Clause 247 - Investigation by official receiver

Enterprise Bill – in a Public Bill Committee am 4:45 pm ar 14 Mai 2002.

Danfonwch hysbysiad imi am ddadleuon fel hyn

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne 4:45, 14 Mai 2002

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.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

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

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.

Photo of Mr Tony McWalter Mr Tony McWalter Labour/Co-operative, 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.

Photo of Miss Melanie Johnson Miss Melanie Johnson Parliamentary Under-Secretary, Department of Trade and Industry

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.

Photo of Nigel Waterson Nigel Waterson Ceidwadwyr, Eastbourne

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.