Secretary of State for Trade and Industry v Bell Davies Trading Ltd. & Anor

Whether companies were controlled for quota purposes depended on all the relevant facts at the time of their licence applications. The court could consider the continuing relationship between an existing client company and the scheme operator, including the absence of any material change from earlier years. A later draft management proposal could not retrospectively alter the fact of control when the applications were made. Where the evidence did not establish a material change, or was inadequate to show independence, the companies remained within the undertaking’s definition of controlled quota companies.

The applications arose from winding-up petitions brought by the Secretary of State against Bell Davies Trading Ltd and KTA Limited concerning an alleged scheme to circumvent European import quotas. The court had previously found that quota companies were controlled by Bell Davies Trading Ltd and that the scheme involved unlawful licence applications. The companies subsequently sought declarations that dealing with 2004 licences would not breach an undertaking given to the court.

The central issues were whether the existing and newly recruited quota companies were controlled by Bell Davies Trading Ltd when they applied for 2004 licences in 2003, and whether the proposed method of managing those licences affected that question.

1. Applications dismissed. The court refused the declarations sought by Bell Davies Trading Ltd and KTA Limited.
2. The question whether a quota company was controlled by Bell Davies Trading Ltd had to be determined by considering all the facts relating to that company at the time of its licence application. The proposed future method of managing the licences was not determinative.
3. Existing quota companies had previously operated within Bell Davies Trading Ltd’s scheme. The evidence showed no material change before the September or December 2003 applications. Their continued expectation of signing documents and receiving a fee supported the conclusion that they remained controlled.
4. The evidence concerning new quota companies was inadequate to establish that they were independent. The available standard letter indicated that Bell Davies Trading Ltd arranged the scheme, completed the applications and required participants to have only minimal involvement. The evidence therefore showed or suggested control.
5. The undertaking expressly covered companies controlled by Bell Davies Trading Ltd or KTA Limited at the time of application, with control defined by Regulation (EEC) No. 2454/1993, Art.143.1(f). The conclusion also reflected the single-application requirement in EC Regulation No. 1394/2001, Art.2.3(b).