Enterprise Bill

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Mr. Field: On balance, although the matter has been discussed, our underlying concern is that, in complicated cases, the official receiver may find it difficult to bring together enough evidence to satisfy the court that a prima facie case could be made for a fully fledged order. We were seeking guidance on whether an interim order could be made in those circumstances. I appreciate that the Government have no desire for interim orders to be handed out as if they were a rubber stamp job; particularly if, further down the line, there was insufficient evidence to mount a prima facie case and the interim order lapsed before a fully fledged order had been applied for, let alone made.

I hope that the Under-Secretary understands at least some of the concerns that have been passed on to us about the fact that strongish cases might sometimes be brought. On balance, however, we have made the point.

Miss Johnson: Before the hon. Gentleman concludes, it may help if I say that I will write to him in a little more detail about timing, with copies sent to other members of the Committee. I assure him that our desire, like his, is that there should be no gap.

Mr. Field: That would be helpful, and I thank the Under-Secretary. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 20 agreed to.

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Schedule 21 agreed to.

Clause 247

Investigation by official receiver

Mr. Nigel Waterson (Eastbourne): I beg to move amendment No. 432, in page 172, leave out lines 37 and 38.

The amendment is, in effect, sponsored by the CBI and the Consumer Credit Association, which makes me wonder whether it should not have considerable appeal. The amendment seeks to remove subsection (2) of proposed new section 289 of the Insolvency Act 1986. The provisions of clause 247 seem rather odd. Subsection (1) imposes a duty on the official receiver to conduct an inquiry or investigation into the affairs of each and every bankrupt and make a report. In a contradictory provision, subsection (2) says that the official receiver can decide for himself that it is not necessary to comply with the duty set out in subjection (1).

We do not agree with that provision; nor do the CBI and the Consumer Credit Association. We all take the view that bankruptcy is a serious and important matter and that a proper investigation—whether it is long or short is another matter—should be made into each case of personal insolvency. If an argument can be made for dispensing with that investigation, at the very least provision should be made for someone else to make that decision. It seems a bit unfortunate, to put it mildly, that the official receiver will be able to decide whether to carry out an investigation. The CBI states:

    ''To leave the provision as it stands invites the most self-serving abuse by an overstretched Official Receiver's department.''

The official receiver's department is already under great pressure. We have said that there will be a sharp increase in the number of insolvencies across the board, and I do not think that has been gainsaid by the Under-Secretary. If it has been I must have missed it. If, like all departments, the official receiver's department will be under relentless pressure to perform to certain standards, will there not be a temptation to cut corners and to take the view that, in many insolvency cases—particularly those involving small amounts—no fraud investigation is necessary? As the CBI says,

    ''If the Official Receiver is both judge and jury on the issue whether an investigation is necessary, how will we ever know whether the decision has been made properly?''

The effect of our amendment would be to require the official receiver to investigate the conduct and affairs of all bankrupts, on the basis that those who have such a duty placed upon them should not have a completely unfettered, unqualified power to release themselves from that very duty.

Miss Johnson: As the hon. Member for Eastbourne (Mr. Waterson) said, the amendment demands a full investigation by the official receiver into all cases, regardless of the facts and circumstances of the case. There is no such requirement under existing legislation. In summary bankruptcies where the unsecured liabilities are less than £20,000, which account for a large number of bankruptcies, the

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official receiver presently has discretion to investigate where he or she sees fit; I emphasise the word ''discretion''.

The Bill will remove the provisions relating to summary bankruptcy and introduce instead a general discretion to investigate. It makes for a more efficient use of resources to examine each case on its merits rather than to apply an arbitrary financial limit, as is currently the case. Indeed, the amendment would provide for many a much harsher regime than the Bill envisages. I would like to reassure the hon. Gentleman that, as is currently the case, the official receiver will continue to examine comments and requests from creditors.

Mr. Tony McWalter (Hemel Hempstead): Does my hon. Friend have in mind the kind of case in which a company is brought down because somebody with whom it has traded for many years suddenly lets it down on a huge order, as a result of which it suddenly finds itself insolvent, when previously it had always been solvent? As I have such a case in my constituency, I would be grateful if my hon. Friend were to resist the amendment.

Miss Johnson: My hon. Friend raises a very interesting case, on the particulars of which I obviously cannot comment. However, there is no point in placing on the official receiver a duty to investigate under circumstances of the kind that he has just described with reference to his constituency issue, where there would be little to investigate. Such investigation would be intrusive and would cost money and time for all parties concerned.

Should the official receiver decide that an investigation is necessary and decide to exercise their powers under new section 279(2) to file a notice of discharge earlier than the one-year discharge period, we propose to ensure, in the insolvency rules, that the official receiver notifies the creditors before such a notice is filed before the court. That will allow the creditors to make any representations about matters that they consider the official receiver ought to investigate.

I see only disadvantages to the amendment. It is not necessary and it would not smooth things; if anything, it would create a lot of red tape and a lot of activity to no good purpose. I hope, therefore, that I have persuaded the hon. Gentleman to withdraw it.

Mr. Waterson: I have not been persuaded on the merits. There is still the issue, apart from anything else that the Under-Secretary said, of whether the official receiver should be the person to decide whether the official receiver should carry out the investigation. However, so that we can make progress, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 247 ordered to stand part of the Bill.

Clause 248

Income payments order

Mr. Waterson: I beg to move amendment No. 555, in page 173, line 17, leave out 'before the discharge of the bankrupt' and insert

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    'within twelve months of the bankruptcy order'.

The Chairman: With this it will be convenient to take amendment No. 433, in page 173, leave out lines 19 to 23 and insert—

    '(6) An income payments order must specify the period during which it is to have effect which period may end after the discharge of the bankrupt.'.

Mr. Waterson: To an extent, these amendments overlap slightly. They try to sort out the same problem as we perceive it and as it is perceived by some practitioners in this part of the law. As the Bill stands, it will be possible for bankrupts to be discharged as soon as the official receiver has decided that there is nothing calling for an investigation. In theory, that can happen quite quickly; within weeks or, certainly, two or three months. That means that the trustee will have little time in which to decide whether or not to apply for an income payments order, which gives the trustee an incentive to apply for such an order as soon as possible and gives the bankrupt an incentive to conceal his income from his trustee for as long as possible. If the amendment is accepted, it will put trustees and bankrupts on an equal footing and will stop possible variations between different official receivers' officers around the country.

Our justification for amendment No. 433 is that there should be no limit on the length of time for which an income payments order or an agreement can last. The decision about whether to cap the length of time should be left to the discretion of the court. Only the court will be in a position to give due consideration to an individual's circumstances and his ability to make future payments. The point is to ensure that debtors who can pay, do pay, and that they are not able to avoid their obligations. Both of the amendments are designed to ensure that, in the scramble to allow someone to come out of bankruptcy within less than the stipulated period of 12 months, creditors are protected and—as far as possible—assets are made available for them.

Miss Johnson: First, I shall address amendment No. 555. The administration of a bankruptcy case by the official receiver will enable IPOs to be dealt with at an early stage. In cases in which such information has not been made available, it is possible to suspend discharge until it has been delivered. The provisions introducing income payments agreements will speed up the process still further by avoiding court application. There is no real advantage in extending the time available for an IPO application, except in cases in which it is strictly necessary. That is already achieved by means of the facility to suspend discharge. Indeed, the amendment would affect those cases in which a bankrupt had been suspended from discharge. If, after 12 months, he co-operated, the trustee would be time-barred from making such an application. That does not seem to be a sensible consequence.

Turning to amendment No. 433, I agree that those bankrupts who are able to make contributions from their income should be required to do so. However, setting a 3-year limit to the duration of IPOs recognises that there must be a balance between the

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benefits that that would bring to the bankrupt's creditors and the rehabilitation of the individual. It would not be fair or consistent to impose a far more stringent system than already exists, as would be the effect of the amendment. I therefore trust that both amendments will be withdrawn.

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