Secretary of State for Business, Innovation & Skills v Chohan & Ors

In disqualification proceedings, the applicant must state the grounds of alleged unfitness and the essential supporting facts with sufficient clarity for the respondent to know the case to be met. The evidence should identify the allegations, the particular evidence relied upon, and, where relevant, distinguish direct evidence from inference. If the original evidence is deficient, clarification may be sought before the respondent is required to decide whether to file evidence. However, where the evidence and subsequent responses make the substance of the case sufficiently clear, further particulars or interrogatories should not be ordered. The court may proceed on a case advanced by inference from a respondent’s role and responsibilities.

The Secretary of State brought proceedings under the Company Directors Disqualification Act 1986 against six respondents arising from the operation of UKLI Limited’s land-bank schemes. The fifth respondent, Nigel Walter, applied for clarification under CPR Part 18 of the allegations and evidence said to establish his unfitness. He contended that the case concerning the second scheme was insufficiently particularised, including the alleged basis on which it constituted a collective investment scheme and the conduct and knowledge attributed to him.

The Secretary of State relied on an affidavit alleging that Mr Walter acted as a de facto managing director and caused or allowed the company to market and operate the scheme unlawfully. The central issue was whether the affidavit and subsequent responses made that case sufficiently clear for Mr Walter to answer in evidence.

1. Application refused. The Secretary of State’s case was sufficiently clear after the responses to the requests for information.
2. The applicant’s evidence in disqualification proceedings must clearly identify the grounds of alleged unfitness and the essential facts and evidence relied upon. The court adopted the guidance in Re Sutton Glassworks Limited [1996] BCC 174 and relied on Re Finelist Limited [2003] EWHC 1780 (Ch); [2004] BCC 877. The evidence should distinguish direct evidence from inference and should identify the particular evidence relied upon.
3. The original formulation of the case was seriously deficient. It should have stated that the second scheme was alleged to be marketed or operated as a collective investment scheme, identified by reference to the statutory definition the features said to produce that result, identified the supporting evidence, explained how Mr Walter caused or allowed the conduct as a director or de facto director, and stated the case on his knowledge or presumed knowledge.
4. Despite those defects, the Secretary of State had adopted the grounds set out in the FSA’s letter of 23 May 2007 and relied on the specific marketing evidence in the affidavit. The case was therefore sufficiently intelligible. The later opinions of counsel in June and July 2007 did not require separate clarification because they post-dated Mr Walter’s involvement and were irrelevant to the case advanced.
5. The case on Mr Walter’s conduct was that, as de facto managing director, he caused or allowed the company’s acts and had actual knowledge of them. The Secretary of State could seek to establish that knowledge by inference from Mr Walter’s role and responsibilities. No further order was required.