Clause 34
Company Law Reform Bill [Lords]
5:30 pm
David Howarth (Shadow Minister (Energy), Trade & Industry; Cambridge, Liberal Democrat)
I shall resist the temptation to rehearse my entire one-hour lecture on the clause, but I can send the notes to anyone who might request them. As the hon. Member for Huntingdon said, this is an old chestnut in company law. My interest, which I should declare, is that if I ever had to go back to teaching company law and the amendment goes through, I would be denied the most obvious essay title for the second week of the course that I ever had.
The hon. Gentleman talked about the point that Lord Wedderburn made in the Lords; Lord Wedderburn wrote a famous article about this in the Cambridge Law Journal as long ago as 1957, so we are about to mark the 50th anniversary of his interest in the matter. That the clause has the meaning put forward in the amendment is widely accepted, but there is another point to make. The case on which that assumption rests is a first-instance judgment of Mr. Justice Astbury in 1915. The Minister has already referred to the case, Hickman v. Kent or Romney Marsh Sheep Breeders’ Association, with which she is now fully familiar.
The serious point, to quote Professor Len Sealy, who is a leading and eminent writer on company law, is quite how remarkable it is that so shaky a first-instance decision has been tacitly accepted for the greater part of a century. There are articles in the academic literature that heavily criticise the decision—I seem to remember an article by Gregory in the 1981 Modern Law Review.
It is an extraordinary situation that something everyone assumes to be the law rests on so flimsy a foundation. The reason why the Government should give way and put these words into the statute is simply to give that foundation the firmness that it deserves.