SECTION 137.

We now come to amendment No. 202. The proposal to delete the section is related. Amendment No 202 and the proposal to delete the section to be taken together by agreement. Agreed? Agreed. Will Deputy Bruton or Deputy Barrett please move amendment No. 202.

First, I would prefer the Minister to explain why she is deleting the section because my amendment was tabled while the section was still in existence.

I think that is wise, Chairman, because there might not be a need then to discuss the amendment.

As I see it there are a number of problems arising on this section. These have to do with the internal logic and appropriateness of the section itself, with the actual need for it, particularly given the proposed recasting of the provisions in Chapter 1. In the circumstances the best thing to do is to delete it altogether.

Section 136 provides, among other things, that any person who is subject to the restrictions in Chapter 1 of this Part, but who nevertheless becomes a director of another company without that other company being properly capitalised, commits an offence. Section 137 offers a defence in such criminal proceedings in certain very restricted circumstances. First, the defence is available only to a person who was not a director of a company when it went into liquidation but who was a director thereof within the previous 12 months. Secondly, the director has to prove a number of things to escape conviction for acting while restricted: (a) that his resignation was bona fide; (b) that where the company is proved to have been trading fraudulently or recklessly he did everything he could to prevent this; (c) that where he could not prevent such trading he resigned; (d) that he was not knowingly a party to either reckless or fraudulent trading and (e) that he is not guilty of any criminal offence in relation to the company.

Having reflected on the matter there are strong doubts as to whether this defence is logical and appropriate for the following reasons: (a) to begin with, if we say that a director is to be subject to a restriction from the occurrence of a certain event, for example, his company's insolvency, surely that is the end of the matter. If he is so liable, how or why should we then come along and, as it were, let him off the hook? Secondly, subsection (2), (b) and (c) currently require the defendant to show that, where the company was trading in a reckless or fraudulent manner, he did whatever he could to stop it. If he can show this, it does not seem possible that he could then be a person to whom the said subsection 297A applies; in other words, a person who was a party to such trading. To put it another way, if he proves his case under paragraphs (a), (b) and (c), then (d) should be self-evident; furthermore, if reckless or fraudulent trading is not alleged — as it might not be in the particular cases involved — how could the person concerned show a negative case; in other words, that he was not knowingly a party to either reckless trading or fraudulent trading with regard to subsection (d), another difficulty is that paragraph (e) seems to suffer from the problem of circularity. After all, the person concerned is being charged with a criminal offence under section 136. If he can demonstrate or prove to the court that he is not guilty of that offence, he would not then need the defence provided for in section 137 (2) (e) anyway. Furthermore, it also seems unreasonable for the court and the accused to have to undertake a trawl of any number of possible offences to demonstrate that he was not guilty of any of them.

Finally, it seems to be bad law to say that if you may be guilty of one offence this prejudices your right to avail of a statutory defence in relation to another, perhaps totally unrelated, offence. These difficulties may stem from the automatic nature of section 128 as at present drafted. However, if we recast Chapter 1 to provide that section 128 will apply only where the court is actively involved in a particular case perhaps that is the appropriate time for the director concerned to demonstrate — in the words of the proposed new section 129 — that he acted honestly and responsibly. That seems tidier, more logical than the present requirements of section 137 which in my view we ought now to delete.

We are not going to dispute that masterly exposition.

Amendment No. 202 not moved.
Question: "That section 137 be deleted" put, and agreed to.