Clause 8

– in the House of Commons at 10:30 pm on 11th February 1980.

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LIABILITY OF THE SUCCESSOR COMPANY FOR DEFAULTING SUBSIDIARY WHERE CAUSE OF ACTION AROSE BEFORE APPOINTED DAY

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

I beg to move amendment No. 39, in page 7, line 11, leave out 'only applies' and insert 'applies only'.

It gives me pleasure to move the amendment, because, as hon. Members who served on the Committee will recall, it was salutary for us all to feel the stern and skilful application of the effective use of English by the hon. Member for East Kilbride(Dr. Miller). It was his suggestion that the order of the words "only applies" should be reversed. Shamefaced officials admitted that the hon. Gentleman had a point, and I am happy to put the amendment forward in the spirit in which it was suggested.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

As this is the first reverse that we have secured from the Government since we started our consideration of the Bill, we gladly accept what the Minister says.

Amendment agreed to.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

I beg to move amendment No. 40, in page 7, line 17, leave out 'at the time when the contract was made' and insert 'when the breach took place'. This amendment follows on from amendment No. 38 and seeks to establish the principle of the law of continuous liability. We debated the matter in Committee, and I know that the Under-Secretary will probably not feel yielding at this time of the evening, but he may be able to say something that will enable us not to press the amendment to a Division.

Photo of Mr Michael Marshall Mr Michael Marshall , Arundel

The purpose of clause 8 is to continue, in relation to obligations undertaken before the appointed day, the effect of section 53(1) of the Aircraft and Shipbuilding Industries Act 1977; which provides that British Aerospace is to be liable for the judgment debts of it wholly owned subsidiaries.

Creditors have done business with British Aerospace's wholly owned subsidiaries in the knowledge of the protection afforded by section 53(1), and on the basis of the general doctrine that the Government stand behind nationalised industries and will not allow them to default.

Hon. Members who served on the Standing Committee will recall that this was debated at considerable length.

Clause 9 reproduces, as nearly as possible, the doctrine I have mentioned by making the Secretary of State liable, in the event of the successor company being wound up, to meet those, but only those, obligations that British Aerospace undertook before the appointed day—in other words, the traditional obligations under the rules that then applied.

Clause 8 reproduces section 53(1) by making the successor company liable to meet the judgment debts of wholly owned subsidiaries where, and only where, the obligations arose before the appointed day.

As the clause stands, wherever a company becomes a wholly owned subsidiary of the successor company on the appointed day, the successor company will be liable to pay any debts of the subsidiary arising under a contract made before the appointed day. In this way, people who did business with a wholly owned subsidiary of British Aerospace, before or after nationalisation, will permanently enjoy the same sort of protection as they do at present under the Aircraft and Shipbuilding Industries Act 1977.

The amendment would be restrictive. It would mean that the successor company was liable only where the default had occurred before the appointed day. The position of creditors in respect of contracts entered into with subsidiaries of British Aerospace would be worsened. The protection afforded them would be less than under section 53(1)of the 1977 Act.

I do not believe that that is what the hon. Gentleman seeks to achieve. Having explained how we see this matter, I hope that he will feel disposed to withdraw the amendment.

Photo of Mr Leslie Huckfield Mr Leslie Huckfield , Nuneaton

As I explained that we thought amendment No. 40 was consequential to amendment No. 38, the hon. Gentleman is right in stating that, standing by itself, it has the effect he has described. We shall need to consider further what the hon. Gentleman has said. It would therefore be best if we did not push the matter to a Division on this occasion. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.