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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Secretary of State for Business, Innovation and Skills v Doffman & Anor [2010] EWHC 2518 (Ch) (11 October 2010) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2010/2518.html Cite as: [2011] Bus LR 457, [2010] EWHC 2518 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

		Royal Courts of Justice The Strand London WC2A 2LL
		11 October 2010

MR JUSTICE NEWEY:

1. I have before me an application by the defendants to these directors' disqualification proceedings for the claim to be struck out or dismissed on the ground that the Secretary of State has breached the defendants' rights to a fair trial under Article 6 of the European Convention on Human Rights and/or breached his duty to act fairly.
2. The underlying proceedings relate to the defendants' conduct as directors of four companies: Stakefield (Midlands) Limited (referred to as "Stakefield"), Cindan Land (Littledean) Limited (referred to as "Cindan (Littledean)"), Cindan Land (Southampton) Limited (referred to as "Cindan (Southampton)") and Axelpark (Hull) Limited. Stakefield, Cindan (Littledean) and Cindan (Southampton) went into administration in 2006 and have since gone into liquidation. Axelpark (Hull) Limited went into liquidation in 2007.
3. Some indication of the level of seriousness of the allegations made against the defendants can be gained from the letters which the Secretary of State sent to the defendants, in accordance with section 16 of the Company Directors Disqualification Act 1986, before instituting proceedings. It was stated in those letters that the Secretary of State would accept disqualification undertakings for eight years. Such a period would be consistent with the case being a serious one, but not one meriting the highest of the three brackets endorsed by the Court of Appeal in Re Sevenoaks Stationers (Retail) Limited [1991] Ch 164. The importance of the case to the defendants will be heightened by the fact that they are both solicitors.
4. Given the basis on which the application I am now considering is made, it is relevant to record that the allegations against the defendants concern, to a considerable extent, loans which Barclays Bank made to Stakefield, Cindan (Littledean) and Cindan (Southampton). Moreover, those companies' administrators were appointed by Barclays Bank, and Barclays Bank seems to be the only, or at least the main, creditor of two of the companies, Stakefield and Cindan (Littledean). Barclays Bank was also a creditor of Cindan (Southampton) when that company went into administration, but it was able to recover what it was owed from the defendants as guarantors.
5. The case came on for trial last Wednesday, 6 October, but on 1 October the defendants had issued the application I have already mentioned for the claim to be struck out or dismissed.
6. Mr Stuart Adair, who appears for the defendants, submitted that the Secretary of State had failed in his duties both in relation to the disclosure of documents in his own possession and in relation to the way he presented his case against the defendants in his evidence. His principal criticisms of the Secretary of State related, though, to the investigations which have been undertaken into the matters at issue. Mr Adair said that it was the Secretary of State's duty to ensure that a thorough and unbiased investigation was carried out and that there was full disclosure of documents associated with the investigation. In the event, Mr Adair claimed, the investigation was controlled by Barclays Bank, relevant witnesses were not interviewed or, if they were, their evidence was not made available and the disclosure of documents was highly selective.
7. The authorities on which Mr Adair relied in support of his application included, first, cases dealing with common law duties of prosecutors in criminal cases. In this respect, I was taken to R v Hennessey (Timothy) (1978) 68 Cr.App.R. 419 and R v Ward [1993] 1 WLR 619. It is clear from these cases that, even before the Human Rights Act 1998 was enacted, it was incumbent on the prosecution in a criminal case to make available to the defence all relevant evidence in the prosecution's hands. In Hennessey, Lawton LJ said that the courts must "keep in mind that those who prepare and conduct prosecutions owe a duty to the courts to ensure that all relevant evidence of help to an accused is either led by them or made available to the defence". In Ward, the Court of Appeal emphasised that "all relevant evidence of help to the accused" was not limited to evidence which will obviously advance the accused's case. "It is of help to the accused", the Court of Appeal observed, "to have the opportunity of considering all the material evidence which the prosecution have gathered, and from which the prosecution have made their own selection of evidence to be led".
8. Disclosure obligations can also, as Mr Adair pointed out, arise under the European Convention on Human Rights. Article 6(1) of the Convention, which extends to both criminal and civil proceedings, stipulates that "everyone is entitled to a fair .... hearing", which has been taken to imply a right to equality of arms. In a criminal case, article 6(3)(b), which states that a person charged with a criminal offence is to have "adequate time and facilities for the preparation of his defence", will also apply. It is clear that these provisions impose duties of disclosure in criminal cases. In Jespers v United Kingdom (1983) 5 EHRR 305, the European Commission of Human Rights took the view that the "facilities" referred to in article 6(3) of the Convention included the opportunity for a person charged with a criminal offence "to acquaint himself, for the purposes of preparing his defence, with the results of investigations carried out throughout the proceedings". The Commission went on to say this:

".... Art. 6(3)(b) recognises the right of the accused to have at his disposal, for the purposes of exonerating himself or of obtaining a reduction in his sentence, all relevant elements that have been or could be collected by the competent authorities. The Commission considers that, if the element in question is a document, access to that document is a necessary 'facility' .... if, as in the present case, it concerns acts of which the defendant is accused, the credibility of testimony, etc."

In Edwards v United Kingdom (1992) 15 EHRR 417, the European Court of Human Rights said that "it is a requirement of fairness under Article 1 .... that the prosecution authorities disclose to the defence all material evidence for or against the accused." In Sinclair v HM Advocate [2005] HRLR 26, a Privy Council case, Lord Hope of Craighead summarised the effect of the authorities in the following terms:

"First, it is a fundamental aspect of the accused's right to a fair trial that there should be an adversarial procedure in which there is equality of arms between the prosecution and the defence. The phrase 'equality of arms' brings to mind the rules of a mediaeval tournament – the idea that neither side may seek an unfair advantage by concealing weapons behind its back. But in this context the rules operate in one direction only. The prosecution has no Convention right which it can assert against the accused. Nor can it avoid the accused's Convention right by insisting that the duty does not arise unless the accused invokes it first. Secondly, the prosecution is under a duty to disclose to the defence all material evidence in its possession for or against the accused. For this purpose any evidence which would tend to undermine the prosecution's case or to assist the case for the defence is to be taken as material. Thirdly, the defence does not have an absolute right to the disclosure of all relevant evidence. There may be competing interests which it is in the public interest to protect. But decisions as to whether the withholding of relevant information is in the public interest, cannot be left exclusively to the Crown. There must be sufficient judicial safeguards in place to ensure that information is not withheld on the grounds of public interest unless this is strictly necessary."

9. Proceedings under the Company Directors Disqualification Act 1986 have been held not to be criminal for the purposes of the European Convention on Human Rights: see DC, HS and AD v United Kingdom [2000] BCC 710. Article 6(3) of the Convention (and also article 6(2)) will not therefore apply as such in disqualification cases. However, articles 6(2) and 6(3) have been said to have "a certain relevance outside the strict confines of criminal law" (see Dombo Beheer v The Netherlands (1994) 18 EHRR 213, at paragraph 32). Moreover, "there is something of a hierarchy of civil proceedings (in terms of the penal element or stigma that may be involved)" and disqualification proceedings "often involve serious allegations and almost always carry a degree of stigma for anyone who is disqualified" (see Official Receiver v Stern [2000] 1 WLR 2230, at 2257 and 2258). In the circumstances, article 6(3) is not necessarily irrelevant in a disqualification context.
10. Mr Adair also placed reliance on two cases in which judges have referred to the duties of the Secretary of State in disqualification cases. The earlier of these was Secretary of State for Trade & Industry v Hickling [1996] BCC 678, where Judge Weeks QC (sitting as a High Court Judge) said this:

"It is accepted that these are not ordinary adversarial proceedings but have an element of public interest and may entail penal consequences. It follows that there is a duty on the applicant to present the case against each respondent fairly. Many of these applications go by default or are defended by litigants in person, and the practice is for an official in the Department of Trade and Industry to swear a short affidavit referring to charges, specified in a detailed affidavit sworn by the receiver or liquidator.

In my judgment that second affidavit should not omit significant available evidence in favour of any respondent. It should attempt to deal with any explanation already proffered by any of the respondents. It should endeavour to apportion responsibility as between the respondents and it should avoid sweeping statements for which there is no evidence."

In the later case, Re Finelist Limited [2004] BCC 877, Laddie J, having referred to the potentially serious consequences of a disqualification order, said:

"It is the seriousness of these consequences and the fact that such orders are sought by the [Secretary of State] on behalf of the public which should inform the way in which the proceedings are commenced and how the [Secretary of State] carries out her functions."

Laddie J went on to refer to the possibility that "failure of the [Secretary of State] to act fairly in preparing her case against [the director], including failing to give him an opportunity to respond to her allegations, could amount to an abuse of process."

11. As Mr Malcolm Davis-White QC, who appears with Miss Ruth Jordan for the Secretary of State, recognised, the cases indicate that it can be incumbent on the Secretary of State to provide a defendant with documents in his possession regardless of whether any court order to that effect has been made. Authority for that is to be found, in particular, in Hickling, in which Judge Weeks spoke of the need for the Secretary of State's evidence not to omit "significant available evidence in favour of any respondent". There is scope for argument as to the extent of the Secretary of State's obligations to disclose documents in his possession, but I agree with Mr Davis-White that there is no need for me to try to resolve that in this case.
12. More importantly for present purposes, I do not read the authorities to which I have been taken as establishing any duty on the Secretary of State to interview or obtain documents from third parties, nor to ensure that investigations are carried out. Hennessey and Ward deal with "evidence which the prosecution have gathered", not with materials which could have been assembled but which have not been. Similarly, the European Convention cases show, as Lord Hope explained, that the prosecution is under a duty to disclose "all material evidence in its possession for or against the accused". Mr Adair pointed out that in Jespers there was reference to "elements that have been or could be collected by the competent authorities", but (a) that was in the context of article 6(3), which is not as such applicable to disqualification cases, and (b) the complaint in Jespers was about failure to disclose documents which were in the hands of the relevant authorities. Further, Judge Weeks spoke in Hickling of the need to include "significant available evidence". He was not concerned with material which the Secretary of State did not have.
13. It would be dangerous to lay down an absolute rule. However, it seems to me that neither article 6 of the European Convention on Human Rights, nor the Secretary of State's duty to act fairly, will normally extend to requiring the Secretary of State to obtain evidence or to ensure that investigations are undertaken.
14. If a defendant takes the view that the Secretary of State has failed to investigate sufficiently, it may theoretically be open to him to challenge by way of judicial review a decision to institute or continue disqualification proceedings (compare Re Walter L Jacob & Co Ltd [1989] BCLC 345, at 352). More realistically, he could, in an appropriate case, apply to have the proceedings struck out as too weak to be allowed to proceed. In other cases, the defendant may wish to secure missing evidence himself (including, if necessary, by applying for non-party disclosure or serving witness summonses) and/or to draw attention at trial to the deficiencies in the Secretary of State's investigations and evidence. What the defendant will not usually, in my judgment, be able to do is have the proceedings struck out on the basis that the Secretary of State has committed a breach of duty by failing to obtain evidence or otherwise to investigate.
15. Where, however imperfect the investigations may have been, the Secretary of State has in fact assembled evidence of a defendant's unfitness to be concerned in the management of a company, it is, as I see it, for the court to determine at trial whether the Secretary of State has made out his case. If, in the event, the evidence proves to be sufficient to establish unfitness, the defendant should be disqualified even if the Secretary of State failed to obtain relevant evidence or ensure a thorough investigation. On the other hand, the defendant may be able to point to the absence of evidence or investigation to cast doubt on the Secretary of State's case.
16. Even where a defendant can demonstrate that the Secretary of State has failed in his duties, it will not always, by any means, follow that the proceedings should be struck out. In Edwards, the European Court of Human Rights considered that defects in the original criminal trial had been "remedied by the subsequent procedure before the Court of Appeal". In Finelist, Laddie J said that a failure on the part of the Secretary of State "could amount to an abuse of process", in which event "at least one possible form of relief would be to strike out the proceedings"; plainly, Laddie J was not saying that a failure by the Secretary of State would invariably warrant striking out. In ordinary civil litigation, a party who has failed to comply with rules as to disclosure "is not to be deprived of his right to a proper trial as a penalty for disobedience of those rules – even if such disobedience amounts to contempt for or defiance of the court – if that object is ultimately secured, by (for example) the late production of a document which has been withheld" (per Chadwick LJ in Arrow Nominees Inc v Blackledge [2001] BCC 591); it would be strange if, in a disqualification context, late production of documentation necessarily justified striking out.
17. In my judgment, a failure on the part of the Secretary of State is unlikely to warrant striking out unless it threatens the fairness of the trial or, perhaps, was deliberate. Mr Adair did not contend otherwise: he suggested in argument that the ultimate test was whether there is a probable risk that there will not be a fair trial.
18. Turning to the facts of the present case, Mr Adair accepted that such relevant documents as were in the Secretary of State's own possession had probably been disclosed to the defendants. Mr Adair complained, however, that some of the documents had been disclosed very tardily, in certain cases only in the days immediately before the trial. One of Mr Davis-White's answers to this point was that the Secretary of State, through his solicitors, had offered to allow the defendants to inspect the documents he held (apart from those that were privileged) in October of last year but that the defendants had not availed themselves of the offer. Mr Adair responded that, in the context, the defendants were justified in taking the view that what they would see would be unimportant. My impression is that neither side can be said to have behaved unreasonably, but I do not think it matters. The fact is that the documents have now been made available to the defendants. Moreover, the application with which I am now dealing has meant that there has been some extra time for the defendants and their lawyers to consider the documents that came into their hands only recently. In the circumstances, there can be no question of the position as regards disclosure of documents held by the Secretary of State providing any basis or support for the striking out of the proceedings.
19. With regard to the presentation of the Secretary of State's evidence, Mr Adair contended that the affidavit sworn by Mr Elliott Burns in support of the application when it was first issued, failed in a variety of ways to fulfil the requirements laid down by Judge Weeks in Hickling. Mr Adair identified a number of respects in which, he said, Mr Burns' affidavit failed to deal with explanations which had already been proffered by the defendants. There was also, Mr Adair submitted, no attempt either in the original affidavit or later to apportion responsibility between the defendants; nor, Mr Adair said, had the Secretary of State even stated that he was unable to apportion responsibility. Further, Mr Burns' affidavit had, Mr Adair said, wrongly included irrelevant (but potentially prejudicial) material.
20. I do not think that these points lend any support to the present application. Whatever their rights and wrongs, there is no question of them prejudicing a fair trial or justifying the striking out of the proceedings. The very fact that Mr Adair was able to identify the alleged deficiencies means that he can address them as the trial proceeds.
21. The main thrust of Mr Adair's attack was, as I have said, to the effect that the Secretary of State had failed to ensure that there was an adequate investigation and that documentation relating to it had been made available. As I have explained, however, I take the view that neither article 6 of the European Convention on Human Rights, nor the Secretary of State's duty to act fairly, will normally extend to requiring the Secretary of State to obtain evidence or to ensure that investigations are undertaken, and I can see no reason why the position should be different in the present case. In any event, it seems to me that it will be possible to have a fair trial.
22. I would make the following comments in particular:

(1) Many of the points Mr Adair made go to the strength of the Secretary of State's case rather than to whether there can be a fair trial. Take, for example, his complaints that the disclosure of documents in the hands of third parties has been selective and that employees of Barclays Bank who could have given relevant evidence have not been interviewed. These points seem to me to provide material to be deployed during the trial, as casting doubt on the Secretary of State's case, rather than to make the trial unfair. It is, after all, frequently the case in litigation that additional documents or witnesses could potentially have been relevant. Their absence will not render a trial unfair;

(2) When considering whether a fair trial has been put at risk, account should, I think, be taken of a defendant's ability to obtain evidence for himself by invoking court procedures (for example, serving witness summonses or applying for non-party disclosure or for cross-examination on hearsay evidence). In the present case, the defendants did in fact make an application for non-party disclosure, which was ultimately compromised. Mr Adair told me on instructions that the compromise had in part been motivated by concerns as to costs, but what matters to my mind is that the procedure was available. Mr Adair criticised the Secretary of State for failing to support the defendants' application, referring me, in particular, to a letter in which the Secretary of State's solicitors criticised the breadth of the defendants' request for documents. It seems to me, however, that the Secretary of State's stance was not an unreasonable one;

(3) Mr Adair focused on Barclays Bank's role, which, he said, changed the dynamic. As already mentioned, Mr Adair contended that the investigation into the matters at issue had been controlled by Barclays Bank, and he submitted that it was improper for disqualification proceedings to be founded on an investigation carried out by a commercial entity in pursuit of its own commercial objectives. However, I can see no bar on the Secretary of State making use of the fruits of such an investigation. Even, therefore, if it were the case that the investigation in the present case had been controlled by Barclays Bank and pursued in the interests of the bank, as to which I express no view, that would not, in my judgment, make it wrong for the Secretary of State to rely on material from the investigation, either when deciding whether to bring proceedings or in support of such proceedings. Further, I agree with Mr Davis-White that, where an insolvent company has a single creditor, it is neither uncommon nor of itself improper for there to be close cooperation between the office holders and the creditor;

(4) Mr Adair expressed a concern that the powers given by sections 235 and 236 of the Insolvency Act 1986 might have been invoked improperly by the administrators. However, I do not think the point, even if it were established, would matter. It could not render it appropriate to strike out the proceedings;

(5) Mr Adair submitted that the Secretary of State ought, if necessary, to have used his powers under section 7(4) of the Company Directors Disqualification Act 1986 to obtain documents from the administrators and, if needs be, to require the administrators to use their own powers under sections 235 and 236 of the Insolvency Act 1986 to procure materials from third parties (for example, Barclays Bank and DTZ Debenham Tie Leung). However, section 7(4) may not entitle the Secretary of State to insist on the production of much, if anything, that a defendant could not have sought by means of an application for non-party disclosure. It would have been particularly problematic for the Secretary of State to ensure that documents were produced by third parties.

23. In the circumstances, I decline to strike out or dismiss the proceedings and will dismiss the defendants' application.