I understand that we are dealing at the moment with an amendment proposed by Deputy McDowell which concerns the powers to obtain information in the course of an investigation which has been undertaken. I understand that a number of points were raised in the Seanad by Senator Patrick Kennedy in regard to this matter. It derives from the issue as to whether the investigation is, in fact, a judicial process and, if so, in that regard the investigator has powers to summon witnesses.
Companies (No. 2) Bill, 1987 [Seanad]: Committee Stage (Resumed).
Debate resumed on amendment No. 7:
In page 14, lines 48 to 51, to delete subsection (4), and substitute the following:
"(4) An inspector may examine on oath, either by word of mouth or on written interrogatories the officers and agents of the company or other body corporate and such person as is mentioned in subsection (2) in relation to its affairs and may—
(a) administer an oath accordingly,
(b) reduce the answers of such person to writing and require him to sign them.".
—(Deputy McDowell.)
I hesitate to interrupt the Deputy, but can we be clear that we are now dealing with section 10, amendment No. 7 on the Order Paper in the name of Deputy Martin Cullen?
That is what I meant. I was explaining essentially that matter. I do not fully appreciate what the amendment from Deputy Cullen is designed to achieve, but I am aware that there is a problem in this area arising, I think, from the case where the Committee of Public Accounts of this House were seeking to have evidence from a Member of the House who is still a Member of the House, in re Haughey. I understand the committee were not able to obtain the evidence that they would have obtained if they were acting in a judicial capacity.
The question again arises as to whether an investigation in these circumstances could be frustrated, or in any way deprived of evidence that the committee might otherwise obtain, on a similar ground that their judicial capacity might be challenged. Whether that is an issue that is addressed in the amendment by Deputy Cullen or not, I am not certain. It would be useful if the Minister would address that issue when dealing with the amendment.
Amendment No. 7 would introduce two changes to section 10 (4) of this Bill as it now stands. First, it would enable the inspector to address a series of written questions to any person being examined, whether instead of, or in addition to, an oral examination. That is the key import, as I understand it, of Deputy Cullen's amendment. I can see how such a device might be a useful enough tool in the inspector's armoury. The amendment would also allow the inspector to record the answers given by any person exam-lined and require that person to sign the answers. I can see the merit of this aspect of the amendment. Probably the amendment will improve the Bill and I am quite prepared to accept it on that basis, the main change being that the person in question would be asked to sign his or her answers. That is a reasonable enough approach. I am happy to accept the amendment.
I should like to thank the Minister of State for that. Deputy Cullen's amendment is an important and useful one. It arose out of my own personal experience in trying to investigate two companies where I was advised, correctly as it happened, by the Department of Industry and Commerce that I was wasting my time. I found that two or three years later the inspectors had made no progress, simply because they had not powers of the kind envisaged here. For that reason, I am particularly happy that the Minister of State has accepted the amendment.
What would happen if a person refused to give evidence or considers that the evidence he would give might incriminate him in a future criminal action? Can the evidence he gives be referred to in a future criminal action? Deputy Cullen's amendment goes further than the present provisions. The whole purpose of the investigation is to elicit wrongdoing in the course of the company's affairs. I know that the court will appoint an inspector and, therefore, he will act on behalf of the court. However, it is not too clear what will happen when the inspector outlines the causes for the company's downfall. It will still be up to the court to decide what action will be taken. The section, as it stands, is wide-ranging and if we include this amendment it will cause great difficulties. It will not be a normal court of law but it will have far reaching powers. When a liquidation takes place the books and records of a company for the previous few years are examined to try to ascertain what went wrong and very often it is obvious that things were not run properly. The agents and officers of the company would have to discuss the matter in an informal manner. People are usually brought in, one by one to a room, usually the place of business of the company.
Presumably the inspector will be conducting his affairs from an office in the company or in his own office. Only he and his officials will be present and the person being examined will know nothing of what other witnesses said to the inspector before he came in. Everything will be taken down, written out in longhand and typed and he will have to sign it like a statement in any ordinary criminal prosecution. I am sure that many people will refuse to co-operate in those circumstances. I appreciate the purpose behind Deputy Cullen's amendment, to make the Bill more stringent, but it is doubtful if it would be effective. I see great difficulties in anyone going before the inspector because it will not be in an open court with witnesses and powers to cross examine them. The person giving evidence will have to sign a statement under oath and, as I said, there is a great danger that it could be used against him in a criminal prosecution. I also dislike the fact that the person will not be aware of the evidence of other people given perhaps a couple of weeks earlier. I know the Minister is prepared to accept the amendment but I want him to be aware of my objections to it.
All we are doing here is providing for somebody who gives information to an inspector to sign the answers they give to questions. If there are downstream legal implications we will certainly look at them between now and Report Stage. On the surface, we have no difficulty in asking someone to sign answers which they gave to an inspector or the list of written questions which they answer subsequently. There may be areas to be looked at if people refuse to sign them but we will look at the implications in accepting the amendment. The amendment is not a major departure from any principles.
I disagree with the Minister. Deputy Cullen's amendment states:
..."(4) An inspector may examine on oath, either by word of mouth or on written interrogatories the officers and agents of the company or other body corporate and such person as is mentioned in subsection (2) in relation to its affairs and may—
(a) administer an oath accordingly,
(b) reduce the answers of such person to writing and require him to sign them.".
If we include this amendment in the Bill it is not too clear what its effect will be. I thought the whole purpose of this investigation procedure on behalf of the court was to give powers to the inspector and that when he had conducted his investigation of the affairs of the company he would form his own opinion as to how the company was run. He would then report back to the court and indicate what he thinks should be done in regard to contradictory evidence or whatever. He could recommend a certain course of action to the court but the court would have the final decision as to what would be done. The inspector's examination is not in open court and Part II transfers the powers in the 1963 Act from the Minister to the court to appoint an inspector. This is a quasi-judicial function.
How will the inspector work? He will not have an inspector's room which will be open to the public, like an open court, and people will not be examined there nor will witnesses be cross-examined there as in open court. This inspector will work on the lines of the liquidator or receiver who investigates the affairs of a company. The directors or financial controller will be examined if there is anything wrong with the books, and if it has been discovered that the company was not properly run.
These proceedings will be conducted in private but the person conducting the investigation will be an inspector appointed by the court. People will be examined in private not knowing what other witnesses, employees or agents of the company have said about the conduct of the affairs of the company or what they have said about other people in the company, even if defamatory remarks have been made which do not relate to the matter under investigation. There is nothing in this section to suggest that a person has the right to know what others have said about him, either orally or in writing. Now we are amending that section and the inspector, sitting in his private room, will require a person to sign on oath that his answers were true, without knowing what has been said by other witnesses.
Later sections make it clear that when finalising his report the inspector can say what he thought went on in the company and the court, if it thinks fit, may direct that appropriate action, even court action or criminal proceedings, be taken. It is not fair that under the other subsections of section 10 people do not have the right to know what others have said about them. Now we require the witness to sign an affidavit saying he has given the correct answers. Presumably that will form part of the evidence if the court decides to bring criminal prosecutions. Any person who got legal advice would be very reluctant to sign an affidavit at that stage.
When a person is in open court he has no option but to state on oath what went on in the company but to do it during the investigation not knowing what other witnesses have said, and now under the amendment the inspector may administer an oath and then reduce the answers of such person to writing and require him to sign them. I must protest at this amendment. I recognise that its purpose is to strengthen the powers of the inspector but it is going too far and I do not think the Minister should accept it.
Arising from what Deputy McCreevy said, this amendment strengthens and clarifies the powers of the inspector. In strengthening these powers, it calls into question some of the more profound constitutional issues as to the rights of an inspector and the rights of somebody appearing before him in regard to natural justice.
In the case of Kiely v. the Minister for Social Welfare, 1977 Irish Law Reports it was decided that where an inspector was making an investigation, inspecting one person, the person was entitled to an oral hearing and also to the opportunity of cross-examining other witnesses if he was to be adversely affected. Similarly, a person in such circumstances is entitled to access to documents in the possession of another person or company concerned in the investigation. This also arises in the case of Nolan v. the Land Commission, 1981 Irish Law Reports. Furthermore, a person may be entitled under natural justice to an adjournment in order to prepare his case or to defend the case being made against him, and that may be granted. It is important to recognise that that arises again in the case of Kiely v. the Minister for Social Welfare. Finally, a person may be entitled to legal representation if the seriousness of the matter at issue would appear to warrant it. That arises from the case re Haughey, an investigation conducted by this House and the Committee of Public Accounts, or perhaps a court case associated therewith, I am not absolutely certain.
If all those rights exist for a person who is the subject of an investigation of this kind, the investigations will be very long drawn out and expensive, and will continue to be very expensive despite the fact that the court has been brought in to sanction the appointment of an inspector. I do not think appointment by a court per se makes anybody appointed by the court a court itself. That is not the case, and I do not believe the Minister is claiming it to be.
If this inspector is acting in place of a court and all those rights to which I have referred arise this makes me question whether this procedure serves any purpose. One wonders if it would not be better to go ahead and prosecute and wind up the company rather than go through all this procedure when all these rights arise in natural justice anyway.
We are making slow progress in this House and I do not want to draw the Minister into making a point by point reference to all the cases I cited, but it is only fair to say that those authorities I have quoted raise serious issues and the Minister might want to contemplate whether this part of the Bill can work in the way it was intended. We spent all the last day, and we may spend all today, dealing solely with the inspection sections, and if it transpires that these sections serve no purpose because they are unworkable, we may be wasting a lot of time.
If the Minister could give an adequate assurance that he would deal with some of these issues on Report Stage, maybe we could make progress, but we would need to acknowledge the seriousness of these points or we will be fighting about them all day. Deputy McCreevy made a number of valid points which need to be addressed.
I have no difficulty at all in acknowledging the seriousness of the points made, and the legal background quoted by Deputy Bruton is very useful. We are in almost daily touch with the Attorney General's office on this Bill seeking to develop some of these issues, but I do not think anything said so far has made the acceptance of this amendment something we should change our minds about.
I do not think this amendment is the issue.
Before I call Deputy O'Dea, since the lack of progress has been adverted to and in view of the fact that the Minister of State at the Department of Industry and Commerce, Deputy Séamus Brennan, has indicated his acceptance of amendment No. 7 in the name of Deputy Martin Cullen, let me ask if the amendment is agreed?
Deputies: Agreed.
Amendment put and agreed to.
May we then proceed with amendment No. 8 in the name of the same Deputy? Here I observe that amendments Nos. 16 and 17 are related. I suggest, therefore, that we discuss amendments Nos. 8, 16 and 17 together. Is that satisfactory?
I move amendment No. 8:
In page 14, between lines 51 and 52, to insert the following subsection:
"(5) A person who is examined under this section shall not be entitled to refuse to answer any question put to him on the ground that his answer might incriminate him but none of the answers of such person shall be admissible in evidence against him in any other proceedings, civil or criminal, except in the case of any criminal proceedings for perjury in respect of any such answer.".
I move this amendment on behalf of Deputy Cullen who is indisposed at the moment but hopes to be back shortly. This amendment is word for word the same as section 105 (6). That section relates to the power of the court to summon persons for examination after the appointment of a provisional liquidator or after the making of a winding up order. It defines the rights of somebody who is questioned by the court in those circumstances and provides that none of the answers he might give which might incriminate him should be admissible as evidence against him in any other proceedings, civil or criminal, except in the case of proceedings for perjury for giving an untrue answer on oath. If that is appropriate, as I think it is, in the case of an examination on oath by the court, it is perhaps even more appropriate in the case of an examination by an inspector. That is why I suggest it be inserted in section 10 after subsection (4) which is a new subsection just now inserted. It in no way differs from the provision in section 105 and if it is thought to be necessary in section 105 it is even more appropriate in section 10.
Arising out of what Deputy Bruton has just said, an inspector is now in a position different from the position he was in when he was appointed only by the Minister. As I see it, the whole purpose of changing the provision to enable him to be appointed by the court on the application of the Minister rather than by the Minister off his own bat alone, is to give him additional powers and to put the exercise of those powers beyond the challenge to which they might otherwise be open if he were not appointed by the court. The phrase used by Deputy Bruton was in loco the court. I think the correct phrase to use would be that he act as a commissioner of the court, in other words he is taking evidence on commission. Somebody in that situation, usually a barrister who is asked by the court to take evidence from somebody who cannot attend the court due to illness, absence abroad or whatever else, has normally all the powers of the court and somebody appearing before that person is in the same position as if he were appearing before the court itself. The fears raised in regard to the inspector's powers are, perhaps, not well founded for that reason because he is in a much stronger position legally than he was previously when he was appointed by the Minister only.
If we are only going to seek to vindicate the rights of those who are under investigation it would be a pity because the whole purpose of this section, this Part and these amendments, is to try to vindicate the rights of those who have been wronged by the abuse of incorporation, by the abuse of directors' powers. Those people certainly have their rights too; there are a great many of them and they have to be balanced. This section is favourable to those who are undergoing examination, therefore whatever objections may have been raised to the last amendment, I do not think they are appropriate to this one.
I am not sure I understand the purpose of these investigations if it is not to lead to criminal proceedings. If Deputy O'Malley's and my amendments are accepted the evidence obtained in investigation could not be used in criminal proceedings. Is that not the case? If the purpose of the investigation is to get money for creditors the way to go about that is to wind up the company, not to put them into an investigation which would last for years while the assets wither. Therefore, I must say I am puzzled by the way this thing is intended to work. This procedure for investigations does not exist in company law in other countries. The Minister will correct me if I am wrong, but I understand they operate on the basis of normal winding up or criminal proceedings.
It would appear that in one sense Deputy O'Malley's and my amendments would remove the problems I was adverting to on the earlier amendment where a person is entitled under the maxim audi alteram partem to get a fair hearing if that person is likely to be affected by findings and recommendations of an investigation. That involves cross-examination, legal representation and so forth. Those requirements may be reduced if the evidence adduced before the investigation cannot lead to criminal or civil proceedings and cannot be used in them, but if that is the case what is the point of the investigation if the evidence obtained in it cannot be used for either civil or criminal proceedings? Therefore, we are caught in a conflict. That is why I opposed the original section and I have continuing doubts about the validity of this entire Parts of the Bill. However, I am open to be persuaded on that point.
In regard to my amendments, whereas Deputy O'Malley says the evidence given here may not be used in any criminal proceedings or civil proceedings, I am saying simply that they shall not be used in criminal proceedings but may be used in civil proceedings. That would give some use to the evidence obtained by the investigation. If evidence given on oath before an inspector is useless other than for the inspector's report, useless in civil proceedings and useless in criminal proceedings, and has to be obtained all over again when somebody takes civil or criminal proceedings, all we are doing essentially is giving witnesses an opportunity for a free rehearsal of their evidence and if they said anything they should not have said in the investigation by the inspector their legal advisers will point out to them afterwards, "You should not have said that, so on no account say it when you come to the real court, which may be in two or three years time, so say something else and let them prove you wrong and remember they cannot refer to what you said before the inspector". It is a sort of free rehearsal, a dry run for the defendant. That is not what any of us intended in the section. I would like to hear the Minister of State on this because he may have something to say which will allay some of my fears.
The amendment in the name of Deputy Cullen to section 10 and Deputy John Bruton's two amendments to section 18 deal essentially with the same issue, the question of what evidential use can be made of answers given by a person to an inspector. Obviously, as is clear from the debate, this brings us into a very difficult and tricky legal area. Section 18 provides that an answer given by a person to a question put to him by an inspector under section 10 can be used in evidence against him in any subsequent proceedings. I should like to make it clear that the Bill is currently silent as to whether a person can refuse to answer a question on the grounds of self-incrimination. Deputy Cullen's amendment would, in effect, remove any right to silence which may currently exist but would make any statements which are made inadmissible in evidence in any subsequent proceedings. On the other hand, Deputy Bruton's amendments would allow the statements concerned to be used in evidence, but only in civil proceedings and not in criminal proceedings.
My main problem with Deputy Cullen's amendment is that it is in direct conflict with section 18 which provides that an answer given by a person to a question put to him by an inspector may be used in evidence against him. The section also appears in corresponding UK legislation and is important to ensure effective investigation procedures. Without it I do not think we could have effective investigation procedures. I understand Deputy Bruton's reservations about this procedure but, now that we have adopted the notion of having it, it is important that we make it effective.
On the other hand, the idea behind the amendment may be covered in section 10 (5) which provides that, if a person refuses to answer an inspector's question, the inspector may refer the matter to the court. Where this happens the court can inquire into the case and, after hearing evidence for the defence, can punish the person concerned as if he had been guilty of contempt of court. If a person persisted in claiming that his refusal to answer a question was based on a fear that he might incriminate himself, the court would be in a fairly good position to adjudicate on any such claim under section 10 (5).
Deputy Bruton's amendments, on the other hand, do not deal with the question of self-incrimination but confine themselves to narrowing to civil proceedings the evidential use that can be made of the information concerned. In regard to Deputy Cullen's amendment I should like to state that in practical cases it is likely that the inspector will be able to establish the facts from other sources and an admission of guilt on somebody's part would not add greatly to the effectiveness of an investigation but, as I said earlier, may perhaps hinder the process of law by giving safe conduct to a person provided he co-operated by not refusing to answer questions.
I would not see any point in effectively forcing a person to answer a question and then ruling out the admissibility of his answer in any subsequent proceedings. That would amount to saying to a person: "If you come clean and make a full confession we will forget about any consequences and absolve you fully from any sins you may have committed". I do not think that is what we should be able to do here. It has to be remembered that the prime purpose of an investigation is to establish the facts in a particular case of concern as a part of an overall system of regulatory control under company law. If the facts lead to a conclusion that some aspect of the law ought to be changed, then so be it but if, on the other hand, the facts established suggest that criminal proceedings ought to be brought against a person I do not think we should rule them out. That, in effect, is what Deputy Cullen's and Deputy Bruton's amendments would do.
Deputy O'Malley correctly referred to section 105. We have been taking advice on this but certainly it is the case that those provisions are identical. However, I am advised that the two situations are completely different and that the context of section 105 is a different one from that of section 10. An examination of a person under section 245, which is what section 105 is based on, is a judicial process while an investigation of a company's affairs under Part II of the Bill is not. I am advised that a court examination under section 245, which is the one we are discussing, arises in the context of winding up proceedings at a stage when the company is already dead. An investigation by an inspector is more in the nature of a system of ongoing regulatory control of companies under company legislation.
I will continue to have talks with the Attorney General's office and take advice from that quarter as we proceed through Committee Stage. In particular I will be referring to that office the legal points which arose in the earlier part of the debate and, if adjustments or tidying up are required, I will make the necessary changes on Report Stage, based on the Attorney General's advice. The advice given to me is that section 105 is in a different context. I can see how a person reading the Bill may consider it unusual that we are not prepared to put word for word what appears later in the Bill into an earlier section. On the surface I can see that there is common sense in that. Nevertheless, I am advised strongly that this is not a judicial part of the Bill and that section 105 is. It refers to an open court and is in the context of the winding up of a company. I am advised that it would not be appropriate to put that control into the section under debate. I should like to assure the House that, if there is any doubt in this area, having had discussions with the Attorney General's office on the points made in the House, I will bring forward any changes that are needed.
If section 10 is not a judicial process how can a court punish somebody for contempt of court by refusing to answer a question put to him under this process? I do not understand that. It seems to me that that raises a key issue. If it is judicial there may be a right to punish for refusing to co-operate and answer but if it is not judicial I cannot see how, constitutionally, it could be possible to punish.
It says, "...as if he had been guilty of contempt of court."
It states:
... and the court may thereupon inquire into the case and, after hearing any witnesses who may be produced against or on behalf of the alleged offender [the offender who refuses to answer questions] and any statement which may be offered in defence, punish the offender in like manner as if he had been guilty of contempt of court.
That imports directly into this one of the key elements of court proceedings, the ability to punish contempt thereof. If this is not a judicial process and yet people can be punished for refusing to give information to it, and also if statements made to an inspector can incriminate the person making those statements or be used against that person in civil proceedings, that person must be entitled to all the rights I recited which arise from the Kiely v. Minister for Social Welfare, re Haughey and the case of Nolan v. Land Commission. If he is entitled to all those rights, legal representation, cross examination, access to documents belonging to other parties etc., on the grounds that a statement made might incriminate him, then, in essence, what we are talking about here under such an investigation is a judicial process.
With respect, the section says that the inspector may certify the refusal, that is to answer questions and so on, under their hand to the court and the court may punish the offender. The judicial process commences at the point at which it is referred to the court. The inspector may certify the refusal under their hand to the court and the court may thereupon inquire into the case and so on. After hearing witnesses the court may punish the offender as if he has been guilty of contempt of court. It moves to the judicial side of the house when it is certified by the inspector.
It does but the offence for which he is punished is an offence committed for refusing to answer before the inspector. That refusal creates contempt of court.
The provision in subsection (5) is a very common one. It is contained in a whole lot of Acts and it is frequently implemented. You do not commit the contempt and be condemned or sentenced by the inspector. The inspector has to report the fact to the court who then inquires into it. If the court is satisfied it then declares the failure a contempt of court as it is perfectly entitled to do. All of that was dealt with in the Haughey case in, I think, 1971. At that time an effort was made to give the committee the power to punish a witness who refused to answer. It was held that that was quite improper, that the committee did not have and could not be given any such power, that only the court could impose the penalty after the facts were reported to the court and it had inquired into it. That is exactly what is happening here. It is what has always been held to be appropriate. If the inspectors and the court are to be divested of all sanctions against people who tell untruths to the inspector, or refuse to answer, the whole investigation process falls down.
I am sorry to hear questions raised in this House by somebody like Deputy Bruton as to the propriety in this Bill of having investigations. There is a vital need for these because in no country that I know of can people get away with more under the existing Companies Act, 1963, in relation to improper conduct of companies, than in this country. That is deplorable. There has not been, to the best of my knowledge, a successful investigation carried out by inspectors under the appropriate part of the 1963 Act since it was passed — 25 years ago. It cannot be suggested that the conduct of corporate affairs in this country is such that nothing has happened in the last 25 years that does not warrant investigation. It most certainly does and it galls me to see the people who have got away with serious improprieties and serious malpractices, who have cocked a snook at the law, laughed at it, left the companies there and started up others, again with the benefit of limited liability. Very often they engaged in the same malpractices as in the first case and nobody was able to say anything about them.
I am inclined to the view expressed by the previous speaker, Deputy O'Malley, regarding the need for an effective investigation procedure. It was brought home very forcibly to me in the sad events surrounding a company in this city not very long ago which was established with a fanfare of glitterati and public figures, some of whom were perhaps unwittingly involved. This was a company set up and designed to deliver through sales of goods about the city and country. A case was brought to my attention of a young married man from Darn-dale who was caught by this and gave up £2,500, which he had borrowed, in the hope that this company was going to be his saviour. Despite the hype that was generated, that eventually collapsed, it was a completely worthless exercise. The person responsible was a member of the Bar and was brought before the Master's Court and examined at length. More than anything else the case illustrated the ineffectiveness of the 1963 Act.
I think we are getting bogged down in the differences between administrative and legal functions. The authorities quoted by Deputy Bruton say that a person acting in an administrative capacity, as in this instance an investigator, must act fairly. Clearly, a person brought in will have certain rights and will be entitled to avail of them but because these exist that does not turn the exercise into a judicial function. It is important to remember that there is a distinction to be drawn between what is basically an administrative function carried out by non-court people and judicial functions carried out in the courts. In terms of the rights of persons there can be certain similarities but in law they are understood to be difficult. That is so even though the person is appointed by the court and has, ultimately, under section 10 (5) the right to come back. Subsection (5) is a procedure on its own which allows the administrative officer appointed to come to the court and make a complaint, unnoticed to the offending person. The matter is then opened before the judge. There is an opportunity for the alleged offender to answer and to reason and for the judge to adjudicate. There are two separate parts in this and we should not get bogged down on how we describe them. They are separate and entire and should not present us with any difficulties.
The question relates to the amendments proposed. I am more inclined to accept these sections as they stand without amendment. What we are trying to achieve — and that is the approach we should take here — is an effective body of legislation which has grown out of 25 years of experience under existing law, where it is clear that there is a body of entrepreneurs or rogue directors, as they are more correctly termed, who are prepared to exploit the laws as they stand, abuse the entitlements and avail of the limited liability and the secretiveness of the boardroom to its fullest extent and to the disadvantage of a great many people. For that reason we need an investigative process. We need a process whereby a company that is operating but which, people in authority are unhappy with, for many different reasons can be investigated at an early stage and reported on where necessary. Often it is discovered too late that what has been happening has been a conspiracy of criminality. That has been the experience of the past 25 years and we are trying to address that problem.
For that reason where a person is being investigated they should be obliged to answer. Where they do not answer they should be made answerable for their silence and where their replies are forthcoming they should be answerable in full both in civil and in criminal law for what they say they have been doing and what they have been discovered to have been doing. For that reason I am not impressed by the suggestion that savers should be given to them. I think Deputy Bruton agrees with the need to deal with the criminal activities of directors but there is a certain contradiction in his suggestion that, while we may extract answers from them, the information thus gained should be used only in civil cases. We have a problem about Part II in its entirety.
There are analogous provisions in the 1984 Criminal Justice Act, under which a person is required to give an account in relation to stolen property, with the proviso that the answers given cannot be used in evidence in a subsequent prosecution. The idea is to help the Garda to investigate and pursue the recovery of stolen property and to make people answerable on the spot. If they find somebody in possession of property, they can get an explanation there and then. My understanding is that the section is virtually unworkable and that the Garda have not relied on it at all. I know this from talking to practitioners in the city. If a garda finds property and brings a suspect into the police station, the one thing he does not want to do is to give the suspect the opportunity to give an account which cannot be used subsequently. Huge problems are being created by giving savers to people who are prepared or are obliged to talk.
It would be far more effective to leave the section as it stands and make these people answerable. Those who conduct their business properly and fairly have nothing to worry about. Those who will be worried will be the rogues and they would welcome the opportunity of an "out".
I want to make clear to Deputy O'Malley who misrepresented, perhaps deliberately, what I was saying that I am in favour of an effective and speedy way of dealing with rogue directors. I believe that this investigation procedure will simply be duplication of effort. The Minister is taking substantial powers under sections 19 and 20 to obtain information from companies. My view is that he should not use that information to initiate an investigation in which there would be a surfeit of legal representation, under the authorities I quoted earlier, because of the rights of everyone being investigated to be represented, to cross-examine, to obtain other people's documents and so on.
The Minister should not engage in that procedure which cannot lead to a prosecution but should go directly to court and prosecute offenders on the basis of information obtained in the normal way in which one would obtain information in respect of any criminal activity. If that is not sufficient, the Minister should take power to petition to wind up the company if he is not satisfied with the way it is being run. He should not engage in this long investigative procedure which would serve no other purpose than to be a bonanza for the legal profession. Everybody involved would have to be legally represented, not just before the investigation but also before any subsequent winding up or criminal proceedings. The lawyers would be involved twice. That is a waste of time.
I have made this case before. Deputy O'Malley was not here when I originally made it. I am repeating it today so that he will understand exactly what my position is. The House has decided it is going to have this Part of the Bill. That being the case, although I feel it may well be a recipe for a waste of time, it behoves us to try to make the section as effective as possible. I have no great attachment to limiting the use of the evidence to civil proceedings. Given the safeguards that are there, perhaps it would be no harm to allow it to be used in criminal proceedings as well. If it were not to be used in criminal proceedings, it would be even harder to justify the investigation. In that spirit and in the hope that we will make progress without trying to impugn one another's motives I will withdraw my two amendments.
I am certainly not anxious to push amendment No. 8 and I would be perfectly happy to withdraw it. I am taken aback by the statement which has just been made by Deputy Bruton that I deliberately misrepresented him. I most certainly did not. I based what I had to say on what he said this morning, which surprised me. That is why I felt it necessary to say it. I did not bother to comment on certain other things I heard. Deputy Bruton made the suggestion this morning that perhaps the best thing to do in these cases is not to pursue an investigation but to put the company into liquidation.
Or prosecute the directors.
Prosecute and let the company go into liquidation.
"Or" not "and".
The whole problem has been caused over the past 25 years by a succession of companies going into liquidation. The consequence for the creditors and people dealing with the company is that they do not get paid. The people who have run the company improperly depart with the assets, leaving the creditors high and dry.
We are all in favour of dealing with that. It is common cause in the House.
That is why it is important that the powers contained in the section should be used long before the question arises of putting the company into liquidation. When a company of this type which is improperly run goes into liquidation, the creditors very rarely get any dividends of even part of what is owed to them. That, in turn, has forced into bankruptcy or liquidation many other people and companies who, if they had been trading with honest people, would not have found themselves in that situation. That is why these provisions are important and should be maintained and strengthened. I do not think resort to prosecution or liquidation is sufficient because it means the creditors get nothing. Something more is needed. This kind of investigation is invaluable. It has not been possible to carry it out over the past 25 years but it will be possible now. In the circumstances I withdraw amendment No. 8.
Amendment, by leave, withdrawn.
Question proposed: "That section 10, as amended, stand part of the Bill."
Section 10 covers a very important part of the investigative procedure. Lest anyone be under any misapprehension about my views, I gave my opinions on Committee Stage. Nobody would disagree with what Deputy O'Malley and Deputy McCartan have said regarding the abuse of the concept of limited liability, particularly over the past ten or 15 years. There have been no successful investigations under the 1963 Act which gave power to the Minister. This Bill provides for the transfer of the power from the Minister and the appointment of an inspector by the court. Sections 7 to 23, inclusive, dealing with investigations will, in my opinion, achieve nothing at all. I am in agreement with what Deputy Bruton said. I am not against the concept of having the investigation of companies carried out by inspectors but because of the way in which this will be done under section 7 of the Bill, which we previously discussed, I believe very little investigation will be carried out under this Bill. Under section 7 only certain categories of people can apply to the courts to have an inspector appointed and security or money will have to be given to conduct the investigation. When we last discussed the Bill I advocated that investigations should be carried out by an official investigator, similar to the Director of Public Prosecutions or the Director of Consumer Affairs, who could investigate the abuse which Deputy O'Malley spoke about.
The more I read sections 7 to 24, covering investigations, the more I am convinced—and this idea was originally put forward by the consultative committee of accountancy bodies and many other people—we will not be able to get at the rogue directors and the abuses of limited liability which should be got at under Part II of the Bill. I doubt if anything can be done about this now because the Bill has gone through the Seanad but the more I read the sections under Part II of the Bill the more I am convinced we will get into legal tangles about whether this is a judicial process under section 10.
Limited liability is a privilege and it has responsibilities. As we all know, this privilege has been abused and I believe the best approach to dealing with this problem is, as I advocated the last day, to establish an office of official investigator. This office could have an investigator's court which would examine all the problems which have been spoken about. If we proceed, as proposed under section 10, we will pile up thousands of pounds in legal fees and under previous sections people could be rushed in and out of court. After studying sections 7 to 24 over the weekend I am convinced that it is not the right approach for the carrying out of investigations. The 1963 Act provided that the Minister could appoint inspectors but that provision was not successful. This section seeks to get over the problems which arose in that respect by providing for the appointment of inspectors by the court but I do not think this provision will work and it will not stamp out the problems which Deputy O'Malley and Deputy McCartan spoke about. The way to get over all these problems is to establish an office of official investigator who could examine all these matters and the powers in relation to the judicial process and the powers of the court could be transferred to this individual so that he can carry out the investigations.
If we include the provisions in section 10 in relation to investigations in the Bill, which I am not convinced is the right approach—I put this on the record of the House the last day and I wish to do so again—we will have to ensure that it is the best section possible. Under this section an inspector can be appointed by the court, he has the power to administer oaths and, under Deputy Cullen's amendment which we agreed to earlier this morning, the person whom questions are asked of will have to put his replies in writing. However, having given all these powers to the inspector I think a subsection should be included in section 10 which would also give some rights to the people being examined. Perhaps the Minister can include a subsection on Report Stage which would give the right to people being examined either to cross-examine or have before them the replies given by other persons of the company about the person being examined. The Minister said earlier in reply to Deputy O'Malley and Deputy Bruton that this is not a judicial process.
I do not know what kind of a process it is at present. We went down the road of trying to make it a judicial process but I believe the more we discuss it the more a mess we will make of it. It is not a judicial process, yet a person who refuses to give answers can be brought before the courts under section 10 (5) and found to be in comtempt of court if the court so decides. I believe a subsection should be included in section 10 which would give people who are being questioned the right to examine the replies given by other witnesses or to cross-examine them, but I find it hard to understand how this will be done given that the Minister said a few minutes ago that this is not a judicial process.
I have liquidated some companies under an official court investigation and during the liquidation of the company I have on occasion questioned directors and other members of a company. When I asked one director what he had been doing he told a story which lasted a few hours but when another member of the company was questioned another day he told a different story. It is the same in politics or in any other walk of life: when the muck starts to hit the fan everyone dives for cover and blames everybody else. For example, if I investigate a company of which Deputy Bruton is the director and I ask him questions he will give me one set of answers and if I bring in, say, Deputy Pat McCartan another day and he thinks Deputy Bruton incriminated him the previous day, he will give me different answers to the same questions. I believe it is only fair to both people being examined that they know what the other person has said about them. Therefore, I would like a subsection to be included in section 10 which would give a right to people either to cross-examine — and there may be some difficulty with this because, as the Minister said, it is not now a judicial process — or have access to what was said by another member of the company. The answers given by one member of a company should be produced to the person being investigated if they include information which damages or incriminates that person. If this is not done it will be difficult for an inspector to form an opinion if he has to consider contradictory statements from five or six directors of a company.
There are three points I want to raise. Mr. Justice Keane in his book, Company Law in Ireland, says in regard to the rights of people appearing before an inspector that it may be that in certain circumstances it would be a denial of natural justice not to allow such persons an oral hearing, an opportunity to cross-examine other witnesses, access to documents in the possession of other persons associated with the company, an adjournment in order to enable them to prepare their case and legal representation. While I defer to Deputy McCartan and Deputy O'Malley, who said that this does not constitute a judicial process — and the Minister said the same — it will certainly cost as much as a judicial process. That is why I agree with Deputy McCreevy that it would be better to have an official investigator of companies who would go out in the same way as the Fraud Squad go out and get information and then take criminal proceedings.
The same rights would still arise no matter what one calls it.
Under this procedure one would have an investigation which would cost as much as a court case, the outcome of which would only be a report, and one would then have the whole investigation again in court. This would mean that people would not be brought to justice quickly. If we have a purpose, which I believe we do, it is to stamp out fraud quickly and not after five or ten years of interminable and costly investigations.
There are one or two points I should like to query in relation to the section. There seems to be a case for reciting the rights in the section of those appearing in court and making certain whether those rights adverted to by Mr. Justice Keane in the book Company Law in Ireland do or do not exist in so far as the person being investigated is concerned.
If the law is to be effective there should be certainty and we should not have to wait until a court case is heard before we know whether Justice Keane is right or wrong. It should be stated in the Act whether a person has the rights I have referred to just now. A subsection should be inserted stating that those are their rights or qualifying those rights but an investigation should proceed on the basis of certainty, rather than uncertainty, as to the rights of the persons concerned.
Subsection (5) of this section states that the court may punish somebody as if guilty of contempt of court if they refuse to answer certain questions or produce certain documents. According to the wording of that subsection the court does not appear to have the right to direct that the person does not need to produce the documents. The court should have the right to direct that a person produces the documents or to direct that he should not but as presently phrased, while the court may punish a person for not producing the documents, it is not stated that the court may direct that he does not have to produce the documents. Perhaps that is implicit in the section but it would appear that the language should be made clearer.
The final point I wish to make is in relation to subsection (6). It is stated that it shall be the duty of all officers and agents of a company to produce books, documents and so on and to appear before the inspectors. Officers and agents include the solicitors of the company. Could the privacy of the relationship between the solicitor and the client be interfered with in this regard? For instance, if the solicitor of the company is also the solicitor to a director of the company who subsequently may be prosecuted—and we know that any statement made by a director of the company before an inspector may be used as evidence in criminal proceedings—would communications between that director and the solicitor cause any problems?
There is something about that in section 23.
I agree largely with what was said by Deputy McCartan in relation to the ineffectiveness of the 1963 legislation. Various points of view have been expressed as to why the investigative procedure set out in the 1963 legislation has proved to be ineffective. It may be that the provisions as written are unworkable or it may be that there is a lack of political will to pursue the procedure. However, the Minister of State should take on board the point made by Deputy McCreevy in that to initiate the procedure as set out in the Act a person has to request under section 7 that an investigation take place.
It would seem that this is a very expensive process and a very cumbersome way of dealing with this matter. There is some merit in Deputy McCreevy's suggestion that we set up a speedy and effective investigative procedure which would be inexpensive. I agree with other speakers who suggested that a provision for an investigation to take place should be contained in company law, as one can imagine a liquidation resulting in a great deal of social and financial dislocation. Such an investigation might head off that eventuality and this would be desirable.
No one could disagree with the statements made this morning with regard to cowboy directors who have literally got away with murder. There is little point in Deputies, such as Deputy O'Malley, coming into this House to cry about the fraud and the illegalities which have been perpetrated by those people and to regret that they have got away with it while at the same time putting down amendments which seek to emasculate the investigative procedure as laid down. I agree with Deputy McCreevy when he says this is not the best way of going about it but if the Minister and the Government insist upon this procedure then we are stuck with it, and if we are stuck with it it is incumbent upon us to make sure that it is as effective as possible and to give it as much teeth as possible. Therefore, I am totally opposed to Deputy O'Malley's amendment, amendment No. 8.
Deputy O'Malley is withdrawing his amendment.
He made a number of points in favour of the amendment and I am entitled to respond to them. There seems to be an amount of confusion in regard to the report to be produced by the inspector following an investigation and as to the answers to some of the questions put by the inspector in the course of his investigation. The report could form the basis of criminal or civil proceedings. It is easy to imagine cases where the conclusions reached by the inspector could be used as a basis for such proceedings. The suggestion that the answers given during the course of the inspector's investigation should not be admissible would render the procedure nugatory and ineffective.
Section 10 contains a certain amount of technical detail and I would like the Minister of State when replying to respond to a couple of points I am going to make in regard to the interpretation of parts of the section. Subsection (2) refers to books or documents which must be produced in respect of an illicit bank account. The term "books or documents" is defined in the interpretation section, section 3, but it is not clear on reading section 3 whether the definition extends to electronic data records. Even if the definition in section 3 could be interpreted in such a way, I think that it should be clearly stated that it does.
I understand that there was some debate in the Seanad as to the definition of a bank account and apparently the Minister of State has taken on board some of the suggestions made in the Seanad in that he has inserted a definition of what is a bank account, to include an account with any person, exempt by virtue of section 7 (4) of the Central Bank Act, 1971 from the requirements of holding a licence under section 9 of that Act. Under section 7 (4) the following are exempt: the ACC, ICC, the Post Office Savings Bank, the Trustees Savings Banks covered by the Trustee Savings Bank legislation 1863 to 1965, building societies, industrial and provident societies, friendly societies, credit unions, investment trust companies and unit trust schemes. However, in my opinion there is a large loophole in this section. For instance, pension funds and funds managed by life assurance companies are not covered by that definition. It is easy to imagine a director of a company buying a life assurance bond with money arising from the sale of one of the company's assets which he does not account for and putting that money into a bank account. The legislation is very loose in this respect and the Minister should take another look at it with a view to tightening it up. I appreciate that he has extended the definition as contained in the original Act but there is still a lot of room for improvement.
The section also refers to documents not only in the possession of such a director but also those under his control. We all accept that we must draw the line at some point but the Minister should look at the feasibility of getting at documents within the possession or under the control of somebody connected with the director or somebody over whom he has some influence or control. There is a certain number of words which I think should not be included in the legislation but the main point I wish to make is that a provision for an effective investigative procedure should be contained in this Bill. It should be as speedy and as simple as possible. The Minister should look carefully at the definition of "bank account" in section 10 (3) and also look at the people connected with the director who is referred to in that subsection to see if documentation within the control of these people can be brought within the ambit of the subsection.
I thank Deputies for their contributions on section 10. Deputy McCreevy talked about the official inspector. On section 7 we already debated the whole question of whether or not we have an inspection procedure and that has been decided by the House. I would prefer if we could move on to try to make the system, that we decided on the last day, more effective. There is no point in redebating, in a Bill with 28 sections and hundreds of amendments, something that we already debated. Many Deputies have slipped into doing that. We really should move on because this legislation is required as soon as possible to tackle the kind of abuses the Deputies have spoken about.
I made it clear on the last day that the official inspector approach means setting up another State office, more bureaucracy and arguably the State sitting on the shoulders of businesses. I thought we had got to the point where we did not want to go down that road. The procedure here for investigating companies will be rarely used. It is a full dress rehearsal. It is not meant to be a short, snappy, simple mechanism as Deputies want. Sections 19 and 20 provide those mechanisms. This is an alternative where one wants to get to the bottom of a very complex case. This procedure is not baggage and it does not cost the State very much because the costs will be paid by the people seeking the application and by the persons convicted arising out of that, under section 13. What we have here are companies paying for their own crimes.
In relation to cross-examination, I do not see it as being essential, as Deputies McCreevy and Bruton suggested. The inspector will take evidence from up to a dozen persons and get those persons to sign the evidence. Then the inspector will decide which statements he can accept because he must make the decision as to what goes into his report. The inspector does not have to put every allegation into his report. He has to adjudicate on the evidence given to him, because he has been appointed by the court as an inspector. The inspector then goes to the court with that report and the court also would be very slow to accept any defamatory statements without substantial support for them. I am happy that we should not try to turn into a judicial process something that is not meant to be a judicial process. This is an investigation procedure which is not meant for everyday use but for major fact finding operations. We should retain this procedure which is cost effective in that the people involved, and not the State, pay for it.
Deputy Bruton raised the question of quoting the rights and I mentioned the Judge Keane opinion. There are enough precedents and enough legislation to indicate the rights of a person in any court.
Does that apply in this case?
Yes.
This is not a court, of course.
The inspector may certify that it goes to a court.
Is it clear that a person appearing before an inspector has all the rights I quoted?
I will doubly check that, but as of now my opinion is that he would certainly have those rights. If I have any difficulty with that I will clear it up on Report Stage.
Deputy Bruton also talked about where the court may punish a person for contempt of court on receipt of the inspector's certified complaint and pointed out that the court has no option other than to punish the person for contempt of court and that the section does not say, for example, that one must now publish the information. I am happy that where it says "the court may thereupon enquire into the case and, after hearing any witnesses who may be produced against" may punish the offender. What we have put in here is an option for the court, but it is not the only option.
Would it be improved if it said "the court may make such order as it thinks fit and may punish"?
I have no difficulty with that. I will look at it to see if I can include it on Report Stage. I am happy at this stage that the wording gives the court one option and that there are other options that the court can take. I am assuming that if the court decided to insist on the production of the documents they could do so.
Or decide that the person had reasonable grounds?
Exactly. That is what I intend in that section. I will look at whether or not the wording actually reflects that. Deputy O'Dea made interesting points about books and computers. Section 3 makes it clear that reference to books include computer printcuts and computer information. The Deputy queried the procedure for investigations and I have already dealt with that. The Deputy also asked me to look at section 10 (3) with regard to the definition of banks. I amended that in the Seanad to further expand what is generally regarded as a bank account. I am happy that that takes as broad a sweep as possible in the matter.
Deputy Bruton asked about solicitors and accountants. Section 10 (6) would be subject to section 23 (1) which is a specified provision about privilege, particularly in the light of Government amendment No. 18a. to which we will come later on. Section 10 is essential because we have debated and put in place an inspection system to allow someone to go to court to get an inspector put into a company. Section 10 is totally consequential on having decided on an inspection procedure, so as to make it as efficient as possible. I am happy that section 10 makes it as efficient as possible.
Section 10 (3) specifies that if an inspector has reasonable grounds for believing that a director, or past director, of a company maintains or has maintained a bank account he can ask that person to produce details of such bank account and so on which may not be in the name of a limited company. Section 10 (1) gives such power to directors, officers and agents, and subsection (2) specifically to any other person. Why then is there need for the inclusion of subsection (3) in order to break down the grounds under which certain people can be asked to furnish details of bank accounts and so on? For example, some person who was not a director of a company could effectively control that company; I can think of many such instances. A person who may be listed as a director but who may not be in control of the company at all would be required to furnish evidence under the provisions of subsection (2) whereas the other person, if not known, would not be caught at all. I wonder why it is necessary to have included subsections (2) and (3). It strikes me that the provisions of subsections (1) and (2) are adequate to cover everybody, whereas the provisions of subsection (3) are more specific, laying down certain grounds for seeking such evidence.
Perhaps that could be dealt with by including in the section, after the reference to director, or past director, of the company: "or any person connected with a former director of the company within the terms of section 25 of this Act" which refers to connected persons.
I see what Deputies are at. Certainly it is something we would want to include. I will ascertain whether we can do something with it.
My profession are greatly concerned that, in all sections of an Act, where auditors are referred to as officers or agents of a company, there would be included a further subsection to say that an auditor is not an officer or agent of a company. In section 10 (6) and other sections auditors are included as agents of a company. My professional body would be very anxious to have it made clear that an auditor is an independent person or body. I am sure that point has been made to the Minister by many accountancy bodies. There are other sections apart from this one which include an auditor as an officer or agent of a company whereas he is neither.
Section 10, as amended, agreed to.
SECTION 11.
I move amendment No. 9:
In page 15, subsection (3) (b), line 36, to delete “(including an employee)” and substitute “(including an employee, or a trade union representing employees)”.
The amendment speaks for itself. It seeks to establish and recognise the position of rights of trade unions and trade unionists to represent employees and their interests with regard to companies. Many of them have been very active in this area, particularly in the period within which companies may be wound up. The provisions of the amendment seek to facilitate and recognise their position, to enable a copy of any report prepared by an inspector to be passed on, not merely to an individual but, where appropriate, to the union representing him or her.
Section 11 (3) provides that the court shall furnish a copy of an inspector's report to certain persons set out in the subsections. In particular subsection (3) (v) provides that the court may, if it thinks fit, and if requested to do so, furnish a copy of the report to an employee where the court is of the opinion that the employee's financial interests are affected by the matters dealt with in the report. This matter was discussed at great length in the Seanad on the basis of a number of amendments tabled there.
By way of general comment I should make it clear that, while I appreciate, understand and sympathise with what the Deputy is trying to achieve, I do not think that this Bill is the appropriate place to make provisions for the position of representatives of employees or, for that matter, employers. There is no way in which it can be said that a trade union itself is being directly affected by the activities of a company. Clearly the members of a trade union, who are employees of a company, may be affected and, in the case of insolvency, very often will be badly affected. The fact of the matter is that the employees themselves have the right to request a copy of an inspector's report. Undoubtedly they would use that right whenever it was considered appropriate.
As I have said, this matter was the subject of considerable debate in the Seanad, at the end of which I agreed to insert the phrase "including an employee" which had not been in the original draft. I feel I have moved a substantial distance in having done so and, on account of the facts I have put before the House now, I cannot accept the amendment in its present form.
I am disappointed at the Minister's response. I had read the Seanad debate. I do not accept that the inclusion of the words "including an employee" constitutes a concession. Of necessity the existing wording, would have involved an employee. By definition all employees must be affected in their financial interest by the workings of any company at any given time. Therefore the words in section 11 (3) (v) reading:
any other person (including an employee) whose financial interests appear to the court to be affected by the matters dealt with in the report whether as a creditor of the company or body corporate or otherwise;
will include an employee. Our amendment seeks to recognise the position that trade unions play on behalf of employees at such trying times. It is worth putting in context the scale of the David and Goliath encounter that often obtains when an individual employee is attempting to come to terms with what is going on within a company at a given time, even more so if there are troubles looming that might, in time, lead to the winding up of that company. The history of this is well known — employees being left without proper tax, PRSI and other contributions having been paid, indeed when VAT and other dues owing to the State leave them in very difficult circumstances, when often efforts on the part of trade unions, with all their might, are thwarted.
The provisions of this section seek to deal with events beyond the capacity of an individual employee. For that reason employees become members of trade unions in an effort to protect themselves collectively. Indeed trade unions have the resources, authority and capability to confront sometimes what may be termed the activities of cowboy companies.
The Minister has suggested that the Companies Bill is not appropriate legislation for dealing with the position of trade unions. I could not disagree more, particularly in the case of companies in difficulties and the huge impact that has, and will have, on the position of their employees. The Minister said he had made the concession of referring specifically to employees. I contend that the insertion of the wording "including an employee, or a trade union representing employees" would not complicate the formula. No one is suggesting that it should be just any trade union or trade unions at large. The amendment is drafted in such a way as to make it clear that the union concerned is the one representing the employee and also that the union receive the report in the context of representing the employee. It is in that limited way that we are asking the Minister to concede, on the advice of his officials an amendment that simply reflects a de facto situation on an everyday basis and recognises that unions have a very important role to play on behalf of their members in the events as they unfold when companies run into difficulties.
I am in favour of the general principle being put forward by Deputy McCartan but in practice a court might order that the report would be given to the trade union and not to the individual employees. For instance, individual employees who are not members of a trade union would not get the report whereas those who are members would get it. The wording would have to be changed to make it clear that all employees and not just those who are members of a trade union should have an equal right to access to the report. Perhaps the wording could read, "including an employee or a representative nominated by him". That could include a trade union but the right to receive the report would be that of the employee rather than of the representative. Perhaps if that phraseology were used it would achieve the objective set out by Deputy McCartan.
There is a certain logic in what Deputy McCartan says but I think it is purely a symbolic geature. Symbolism seems to be very important in many aspects of Irish life and to include this amendment might be another symbolic gesture. I would have to agree with the Minister that perhaps the Companies Bill is not the correct legislation in which to make this change. To include Deputy McCartan's amendment would be a contradiction but I can see the symbolism of including it.
Nobody pressed an amendment under section 7 which is an important section. Of all the people who could apply to the court to have an inspector appointed, a trade union, or an employee, was not included. In many cases it is the trade union who would avail of this provision. I cannot see any other people, or very few at least, going to the bother or expense of carrying out an investigation, but a large trade union could do so, because employees are usually the people who are ripped off the most when companies go to the wall. If we are to accept Deputy McCartan's amendment it would only be fair to provide that trade unions or employees also have the right to apply to the court to appoint an inspector.
I also see difficulties arising if we accept Deputy McCartan's amendment, for example, under section 11 the court may, if it thinks fit, order that this report be sent to a variety of people, including the Minister. Amendment No. 10 in the name of the Minister, which is a good amendment, states that certain sections of the report may be left out. If the report is to be issued to all and sundry, it will also appear in the public press. If this provision regarding the inspectorate is effective I hope it will apply to companies that are still trading rather than companies that are winding up. If the report is issued to a wide variety of people it could end up in the hands of the media and that could do extreme damage to a trading company. The publicity attaching to such reports should be considered. It does not make much difference if the inspector issues a report when the company is gone out of business but it may do considerable damage to trading companies.
If we accept Deputy McCartan's amendment, which I am not very much in favour of, the quid pro quo should be in section 7 and, secondly, perhaps an amendment could be included on Report Stage to provide that the court order that the report be given only to the people concerned and not to the public press. Perhaps the insertion of Deputy McCartan's amendment would be a symbolic gesture but I can see difficulties arising regarding the publication of the inspector's report for the reasons I have outlined.
I wish to say to Deputy McCartan that there is absolutely nothing sinister about my not wanting to include trade unions. It is a purely pragmatic approach to the matter. Other organisations such as the Federated Union of Employers and the CII are not included. We deliberately did not include representative bodies of people who might have an interest but that was purely for the sake of being consistent. I reiterate the Government's desire, and the importance they attach to working with the trade union movement in resolving all our national difficulties, as we have been doing. There is absolutely nothing sinister in it and I do not resist it for any other reason than purely to be consistent about representative organisations in general. In practice, the trade union that represents the employees will get a copy of the report but we have gone further and said that an employee also can get a copy. Obviously the trade union official will be in contact with the employee but that is a matter for them. The union are fully involved in this process.
This is a Companies Bill and, to my knowledge, in all companies legislation we have avoided representative bodies and tried to deal with the individuals affected, such as the directors or employees. We try to avoid the representative bodies on either side, as it were. I would like to genuinely assure the Deputy that there is no other motive or reasoning behind it. We have made it possible for an employee to get a copy of the report immediately and in that context I am sure the union involved will have the report. Throughout company legislation we have avoided nominating representative bodies and that is purely to be consistent in company law. I stress again that there is no philosophical or other reason involved.
I will be brief because I know Deputy McCartan wants to contribute as this is his amendment. I am sorry I missed most of the debate because I was elsewhere. There is no fundamental reason why a report should be furnished to a trade union representative of an employee if the employee can get a copy of the report. I have no objection to the amendment but I do not think it adds anything to the legislation.
One point has not been raised in relation to paragraph (v) of subsection (3) (b). From newspaper reports I know that there was some debate about this matter in the Seanad. The Minister of State included the words "including an employee" to satisfy the fears of some Senators that employees were not included among those who had a right to seek a copy of a report. That was not necessary. Under the original wording they were covered. Nonetheless, I welcome the inclusion of the phrase, to make it absolutely beyond any doubt that employees who are a fundamental part of the company are included also among those with a right to demand a copy of the report.
Could the Minister of State expand on the question of the financial interests of employees, whether as a creditor or otherwise? What does "otherwise" mean? Does it mean future employment prospects, or does it refer to the wage structure of the company? Have the Department or the Minister an exact idea of the limitations in this case? Is it the intention to leave the position like that and let the courts decide on such limits? My own view is that the rights of employees should be as widely interpreted as possible in company legislation. I would like to think that in a matter for the courts those rights would be interpreted very widely and very liberally. Has the Minister any concept of what the limitations under that phrase will be?
We have specifically included employee in this paragraph. Financial interests in that regard would be moneys due in wages and salary or, indeed, the sheer prospect that there might not be employment in the future. I would certainly see that as a financial interest. It would include any concern of an employee that might affect his or her future earning capacity or power.
We have specifically written in an employee after a lengthy debate in the Seanad. I wanted to remove any suggestion that I did not want employees to have a copy of the report. However, the exclusion of the representative body is purely for the sake of consistency in legislation. It takes one into the area of other representative bodies, various associations and so on, that may be attached to individuals who operate the company's system.
I want to speak briefly in respect of the amendment and, secondly, on the general aspect of another point touched on by Deputy O'Dea. I am somewhat dissapointed that the amendment does not commend itself to the Minister. I accept his position in regard to the way in which he wishes to present the Government view of being consistent in not including any one particular representative organisation to the exclusion of others. However, I base my case on my belief that we are dealing often with issues of confrontation where employees are greatly disadvantaged and, of necessity, rely on union representation. That should be recognised. This is unique. Drawing in references to the Federated Union of Employers or other groups does not really arise. The point has been made by Deputy Bruton and touched on by Deputy O'Dea.
The section is permissive of the inspectorate investigator. There in no obligation on him to supply, and no right in the section for persons to ask for, a copy of the report because the wording is that "the court, if it thinks fit,...". It is the court that decides. I incorrectly said that it was the inspector who had the discretion, but it is the court. There is certainly no right of any person to demand one. Has the Minister considered whether it would be more desirable to make it obligatory on the court to furnish copies, in other words to substitute for "if it thinks fit" the words "it shall"? I would be worried that considerations not in the interests of those who should see the reports might come into play to act against them.
If a court concedes that an investigator should be sent in, we are at a stage where all the parties named in paragraphs (i) to (vi) in the subsection should be advised and kept abreast of what is happening and what the conclusions are. That is where the inclusion of the amendment with regard to union representation becomes even more important. You are ensuring that the report moves into not just individual hands but responsible hands. It has been a constant complaint and a fact of life that the company have gone or are complete and utter financially negative entity, a huge liability without anybody's knowledge. They have been able to maintain a facade but nobody could get behind that to see exactly the truth of the future of the company. It is very progressive that in terms of future employment capability of the company reports can now find their way, directly or indirectly, into the hands of employees so that they can be fully apprised of what is going on. That is something to which they are entitled.
If people put a lifetime of effort and commitment into a company, they are entitled at least to know where the company is going. Too often company accounts, or reports, or statements are given out when employees are not in a position to confront and examine them. In the order of things proposed by the Minister and the intent of the legislation, we should be working towards people, as of right, being furnished as a matter of course with such reports. Would the Minister comment on the reason for his borrowing those terms, of allowing the court a discretion to decide whether reports are to be made available or not? These, as a matter of course, should be made available to the bodies named therein. They have a well established right of interest and they should be kept informed.
This intervention is designed to be helpful and not prolong the discussion, but whether I shall succeed in that aim I do not know. Would it meet the Minister's point and also that of Deputy McCartan if the Deputy's amendment were to read something like this:
to any other person including an employee or a representative nominated to act on his behalf for the purposes of this section.
In other words, the employee could nominate his accountant or his trade union.
That is fair enough.
Before the Minister replies, what is the procedure for applying to the court for a copy of the report? I thought from my reading of the section that somebody had to apply for it.
No.
So the court decides unilaterally to whom to give the report. If that is the case, it is unsatisfactory. There should be some defined and definite procedure laid down whereby people can apply for copies of the report after a certain time has elapsed.
A few points have arisen. Deputy McCartan referred to a trade union. I want it to be crystal clear that it is purely for technical consistency reasons that I am opposing the insertion of the words, not for any other reason. I fully accept the Deputy's right to pursue the inclusion of the words, from his standpoint.
I would accept Deputy Bruton's suggestion.
I shall come to that later. Line 26 included the expression "if it thinks fit". That is the point that Deputy McCartan has raised with me. In other words, should we insist that the court makes the report available to a list of people or should we give the court the authority to make up its own mind in that regard? I favour the latter course, letting the court make up its own mind about it, because there may be circumstances which we cannot envisage in which the court may decide not to release the report into the broad public arena. It may be, for example, that the publication of such a report might in itself bring down the company and in a case like that the court might say that if they gave the report to the list of people who are entitled to request it, it might be the straw that breaks the camel's back. Indeed, it could be detrimental to the employees, directors and shareholders of the company. In the vast majority — if not all — cases I envisage the court making it available to the list of people in the section but we might be wrong to tie the hands of the court to having to give it out when it might be clear to them that doing so would damage the company and those who work there. I see Deputy McCartan's point but it is better to let the court have the prerogative.
I appreciate that Deputy Bruton was trying to be helpful when he spoke about a person acting on behalf of others. I have no difficulty in doing that but it is not necessary. We could put the phrase "a person whose conduct is referred to in the report" in all the sections or "a person nominated to act on their behalf". We would be extending the list to people acting on behalf of others. I know the Deputy was referring to a specific discussion between Deputy McCartan and me and I welcome his intervention in that regard but it will not solve the problem. I ask Deputy McCartan to accept the context and the goodwill which I am extending to the trade union movement instead of trying to get around it in a clever way. I have clearly put in "including an employee" which should be sufficient. It means an employee of a company can get a copy of the report.
Deputy O'Dea asked about the procedure for applying. Line 29, page 15 says "furnish a copy on request and payment of the prescribed fee". You will notice that there is always a prescribed fee. It is not necessary to spell out what "on request" means. It merely involves a letter, telephone call or a knock on the door.
If a fee is involved it probably makes sense for employees to get together, get someone to represent them and get one report for one fee rather than applying individually. As Deputy McCartan said, one would expect most of the other people involved to be professionally competent and to be able to pursue their rights under company law whereas employees are probably more likely to require representation. I hope we will not spend too much time on this section.
Is Deputy McCartan pressing his amendment?
In view of what Deputy Bruton said, is the Minister prepared to accept the formula put forward by him, which is a fair compromise?
I am not well disposed to doing so for the reasons I gave. It does not add much to the Bill. If an employee wishes to have a representative, he or she is quite entitled to do so. Quite obviously, employees can discuss the report with their representative and I do not take Deputy Bruton's point that an employee will not be able to receive a report from the courts. I want to ensure that employees are fully protected and have full access under this section.
I do not propose to press my amendment.
Amendment, by leave, withdrawn.
I move amendment No. 10:
In page 15, between lines 45 and 46, to insert the following subsection:
"(4) Where the court so thinks proper it may direct that a particular part of a report made by virtue of this section be omitted from a copy forwarded or furnished under subsection (3) (a) or (b), or from the report as printed and published under subsection (3) (c)".
This allows the court to edit or omit parts of the report before circulating it and the idea behind it is similar to that underlying a number of amendments we introduced in the Seanad to Part IX of the Bill. It is a recognition that where a report of some aspect of a company's affairs is conducted by an outsider, so to speak, some parts of it may be unsuitable for general publication. Indeed, full publication in all cases could be positively and unnecessarily damaging to the interests of the company, their employees or some other party. We obviously would not want legislation to have this effect and this amendment would give the court the discretion to make the report available with certain aspects omitted. The form of the draft amendment is based on a similar idea which we introduced in the Seanad in regard to sections 167 and 170 which contain similar provisions in relation to reports by an examiner. We are giving the court authority to omit portions of it from those supplied to the individuals listed.
I defer to those who practise law in matters of this kind. Will the court be hearing the argument as to whether parts of the report should be made public? Will it be a public hearing and, if so, what is the advantage of the amendment?
The inspector might suggest to the court that that part might be held in private but I will have to check it for the Deputy.
The court has the power to make this decision and, presumably, those who wanted parts of the report kept quiet would be affected by its publication, who might include some of the people listed here. However, they will not know what submission to make to the court about having a part of the report kept quiet without seeing it in the first place. There will be a problem in that regard for everyone concerned. Is a court hearing of this kind normally held in camera or could it be held in camera for the purpose of deciding an issue of this kind?
I understand the court would make that decision and the inspector may, if he wishes, make a recommendation to the court in that regard.
Amendment agreed to.
Question proposed: "That section 11, as amended, stand part of the Bill."
Under section 11 (3) (a) an inspector may forward a copy of any report made by the inspectors to the company's registered office. Would it not be as well to mention that a copy should be forwarded to the secretary or directors of the company, or both? The registered offices of some companies may not be their normal trading place. It could be a solicitor's office in Hong Kong, Gibraltar or elsewhere. I think this section could be amended because the report should be sent to the secretary of the company at least.
I do not think that is necessary. Paragraph (a) reads:
forward a copy of any report made by the inspectors to the company's registered office,
That is normal procedure and I presume the documents would be addressed to the secretary.
Question put and agreed to.
SECTION 12.
Question proposed: "That section 12 stand part of the Bill."
I do not understand this section which deals with proceedings on inspectors' reports. This incorporates part of section 170 of the Companies Act, 1963, and it appears as if someone decided to keep just part of that section. Section 170 of the 1963 Act referred to the proceedings the Attorney General could bring on behalf of the State. As I said, it appears as if somebody decided to incorporate parts of that section to make up section 12 of this Bill. Subsection (2) reads:
If, in the case of any body corporate liable to be wound up under the Companies Acts, it appears to the Minister from—
(b) any report made by inspectors appointed by the Minister under this Act,
Under this Bill we are taking from the Minister the power to appoint the inspector. The courts will be appointing them. Some of this wording is in section 170 of the 1963 Act. Maybe I am reading it incorrectly but perhaps somebody could explain the wording in section 12 (2) (a) and (b).
Subsections (1), (2), (4) and (5) of section 170 of the 1963 Act are not being re-enacted. Subsection (1) requires the Minister to refer criminal evidence arising from a report to the Director of Public Prosecutions. This will not now be necessary. Subsection (2) requires the company's officers and agents to assist the Director of Public Prosecutions where such referral took place. This is also unnecessary now. Subsections (4) and (5) enable the Minister to bring public interest proceedings on behalf of the company against a director arising from a report.
As the Minister is effectively withdrawing from active involvement in the investigation of companies, this does not appear to be an appropriate power for the Minister to have. As regards paragraph (b) which says, "any report made by inspectors appointed by the Minister under this Act," there are specific instances in sections 14 and 16 when the Minister has the power to appoint inspectors.
The Minister said we are doing away with section 170 of the 1963 Act which referred to the Attorney General before the advent of the Director of Public Prosecutions. I agree with the Minister not including the Attorney General, but why are we re-enacting one part of the 1963 Act here by referring to the Minister? These inspectors are appointed by the court. The Minister can have an inspector appointed under section 8 but he has to go to the court to do so.
The Minister does not appoint the inspectors in general but he retains power to appoint inspectors under section 14 to investigate the ownership of a company. It is in these cases that the Minister appoints an inspector. This legislation retains provisions whereby the Minister appoints an inspector and not the courts. Section 14 deals with the appointment and powers of inspectors to investigate ownership of a company.
This section is a little confusing. Section 12 (1) reads:
Having considered a report made under section 11, the court may make such order as it deems fit in relation to matters arising from that report...
The section starts by referring to a report under section 11 which covers inspectors appointed by the court, but in section 12 (2) (b) we refer to "any report made by inspectors appointed by the Minister under this Act". It appears that this wording was taken directly from the 1963 Act. Inspectors appointed by the Minister are referred to in sections 8 and 12 of this Bill. Section 12 (2) (b) does not say anything about inspectors appointed by the Minister to investigate the ownership of a company. Reading this Bill one would get the impression that whoever drafted it decided to scrap a number of sections in the 1963 Act by omitting the words "Attorney General" and inserting the "Director of Public Prosecutions". This is totally unnecessary and I do not know why these words are there.
Section 12 has two parts. Subsection (1) deals with the courts and the general appointment of inspectors and says "the court may make such order as it deems fit in relation to matters arising from that report including an order of its own motion for the winding up of a body corporate.". That deals with the court, but subsection (2) does not take that approach. It says:
If, in the case of any body corporate liable to be wound up under the Companies Acts, it appears to the Minister from—
(a) any report made under section 11 as a result of an application by the Minister under section 8, or
(b) any report made by inspectors appointed by the Minister under this Act, or
(c) any information or document obtained by the Minister under this Part,
It is broader than just dealing with what the Deputy refers to, the general area of appointing inspectors. It broadens it out completely to take in a number of instances, including where the Minister directly appoints an inspector. If I thought it was not crystal clear I would certainly find a way to clear it.
Maybe it would be more appropriate to have this subsection as part of section 14 which retains the right to the Minister to appoint inspectors in certain cases. Certainly it would be less confusing.
I agree with Deputy O'Dea. The people drafting the Bill probably said to themselves: "We are coming up to section 170. We will replace it with something else. We cannot have subsections (1), (2) and (4) but we can still have the exact same wording". It just seems confusing. If the Minister wants to leave it there——
It clearly says "any report made by inspectors appointed by the Minister under this Act". Only where the Minister appoints the inspector does the event arise. Whether we put it in section 14 or section 11 we are talking about the same wording and I know that a number of good professional advisers would be able to assist the public in getting through this.
Acting Chairman
Is section 12 agreed?
No.
We will have a vote on this.
I want to ask a question anyway. Section 12 (1) states: "Having considered a report made under section 11, the court may make such order as it deems fit in relation to matters arising from that report including an order of its own motion for the winding up of a body corporate". Could the Minister say what is in mind there? Is there other than a winding up order? I cannot think of any order "the court may make" other than a winding up order. What other orders are we talking about? Take a hypothetical example which is quite possible considering events here in the past couple of years. Suppose there has been a dispute in a company regarding the trade union and management and maybe a difference of opinion between individual members of the union as to how the company should be conducted, and that led to a strike and eventually the close down of the company. We have seen instances of that. Suppose the inspector's report, having taken on the evidence, said the trade union or someone else was totally responsible for the way this company was conducted and this led to a number of problems. This is why I make so much reference to section 170 of the 1963 Act. I still think this section was thrown in because section 170 was there and it was a case of throwing in something like this here also. I see no need at all for it. What is the purpose of this section and in particular subsection (1)? What other orders would the court be thinking about? Are there any such orders? When we come to other sections there can be criminal prosecutions and whatever and the court can decide on compensation but this section was just thrown in. What is the purpose of it?
Acting Chairman
Before the Minister replies let me say that we have a number of amendments to this Bill and that we are trying to get through as many as possible. There is a good deal of repetition at this stage. I think I should be putting the question now. Is section 12 agreed?
The point the Minister made on section 12 has not been made about any other section.
Acting Chairman
The Minister said this morning he was anxious to get through as many sections as possible but if we are to have repetition we will hardly get through them.
I can answer that very briefly to clear it up. The court may make orders, for example, to restrict circulation. It may make orders to ask the inspector to go and get more information. The court's hands are not tied to one specific order. They are just two examples of another order it might make. I hope that meets the Deputy's point.
Question put and agreed to.
NEW SECTION.
Amendment No. 10a.
In what order are the amendments to be taken?
Amendments Nos. 11, 11a and 11b are alternatives. For discussion purposes, therefore amendments Nos. 10a, 11, 11a and 11b may be taken together.
I move amendment No. 10a:
In page 16, before section 13, to insert the following new section:
"13.—(1) The expenses of and incidental to an investigation by an inspector appointed by the court under the foregoing provisions of this Act shall be defrayed in the first instance by the Minister for Justice but the court may direct that any person being—
(a) a body corporate dealt with in the report, or
(b) the applicant or applicants for the investigation,
shall be liable, to such extent as the court may direct, to repay the Minister for Justice, provided that no such liability on the part of the applicant or applicants shall exceed in the aggregate £200,000.
(2) Without prejudice to subsection (1), any person who is—
(a) convicted of an offence on a prosecution instituted as a result of an investigation,
(b) ordered to pay damages or restore any property in proceedings brought as a result of an investigation, or
(c) awarded damages or to whom property is restored in proceedings brought as a result of an investigation,
may, in the same proceedings, be ordered to repay all or part of the expenses referred to in subsection (1) to the Minister for Justice or to any person on whom liability has been imposed by the court under that subsection, provided that, in the case of a person to whom paragraph (c) relates, the court shall not order payment in excess of one-tenth of the amount of the damages awarded or of the value of the property restored, as the case may be.
(3) The report of an inspector may, if he thinks fit, and shall, if the court so directs, include a recommendation as to the directions (if any) which he thinks appropriate, in the light of his investigation, to be given under subsection (1).".
We are coming to section 13 which deals with expenses of the investigating company's affairs, how they are paid and so on. That is the general thrust of section 13. The amendments which are put down all relate to this section 13 which deals with the question of liability for the expenses of an investigation and provides guidelines for the court as to the manner in which these expenses are to be defrayed. As drafted the section provides that the expenses of an investigation shall be defrayed in the first instance by the Minister for Justice and then that certain other persons shall be liable to repay that Minister to the extent to be specified by the court.
Deputies will remember that there was considerable debate in the House last week on the whole question of who should pay for the expenses of an investigation. This debate took place in the context of section 7 (3) which deals with security for costs in relation to investigation. There was strong opposition last week to the idea that an applicant for an investigation could be liable to pay for the whole cost of an investigation, with no limit. I have given careful consideration during the past week to the points raised by Deputies and have come to the conclusion that some of what was said — indeed, a great deal of what was said — has considerable merit. Therefore, I am proposing an amendment which would replace the existing section 13 with a new section which will cover many of the concerns raised by Deputies, Deputy Bruton in particular. In proposing this amendment I am satisfied that we are improving the overall workability, as it were, of the investigation procedure of the Bill.
It will be useful if I outline quickly what I am proposing in this amendment and I hope Deputies will see from the explanation that we are taking on board many of the suggestions made in last week's debate. First, we made three changes in subsection (1). We have taken out the reference to the liability of a person convicted of an offence as a result of an investigation. A number of questions were raised in the debate last week about how this provision would work in practice as a prosecution for an offence would probably take place only some considerable time after the investigation had been completed. My reaction at the time to those comments was that this provision was already in the 1963 Act and should not be changed. I am proposing, therefore, that the question of the liability of a person convicted of an offence in a prosecution arising out of an investigation should be decided during those proceedings and that where liability is imposed the person convicted should be required to repay any person who has been ordered by the court to pay the expenses in the first instance. This is provided for in subsection (2) of the amendment where there is also a number of other new provisions which I would like to deal with quickly.
I should say at this stage that I cannot agree with Deputy Bruton's proposal in amendment No. 11 that a person convicted of an offence should only be liable to the extent that he benefited financially from the company. In the first place it seems to me that the extent of a person's benefit would be extremely hard to establish and that it is not a question which is appropriate for decision by a criminal court. Secondly, the question of the extent of a person's liability in this type of case should be left to the court to decide.
In regard to my amendment, the second change we are making in subsection (1) is to tidy up the wording somewhat. This is a minor change but it makes the subsection easier to understand.
The final change in this subsection is much more fundamental and takes account of the concerns raised by a number of Deputies that there should be a limit written into the legislation on the extent of an applicant's liability under the section. On reflection I am inclined to agree that this is a good idea and I am proposing, therefore, that the maximum liability for an applicant should be set at £200,000. At this point I should like to make it clear that the figure of £200,000 will be the maximum liability which the courts could impose on an applicant. It does not in any way suggest that that figure will be the usual one used by the courts. Clearly, the courts will decide in each case what the extent of the applicant's liability should be, depending on the cost of the investigation and whether the applicant should be liable to pay at all. In many cases an applicant may not be liable to pay.
During the debate last week Deputy Bruton was concerned that an applicant's liability should be limited to half the cost of an investigation. In fact, he has tabled amendment No. 11 (a) to this effect. Having examined the question of maximum liability for an applicant I am prepared to accept the principle involved. I am not sure, however, that Deputy Bruton's proposal is the best way to deal with the problem. In my view my proposal setting a figure for maximum liability is a clearer way to approach this as it has the advantage of certainty. Under Deputy Bruton's proposal an applicant could be required to pay costs arguably in excess of £200,000 if the expenses of an investigation exceed £400,000.
The idea that liability should be set at half the cost of an investigation gives no guarantee whatever as to a person's maximum liability. While I accept the principle of setting a limit I suggest to the House that my proposal of specifying the limit of £200,000 in the section is preferable and I urge the House to adopt it.
The proposed new subsection (2) deals with the question I referred to, relating to the liability of a person convicted of an offence on a prosecution arising as a result of an investigation. I should like to emphasise that the question of such a person's liability will be decided at the time of the criminal proceedings, as provided for in section 171 of the 1963 Act. That was not made clear in the Bill as drafted. In addition, we are taking another element of the 1963 Act, not included in the Bill initially and which on reflection should now be included, and that is where a person is found to be in default by virtue of civil proceedings brought as a result of an investigation he should be liable to pay some or all of the costs of the investigation if the court which hears these proceedings considers it appropriate.
I am taking on board the substance of Deputy Bruton's amendment No. 11 (b) by providing in paragraph (c) of subsection (2) that a person who actually benefits from an investigation being held on the basis of damages being awarded to him, or property being restored at civil proceedings, should be required to contribute to the cost of the investigation. I agree with Deputy Bruton's proposals that this liability should be limited and I am including a limit of one-tenth of the cost of the investigation.
Subsection (3) of the amendment is the same as the existing subsection (3) in the Bill as it came from the Seanad. Finally, I am proposing the deletion of the existing subsections (2) and (4). On reflection, subsection (2) is unnecessarily complicated and unlikely to be availed of in practice. I am satisfied that the safeguards which are now built into the section under my proposed amendment will ensure that the liability for the costs of an investigation would be properly dealt with. I do not, therefore, think that subsection (2) is necessary. Subsection (4) is being deleted because it is no longer relevant in view of our proposed changes in relation to the liability of a person convicted of an offence arising out of an investigation. I value last week's contributions by Members and I trust that they find my response to them to be suitable.
I should like to thank the Minister for in substance accepting many of the amendments I tabled and incorporating them in the new section drafted with the professional advice available to him. There are one or two points which remain and which I would like to pursue with the Minister. The first is in regard to the amendment tabled. According to that a person convicted of an offence on a prosecution instituted as a result of an investigation in the course of those criminal proceedings may, in addition to being sentenced to jail or being ordered to pay a fine, be also asked by the judge hearing the criminal case to pay to the Minister for Justice a sum of money in respect of the costs of the original investigation. Two issues arise from that. It would appear that a court would be considering the question of the attribution of the costs of an investigation in two separate proceedings. In the first instance the court would be considering it at the conclusion of the investigation and asking for contributions at that point from the body corporate that was investigated and from the applicants. Subsequently, another judge in a criminal case may decide that the directors, or whoever was being prosecuted, should pay a contribution. There could yet be another court case in which a person who was awarded damages against a member of the company arising from the investigation had those damages confirmed and yet a third judge might decide to order that some of the damages should be paid back to the Minister for Justice as a contribution towards the cost of the investigation.
What the Minister is trying to achieve is very good but I wonder, from a practical point of view, if there is not a possibility that at the first of those hearings the judge might decide to make an order for restitution to the Minister for Justice of the entire costs of the proceedings and ask the body corporate and the applicant to split the costs between them. Later, if there is a prosecution another judge may say that he thinks the person who was convicted should pay a contribution to the costs of the proceedings. What happens then? Will the fact that the issue of costs has been dealt with influence the judge in the subsequent criminal proceedings to take the view that as the costs had been looked after he would not bother making any order? Will the judge make such an order in which case the money will be paid to the Minister for Justice who will refund such proportion of the costs paid by the applicant or the body corporate as represented by the money received for the second court case? In the case of a third court case, if there is one, will the same procedure be gone through, that the money will be paid to the Minister who will in turn pay it to the applicants?
We should remember that there may be three court cases and there may be gaps of several years between them. I wonder if the Minister should introduce a provision to ensure that the one judge hears all cases so that there will be a continuity of view as to the appropriate proportion of the costs that should be met. Alternatively, should a formula be established by law whereby money coming in from subsequent proceedings can be paid back to those who have already paid in money? Some provision is needed to deal with that matter.
So far as my own amendments are concerned the Minister has correctly stated that he has accepted in practice amendment 11b. He has not accepted amendment No. 11a but he has introduced an overall limit of £200,000. I am not pushed about that, the Minister's approach may be better. My original amendment, No. 11, is one which raises another issue of jurisprudence which we should look at. Amendment No. 11 proposes that a person who is convicted of a crime shall only be asked to pay towards the cost of the investigation in proportion to the extent that he has actually benefited from the operations of the company. In looking at it from a broad moral point of view one could say that nobody should be more responsible for the cost of the investigation than the person who is convicted ultimately of the offence which may have been the reason the investigation was initiated. It seems much more sensible that he should pay than that somebody who applied for the investigation should pay. In that sense it is fair. In another sense it is importing into our law a rather unusual principle, namely, that someone convicted of an offence, sent to jail or fined should also have to pay for the investigation which led to their being brought to court. Such a provision does not apply, for instance, in the case of the offence of murder.
When somebody commits a murder they are sent to jail but they are not asked to pay for the cost of the Garda Special Detective Unit, travelling expenses and so forth that led to their being detected and the evidence being assembled. If we are to ask persons convicted of crimes under the company's law to pay for the cost of the investigation, if that is to be an accepted principle of company law and this is company law we are talking about, why should we confine that provision to company offences? I have made suggestions before on the Estimate for the Department of Justice that there should be much more power to ensure a contribution by criminals to the cost of either the investigation leading to the offence or the cost of their incarceration if they have substantial resources. That is a very wide and potentially disputatious area of criminal jurisprudence. Here we are providing in company law that a person should be civilly liable for the costs of an investigation. I know that has applied in the 1963 Act but it is new in the sense that it is being renewed here. It is an unusual principle and I do not know what are the views of other Members of the House who, perhaps, have more practical experience of dealing with cases of this kind in relation to it. The idea is that a person who has committed an offence, as well as paying the fine or going to jail, would have to pay the cost of the detectives.
The Minister has been very generous in accepting the spirit of the amendments put forward in this debate. I wonder whether this is an appropriate amendment to make and I wonder whether the Minister has not been too generous to Deputy Bruton by taking on some of his measures. I am worried about subsection (2) because it seems to provide, in three separate circumstances, that someone can be made liable to indemnify the Minister or the company or the applicant for the costs of an investigation. The three separate circumstances are very different. One is that a person has been actually convicted, another is that you are found civilly liable and the third is that you are found civilly to have been wronged. I agree that in the last case a person's liability to contribute to the cost is limited to 10 per cent. It is extraordinary that it is now proposed that in law the victim of a wrong, a wrong carried out by someone else, would have to pay towards the investigation.
That is not new, it is in the 1963 Act.
I think it is wrong, it should not be brought in. The principle of paying something towards the cost of finding out that you had a case is all very well but it is very difficult to decide whether civil proceedings were brought as a result of an investigation. It is very hard to know whether something which follows something in time resulted from it and whether somebody had, in fact, intended bringing that action beforehand, had just waited to see the outcome of the report and when fortified by the result of the report actually brought his case. It is very difficult for a judge to work out what was going on in the mind of the plaintiff, whether he was holding fire or whether he was activated only when he saw the report and realised he had a case.
I am not keen on the whole idea of lumping what is penal in subsection (2) (a) and (b) with a non-penal but similar liability, even though of a lesser kind in paragraph (c). I do not see the logic of it.
I would ask the Minister to take on board another reservation I have concerning a person convicted of an offence on a prosecution instituted as the result of an investigation. If that were a summary offence we could be back in theory to the old difficulty under section 57 of the Road Traffic Act, 1961, where the District Court would have an ancillary power to award a sum, effectively as damages, which hugely exceeds anything the District Court can otherwise do. I think there would have to be a trial on indictment, otherwise it would be unconstitutional to allow the District Court to make a person liable up to £200,000 or more — there is not a limit of £200,000 on the amount. That needs to be looked at. Those are my thoughts on the section. I do not like the look of that section as it is coming out. It was better as drafted and was neater. I do not like the general drift of it. It may not be an improvement and there may be an over-generous acceptance of suggestions from the Government side of the House which may lead, in the last analysis, to a worse piece of law.
I congratulate the Minister on bringing in a new section replacing the old section completely but whether it will do what is intended I do not know. The applicant for an investigation is the person who will have to put up security of a sum not exceeding £200,000. That is the bond the court will have. The problem with the section as originally drafted was that if the court found that X, Y and Z were the people responsible for the trouble in the company and should be prosecuted and found that the applicant should only be responsible for £50,000 of the cost of the inspector's report and if none of the people who were criminally liable could come up with some of the costs of the report, one could go back to the person who had suffered the greatest loss and take out the rest of his money. That was the main objection I had to the section. Subsection (1) of the new section proposed by the Minister says that a liability greater than £200,000 cannot be exceeded. That is not the same £200,000 which was mentioned in section 7 which is the security an applicant must put up. It cannot be greater than £200,000. If I am reading this correctly it is a different matter altogether. The cost of this whole investigation may not exceed £200,000 and it shall not be borne by those people referred to in paragraphs (a) and (b).
Under section 7 the court may decide that the security put up should be, say, £100,000. When the investigation and so on takes place the costs might be £500,000. Not only will the court have the security of the £100,000 but it can also order another £100,000 to be paid which would bring the amount up to £200,000. Lest anybody be confused this £200,000 is not the same as that in section 7. It just so happens that the two figures coincide. In the new section as proposed by the Minister the figure could be £1 million. It would be a total contradiction if it was under £200,000 and it is obvious that we are not talking about the same figure. Am I correct in my assumptions?
We will have to wait until later in the afternoon to discover the truth or otherwise of that.
Progress reported; Committee to sit again.
Sitting suspended at 1.30 p.m. and resumed at 2.30 p.m.