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.
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