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Wednesday 5 May 2021

Speak no evil: Section 236 examinees and immunity from suit

The High Court has had to grapple with the application of witness immunity and the unique examination process under section 236 Insolvency Act 1986. Witness immunity (or immunity from suit) provides that no witness, party, counsel or judge may be liable for words spoken or evidence given in court proceedings; it is an absolute immunity from any civil proceedings based on such conduct. Immunity was removed from barristers in 2002[1], and for expert witnesses being sued by their own clients in 2011[2], but no authority has dealt with the position of examinees under section 236 until now.

Mitchell v Al Jaber [2021] EWHC 912 (Ch) was the hearing of an amendment application made by the liquidators to plead claims including (amongst others): misrepresentation; negligent misstatement; and conspiracy, alleging that a company director had knowingly given false information to the liquidators in the course of a section 236 examination.

Accordingly, the question arose as to whether the examination was a “judicial proceeding” for the purposes of the witness immunity rule, and whether the examinee was merely giving information (which would not attract the protection of the rule), or whether they were giving evidence as a witness.

The liquidators argued that although examination itself took place in court, it lacked the hallmarks of judicial proceedings: no issue was under consideration by the court on a s236 examination to arrive at even a non-binding determination – indeed, no decision was taken by the court on the basis of the examination itself; there was no usual procedure of examination-in-chief and cross-examination; and the examination was confidential and took place in private. Nor could the examinee rely on the privilege against self-incrimination. The liquidators further argued that as case law has referred to s236 as solely providing information, and that the examinee is different from the “ordinary witness”, no immunity arose.

The respondents argued that whilst the examination itself does not resolve a dispute, it takes place in circumstances where the examinee is a party to an action, gives evidence in court and is subject to court control, which are the key elements of the immunity. The examinee gives evidence on oath, may be arrested for refusing to attend the examination, and may be committed for contempt of court for refusing to answer questions. In any event, the examination is part of wider insolvency proceedings which determine the issue of the dissolution of the company and the distribution of its assets. Accordingly, this meant that either (i) the examination was a judicial proceeding; or (ii) that it fell within the extended immunity as a preliminary step to a judicial proceeding.

The Decision

In a meticulously written judgment, Mrs Justice Joanna Smith DBE held that the witness immunity rule did not apply for the following reasons:

  • Firstly, whilst a section 236 examination had many characteristics of a judicial proceeding, it was not one. The Judge held that there were too many points of difference between an ordinary judicial proceeding and the process of examination under section 236. In her view, the fact that the court during the examination was not resolving an issue or inquiring into a specific issue in dispute was fatal. Nor were there sufficient legal consequences flowing from the section 236 examination itself.
  • Secondly, as the section 236 power is designed as a means for the liquidator to acquire sufficient knowledge about a company to fulfil their duties and determine their next steps, it would be inappropriate to characterise the examination as a judicial proceeding where the witness gives evidence; the authorities suggested it was a quite different procedure. There was also a need to encourage co-operation between those with knowledge of a company’s affairs and the liquidator which would be undermined if an examinee under s236 was protected, but the voluntary discloser of information was not.
  • Thirdly, although some s236 examinees might come under the extended immunity, there was insufficient evidence for that to be available to the director here. It was not clear that proceedings had been contemplated when the examination took place, and the causal link between the examination as an investigatory step and the eventual proceedings was insufficient.
  • Fourthly, the existence of general insolvency proceedings was not enough to make the examination a judicial proceeding, or to engage the extended immunity.

Permission to appeal has been granted, more decisions are therefore likely.

A copy of the judgment can be found here. Clare Stanley QC and Lemuel Lucan-Wilson acted for the respondent director.

[1] Arthur JS Hall v Simons [2002] 1 AC 615

[2] Jones v Kaney [2011] 2 AC 398

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