Offences under the Companies Act 2006: reversing the burden of proof
The Companies Act 2006 creates a number of criminal offences. Some of these are subject to so-called ‘reverse burden’ provisions, whereby the defendant (usually a company director) is guilty unless he or she can prove a specific fact in their defence (eg. that they took all reasonable steps to avoid committing the offence). The lawfulness of reverse burden defences has been considered in other contexts but there appear to be no reported decisions in relation to offences under the Companies Act. This article therefore reviews some of the relevant provisions and considers the arguments which arise. Before embarking upon that analysis, however, it may be helpful to summarise briefly the applicable legal principles.
The presumption of innocence, long since a seminal feature of UK domestic law, was codified by Article 6(2) of the European Convention of Human Rights (to which the UK remains a signatory, notwithstanding Brexit). Despite its sacrosanct reputation, however, the presumption is a qualified right and Parliament is permitted to create statutory exceptions to it. Such derogation will not breach Article 6(2) if it imposes only an evidential burden on the accused (ie. a requirement only to produce some evidence in support of the defence, following which the burden reverts to the Crown to the criminal standard). If, however, a statutory provision imposes a persuasive (ie. legal) burden on the accused, such that he or she has to prove their defence to the civil standard, the position is more nuanced. At that point, issues of proportionality arise, with the court having to make an assessment as to whether or not the incursion into the presumption of innocence can be justified. If it can, there will be no breach of the accused’s Convention rights under Article 6(2). If it cannot, however, the provision will need to be ‘read down’ under s.3 of the Human Rights Act 1998, such that the accused will be under an evidential burden only.
In assessing the position in any given case, the first task of the court therefore will be to assess whether, as a matter of statutory construction, the provision imposes a legal or an evidential burden on the accused. In some instances, this will be obvious. Section 451 of the Companies Act 2006, for example, which is concerned with the late filing of accounts, states as follows:
451 Default in filing accounts and reports: offences
(1) If the requirements of section 441 (duty to file accounts and reports) are not complied with in relation to a company’s accounts and reports for a financial year before the end of the period for filing those accounts and reports, every person who immediately before the end of that period was a director of the company commits an offence.
(2) It is a defence for a person charged with such an offence to prove that he took all reasonable steps for securing that those requirements would be complied with before the end of that period.
As can be seen by the underlined wording, there can be no question in that instance that Parliament intended to impose a legal burden on the defendant. In relation to other provisions, however, the position is less clear. Take s.949 of the Act, for example, which concerns restrictions on the disclosure of information in Takeover Panel cases. This section is couched in the following terms:
949 Offence of disclosure in contravention of section 948
(1) A person who discloses information in contravention of section 948 is guilty of an offence, unless-
(b) he took all reasonable steps and exercised all due diligence to avoid the commission of the offence.
What is the position here? The prosecution might argue that the burden of establishing the defence falls upon the accused. After all, it is within the defendant’s gift to demonstrate that all reasonable steps were taken. The defence would point out, meanwhile, that in contrast to s.451 (above), the provision does not begin with the words “It is a defence for a person charged with such an offence to prove [that he took all reasonable steps]..…” This tends to suggest that no reverse burden was intended (Shepherd v ICO  1 Cr App R 29). Furthermore, the defence would say, if the position is ambiguous, it ought to be resolved in favour of the accused (R v S  1 Cr App R 35; S v LBH  EWCA 2558; Hogan v DPP  1 WLR 2944).
In any event, once the court has determined that a particular provision does impose a legal burden, the next question for consideration will be whether this is compatible with Article 6(2). In the early jurisprudence, this issue was largely determined by reference to the seriousness of the offence – the more serious the allegation, the less likely it was that reversing the burden could be justified.
Adopting this simplistic approach would have ramifications for several offences under the Companies Act, such as the late filing of accounts, which are summary in nature and punishable only by a fine. In more recent times, however, the analysis has become more sophisticated. In particular, the courts have stated that the gravity of the offence is but one matter to be taken into account and that there should be no presumption that legal burdens imposed in less serious cases will automatically be upheld. Sir Anthony May summarised the position as follows in DPP v Wright  EWHC 105 (Admin):
“……we are disinclined to accede readily to a submission that it is proportionate to bypass Article 6(2) for summary offences in magistrates’ courts because they are relatively trivial. Chipping away at a fundamental principle of the criminal law has obvious dangers.”
As for other matters for the court to take into account, an important one is the extent of any difficulties which the prosecution would encounter if the reverse burden is ‘read down’ to an evidential level only. In addition, the court will pay close attention to the extent of any connection between moral blame attaching to the offence and the statutory defence to it – the closer the connection, the less likely the reverse burden is to be upheld. Finally, in every case, the court will bear in mind the need for the prosecution to show a compelling reason why the usual presumption of innocence should be undermined R v Johnstone  UKHL.
In that light, the position will need to be considered carefully in any case involving criminal allegations under the Companies Act 2006. Whether or not a legal burden is imposed will depend upon the wording of the provision in question. If such a burden does arise, issues of proportionality will then fall to be considered. One thing is for sure however – if there is a respectable challenge to the lawfulness of the reverse burden in question, it should be taken. It could make all the difference between a client being convicted, or not.