THIRD SECTION

DECISION [Note1]

AS TO THE ADMISSIBILITY OF

Application no. 38172/97 by W.G.S. and M.S.L.S.

against the United Kingdom

The European Court of Human Rights ( Third Section ) sitting on 23 November 1999 as a Chamber composed of

Mr J.-P. Costa, President , Sir Nicolas Bratza Mr L. Loucaides, Mr P. KÅ«ris, Mr W. Fuhrmann, Mrs H.S. Greve, Mr K. Traja, judges ,

and Mrs S. Dollé, Section Registrar ;

Having regard to Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms;

Having regard to the application introduced on 30 January 1997 by W.G.S. and M.S.L.S. against the United Kingdom and registered on 9 October 1997 under file no. 38172/97;

Having regard to the report provided for in Rule 49 of the Rules of Court;

Having deliberated;

Decides as follows:

THE FACTS

The first applicant is a citizen of Austria and of the United States of America. He was born in Hungary in 1935 and is currently living in London, England.

The second applicant, the first applicant’s son, is a British national, born in 1962 and living in London.

Both applicants are represented before the Court by Isadore Goldman, Solicitors, London, and by Mr J.P. Gardner, a lawyer practising in London.

The facts of the case, as submitted by the applicants, may be summarised as follows.

A. Particular circumstances of the case

The applicants were directors of the Kensington Property Management Ltd (Kensington), which was responsible for managing various companies operating in the property investment sector. As a result of the property collapse from 1989 onwards, Kensington’s various sources of property-based income suffered and it ceased trading in January 1993. Kensington was placed into Creditors’ Voluntary Liquidation on 17 February 1993.

The management functions of Kensington were thereafter carried out by Westminster Property Management Ltd (Westminster) of which the applicants became directors on 13 February 1990. In 1994 Westminster agreed a schedule of payments of outstanding income tax but as trading conditions continued to deteriorate the agreed schedule of conditions could not be met and on 15 August 1994 the Inland Revenue presented a winding up petition to the court and a winding-up order was made on 26 October 1994.

The Secretary of State for Trade and Industry subsequently appointed an Official Receiver who became Liquidator on an interim basis. As such, he had various obligations under the provisions of the Insolvency Act 1986 (“the 1986 Act”) to look into the affairs of Westminster and in particular its causes of failure.

The applicants, as well as a number of officers of companies within Westminster’s management remit, were interviewed by an Examiner from the Official Receiver’s Office in connection with Westminster’s affairs. The persons interviewed were required to give written statements.

The first applicant was interviewed on 9 January and 12 December 1995 and the second applicant on 7 February and 15 December 1995. The statements were given pursuant to the provisions of sections 131, 132 and 235 of the 1986 Act. The first applicant states that the first interview was unfair and oppressive and that the questioning was conducted in a peremptory and police-like manner. He was not advised that he had the right to have a legal adviser during interview. The first applicant signed a written statement in connection with this interview on 31 January 1995. He was accompanied by his solicitor at the second interview.

The second applicant also states that his first interview was conducted in an oppressive, intense and accusatory manner. He was not informed of his right to have his lawyer present at the interview and many of the questions put to him were not within his personal knowledge. His solicitor was present at the second interview, which was conducted smoothly, speedily and in a dignified and business-like manner.

On 24 October 1996 the Official Receiver acting on behalf of the Secretary of State issued proceedings against the applicants under the Company Directors’ Disqualification Act 1986 (“the CDDA”) asserting that they were unfit to be company directors and should be disqualified from that competence.

The proceedings were founded on a report made to the court by the Deputy Official Receiver on 23 October 1996 which drew extensively on the statements made by the applicants in interviews as well as materials which they and others produced to the Examiner acting under compulsory powers.

On 6 November 1996 a national newspaper published an article stating that proceedings had been issued against the applicants on 24 October 1996.

The disqualification proceedings were served on the applicant on 7 or 8 November 1996 and alleged, inter alia , that the applicants allowed Kensington and Westminster to continue to trade without there being any commercial prospect of the companies meeting their liabilities, misapplication of company funds and unlawful payments to directors. The applicants state that the criticism levelled against them is based on information obtained unfairly in the exercise of compulsory powers and that difficulties which Kensington and Westminster encountered are to be explained in terms of the exceptional cash flow problems due to market forces at the relevant time.

B. Relevant domestic law

Appointment etc. of official receivers under the Insolvency Act 1986

Section 399 of the Insolvency Act 1986 states:

“(1) For the purpose of this Act the official receiver, in relation to any bankruptcy or winding up, is any person who by virtue of the following provisions of this section or section 401 below is authorised to act as the official receiver in relation to that bankruptcy or winding up.

2) The Secretary of State may (subject to the approval of the Treasury as to numbers) appoint persons to the office of official receiver … .

(3) Where a person holds the office of official receiver, the Secretary of State shall from time to time attach him either to the High Court or to a county court having jurisdiction for the purposes of the second Group of Parts of this Act.

(4) Subject to any directions under subsection (6) below, an official receiver attached to a particular court is the person authorised to act as the official receiver in relation to every bankruptcy or winding up falling within the jurisdiction of that court.  ...”

Company’s statement of affairs

Section 131 of the Act reads:

“(1) Where the court has made a winding-up order or appointed a provisional liquidator , the official receiver may require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.

(2) The statement shall be verified by affidavit by the persons required to submit it and shall show              ...

(e) such further or other information as may be prescribed or as the official receiver may require.

(3) The persons referred to in subsection (1) are

(a) those who are or have been officers of the company;   ...

(7) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he is liable to a fine and, for continued contravention, to a daily default fine. ...”

Investigation by the official receiver

Section 132 provides:

“ (1) Where a winding-up order is made by the court in England and Wales, it is the duty of the official receiver to investigate

(a) if the company has failed, the causes of the failure; and

(b) generally, the promotion, formation, business, dealings and affairs of the company,

and to make such report (if any) to the court as he thinks fit.

(2) The report is, in any proceedings, prima facie evidence of the facts stated in it.”

Section 235 provides:

“(1) This section applies as does section 234; and it also applies, in the case of a company in respect of which a winding-up order has been made by the court in England and Wales, as if references to the office-holder included the official receiver, whether or not he is the liquidator .

(2) Each of the persons mentioned in the next subsection shall

(a) give the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require, and

(b) attend on the office-holder at such times as the latter may reasonably require.  …

(5) If a person without reasonable excuse fails to comply with any obligation imposed by this section, he is liable to a fine and, for continued contravention, to a daily default fine.”

Section 5 of the Perjury Act 1911

Section 5(c) of the Perjury Act 1911 makes it a criminal offence for any person knowingly or willingly to make a statement that is false in a material respect if that person is required to provide an oral declaration or an oral answer under or in pursuance of a Public General Act of Parliament for the time being in force.

The Company Directors Disqualification Act 1986 gives power for the disqualification of directors of companies who are regarded as unfit.

Section 1 reads:

"(1) ... a court may, and under Section 6 shall, make against a person a disqualification order, that is to say an order that he shall not, without leave of the court

(a) be a director of a company, or

(b) be a liquidator or administrator of a company, or

(c) be a receiver or manager of a company's property, or

(d) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company,

for a specified period beginning with the date of the order.  ...

(2) In each section of this Act which gives to a court power or, as the case may be, imposes on it the duty to make a disqualification order, there is specified the maximum (and, in section 6, the minimum) period of disqualification which may or (as the case may be) must be imposed by means of the order.

(3) Where a disqualification order is made against a person who is already subject to such an order, the periods specified in those orders shall run concurrently.

(4) A disqualification order may be made on grounds which are or include matters other than criminal convictions, notwithstanding that the person in respect of whom it is to be made may be criminally liable in respect of those matters. ...”

Section 6 provides:

“(1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied  -

(a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and

(b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.  …”

Rule 3 of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 reads as follows:

“(1) There shall, at the time when the summons is issued, be filed in court evidence in support of the application for a disqualification order, and copies of the evidence shall be served with the summons on the respondent.

(2) The evidence shall be by one or more affidavits, except where the applicant is the official receiver, in which case it may be in the form of a written report (with or without affidavits by other persons) which shall be treated as if it had been verified by affidavit by him and shall be prima facie evidence of any matter contained in it.

(3) There shall in the affidavit or affidavits or (as the case may be) the official receiver’s report be included a statement of the matters by reference to which the respondent is alleged to be unfit to be concerned in the management of a company.”

COMPLAINTS

The applicants complain that the proceedings taken against them under the Company Directors’ Disqualification Act 1986 (“CDDA”) are essentially penal in nature, as is confirmed by the growing recognition by the domestic courts of the particular character of the proceedings even if they do not specifically classify them as criminal. They maintain that since the proceedings continue to be considered civil proceedings, they are denied the protection of a fair trial as guaranteed under Article 6 § 1 of the Convention, and in particular the safeguards of Article 6 §§ 2 and 3.

With reference to the Court’s Saunders v. the United Kingdom judgment of 17 December 1996 ( Reports of Judgments and Decisions 1996-VI, p. 2044), the applicants assert that their right to silence and their privilege against self-incrimination were violated on account of the fact that they, like others, were obliged on pain of sanction to provide statements and written materials to the Examiner acting under the compulsory powers conferred on him by section 235 2A of the Insolvency Act 1986. The information so collected formed the basis of the report which led to the instigation of the disqualification proceedings. Further, that report is deemed to be prima facie evidence of the information, including hearsay information, contained therein.

The applicants state that the effect is to compel them to file evidence rather than wait and see whether the prosecution may or may not establish a case against them without such evidence and to make the product of compulsory interviews admissible in the proceedings against them despite the use of compulsory powers to obtain the material and the fact that such evidence would normally be excluded because it is indirect, hearsay evidence.

The applicants invoke Article 6 § 1 with respect to the above complaints.

The applicants rely on Article 6 § 2 of the Convention. They maintain, inter alia , that the civil burden of proof applies to the determination of whether or not the unfitness of a person to act as a company director has been established. The criminal standard of proof - beyond reasonable doubt - is inapplicable even though this is the standard which reflects the presumption of innocence and even though the consequences for them and what is at stake is of such importance. They highlight the evidentiary value of the report in the disqualification proceedings and how they are obliged to file evidence in reply to it, in breach of the principle of the presumption of innocence.

The applicants invoke Article 6 § 3(d) of the Convention. They maintain that since the evidence contained in the report is based on information acquired from them and others under compulsory powers, it cannot be tested in adversarial proceedings.

The applicants also rely on Article 1 of Protocol No. 1 to the Convention. They state that the disqualification proceedings, unfair as they are, give rise to substantial costs which will have to be borne by them if the Official Receiver wins his case. The applicants aver that such a deprivation of their possessions could only be justified if it was lawful. However, having regard to the unfairness of the proceedings from the standpoint of Article 6 of the Convention, it must be concluded that there has been an unlawful and disproportionate interference with their rights under this head.

The applicants further complain that the proceedings are a disproportionate interference with their right to respect for their private life and reputation. They invoke Article 8 § 1 of the Convention in this connection. They maintain, inter alia , that the proceedings were conducted in breach of Article 6. Having regard to the absence of safeguards and to the circumstances of the case, the interference with their right under Article 8 cannot be said to be either proportionate or in accordance with the law.

The applicants complain under Article 13 of the Convention with respect to the above complaints. They state, with reference to Article 6, that they are denied access to a court to review the procedural safeguards in the proceedings which constitute a determination of civil rights and obligations and, on the facts, of criminal charges against them, and that they have no effective remedy as regards the violations of the other Articles relied on.

THE LAW

1. The applicants submit that they are at the present time subject to proceedings which are structurally unfair and contrary to Article 6 of the Convention, which provides in relevant part:

“1. In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing ... .

2. Everyone charged with a criminal offence shall be presumed innocent until proved guilty according to law.

3. Everyone charged with a criminal offence has the following minimum rights: (..)

(d) to examine or have examined witnesses against him and to obtain the attendance and examination of witnesses on his behalf under the same conditions as witnesses against him; … .”

The applicants aver that their situation may be compared with a continuing situation of cumulative breaches of the presumption of the innocence and the right to a fair trial. Having regard to the fact that there is a growing number of disqualification proceedings initiated on the basis of the Official Receiver’s reports, the applicants state that there is a general interest in having at this stage a clear interpretation of the application of Article 6 to disqualification proceedings.

The Court notes that the proceedings of which the applicants complain have not yet been the subject of any judicial determination. It observes that the competence to make a disqualification order rests with the domestic court on the basis of the evidence put forward at a hearing. An appeal lies against the making of a disqualification order. In these circumstances the Court is led to conclude that this part of the application is premature and on that account is inadmissible as being manifestly ill-founded within the meaning of Article 35 §§ 3 and 4 of the Convention.

The Court’s conclusion in this respect is not affected by the applicants’ contention that they are already victims of a legislative regime which is unimpeachable in terms of domestic law yet incompatible with Convention standards of fairness. The acceptance of such an argument would not only give rise to an illegitimate intervention by the Court in any impending court proceedings against the applicants at the domestic level, it would also amount to impermissible speculation on the outcome of the fairness of those proceedings.

The Court would note in any event that it concluded in the case of D.C., H.S and A.D. v. the United Kingdom (application no. 39031/97; inadmissibility decision of 14 September 1999) that, having regard to the domestic classification of the alleged “offence”, its nature as well as the nature and degree of severity of the potential and actual penalty, the disqualification proceedings under the CDDA instituted against those applicants determined “civil rights” within the meaning of Article 6 § 1 of the Convention.

The Court stresses, however, that the fact that such proceedings are to be treated as regulatory civil proceedings and not criminal proceedings for the purposes of Article 6 § 1 does not remove from the applicants their right to a fair hearing. While Contracting States have greater latitude when dealing with civil cases concerning civil rights and obligations than they have when dealing with criminal cases, it is still incumbent on them to secure fairness in the determination of civil rights and obligations (see the Dombo Beheer B.V. v. the Netherlands judgment of 27 October 1993, Series A no. 274, p. 19, § 32-33). As the Court has already observed, it is not its function to anticipate as to whether or not that requirement will be respected in the instant case.

For the above reasons, the Court finds that the applicants’ complaint is premature and therefore, at this stage, manifestly ill-founded within the meaning of Article 35 §§ 3 and 4 of the Convention.

2. The applicants further maintain that their rights under Article 8 of the Convention have been violated by reason of the nature and conduct of the disqualification proceedings. Article 8 provides as relevant:

“1. Everyone has the right to respect for his private ... life ... .”

The applicants state that the mere existence of the disqualification proceedings has a direct impact on the applicants’ reputations. They refer in this respect to the publication in a national newspaper of a reference to proceedings being taken against the first applicant even though he had not been notified at the time of such.

The Court recalls that in the above-mentioned D.C., H.S. and A.D. v. the United Kingdom application, it noted the importance in modern economic life of public confidence in limited companies and it accepted that regulatory mechanisms to ensure respect for directors’ duties are one way of maintaining the necessary confidence. Having regard to the public nature of disqualification proceedings and to the role played by the applicants in corporate life, there is an inevitable public interest in the conduct and outcome of those proceedings. In so far as the applicants complain about press reporting on their case, it is open to them to invoke the law of defamation in order to vindicate their reputations.

For the above reasons the Court finds that the applicants’ complaints under this head are inadmissible as being manifestly ill-founded within the meaning of Article 35 §§ 3 and 4 of the Convention.

3. The applicants rely on Article 1 of Protocol No. 1 to the Convention in respect of the substantial costs which they have incurred and will continue to incur as a result of the disqualification proceedings. That provision states as relevant:

“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. ... .”

The Court recalls that it cannot speculate on the outcome of the disqualification proceedings and on the ultimate determination of the costs issue. It considers that the applicants’ complaint is premature and must be rejected as being manifestly ill-founded pursuant to Articles 35 §§ 3 and 4 of the Convention.

4. Finally, the applicants invoke Article 13 in relation to the above complaints which requires an effective remedy for Convention breaches.

The Court finds that in the absence of any “arguable claim” of a breach of a substantive right under the Convention (see the Boyle and Rice v. the United Kingdom judgment of 27 April 1988, Series A no. 131, p. 24, § 54), the applicants’ complaint under this head cannot be said to be sustainable. It follows that this part of the application is also to be rejected as being manifestly ill-founded pursuant to Article 35 §§ 3 and 4 of the Convention.

For these reasons, the Court, unanimously,

DECLARES THE APPLICATION INADMISSIBLE .

S. Dollé J.-P. Costa

Registrar President

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