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In the defence section, P is given a way of showing that it is not reasonable to issue a contribution notice because he has carried out due diligence and taken reasonable steps on that basis. Why is it necessary for P himself to have carried out the due diligence and taken all the steps that are necessary? If two parties are involved, why is it necessary for each of them to have carried out all the steps? Why is it not reasonable for P to look at what others are doing and not necessarily take action himself? My amendment would reflect the commercial reality of avoiding duplication in transactions. Provided that someone has done due diligence and/or taken actions, that ought to be the end of the story. I beg to move.

Lord McKenzie of Luton: My Lords, as explained, the purpose of the amendment is to provide that somebody other than the person raising the defence might be the one to mitigate the detriment. However, this is unnecessary. The legislation does not require the person raising the defence to mitigate the detriment; rather, it requires the defendant to ensure that he or she takes reasonable steps to ensure that there is an appropriate mitigation in place. Therefore, if the mitigation is to be undertaken by someone other than the defendant, then the reasonable step the defendant can take is to ensure that there is an appropriate mitigation and that

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it is in place. I do not think that the amendment adds anything to the Government’s proposals. I hope that that has produced some clarification for the noble Baroness.

Baroness Noakes: My Lords, I will consider that carefully in the light of the representations made to us. The Minister is reading the proposed new section differently from the way in which it has been read by those who contacted us. For today, I beg leave to withdraw the amendment.

Amendment No. 78NA, as an amendment to Amendment No. 78B, by leave, withdrawn.

Baroness Noakes moved, as an amendment to Amendment No. 78B, Amendment No. 78P:

78P: Before Schedule 9, line 110, leave out “all reasonable steps to” and insert “steps which would reasonably”

The noble Baroness said: My Lords, the amendment focuses on condition B. Condition B kicks in if, as a result of condition A, it is considered that the act or failure might have a detrimental effect. P has to take,

My amendment would replace the concept of taking “all” steps with one based on taking steps which would reasonably eliminate or minimise the detrimental effects.

Why is a person expected to take all possible steps? Is a belt-and-braces approach mandated as a necessary precondition to establishing the defence? Surely it is only reasonable that the person applies reasonable mitigation. For example, if the transaction might result in a potential deficit, is it necessary for the person to make additional contributions and provide other financial support such as guarantees, or can they take just some of those steps? Is it absolutely necessary to do everything that could possibly be done, or is it enough to take reasonable steps? I beg to move.



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Lord McKenzie of Luton: My Lords, the amendment would strengthen the statutory defence in favour of the person who could be subject to a contribution notice issued under the material detriment test. It would limit the regulator by strengthening P’s defence in relation to condition B, enabling them to show that they had taken “steps which would reasonably” eliminate or minimise potential detriment, rather than “all reasonable steps”.

It is important for the operation of the defence that P should be able to show that he or she has taken all reasonable steps, not the likelihood of the steps taken eliminating or minimising the potential risk. If the defence was amended as the noble Baroness suggests, it would make it unclear who would judge whether the steps taken were indeed “steps which would reasonably” eliminate or minimise potential detriment, which would make it much harder for parties and the regulator to operate. Parties might need to seek the view of the court as to whether they had taken “steps which would reasonably” eliminate or minimise potential detriment. This could be costly and unnecessary.

The intention is not that the defendant should have to take every step possible. Once P was satisfied that the potential detriment was minimised or eliminated, there would be no more reasonable steps for them to take. On this basis, and in light of my earlier explanation of the Government’s thinking behind the statutory defence, I hope that the amendment will be withdrawn. I hope that the noble Baroness will take comfort from that level of assurance.

Baroness Noakes: My Lords, my brain is slowing up at this hour. I think that what the Minister said is a good answer to the point that I put to him, but I reserve the right to read it in Hansard and think about it further. I beg leave to withdraw the amendment.

Amendment No. 78P, as an amendment to Amendment No. 78B, by leave, withdrawn.

[Amendments Nos. 78PA to 78T, as amendments to Amendment No. 78B, not moved.]


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