England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM CHANCERY DIVISION (IN BANKRUPTCY)
(HIS HONOUR JUDGE KAYE QC)

		Royal Courts of Justice Strand, London, WC2A 2LL
		18th March 2009

Lord Justice Ward:

1. Mr Michael Rottmann is a German citizen. It is alleged against him that in the late 1980s he and others participated in a huge fraud by taking advantage of opportunities presenting themselves on the reunification of the former German Democratic Republic and the Federal Republic. He, as I understand it, privatised an East German company which subsequently folded. Civil proceedings were taken against him and summary judgment was eventually entered in a sum of about €57 million. In 1985 he fled from Germany and came to the United Kingdom and he has remained here ever since. Warrants for his arrest have been issued and he is technically on bail. There are extradition proceedings which may still be unresolved to secure his return to Germany to face the criminal prosecutions which were instituted against him in about February of 2001. Those proceedings in Germany will collapse with the passage of time, because in Germany, as in other continental countries, there is a time bar on criminal proceedings, and they will come to an end at the end of this year. The matters before us arise because in September 2005 Mr Rottmann was adjudged to be bankrupt and in that bankruptcy he has disclosed virtually no assets. Efforts by the trustee in bankruptcy to find out what has happened to his assets and their present whereabouts have met with blank refusals of cooperation.
2. Freezing orders have been made against him. Search and seizure orders have been made against him, but no more then €10,000 has been recovered as a result. In the many trips to the bankruptcy court since 2005 Blackburn J has on one such occasion remarked that Mr Rottmann has:

"…played ducks and drakes with his trustee in bankruptcy and with those who are seeking to obtain redress for his previous wrongs."

3. It may therefore be little surprise that on 8 October 2007 Mr Rottmann was eventually ordered to attend on 23 November 2007 for the purpose of his being publicly examined. The procedure for such an examination is prescribed by rule 6.175 of the Insolvency Rules of 1986 to this effect:

"Procedure at hearing

(1) The bankrupt shall at the hearing be examined on oath; and he shall answer all such questions as the court may put, or allow to be put, to him […]

(4) There shall be made in writing such record of the examination as the court thinks proper. The record shall be read over either to or by the bankrupt, signed by him, and verified by affidavit at a venue fixed by the court.

(5) The written record may, in any proceedings (whether under the Act or otherwise) be used as evidence against the bankrupt of any statement made by him in the course of his public examination.

(6) If criminal proceedings have been instituted against the bankrupt, and the court is of opinion that the continuance of the hearing would be calculated to prejudice a fair trial of those proceedings, the hearing may be adjourned."

4. On 23 November 2000 Mr Rottmann duly applied for such an adjournment based on advice given to him by his German lawyers. He has submitted that if he were compelled to answer questions at a public examination, a transcript of those answers could be supplied to the German prosecuting authorities and used against him in his criminal trial in Germany. That, he submits, would infringe his right not to incriminate himself and would infringe the rights guaranteed to him under article 6 of the European Convention of Human Rights, the guarantee of a fair trial. That application was heard by HHJ Kaye QC, sitting as a judge of the High Court on 20 May 2008, and the judge ordered that the public examination be suspended until further order upon condition that Mr Rottmann do attend the court for a private examination to be conducted before a High Court judge at a time to be fixed. Mr Rottmann sought permission to appeal that order. It was refused by Lloyd LJ but renewed orally before Mummery LJ, and on 12 November 2008 Mummery LJ further adjourned the application to be heard by this full court with the appeal to follow if permission had been granted.
5. The gist of the judgment under appeal is to be found in these paragraphs of the judgment: HHJ Kaye said in paragraph 28:

"How, therefore, is the discretion which I have to adjourn the public examination under rule 6.175 to be exercised here? I have to balance the rights of Mr. Rottmann on the one hand and the interests of creditors and the trustee on the other. There is also the public interest, because a public examination was ordered which gives creditors the rights and attendance at examination of the bankrupt: see Insolvency Act 1986, section 290(4)(d). It seems to me, however, that Mr. Rottmann can be protected to some extent on the one hand and the trustee's legitimate rights fulfilled on the other by ordering a private examination under section 366.

29. Mr. Davenport has said that he would prefer a public examination but, as an alternative, he would support a private examination. There is no doubt that the court has extensive powers on such an examination as a consideration of the provisions under section 366 and 367 of the Insolvency Act and the relevant Insolvency Rules 9.3 to 9.4 show. So far as the latter is concerned, the court has extensive powers over the use of the material, information and transcripts obtained at or in consequence of such an examination.

30. In normal circumstances, the power of the court to order a private examination under section 366 follows from an application made by, for example, by the trustee. It seems to me that if I have got power to adjourn the public examination in this case under rule 6.175, I have power to adjourn it on terms, which might include the requirement of the trustee, an officer of this court, to make, if necessary, a proforma application under section 366. I do not, for my part, think that the trustee in this case will be forced to do that. I have very little doubt that as an officer of the court, if I direct it, and that the trustee's interests were to be satisfied in this case by a private examination under section 366, then such could, should and would be held.

31. In a private examination, it seems to me that the court could control the transcript and the use of the transcript and copies of the transcript, if necessary, in a most Draconian way, for example, by ensuring that no copy of the transcript was placed on the court file, thus meeting one of Mr. Rottmann's concerns that even if the transcript was locked up, somebody might apply for it to be unlocked; so they might. I cannot cover every eventuality. At the end of the day, I have, as I mentioned, to conduct a balancing exercise. At least provisions of the kind set out in Rules 9.4 to 9.5 could go some way to ensuring that the transcript remained private, for example, until conclusion of the eighteen month period desired by Mr. Rottmann. If a problem arose, no doubt application could be made to the court.

32. I do not forget the small disadvantage to creditors generally who would thereby lose their right to attend at a public examination and ask questions of Mr. Rottmann. This is to be balanced against Mr. Rottmann's human rights, not to self-incriminate himself, at least in jurisprudential theory even if the rule does not apply to foreign criminal proceedings. It also seems to me to serve the trustee's interest of obtaining information. At the conclusion of the eighteen month period, the public examination could still be held and the bankrupt could be asked to confirm his answers at the public examination at which creditors could attend."

6. So with the added safeguard of directing that the private examination be heard by a judge of the High Court he made the order which I have already recited.
7. The issue for HHJ Kaye and also for us is, as defined by Rule 6.175(6), whether the continuance of the public hearing would be calculated to prejudice a fair trial of the criminal proceedings instituted against the bankrupt. The first question, it seems to me, which then falls for consideration is: what will result from the continuance of that hearing should it go ahead? That is of course a hypothetical question. We do not know what will happen at the inquiry. It will depend on the questions asked. It will depend on whether the bankrupt is required to answer them and it will ultimately of course depend on the answers that he gives and whether or not they are directly or indirectly incriminating. The control of that hearing is in the hands of a High Court judge when he hears it. But we must have some regard to and must assess the possibilities. In so doing the likelihood is that Rule 6.175(1) will be applied so that the bankrupt:

"shall answer all such questions as the court may put or allow to be put to him"

In Re: Atherton [1912] 2 KB 251 Phillimore J held at page 254:

"those words mean what they say, that a debtor is bound to answer all such questions as the Court may put or allow to be put to him, whether they tend to criminate him or not -- even such a question as "Have you committed a crime?"

His Lordship added at page 255:

"Historically the rule that a man cannot be compelled to answer questions tending to criminate him has never, so far as I am aware, been applied to the case where the alleged crime has not been committed within the jurisdiction of English law or on English soil Crimes committed abroad are not, with few exceptions, crimes at home. A crime committed in a colony is for this purpose in the same position as a crime committed in France, or in Germany, or in any other foreign country and I know of no principle which will enable a man to protect himself on the ground that he fears criminal proceedings in some other country."

8. In Brannigan v Davison [1997] AC 238 the Privy Council had to deal with the privilege or the rule against self-incrimination. Lord Nicholls of Birkenhead posed the question in that case in this way. Does the rule or privilege against self-incrimination apply where the criminal offence arises under the law of another country? In the opinion which was delivered, their Lordships observed that the right not to incriminate one's self is so basic an aspiration that it has been incorporated as a right in many charters and, although their Lordships did not then mention it, it is of course enshrined in Article 6 of the European Convention. His Lordship commented that, seen from the point of view of the witness, the right may be as much needed where foreign law is involved as where it is not. The difficulty confronting the individual may be just as acute when the feared prosecution is under the law of another country. Nonetheless the conclusion which their Lordships reached as expressed at pages 249-250 was this:

"Different countries have their own interests to pursue. At times national interests conflict. In its simple, absolute, unqualified form the privilege, established in a domestic law setting, cannot be extended to include foreign law without encroaching unacceptably upon the domestic country's legitimate interest in the conduct of its own judicial proceedings … Their Lordships' conclusion is that the common law privilege does not run where the criminal or penal sanctions arise under a foreign law."

9. Their Lordships did not, however, consider it necessary to answer a further question which can arise which can be expressed in this way: where the self-incrimination privilege does not apply because the fear of prosecution is under foreign law, does the domestic court under its inherent power to conduct its process in a fair and reasonable manner nevertheless have a discretion to excuse a witness from giving self-incriminating evidence? His Lordship's view was that that could be seen to be a harsh attitude, but he declined to answer the question, believing it would be better to leave the answer to be supplied on another occasion. I feel the same in this case. The question of course can now be refined because Article 6 now has binding force which it would not have had when their Lordships were considering Brannigan. As is well-known Article 6(1) provides that:

"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."

10. Under Article 6(2) everyone is to be presumed innocent until proven guilty according to law. All of this was considered in Saunders v United Kingdom [1997] 23 EHRR 313. It will be recalled that Mr Saunders had been required to answer questions in the course of enquiries by the DTI inspectors made under the Companies Act of 1985. Transcripts of his evidence were subsequently used in his criminal trial when he was charged and convicted of fraud.
11. The European Court of Human Rights made these important findings. At paragraph 67 the court held:

"The Court first observes that the applicant's complaint is confined to the use of the statements obtained by the DTI inspectors during the criminal proceedings against him. While an administrative investigation is capable of involving the determination of a "criminal charge" in the light of the Court's case-law concerning the autonomous meaning of this concept, it has not been suggested in the pleadings before the Court that Article 6 para. 1 (art. 6-1) was applicable to the proceedings conducted by the inspectors or that these proceedings themselves involved the determination of a criminal charge within the meaning of that provision … a requirement that such a preparatory investigation should be subject to the guarantees of a judicial procedure as set forth in Article 6 para. 1 (art. 6-1) would in practice unduly hamper the effective regulation in the public interest of complex financial and commercial activities…

Accordingly the Court's sole concern in the present case is with the use made of the relevant statements at the applicant's criminal trial."

12. It seems to me that on the basis of that finding human rights law and the common law are at one and march in step, and, subject perhaps to any residual discretion in the court, the bankrupt would be required to answer whatever relevant questions are put to him, even in the examination in his bankruptcy, even at the risk of his incriminating himself. That enquiry is not one in which his criminal liability is under consideration in any way at all. It is an enquiry directed to a wholly different matter, namely of the location and whereabouts and fate of the assets he has. So the next question, and relevant question, is what use can be made of any such evidence? The court answered that in paragraph 69 of the judgment, saying:

"In the present case the Court is only called upon to decide whether the use made by the prosecution of the statements obtained from the applicant by the inspectors amounted to an unjustifiable infringement of the right. This question must be examined by the Court in the light of all the circumstances of the case. In particular, it must be determined whether the applicant has been subject to compulsion to give evidence and whether the use made of the resulting testimony at his trial offended the basic principles of a fair procedure inherent in Article 6 para. 1 (art. 6-1) of which the right not to incriminate oneself is a constituent element.

70. It has not been disputed by the Government that the applicant was subject to legal compulsion to give evidence to the inspectors. He was obliged under sections 434 and 436 of the Companies Act 1985 (see paragraphs 48-49 above) to answer the questions put to him by the inspectors in the course of nine lengthy interviews of which seven were admissible as evidence at his trial."

13. The court is arguably likely to take the view that a bankrupt is under the same sort of compulsion by virtue of rule 6.175(1). In Saunders it was further held:

"71. …bearing in mind the concept of fairness in Article 6 (art. 6), the right not to incriminate oneself cannot reasonably be confined to statements of admission of wrongdoing or to remarks which are directly incriminating. Testimony obtained under compulsion which appears on its face to be of a non-incriminating nature - such as exculpatory remarks or mere information on questions of fact - may later be deployed in criminal proceedings in support of the prosecution case, for example to contradict or cast doubt upon other statements of the accused or evidence given by him during the trial or to otherwise undermine his credibility. Where the credibility of an accused must be assessed by a jury the use of such testimony may be especially harmful. It follows that what is of the essence in this context is the use to which evidence obtained under compulsion is put in the course of the criminal trial.

72. … In sum, the evidence available to the Court supports the claim that the transcripts of the applicant's answers, whether directly self-incriminating or not, were used in the course of the proceedings in a manner which sought to incriminate the applicant."

And the result, accordingly, as expressed in paragraph 76 of the judgment was that there had been an infringement in the Saunders case of the right not to incriminate himself.

14. Here the judge has sought to alleviate the possibility of harm to the bankrupt by directing that the hearing take place in private with a judge of the High Court having control over the release of the transcripts. The applicant contends that this is insufficient protection, because the biggest creditor in the financial fiasco in Germany is a trust company which is in fact a part of the German Finance Ministry, or at least has the closest possible links to the Finance Ministry, and it is the body which filed the complaint against him and provided the evidence upon which the German authorities had relied in bringing the criminal proceedings against him. He submits that this trust company will inevitably pass to the German prosecution all the material that is made available in the bankruptcy proceedings in England. Even if the prosecutor does not make use of the actual transcript, the nature of the questions that had been asked and the answers that had been given will enable the prosecutor to gain unfair advantage over him in those criminal proceedings, and that, he submits, works to his considerable disadvantage. I regret I do not agree. The bankruptcy court has control over the use to be made of these proceedings since they are proceedings in private. It will, I believe, be a contempt of court to reveal the information in chambers without permission of the court. The fears of the bankrupt are in my judgment unfounded.
15. He submits that in this case the protection given under section 14 of the Civil Evidence Act of 1968 is incompatible now with the guarantee under Article 6. Section 14 provides:

"(1) The right of a person in any legal proceedings other than criminal proceedings to refuse to answer any question or produce any document or thing if to do so would tend to expose that person to proceedings for an offence or for the recovery of a penalty-

(a) shall apply only as regards criminal offences under the law of any part of the United Kingdom and penalties provided for by such law"

16. In so providing the Act is reflecting the law which I have already recited. It seems to me to be fully in accord with the European Convention law, and therein lies what seems to me Mr Rottmann's greatest difficulty. It is in my judgment for the English court to control proceedings before the English court. It is for the judge dealing with the bankruptcy matter to exercise his discretion in allowing or not allowing incriminating questions to be put to and to be answered by Mr Rottmann. But such use as may be made of those answers in Germany is a matter for the German court to control. Germany is a signatory to the Human Rights Convention. The German court will, we must assume, and I assume it without any doubt at all, consider any objection to the use of the transcript which may be made by Mr Rottmann should he ever stand his trial in Germany. That consideration would be by reference to the case of Saunders v United Kingdom, of which Germany no doubt will take full and due and proper notice. It is for the German court to control its proceedings and not for this court to be further concerned about the hypothetical use that may be made in that jurisdiction. The judge, if I may so, bent over backwards to protect Mr Rottmann by acceding to his request that the examination should not be a public examination, that it should be conducted in private. In doing so the judge was exercising the discretion he had under rule 6.175(6). In order to upset his conclusion, Mr Rottmann has to show that he exceeded the generous ambit within which there is reasonable room for disagreement. Far from the judge making any error in the exercise of his discretion, I can see no fault made by him whatsoever.
17. In my judgment this application for permission to appeal is utterly hopeless and I would dismiss it. Although this matter is disposed of by dismissing the application for permission to appeal with result that there can be no further appeal to the House of Lords, we have had full argument on the interesting issues before us, and we give permission for our judgments to be cited as if they had been given in disposing of a full appeal.

Lord Justice Keene:

18. I agree.

Lord Justice Lawrence Collins:

19. I also agree. The trustees' application for the examination was made as long ago as October 2007, and HHJ Kaye's order was made in May of last year. Mr Rottmann's wholly unmeritorious application has taken up another ten months. I hope that the examination will take place without any further delay.

Order: Application refused