Orders of the Day — Clause 1. — (Transfer of Burden of Proof in Certain Cases.)

Part of the debate – in the House of Commons at 12:00 am on 11th July 1952.

Alert me about debates like this

Photo of Mr Lynn Ungoed-Thomas Mr Lynn Ungoed-Thomas , Leicester North East 12:00 am, 11th July 1952

I respectfully agree, Mr. Speaker. I was merely indicating the difficulty of anybody who puts down a series of Amendments, whereas if he had put down particular Amendments he might have chosen ones which might not have commended themselves to you.

In this Amendment—[An HON. MEMBER: "Hear, hear."] I am glad to have the support of an hon. Member opposite for that opening part of my observations. We are here faced with a difficulty of Principle which is of general application; it applies to all the statutes. I should like first to bring out perfectly clearly what is the effect and purpose of this Amendment, and how it would operate.

The various provisions which it is proposed to amend, and which are referred to in the Schedule to the Bill, are all in the same form. I will read the one which appears in the Borrowing (Control and Guarantees) Act, which is as follows: Where an offence under this Act has been committed by a body corporate (other than a local authority), every person who at the time of the commission of the offence was a director, general manager, secretary or other similar officer of the body corporate, or was purporting to act in any such capacity, shall be deemed to be guilty of that offence, unless he proves that the offence was committed without his consent or connivance and that he exercised all such diligence to prevent the commission of the offence as he ought to have exercised having regard to the nature of his functions in that capacity and to all the circumstances. That provision puts the burden of proof on a director if two requirements are satisfied: first, if the company is guilty of the offence, and second, if the director was a director of the company at the time when the offence was committed. So we have those two requirements clearly laid down. In other words, we are not dealing here with the case of a man who is presumed to be guilty unless he is proved innocent. I hope that we disposed of that point in Committee; I think that in the Committee we were all agreed on that.

We are merely concerned with the question of the moving of the burden of proof. The burden of proof of course moves in the course of any case—in the course of a civil case or a criminal case. All that we are here concerned with is that shifting of the burden of proof in the course of the hearing of the case. All this enactment does is to provide by Statute instead of by common law or by the movement of the evidence in the course of the case, that when those two requirements are fulfilled, namely, that the company is guilty and that the director was a director of the company at the time the offence was committed, then the burden of proof is on the director to establish his innocence.

It does not mean that he is presumed guilty until he has proved his innocence. The Crown first has to establish the guilt of the company and that the director was a director of the company when the offence was committed. Then there is put on him the burden of having to show that the offence was committed without his consent or connivance; that is the first point. Consent and connivance, of course, involve an active participation of one kind or another. Secondly, it has to establish that he exercised all such diligence to prevent the commission of the offence as he ought to have exercised having regard to the nature of his functions in that capacity and to all the circumstances. This Amendment proposes that, whereas those two former requirements should remain within the enactment, then, when the burden of proof is shifted, he must prove that the offence was committed without his consent, or connivance; but it provides that he need not prove that he exercised all such diligence to prevent the commission of the offence as he ought to have exercised.… In other words, it leaves on him the burden of proving that there was no active participation on his part but relieves him of the burden which is now placed upon him by the enactment to show that he exercised all such diligence to prevent the commission of the offence… There seems to me to be a difference of principle there—a clear distinction between consent and connivance on the one hand and the exercising of "all such diligence" on the other. Hon. Members may well come to the conclusion that whereas the burden of proof should remain on him to show that he had no active participation, it should not lie on him to show that he exercised diligence, and so on. That is the issue which is raised by this Amendment. In addition, it provides for the elimination from the Bill of the provision in Clause 1, from lines 10 to 22.

11.30 a.m.

I have indicated what difference the Amendment makes to the enactments as they now stand. I now come to the difference which the Amendment would make to Clause 1 of this particular Bill. The Amendments provides that in each of the scheduled provisions there shall be omitted the words which I have indicated with regard to diligence in the enactments as they now stand; but it also provides that there shall be eliminated from the Clause the words: and it is proved that the offence was committed with the consent or connivance of, or is attributable to any neglect on the part of, any director, general manager, secretary or other similar officer of the body corporate or any person purporting to act in any such capacity, he as well as the body corporate shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly. The Clause in the Bill provides that the burden of proof shall lie on the prosecution to show that the offence was committed with the director's consent or connivance, or is attributable to any neglect on the part of any director, general manager, and so on. We propose that the provision which puts the burden of proof upon the officer of the body corporate in those three cases—consent, connivance and neglect—should be taken out of the Clause.

I should like to mention one point of detail—which is not unimportant—in relation to Clause 1 as it now stands, and in regard to the words that we propose should be left out. The Clause refers to the offence being committed "with the consent or connivance of." I can understand the word "consent" and also the word "connivance." They have perfectly clear meanings, about which nobody could have any doubt. The Clause goes on to say: …or is attributable to any neglect on the part of, any director, general manager, secretary or other similar officer. I must say at once—and I hope that this point will be dealt with—that I do not understand what precisely is meant by the word "neglect." I am sure that the hon. Gentlemen who are sponsoring this Bill have had similar difficulty, because in their Bill as originally drafted—which, as I indicated before, I prefer to the more professional form of drafting which we have at the moment because I think it is much clearer for the layman to understand, though I appreciate the legal difficulties in which it would land us and which the Solicitor-General indicated on the last occasion—the word "negligence" appeared instead of "neglect."

Negligence is a term of art. It has a legal meaning. One knows where one is with that word. The hon. Member for Buckinghamshire, South (Mr. R. Bell), in a very valuable speech in Committee—although it was not a speech which commended itself to me as far as its conclusions were concerned—indicated that "neglect" was a wider term than "negligence," In other words, he suggested that it placed a greater obligation upon the director than the word "negligence." But what does "neglect mean, if it means more than negligence? Negligence is a term of art which has a legal signification which has been interpreted and is known by the courts. What does "neglect" mean if it is intended to mean more than negligence?

If I may read the relevant words of the Clause once more, they are: or is attributable to any neglect on the part of any director, general manager, secretary or other similar officer. Neglect of what duty? Negligence imports a duty. One can understand that there is a duty to the company. Criminal negligence is another matter. It is a breach of the duty which is owed to the public at large—to the country and to the State—but what is this?

Let us take a case which may arise under the Borrowing (Control and Guarantees) Act, where more than £10,000 is borrowed without proper authority, in contravention of the Regula- tions passed in accordance with that Act. Supposing that is done and that the director is not present at the board meeting at which the decision to borrow is made. Is that neglect on his part? If so, neglect of what? Is it neglect of his duty to the company? If so, what is his duty to the company? Is it his duty to attend every board meeting? Is it his duty to attend a particular board meeting at which an important matter is to be raised? Is it neglect if he gets a specific notice that this particular matter of borrowing more than £10,000 is to be discussed at the board meeting, but he does not turn up? Is it neglect if he does not turn up although he has not had notice from the company but nevertheless knows about it?

Where are we here? We are launching on to a criminal obligation and liability in the vaguest terms, without indicating precisely what is that criminal liability. If the hon. Gentlemen who are sponsoring this Bill say that it is not the neglect of the duty to the company, and that we have to read these words together and say that the offence is attributable to any neglect on the part of a director, let us again consider the circumstances. What is the neglect to which an offence can be attributed? Does it mean that it is because of the director's neglect that the offence has arisen? If so, it raises the question—the director's neglect of what? We come back to the original difficulty of his duty to the company, which I have just mentioned.

Let me refer again to my last illustration which, I suggest, shows how ludicrous is this word. Supposing that a company decides at a board meeting to borrow more than £10,000 under the Borrowing (Control and Guarantees) Act, with the result that the company commits an offence under the Act. It is carried by one vote. A couple of directors do not attend the meeting. If they had been there, there would have been a majority against this being done. They neglect—or is "neglect" the wrong word?—to turn up at the meeting, and because they neglect to do so, the offence is committed. In those circumstances, is that offence attributable to the neglect of the directors, or is it not? I do not know.

We are using here, in a criminal Bill, a term which is quite obviously open to a great deal of discussion and debate, which is not a term of art, which is a loose term and which, in my view, will lead to very considerable difficulties. I am not cavilling at the attitude of the hon. Member for Altrincham and Sale (Mr. Erroll), who is mainly responsible for the Bill, because I recognise that in the original drafting he had the word "negligence" and not the word "neglect" and I also appreciate his motive for introducing "neglect," as explained by the hon. Member for Buckinghamshire, South in place of "negligence," because he thought there should be a heavier onus on the director than is included in the word "negligence."

We had a little difficulty over the word in Committee, and I hope we shall have a little clarification, as no doubt we shall, of what the word means. At the moment I am in considerable difficulty about it. On the other hand, I feel that there must be some explantaion of why the hon. Gentleman introduced the word into the Bill, for he would not have done so without some good reason, but I should like to know exactly what is meant by the words "attributable to any neglect" and how they will work in practice, for instance, in the cases which I have already cited.

That is the objection to the Clause as it stands. I return to my proposal to eliminate part of Clause 1 and to eliminate the wording in the original Statute which I indicated, …all such diligence to prevent the commission of the offence… In the original statute, obviously a considerable amount of care was taken to deal with words which correspond with the word "neglect" in the Clause. The words in the statute corresponding to "neglect" in the Clause are the words I now propose to leave out. …all such diligence to prevent the commission of the offence as he ought to have exercised having regard to the nature of his functions in that capacity and all the circumstances. I realise that this Amendment is open to serious criticism, and certainly to serious criticism from hon. Members on my own side of the House, because when these provisions were inserted in the Statute we felt that it should not be possible for a director to say, "I escape liability, I am not liable, although I am undertaking such duties that, if I had performed them properly, the offence would not have been committed." Obviously this Amendment is open to attack on those lines.

In other words, it can be said that where we have a "guinea pig" director, he should not be permitted to escape liability simply because he draws the money and does not perform the functions. I know there is a great deal of feeling amongst some hon. Members opposite that that should not obtain, but nevertheless there is a distinction when we come to deal with a criminal offence. We are dealing here with a criminal offence, and it may well be said that in the case of a "guinea pig" director his neglect of his duty is a neglect of his duty to the company, and that that is the company's look out.

11.45 a.m.

Although his position is not one with which, I hope, any hon. Member would have sympathy, nevertheless it may well be said that what he is neglecting is his duty to the company, and that that is a different matter from imposing upon him a penalty because of his neglect of his duty—and again I am coming back to the word "neglect"—where it means neglect of his duty to the country or criminal neglect. At any rate, there is a difference where his fault, if I may use a neutral word, is not of actively conniving or consenting to an offence being committed but is one of failure to prevent the commission of the offence.

It is difficult to draw the distinction between the neglect with which we are now dealing—criminal negligence—and neglect which does not mean criminal negligence but is neglect of duty to the company; between criminal neglect of one kind or another and neglect of his duties to the company. A good deal depends upon the meaning of the word "neglect," but I should have thought there was a distinction here, almost I must confess at once that I can see the difficulty.

The argument about the "guinea pig" director, that because of his neglect of his duty to the company he should therefore be made criminally liable, which is an entirely different category of liability, is a difficult argument. I do not know what the sponsors of the Bill feel about this or how far they would be prepared to accept the Amendment which we have put down.

We suggest that, in the cafe of consent or connivance, the burden of proof should remain on the director—and here I am leaving "negligence" and coming to "consent or connivance." In the case of "consent or connivance" the burden should remain on the director as proposed by these enactments which it is proposed to repeal. We are dealing with the burden of proof; we are not dealing with presuming guilt or presuming innocence, and what we have in each of these cases is a company involved, a body corporate of one kind or another, with a director or an officer of the company; and it is said that where the company is guilty and the officer was an officer of the company, and the director was a director at the time the offence was committed, the burden of proof shall lie on him.

Let us consider that. The company is a legal entity and cannot operate or act except by directors coming to conclusions. Although it is at law a person, it cannot itself act at all, except through human beings operating. What we have here is a company which is guilty—a person if hon. Members prefer that—but whose guilt cannot be brought about by itself at all, because a company without human operation is nothing but a mere legal fiction.

The guilt is brought about by the person who controls the company, the person who runs the company—the officer, the director, of the company; and all that is proposed here is, not that that director himself be liable if the company is liable, but that the director who runs the company, whose job it is to run the company—and that company cannot be run without a director—should in those circumstances have the onus placed upon him of showing that he did not consent or connive.

In other words, I can put it in a very simple proposition. A cannot act without B operating. If B operates, the burden should lie on B to say that in a particular case he did not, in fact, operate. One would have thought that in circumstances of that kind, where a company is guilty and where the director was the director when the offence was committed, it would be a most reasonable provision in this case that the director should go into the box and say he did not himself consent or connive at it.

I fail to understand at the moment what the strength of the feeling about this is. All we are providing here is that the burden of proof should be made quite clear by Statute, that in the case I have given the burden of proof should not in fact shift to—if I may use a legal term "the man on the top of the Clapham omnibus." Where the burden of proof shifts in this case, it is up to the director, in those circumstances, to say he did not consent or connive.

The hon. Member for Buckinghamshire, South, in his speech in Committee, referred to the receiving of stolen goods. It was a very valuable and, I thought, illuminating illustration, and he recognised, of course, as we all recognise, that the burden of proof does shift even in criminal law, in other courts than the Chancery courts, and that in the case of stolen goods it is up to the receiver of the stolen goods, when he is charged with receiving the goods, when it is established that the goods have been stolen and that they are in the possession or were in the possession of the person charged, to say that he was not aware that the goods were stolen when he received them.

We all agree that in that case it is reasonable that the burden of proof should be on the person charged with receiving the stolen goods. And why? Because he is the person who can very simply, without any injustice at all to himself, go into the box and establish that he did not in fact know that the goods were stolen at the time. My hon. and learned Friend the Member for Brigg (Mr. E. L. Mallalieu) emphasised this point in Committee, and said, that of course it was a matter which was locked up in the mind of the director, as it was locked up in the mind of the receiver of stolen goods. The Solicitor-General took exception to the phrase about "locking up in the mind." I was not quite sure whether he was referring to the mind of my hon. and learned Friend the Member for Brigg or to the mind of the director; but, of course, it is reasonable that the burden of proof should shift in that case.

What is the correct analogy here? The correct analogy is that the director himself knows whether he consented or connived. He is the person whose job it is to carry on, to do the business, to be the person who runs the company. He knows perfectly well whether in a particular instance he consented or connived. If it is his job to do that particular thing, then surely there is no difficulty at all and there is no injustice at all in saying that he should go into the box in those circumstances and say, "No, I did not consent or connive."

It would be exceedingly difficult to know, or it might be a very difficult thing to prove, that he consented or connived in a particular case; and when his company has committed an offence, and he is the director whose job it is to see the company does not commit an offence, why, in that case, should he not go into the box and say, "At any rate, in this particular case, although it is my job to see the company does not commit an offence, nevertheless in this particular case I did not consent and I did not connive"? I should think that would be the simplest thing in the world, and I should have thought that the burden in that case should properly have lain upon him.

Therefore, in this Amendment we propose these two things as contrasted with the Clause as it now stands: first, that the burden of proof in the case of consent or connivance should lie upon the director once the two preliminary points are proved of the company's guilt and that he was the director of the company at the time; but that, on the other hand, in contrast with the statutes as they now exist, the burden should not lie on him to show that he acted with due diligence. I hope that in these circumstances it will be possible for the sponsors of the Bill to accept this Amendment.