Secretary of State for Business Enterprise & Regulatory Reform v Aaron & Ors

In company-director disqualification proceedings, an implied statutory exception permits the Secretary of State to adduce reports and other material produced through the statutory investigative scheme. The exception extends beyond hearsay to investigators’ findings of fact and opinions, despite the rule in Hollington v Hewthorn.

The material is only prima facie evidence. A director may rebut it, and the court must reach its own conclusions and determine its weight. The exception does not extend merely because the Secretary of State relied on a document. Findings arising from an adjudicative process, including Financial Ombudsman Service decisions and a regulatory Final Notice, remain inadmissible unless another rule permits their admission.

The Secretary of State applied under section 7 of the Company Directors Disqualification Act 1986 for orders under section 6 against three directors of an insolvent financial advisory company. The supporting evidence relied on a Financial Services Authority investigation report produced under the Financial Services and Markets Act 2000, a Final Notice, Financial Ombudsman Service decisions and related material.

The directors sought the removal of findings and opinions from the supporting affidavit. Thomas Ivory QC, sitting as a deputy High Court judge, held that all the exhibited material was admissible. The directors appealed.

The central questions were whether the implied evidential exception developed for statutory investigative material extended to findings and opinions notwithstanding Hollington v Hewthorn, and whether it also covered adjudicative or other documents outside the statutory investigative scheme.

1. Appeal allowed in part. The Financial Services Authority investigation report was admissible, but findings contained in the Financial Ombudsman Service decisions, the Final Notice and other non-investigative documents fell outside the implied statutory exception.

2. The established implied exception applies in disqualification proceedings brought under sections 6 and 7 or section 8 of the Company Directors Disqualification Act 1986. Parliament must have intended the court to receive material produced through the statutory investigative machinery upon which the Secretary of State based the proceedings. The exception extends to hearsay, findings of primary and secondary fact, and investigators’ opinions or conclusions. The enactment of the Civil Evidence Act 1995 removed the need for the exception in relation to hearsay but did not remove its continuing operation in relation to findings and opinions excluded by Hollington v Hewthorn.

3. Such material is only prima facie evidence. The directors may adduce evidence contradicting it. The trial judge must assess the report with all the other evidence, determine its proper weight and reach an independent conclusion. Fairness may require the judge to disregard a particular part unless the Secretary of State supports it with direct evidence.

4. The exception is founded on the statutory investigative scheme, not merely on the Secretary of State having considered a document. It therefore did not cover findings made through adjudicative processes such as Financial Ombudsman Service decisions or the Final Notice. Whether analogous investigative reports produced by other domestic regulators or foreign statutory authorities might qualify was left open.

5. It was unnecessary to excise inadmissible passages before trial. The documents could remain before the court because portions such as recitals of witness evidence were admissible as hearsay under the Civil Evidence Act 1995. The trial judge should consider admissible material and ignore the remainder. The supporting affidavit therefore stood, and the directors were required to serve their evidence within two months.

1. Court of Appeal (Civil Division): The appeal was allowed in part. The court upheld the admission of the statutory Financial Services Authority investigation report but held that adjudicative findings and other non-investigative material fell outside the implied exception. The affidavit was permitted to stand because the trial judge could ignore inadmissible passages. [2008] EWCA Civ 1146

2. High Court, Chancery Division: Thomas Ivory QC, sitting as a deputy judge, dismissed the directors’ application on 22 April 2008 and held that all the exhibited material was admissible.

3. High Court, Chancery Division: Robin Knowles QC had earlier granted only limited permission for expert evidence concerning the nature and investment risks of the relevant financial products.