Previous Section Back to Table of Contents Lords Hansard Home Page


Lord Sharman: I listened with great care to what the Minister had to say. I should like to read it carefully in Hansard and reflect upon it, but I do see a fundamental difference of view between us. That is the difference between an individual having a number of different roles and an individual having a different duty of care. In many cases one can carry out different roles, but one's duty of care very frequently can become conflicted if it is to more than two or three people. Having said that, however, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 27 to 29 not moved.]

Lord Sharman moved Amendment No. 30:



("Directions to nominee
24. The nominee may apply to the court for directions in respect of any matter arising in connection with the performance by him of his functions.").

The noble Lord said: I beg your Lordships' indulgence because in moving Amendment No. 30 I shall speak also to Amendment No. 32, which is grouped with it. The issue here is to whom the nominee owes his fundamental duty of care. Amendment No. 30 seeks to provide the ability for the nominee to apply to the court for directions. It also removes the answerability to parties other than the creditors generally and to the court.

An individual may be fulfilling a number of roles. It is difficult for me to see how his fundamental duty of care can be to more than one particular body. He may

15 Jun 2000 : Column CWH29

well be there to supervise a moratorium for a limited period of time, but it will be found to be almost impossible to attract professionals into this function unless there is a clear definition of the duty of care. In my judgment, this amendment seeks simply to put that issue on the table and suggest that it should be to the creditors generally and to the court. Amendment No. 32 is a consequence of that decision. I beg to move.

The Deputy Chairman of Committees (Lord Brougham and Vaux): I should advise the Committee that if this amendment is agreed to I cannot call Amendment No. 31.

Baroness Buscombe: I should like to speak to Amendment No. 30 and, with it, Amendments Nos. 31 and 32. We are in considerable agreement with regard to the amendment moved by the noble Lord, Lord Sharman—to the extent that we agree that the nominee should be able to apply to the court for directions in respect of any matter arising in connection with the performance by him of his functions. However, we do not agree to the extent that the noble Lord seeks to remove lines 36 to 48. It is our view that a creditor would then be unable to challenge the nominee's decision. We cannot believe that that is the noble Lord's intention. It would be unrealistic for creditors to be allowed the right to challenge the decision of the nominee. There is common ground between us and we should be happy if Amendment No. 31 were accepted. However, the removal of lines 36 to 48 would present a problem. The nominee should have the right to ask the court for directions. This jurisdiction has always been given to office-holders in the position of the nominee. The original right was that of a trustee to apply to the court for directions, and that right has been given to all office-holders who do not act in self-interest, or similar office-holders.

We cannot support the noble Lord's second amendment on this point, Amendment No. 32. It seeks to remove a further right from the creditor; namely, the right of the creditor, and others, to take proceedings against the nominee. Would that have the effect of granting immunity to nominees—many of whom are likely to be accountants?

Lord McIntosh of Haringey: Amendments Nos. 30 and 32 are "ferocious" amendments which would remove from creditors a considerable element of the protection which, as the noble Baroness, Lady Buscombe, has rightly pointed out, is carefully provided for in this part of the schedule. Paragraph 24 provides that,


    "(1) If any creditor, director or member of the company, or any other person affected by a moratorium, is dissatisfied by any act, omission or decision of the nominee during the moratorium, he may apply to the court".

In general terms, paragraph 25 provides that,


    "(1) Where there are reasonable grounds for believing that—


    (a) as a result of any act, omission or decision of the nominee during the moratorium, the company has suffered loss, but


    (b) the company does not intend to pursue any claim it may have against the nominee,


    any creditor of the company may apply to the court".

15 Jun 2000 : Column CWH30

I repeat the warning that I gave about applications to the court. Courts are quite unlikely to entertain such applications and Mr Justice Neuberger in a recent case expressed the view that the courts should not be used by the administrator in relation to an administration order as a way of avoiding commercial and administrative decisions which are properly for him, and to enable him to obtain the court's endorsement of his intended course of action. The judge said that the court was not there to act as a bomb shelter for the administrator. The case was T&D Industries plc v Another—and, as he is nodding, it seems that the noble Lord, Lord Kingsland, knows the case.

I do not believe that the duty of care issue is as the noble Lord, Lord Sharman, described it. There is only one possible successful outcome of a moratorium, and that is an agreed voluntary arrangement. That cannot be achieved without a duty of care to all the parties; they all have to accept that the voluntary arrangement is agreed to. However, these "ferocious" amendments would remove the important safeguards provided by paragraphs 24 and 25 for those affected by a moratorium which enable interested parties to challenge a nominee's actions. They are replaced with a provision that the nominee may apply to the court for directions in respect of any matter arising in connection with the performance by him of his functions. That provides no safeguard for interested parties, but offers a nominee the means to seek directions from the court, which, as I have indicated, is unlikely to be successful. The nominee should be accountable for his actions; that is why we need paragraphs 24 and 25.

I now turn to Amendment No. 31. We do not consider that the nominee should be given the power to apply to the court for directions, for exactly the reason I gave in response to other amendments. The nominee's role in the moratorium is such that he should not be in a position where such an application is appropriate. We must not lose sight of the fact that the nominee will not have any of the company's assets in his possession nor will he be running its affairs.

Commercial and administrative decisions are for the nominee, not for the court. We do not consider that the courts should be used to provide the nominee with a way to avoid taking decisions which are rightly for him and to enable him to obtain the court's endorsement of his intended course of action. That is what I believe Mr Justice Neuberger was saying.

5.40 p.m.

Lord Sharman: I can see very little wrong with immunity for accountants. That said, it was my expectation that, under the Bill's provisions, quite a number of people who would act as nominees and supervisors would not be accountants; they would be from a new body or bodies to be recognised. I fear there is still some distance between us on th issue of duty of care and I want to reflect on the matter. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

15 Jun 2000 : Column CWH31

[Amendments Nos. 31 and 32 not moved]

Baroness Buscombe moved Amendment No. 33:


    Page 19, line 18, after ("in") insert ("and fund").

The noble Baroness said: Paragraph 25 of new Schedule A1 gives the creditor the right to apply to the court where the company has suffered loss as the result of some act or omission of the nominee. On such application, the court can authorise the creditor to pursue a claim in the name of the company. In our view, the court should have power to direct the company to fund the creditor in bringing the claim.

In essence, where the company has suffered loss as a result of an act, omission or decision of the nominee, and where the company has no intention of pursuing a claim it may have against the nominee, we believe that not only, as the Bill provides, should the creditor be able to apply to the court for authorisation to pursue a claim and direct the company to assist in the pursuit of a claim; we believe it only reasonable, only equitable, that the company should fund that claim.

That approach is in accordance with numerous decisions, including, for example, Wallesteiner v Moir and subsequent cases. Where a minority shareholder wishes to bring a minority shareholder's action in the name of a company, he can apply for an indemnity against the costs of that action. We feel that a similar opportunity should be provided here; otherwise, the creditor is paying for litigation for the benefit of the company—in which case, the Bill as drafted discourages any such creditor. I beg to move.

Lord McIntosh of Haringey: I hope I can reassure the noble Baroness. The amendment indicates a concern that the court may not be able to order the company to fund a claim where it authorises—as it can do under 25(3)—a creditor to pursue a claim against a nominee under that paragraph. Paragraph 25(4) gives examples of matters which may be covered by an order made under sub-paragraph (3). It is clear from the words "among other things" in sub-paragraph (4) that matters which may be covered by such an order are not limited to those set out in sub-paragraph (4). Therefore, if the court thought it appropriate to order the company to fund pursuit, by a creditor, of the company's claim against the nominee, it could do so without the further words being added.


Next Section Back to Table of Contents Lords Hansard Home Page