R (Sajjad) v Secretary of State for the Home Department

The Court of Appeal dismissed an appeal against refusals of permission to apply for judicial review of a decision refusing further leave to remain under the Points Based System as a Tier 1 (Entrepreneur) migrant. The appellant had claimed points for investment in a UK company but did not supply a director's loan agreement. The court held that, for the purposes of paragraph 46-SD(a)(iii) of Appendix A of the Immigration Rules, the sums advanced by a sole director and shown in the director's current account constituted a "director's loan" and therefore required a written legal agreement evidencing (1) the terms, (2) any interest, (3) the period and (4) that the loan was unsecured and subordinated in favour of third-party creditors.

The court emphasised the prescriptive nature of the PBS and the limited scope for evidential flexibility under paragraph 245AA of the Immigration Rules, following Mudiyanselage. Because no director's loan agreement existed or was produced, the respondent lawfully refused the application and the refusals of permission to apply for judicial review were correctly upheld.

Background and procedural history:

• The appellant, a Pakistani national, entered the United Kingdom in June 2011 with Tier 1 (Entrepreneur) leave and applied on 1 April 2015 for further leave to remain. The respondent refused the application on 27 May 2015; the administrative review upheld that refusal on 18 June 2015.
• The appellant challenged the refusal by an application for judicial review in the Upper Tribunal (Immigration and Asylum Chamber). Permission to apply was refused on the papers by Upper Tribunal Judge Smith. On renewal, Elisabeth Laing J refused permission, recorded in a Judicial Review Decision Notice dated 26 January 2016. The appellant appealed to the Court of Appeal; initial refusal on the papers was overturned and Singh LJ granted permission to appeal on 6 June 2018.

Nature of claim and relief sought:

The appellant sought judicial review of the respondent's refusal of further leave to remain. The dispute concerned whether the appellant had provided the specified documentary evidence to show he had invested the requisite funds in a UK business for the award of points under Appendix A (Table 5) of the Immigration Rules.

Issues framed:

1. Whether the appellant's investment in his company amounted to a "director's loan" within the meaning of paragraph 46-SD(a)(iii) so as to require a legal agreement setting out specified particulars.
2. Alternatively, whether the phrase "a director's loan" was unclear and, if so, whether it was unfair for the respondent to refuse the application without first contacting the appellant or affording him an opportunity to supply the director's loan agreement (whether or not paragraph 245AA applied).

Court's reasoning and disposition:

The court examined the relevant PBS provisions, including paragraph 39B, paragraph 245DD and Appendix A (notably Table 5, paragraph 46 and 46-SD and paragraph 47), and applied established authorities on the construction and operation of the PBS (including Mahad, Kaur and Raju). The court held that, given the purpose and prescriptive nature of the PBS, the ordinary and plain meaning of "a director's loan" is a loan from a director to his company and that the appellant's payments (reflected in the director's current account and described by the company's accountants as an interest-free loan for an indefinite period) were properly characterised as a director's loan. Because paragraph 46-SD(a)(iii) requires a written legal agreement showing specified details (including subordination), and no such agreement existed or was produced, the respondent was entitled to refuse the application. The court further held that evidential flexibility under paragraph 245AA is limited (as explained in Mudiyanselage) and that there was no basis to require the respondent to exercise a residual discretion to seek a nonexistent document. Permission to apply for judicial review was therefore rightly refused and the appeal was dismissed.

The court acknowledged the potential harshness of the PBS regime but reaffirmed that certainty and administrative predictability were legitimate objectives that constrain indulgence.

This appeal was dismissed. The Court of Appeal held that the sums advanced by the appellant and recorded in the director's current account were a "director's loan" within the meaning of paragraph 46-SD(a)(iii) of Appendix A to the Immigration Rules; accordingly a written director's loan agreement evidencing terms, interest, period and that the loan was unsecured and subordinated to third-party creditors was required. No such document existed or was produced; given the limited evidential flexibility under paragraph 245AA and the prescriptive nature of the PBS, the respondent lawfully refused the application and the refusals of permission to apply for judicial review were upheld.

Appeal to the Court of Appeal from the Upper Tribunal (Immigration and Asylum Chamber) (JR/11169/2015). Permission to apply for judicial review was refused on the papers by Upper Tribunal Judge Smith; Elisabeth Laing J refused permission on renewal (Judicial Review Decision Notice dated 26 January 2016). Permission to appeal to the Court of Appeal was originally refused on the papers but granted by Singh LJ on 6 June 2018. The Court of Appeal heard the appeal and dismissed it ([2019] EWCA Civ 720).