Secretary of State for Trade and Industry v Carr & Ors [2005] EWHC 1723 (Ch)

Case No 154 of 2005[2005] EWHC 1723 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 29/07/2005
Before
MR JUSTICE DAVID RICHARDS
Between
The Secretary of State for Trade And IndustryClaimant(1) Richard CarrRespondents(2) William JeffreyRespondent(3) Philip LondonRespondent(4) Anthony SartoriusRespondent(5) Christopher SnazellRespondent
In the Matter of TransTec Plc and Other Companies
And in the Matter of the Company Directors Disqualification Act 1986
Malcolm Davis-White QC and Edmund Nourse (instructed by the Treasury Solicitor) for ClaimantPhilip Jones (instructed by Kingsley Napley) for 1 st RespondentHearing Hearing dates: 4 July 2005
Judgment
[1]These are applications for a stay of proceedings under the Company Directors Disqualification Act 1986 (the 1986 Act). The applications are made by Richard Carr and William Jeffrey who were directors of TransTec Plc and a number of its subsidiaries. They are the two remaining respondents to an application made by the Secretary of State for disqualification orders under section 8 of the 1986 Act. They are also the defendants in a criminal prosecution. Both the disqualification and the criminal proceedings arise out of their alleged conduct as directors of TransTec Plc and certain subsidiaries, and there is a very substantial overlap between the factual allegations in the two cases.[2]Mr Carr and Mr Jeffrey apply for a stay of the disqualification proceedings until after the conclusion of the criminal trial. It is due to begin in the Birmingham Crown Court on 9 January 2006, with an estimated length of 3 months. As will appear, there is no question of a trial of the disqualification proceedings occurring before the criminal trial and the real question for decision is whether Mr Carr and Mr Jeffrey should be required to serve their written evidence in the disqualification proceedings before the commencement of the criminal trial.[3]The procedural steps so far taken in the disqualification case are as follows. Notice of the proposed disqualification proceedings was sent to the intended respondents on 23 August 2004. A number of intended respondents gave undertakings in accordance with Section 1A of the 1986 Act before issue of the proceedings. The claim form was issued on 11 January 2005 against five respondents, of whom three have since given undertakings. The evidence in support of the application was served shortly after the issue of the claim form. Mr Carr’s application for a stay was issued on 7 February 2005, while Mr Jeffrey’s application was issued on 25 May 2005.[4]A directions hearing took place on 21 March 2005 and, in the usual course, directions would then have been given for the service of the respondents’ evidence in answer to the Secretary of State’s evidence, a further round of evidence by the respondents in response to each other’s evidence (if they wished to serve any) and evidence in reply from the Secretary of State. No directions were given for service of evidence by Mr Carr in view of his application for a stay, and subsequently the Secretary of State agreed to postpone the service of evidence by Mr Jeffery after the issue of his application for a stay.[5]Mr Carr has been represented on this application by solicitors and counsel. His solicitors, Kingsley Napley, also act for him in the criminal proceedings and have instructed different counsel in those proceedings. Mr Philip Jones, appearing for Mr Carr on this application, has not been instructed to act generally in the disqualification proceedings.[6]Mr Jeffrey now lives in Australia. Like the other respondents, he was notified in August 2004 of the intention to bring disqualification proceedings. He was sent the claim form and supporting evidence in January 2005, as was a lawyer in Australia who was providing some assistance to him. Leave to serve Mr Jeffrey out of the jurisdiction was given on 14 March 2005 and formal service was then effected.[7]Mr Jeffrey’s application for a stay was issued on 25 May 2005, supported by a witness statement of David McCluskey, a solicitor employed by Peters & Peters. His firm represents Mr Jeffrey in the criminal proceedings but not in these proceedings. Mr Jeffery did not appear and was not represented on this application. However, the submissions made on behalf of Mr Carr are applicable also to Mr Jeffrey and I have also has regard to the particular points relevant to his position set out by Mr McCluskey in his witness statement.[8]The common area of the criminal and disqualification proceedings concerns what is called “the Ford Claim”. A very brief summary of the Secretary of State’s case is as follows. TransTec manufactured a cylinder head for Ford in Germany. There were significant production problems and, following a number of default notices, Ford faxed a formal claim of $36 million for compensation on 23 April 1997, relating principally to alleged losses in 1996. The following day, TransTec made a substantial offer of settlement. On 25 April 1997, TransTec’s accounts for the year ended 31 December 1996 were signed, without providing for or disclosing Ford’s claim. By 18 September 1997, TransTec had agreed a settlement with Ford, under which it agreed to pay $18 million to Ford over three years. The payments were to be made by way of price reductions on future orders placed by Ford. This settlement and the payments and liabilities arising from it were not disclosed in the interim accounts published on 22 September 1997 or in the annual accounts for 1997. Payments pursuant to the settlement were made to Ford in 1998 but were allegedly mischaracterised as assets in the interim and annual accounts for that year. Payments made in 1999 were not accounted for in the annual accounts for 1999. The Secretary of State alleges that Mr Carr and Mr Jeffrey were responsible for the non-disclosure or treatment of the Ford Claim, settlement and payments in the various accounts mentioned above.[9]The charges in the criminal proceedings against both Mr Carr and Mr Jeffrey relate to the alleged non-disclosure or mischaracterisation of the Ford Claim, settlement and payments in the various annual and interim accounts referred to above. The charges are made under section 19 of the Theft Act 1968. In addition, each is charged with offences under section 398A(2) of the Companies Act 1985 in relation to the provision of a letter of representation to TransTec’s auditors.[10]The significant difference between the two sets of proceedings is that, while the criminal proceedings involve only offences of dishonesty, the Secretary of State alleges recklessness or negligence as alternatives to deliberate misconduct. There are also allegations in the disqualification proceedings of non-disclosure of the Ford Claim to the Stock Exchange, the board of directors of TransTec and others, which do not feature in the criminal charges.[11]While the criminal proceeding are confined to the Ford Claim, there is a single further allegation against Mr Carr and Mr Jeffrey in the disqualification proceedings, which relates to the accounting treatment in the 1997 accounts of a payment of £400,000 to Rover.[12]Mr Carr and Mr Jeffrey state that they entirely reject the case alleged against them in both proceedings. It appears from answers given by Mr Carr in response to provisional criticisms by the inspectors and from the evidence filed on this application that the areas of substantial dispute relate not so much to the underlying facts but to the nature of the agreement with Ford, whether disclosure was required and whether the accounting treatments were proper, and as to Mr Carr’s state of mind in relation to those matters. This does not of course preclude him from mounting a wider challenge but he has not given evidence on this application to suggest that there is a greater area of dispute. Mr Jeffrey did not respond to the inspectors’ provisional criticisms but it does not appear from his evidence to the inspectors, or from evidence filed on his behalf in this application, that his position is different from that of Mr Carr.[13]There is a long history to this matter. Administrative receivers of TransTec and its subsidiaries were appointed on 29 December 1999. On 16 February 2000 and 8 March 2000 Mr Carr was interviewed by the administrative receivers. He was accompanied by his solicitor and it is apparent from comments at the start of the first interview that he knew that the Ford Claim would be the focus of the interviews and that the administrative receivers had reporting duties under the 1986 Act. Documents were put to Mr Carr in the course of the interviews and he disclosed that he had certain documents concerning the Ford Claim, which he supplied to them.[14]On 20 January 2000 the Secretary of State appointed inspectors to investigate the affairs of the companies under Section 432 of the Companies Act 1985. In announcing their appointment the Secretary of State stated that he expected the inspectors to concentrate on the Ford Claim and its disclosure, and the reasons for the collapse of the group.[15]Mr Carr was interviewed by the inspectors on 26 September 2000 and 23 October 2000. Amongst other matters, he was questioned about the Ford Claim and the Rover payment. The inspectors presented an interim report on 22 January 2001 which was published a month later. They continued their investigations and interviewed Mr Carr for a third time on 30 May 2001. The interview included questions on the Ford Claim and the Rover payment and he was specifically warned about the risk of answering a particular question in the light of possible disqualification, regulatory or criminal proceedings. Provisional criticisms were supplied to Mr Carr in a letter dated 10 July 2001 which referred in part to the Ford Claim and the Rover payment and a response was made by the solicitors then acting for him on 3 August 2001. Further provisional criticisms including some relating to the Ford Claim and the Rover payment were sent in a letter dated 6 August 2001. A 41 page response was sent on his behalf on 6 September 2001. The process of provisional criticisms and responses continued until 15 May 2002.[16]In December 2001, following the receipt of reports from office holders pursuant to the 1986 Act, the Secretary of State sent letters to 39 individuals, including Mr Carr and Mr Jeffrey, referring to the possibility of disqualification proceedings and to the matters under investigation, including the Ford Claim and the Rover payment. The inspectors presented their final report to the Secretary of State in January 2003 and it was published in October 2003. The case made against Mr Carr and Mr Jeffrey in the disqualification proceedings is based on the report.[17]On 12 March 2004 Mr Carr was interviewed over a period of 4½ hours by the Serious Fraud Office. A month before the interview he was provided with two files of documents totalling about 500 pages. At the interview he read out an 18 page prepared statement, together with a 34 page annex commenting on the documents provided to him. He sent a 7 page supplemental statement to the Serious Fraud Office on 26 March 2004.[18]By letters dated 23 August 2004 from the Treasury Solicitor, Mr Carr and Mr Jeffrey were informed of the decision to institute disqualification proceedings against them and were provided with the proposed allegations of unfitness. The letter contained an offer to supply the supporting witness statement in draft. At the request of Mr Carr’s solicitors, the draft statement was sent to them on 6 September 2004. The exhibits were not provided but the Treasury Solicitor made clear that they too would be supplied on request. No request was made for them by Mr Carr or his solicitors. Mr Jeffrey made no request to see the draft statement or exhibits.[19]On 21 October 2004 Mr Carr and Mr Jeffrey were charged with the offences in relation to the Ford Claim. The disqualification proceedings were commenced on 11 January 2005.[20]The proper conduct of civil proceedings, including disqualification proceedings, where there are concurrent criminal proceedings arising out of substantially the same facts, has been considered in a number of authorities. In Secretary of State v Crane [2001] 2 BCLC 222, Ferris J identified a number of relevant principles to be deduced from the authorities, although he made clear that it was not an exhaustive list. On behalf of Mr Carr, Mr Jones does not take issue with these principles. They include: 1) There is no principle of law that a claimant in a civil action is to be debarred from pursuing that action in accordance with the normal rules merely because to do so would, or might, result in the defendant having to disclose his defence. 2) The judge in criminal proceedings has extensive powers to control those proceedings in order to ensure a fair trial, and the responsibility for doing justice in the criminal proceedings lies primarily with the criminal court. 3) That is not to say that the civil court has no responsibility in the matter. It has powers, including a power to stay the civil proceedings, which will be exercised if justice so requires, having regard to the concurrent criminal proceedings. Ferris J cited the following statement of Neill LJ in R v Panel on Takeovers and Mergers, ex p Fayed [1992] BCLC 938 at 947:
“It is clear that the court has power to intervene to prevent injustice where the continuation of one set of proceedings may prejudice the fairness of the trial of other proceedings…But it is a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice”
Ferris J observed that while the civil court will clearly strive to avoid a manifest risk of injustice, it should not go out of its way to anticipate the existence of a mere possibility of injustice. 4) The Secretary of State has a public duty to apply for the disqualification of unfit directors. Such proceedings are brought in the public interest and the purpose of a disqualification order is the protection of the public. The public interest in bringing such proceedings to a substantive hearing is particularly strong in those cases where serious misconduct is alleged, as will be the case where there are concurrent disqualification and criminal proceedings arising from the same conduct.[21]On behalf of Mr Carr, Mr Jones does not rest his application for a stay on an argument that Mr Carr should be entitled to keep silent on his defence in the disqualification proceedings until after the criminal proceedings or that an unparticularised risk of self-incrimination justifies the deferral of his written evidence until after the criminal trial. The principle that these do not provide grounds for a stay, established in relation to ordinary civil claims by the decisions of the Court of Appeal in Jefferson Ltd v Bhetcha [1979] 1WLR 898 and Versailles Trade Finance Ltd v Clough [2001] EWCA Civ 1509, is equally applicable to directors disqualification proceedings: see Secretary of State v Crane, and Re Lighting World Limited, Jibrail v Secretary of State (Jacob J, 20.11.97 unreported).[22]Three grounds are advanced for the stay. First, it is said that it will be impracticable for Mr Carr to prepare his defence in both sets of proceedings before the start of the criminal trial in January 2006. An order which required him to serve evidence in the disqualification proceedings would jeopardise the proper preparation of his defence to the criminal charges and would therefore be oppressive and unfair. Secondly, there may be a specific prejudice to each defendant’s position in the criminal trial if he has to put in evidence in the disqualification proceedings which the other can then use against him. Thirdly, there may be specific prejudice to their position in the criminal trial if the Secretary of State interviews actual or potential witnesses in the criminal proceedings with a view to the preparation of his evidence in reply. This gives rise to the risk of witness contamination.[23]It would seem that the course which the Secretary of State would propose to adopt in relation to any evidence served by Mr Carr and Mr Jeffrey would meet the second and third concerns. As regards the second concern, the Secretary of State proposes that Mr Carr and Mr Jeffrey should serve their evidence on him but should not serve it on each other or file it. Neither would therefore have access to the other’s evidence, unless the judge in the criminal trial ordered disclosure. It would be for that judge to consider the impact of such an order on the fairness of the criminal trial. As regards the third concern, the Secretary of State would not show the evidence of Mr Carr and Mr Jeffrey to any witness or potential witness in the criminal trial, pending the outcome of the trial or further order in the meantime.[24]This therefore leaves the principal ground put forward by Mr Carr and Mr Jeffrey for a stay of the disqualification proceedings, that preparation of their written evidence will be impracticable before the criminal trial. As I have mentioned, the criminal trial is set to begin on 9 January 2006, with an estimated length of 3 months. Defence statements in the criminal proceedings must be provided by 12 September 2005.[25]Mr Jones on behalf of Mr Carr put his application on two bases. First, it would seriously jeopardise the preparation of his defence in the criminal proceedings or would carry a real risk of doing so, and would therefore be oppressive and unfair. Secondly, whether or not the first basis was accepted, it would be the right exercise of case management powers, given the existence of the parallel criminal proceedings. Mr Davis-White, for the Secretary of State, opposes the application and challenges both of the ways in which it is put.[26]The submission that the refusal of a stay would seriously jeopardise the preparation of Mr Carr’s defence to the criminal charges requires an examination of the work required for the preparation of his defence and an assessment of the additional burden of preparing evidence in the disqualification proceedings.[27]Evidence on these matters has been given by Stephen Parkinson, a solicitor employed by Kingsley Napley who has conduct of Mr Carr’s defence in both the criminal and disqualification proceedings. Mr Parkinson is on secondment from the Government Legal Service and has extensive experience with the Crown Prosecution Service, the Companies Investigation Branch of the Department of Trade and Industry and the Treasury Solicitors Department, where he had a supervisory role in relation to civil cases including disqualification proceedings.[28]The principal material in support of the prosecution case was served in December 2004. It consists of 44 witness statements, of which about half deal with substantive issues, and 5 files of exhibits, including one expert’s report. This material was considered in detail by Mr Carr and his legal team in the period from January to April 2005.[29]There is also a voluminous amount of unused material in the possession of the Serious Fraud Office and material in the possession of third parties, which has been notified to the defendants. On 10 March 2005 the Serious Fraud Office served schedules of non-sensitive unused material in its own possession and of third party material. The schedule of unused material runs to 32 pages. In late March 2005 the Serious Fraud Office disclosed four files of unused documents in hard copy form and on 10 May 2005 it provided CD-ROMs containing all the remaining unused material which it held and had scanned into its system. Mr Parkinson explains that the summaries of the contents of documents are not in all cases sufficient to enable an informed decision to be made about inspection.[30]There is a very substantial quantity of third party material. It includes 852 boxes of original documents belonging to TransTec and its subsidiaries, which were provided by the administrative receivers and have been retained under the control of the Secretary of State. Solicitors acting for the Secretary of State have considered the lists of contents of all the boxes and on that basis have read the contents of 528 boxes. They extracted documents relating to all possible disqualification issues, including but not limited to the Ford Claim and Rover payment. The extracted documents amounted to eight files. Inventories, running to some 900 pages, of all 852 boxes have been supplied to the defendants. Mr Parkinson says that the contents of these boxes must be considered for any documents relevant to the defence of the criminal proceedings, in some cases relying on the description in the inventory but in other cases requiring an examination of the documents.[31]There is also a large quantity of company documents collected by the inspectors. There is an inventory which is over 220 pages long. Mr Parkinson makes the same point as regards the accuracy of this inventory as he makes in relation to the inventory to the 852 boxes held by the Secretary of State. The inspectors themselves created subject-matter files, so that those relevant to the Ford Claim and the Rover payment are easily identifiable. It does not of course follow that every document with a bearing on those issues is included in the subject-matter files. Many of these subject-matter files were disclosed by the Serious Fraud Office as part of the unused material, as were all or most of the transcripts of evidence taken by the inspectors. These transcripts are also part of the evidence served in the disqualification proceedings in January 2005. They fill 26 files, although a good part of the evidence is irrelevant to the issues of the Ford Claim and the Rover payment.[32]Employees of Kingsley Napley are summarising the documents identified by Mr Carr, Mr Parkinson and his assistant as potentially relevant. Those summaries will be considered by Mr Carr and his legal team. Mr Parkinson deposes that his firm’s experience is that the process of examining unused and third party material, though time-consuming, is necessary. He does not believe that this exercise will be completed before late November 2005.[33]Mr Parkinson explains how Mr Carr has to be closely involved in this process and in giving instructions on relevant documents. The final stages in the preparation for the criminal trial will be in the period from October to December 2005. In a witness statement made on 7 February 2005, Mr Parkinson expressed his view that it was not unreasonable to expect that, in order to do justice to his defence, Mr Carr would need to devote all or most of his attention to the criminal case from February onwards, a view which he re-affirmed in his second witness statement dated 19 April 2005. The slippage of the timetable for the provision of unused material meant that more work than expected was concentrated in the period from May 2005.[34]As for preparation for the disqualification proceedings, in his first witness statement Mr Parkinson contemplated that before the start of the criminal trial there would be the process of considering the Secretary of State’s evidence, preparing evidence in response, considering each defendant’s evidence, serving further evidence in reply and considering experts’ evidence. All of this would be extremely time consuming for Mr Carr and would divert his attention from the preparation of his defence in the criminal proceedings. Mr Parkinson considered that Mr Carr would not be able to devote adequate time to the preparation of his defence in both sets of proceedings. Mr Parkinson draws attention to the fact that the case against Mr Carr in the disqualification proceedings occupies some 74 pages of the principal witness statement and that the exhibits comprise the Inspector’s report of over 400 pages, three files of documents and three CD-ROMs containing the statements and transcripts of evidence given to the inspectors.[35]Mr Parkinson explains that it will not be possible for counsel acting for Mr Carr in the criminal proceedings to prepare his defence to the disqualification proceedings. Their view is that they have neither the time nor the technical expertise to do so. Mr Parkinson says that neither he nor the other legal staff at Kingsley Napley who are working on the defence in the criminal proceedings will be able to spend any time on the defence to the disqualification proceedings. It will therefore be necessary to instruct other counsel and involve additional solicitors.[36]Mr Davis-White, for the Secretary of State, submitted that Mr Carr would not be prejudiced in his defence of the criminal proceedings by a requirement to file his evidence in the disqualification proceedings before the start of the criminal case. First, the scope of the work is significantly less than that assessed by Mr Parkinson. Mr Carr and Mr Jeffrey would not see each other’s evidence at this stage and would not therefore need to consider a response to it until after the criminal trial. Nor would they need to consider the preparation of experts’ reports at this stage. If they wished to interview or adduce statements from persons who were actual or potential prosecution witnesses, that too should properly wait until after the criminal trial. Secondly, as is common ground, there is a substantial factual overlap between the two cases, with no significant dispute on at least part of the primary facts. Thirdly, Mr Carr and Mr Jeffrey are very familiar with the facts relevant to the cases being made against them. Fourthly, it is not suggested that Mr Carr could not engage the additional legal assistance required to assist the preparation of his evidence. The legal costs of Mr Carr’s defence to the criminal charges, which he is paying personally, are estimated at £1.35 million. This is a very large sum, but there is no suggestion in the evidence that he could not afford to engage the additional solicitors and counsel required for the disqualification proceedings.[37]It is for Mr Carr to satisfy the court that a requirement to file his evidence in the disqualification proceedings before the start of the criminal trial would materially prejudice the preparation of his defence to the criminal charges, or carry a real risk of doing so. If the court is satisfied on that issue, then it would in my judgment be oppressive and unfair to require him to file his evidence at this stage. The reason is that it would put at risk a fair trial of the criminal charges and, important as disqualification proceedings are, there is in my view an overriding interest in the fair trial of criminal charges. I do not here consider what the position would be if the prejudice resulted from the defendant’s own default, for example in delay on his part in preparation of his defence in either set proceedings. No such default is suggested against Mr Carr or Mr Jeffrey.[38]I fully appreciate the substantial burden faced by Mr Carr and his legal team in preparing for the criminal proceedings. I do not, however, accept that they will be materially prejudiced in that task by the preparation at this stage of the evidence on behalf of Mr Carr in response to the disqualification proceedings. My reasons are as follows. First, while the preparation of Mr Carr’s evidence in response to the disqualification proceedings is a significant task, it is not at this stage as comprehensive as Mr Parkinson assumed. Before the conclusion of the criminal trial, it will not involve a consideration of the other respondents’ evidence or the taking of statements from actual or potential prosecution witnesses or the preparation of expert evidence.[39]Secondly, the issues in the disqualification proceedings are relatively narrow, focussing on the Ford Claim and the Rover payment. Although the allegations arising out of the Ford Claim cover a period from 1996 to 1999, they are not, for example, a general case of trading whilst insolvent over that period. Thirdly, in consequence, although there is inevitably a vast amount of documentation concerning TransTec and its subsidiaries over that period, most of it is irrelevant to the issues. The same is true of a substantial part of the written and oral evidence taken by the inspectors.[40]Fourthly, so far as the relevant events and documents relating to the Ford Claim are concerned, there is a very substantial, perhaps complete, overlap between the criminal and disqualification proceedings. Mr Carr and his legal team for the disqualification proceedings can take full advantage of the work on the documents already being undertaken by himself and his team in the criminal proceedings. Mr Parkinson’s evidence shows that there is in progress a comprehensive trawl and examination of the available documentation for relevance to the criminal case.[41]Fifthly, I do not accept that the fact that the evidence in the two proceedings is in different form or that the legal issues in the two proceedings are not identical, or that negligence is alleged in the disqualification proceedings as an alternative to dishonesty, creates a significant difficulty.[42]Sixthly, I do not accept the suggestion that Mr Carr has not for some considerable time been familiar with the allegations concerning the Ford Claim and the Rover payment. Over a considerable period, he was engaged in the process of interviews with the inspectors, submitting statements and responding to provisional criticisms. The final Report was published in October 2003 and has been available to him since then. The witness statement in support of the disqualification proceedings was supplied to him in draft in September 2004 and the exhibits were available to him on request. The full evidence was served on him in January 2005.[43]In reaching my conclusion, I have carefully considered the evidence of Mr Parkinson and accorded weight to his assessments. But, as Mr Jones submitted, it is in the end for the court to take a view as to the amount of work involved in meeting the Secretary of State’s allegations.[44]I have also paid particular attention to concerns which were at one time expressed by counsel for the Serious Fraud Office and by HH Judge Stanley, the trial judge in the criminal proceedings. In an e-mail sent to the judge on 8 April 2005, leading counsel for the Serious Fraud Office referred to the disqualification proceedings and to the defendants’ concern not to be side-tracked by preparing defences to the disqualification proceedings. He said that the prosecution was in principle likely to support, if called on, any application by the defendants to adjourn the disqualification proceedings. The present position of the Serious Fraud Office is set out in a letter dated 21 June 2005 to the Department of Trade and Industry. It explains that the comments in the e-mail of 8 April were made at a time when it was believed that there was a danger of a trial of the disqualification proceedings before the criminal case. As it is now clear that this will not occur and that the Serious Fraud Office’s concerns for a fair trial are understood, the Serious Fraud Office is neutral as to the stay application. Specifically as regards the burden of preparing for both sets of proceedings, the Serious Fraud Office stated in a letter dated 8 June 2005 to the Treasury Solicitor:
“Another concern is that the defendants should not be in a position to argue that their criminal trial was unfair on the basis that they had to respond to two sets of proceedings simultaneously. While estimates will differ as to the nature and extent of the work required in order to prepare adequately for each set of proceedings, it seems to us that this is a material consideration. It was suggested at our meeting that the disqualification proceedings might be put on hold after the service of the defendants’ evidence in response to the Secretary of State as supported by the Affidavit of John Gardner of the DTI. Depending on the timing of such responses, this might well meet our concern.”
[45]At a directions hearing in the criminal proceedings on 15April 2005, HH Judge Stanley heard submissions from counsel for Mr Carr on the difficulties presented by the concurrent disqualification proceedings and was asked to express a view which could be passed on to the court hearing the present application for a stay. Judge Stanley said:
“I can see that so far as the directors’ disqualification proceedings are concerned there is a great deal involved in that, and there would be a terrific distraction from proper preparation of the criminal case, which must take priority. I therefore express the view strongly that those proceedings should take second place and that they should not continue at this stage.”
[46]Those comments must be read in the light of the submissions made to the judge. Counsel said that there were two aspects to their objection to the disqualification proceedings “going ahead before the [criminal] trial”. The first was “the general oppression to Mr Carr in having to deal with that difficult and complex matter at a time when he is fully engaged with trying to focus on his defence of this serious criminal charge”. As “an indication of the amount of material in the DTI proceedings”, reference was made to the 850 boxes of third party material which I have described above. In response to an observation by the judge that disqualification proceedings are much wider ranging, counsel replied that “the material is considerably greater: times ten, as far as we can judge at the moment”. Secondly, specific concern was expressed “for direct prejudice arising from some events were the DTI disqualification proceedings to take place this year”, particularly the possibility of a co-defendant making use of material emerging in the course of the hearing.[47]The position is a great deal clearer now that it appeared on 15 April 2005. First, there is no question of a hearing before the criminal trial. Secondly, as to the scope of the disqualification proceedings, the common ground with the criminal case is very substantial and the documents on the major issue of the Ford Claim to be considered for the disqualification proceedings are largely the same as those for the criminal trial. Thirdly, the Serious Fraud Office, which supported the position taken by Mr Carr, is now neutral as regards the limited question of the preparation of the respondents’ written evidence. I have had an opportunity of looking at the issues in detail. As I have explained, I share the concern for a fair trial of the criminal charges, but I have concluded that it will not be jeopardised by a requirement that Mr Carr and Mr Jeffrey serve their evidence in the disqualification proceedings before the start of the criminal trial.[48]Mr Jones’ alternative submission was that it would be right to stay the proceedings on case management grounds. This involves a balancing of the factors for and against a stay. Mr Jones relied on the following factors as justifying a stay. First, the preparation of evidence will impose a significant burden on Mr Carr in terms of time and cost, which will be entirely wasted if he is convicted at his criminal trial and a disqualification order is made by the criminal court under section 2 of the 1986 Act. In this respect, Mr Jones submitted that disqualification proceedings were essentially different from the civil claims under consideration in Jefferson Ltd v Bhetcha and Versailles Trade Finance Ltd v Clough. In those cases, the civil claimants could not obtain their remedy in the criminal proceedings. Secondly, service of the respondents’ evidence before the end of this year will not result in a hearing of the disqualification proceedings much earlier than would otherwise be the case. It will be after the criminal trial that they will consider each other’s evidence and respond to it, approach witnesses in the criminal trial and consider the question of expert evidence. Until then, the Secretary of State will not be able to approach actual or potential witnesses in the criminal trial for responses to the respondents’ evidence. Moreover, the Secretary of State will be bound, and the respondents will wish, to take stock of the evidence at the criminal trial before proceeding with the disqualification application. It would be more sensible and cost effective for all parties if all the first round evidence of the respondents was filed at one time. Thirdly, Mr Carr is prepared to give an undertaking to the court in the terms of a disqualification order which will last until judgment in the disqualification proceedings, thereby protecting the public interest so far as possible. Mr Jeffrey is not offering an undertaking but he is not presently living or working in the UK.[49]While taken together these factors have some force, I accept Mr Davis-White’s submission that it would not be right to order a stay of the disqualification proceedings on case management grounds. Such proceedings are brought in the public interest and they serve an important purpose. The public interest is best served by such proceedings being brought to a conclusion as soon as reasonably practicable. While Mr Carr’s proposed undertaking is designed to achieve as much as possible of the effect of a disqualification order, Mr Jones accepts that it achieves less than an order. For example, breach of the undertaking would be a civil contempt of court with a maximum penalty of 2 years’ imprisonment, while breach of a disqualification order is an offence punishable by a maximum of 5 years’ imprisonment. There is no public register on which the undertaking could appear. While Mr Carr is willing to give an undertaking to be personally liable for debts as provided by section 15 of the 1986 Act as if a disqualification order had been made, there can be no similar liability imposed on his associates (cf section 15(1)(b)). Moreover, if a respondent is to be prohibited from acting as a director, the public is entitled to know as early as reasonably practicable the grounds on which he has been found unfit.[50]In my judgment, it is likely that service of the respondents’ evidence before the criminal trial will lead to an earlier hearing of the disqualification proceedings. Not only will a significant part of the relevant evidence be prepared earlier than if there is a stay, so saving time at a later stage, but the Secretary of State’s advisers will be able to consider and perhaps prepare their response to that evidence. Mr Jones said that there were some substantial areas of factual dispute, but in that case the efficient prosecution of these proceedings will be best served by the identification of those areas earlier rather than later. There may be some witnesses who cannot be approached, but all other work including any necessary examination of documents can proceed. In this way the proceedings will be materially more advanced at the end of the criminal trial than would be the case with a stay.[51]There is a real possibility that disqualification orders will be imposed by the criminal court if the respondents are convicted. However, if they are not convicted, it is a proper assumption that the Secretary of State will proceed with a case based on recklessness or negligence and may decide to proceed with a case of dishonesty. Additionally, the allegation concerning the Rover payment does not feature in the criminal charges. Submissions based on the prospect of a disqualification order in criminal proceedings were made in support of a stay in Secretary of State v Maclean (29.10.96 unreported) and in re Battery Specialists (Five Star) Ltd (23.2.98, unreported). In the former, Jonathan Parker J said that he did not attach significant weight to this factor and, in the latter, Neuberger J regarded it is a very minor factor. I agree.[52]In considering the application for a stay, I have addressed the submissions made by Mr Jones on behalf of Mr Carr. Those submissions are applicable also to Mr Jeffrey. There are some differences in their positions. First, Mr Jeffrey did not make submissions to the inspectors in response to provisional criticisms, but he has for a long time been generally familiar with the allegations against him concerning the Ford Claim and the Rover payment. Secondly, Mr Jeffery lives in Australia, so that preparation for each set of proceedings is hampered by that fact. However, Mr Jeffrey, who is a British citizen, lived in the UK during the relevant period of TransTec’s operations and there is no suggestion that he could not spend the time in England necessary to prepare his case. Thirdly, while Mr Jeffrey has legal aid for the criminal proceedings, he has no representation in the disqualification proceedings. The grant of civil legal aid is not, however, ruled out by Mr McCluskey but no application for it has been made. None of these points leads me to conclude that Mr Jeffrey’s application for a stay should succeed.[53]I have therefore come to the conclusion that there should not be a stay of the disqualification proceedings, but that directions should be given for service of the respondents’ evidence before the start of the criminal trial. Such evidence will not be filed, nor will one respondent’s evidence be given to the other, until after the end of the criminal trial. The respondents will not be required to serve any evidence from actual or potential witnesses in the criminal case at this stage. Directions for further evidence and any application to adduce expert evidence will be considered after the criminal trial.