Rottmann, Re

The privilege against self-incrimination is a basic common law right of fundamental importance in English law. It is recognised in English common law, in the United States of America, in Germany, and under Article 14(3)G of the International Covenant on Civil and Political Rights. Whilst not explicitly protected in the European Convention of Human Rights and Fundamental Freedoms, it has been held implicit within the right to a fair trial protected under Article 6(1) (See Funke v France [1993] 16 EHRR 297 and Saunders v United Kingdom [1997] 23 EHRR 313). The privilege, however, does not protect a witness against self-incrimination in relation to possible criminal offences under foreign law by virtue of section 14 of the Civil Evidence Act 1968: see Rio Tinto-Zinc Corporation v Westinghouse [1978] AC 547, 673 and Brannigan v Davison [1997] AC 238 PC.

The issue in the present case before me is whether I should suspend the public examination of a bankrupt (Mr. Michael Rottmann) on the grounds that he is facing potential criminal proceedings in a foreign jurisdiction, namely the Federal Republic of Germany.

The background, in brief, is as follows. Mr. Rottmann was adjudged bankrupt in 2005. It is alleged against him that in the late 1980s he, together with others, participated in a fraud involving several millions of euros through taking advantage of opportunities presenting themselves on the reunification of the former German Democratic Republic (or East Germany) and the Federal Republic.

Civil proceedings in Germany were commenced against Mr. Rottman leading to a judgment against him, and criminal proceedings were also instituted. The civil proceedings were settled, leading to his becoming indebted in the sum of about 57 million euros and eventually to bankruptcy in this country. However, in 1995 Mr. Rottmann had left Germany and came to the United Kingdom where he has remained ever since. He lived in the United Kingdom under an alias for some years, his whereabouts only being discovered in 2000. The criminal proceedings were instituted, he tells me, in Germany in 2001 and extradition proceedings were commenced against him in the UK.

He has challenged the warrant presented in the UK. Although subject to bail restrictions in the extradition proceedings, the challenge, as I understand it, continues. The original warrant has since been modified, dropping the original twelve charges to six, but the modified warrant, I was told, has not yet been presented in England. Both sides, however, agree that under German law the charges are subject to a statute of limitations, which means that the time by which the charges must be brought will expire some time in 2009.

In his bankruptcy, Mr. Rottmann has disclosed virtually no assets. Efforts by the trustee in bankruptcy and her predecessor to find out what has happened to the assets and their present whereabouts have been met by blank refusals. Orders were obtained from Blackburne J in May 2007 in the form of freezing orders, search and seizure orders, all under section 365 of the Insolvency Act 1986 in respect of specified properties at which Mr. Rottmann or his family were apparently living or from which he appeared to be conducting his affairs. An order was also obtained preventing him from leaving the United Kingdom. Blackburne J did not have a favourable impression of Mr. Rottmann. He thought he had played “ducks and drakes with his trustee in bankruptcy and with those who are seeking to obtain redress for his previous wrongs”. Following the granting of the orders, the sum of 10,000 euros was then discovered in one of the properties.

In November 2007, Mr. Registrar Nicholls ordered, following a contested hearing, that that sum should form part of Mr. Rottmann’s estate in bankruptcy. The Official Receiver then applied for a public examination under section 290 of the Insolvency Act 1986. That was ordered to take place on 23^rd November 2007. Mr. Rottmann, however, applied under Insolvency Rule 6.175(6) to suspend the public examination indefinitely pending the conclusion of criminal proceedings against him in Germany. The trustee applied for an order suspending the bankrupt’s automatic discharge from bankruptcy. The matter was ordered until further order on 29^th November 2007 by Mr. Registrar Nicholls.

On 15^th January 2008, David Richards J ordered Mr. Rottmann’s application to suspend his public examination to be heard and gave directions as to evidence. I am unsure as to why it has all taken so long, but it is that application which is now before me.

The respondent to the application was the Official Receiver, but he has in substance surrendered it to the trustee who has appeared to oppose the application. I have had the benefit of some evidence from German lawyers on both sides. I have heard Mr. Rottmann in person and Mr. Davenport for the trustee. Mr. Rottmann has presented his arguments fluently and moderately.

Rule 6.175 of the Insolvency Rules 1986 deals with the procedure at the hearing of a public examination. The bankrupt is required to attend the hearing in order to be examined on oath, and he is to answer all such questions as the court may put or allow to be put to him. Under rule 6.175(4) there is a record of the examination to be made in writing as the court thinks proper. The record is to be read over either to or by the bankrupt and signed by him. Under subrule (5), the written record may in any proceedings, whether under the Act or otherwise, be used as evidence against the bankrupt of any statement made by him in the course of his public examination. That subrule has some modification in relation to criminal proceedings, as I shall explain in a moment.

Under subrule (6) it is provided “if criminal proceedings have been instituted against the bankrupt and the court is of opinion that the continuance of the hearing would be calculated to prejudice a fair trial of those proceedings, the hearing may be adjourned”. This latter is a measure of relief against the strictures applicable to a bankrupt who does not cooperate with the Official Receiver or trustee.

For example, section 290(5) of the Insolvency Act 1986 provides that if a bankrupt without reasonable excuse fails at any time to attend his public examination, then he is guilty of contempt of court and liable to be punished accordingly in addition to any other punishment to which he may be subject. Similar provisions relate to private examinations under section 366 of that Act.

These provisions are all but part of a panoply of powers enforceable against the bankrupt by punishment for contempt of court where necessary if he fails in his statutory duties of cooperation and provision of information to the trustee and Official Receiver: see, for example, Insolvency Act 1986, sections 290, 291 and 333.

It is in these circumstances, Mr. Rottmann submits, based on the evidence provided by his German lawyer, that if he were compelled to answer questions at his public examination, the transcript of those answers could be supplied to the German authorities, including the prosecuting authorities, and used against him at his criminal trial or at any criminal trial concerning the activities arising out of the opportunities that presented themselves on the reunification of the two Germanys, to which I have alluded a moment ago. That, he submits, would infringe his rights under article 6 of the European Convention of Human Rights to a fair trial. He relies on the Saunders case, I have previously mentioned (Saunders v UK [1997] 23 EHRR 313], where at the trial of Mr. Saunders the transcripts of his examination by and obtained from company inspectors appointed to investigate the affairs of Guinness Plc were introduced and helped to secure his conviction. The use of such transcripts in those circumstances, held the European Court of Human Rights, infringed Mr. Saunders’ right to a fair trial under article 6.

It is important to note that the European Court did not object to the use of compulsory powers to obtain information as part of a fact-finding exercise. To that end, the court reaffirmed the earlier decision in Funke, even if those powers meant self-incriminating answers had to be given. But, held the European Court, it was the use to which the transcripts were put that was objectionable. The implication of the ruling was that the transcript should not have been used at Mr. Saunders’ criminal trial.

For these reasons, Mr. Rottmann says he has been advised to say nothing. He points also to the risk that he runs that his answers may lead to a train of enquiry which, in turn, can lead to evidence being adduced against him at his trial. He accepts, as I understood him, that the law in Germany, so far as insolvency procedures are concerned, in this respect is now effectively the same as in England. A bankrupt or debtor can be asked questions about his assets, debts and affairs, and must answer. His answers, however, cannot be used against him in criminal proceedings in Germany. In this respect there is no issue between the parties.

Mr. Rottmann was engagingly frank about his motives. He wants the public examination put off, he says, until there is no further possibility of criminal proceedings against him arising out of the reunification matters. He says that that will arrive in about eighteen months’ time when the charges must expire as time-barred.

The implication of the Saunders case, as I said, was that transcripts of evidence obtained under compulsory powers should be excluded from any criminal trial of the person being interviewed in exercise of such powers, e.g. under section 78(1) of the Police and Criminal Evidence Act 1984.

Ironically, in Saunders itself, there had been an application to exclude the transcripts under section 78(1), but that application had not succeeded. This subsection provides:

“In any proceedings the court may refuse to allow evidence on which the prosecution proposes to rely to be given if it appears to the court that, having regard to all the circumstances, including the circumstances in which the evidence was obtained, the admission of the evidence would have such an adverse effect on the fairness of the proceedings that the court ought not to admit it”.

The decision in Saunders led to a change in the law in England and Wales. I referred earlier to the provision of rule 6.175(5). I said previously that that must now be considered in light of legislation applicable to criminal proceedings. The position in England and Wales, is as I summarised it above and is the effect of section 433 of the Insolvency Act 1986 as amended by the Youth Justice and Criminal Evidence Act 1999. Similar amendments were made to corresponding provisions in part XIV of the Companies Act 1985. Section 433 (as amended) now provides, so far as relevant:

“(1)

In any proceedings (whether or not under this Act) -

(a)

a statement of affairs prepared for the purposes of any provision of this Act which is derived from the Insolvency Act 1985, and

(b)

any other statement made in pursuance of a requirement is imposed by or under any such provision or by or under rules made under this Act,

may be used in evidence against any person making or concurring in making the statement.

(2)

However, in criminal proceedings in which any such person is charged with an offence to which this subsection applies -

(a)

no evidence relating the statement may be adduced, and

(b)

no question relating to it may be asked,

by or on behalf of the prosecution, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of that person.”

Subsection (3) then provides that subsection (2) applies to any offence other than a number of listed offences.

Whist in this jurisdiction, Mr. Rottmann’s answers at his public examination would not generally be admissible against him in criminal proceedings in this country. That, however, does not extend to Germany. When I pointed out to Mr. Rottmann, as he accepted, that the European Convention of Human Rights applies to and in Germany, and that the logic of the Saunders case was that in Germany a criminal trial ought surely also to exclude the transcripts, even on a cross-border basis because the European Convention applies to a number of different countries. To be fair, Mr. Rottmann was not sure whether this was so, but he did accept that in Germany the trial judge did have a discretion to exclude unfair evidence or evidence of a self-incriminatory nature.

Mr. Davenport’s submissions (for the trustee) were that the privilege against self-incrimination did not run to foreign criminal proceedings. In those circumstances, he submits, the public examination should go ahead. It would, he submitted, based on Saunders, be a matter for the German court whether the evidence obtained at the public examination was to be excluded from any criminal proceedings in Germany. Moreover, points out Mr. Davenport, there is already plenty of evidence in the public domain about Mr. Rottmann and his alleged co-conspirators. Many have already been convicted or have confessed, he says. I am not in a position to judge the nature or extent of the case against Mr. Rottmann, and I have little evidence of the details of the criminal proceedings in Germany before me.

Mr. Davenport does, however, accept that the task of the court is, to some extent, a balancing exercise. He submits that the effect of the common law rule that the privilege against self-incrimination does not extent to foreign criminal proceedings means that this court still has a discretion whether having regard to all the circumstances it should suspend the public examination and, if so, on what terms. He points out the long delay need for the trustee to obtain information as to assets and their whereabouts in the context of Mr. Rottmann’s lack of cooperation. He says the trustee is not interested in Mr. Rottmann’s activities forming the basis of the charges against him in Germany or other aspects of his conduct, but he is interested in assets.

There is no doubt that at the public examination, the bankrupt must attend and answer questions even if they are self-incriminating See, for example, Bishopsgate Investment Management Limited v Maxwell [1993] Ch 1, a decision of the Court Appeal, not on public examinations in bankruptcy but where the cases are all exhaustively examined. See also in the same context however of public examinations Re Atherton [1912] 2 KB 251, 255 where Phillimore J commented that historically the self-incrimination principle had not been applied where the alleged crime had been committed abroad.

In Brannigan v Davison, to which I have already referred, Lord Nicholls, giving the judgment of the board, said this at page 249:

“With the authorities in this unsettled state, their Lordships go back to first principles. Expressed in various ways, the chief strand of reasoning discernible in the common law rule is the undesirability of the state compelling a person to convict himself out of his own mouth. There is an instinctive recoil from the use of coercive power to this end. The state should not ‘subject those suspected of crime to the cruel trilemma of self-accusation, perjury or contempt’, per Goldberg J in Murphy v Waterfront Commission of New York Harbour [1964] 378 US 52, 55. A person should not be put in a position where he is exposed to punishment whatever he does (see R. v. Director of the Serious Fraud Office, Ex Parte Smith [1993] AC 1, 32 per Lord Mustill). Members of a civilised society ought to treat each other better than this. This aspiration is so basic that it has been incorporated as a right in many charters enshrining fundamental rights and liberties, such as the International Covenant on Civil and Political Rights, Article14(3)(G), the 5^th amendment to the United States Constitution, and the New Zealand Bill of Rights Act 1990, sections 23(4) and 25(d). The right is expressed with varying degrees of width, but the consistent emphasis is the benefit and protection of the individual. That is the primary purpose of the right. Seen from the point of view of the witness, the right may be as much needed where foreign law is involved as where it is not. The difficulty confronting the individual may be just as acute when the feared prosecution is under the law of another country.”

At page 251, Lord Nicholls added this, under the heading Discretion of Just Excuse:

“If the unqualified application of the privilege to foreign law is unsatisfactory, so also is the opposite extreme. The opposite extreme is that the prospect of prosecution under a foreign law is neither here nor there. Since the privilege does not apply to prosecution under foreign law, the witness must always answer a relevant question in the domestic proceedings, regardless of the nature of the crime under the foreign law and regardless of the likely practical consequences for the witness under that law. This would be a harsh attitude. It would be a reproach to any legal system. One would expect that a trial judge would have a measure of discretion. It will be recalled that paragraph 11 of the report of the Law Reform Committee envisaged that the judge would exercise a discretion. A further question arises where the self-incrimination privilege does not apply because the feared prosecution is under foreign law, does the domestic court, under its inherent power to conduct its process in a fair and reasonable manner, nevertheless have a discretion to excuse a witness from giving self-incriminating evidence. This important question”, Lord Nicholls tantalisingly concluded, “need not be answered in the present case …. ”

I do, however, have in mind what he said earlier, as I quoted. “Members of a civilised society ought to treat each other better than this.” How, therefore, is the discretion which I have to adjourn the public examination under rule 6.175 to be exercised here? I have to balance the rights of Mr. Rottmann on the one hand and the interests of creditors and the trustee on the other. There is also the public interest, because a public examination was ordered which gives creditors the rights and attendance at examination of the bankrupt: see Insolvency Act 1986, section 290(4)(d). It seems to me, however, that Mr. Rottmann can be protected to some extent on the one hand and the trustee’s legitimate rights fulfilled on the other by ordering a private examination under section 366.

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

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

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

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

In the result, therefore, having regard to the circumstances as a whole in this case, I shall acceed in a limited way to Mr. Rottmann’s application to suspend the public examination until further order. It will be on terms, the precise terms of which I will discuss with Mr. Davenport and Mr. Rottmann in a moment, that there takes place instead a private examination of the bankrupt, to be conducted by the trustee in bankruptcy at a date and time to be arranged and at which, or course, the Official Receiver, if he wishes to do so, may attend.

Moreover, it seems to me, there is one further important measure of protection that can be built in to such an order, both to serve as a protection to Mr. Rottmann and as well as to oversee the interests of the trustee and the creditors generally. That is that the examination should be conducted with a view to saving any time in case any problems arose in front of the Registrar (who would otherwise conduct the examination) by a judge of or having the status of a high court judge.