Claimant v First Defendant & Ors [2012] EWHC 3214 (Ch)

[2012] EWHC 3214 (Ch)Case No HC11C02143
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 15/11/2012
Before
MR JUSTICE WARREN
Between
CLAIMANTClaimantFIRST DEFENDANTDefendantsAnd 9 other DefendantsDefendant
Charles Holbech (instructed by Messrs Tees) for ClaimantPenelope Reed QC (instructed by Hewitsons LLP) for 1 st DefendantHearing Hearing date: 7th November 2012
Judgment
[1]I have before me two related applications. One is by the Claimant (C) for permission to adduce in evidence a conviction of the First Defendant (D1); the other is by D1 for an order that C redacts from her witness statement reference to the conviction. Although these applications were heard in open court, it is best, I think that I anonymise the names of C and D1 until after the trial of the substantive action.[2]The underlying action is a probate action under which C challenges the apparent last will (the Will) of her mother (the Testatrix). D1 is her brother who fares better under the Will as compared with C than he did under an earlier will. It is alleged by C that D1 tricked their mother into signing the Will so that she lacked knowledge and approval or that he procured its execution by undue influence. The Will was properly witnessed and, no doubt, the evidence of the witnesses will be of significance in deciding whether or not she knew that the document which she was signing was a will.[3]D1 suffers from Parkinson’s disease which has affected his mental state. It is feared that his condition will be worse by the time the trial takes place. As the result of an order which I made some time ago, his evidence is to be taken by deposition. This was planned to take place last week but, unfortunately, he has been hospitalised for reasons nothing to do with his mental health and the deposition has had to be adjourned.[4]In her witness statement prepared for the trial, C refers to a conviction in the magistrates’ court of D1 for offences relating to National Insurance Contributions in relation to the affairs of a company of which he was a director and which I will explain in more detail in a moment. She also exhibits a contemporaneous newspaper article which contains a reference to that conviction.[5]The conviction was as long ago as 1995. It is a spent conviction (and has been for 12 years). Section 4(1) Rehabilitation of Offenders Act 1974 prevents reference being made to it in any civil proceedings unless the court allows it to be admitted. The rehabilitated person is to be treated as a person who has not committed or been charged with or prosecuted for or been convicted of or sentenced for the offence. It is not permissible to ask the rehabilitated person any question relating to his past which cannot be answered without acknowledging or referring to a spent conviction or the circumstances ancillary thereto.[6]Under section 7(3), the court has power, in some cases, to admit evidence relating to a spent conviction. The present case is such a case; the court has power to allow such evidence relating to D1’s conviction. The court may do so if it is “satisfied, in the light of any considerations which appear to it to be relevant (including any evidence which has been or may thereafter be put before it), that justice cannot be done in the case except by admitting or requiring evidence relating to a person’s spent convictions or to the circumstances ancillary thereto….”[7]D1’s conviction arose out of the provisions of sections 114 and 115 Social Security Administration Act 1992. As enacted at the time when D1 was convicted, section 114 provided that a person who failed to pay certain national insurance contributions under Part 1 Social Security Contributions and Benefits Act 1992 for which he was liable, was guilty of an offence. Section 115 provided that, in some circumstances, a director of a company which was liable under section 114 would also be liable for the offence as well. He could only be made liable where the company’s offence was “proved to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of” the director. It was not necessary to establish any sort of dishonesty on the part of the company or the director for an offence to be committed.[8]Amendments were made to section 114 which came into force on 6 April 1999. An offence under the amended provision arose only where the person was “knowingly concerned in the fraudulent evasion of any contributions which he or any other person is liable to pay”. Unlike under the old provision, a person could be guilty of an offence under section 114 even if he himself had no liability to pay contributions; but, in contrast with the old provision, he had to be concerned in fraudulent evasion of contributions. Although section 115 had been amended in 1996 to a minor extent, its application to an offence under section 114 remained unchanged: for a person to be guilty of an offence in that regard after 6 April 1999, there had to be fraudulent evasion of contributions and that offence (fraudulent evasion) had to have been committed with the consent or connivance of, or to be attributable to neglect on the part of the director concerned.[9]In the present case, the offence of which D1 was convicted arose under section 115 in respect of an offence by a company of which he was a director. The conviction was under the old versions of sections 114 and 115 and was, of course, several years before the new version of section 114 came into force.[10]In her witness statement in support of C’s application to admit evidence of D1’s conviction, her solicitor, Caroline Metcalfe, referred to the new version of section 114. D1 could not have been guilty of any offence under the old section 114 since he was not a person liable to pay contributions for which he, rather than the company was liable. But he could have been guilty of an offence under the old section 115 and that, indeed, seems to be what actually happened. But, as already mentioned, neither that section nor the old section 114 required dishonesty to be proved. It was, however, on the basis that D1 had committed an offence of dishonesty that C’s application was launched and this was the basis on which Mr Holbech (who appears for C) prepared his skeleton argument. In a supplemental skeleton argument lodged on the morning of the hearing, Mr Holbech concedes that the old section 114 made no reference to fraudulent evasion of contributions.[11]Notwithstanding his concession with the central plank of his original submissions removed, Mr Holbech nonetheless suggests that there was material to suggest that there was dishonesty or at least what he refers to as nefarious behaviour on the part of D1. He says that in reliance on three items.[12]The first item is a reference to the prosecution against D1 in Tolley’s National Insurance Contributions, 2012-13, para [22.14] which proceeds on the basis that the prosecution was brought under the old section 115 of the 1992 Act. That takes Mr Holbech nowhere in establishing dishonesty since sections 114 and 115 as they stood at the time of D1’s conviction did not require dishonesty to be shown.[13]The second item is a contemporaneous newspaper article in the Financial Mail on Sunday, 5 November 1995. The first part of the article is concerned with a crackdown by the Government of the day on “crooked directors who trick the State of millions of pounds” with the Secretary of State launching “a special team of investigators to stamp out so-called ‘phoenix companies’”. Reference is made to a blacklist of suspected fraudsters. The second part of the article referred to the “first successful criminal prosecution against the directors of a phoenix company”, going on to identify D1 and the company of which he was a director. The article states that he was convicted of six charges by the magistrates and fined the maximum £400 for each offence, as well as being ordered to pay contribution arrears in excess of £50,000.[14]The third item is a circular produced by D1 a few days later setting out his side of the story and his reaction to what he referred to as “libellous newspaper reports”. In that circular, he says this:
“In our case, there has not been any suggestion of incorrect behaviour, let alone fraudulent behaviour, and any suggestion that I or any other director behaved in a fraudulent manner is absolutely scandalous and gross libel”
. I do not know if libel proceedings were threatened or commenced. Later in the circular, he identified, correctly, what the legislation provided, namely that “the DSS has only to show that a director or executive knew, or should have known, that monies were outstanding or overdue to the DSS and unpaid, for such directors to be held personally responsible to pay the unremitted contributions, and pursued through the local Magistrates Court”.[15]As to the second of those items, Mr Holbech suggests that it is evidence of dishonesty of the part of D1. Insofar as that submission is based on the reference to “crooked directors” who “trick” the State out of money, I reject it. It cannot sensibly be suggested, in my view, that a conviction of D1 under section 115, even if the maximum fine was imposed, shows that he was “crooked” and had set out to “trick” the State out of money.[16]Mr Holbech goes on to say this:
“…it seems that [D1] was successfully prosecuted on the basis that a company, of which he was a director, had not paid National Insurance contributions when due and that he was responsible for such an evasion of tax, having closed down that company, and set up a new phoenix company. It is submitted that such conduct amounts to subterfuge and is dishonest. No doubt, this is reflected in the fact that maximum fines were imposed”
. There is, in fact, no evidence that the maximum fines were imposed other than the statement to that effect in the newspaper article. It has not, however, been suggested on behalf of D1 that this is wrong and for present purposes I shall assume it to be the fact.[17]I do not accept Mr Holbech’s submission. It is wrong to say that D1 was responsible for an evasion of tax. In the context of tax (or national insurance contributions) the use of the word “evasion” carries with it a connotation of dishonesty. If there has been a failure to pay tax because of dishonesty, then it is accurate to describe what has taken place as evasion. But if tax has not been paid because a company has become insolvent through adverse trading, leaving creditors, including HMRC, unpaid, there is not necessarily dishonesty: and if there is no dishonesty, there is no evasion. To accuse D1 of evasion is to beg the very question at issue, namely whether he was dishonest. It is true that the company with which D1 was concerned went into administrative receivership and then into liquidation, with a new company then continuing the trade of the liquidated company. In that sense, there was a “phoenix company”. But that sequence of events does not mean that there was necessarily dishonesty involved. It does not even demonstrate that there was any subterfuge: so far as the evidence shows, nothing was hidden.[18]Moreover, even accepting that the maximum fines were imposed, the mere reporting of the conviction, albeit in the context of an article about crooked directors and phoenix companies, does not amount to evidence that any suggestion of dishonesty had been made to the magistrates.[19]As to the third of those items, D1 was, perhaps, putting his case rather high in saying that there had not been any suggestion of incorrect behaviour since his conduct led to a conviction under section 115. Whether or not any fraudulent behaviour was alleged before the magistrates, I do not know. There is certainly no evidence that it was alleged.[20]D1’s conviction under section 115 is, of course, not inconsistent with his having been dishonest. But nor is it inconsistent with his having been entirely honest. Accordingly, the mere fact of the conviction does not lend any support to the proposition that he was dishonest.[21]In my judgment, therefore none of the three items relied on by Mr Holbech supports the conclusion that D1 was dishonest.[22]Both sides rely on the decision of the Court of Appeal in Thomas v Commissioner of Police of the Metropolis [1997] 1 All ER 747 in support of their respective conclusions. In that case, the plaintiff was tried in the magistrates’ court (where he was acquitted) on a charge of threatening behaviour. He brought an action for damages for assault, damage to property, false imprisonment and malicious prosecution in relation to the circumstances of his arrest. The judge, in the absence of the jury, ruled that two previous convictions could be put to him in cross-examination. Both convictions were spent convictions for the purposes of the 1994 Act. One was for unlawful wounding in 1980 for which he had been given a suspended prison sentence. The other was for criminal damage in 1993 for which he had been fined. When the jury returned, the two convictions were put to him and he admitted them. The jury found for the plaintiff on his claims for assault and damage to property and for the defendant on the claims for false imprisonment and malicious prosecution. The plaintiff appealed, contending that the evidence of spent convictions should have been admitted in evidence only if they were relevant to an issue in the case and not where they were relevant merely to credit.[23]The court was unanimous in dismissing the appeal; but they did not speak with one voice. Sir Richard Scott V-C emphasised the requirement of section 7(3) that justice cannot be done except by admitting the evidence. He acknowledged that a spent conviction might show a propensity of the individual to do or omit to do some act, the commission or omission of which was an issue in the case. And he acknowledged that a spent conviction and the circumstances surrounding it might cast light on an aspect of the individual’s character, such as dishonesty, which was of relevance to an issue in the case. On the facts of the case before him, he considered that the judge should not have admitted evidence of the spent convictions. The judge, he noted, had allowed in the offences for the reason that the plaintiff appeared to be well-spoken and respectable which might, in view of the convictions, have been seen as a misrepresentation of his character to the jury. His view was that that was insufficient to satisfy the statutory criterion. Thus, it had not been suggested that the plaintiff’s convictions were probative of any issue in the case; nor had it been suggested that they were relevant to his credibility in the sense that they showed him to be a man who had previously lied in giving sworn testimony or to be a man who had dishonest tendencies. In relation to that he said this at p756a: “In what sense then could it be said that the convictions were relevant to credit? I do not see what answer could be given unless it be said that the status of an individual is relevant to his credit and that a person who has suffered a spent conviction in the past is not entitled to present himself as a respectable upright citizen. This is an answer which I would have no hesitation in rejecting. If [the plaintiff]’s case had been tried before a judge alone I cannot believe that any judge would have placed weight on those spent convictions when deciding whether to believe [the plaintiff] or the police officers. If a judge would not have done so, how could it be said that ‘justice cannot be done’ unless those spent convictions were admitted?[24]Later, at p757j, he said this:
“….Section 4(1), subject to the section 7(1) exceptions, is intended to allow an individual whose convictions are spent ‘to present himself as a person of good character’ (See Talbot J in R v Nye). It cannot, in my judgment, be a sufficient reason for holding the section 7(3) test to be satisfied that the individual is so presenting himself. In a civil case in which spent convictions have no probative value on any issue in the case and do not provide any rational support for a suggestion that the individual might not be telling, or might not have told, the truth on one or other issue in the case, the fact that individual’s evidence or the nature of the case sued on involve imputations on the character of the other part or other witnesses in the case does not, in my judgment, justify admitting the spent convictions into evidence. That fact does not meet the test that ‘justice cannot be done except’ by admitting the evidence.”
[25]He nonetheless dismissed the appeal because he did not consider that there should be a new trial, not being of the view that the jury’s knowledge of the convictions had occasioned any substantial wrong or miscarriage of justice.[26]Evans LJ reached a different conclusion on whether the judge was right to admit the evidence. He acknowledged (see p762b-c) that under section 7(3) there is a “strong presumption against permitting cross-examination or admitting the evidence” although noting also that “the section also emphases that the discretion is a broad one”. He held (see p764b) that “it would be wrong to restrict the scope of the judge’s discretion under section 7(3) except by reference to the words of the statute – the interests of justice – and equally wrong to limit the facts which he may properly take into account – any consideration which appear to him to be relevant.[27]In contrast with the Vice-Chancellor, he considered (see p764g) that the question raised by section 7(3) “has to be answered by the judge, although it is not a matter of law, nor can it be answered by logic or by any process of reasoning alone. A negative answer would be required, in my judgment, where the previous conviction was so obviously irrelevant both to the issue in the case and the moral standing of the witness that a reasonable jury could not properly take it into account when deciding whether to believe him or not. But the interests of justice are synonymous with a search for the truth, and the judge has to recognise that a reasonable jury may take a wide range of factors into account when deciding which witnesses to believe and therefore where the truth lies. It is also his responsibility, in my judgment, to consider whether the likely significance of the fact of a previous conviction in the jury’s eyes is such that they may be unfairly prejudiced against the witness in question, when deciding whether to accept his evidence or not….. In summary: some degree of relevance, including relevance to credit, is a sine qua non requirement for admitting evidence. If it has any relevance, then it has some potential for prejudice. The degree of relevance can be weighed against the amount of prejudice, and other factors may be taken into account. The judge must be satisfied that the parties will not have a fair trial, or that a witness’s credit cannot be fairly assessed, unless the evidence is admitted. The statutory exclusion does not apply if, in his view, the interests of justice otherwise dictate.”[28]Saville LJ started by referring to the submissions of Lord Gifford QC who appears for the plaintiff to the effect that the judge was wrong to conclude that justice could not be done otherwise than by admitting the evidence. The judge said this at p 766b:
“To my mind that submission can only be correct if the evidence of the spent convictions had so little relevance to the issue of credibility that its exclusion from the trial could not properly have made any material difference to the outcome. If the evidence could properly have made a material difference, then it seems to me self-evident that justice indicates that it should not be excluded…. In my view, the only escape route from this would be if it could be shown not only that the evidence could not properly have made a material difference, but also that the jury might well have unreasonably or perversely thought it did….”
[29]Although that was his statement of principle, some discomfort with the judge’s actual decision is perhaps to be found later, where at p766h, he said this:
“It is possible that I might myself have excluded the evidence on the grounds that it had little or no relevance to the credibility of the plaintiff; but since I accept that others could reasonably hold the opposite view, it seems to me that it would be wrong to substitute this possible view for that held by the judge who had the advantage, which I do not, of actually conducting the trial and thus of being able better to judge what justice required to be done.”
[30]In the present case, the preferable course, other things being equal, might have been for the question of admissibility to have been dealt with by the trial judge who would be in a better position than I am to assess whether cross-examination of D1 on this issue would be of any relevance (and who could be relied on not to place any weight on the evidence of the actual conviction if he considered it irrelevant). Unfortunately, in the light of D1’s state of health, this issue has to be resolved before the trial.[31]In my judgment, evidence of the conviction should not be admitted whether one adopts the approval of the Vice Chancellor, or that of Evans LJ or that of Saville LJ. For the reasons which I have given, I do not consider that the conviction provides any support for the proposition that D1 was dishonest in relation to the non-payment of national insurance contributions by the company of which he was a director. Accordingly, there is no tenable argument in favour of its admissibility on the grounds that it demonstrates a relevant propensity on the part of D1.[32]Further, I do not consider that the conviction, as such, is of any, or any but the slightest, relevance to his credit. The conviction, of itself, provides no indication of the circumstances under which the company failed to pay the contributions for which it was liable. The failure might have been a matter for censure, but it might have been entirely innocent and forced on it by unfortunate adverse trading conditions.[33]Since the conviction does not, of itself indicate dishonesty or any moral turpitude on the part of D1, it would be wrong, in my judgment, to allow it to be admitted in evidence or to be relied on as the basis for questions of D1 in cross-examination. I do not, in saying this, intend to say anything about permissible lines of cross-examination going to propensity or credit. My decision does not preclude D1 being asked questions relating to his past provided they can be answered without acknowledging or referring to the spent conviction (although general principles of relevance may preclude particular lines of questioning). My decision is limited to a refusal to allow admission of evidence relating to the spent conviction or any circumstances ancillary thereto.[34]It follows(i) that I dismiss the Claimant’s application to admit evidence of D1’s spent conviction and(ii) allow D1’s application to have reference to that convictions redacted from her witness statement.

Cited in 1 later judgment