Law Report: 10 February 1998; Policy on compelled evidence upheld on appeal

The policy of the Secretary of State for Trade and Industry to use, in proceedings for the disqualification of company directors, evidence obtained under compulsion pursuant to section 434 of the Companies Act 1985, was not irrational, unreasonable or inconsistent.

Regina v Secretary of State for Trade and Industry, ex parte McCormick; Court of Appeal (Lord Justice Morritt, Lord Justice Waller and Sir Christopher Staughton) 5 February 1998

The Court of Appeal dismissed the appeal of David Austin McCormick against the dismissal by Rimer J of his application for judicial review of the decision of the Secretary of State for Trade and Industry to rely on transcripts of evidence given by him under compulsion of law to inspectors appointed under sections 432 and 433 of the Companies Act 1985 (Law Report, 15 January 1998).

The appellant had been a director of Atlantic Computers plc, Atlantic Computer Systems plc and British and Commonwealth Holdings plc, which were investigated under the 1985 Act. During the investigations the appellant was ob-liged, by virtue of section 434 of the Act, to give oral evidence to the inspectors. Following the inspectors' report, the Secretary of State instituted proceedings under the Company Directors Disqualification Act 1986 against the appellant, on the ground that his conduct in relation to all three companies rendered him unfit to be concerned in the management of a company. The appellant sought judicial review of her decision to rely, in the disqualification proceedings, on transcripts of his evidence.

Matthew Collings (Peters & Peters) for the appellant; A.W.H. Charles and James Eadie (Treasury Solicitor) for the Secretary of State.

Lord Justice Morritt said that the grounds for the application for judicial review stemmed from the decision of the European Court of Human Rights in Saunders v United Kingdom [1977] BCC 872 that the use, in criminal proceedings, of compelled evidence given to inspectors under section 434 of the Act infringed article 6.1 of the European Convention on Human Rights. In consequence of and since that decision, the Secretary of State had formed and applied a policy of not using against the accused in criminal proceedings transcripts of compelled evidence given by him to inspectors, whether before or after he was charged.

It was the appellant's contention that it was irrational, unreasonable, inconsistent and contrary to the requirements of good public administration not to apply to proceedings for disqualification the same policy as was applied in the case of criminal charges, so as to abstain from using compelled evidence.

He argued that the application for a disqualification order involved a "criminal charge" within the meaning of article 6.1 of the Convention. It was established by the jurisprudence of the European Court of Human Rights that proceedings classified by domestic law as criminal must be treated as criminal for the purposes of article 6.1. If they were not so classified the question would depend upon the nature and severity of the penalty to which those who committed the relevant act were liable.

A person subject to a disqualification order was not prevented from carrying on any commercial activity in his own name (save those of a receiver, liquidator or company promoter, etc). Its effect was to remove the privilege of doing so through a limited company. Although those consequences were severe and had been described as penal, they did not involve a deprivation of liberty, livelihood or property. It was clear that the Secretary of State was not bound to treat disqualification proceedings as if they involved a criminal charge rather than the determination of civil rights and obligations.

There was nothing irrational, unreasonable or inconsistent in the Secretary of State's decision. The judge had been right to dismiss the application for judicial review.

- Kate O'Hanlon, Barrister