My Lords, in moving Amendment 61ADE, I will also speak to Amendment 61ADF, which is in my name and that of my noble friend Lord Mendelsohn, who is sadly still absent. I am thinking in terms of search parties, particularly if my noble friend Lord Mitchell is proposing to stand in his place, which, of course, he is perfectly entitled to do.
As the law stands, in order to receive a dividend in an insolvency, a creditor must first submit a claim to the officeholder, who, where necessary, will request further evidence to verify that claim. Clauses 128 and 129 simplify the process for what the Government term “small debts”, so that in future such creditors do not have to prove their ownership of the debt in the same way. Clause 128 takes care of company insolvencies, while Clause 129 takes care of individual insolvencies. We do not object to the principle behind such moves, but I am quite concerned that the figure of £1,000 that the Government have floated for the prescribed amount is a little too high, and I would be interested to hear how the Government arrived at £1,000. I appreciate that provisions will remain in place for the insolvency practitioner to require further information where they have suspicion or doubt, but the clauses seem to set a dangerous precedent that a business can claim amounts of up to £1,000 without any evidence.
We all know that in the event of a corporate insolvency, or even a personal insolvency, there is a certain amount of chaos around. In the corporate case, employees are often desperately attempting to find alternative employment, with the pressure of their mortgages hanging over their heads and the business that they expected would be capable of paying them, and to which they were dedicating their careers, looking increasingly vulnerable and unable to do so. Under those circumstances, many normal practices might go out of the window. It is also the case that insolvent companies have been in a less than ordered state in the run-up to declaring themselves insolvent or bringing administrators in, and they are often scrambling around to find anyone that they are not on stop with to purchase supplies in order to stay afloat. Purchase order numbers and other systems may well become irregularly used. In those circumstances, it is a very dangerous step for any business to be able to say, “We have an outstanding invoice for £826, can you send it to us? We do not need to provide any evidence under the new law, and documentation is not required to show whether the goods were received”.
I understand the thinking behind this, but I am just a bit worried about some of the issues. The particularity of this applies more to personal insolvency, as we are talking about claims up to £1,000, which is obviously quite a significant amount in those circumstances. Again, is it right to remove the need for proof for any bill up to £1,000 in a personal bankruptcy when some of the limits are relatively small, particularly in relation to DROs? It is clear that we should all try to make sure that costs are taken out of bankruptcy administrative processes. Where these are small amounts, there may well be a way that they should be dealt with that does not require too much effort and red tape. However, a bar of £1,000, particularly for individual
insolvency, is quite significant. I would be grateful if the Minister could respond to us on these points. I beg to move.