Partnerships (Prosecution) (Scotland) Bill [HL]
(12 years ago)
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The Advocate-General for Scotland (Lord Wallace of Tankerness)
My Lords, the Partnerships (Prosecution) (Scotland) Bill takes forward the proposals of the Scottish Law Commission to address the loophole that makes it impossible at present to prosecute partnerships that have dissolved. In 2004, a fire at the Rosepark Nursing Home in Uddingston led to the death of 14 elderly residents. The Lord Advocate brought serious criminal charges under health and safety legislation, but because of a legal technicality—the dissolution of the partnership that ran the home—nobody could be prosecuted. Rosepark was run by three individuals who had come together to form a business partnership. Following the fire, the partnership was dissolved. The Crown Office attempted three times to prosecute offences under the Health and Safety at Work etc. Act—offences that could be committed only by an employer.
The first attempt at prosecution, against the former partners of the nursing home, failed because they were charged as having been the employer at the time of the fire. The partners successfully argued that it was the partnership, by then no longer in existence, that had been the employer. A second charge was then brought against the dissolved partnership. The partners successfully argued that the partnership no longer had any legal existence and so could not be prosecuted. A third charge was then brought against the three individuals as whole surviving partners of the dissolved partnership. In turn, this was not successful because it had already been established, at the first attempt, that it had been the partnership that was the employer, and therefore responsible for the answering the charges, not any of the individual partners. In summary, prosecutors were unable to find the legal basis to pursue what were in anyone’s mind very serious charges.
The Rosepark fire created the impetus for a Scottish Law Commission project to investigate why the prosecutions had failed and how the anomaly in the law could be addressed. In May 2011, the commission published its discussion paper on the issue and, following consultation with the legal profession, reported with a draft Bill last December. The Scotland Office subsequently consulted on that draft and I am pleased to be here before this Committee a year later with a Bill that provides a very sound, yet simple, solution to ensure that partnerships and culpable partners cannot evade prosecution by dissolving.
I put on record thanks to the Scottish Law Commission for working with my office and the Scotland Office over the course of this year to ready the Bill for introduction. I particularly am grateful to Patrick Layden, the commissioner who led the project, for his untiring commitment to this work.
The Bill has the support of the Lord Advocate. In a letter to me following publication of the Bill, he said:
“I am pleased that the Bill provides a framework to ensure that it will be possible in future to prosecute a partnership that has been dissolved in Scotland and that the loophole in the law exposed by the Rosepark case will be closed”.
The Bill also has the support of Scottish Ministers and has been welcomed by the Law Society of Scotland. My hope is that we can fulfil expectations that the Bill will receive a positive response in this House and a smooth and quick passage eventually to Royal Assent. It is also worth noting that this will be the first Scottish Law Commission Bill to use the special Law Commission procedure in your Lordships’ House.
Turning to the content of the Bill, it responds to a feature of the general law of partnerships. In Scotland, a partnership is a legal person in its own right, distinct from its partners. The essential reason why the Rosepark prosecutions could not proceed was that the offence being prosecuted was one that could be committed only by an employer. As the employer in that case was a Scottish partnership, when it ceased to exist in law, there ceased to be a legal person to prosecute.
The aim of the Bill is to ensure that the dissolution of a partnership or a change in its membership will not prevent the prosecution, in Scotland, of a partnership or, where the conditions for individual criminal liability exist, the responsible partners. The Bill is deliberately limited to achieving this objective. It will create a limited exception to the current position that, in Scots law, dissolved partnerships cannot be prosecuted. It does not attempt to reform the law of partnerships more generally. In particular, it does not criminalise acts which are not presently criminalised. In other words, there is no expansion of criminal liability either on partnerships or individual partners. The Bill merely closes down a technical bar to prosecution. Nor does it attempt to clarify points of partnership law which do not relate directly to the competency of prosecution. The principle underpinning the Bill is to reflect, so far as is feasible, what would happen if a live partnership were prosecuted. In short, the principal effect of the Bill is that, if it would have been possible to prosecute a partnership had it been live, it will be possible to prosecute it if it dissolves, or has changed its legal personality by the assumption or resignation of partners.
In Clause 1, the Bill allows the prosecution of a dissolved partnership. I mention two aspects of this provision. First, there is a time limit. A prosecution will have to have commenced within five years of the partnership having dissolved for the new law to have effect. This limit is considered necessary to balance the public interest in permitting the prosecution of crime with the interest of certainty in winding up the affairs of a dissolved partnership and the estates of former partners. The five-year period was that most commonly suggested by the Scottish Law Commission’s consultees and reflects the period of negative prescription applying to most of the civil obligations to which the estate of a former partner might be subject following the dissolution of the partnership. Noble Lords may be reassured that the time limit applies only in the case of dissolved partnerships, and runs not from the date of the alleged offence but from the date of the dissolution of the partnership. I am satisfied that the time limit, as recommended by the Scottish Law Commission, strikes an appropriate balance.
Secondly, the Bill applies only to offences which are capable of being committed by the partnership in its own right. As these are the only offences where the mischief arises, where the dissolution or change of membership would prevent prosecution, the Bill is drafted so as to catch only them.
In Clause 1(6) the Bill provides that a fine for an offence committed by a dissolved partnership can be enforced in the same way as a fine for an offence committed by a live partnership. Under existing law, where a criminal fine is imposed on a live partnership, it is enforceable in the same way as a civil debt of the partnership. The liability to pay it arises at the time that it is imposed. If partnership assets are insufficient to meet such debts, individual partners are liable to pay the fine from their personal assets. In Scotland, partners are jointly and severally liable for such fines, therefore the net effect of the Bill is that persons who were partners immediately prior to dissolution are jointly and severally liable to pay the fine.
Clauses 2 and 5 deal with the issue that it is relatively common for statutory offences to provide that an individual partner is also liable for an offence committed by the partnership, where the offence is committed with that partner’s consent or connivance. Where the conditions for such individual liability exist, the Bill makes it clear that the prosecution of the individual will not be prevented by the dissolution of the partnership or a change in its membership.
Where a statute creates an offence which may be committed by a partnership, it sometimes goes on to provide that any fine must be paid from the partnership assets. In such a case, no fine could be enforced against a partnership which had dissolved, since by definition there would no longer be any partnership left to own assets. So, in order to allow such offences to be effectively prosecuted, Clause 3 provides that any such restriction will not apply where a partnership has been dissolved.
Taking together Clauses 1(6), 3 and 4, when a fine imposed upon a partnership is enforced against the assets of a partner, that partner will have, under the terms of the Partnership Act 1890, a right of relief against his or her fellow partners and may, depending on the terms of the contracts agreed between incoming and outgoing partners, have further claims against those former partners who were members of the firm at the time when the offence was committed.
The Bill also ensures that the prosecution of a partnership can proceed in the event of a change in membership. As the Law Commission and the Scottish Law Commission noted in their report on partnership law, in Scots law there is,
“uncertainty as to whether a change in membership terminates the personality of the ‘old’ partnership and brings into being a ‘new’ partnership entity”.
One cannot say with certainty whether a partnership is the same legal entity before and after a change in membership. Given that the present law may be that a change in membership establishes a new legal entity, distinct from the one that existed before the change in membership, the Bill has been drafted to ensure that the continuing partnership can still be prosecuted. There is otherwise a risk that the assumption of a new partner or the resignation of an existing one might make it legally impossible for the partnership to be prosecuted for offences that it had already committed. I am sure that your Lordships will agree that this would be an unacceptable outcome.
On this point, I note that the Law Society of Scotland has suggested that by including the assumption of new partners in the clause, a potential consequence is that a new partner could find him or herself criminally liable for an offence committed before he or she joined the partnership. However, that is not the effect of the Bill and is certainly not our intention. Clause 4 is purely about liability of the partnership entity to prosecution. It clearly would be wrong to confer criminal liability on any person who had not been involved in the commission of the offence.
The Bill extends to Scotland only, and it is worth remarking that it is one of only a handful of Westminster Bills to have done so since the establishment of the Scottish Parliament in 1999. It is sometimes forgotten that Scotland has two Governments and two Parliaments, both with their own contribution to make in improving the lives of people in Scotland. I have worked closely with not only the Lord Advocate but his predecessor on preparatory work for the Bill and taking it forward, as I do on many other issues. He and his ministerial colleagues in the Scottish Government accept that this is a matter that only Westminster can remedy. The Bill demonstrates the continuing interest and responsibility of the UK Government in taking forward Scottish legislation in the UK Parliament, and our commitment to doing so.
The families of those who lost their lives at Rosepark were rightly angry and frustrated by the failure of the prosecutors to find the legal basis to pursue those responsible. It is worth putting on the record with appreciation that some family members have taken an active part in responding to the consultations. Vulnerable people lost their lives and serious charges were brought, but a legal technicality meant that they could not be tried. For the sake of the victims and their families, it is right that we get the law changed to ensure that this can never happen again.
I am sure noble Lords will actively and constructively contribute to the debates on the Bill, and I look forward to listening to their comments. I commend the Bill to the Committee.
The Duke of Montrose
My Lords, when it comes to a topic such as this, I stand slightly in awe of venturing forth among those with such distinguished experience of both law and government. I hope that the Committee will forgive me if some of my questions are a little simplistic as a result. I understand that the provisions of this legislation will apply to anyone operating as a partnership in Scotland, whether it is described simply as a partnership or as a limited partnership. It is slightly daunting to realise that one is reviewing laws that may be affecting, among others, considerable numbers of the Scottish legal profession who perhaps still operate as partners or limited partnerships.
I speak as one whose forebears have had some considerable fall-outs with the legal profession, although there is nothing outstanding at the moment. I hope only that the attention of the Committee will ensure that this will be legislation at its best; whatever the outcome, I am sure that the legal profession will know how to look after itself.
I have a number of questions to put to the Minister, and from his answers I will know whether there is anything that requires being taken further. An issue raised with me by the Law Society of Scotland, which the Minister has already mentioned, arises from Clause 2(2), which states that a former partner of a dissolved partnership cannot be prosecuted where the partnership has already been prosecuted and acquitted. The question, if it is ever likely to occur, is whether it would be wise to introduce a balancing clause whereby a partnership cannot be tried where one of the partners has already been tried and acquitted on the same or related grounds.
The other question over Clause 1 arises because it says that no prosecution of a partnership can occur more than five years after its dissolution, but when we come to Clause 2 the same time limit on the prosecution of former partners is not quite as clear. Perhaps the noble and learned Lord can say whether it would be taken in law that the former condition could be read over into this clause. Would it not be better to have it clearly stated so that those reading the Bill know exactly where the limit lies?
For the sake of general clarity, for me and the Committee, it might be of use if the Minister can say what is likely to happen to the liability of a partner who dies while serving in a partnership within the five years preceding the dissolution. Is this liability likely to hang over and affect the settlement of the person’s estate? For that matter, is it really necessary that any such liability should continue against a partner who has already been dead for such a period of time? Would a shorter period of liability not be more appropriate?
Baroness Liddell of Coatdyke
My Lords, I will not delay the Committee long. This is rightly an opportunity for the legal profession to look at the terms of the Bill in some detail. The reason for my interest stems from the fact that I know Rosepark home. I was born and brought up in Lanarkshire and I have friends and family who knew people who were lost in the Rosepark fire. The sense of anger that the Minister referred to is palpable in the community. These people have not been well served by Scottish justice because of a quirk in the law.
It is never easy reading the evidence or the result of a fatal accident inquiry, but in Rosepark home it was made clear that the failure to have adequate fire safety provision was the reason for the loss of life. There was one particular protocol that required the fire brigade should not be called until the source of the fire was identified. As a consequence, nine minutes elapsed before the fire brigade was notified and a further four minutes were lost because it was called to the wrong gate. The fatal accident inquiry therefore concluded that four of the 14 could have been saved had proper action been taken.
The Minister has already set out the three attempts that were made to bring the Balmer partnership to answer for these matters in court. On all three occasions the loopholes in the law allowed them, to put it bluntly, to get off the hook.
Baroness Liddell of Coatdyke
Before I was interrupted—I will not say rudely—by your Lordships’ House, I was making the point that the Rosepark story is horrific. The loopholes in the law allowed a terrible injustice to happen to the families and friends of the 14 people who lost their lives.
In respect of the Bill, I regard my role to be to ask the daft questions. This is rightly a Bill on which the legal profession will predominate. Normally, I would call it a lawyer fest, but on this occasion it is entitled to be that because of the nature of the issues with which we are dealing. It is also important that the questions that family and friends are asking should be answered.
I have only one question, which may be daft but it probably will be the first of a number of such questions. The Minister referred to the fact that Clause 1 relates to a five-year period having elapsed, during which time the partnership could still be held in question. If that period was enlarged to 10 years, would it be possible for the Balmers to be brought before a court to answer for the breaches of the health and safety legislation that took place in Rosepark care home? That is the only point I wish to make but, undoubtedly, I will ask other daft questions during the passage of the Bill.
Lord Stephen
I, too, thank and congratulate the Scottish Law Commission on the excellent work that it has done on this issue. I also thank the Advocate-General and the Scotland Office for all their work over the past few months, since the Scottish Law Commission reported, to bring this Bill forward. It is very important to remember the evening of 31 January 2004 and the shock that there was right across Scotland at that time. We should remember that the 14 people who died were individuals who had a right to expect far better. They were Dorothy McWee, Tom Cook, Isabella MacLachlan, Julia McRoberts, Annie Thomson, Helen Crawford, Margaret Lappin, May Mullen, Helen Milne, Anna Stirrat, Mary McKenner, Robina Burns, Isabella MacLeod and Margaret Gow.
Although nothing could have been done to bring back those who died, the events subsequently have been most unfortunate. It is important that we now take action to remedy the wrong. All three prosecutions failed. Rosepark care home and its partners, Thomas, Anne and Alan Balmer, have never been successfully prosecuted. There is a sense that there has been a real miscarriage of justice here. It is important to remember that in the third and final prosecution, for example, more than 30 charges were on the indictment, including contraventions of Sections 2 and 3 of the Health and Safety at Work etc. Act, related contraventions of the Management of Health and Safety at Work Regulations 1992 and 1999, and the Fire Precautions (Workplace) Regulations 1997. These were extensive and very serious issues.
Subsequent to the final prosecution, it was decided to hold a fatal accident inquiry. As the noble Baroness, Lady Liddell, has explained, there were some very serious findings at the end of that inquiry which took place over 141 days. Sheriff Principal Brian Lockhart began the fatal accident inquiry in February 2010 and it reported in April 2011. He found that “some or all” of the deaths could have been prevented if the home had had a “suitable and sufficient” fire safety plan. He concluded:
“The management of fire safety at Rosepark was systematically and seriously defective. The deficiencies in the management of fire safety at Rosepark contributed to the deaths. Management did not have a proper appreciation of its role and responsibilities in relation to issues of fire safety”.
He said that the “critical failing” was not to identify residents at the home as being at risk in the event of a fire, as well as failing to consider the “worst-case scenario” of a fire breaking out at night. A further “serious deficiency” was found in the “limited attention” given to how residents would escape from the home in the event of a fire. The noble Baroness, Lady Liddell, has already gone into detail about how Brian Lockhart believes that the lives of Isabella MacLachlan, Margaret Gow, Isabella MacLeod and Robina Burns could have been saved, that there were shortcomings in dialling 999 and that a delay was caused by the fire brigade going to the wrong entrance. In other words, this was not a single fault. As is so often the case with a terrible tragedy, many errors accumulated to create a major disaster.
The gap in Scottish law on this issue has been well explained and the need for action is clear. The role of the Scottish Law Commission has been entirely positive in this. Usually it reports to the Scottish Government and Parliament. It is very encouraging that the matter has been tackled swiftly and positively by the UK Parliament and Government working alongside the Scottish Parliament and Government. There has been no constitutional wrangling on the issue—simply a desire to find a fair and effective solution. The benefit will not be to the deceased of Rosepark or to their relatives. I hope that the latter will take some comfort from the benefits that should come to others in future. It is important to emphasise that it is very unlikely that it will be elderly people killed in a fire in a care home who will benefit from this legislation. However, I believe that many others will benefit through its introduction.
I have a few technical questions and concerns. A number of us have detailed legal questions. Some of us are lawyers or former lawyers. I realise that a lot of hard work has already been done on this by many eminent lawyers, so I hope that all the answers will be easy, sound and solid. Evasion of criminal liability is the main issue that we want to tackle. Clearly it is being tackled as the central pillar of the legislation. I remain concerned about the potential for evasion of any fine imposed following a successful prosecution. I am also concerned that any new partner could become unwittingly liable. The Advocate-General went out of his way to emphasise that the intention was that any new partner should not be caught by prosecution. However, I still worry that liability for a fine could fall—and even fall disproportionately—on a new partner. Perhaps some comfort could be given on that.
Clause 4(1)(b) refers to a situation where,
“the partnership continues to carry on business after the change”.
Why was this felt to be required, and how will we define “carrying on business”? For example, could there be unintended consequences? Could a firm be defined as carrying on business when it was no longer able to trade: for example, if its licence had been withdrawn because of regulatory breaches or if its place of business had been destroyed by fire? Could there be unintended consequences from this wording?
I am interested also in confirming the powers that a sheriff or a judge might have against a partnership. The Bill envisages that the powers would relate only to imposing a fine. Could a judge impose other sanctions? For example, would they have the power to seize or confiscate assets, withdraw licences, and dissolve the partnership or prevent it carrying on trading? The range of sentences, and how they might be enforced against the partnership and against individual partners, is of real interest to me.
I will close with the following thoughts. At Rosepark we know that the partnership, and individual partners, should have been held accountable. We know that the partners were Thomas, Anne and Alan Balmer. It is a matter of huge regret, and a very deep failure of Scotland’s justice system, that there was no successful prosecution. That miscarriage of justice cannot be remedied or changed, but the law can be corrected and put right. That is what we must do.
Lord Cameron of Lochbroom
My Lords, in its report on the criminal liability of partnerships, the Scottish Law Commission pointed out that the effect of Balmer was that once a partnership had been dissolved, and in the absence of evidence showing the guilt of one or more individual partners, there remained no person who could be held criminally accountable for offences committed by the partnership. The Bill seeks to provide a solution to this dilemma by amending the law with a targeted solution whereby a partnership may be prosecuted after dissolution for the limited purposes of establishing criminal liability for an offence committed by the partnership prior to dissolution. Clauses 2 and 5 also make clear that the competency of criminal proceedings against an individual partner is not affected by dissolution of the partnership. I offer it a general welcome and commend the clear terms of the Law Commission’s report which gave rise to the Bill.
I note the Law Commission’s recommendation that the amendment of the law presently proposed should only have effect pending the introduction of more comprehensive reform of the law of partnership. The joint report of the Scottish Law Commission and the Law Commission for England and Wales, issued in 2003, made a range of recommendations which, if implemented, would clarify and modernise the present law of partnership. To these should be added the point made in paragraph 2.7 of the present report that any such reform should make specific provision in relation to the criminal liability of Scottish partnerships. It would be helpful if the Advocate-General could say when such reform is likely to be embarked upon.
As regards the provision of Clauses 1 to 3, I have some reservations. The first relates to the period of five years for commencement of proceedings against a dissolved partnership in terms of Clause 1(3). This provision does not apply where there are time limits for commencement of a prosecution, as subsection (7) makes clear. Where an offence has been committed of a character that would give rise to criminal liability of a partnership, such as the fire in Balmer, or a work accident under health and safety legislation, the incident is likely to be investigated within a relatively short time of its happening. With that, there would be the knowledge that a partnership was a possible offender and, of course, the identity of the individuals who were partners at the time of any alleged offence.
Subsection (3) does not relate to the date of the alleged offence but to the date of dissolution of the partnership, a necessarily indeterminate length of time after the incident. I suggest that the period of five years from the date of dissolution is perhaps unduly long to enable a prosecution to be commenced, even if the dissolution were to occur very shortly after the incident giving rise to the alleged offence by the partnership. There has been reference to the five years as being the period of negative prescription, but that period applies only in relation to the question that would arise when a fine was imposed. Under those circumstances, one would imagine that it would take less than five years to operate the principle that is implicit in civil diligence once the fine has been imposed.
As I understand the provisions of Clause 1(5), (6) and (7), they operate to render a fine imposed on a dissolved partnership following a prosecution by virtue of subsection (2), enforceable against the former partners jointly and severally, with each partner having a right of relief against fellow partners. Each partner on conviction of the dissolved partnership would thus become subject to payment of any fine by way of recovery by civil diligence whether or not as individuals they bear any personal criminal liability with the incident. In fairness, they are entitled to have such a matter resolved as quickly as is reasonable. This comment is equally pertinent to the provision of Clause 4(3).
My second reservation concerns the principles to be applied in sentencing where the court is dealing with the prosecution of a dissolved partnership. It is the dissolved partnership which is to be named in the proceedings and not the individual partners. In the indictment in Balmer both the dissolved partners and the partners were named but the Crown specifically accepted that the partners were not parties to the proceedings. Hence, only the dissolved firm was indicted. Clause 3 provides that any enactment that restricts payment of a fine imposed upon a partnership to payment out of partnership assets does not apply. However, the provisions which enact that fines imposed upon organisations such as partnerships are recoverable by civil diligence can come into operation only after the fine has been imposed by the court. Upon what material is the sentencing judge to determine what can only be a fine? I think that the noble Baroness, Lady Liddell, suggested that perhaps we should look again at the issue of what a dissolved partnership, and indeed a partnership in the context of Clause 4, should be subject to by way of sentence.
In the ordinary case where a partnership is continuing, there will be information about partnership assets and the extent of the profitability of the business of the partnership that could be placed before the court. Information about the state of business up to and upon dissolution could be made available to the court as relevant material for sentence, even where there were restrictions of the kind imposed by present legislation. In chapter 3 of the report, the Law Commission noted that the Senators of the College of Justice considered that the case for disapplying the statutory limitations in relation to Scottish partnerships have not been made out. It expressed the view that it was appropriate to presume that Parliament was well aware of the separate personality of partnerships in Scotland and that, whatever the reasoning behind the provisions limiting the payment of fines to partnership assets, Parliament must have intended them to take effect. That is a strong expression of view.
The Law Commission said that it certainly recognised the possibility that the imposition of such limitations represented a conscious choice on the part of those responsible for preparing the legislation in which they appear, but, on the face of the report, the commission does not appear to have made any detailed examination of what was said at the time when the legislation was passed, which could bear on the matter. I ask the Minister to what extent the legislative background to such statutory limitations was examined by the Law Commission in advance of its recommendation giving rise to Clause 3.
In the case of summary proceedings against an organisation such as a partnership, Section 143(3)(a) of the Criminal Procedures (Scotland) Act 1995 provides that proceedings may be taken against an individual representative of a partnership, who may be dealt with as if he was the person offending and the offence should be deemed to be the offence of the partnership. Case law emphasises that the prosecution of such an individual is as a representative of the partnership and not in a personal capacity. It would appear that in the event of conviction, the personal circumstances of the partner would not then be relevant to sentence. While a similar provision does not apply to proceedings against a partnership by way of indictment in that Act, the principle that the personal circumstances of individual partners should not be relevant to sentence would seem to apply. This is even more the case if, in the circumstances specified in Clauses 2 or 5, an individual partner can be prosecuted for an offence alleged to have been committed by the partnership as well as by the partnership itself.
Before I turn to Clause 4, there is a matter that I wish to raise out of interest: in Balmer, the Crown argued that where criminal liability had been incurred prior to the dissolution of the partnership, that liability ought to continue so that, in terms of Section 38 of the Partnership Act 1890, the partners continued to be responsible for that criminal liability, notwithstanding that no indictment had been served or criminal liability established prior to dissolution. Against that background, it was explained by the Crown that the indictment in Balmer had been framed to avoid the transfer of criminal liability to the partners as individuals, and that an appropriate way to convene the former firm was to convene the former partners in the indictment. That seems to be at least a way in which, in a dissolved partnership, the individual partners who were partners at the time of the offence could be named. That would be important for two reasons: first, as a public notice to those who were controlling the partnership at the time and, secondly, it would have some relevance to the effect of the subsequent civil diligence that would follow upon the imposition of a fine.
Clause 4 makes it competent to prosecute a partnership in respect of an offence alleged to have been committed by the partnership prior to a change in membership of the partnership, notwithstanding the change in membership. Clause 4(4), in its reference to “the partnership”, appears to provide that, despite the change in membership, the partnership remains in existence as one and the same legal person before and after the change. I noted that in the Minister’s introduction he referred to this as a change of legal personality. The provision sets out to address the uncertainty in the present law as to whether the legal personality of a partnership necessarily comes to an end on a change in membership.
I have difficulty with the proposition that it is just to address this uncertainty by proceeding on the assumption that the partners involved at the time of the change intended that there was to be a continuing partnership when that was not in fact the intention. I consider that it is more consistent with justice to proceed on the assumption that for the purposes of fixing criminal liability, the change should be treated as though it were the dissolution of the partnership as constituted before the change, whether or not that was the intention of those who were partners before and after the change. The clause would then fix criminal liability on the partnership that was in existence at the time of the offence and its members at that time. It would also, upon conviction, fix liability arising from current partnership law for payment of any fine imposed on the partnership on those who were partners at the time of the offence.
Clause 5 would, in certain circumstances, permit prosecution of an individual partner who was a member of that partnership as being criminally liable for an offence alleged to have been committed by them, whether or not the partnership was prosecuted for the offence. If the assumption was that, in relation to criminal liability, a change in membership operated as a dissolution of the partnership at the date of the offence, partners in that partnership would become liable to have any fine imposed on the dissolved partnership enforced by civil diligence against any one or more of them. Any rights of indemnity and relief against the new partners would be governed by any agreements entered into at the time of the change of membership— a matter with which the Crown should not be concerned.
However, if the partnership is to be regarded as continuing whatever had been the intention of the partners at the time of the change of membership, under current partnership law each partner is liable jointly with the other partners, and also severally, for all debts and obligations of the firm while he is a partner. The Law Society of Scotland has expressed concern about the potential consequence of Clause 4(4)(c) to the situation of a new partner in such circumstances. Like other noble Lords, I would be very interested to hear the comments of the Advocate-General on this concern, even if he is not able to allay it completely.
Other references were made to the response of the Law Commission. I will simply say that I have read it and I, too, am concerned that we should have a response today from the Minister on the concerns that were expressed. I would also be interested to hear the Minister’s response to the points raised by noble Lords who spoke before me. In general, I give the Bill a fair wind and look forward to further discussion of it in Committee.
Lord Kerr of Kinlochard
My Lords, not having a brief and not being a brief, I can be brief. I should just like to say three things. I thank the Minister for bringing forward this Bill, which is clearly necessary to remedy a loophole that came to light following the tragedy. I also thank him for the meticulous way in which he briefed the unbriefed; I am very grateful for that.
For me, the most important thing that the Minister said today is something that I had deduced: there is no expansion of criminality in the Bill. The criminal law is not extended by the Bill. What happens here is that a technical bar—I think that was the Minister’s word—is removed. That seems very important and reassuring.
I have not heard from the Law Society of Scotland, but my only concern was with the question raised by the Minister himself in relation to Clause 4(4)(c). Suppose that a new partner is admitted—or a series of new partners, cumulatively—and that Clause 4(4)(a) applies as well as Clause 4(4)(c). The partnership still exists but the people are completely different. Could we have an explanation of what the situation would be? This may be a daft question. The noble Baroness, Lady Liddell, said that she might ask daft questions but she did not insist that she be the only one to do so, so I demand the right as well.
Having heard the noble Lord, Lord Stephen, I also look forward to hearing why one needs the words in Clause 4(1)(b),
“continues to carry on business”.
I, too, should like to be reassured that there could not be some unintended consequence.
Lord Fraser of Carmyllie
My Lords, I, too, warmly welcome the Bill and the undoubted amount of work that has gone into its preparation by the Scottish Law Commission.
I have discussed this matter with one of my distinguished predecessors as Lord Advocate, namely my noble and learned friend Lord Mackay of Clashfern. I am delighted to say that he agrees with me that on no occasion could either of us recall any circumstance in which we had declined to prosecute because of this loophole in the law. My other distinguished predecessor is the noble and learned Lord, Lord Cameron of Lochbroom, but I will leave it to him if he has anything to add. He can speak for himself and indeed has done so.
I cannot recall any such incident but I cannot make that assertion to a point of scientific certainty, because a member of the Crown counsel team might have decided not to prosecute but did not refer the case to a law officer. Frankly, I would be surprised if that had happened. If a point of this significance arose, I think it would have been referred to me as Lord Advocate or as Solicitor-General, or to the noble and learned Lord, Lord Cameron, or to my noble and learned friend Lord Mackay. None of us can recall this issue arising. Nevertheless, it is not a theoretical point. We know, because of the Balmer case, that it is not theoretical and there is a loophole, and I am glad that it has now been closed off. If I had had that arrow in my quiver when I was Lord Advocate, I would have been very pleased although, as I say, I do not recall any circumstance in which I would have used it. With those brief words, I give the Bill a warm welcome.
Lord McAvoy
My Lords, I will reply to as many points as I can. First, I place on record again my thanks to the Minister and his staff for keeping in touch. I am sorry that I did not make the meeting; I was called away on Whips’ business. However, I learnt a lot from people who were there, which will help me today.
To be on the safe side, I had better declare an interest. I am in a business partnership. The company I am in partnership with owns a public house in Scotland. That does not make anyone a millionaire these days. The other partners are my wife and son. Knowing them so well, I have no difficulty in envisaging that any of their liabilities would be mine.
Like many other colleagues here, I feel a certain amount of diffidence at being in a room with so many who are in the legal profession. The only thing that hints at that diffidence is my astonishment that there has been this loophole in the law. It is unbelievable that politicians and the legal profession allowed the loophole to be there—although, as the noble and learned Lord, Lord Fraser, said, there are doubts about why charges were not laid. Like others, I pay tribute to the Scottish Law Commission and to the Law Society of Scotland for their briefings and for the information that they have made available. We in Scotland are lucky to have them. I agree with the comment of the noble Lord, Lord Stephen, that the situation does not reflect well on Scottish justice.
The noble Duke, the Duke of Montrose, asked about the limits on liability when a partner dies. I, too, await the response of the Minister to that question. There is nothing like having a local view of how things are regarded on the ground. The account from my friend and colleague, my noble friend Lady Liddell, about the effect on relatives and the community in Lanarkshire, brought home even after a gap of years how much devastation the tragedy brought and still brings to the relatives of those who were there.
Like the noble Lord, Lord Kerr of Kinlochard, I would like to join my noble friend Lady Liddell’s daft questions club. I am sure that some have been answered—probably I did not understand either the question or the answer in the language that was used—so I, too, will ask a couple of questions. I was briefed on one question, which was also asked by the noble Lord, Lord Stephen. The Minister said that the incoming partner would not be criminally liable. Does that mean that the incoming partner will be liable for the fine? What is the share of liability if a fine is incurred? What is the intention of the Bill?
The noble and learned Lord, Lord Cameron of Lochbroom, made a forensic analysis of the Bill that I found helpful because I could understand the language that he used. The noble Lord, Lord Kerr of Kinlochard, talked about the extension of criminality. These questions are there to be asked. I will also ask about the dissolution of partnerships in Clause 2, which deals with proceedings against a former partner. The Minister mentioned the Law Society, but I was not quite sure of his answer, which is why I am repeating the question. A person may not be prosecuted for an offence when a partnership has been prosecuted for and acquitted of the same offence. There is no reciprocal clause that prevents the prosecution of a partnership where an individual former partner or partners have been prosecuted for and acquitted of the same offence. I cannot get my head around that. I have already mentioned the issue of liability in Clause 4. There must be safeguards on how that is dealt with. I look forward to the Minister’s response to the various questions from me and from other noble Lords who contributed so well.
Lord Wallace of Tankerness
My Lords, I thank all noble Lords who have contributed to this very helpful debate. I say immediately to those who said they were subscribing to the “daft questions” brigade that in my experience such questions are usually just as penetrating, and sometimes more difficult to answer, than those produced by the lawyers. It is important that the perspective of non-lawyers is brought to bear on this issue, because what lies behind the Bill is something that commands widespread public interest, and that transcends any narrow legal argument. I therefore welcome the contributions that have come from non-lawyers and lawyers alike, and I am particularly glad that the Committee has had the benefit of the experience of two former Lord Advocates, the noble and learned Lord, Lord Cameron of Lochbroom, and my noble and learned friend Lord Fraser of Carmyllie. My noble and learned friend Lord Fraser indicated that he could not recall such a situation arising and that, in his discussion with him, neither could the noble and learned Lord, Lord Mackay of Clashfern. Nevertheless, I think that he thought that it was a worthwhile weapon in the armoury. I think that that reflects the tenor of the debate, in which a welcome generally was given to these proceedings.
I will try as best I can to respond to the points that were made. Hopefully, I will pick up on most of the questions, but we will go through the transcript afterwards and if any questions have not been answered I will do so in writing and circulate the response. When we move into Committee there will also be an opportunity to take evidence, as well as having normal Committee debates on specific amendments.
A number of noble Lords—not least the noble Baroness, Lady Liddell, my noble friend Lord Stephen and the noble Lord, Lord McAvoy—mentioned in some detail the tragedy of the Rosepark care home fire. The noble Baroness talked about the fatal accident inquiry where, after considerable investigation, Sheriff Principal Brian Lockhart concluded that all or some of the deaths could have been prevented if the home had had a sufficiently suitable fire safety plan, and said that the management of fire safety at Rosepark was systematically and seriously defective. That gives us the context in which we are debating this legislation.
My noble friend the Duke of Montrose talked about partnerships and limited partnerships. I think it is fair to say that limited partnerships are quite rare these days, having been substantially superseded by limited liability companies. Limited partnerships are governed by separate legislation, the Limited Partnerships Act 1907. They are a type of partnership that includes limited partners—essentially, investors who play no part in the activities of the partnership. The limited partners have no liability beyond that directly connected to their investment. The Bill catches limited partnerships but, as I have indicated, they are very rare and no penalty would be enforced against limited partners.
Limited liability partnerships are not covered by the Bill as we believe that the same problems do not arise with limited liability partnerships as they do with partnerships. The essential difference is that partnerships may be dissolved instantly with no formality or any mechanism for restoring a dissolved partnership to existence. On the other hand, limited liability partnerships are registered at Companies House. Like companies, they are subject to a statutory process for being struck off the register and for dissolution, and may later be restored to the register by court order.
My noble friend the Duke of Montrose, the noble Lord, Lord McAvoy, and the noble and learned Lord, Lord Cameron, talked about the asymmetry that had been picked up by the Law Society of Scotland in its helpful briefing to colleagues. They pointed out that Clause 2(2) provides that an individual may not be prosecuted for an offence where a partnership has been prosecuted and acquitted, and asked whether the reverse should not also be the case—that a partnership should not be prosecuted where a partner has been acquitted. I do not accept that the situations are symmetrical. Typically, an offence will provide that an individual partner who in some way—I think that these are the words I used in my opening—consented or connived in the commission of an offence by the partnership will also have committed an offence. To establish the guilt of the individual, it is necessary, first, to establish that the partnership committed an offence. That condition cannot be fulfilled, obviously, if the partnership has been acquitted. However, there are numerous reasons why a prosecution against a particular partner might fail; for example, a lack of connivance or consent on the part of the individual. That does not mean that it should determine whether the partnership as an entity has committed an offence. That has to be determined by reference to the terms of the offence itself.
My noble friend the Duke of Montrose asked about the time limit of five years, which was also raised by the noble and learned Lord, Lord Cameron of Lochbroom. I think that I am right in saying that the Law Society of Scotland recommended 20 years. The faculty of Advocates recommended two years. There is no right answer to this. It is a judgment and, as I indicated in my opening remarks, the judgment was that five years relates to the period of prescription applying to most of the civil obligations to which the estate of a former partner might be subject following the dissolution of the partnership. The majority of consultees supported five years. Clearly, if this is a matter to which noble Lords wish to return in Committee, we can readily do so.
That picks up on another point made by my noble friend the Duke of Montrose about what happens when a partner dies after dissolution. The answer is that the estate of a partner will be liable on the same basis as other partners at the time of the dissolution. As I indicated, the situation is the same as for civil obligations under Section 9 of the Partnership Act. Indeed, the fact that someone may have died is one of the reasons why five years was chosen as a period that gives some finality but, at the same time, ensures that there is an opportunity for the Crown Office to mount a prosecution. Of course, there may be cases where a statutory time limit would—if I may use the non-legal expression—trump the five years if there is a statutory time limit from the time of the commission of the offence. My noble friend the Duke of Montrose also asked about the position with regard to individuals. He pointed out that Clause 2 does not have a similar five-year time limit. It is intended that no time limit should apply. It reflects the Scottish Law Commission’s view of existing law, which Clause 2 is intended to put beyond doubt—subject, as I said, to cases where there would be a statutory time limit.
The noble Baroness, Lady Liddell, asked whether the Balmers could be prosecuted if there was a 10-year limit. The answer is no. Under Clause 8(3), the Bill is drafted in such a way that it comes into effect only with regard to partnerships that dissolve after the date of the Bill coming into effect. The reason for this is that it should apply only to dissolutions post-commencement. To do otherwise and to make retrospective provision could readily fall foul of Article 7 of the European Convention on Human Rights.
The Duke of Montrose
Earlier, when talking about individuals, my noble and learned friend said that it was intended that no time limit should apply. Does that mean, if the individual is charged after the partnership, that there is no five-year limit at all?
Lord Wallace of Tankerness
That is indeed what I said. It is subject to the fact that there may well be an offence for which there is already in law a statutory time limit. Indeed, a number of these offences will have provisions in law which set a statutory time limit.
If this Bill proceeds to Royal Assent it will come into force the day after and there will not be the usual lapse of two months or until some future date set by order. It will take almost immediate effect.
My noble friend Lord Stephen asked what other enforcement options might be available to the court, as we had talked very much in terms of fines. That will obviously depend on the particular offence, but most typically it will be a fine. The offence may include imprisonment but one cannot imprison legal persons such as a company or partnership. I asked officials if it could mean that individual partners might be subject to a community service order but the answer is the same; a partnership as a legal entity could not be the subject of a community service sentence and therefore that provision could not, by joint or several responsibility liability, apply to individual partners. It could be that an individual partner may be prosecuted if the Lord Advocate considered it important. Enforcement of a fine could lead to confiscation of assets under proceeds of crime legislation. There may be relevant regulatory bodies that would then take cognisance of the fact that a crime had been committed and an offence established. That could have possible licensing consequences, but not necessarily ones imposed by the court.
My noble friend also asked why we provide in Clause 4 that the partnership must continue trading. This is to distinguish a change of membership from dissolution because change of membership may be a technical dissolution. There is no intention that an interruption to trading should cause Clause 4 to be inoperable. He suggested that if there had been a change through the assumption or resignation of a partner, it was very unlikely that there would be an immediate cessation of trading as well. The Bill envisages trading going on beyond the change in the partnership.
I am very grateful to the noble and learned Lord, Lord Cameron of Lochbroom, for his very detailed analysis. He asked whether it would not have been possible to say that a change in the membership of a partnership constituted a dissolved partnership. I thought, “Why didn’t we think of that?”. It is something that I will consider, although I suspect there are reasons and possible implications which have led to the proposal we have here. However, I will reflect on that point and would hope to write before Committee not only to the noble and learned Lord but to others who have taken part in this debate.
The noble and learned Lord also asked what assessment the court would make in terms of a dissolved partnership in determining a fine. I certainly defer to his judicial mind and experience when it comes to sentencing but, as we all recognise, when it comes to considering the appropriate level of a fine the judge balances the interests of society with the effect of the fine on those who will have to pay. When the Bill is enacted the court will know what fine would be enforced against individuals, and I have no doubt that counsel or a solicitor acting on behalf of the dissolved partnership and its partners would make appropriate representations to the court to take account of the assets of the individuals on whom the fine will fall.
A number of contributors to the debate raised the issue of a crime being committed prior to a change of membership in a partnership and the subsequent enforcement of the fine falling on somebody who has been assumed as a partner after the crime. The reason that after consideration the provision was included in the Bill is that it reflects the current position. For example, if there were an action for damages for delict that occurred before a change in membership and the court case took place after the change, the court order would then be enforced against the existing members of the partnership. Likewise, assuming no change in membership, if a criminal offence had been committed, a partnership convicted and a fine imposed, the fine would then be enforced using a procedure that is akin to that used for civil recovery following a court order.
The answer to some of the concerns about this may well lie in the fact that if you join a partnership and you are aware that a crime has been committed, any person doing proper diligence might well say, “I want to be indemnified against this and against the other partners”. If a partner is leaving, his fellow partners might say, “You know we have a criminal case hanging over us”. Contractual arrangements can be made in a partnership agreement for resignation or assumption. That is why it is very important that this does not apply to partnerships that are dissolved, or in which there is a change, prior to the Bill becoming law. It will also be important that proper notice is given so that people are aware of what the new law will be. At the briefing meeting we had the benefit of the chair of the Scottish Law Commission, the noble and learned Baroness, Lady Clark of Calton. The issue arose and I anticipate that we will come back to it and give it proper consideration.
The noble and learned Lord, Lord Cameron, asked what examination had been made of the legislative background to statutes that were limited to imposing fines on partnership assets. I am advised that the Scottish Law Commission carried out an extensive search of the statute books. Its finding appears to be that statutes in which there were such limitations tended to be GB or UK statutes, where it was certainly thought that what was being dealt with were cases of English partnerships established under the law of England and Wales.
The noble Lord, Lord Kerr, also referred to changes in partnerships, and to situations where there has been such a change that the people who are currently the partners are by and large, with perhaps a very few exceptions, not the partners who were there when the crime was committed. At that point one has to remember the entirety of the Scottish criminal justice system. Prosecution would be competent but it would be a matter for prosecutorial discretion. We have the benefit of two former Lord Advocates here. If there was a situation where a partnership that had been prosecuted bore no relationship other than a tenuous link to the one that existed at the time of the crime, the Lord Advocate of the day would take into account whether in these circumstances it would be in the public interest to prosecute. Certainly the Bill makes provision for the possibility of that happening, but there may well be other factors that the Lord Advocate of the day would feel that he or she had to take into account in the public interest.
Finally, the noble and learned Lord, Lord Cameron, asked what had happened to the 2003 joint report on partnership law from the Law Commission and the Scottish Law Commission. The Government of the day received the report in 2003. In 2006 they indicated that they would not undertake the wholesale reform of partnership law. I do not think that anyone could view the present law of partnership as a model of clarity, but on a day-to-day basis it generally works. While we have indicated that our ears are not closed to representations about a more general review of changes to partnership law in Scotland, I have to be frank with the Committee and indicate that we do not foresee any immediate chance of legislation or legislative time. Also, it would be only fair to say that with the passage of almost 10 years since the original joint law commissions’ report, there would inevitably be a need for further consultation and discussion to take account of any developments that had taken place during that time.
Nevertheless, it is the case that, as the Scottish Law Commission report indicated, while there was a preference on its part for the implementation of the broader reform of the law on partnerships, if that reform was not going to happen immediately or in the very near future, there was still a pressing need to address this issue of dissolved partnerships. That has been reflected in our debate. It may be that at some future date there will be a change in partnership law generally, and this would undoubtedly be picked up in that context. For now, though, as has been reflected, people feel that the loophole that has existed ought to be closed, and the Bill is a simple but comprehensive way of doing that. I look forward to further engagement with noble Lords as we proceed with the Bill, and I commend it to the Committee.