R v Kearns (Nicholas Gary)
| Jurisdiction | England & Wales |
| Judge | Mr Justice Aikens |
| Judgment Date | 22 March 2002 |
| Neutral Citation | [2002] EWCA Crim 748 |
| Docket Number | Case No: 2001/2319/X3 |
| Court | Court of Appeal (Criminal Division) |
| Date | 22 March 2002 |
[2002] EWCA Crim 748
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CRIMINAL DIVISION)
Royal Courts of Justice
Strand,
London, WC2A 2LL
Lord Justice Kennedy
Mr Justice Aikens and
Mr Justice Pitchford
Case No: 2001/2319/X3
Marc Willers for the appellant
James Eadie for the Crown
This appeal concerns the issue of whether section 353(3)(a) of the Insolvency Act 1986, by its terms, contravenes the right of a person to have a fair trial pursuant to Article 6 of the European Convention on Human Rights ("ECHR"), as scheduled to the Human Rights Act 1998. The issue was raised at the outset of a trial before HHJ McNaught on 26 March 2001. Mr Kearns faced four counts on the Indictment. The Particulars of Offence on Count 3 alleged that:
"Nicholas Gary Liam Kearns, between 11 September 1998 and 18 August 1999, being a bankrupt and having been required to do so by the Official Receiver, failed without reasonable excuse to account for the loss of a substantial part of his property, namely the sum of £22,400, incurred in the period between the presentation of the bankruptcy petition on 17 September 1998 and 11 November 1998, contrary to section 354(3) (a) of the Insolvency Act 1986".
At the outset of the trial the Judge heard argument on the issue. He held, in an admirably concise ruling, that the terms of section 354(3)(a) of the Insolvency Act 1986 ("the 1986 Act") did not offend Article 6. Therefore Mr Kearns could have a fair trial on Count 3. Following that ruling the appellant pleaded guilty to Count 3. He was subsequently sentenced to a Community Punishment. The maximum sentence for the offence if convicted on Indictment is 2 years imprisonment and/or a fine.
The appellant has appealed with the leave of the single judge. The Court heard argument on Friday 8 February 2002 and announced that the appeal would be dismissed for reasons to be given at a later date. We now give those reasons.
The Facts
The appellant, Mr Kearns, was the owner and operator of some JCB tractors. On 17 September 1998 Her Majesty's Customs and Excise presented a petition for the bankruptcy of Mr Kearns. On 11 November 1998 the appellant was adjudged bankrupt.
Following the bankruptcy adjudication the Official Receiver was appointed to administer the bankruptcy. The Official Receiver demanded to see the appellant's accounting records. Some were produced but the Official Receiver was not satisfied that he had the full picture. In particular he was not given any independent record of the money received or expended by the business on a day to day basis. The Official Receiver contacted the National Westminster Bank Account Management Centre to enquire about National Westminster Bank Account No 9890889. That account was in the name of Nicholas Gary Liam Kearns trading as NGK Plant Hire. The records showed that in the period between the presentation of the bankruptcy petition and the date of the bankruptcy the sum of £22,400 had been withdrawn from this account by cheques made payable to "cash". Further, between 11 November 1998 and 30 November 1998 Mr Kearns withdrew an additional sum of £12,700 from the account by cheques that were also made payable to "cash".
Sometime in mid 1999 the appellant was given a form BB4.18 by Joanne Melhado, acting on behalf of the Official Receiver. This form is headed: "Statement of Affairs and Other Information-Receipts and Payment Account/Goods Account (Affidavit Form)". With this form the appellant was given a schedule of the cheques about which further information was sought. He was also given blank forms on which to complete information about payments that were made from 19 June 1998 to 23 November 1998. The form required Mr Kearns to complete an affidavit on the topics identified.
On 6 September 1999 a completed copy of the affidavit was received from Mr Kearns. But no information about receipts or payments was provided either in or with the affidavit. As a result, the appellant was charged with the offence set out in Count 3 of the Indictment that we have set out above.
The regime under the Insolvency Act 1986
Under section 287 of the 1986 Act after the presentation of a bankruptcy petition and before the appointment of a trustee in bankruptcy, an official receiver can be appointed. By section 288 of the 1986 Act a bankrupt is under a duty to submit a statement of affairs to the appointed official receiver within a certain time. Under section 289 it is the duty of the official receiver to investigate the affairs of every bankrupt and to make such report (if any) as the Court thinks fit. Under section 291 of the 1986 Act once a bankruptcy order has been made, the bankrupt is under a duty to deliver possession of his estate to the official receiver. The bankrupt is also obliged to deliver up to the official receiver all books, papers and other records of which the bankrupt has possession or control and which relate to his estate and affairs: see section 291(1). Section 291 also sets out other obligations of the bankrupt. If the bankrupt, without reasonable excuse, fails to comply with any of the obligations set out in the section, then he is guilty of contempt of court and may be punished accordingly: section 291(5).
Section 354 of the Act imposes further duties on the bankrupt and states that if the bankrupt does not perform them, he will be guilty of an offence. That section provides as follows:
"354. Concealment of property
(1) The bankrupt is guilty of an offence, if -
(a) he does not deliver up possession to the official receiver or trustee, or as the official receiver or trustee may direct, of such part of the property comprised in his estate as is in his possession or under his control, and possession of which he is required by law so to deliver up,
(b) he conceals any debt due to or from him or conceals any property the value of which is not less than the prescribed amount and possession of which he is required to deliver up to the official receiver or trustee, or
(c) in the 12 months before petition, or in the initial period, he did anything which would have been an offence under paragraph (b) above if the bankruptcy order had been made immediately before he did it.
Section 352 applies to this offence.
(2) The bankrupt is guilty of an offence if he removes, or in the initial period removed, any property the value of which was not less than the prescribed amount and possession of which he has or would have been required to deliver up to the official receiver or the trustee.
Section 352 applies to this offence.
(3) The bankrupt is guilty of an offence if he without reasonable excuse fails, on being required to do so by the official receiver or the court -
(a) to account for the loss of any substantial part of his property incurred in the 12 months before petition or in the initial period, or
(b) to give a satisfactory explanation of the manner in which such a loss was incurred".
Section 351(b) of the Act defines "the initial period" as being the period between the presentation of the bankruptcy petition and the commencement of the bankruptcy.
The allegations against Mr Kearns and the argument before the Judge
The allegations made against Mr Kearns were that: (i) the official receiver had required Mr Kearns to account for the loss of the sum of £22,400 from the account in the National Westminster Account that was in Mr Kearns' name; (ii) Mr Kearns had failed to do so, and had no reasonable excuse for this failure; and so (iii) he was guilty of an offence under section 354(3)(a) of the 1986 Act.
The argument on behalf of Mr Kearns before the judge was that section 354(3)(a) of the 1986 Act forced the bankrupt to give information to the official receiver and if he failed to do so, (without reasonable excuse), then he automatically committed an offence. This meant that the section was contrary to the bankrupt's right to remain silent if he chose and contrary to his right not to incriminate himself. Those were both rights that had been recognised in judgments of the European Court of Human Rights as being inherently part of a person's rights under Article 6. Further, the wording of section 354(3)(a) had the effect of presuming the bankrupt to be guilty of the offence unless he could account for the losses or he had a reasonable excuse not to give an account. That violated the presumption of innocence in Article 6(2) of the ECHR. Accordingly, section 354(3)(a) was incompatible with the ECHR and so violated Mr Kearns' right to a fair trial.
As we have said, the judge rejected those arguments and then Mr Kearns pleaded guilty to Count 3 on the Indictment.
Preliminary Matters on this appeal
Before we can address the principal argument raised by this appeal there are two preliminary issues that we must consider. The first is the more substantial. The appellant is challenging his conviction following his decision to plead guilty after Judge McNaught had given his ruling. At the hearing of the appeal Kennedy LJ asked Mr James Eadie, who appeared for the prosecution on the appeal, whether the fact that Mr Kearns had pleaded guilty after the ruling had any effect on the Court's jurisdiction to hear the appeal pursuant to section 2(1) of the Criminal Appeal Act 1968 ("the 1968 Act"). Mr Eadie said that the prosecution took no point on the Court's jurisdiction to hear the appeal.
He was right not to do for reasons we will now set out briefly. The argument on behalf of Mr Kearns before the judge was that, given the nature of the offence that section 354(3)(a) purported to create, it offended Article 6 of the ECHR. Once that...
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