PART 5
THE INVESTIGATION PROCESS POST THE INITIAL CASE ASSESSMENT
(AUGUST 2008)
15.53 General matters to be considered
When investigating a case, it is important that a balanced view is taken of the overall situation and circumstances before extensive enquiries or other actions are taken. Normally a combination of adverse conduct rather than an isolated instance of little significance will warrant further investigation.
A realistic view should be taken of the likely outcome of the investigation and whether a positive result is a real possibility. If it appears probable that adequate evidence will not be obtained, the investigation should be closed.
15.54 The investigation process (amended March 2012)
The Insolvency Service has a standard investigation process. Its aims are;
After the CAR A & B have been submitted, a case that requires further action that is not solely related to asset recovery may be put onto one of two registers - Register A for cases where there is non co-operation or Register B for cases where further investigation is necessary. See also paragraphs 15.55 and 15.56.
15.54A Benefits of the investigation process (inserted March 2012)
15.54B The investigation process flowchart (inserted March 2012)
An investigation process flowchart has been produced by ORBS to assist in understanding the investigation process (Annex C).
15.54C Completion of CAR C Forms (inserted March 2012)
Any investigation decision should be accurately recorded on the CAR C forms [Note 1]. The forms provide a record of decisions made so that the investigation process can be clearly followed at a later date if the need to do so should arise.
The CAR C (1) sets out the chronology of the key events of the case. It can be added to as appropriate, and should be submitted with the case papers at each subsequent review.
The CAR C (2) should be completed and submitted to the assistant official receiver or official receiver by the investigation examiner within 7 days of the allocation of the case. It should contain the examiner's summary of findings on the case and proposed action. The assistant official receiver or official receiver will add their comments to the examiner's proposals.
The CAR C (3) (Further Review) contains the summary of findings to date on the case, and proposals for future actions and should be completed and submitted at every case review. The examiner should record the time taken on the case so far. The Assistant official receiver/official receiver will add their comments to the examiner's proposals.
15.55 Register A - non co-operation cases
Cases where no contact has been made with the directors or bankrupt, or they have failed to attend interviews arranged without a valid reason being given, should be placed on Register A - non co-operation. The official receiver may exercise his/her discretion and delay the submission of the CAR A & B and the further investigation decision until after the interview has been held or further action has been taken to enforce co-operation, up to a maximum of 56 days (see also paragraph 15.46.)
15.56 Register B – further investigation cases
(August 2008)
Cases should be entered on to Register B when the official receiver considers that there are matters requiring further investigation. All cases requiring further investigation into criminal allegations or disqualification matters must be categorised as A, B or C as described in Annex A and Annex B, and the nature of the offence under investigation must be recorded in a case on Register B. These categories relate to the OPI scores applicable in each case, and therefore are based on the likely resources needed to undertake the investigation, rather than the severity of the misconduct for the purposes of calculating the appropriate period for disqualification in accordance with the Sevenoaks Stationers (Retail) Ltd ([1991] CH 164) brackets.
The categorisation of bankruptcy restrictions order matters as A, B or C cannot be undertaken until more experience of the different types of cases encountered by the official receiver is obtained, and therefore all bankruptcy restrictions order matters are recorded under category C until instructions to the contrary are issued. All bankruptcy restrictions orders are therefore currently awarded the same number of OPI points, regardless of the resource needed to undertake the investigation.
For further information regarding OPI points attributable to work completed by official receiver’s please see the Official Receiver Services, Case Management, OROS Bulletins intranet page under Office Performance Indicators and management notice M9-03.
15.57 Register B – abandoned (Amended March 2012)
All Register B, category A cases must be allocated and targeted or offered up for transfer to another office. All cases abandoned from the Register must be given one of the following categories:
Category 1 - abandoned due to lack of resources (following consultation with the Regional Manager)
Category 2 - abandoned because of new information
Category 3 - rejected by Authorisations Team
Category 4 - cases transferred between criminal allegation Register B and disqualification or bankruptcy restrictions orders Register B
Category 5 - abandoned for any other reason agreed with the Regional Manager.
Please refer to the Official Receiver Business Support intranet page for further information regarding the Protocol for the Allocation of Surplus Investigation Cases and Investigation protocol – FAQs.
15.58 Review of the investigation (amended March 2012)
Every case on Register A and Register B should be regularly reviewed. In every case identified as requiring further investigation, the CAR C forms should be used (see paragraph 15.54C). Throughout the whole of the process the CAR review forms should be updated to ensure that a full record of the process is maintained.
A review should be carried out on a case every six weeks, although this may be extended at the official receiver's discretion. If an agreed review is not carried out, the reasons for this should be recorded on the next review submitted.
In addition to reviewing the work carried out on the case, the amount of time spent on the case should also be reviewed.
(August 2008)
Regular reviews of investigation cases should also ensure that the performance indicators as set out below are achieved:
15.61 Technical guidance on enforcement issues
Advice and guidance on technical issues relating to prosecution, disqualification and bankruptcy restrictions order matters can be found in the Enforcement Section of the Intranet.
15.62 Statement of affairs (company)
Chapter 12 - Statement of affairs contains details relating to the submission of statements of affairs and the requisitioning of accounts and further information. In general, the decision to require a statement of affairs to be submitted will be taken at the CAR B stage, i.e. at the time the decision is taken whether to investigate further. The view of the Authorisations Team is that it would be preferable to have a formal statement of affairs lodged in any case in which a disqualification report is to be submitted.
The official receiver may decide that the statement of affairs submitted in a previous insolvency proceeding (e.g. a company voluntary arrangement, administration, administrative receivership or voluntary winding up) immediately prior to the winding-up order gives adequate information. Before making the request the official receiver should consider the usefulness of obtaining a statement of affairs and/or requisitioning other accounts.
15.63 Statement of affairs (bankruptcy)
Reference should be made to Chapter 12 - Statement of Affairs regarding the submission of a statement of affairs and any supplementary accounts.
When a debtor files his own petition, he is required to file a statement of affairs in court at the same time [Note 2]. A statement of affairs may also be available if a voluntary arrangement has immediately preceded the bankruptcy. The official receiver may require the bankrupt to submit further written information amplifying, modifying or explaining any matter contained in any statement of affairs submitted.
A bankrupt not subject to a debtor’s petition is required to submit a statement of affairs within 21 days of the bankruptcy order [Note 3]. The official receiver should consider releasing the bankrupt from this requirement where its submission is impracticable or would not materially assist his/her enquiries [Note 4].
15.64 Statements from third parties
Initially the official receiver may decide to obtain information from third parties by letter or questionnaire [Note 5]. If this information is to form the basis of a report, the official receiver should, if possible, obtain a statement from the third parties at an interview (see Chapter 11 Part 2, Part 3 and Part 4 - Interviews). The Perjury Act warning will not be appropriate.
The criteria set out in Chapter 11 Part 2, Part 3 and Part 4 regarding the taking of statements from a company officer or the bankrupt are generally applicable to interviews with third parties.
Any third party who is unwilling to co-operate should be informed of the provisions of section 236 or section 366 (private examination of persons having information), as appropriate (see paragraph 15.68.)
15.65 Exchange of information with the Police
(August 2008)
Requests for disclosure received from the Police are subject to similar disclosure considerations as requests received from other parties. Reference should, in the first instance, be made to Chapter 47 – Disclosure and Chapter 81 – Freedom of information and data protection.
Enforcement Technical Team may be able to provide further advice on requests for disclosure received from the Police, although they will not process the request, conclusion of which will remain the responsibility of the official receiver.
15.66 Extent of section 132 enquiries (company)
The official receiver’s statutory duties are set out in paragraph 15.4. The official receiver has no authority to investigate the affairs of any company, which is not in compulsory liquidation.
A company officer, partner or the bankrupt may properly be questioned at a public examination [Note 6], if one is held, about possible offences of unfit conduct, and he/she cannot refuse to answer on the ground that what he/she says may tend to incriminate him/her (Bishopsgate Investment Management v Maxwell [1992] BCC 222). See also Chapter 14 Part 7 - Public Examinations.
However, statements obtained under compulsion cannot generally be used as evidence in any subsequent criminal proceedings [Note 7] (Saunders v United Kingdom [1997] EHRR 313) (see Chapter 47 Part 1 and Part 5 - Disclosure).
The official receiver may use the public examination to confirm facts and explanations to events but offences or unfit conduct should be established or corroborated by independent evidence. At any public examination held a company officer, partner or the bankrupt must be given the opportunity to explain his/her motives and any circumstances, which may tend to mitigate his/her conduct.
See Chapter 14 Part 7 - Public Examinations for further details of the procedure at a public examination.
Although an examination by the court pursuant to section 236 and section 366 of the Insolvency Act 1986 should not be used to obtain evidence for criminal charges, it may happen that information obtained under those sections with a view to the recovery of assets may indicate the need to enquire about possible offences. In view of the decision in Saunders v United Kingdom [1997] EHRR 313 (see paragraph 15.10) a prosecutor would face difficulties in using a private examination transcript, since it is information obtained under compulsory powers [Note 7].
The use of section 236 solely for the purpose of disqualification related investigations should be the exception rather than the rule. It will mostly be appropriate where a bank/solicitor etc is willing to provide the information but only subject to a court order. For information about the use of section 236 to obtain evidence to use in disqualification proceedings, see paragraph 15.71.
See Chapter 13 Part 5 - Co-operation, non co-operation and enforcement of duty to co-operate and Chapter 23: Private examinations for further details regarding the conduct of a private examination.
15.69 Admissibility of statements obtained under compulsion
Statements obtained under compulsion, whether in an interview, public examination or private examination, cannot generally be used as evidence in subsequent criminal proceedings, unless evidence relating to it is adduced, or a question relating to it is asked, in the proceedings by or on behalf of the person charged with the offence [Note 7].
However, such statements may be used in disqualification proceedings [Note 8] (Re: Westminster Property Management Ltd, Official Receiver v Stern [2000] 1 WLR 2230). Where the question is raised whether the use of such statements is unfair the judge will determine on admissibility.
Statements obtained under compulsion are also admissible in bankruptcy restrictions orders proceedings [Note 8].
15.70 Admissibility of documents obtained under compulsion
Pre-existing documents obtained by the official receiver using his/her compulsive powers can be used as evidence in criminal proceedings (Attorney General's Reference (No 7 of 2000) [2001] All ER (D) 357 (Mar)).
Such documents can also be used in civil proceedings.
15.71 Use of compulsive powers by official receivers in disqualification cases
The House of Lords in the case of Pantmaenog Timber Company Limited (Pantmaenog) reported at Official Receiver (Apellant) v Wadge Rapps & Hunt (a firm) and another and two other actions [2003] UKHL 49, held that the official receiver could use the compulsive powers under section 236 for the purposes of considering and conducting disqualification investigations and proceedings, but that those powers were subject to the discretion of the court as to whether to allow their use in such circumstances.
The Insolvency Act 1986 and the Company Directors Disqualification Act 1986 form part of the same statutory regime and should be read together. The procedures exist for the protection of the general public, and not just to protect the interest of the creditors and shareholders of the company in liquidation. Consequently the powers conferred on liquidators and the official receiver are not limited to use only in connection with the collection and distribution of assets but may also be used to gather information so that liquidators can report to the Secretary of State as they are required to do, and the official receiver can carry out his/her investigative and reporting functions which include making a report to the Secretary of State under CDDA86 section 7(3).
Consideration of the use of section 236 solely for the purpose of disqualification related investigations should be the exception rather than the rule. It will mostly be appropriate where a bank/solicitor etc is willing to provide the information but only subject to a court order. In the period prior to the issue of proceedings, and particularly in cases targeted for an investigation aimed at the preparation of a draft disqualification report, great care should be taken when considering whether to use section 236 against directors or their associates or advisors. In these circumstances if the official receiver has any concerns that the application could be construed as being solely for the purposes of a disqualification, the Enforcement Directorate Technical Team should be approached for advice before the application is issued.
In cases where disqualification proceedings have been issued the usual means of obtaining further information to assist in the conduct or further consideration of the proceedings will be by use of a witness summons in the disqualification proceedings rather than by use of section 236 in the liquidation. If the official receiver wishes to use section 236 for this purpose post issue of disqualification proceedings, the Enforcement Directorate Technical Team should be approached for advice first.
The ruling in the case of Pantmaenog did not deal directly with the use of section 235 to obtain information solely for the purposes of disqualification proceedings, but the same considerations apply. However, an application to court is not required for the use of this power, and so there is not the safeguard of the exercise of the court's discretion in this instance. Consequently the official receiver must be able to demonstrate that the powers conferred by section 235 are not being abused or used oppressively.
In the following situations where the official receiver uses or threatens section 235 (whether it is mentioned specifically to the director or not) the director concerned must be informed at the time why the information or interview is being sought;
For more information on the general approach to the director when carrying out a late interview for the purposes of disqualification proceedings, see Part 3 paragraph 15.41.
15.72 Use of evidence obtained in other proceedings
(August 2008)
Heavy reliance on evidence produced for another legal action should be used with care. An independent view should be taken of the overall conduct. Whatever the third party legal action, disqualification will have different considerations. Serious misconduct will inevitably be the subject of other legal action, but caution should be exercised when the case is reliant substantially on evidence from third party actions, which will have their own agenda. The Secretary of State/official receiver must take an independent stance.
15.73 Early discharge process (bankruptcy)
(updated October 2013)
This paragraph only applies to cases where the bankruptcy order is made after 1 April 2004 but before 1 October 2013.
Where the investigation process is completed and all asset matters have been resolved to the satisfaction of the official receiver within 10 months of the bankruptcy order, the official receiver should file with the court a notice stating that investigation under section 289 is unnecessary or concluded [Note 9] [Note 10]. The bankrupt is discharged from bankruptcy when notice is filed at court.
The official receiver should follow the early discharge process for filing the notice stating that the investigation of the conduct and affairs of the bankrupt is unnecessary or concluded.
For details of the early discharge process see Chapter 22 Part 2 Discharge from bankruptcy.
15.74 Requests for advice from the Enforcement Technical Team
(August 2008)
Prior to the issue of any proceedings the official receiver is responsible for all decisions which relate to the conduct of the investigations. In particular, the decision to commit resources to a particular investigation is the responsibility of the official receiver. Enforcement needs to maintain its independence from the investigation (to retain the integrity of any decision it makes to authorise proceedings) so all advice will avoid directing the investigation or making any decisions for the official receiver.
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