Secretary of State for Business Innovation And Skills v Scaggs

Under section 453C of the Companies Act 1985, failure to comply with a requirement imposed under section 447 may be dealt with as contempt where the court is sure that the requirement was breached without reasonable excuse. The court retains a discretion over penalty. Persistent and deliberate non-cooperation with a company investigation, despite warnings and reasonable efforts to accommodate health difficulties, may justify imprisonment. A custodial sentence may have both punitive and coercive elements. The court should identify those elements and may allow an opportunity to purge the contempt. Health problems may affect when imprisonment is enforced, without necessarily avoiding custody.

The Secretary of State applied under Part 8 of the Civil Procedure Rules for the committal or punishment of Norman Jevons Scaggs. Investigators authorised under sections 447 and 453A of the Companies Act 1985 had required information, documents and attendance at interviews concerning two companies of which Mr Scaggs had been a director.

Mr Scaggs failed to attend several meetings and produced none of the requested material. He relied on ill-health, an alleged sale of the companies to a Belize company, confidentiality, and the assertion that the companies were dormant. The court adjourned the matter to permit further cooperation and legal advice. Mr Scaggs attended one interview but still failed to provide the requested information or documents. He did not attend the final hearing. The central issues were whether non-compliance and absence of reasonable excuse were proved, and what penalty was appropriate.

1. Liability. The court was required to apply the criminal standard of proof because the application was effectively one to commit for contempt. It was sure that Mr Scaggs had failed to comply with requirements imposed under section 447 of the Companies Act 1985 and had failed to establish a reasonable excuse. The alleged sale, confidentiality obligations, alleged dormancy of the companies and medical problems did not justify the persistent failure to cooperate.
2. Assessment of conduct. The investigators had repeatedly explained the requirements and consequences of non-compliance. They had offered meetings in Leeds, attendance with a friend, relative or adviser, comfort breaks, and an interview at Mr Scaggs’s home. His continued refusal to provide documents, and his attempts to distance himself from the companies through Okami International Limited, amounted to serious and deliberate non-cooperation.
3. Penalty. Although the court retained a discretion whether to impose a penalty, the public interest in effective investigations under sections 447 and 453C was important. A custodial sentence was inevitable. The sentence comprised equal punitive and coercive elements of three months each, making six months in total. Mr Scaggs retained the opportunity to apply to purge his contempt.
4. Enforcement and costs. In view of the forthcoming eye operation, execution of the warrant was suspended until 5 November 2012. Mr Scaggs was committed for six months and ordered to pay the Secretary of State’s costs, summarily assessed at £12,204.30.

First-instance committal proceedings in the High Court (Chancery Division). No appeal or earlier judicial decision in this litigation is stated.