Thomas Campbell Mcleannan+tay Square Properties Limited For An Order Under Section 236 Of The Insolvency Act 1986

JurisdictionScotland
JudgeLady Paton
Date03 December 2004
CourtCourt of Session
Published date03 December 2004

OUTER HOUSE, COURT OF SESSION

OPINION OF LADY PATON

in the Note of

THOMAS CAMPBELL McLENNAN, Chartered Accountant, Tenon, 1 Royal Terrace, Edinburgh, Liquidator of TAY SQUARE PROPERTIES LIMITED, a company incorporated under the Companies Acts and having its registered office at The Business Centre, 10 Tay Square, Dundee, DD1 1PB

for

An order under section 236 of the Insolvency Act 1986 to summon and examine and to produce documents

________________

Noter (liquidator): Holroyd, Advocate; Anderson Strathern W.S.

Examinee (company director): Beynon, Advocate; Donaldson & Co, Dundee

3 December 2004

Whether privilege against self-incrimination applicable during inquiry into company's dealings: section 236 of Insolvency Act 1986

[1]Tay Square Properties Limited (TSP) went into liquidation in 2003. Thomas McLennan, Chartered Accountant, was appointed as liquidator. In the course of his duties, the liquidator noted certain disposals of heritable property to another company, Gowrie Homes Limited. He considered that those disposals might constitute gratuitous alienations. He required more information. He accordingly presented a note to the Court of Session, seeking to have the following persons examined on oath in terms of section 236 of the Insolvency Act 1986:

(1) James Griffin, director of TSP

(2) Scott Taylor, director of TSP

(3) John Justice, company secretary and legal consultant, Legal Direct (Scotland) Limited

(4) Michelle Georgeson, director of Legal Direct (Scotland) Limited.

[2]Section 236 provides:

Inquiry into company's dealings, etc

236 ...(2) The court may, on the application of [inter alios the liquidator], summon to appear before it -

(a) any officer of the company,

(b) any person known or suspected to have in his possession any property of the company or supposed to be indebted to the company, or

(c) any person whom the court thinks capable of giving information concerning the promotion, formation, business, dealings, affairs or property of the company ..."

[3]Section 237(4) provides:

Court's enforcement powers under s.236

237 ...(4) Any person who appears or is brought before the court under section 236 or this section may be examined on oath, either orally or (except in Scotland) by interrogatories, concerning the company or the matters mentioned in section 236(2)(c)."

[4]The court ordered that the four named individuals be examined on oath.

[5]After various procedural hearings, Scott Taylor (aged 35) a director of TSP, was examined on oath on 30 September and 1 October 2004. Mr. Taylor was represented by counsel and solicitors: cf. Davidson (Liquidator Larkhall Collieries Limited) (1906) 13 S.L.T. 752; Hamilton and others v Naviede [1995] 2 A.C. 75, Lord Browne-Wilkinson at page 101.

[6]Mr. Taylor took the oath and answered questions about various matters. When the line of questioning focused on the disposal of heritable properties to Gowrie Homes Limited, his counsel took an objection on the basis that Mr. Taylor had a right not to incriminate himself. It was submitted that Mr. Taylor could not be compelled to answer questions relating to the disposals. The court was further advised that Mr. Taylor would prefer not to answer such questions. Mr. Beynon's motion was that Mr. Taylor should be given the standard warning that he was not obliged to answer any question if in so doing he might incriminate himself.

[7]Counsel for the liquidator, on the other hand, contended that any privilege against self-incrimination had been abrogated by section 236 of the Insolvency Act 1986. A debate then took place, outwith Mr. Taylor's presence.

Submissions on behalf of the examinee

[8]Mr. Beynon, on behalf of Mr. Taylor, submitted that the question of self-incrimination during investigatory proceedings in terms of section 236 had been considered extensively and authoritatively by courts in England, but had yet to be ruled upon by courts in Scotland.

[9]Prior to the Human Rights Act 1998, the leading authority was Bishopsgate Investment Management Limited v Maxwell [1993] Ch. 1, [1992] 2 W.L.R. 991. The Court of Appeal there held that any privilege against self-incrimination had been abrogated by section 236 of the Insolvency Act 1986. Reference was made to pages 30-32, 46-48, and 60-63 in Bishopsgate.

[10]Following upon the coming into force of the human rights legislation, the House of Lords had occasion to reconsider matters in R. v Hertfordshire County Council, ex parte Green Environmental Industries Limited [2000] 2 A.C. 412. In that case, Lord Hoffmann held that the serving of a notice under the Environmental Protection Act 1990 requiring the occupier of land to provide certain information did not constitute criminal proceedings, but rather an investigatory exercise conducted as part of a regulatory process. In any subsequent criminal proceedings, any information obtained in terms of the notice could be ruled inadmissible by the trial judge in terms of section 78 of the Police and Criminal Evidence Act 1984.

[11]Reference was then made to Palmer, Company Law, Volume 3, paragraphs 15.316.7 to 15.316.8, where the authors gave their view that even someone charged with criminal proceedings in connection with the running of a company was compelled to answer questions relating to the company.

[12]Accordingly the position in England seemed settled. If the present proceedings had been commenced in England, Mr. Taylor would be obliged to answer all questions, without any warning. However matters were less clear in Scotland. There were some significant differences between English law and Scots law in the context of corporate insolvency and individual bankruptcy. For example, in the context of corporate insolvency, there was no equivalent in Scotland to section 78 of the Police and Criminal Evidence Act 1984. By contrast, in the context of individual bankruptcy, there was in Scotland a statutory protection in the form of section 47(3) of the Bankruptcy (Scotland) Act 1985. That section provided greater protection to examinees on oath in Scotland, in that there was a prohibition against using the information given by the examinee in any subsequent criminal proceedings against him (except proceedings for perjury). The issues were clearly focused in McKenzie-Skene, Insolvency Law in Scotland (1999) pages 227 to 228.

[13]Mr. Beynon submitted that in view of the differences between the insolvency and bankruptcy laws in England and Scotland, section 236 should be construed differently in Scotland. Bearing in mind (i) the greater protection available in individual bankruptcies in Scotland provided by section 47(3) of the 1985 Act; and (ii) the lack of protection in corporate insolvencies in Scotland equivalent to the protection provided in England by section 78 of the Police and Criminal Evidence Act 1984, the proper construction of section 236 of the Insolvency Act 1986 in Scotland was that it did not abrogate the privilege against self-incrimination. Mr. Taylor should therefore be allowed the same protection as an examinee under the Bankruptcy (Scotland) Act 1985. On that basis, the court was invited to give the examinee the standard warning that he was not obliged to answer any question if in so doing he might incriminate himself.

[14]At a later stage in the debate, Mr. Beynon confirmed that, standing the views expressed by Lord Hoffmann in R. v Hertfordshire County Council, cit. sup., it was conceded that the investigatory proceedings into the affairs of TSP in terms of section 236 did not engage Article 6 of the European Convention on Human Rights.

Submissions on behalf of the liquidator

[15]Mr. Holroyd, advocate, on behalf of the liquidator, noted that there appeared to be no Scottish decision directly in point. In England, the law required an examinee under section 236 to answer questions even if the answers were incriminating. Counsel submitted that Scots law should likewise require an examinee to answer, whether or not there was a risk of self-incrimination. The Insolvency Act 1986 was a United Kingdom statute. It would be inappropriate to have one construction of section 236 in England, and a different construction in Scotland.

[16]It was clear that parliament could abrogate any privilege against self-incrimination. It was parliament's intention to make officers of a company assist in an inquiry into the company's affairs, even although there might be a risk of self-incrimination. Reference was made to Bishopsgate, cit. sup., particularly Dillon L.J. at pages 18, 21, 24, 30-31, Stuart-Smith L.J. at pages 46-47, and Mann L.J. at pages 60-62.

[17]In Hamilton and others v Naviede [1995] 2 A.C. 75, Lord Browne-Wilkinson analysed the patchy nature of the protection afforded by the Criminal Justice Act 1987. It was nevertheless held that the fact that someone might not benefit from the Act's protection did not necessarily mean that transcripts obtained under section 236 proceedings should not be released. With reference to the dicta of Lord Hoffmann at pages 419 to 423 of R. v Hertfordshire County Council, cit. sup., counsel invited the court to conclude that even if Article 6 of the European Convention on Human Rights was engaged, there was good reason to apply Lord Hoffmann's reasoning to an inquiry conducted in terms of section 236. In any event, there was a measure of protection afforded to the examinee by the presence of a judge: the examinee was arguably in a less vulnerable position in a section 236 procedure than he might be in other forms of investigative procedure. Also the decision of the Court of Appeal in Official Receiver v Stern [2000] 1 W.L.R. 2230 suggested that the use of compelled evidence was not necessarily precluded by Article 6. Reference was made to pages 2241, 2244 to 2245, 2248, and...

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