Spencer Michael v (1) the Official Receiver (2) Secretary of State for Business, Innovation and Skills

A declaration of incompatibility is an exceptional remedy and should be considered only after it has been established that the legislation cannot receive a Convention-compliant interpretation under section 3 of the Human Rights Act 1998. The statutory scheme for an interim bankruptcy restrictions order is not incompatible with Article 6 merely because the Official Receiver applies for the order. The Official Receiver investigates and applies, but the court decides whether the statutory criteria are met and must protect the respondent’s procedural rights. An interim order requires both prima facie grounds for a final order and a distinct public-interest need for interim protection.

The applicant was bankrupt and subject to an interim bankruptcy restrictions order made under Schedule 4A to the Insolvency Act 1986. He sought a declaration that paragraph 5(2) of that Schedule and section 11 of the Company Directors Disqualification Act 1986 were incompatible with Article 6. He argued that the Official Receiver could improperly obtain an interim order on weak evidence and thereby impair the defence of related company winding-up proceedings.

Alternatively, he sought permission to appeal out of time against the interim order. The issues were whether he had standing, whether a Convention-compliant interpretation should first be considered, and whether the statutory test infringed Article 6.

1. The declaration application was dismissed and permission to appeal was refused. A declaration of incompatibility would not set aside or otherwise affect the interim bankruptcy restrictions order. The court nevertheless extended time, as an indulgence, for an appeal application based on the existing grounds.
2. Mr Michael lacked standing to complain of an alleged infringement of the companies’ Article 6 rights. The winding-up proceedings were directed against the companies, and any interference with their ability to defend themselves would concern their rights, not his.
3. In any event, section 4 of the Human Rights Act 1998 is a measure of last resort. The court should first determine whether a Convention-compliant interpretation is possible under section 3. The applicant’s primary remedy against the interim order was an appeal.
4. The statutory scheme separates the functions of the Official Receiver and the court. The Official Receiver decides whether to apply for an order. The court determines whether paragraph 5(2) of Schedule 4A to the Insolvency Act 1986 is satisfied and must ensure that Article 6 rights are respected. Any improper conduct by an office-holder would engage ordinary private-law, public-law or appellate remedies, rather than establish that the legislation itself was incompatible.
5. An interim bankruptcy restrictions order requires both:
   • prima facie grounds suggesting that the application for a final order will succeed; and
   • a separate public-interest basis for making an interim order.
   The public-interest requirement is not automatic once prima facie grounds exist. It concerns the need for immediate public protection during the period before determination of the final application. The evidence must be cogent enough to establish both limbs, and the respondent must have an opportunity to answer it.

First-instance decision. The judgment describes an interim bankruptcy restrictions order made by Registrar Derrett on 7 July 2008. The present court extended time for seeking permission to appeal but refused permission on the stated grounds.