that the contract sets the amount of the principal, and may also set the date when the debt should have been paid. Thus, one cannot separate the two amounts entirely.

There are other principles of general law which are at issue here and are important. When a dispute arises and the parties seek to and eventually settle it, it would be thoroughly unsatisfactory if they later sought to unpick that settlement. The settlement may have compromised the claim for interest. Moreover, if a party seeks to make a claim for just the principal or interest, and that is decided by the court, further action on the other claim may be barred by the principle known as res judicata (that is to say that the matter has already been finally adjudicated upon). If a party accepts the principal and gives an effective waiver of interest, then that is binding. All these principles have arisen because of the need for certainty and finality in the law, without which commerce would not be able to operate properly.

However, I assure the noble Lords that the Bill has been framed in such a way as to allow the claim for interest to be assigned, for example to a factor who can then claim the interest alone. This is underlined by the effect of Clause 13, with which, of course, we must read the issues to which the noble Earl has alluded in this amendment. If the debtor tenders the principal alone, the creditor can accept it on account and then pursue the interest separately--there is no doubt about that. This right is an important addition to the current law. That is why I think the Law Commission's report, to which the noble Lord, Lord Meston, adverted--which I think was produced in 1980--is not up to date with the present situation. I hope, therefore, that the noble Lords will accept our view that this amendment is not necessary.

As far as the amendments to Clause 13 are concerned, I understand the point of policy that the noble Earl is seeking to make. He wants to ensure that the separated interest may be assigned to a third party. I am not sure that the amendments will have this effect. I make no complaint about the drafting; it is an issue of principle. The noble Earl does not have the drafting facilities that governments have. It is a point which I made frequently when I was in opposition when I put forward amendments that were not sufficiently elegantly drafted--a rare enough occasion.

Having said that, we will have a look at the whole clause to ensure that the concerns which he and the noble Lord, Lord Meston, have addressed are properly met. I would like to consider that element of the matter

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because, as far as the first point is concerned, I hope that I have persuaded the noble Earl that the amendment which he has put forward is in fact redundant.

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