Defending Against Private Prosecutions in Insolvency Cases

Defending against private prosecutions in insolvency cases

Criminal proceedings were sent to the Crown Court, but the Private Prosecutor abandoned the case following NDP’s application to dismiss. In this case study, we detail the the steps taken in defending against private prosecutions in insolvency cases.

Background to this Private Prosecution

A Private Prosecution brought by a solicitor in his personal capacity, alleging various corporate crimes against two individual NDP clients and several of their companies, was recently dismissed by the Crown Court. This outcome was achieved through a carefully drafted application to dismiss from our clients. In essence, the other side conceded in the face of determined opposition. Neil Davies, David Hanman, and Tom Clinton of NDP worked on the case from inception to dismissal over the course of a year.

What is a Private Prosecution?

The majority of criminal prosecutions are conducted by the Crown Prosecution Service (CPS). However, a prosecution can be initiated and conducted by any member of the public. Such a person (‘Private Prosecutor’) assumes the usual position of the investigating body (typically the police) and the body that conducts the Court proceedings (typically the CPS).

The Private Prosecutor is bound by similar evidential and ethical principles by which the CPS measures a case and is, therefore, required to act in the public interest.

The details of this Private Prosecution case

NDP was instructed shortly before the liquidation of a company (Company) by its directors and other companies of which they were directors and/or shareholders.

A contractual-based court case had been issued some time before against the Company in the civil courts by the individual who later became the Private Prosecutor. Funding its defence to the civil claim had left the Company in a precarious financial position. Professional insolvency advice was sought by the Company, and it was resolved that liquidation was the most prudent option to protect the interests of all creditors.

The Company was placed into Creditors Voluntary Liquidation. However, civil court proceedings relating to the contractual dispute were still ongoing. Judgment in default was obtained against the Company due to its inability to continue funding legal expenses to defend its position.

On the facts of the case, a financial recovery for any creditor of the Company from the liquidation process appeared unlikely.

The Claimant in the civil case was unable to recover his judgment damages against the Company and initiated a criminal prosecution against the Company’s directors and their other companies, alleging serious criminal offences.

The threat of a criminal trial, where they could face a custodial sentence, was understandably concerning to the directors. They defended their position.

NDP’s Work

Upon instruction, NDP, led by David Hanman, began by understanding the background matters. Numerous questions needed to be asked of the Private Prosecutor to assist David in considering the legal flaws in his case, of which there were many.

Before the criminal proceedings could be considered ‘live’ against the clients, summonses had to be issued by the Magistrates Court. This is usually a formality. However, because of NDP’s work from the outset, the Magistrates Court listed a preliminary hearing at which arguments were heard from both sides as to why summonses should or should not be granted.

A low threshold is required for summonses to be granted, hence why a hearing where the issues are argued is rare. Despite arguments on behalf of the clients, the low legal threshold was deemed by the Magistrates Court to have been met, and thus, summonses were granted. The criminal proceedings were now live and were sent to the Crown Court.

Further tactical and evidence-gathering work was required to undermine the criminal allegations against our clients. Witnesses were identified by NDP, and witness statements were taken from important witnesses who supported the clients’ defense to the criminal charges and, perhaps more importantly, undermined the credibility of the criminal prosecution.

NDP also made further inquiries of the Private Prosecutor, continuing to highlight the flaws in his case, both factually and procedurally.

Application to dismiss the criminal case – the Private Prosecutor abandons the case

An application to dismiss the criminal proceedings was made to the Crown Court by NDP on behalf of the clients, setting out why the criminal allegations had no prospect of succeeding. A hearing date was set at which the Crown Court was to rule upon the application to dismiss the private prosecution.

Days before that hearing, the Private Prosecutor abandoned his case and notified NDP and the Crown Court that he would not oppose the application to dismiss.

The Crown Court therefore dismissed all of the outstanding charges against NDP’s clients.

Costs

Bringing and defending criminal allegations can be expensive. The costs regime in criminal cases is different from civil proceedings. In both, costs are awarded at the discretion of the Court. The real issue is that the level at which costs are often awarded is far below that of the actual costs incurred. That is not to say that costs cannot be recovered in criminal cases, though it can be more challenging.