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

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

Summary

In director disqualification proceedings, whether brought under s.8 or under s.7 for an order under s.6 of the Company Directors Disqualification Act 1986, there was an implied exception to the strict rules of evidence on hearsay evidence, opinion evidence and the rule in Hollington v Hewthorn.

Facts

The appellants (D) appealed against a decision that the respondent secretary of state could rely on findings of fact and opinion set out in a report of the Financial Services Authority in the course of an application to seek the disqualification of D as directors under the Company Directors Disqualification Act 1986 s.7. The report had been made by investigators under the powers of the Financial and Services and Markets Act 2000 s.170. It was common ground that the findings of fact and the conclusions on the conduct of the defendants contained in the report were ordinarily inadmissible on the basis that they constituted findings in other proceedings and were excluded under the rule in Hollington v F Hewthorn & Co Ltd (1943) KB 587 CA. However the judge found that, applying the principle in Armvent, Re (1975) 1 WLR 1679 Ch D, the findings of fact and opinion set out in the report were admissible under an implied exception to the strict rules of evidence developed in disqualification proceedings. D submitted that the decision in Secretary of State for Trade and Industry v Bairstow (2003) EWCA Civ 321, (2004) Ch 1 made it clear that the Armvent exception was confined to hearsay.

Held

The material that the report contained was undoubtedly relevant. The width of the implied exception applied not only to hearsay, but also to findings of fact and opinion at least when contained in reports or materials obtained under statutory powers. The court in Bairstow was not dealing with an issue that fell within the scope of the implied exception set out in the earlier cases. The findings made in that case were findings made in ordinary civil proceedings to which the rule in Hollington plainly applied, Bairstow distinguished and Hollington applied. It was therefore clearly established that in disqualification proceedings, whether brought under s.8 or under s.7 for an order under s.6 of the 1986 Act, there was an implied exception to the strict rules of evidence on hearsay evidence, opinion evidence and the rule in Hollington. This was developed from the scheme of the Companies Acts on the basis that Parliament must have intended that a court should have regard to the materials produced under clear statutory procedures on which the secretary of state had relied in bringing the proceedings. There was no real disadvantage to a director. It was no more than prima facie evidence and the director was entitled to adduce evidence to contradict the findings and conclusions in the report. It was still necessary to rely on the implied exception in relation to findings of fact and opinion so long as the rule in Hollington remained good law. The primary objective of the implied exception was to put before the court material obtained under the statutory scheme on which the secretary of state relied in making his decision and which formed the basis of the case against the defendant. There was good reason to reaffirm not only the principle of the implied exception and its scope as extending to whatever was contained in the reports and other materials obtained under the statutory scheme, but also its eminent good sense in relation to disqualification proceedings such as the instant. To abrogate the exception would be to render of no value a careful investigation, to put the public through the secretary of state to considerable and unnecessary expense and to cause significant delay. It could not sensibly be argued that the admission of such evidence caused any disadvantage to directors. To exclude the report would cause injustice by bringing about further delay and expense in the instant proceedings and there was no need to do so as the scope of the implied exception was clear.

Appeal dismissed

Court of Appeal
Buxton LJ, Keene LJ, Thomas LJ
Judgment date
16 October 2008
References

Practice areas