Home Information Cases Secretary of State for Business Enterprise and Regulatory Reform v Aaron (2008)

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Secretary of State for Business Enterprise and Regulatory Reform v Aaron (2008)

Summary

The defendants were all directors of a company which operated as an independent financial adviser. The company was regulated by the Personal Investment Authority until the end of November 2001 and thereafter by the Financial Services Authority (FSA). In June 2003, the FSA commenced an investigation into the activities of the company. Five complaints were upheld, and the company later went into creditors' voluntary liquidation, with an estimated deficiency of some £13m. In 2004, the company's permission to carry on regulated activities was cancelled by the FSA. In December 2005, the Secretary of State issued the instant proceedings under the Company Directors Disqualification Act 1986. The evidence served in support of the proceedings consisted of an affidavit, which had as an exhibit a report prepared for the Secretary of State and upon which he had relied when making his decision to begin the action. The defendants applied to strike out the report on the ground that it was inadmissible.

Facts

According to the defendants, opinions, factual findings and conclusions referred to in the evidence filed on behalf of the Secretary of State were inadmissible. They relied on Hollington v F Hewthorn & Co Ltd [1943] 2 All ER 35, which held that such material was irrelevant and inadmissible. They submitted that that general principle was applicable in disqualification proceedings, having regard, inter alia, to Secretary of State for Trade and Industry v Bairstow Re Queen's Moat House [2003] All ER (D) 137 (Mar). The Secretary of State accepted the general principle, but contended that in the case of disqualification proceedings, it was subject to an implied exception based on Re Armvent Ltd [1975] 3 All ER 441, namely that evidence provided by an appointed official, which the Secretary of State could take into account in considering whether to bring proceedings to wind-up a company, was admissible to support the petition despite the fact that it was hearsay. The defendants argued that that principle could not be applied to directors' disqualification proceedings and, moreover, it was confined to hearsay, and did not cover opinions or findings of fact and conclusions.

Held

The principle in Re Armvent Ltd that the court was entitled to look at the material on which the Secretary of State took the decision to commence the proceedings for winding-up applied equally to directors' disqualification proceedings. It was not limited to hearsay evidence, but extended to findings of primary and secondary fact and to evaluative judgments. It was however concerned with admissibility, not the weight of the evidence as such.
The principle applied to render admissible material which the Secretary of State was entitled to take into account when deciding to institute proceedings, on the ground that it would be counterproductive if the court had to ignore such material when considering the application. The scope of the principle was established by authority to include findings of primary and secondary fact and evaluative judgments.

All of the material which the defendants sought to strike out of the evidence relied upon by the Secretary of State in support of the application as being findings of fact and conclusions, or evaluative judgments and opinions, was admissible in the instant case. What weight if any was to be attached to them was a matter for the court hearing the substantive application, but they were admissible.

The defendants' application would be dismissed.

Chancery Division
T Ivory QC
Judgment date
22 April 2008
References

[2008] All ER (D) 298 (April)

Practice areas