I move amendment No. 134:
In page 89, line 30, to delete "mortgage or charge" and substitute "mortgage, charge or pledge".
This is a drafting amendment designed to improve the draft by including the term "pledge".
SECTION 104.
Could the Deputy elaborate slightly for our benefit his reasons for this amendment?
Can the Deputy elaborate on the request that is usually made of the Minister?
It has been represented to us that the terms "mortgage" or "charge" are not comprehensive in their meaning and do not encompass all the situations in which the provisions here are likely to apply. In order to achieve completeness, the term "pledge" should also be added. I would say the Minister has had notice of this amendment for approximately a year and a half and he might, therefore, be able to respond to it in some detail.
We had to wait for the Deputy to explain the situation which he has not done today. We could not anticipate his explanation for this amendment and I would still like to hear, in more detail, his reasons and what grounds he has for this amendment. We are entitled to tease this out slightly before we respond.
May I ask the Minister what damage he thinks the inclusion of the word "pledge" would have on the legislation?
I would like the Deputy to explain what exactly is a pledge in this context.
This term has application in other areas also. Obviously we have received representations from various professional bodies and we discussed it widely with the professional bodies who are concerned with the operation of this legislation. The professional body, which I think in this case was the Incorporated Law Society, but I cannot be specific on that point, felt that the intentions of the legislation would be better achieved by adding the term "pledge". I do not carry around with me a huge legal dictionary which enables me to provide all details, though I have one in my office and I can send for it if the Minister needs help, containing a full description of the term "pledge" and its implications. I really feel that the Minister would perhaps serve his own purposes in this committee better by responding to this amendment in the way in which it is put forward rather than the Chairman being somewhat wooden as at present.
I am very impressed by the explanation of Deputy Bruton, so much so that I am definitely prepared to come back on Report Stage with the most likely clues of this particular word "pledge". A similar amendment will be required in another place, at line 35. In the spirit of conciliation and co-operation on this Bill, we will certainly come back to this point on Report Stage.
I do not think that is funny to be quite honest. This amendment is put forward now and the Minister has had possession of it for a year and a half. He has now indicated that he sees it as a valid addition. It is only a drafting amendment, it is not a big policy issue and I really think that it is making a farce of this committee for the Minister to come in here and say, on a matter of this simplicity, that he will deal with it on Report Stage. I suggest that the Minister accepts the amendment now.
I will accept the amendment but there is a need for another amendment which we will put forward on Report Stage.
Sorry——
We are accepting the amendment but there is a requirement to make one on line 35 as well.
Amendment agreed to.
I move amendment No. 135:
In page 89, lines 31 and 32, to delete "(other than title deeds to land)".
As I mentioned earlier, section 104 of the Bill currently provides that liens on a company's documents are subject to certain exceptions unenforceable as against the liquidator of the company. The first of these exceptions in paragraph (a) provides that the mere production, by a person, of any document relating to a mortgage or charge other than title deeds to land does not affect the person's rights under the mortgage involved. Coming back to these words in brackets however "other than title deeds to land", my concern is that on a reading of this section the implication is that if a bank, say, is forced under the section to hand over title deeds to land, which it may be holding as security or collateral, this handing over does actually prejudice the bank's rights under the mortgage concerned. Representatives of the banks have put the same concern to the Department. I think I would have to accept that the section, as currently drafted, is somewhat unsuitable. I would not want to enact a provision which would put a bank in a position whereby it would have to hand over title deeds to land and, by doing so, would give up its property rights under the mortgage involved. My amendment, therefore, aims to provide that the production by the mortgagee of the title deeds to land does not prejudice any right he may hold over the land in question.
Amendment agreed to.
I move amendment No. 136:
In page 89, between lines 44 and 45, to insert the following:
"(c) a person may withhold possession of any deed for costs incurred working on such deed.".
This amendment definitely derives from discussions with the Incorporated Law Society. Essentially, it protects the position of solicitors who wish to be able to continue to withhold possession of any deeds in respect of costs incurred by them in regard to the workings on such deeds.
I do not know if the Incorporated Law Society saw the point that there is no need for that amendment as the section is drafted. The section states that no person shall be entitled as against the liquidator or provisional liquidator to withhold possession of any deed, instrument, or other document belonging to the company. If, say, a company commissioned somebody to draw up a deed and they have not actually paid that individual, which is the situation Deputy Bruton is trying to achieve and that individual has not handed up the deed, does the document belong to the company in that case?
As a lien on it, that does not transfer the ownership of it. The deeds will still belong to the company.
That is not my interpretation of it, Deputy. I am open to correction as I am not an absolute authority on that aspect of the law. I do not think you could say that the company actually owns the document. My interpretation is that the solicitor, the accountant, the valuer or whoever drew up the document, even on the instructions of the company, would own the document if they still had it in their possession and had not been paid for it. They produce the paper and prepare the document. I cannot envisage a situation where the company could be described as actually legally owning that document, even though they had commissioned its preparation.
The two most likely situations in a winding-up where liens could arise would be where an auditor could have a lien on some of the accounting records of a company in respect of fees due to him, or where the solicitor to a company could have a lien on some documents in relation to contract work he was performing for the company. Again, as I mentioned earlier, the existence of liens in a winding-up situation can seriously impede the work of the liquidator and undermine the whole process of liquidation. Delays can be created for the liquidator in obtaining possession of documents and other records which may be a vital source of information to him in performing his task.
The whole purpose of section 104 of this Bill is to abolish such liens in winding-up situations and the two qualifications in paragraphs (a) and (b) of the section do not affect this central idea behind it. The Deputies' amendment would completely negative what this section is trying to do. The main area where liens are used is in connection with the payment of fees for work carried out. The fact is that if an auditor, solicitor, or anyone else, performs a service for a company, he then becomes a creditor like any other. If the company concerned then goes into liquidation, he has to stand in line like everybody else. There is no justification at all for giving auditors or solicitors the added advantage of being able to twist the liquidator's arms by holding on to documents which would obviously be essential to the liquidation. The effect would be to frustrate the whole process of winding-up the company concerned to the detriment of all creditors. I cannot, for this reason, accept the Deputies' amendment.
May I just ask the Minister a question? There is a distinction in the section between deeds, instruments and other documents belonging to the company, and the books of account, receipts, invoices, bills or other papers of a like nature relating to the accounts of trade dealings or business of the company. As I understood the Minister, he seemed to refer the same argument to both types of document. There is a distinction as in one case they have to belong to the company and in the other case they do not.
As far as the amendment put forward by Deputies Bruton and Barrett is concerned, I am replying directly to that particular amendment. Their amendment would have added a general exception to the whole section itself. To return to what Deputy O'Dea said, the main point is that we cannot accept the amendment put forward by Deputies Bruton and Barrett. On reflection, maybe they might decide that it is not that appropriate that any one person should have a lien on the company in this manner. We just could not accept that.
I think we have given the people concerned their day in court.
Amendment, by leave, withdrawn.
Section 104, as amended, agreed to.
Section 105 agreed to.