Previous Section | Back to Table of Contents | Lords Hansard Home Page |
Lord McIntosh of Haringey: We are now into quite a large group which includes the issues that I referred to briefly in passing about who is responsible for deciding whether particular objectives are reasonably practicable or not.
I deal with the amendments in this group in turn. Amendment No. 263, which the noble Lord, Lord Freeman, has just moved, would insert a new objective so that if rescuing the company was not reasonably practicable, next down the hierarchy would be to
rescue the whole or part of any of its undertaking. Rescuing businesses is exactly the kind of outcome that the second objective is already intended to recover. If it is not reasonably practicable to rescue the company, selling the constituent businesses as going concerns will almost always be the next best thing. I hope that that will reassure the noble Lord, Lord Freeman, that the effect of the provision as drafted will be to cover and give priority to business rescues, as he intends.I should like to take away for consideration Amendments Nos. 264 to 268. The new purpose for administration has a hierarchy of objectives, as the noble Lord, Lord Freeman said, and choices within that hierarchy are governed by the test of what is "reasonably practicable". The amendments would make it clear that it is for the administrator to decide whether or not a particular objective is reasonably practicable. I agree that that is what should happen in practice. The administrator is the person on the ground who is best placed to judge whether or not a particular objective is reasonably practicable, in the light of his experience and professional judgment.
We think that, as it stands, that is how the provision would work. It is not the practice of the courts to second-guess the commercial judgment of administrators in such cases, and we would not expect the provisions to be interpreted in that way. But I have listened to the concerns expressed, and I think that it would be helpful if we reconsidered the Bill's drafting to make our intentions clear. I intend to table an amendment on Report to make it clear that the test for moving from one objective to the next will be whether or not the administrator thinks it is reasonably practicablethat is, it will be for the administrator to reach a conclusion as to whether or not the objectives are reasonably practicable, taking into account all the circumstances of the particular case of which he or she is aware at the time.
Amendments Nos. 329A, 329B, 329C, 329D, 331A, 331B, 331C and 358A would make decisions by the office-holder subject to the test of what he "reasonably believes" rather than what he "thinks". That is a part of parliamentary counsel's drafting that we should be wary of questioning. The present wording would mean that if the administrator's view were then to be tested, it would be subject to a "rationality" testthat is, his decisions would be subject to successful challenge if it could be shown that no reasonable administrator would have acted in such a way in the particular circumstances of a case.
As I said, we do not think that the courts should or will second-guess the administrator's professional or commercial judgment in exercising his or her duties. The administrator is best placed to determine what is appropriate. Again, that is without prejudice to the rights under paragraph 74 of creditors or members to challenge the administrator's decision where that decision has unfairly prejudiced his or her interests. That is why we prefer our wording to that proposed in the amendments.
Having expressed my sympathy for Amendments Nos. 264 to 268, I hope that Amendment No. 263 will not be pressed.
Lord Hunt of Wirral: I am grateful to my noble friend Lord Freeman for having moved Amendment No. 263 and spoken to this group of amendments. I am equally pleased that the Minister has agreed to reconsider. It is so important not to allow scope for vexatious actions by parties who with hindsight take a view that the administrator ought to have taken a different course of action.
However, I hope that the Minister will reconsider the draftsman's wording of "thinks" rather than "reasonably believes". I leave him with the thought that an objective rather than a subjective test is a better way forward. He has agreed to ponder, although he is still reluctant to change the present wording. However, I thank him very much for the manner in which he has approached this group of amendments, which I am sure will result in a better outcome than would otherwise have been the case.
Lord Sharman: I add my commendations to the Minister on the way in which he has approached the matter. It is wholly right that we should consider the matter. I endorse what the noble Lord, Lord Hunt, said about changing the word "thinks", to "reasonably believes". I, too, believe that a positive rather than a negative construction is required.
Lord Freeman: I am also grateful to the Minister and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 264 to 268 not moved.]
Lord Hunt of Wirral moved Amendment No. 269:
The noble Lord said: I should have thought that it is necessary to try to keep to a clear statutory definition, but it will be interesting to hear from the Minister why he believes that the provision needs to be as wide as drafted. I beg to move.
Lord Sharman: We support the amendment. The important thing is that we maintain both the balance sheet and cash flow aspects of the definition of debt. All that the amendment would do is bring the provision into line with the relevant sections of the Insolvency Act 1986.
Lord McIntosh of Haringey: I agree entirely with those arguments, but the amendment is unnecessary because on page 287, paragraph 111(1) of Schedule 16 already provides:
Lord Hunt of Wirral: I am grateful to the Minister for pointing out that I was trying to remove any doubt
that that was the case. I should now like to ponder his emphatic and robust response and, in the circumstances, I beg leave to withdraw the amendment.Amendment, by leave, withdrawn.
Lord Hunt of Wirral moved Amendment No. 270:
The noble Lord said: I rise to move Amendment No. 270, with which are grouped Amendments Nos. 276 and 287. Amendment No. 270 was suggested by the Law Society. It would require applications for administration made through the court to be accompanied by the proposed administrator's consent to act and a statement from the proposed administrator that, in his opinion, the purposes of the administration were reasonably likely to be achieved.
What I am really seeking to discover from the Minister is where we are with the rules to deal with such matters. In the other place, it was said that the rules were being prepared and it would be helpful to know the exact present position and whether we may see the rules before Report.
Amendment No. 276 would insert, at the end of line 31,
Those requirements will be satisfied only when the person who appoints the administrator of the company has filed the notice of appointmentand such other documents as may be prescribedwith the court. It is only upon filing with the court that the appointment becomes effective.
We should consider the problem that would be caused if an administrator were appointed at 4.30 p.m. on a Friday. Such an appointment may be urgently
It is essential, therefore, that the appointment of an administrator should take immediate effect without the necessity to file documents with the court. The amendment would achieve that by inserting a new sub-paragraph in paragraph 17 requiring the statement by the administrator that accompanies the notice of appointment to be signed by the administrator. The amendment to paragraph 18 would provide that the appointment of the administrator would take effect when the statement was signed by the administrator.
Amendment No. 287 would also insert the words,
I hope that the Minister understands the way in which I approach the amendments. If there is another way in which he can satisfy me, I look forward to hearing it. With the Bill in its present form, we have a difficult potential problem. I beg to move.
Lord Sharman: I shall speak to Amendment No. 270, which deals with the consent of the person who is to be the administrator to his appointment. At this stage, I shall not address the issue of timing; it is covered by other amendments.
My principal purpose in supporting the amendment is to ensure that the administrator knows that he is being appointed and is appointed with his consent. As the Bill stands, it is feasible that an administrator could be appointed without knowing it. That would be wholly unwise.
"( ) An administration application shall give the name of the person the applicant proposes to be appointed administrator and shall be accompanied by a statement by that person
(a) that he consents to act if appointed;
(b) that in his opinion the purpose of administration is reasonably likely to be achieved; and
(c) giving such other information and opinions as may be prescribed;
and for the purposes of a statement under this sub-paragraph, that person may rely on information supplied by the directors of the company (unless he has reason to doubt it accuracy)."
"A statement under sub-paragraph (3) must be signed by the administrator".
The requirements set out in paragraphs 13 to 20 of Schedule 16 contain provisions relating to the appointment of an administrator by the holder of a floating charge. Paragraph 13 gives the holder of a floating charge power to appoint an administrator; and paragraph 17 sets out the requirements for his appointment. The person who appoints an administrator must file a notice of appointment and such other documents as may be prescribed by the court. The notice of appointment must include a statutory declaration and be accompanied by a statement by the administrator, inter alia, that he consents to the appointment. Paragraph 18 provides that the appointment of the administrator takes effect when the requirements of paragraph 17 are satisfied.
"A statement . . . must be signed by the administrator".
It is similar. The present provision should be amended to provide that the appointment takes effect when the statement accompanying the notice of appointment is signed by the administrator. The appointment could then take place at the weekend.
9 p.m.
Next Section
Back to Table of Contents
Lords Hansard Home Page