Secretary of State for Trade & Industry v Hollier & Ors [2006] EWHC 1804 (Ch)

[2006] EWHC 1804 (Ch)

Case No 1755 of 2002

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 17 July 2006

Before

MR JUSTICE ETHERTON

Between

THE SECRETARY OF STATE FOR TRADE AND INDUSTRYClaimant

DENNIS GEORGE HOLLIERDefendant

JAYSON WAYNE HOLLIERDefendant

ADRIAN DENNIS HOLLIERDefendant

BARBARA ANN HOLLIER (aka ANNIE HOLLIER)Defendant

DAVID CLARKSONDefendant

ROBERT ANTHONY BELLDefendant

Mr Nicholas Caddick (instructed by Treasury Solicitors) for Claimants

Mr Tim Carlisle (instructed by Chadwick Healy & Co) for Jayson Hollier

Mr Mark Watson-Gandy (instructed by Keoghs) for 5 th Defendant

Dennis Hollier, Barbara Ann Hollier represented themselves

Hearing Hearing dates: 3, 4, 5, 8, 9, 10,11, 15, 16, 17, 18, 22, 23, 24, 25 May, 6, 9, 12 June

Judgment

INDEX

Introduction 1-8 Amba 9-21 Nextime 22-29 The trial 30-44 Representation 30-36 Evidence 37-44 The Law 45-83 The 1986 Act 45-60 De facto director 61-81 The burden and standard of proof 82 -83 Jayson 84-146 Amba 84-146 Was Jayson an investor in Amba?84-115 Did Jayson act as a de facto director?116-146 Nextime 147-157 Was Jayson a de facto director of Nextime?147-157 Mrs Hollier 158-169 Was Mrs Hollier a de facto director of Nextime?158-159 Unfitness 160-169 Adrian 170-193 Was Adrian a de facto director of Amba?173-183 Unfitness 184-193 Decision 194-196

Mr Justice Etherton :

Introduction

[1]These are proceedings by the Secretary of State for Trade and Industry (“the SoS”) for disqualification orders against the Defendants pursuant to section 8 of the Company Directors Disqualification Act 1986 (“the 1986 Act”), on the basis of information and documents obtained pursuant to the Companies Act 1985 (“CA 1985”) s.447.

[2]The proceedings concern the management of Amba Rescue Limited (“Rescue”), Amba Claims Services Limited (“ACS”), Amba Group International plc (“Amba plc”) (together “Amba” or the “Amba companies”), and Nextime.com plc (“Nextime”).

[3]An administration order was made on 6 June 2000 in respect of Rescue. On 8 August 2000 that order was discharged, and a compulsory winding up order was made in respect of Rescue on the petition of the joint administrators. ACS and Amba plc were wound up on 4 April 2001 following public interest petitions presented by the SoS. A winding up order was made against Nextime on 30 November 2000 on a creditor’s petition.

[4]The First Defendant, Dennis George Hollier (“Dennis”) is the father of the Second Defendant, Jayson Wayne Hollier (“Jayson”) and the Third Defendant, Adrian Dennis Hollier (“Adrian”), and is the husband of the Fourth Defendant, Barbara Ann Hollier (“Mrs Hollier”).

[5]Dennis was registered as a director of Rescue. The SoS’s case is that, although never formally appointed and registered as directors of Rescue, Jayson in fact acted as a director (“a de facto director”) of Rescue until January 2000, Adrian was a de facto director of Rescue from July 1999 to March 2000, and the Fifth Defendant, David Clarkson (“Mr Clarkson”), was a de facto director of Rescue throughout.

[6]The SoS claims that Dennis, Jayson, Adrian and Mr Clarkson were at all relevant times de facto directors of ACS and Amba plc.

[7]The Sixth Defendant, Robert Anthony Bell (“Mr Bell”), was registered as a director of Nextime. The SoS’s case is that Dennis was a de facto director of Nextime until April 2000, Jayson was a de facto director of Nextime from July 2000, and Mrs Hollier was a de facto director of Nextime throughout.

[8]Dennis, Mr Clarkson and Mr Bell have given disqualification undertakings to the SoS pursuant to ss.1A and 8(2A) of the 1986 Act. The disqualification undertaking given by Mr Clarkson was for 8 years, and that of Mr Bell was for 5 years. The disqualification undertaking of Dennis, which was given during the course of the trial, after the conclusion of the evidence, was for 12 years. Accordingly, this judgment is in respect of Jayson, Adrian and Mrs Hollier and the SoS’s case that Jayson and Adrian were de facto directors of Rescue, ACS and Amba plc, and Jayson and Mrs Hollier were de facto directors of Nextime.

Amba

[9]Rescue was incorporated on 27 October 1998. At the material times, the principal shareholders were Dennis, CJ Enterprises Limited (a company owned and controlled by Mr Clarkson) and Elliot Blundell (“Mr Blundell”). Each of them had 290 shares.

[10]ACS was incorporated on 30 June 1999. The sole share issued on incorporation was at all material times held by Keith Lewington (“Mr Lewington”) of Shoosmiths, the solicitors retained to incorporate the company.

[11]Dennis’s intention was that Rescue and ACS would provide a vehicle accident management and breakdown recovery service for those who became Amba “members”.

[12]It was also the intention that in due course Amba plc, which was incorporated on 10 August 1999, would become the parent company of the Amba group of companies. That never in fact occurred. The two shares issued on the incorporation of Amba plc were held at all material times by Mr Lewington and Marcus Edward Reynolds (“Mr Reynolds”) of Shoosmiths.

[13]Rescue published a brochure in about August 1999 (“the Brochure”), in which it described itself as “the only Vehicle Rescue company to offer a full Breakdown and Accident Management Service in one simple all-in, low price membership”. The Brochure stated that for £9.95 per month Amba membership would provide, throughout the whole of the United Kingdom and Europe, home breakdown cover, roadside repairs and roadside recovery, as well as certain additional benefits such as replacement car hire, overnight accommodation, chauffeur provision and public transport costs. The Brochure also stated that membership would include accident management services such as handling “the claims process from start to finish”, completing all necessary documentation and claims forms, introducing the member to a specialist legal team to handle any potential litigation and liaising with the member’s own insurance company to ensure the claim would be processed quickly.

[14]Rescue commenced business in April 1999, providing recovery and rescue services to commercial clients using a sub-contractor called React 24 Limited (“React”). React sub-contracted the recovery and rescue work to local operators.

[15]From about August 1999 Rescue offered recovery and rescue services and accident claims management services to the general public. It continued to use React for the recovery and rescue services. In September 1999 Dean Cox (“Mr Cox”) joined Rescue as operations manager in charge of day to day administration. Members were recruited through independent sales agencies operating on a commission basis

[16]Almost from the outset until about the end of 1999, Rescue’s accounting and banking functions were performed by personnel at CIA Insurance (“CIA”) at CIA’s offices at 24 Warwick Street, Rugby. CIA Insurance was the name under which Jayson carried on business as an insurance broker.

[17]Rescue’s cheques were being dishonoured as early as August 1999. By late 1999 Rescue was in very severe financial difficulty, as appears from two reports prepared by Mr Cox in December 1999 and January 2000 respectively. It seems that by January 2000 Rescue was at least £245,000 in debt. Two offices used for the business, in Romford (“the Romford premises”) and Sittingbourne (“the Sittingbourne premises”) were closed, and staff based there were made redundant. ACS ceased to trade at about that time. Also during January 2000 Rescue’s relationship with React broke down, and Rescue decided to deal with local operators directly. At the same time, Rescue was experiencing problems with its sales agencies, including disputes over claims by agents for payment of their commissions, and problems reconciling the agencies’ figures with the number of membership applications and other information received by Rescue. On 5 February 2000 Mr Cox left Rescue.

[18]Notwithstanding those matters, Rescue continued to sell memberships, and used the Brochure for that purpose.

[19]Rescue was placed in administration on 6 June 2000 on the basis of an estimated deficiency of £865,000. It was wound up on 8 August 2000. I have not been provided with any up to date details of the conduct of the liquidation, including, in particular, the amount of any deficiency as regards its creditors.

[20]There is no evidence that Amba plc carried on any significant active trading. It did not have its own bank account. Its principal function appears to have been limited to holding the tenancy of the Romford premises and the Sittingbourne premises.

[21]As I have said, ACS and Amba plc were wound up on 4 April 2001.

Nextime

[22]Nextime was incorporated as a public limited company on 4 February 2000. The only shares it ever issued were the two subscriber shares.

[23]On 16 March 2000 Nextime entered into an agreement (“the FMC Supply Agreement”) with UKnetclubs plc (“UKNC”). UKNC was owned as to 31 per cent by Internet Trading Clubs plc, as to 20 per cent by Internet Trading Clubs (Isle of Man) Limited, and 49 per cent by Freeserve (Investments) Limited, which was part of the quoted Freeserve plc group. UKNC traded as the Freeserve Motorist Club (“FMC”). Under the FMC Supply Agreement Nextime agreed to locate and supply members of FMC with “person imported” (“PI”) vehicles, nearly new and pre-registered vehicles, and “scoop” purchases of cars and other vehicles.

[24]Nextime sub-contracted its obligations for the supply of PI vehicles to a dealer network of, initially, 5 suppliers (“Brokers”). An FMC member wishing to buy a vehicle would pay Nextime a deposit of between 5 per cent and 30 per cent, depending on the manufacturer, which would be paid into Nextime’s account for onward transmission to the Broker. The actual contract was between the client and the Broker, with Nextime acting as a purchasing agent on the member’s behalf.

[25]Under the agreements between Nextime and the Brokers, the Broker would charge the actual cost plus an agreed profit margin. It appears that the average margin was approximately £550. Nextime would then add its own mark up. The vehicle prices quoted on the FMC website and payable by Nextime’s customers were intended to be the best or competitive prices; but they could not be achieved without a subsidy to Nextime from FMC. That subsidy was, therefore, crucial to Nextime. The precise basis on which FMC was to provide that subsidy was never successfully negotiated, concluded and reduced to writing. Some subsidies were paid initially. After a time no further subsidies were ever paid by FMC to Nextime.

[26]Nextime launched its business on about 6 April 2000. It took its first confirmed order on 11 April 2000.

[27]By July 2000 there had been a decline in the business of Nextime, which shed some staff in consequence. The business continued to deteriorate. By September 2000 Nextime had exceeded its overdraft with Lloyds Bank (“Lloyds”), had come under pressure from its creditors, was dishonouring payments, and made members of staff redundant. Attempts to find a source of further investment in the company were unsuccessful.

[28]On the basis of information obtained under CA 1985 s.447, the SoS instructed the Treasury Solicitor to prepare an application to wind-up Nextime in the public interest under s.124 A of the Insolvency Act 1986 (“IA 1986”). Before those instructions were carried through, a winding up order in respect of Nextime was, as I have said, made on 30 November 2000 on a creditor’s petition.

[29]The SoS maintains that there is a link between Nextime and Amba through the common involvement of Dennis, and also because the business of Nextime arose out of earlier negotiations between Rescue and FMC, called the “Nexcar” project. “Nexcar” became the trading style of Nextime. The trial Representation

The trial

[30]The trial of these proceedings commenced on 3 May 2006. The SoS was represented by Mr Nicholas Caddick, counsel.

[31]Mr Bell gave his disqualification undertaking to the SoS prior to the trial, and so he played no part in it.

[32]At the outset of the trial Mr Clarkson was represented by Mr Mark Watson-Gandy, counsel. Shortly afterwards Mr Clarkson agreed to give his disqualification undertaking to the SoS. Mr Clarkson therefore took no significant part in the trial.

[33]Adrian was not represented and did not appear at the trial. At the outset of the trial, I was given some material, including a brief written opinion of Dr R A Wall dated 25 April 2006, indicating that Adrian was not, or at least did not consider himself to be, in a mental state fit to attend the trial. I was informed by Mr Caddick that Adrian had declined to be examined by a doctor appointed by the SoS. There was no application by Adrian at any stage for an adjournment of the trial, either generally or only as regards the case against him. The trial therefore proceeded in his absence, without any appearance by him either personally or by a legal representative.

[34]Dennis appeared and represented himself at the trial. After the conclusion of the evidence, but before the end of the trial, he gave his disqualification undertaking to the SoS.

[35]Mrs Hollier appeared and represented herself throughout the trial.

[36]Jayson was represented by Mr Timothy Carlisle, counsel.

Evidence

[37]Evidence in support of the SoS was given in affirmations or affidavits of Philip Anthony Keith (“Mr Keith”), who was formerly an investigator in the Companies Investigation Branch of the Company Law and Investigations Directorate of the Department of Trade and Industry (“the DTI”); David Richard White (“Mr White”), who founded and ran React; Henry Marks (“Mr Marks”), who was employed as an executive with Rescue in January and February 2000; and Neil MacKay (“Mr MacKay”), who was Nextime’s manager at Lloyds. They all gave oral evidence at the trial.

[38]Dennis swore an affidavit, and gave oral evidence at the trial.

[39]Jayson swore four affidavits. Affidavits were sworn in support of Jayson and Adrian by Linda Veronica Letchford (“Mrs Letchford”), their mother; John Dudley Talbot (“Mr Talbot”), a solicitor , who had dealings with Rescue and who made various loans to Rescue; Michael Thomas Feeney, who established Amba Network Limited, with a view to selling Amba’s products, and from whose premises the breakdown business of Amba was conducted from March 2002 until June 2002; Lee Caroline Martin (“Ms Martin”), who worked for Jayson at CIA and was his domestic partner at the relevant time; Richard Daniel Wayman (“Mr Wayman”), who was employed as an accounts manager by CIA at the relevant time; James Crawford Robertson (“Mr Robertson”), an accountant who carried out work for Jayson, Dennis, and Mrs Hollier; Neil Francis Liversidge (“Mr Liversidge”), who had dealings with Jayson, Adrian and Dennis in his capacity as chairman of the Motorcycle Action Group (“MAG”) and chairman of MAG UK Ltd; John Howard Russell (“Mr Russell”), who is alleged by the SoS to have been used by Jayson as a nominee; Andrew Patterson Booth (“Mr Booth”), who is also alleged by the SoS to have been used by Jayson as a nominee; John Edmund Fenton, who assisted Dennis in connection with Amba’s marketing strategies; Leo Ernest Vaughan Knifton, who was chairman of Netwindfall plc, a subsidiary of which, Netwindfall Insurance Services Ltd, employed Jayson as joint managing director between January 2000 and August 2001; and Ian Geddes Mutch, who is currently President of MAG, and in 1999/2000 was running MAG with Mr Liversidge.

[40]Oral evidence was given by all those witnesses, other than Mr Talbot, Mr Feeney, and Mr Russell. With the consent of the SoS, the affidavits of Mr Talbot and Mr Feeney were admitted as hearsay evidence.

[41]The affidavit of Mr Russell was excluded from the admissible evidence pursuant to directions given before the trial by Mr Registrar Rawson and Mr Registrar Baister that, unless deponents of affidavits attended for cross examination on 21 days prior written notice before the trial, the evidence of those deponents should not be read or used in evidence without leave of the court.

[42]An affidavit was made by Adrian, and witness statements were made by Mr Clarkson and Mr Bell, but, since they did not attend the trial for cross examination, that affidavit and those witness statements were excluded from the admissible evidence for the same reason.

[43]Save in relation to Jayson, I shall not comment here on the credibility of each of the witnesses who gave evidence at the trial, but shall do so, if and where appropriate, later in this judgment in relation to specific allegations.

[44]A substantial part of the voluminous evidence in the proceedings and of the lengthy trial were devoted to the SoS’s allegations concerning Jayson. As will appear from my analysis later in this judgment, if the SoS is correct in those allegations, then Jayson has deliberately and dishonestly perjured himself in respect of virtually every major contention of fact and has based his defence on a comprehensive web of lies. It is appropriate that I should state, at this early stage of my judgment, that I have no hesitation whatsoever in rejecting that assessment of Jayson and his character. I accept that, amongst the vast amount of evidence collated and analysed on behalf of the SoS, and deployed with great skill and effect by Mr Caddick, there are matters which, on their face, appear to contradict aspects of Jayson’s defence and undermine his credibility. Nevertheless, taking account of his evidence as a whole and the manner in which he conducted himself under cross examination at the trial, I am quite satisfied that he was essentially an honest witness doing the best he could, from the available documentary material and from his memory, to recall events which took place some 6 years or more ago. The Law The 1986 Act

The Law

[45]Section 8 (1) of the 1986 Act provides that, if it appears to the SoS from investigative material that it is expedient in the public interest that a disqualification order should be made against a person who is or has been a director or shadow director of a company, he may apply to the court for such an order. “Investigative material” is defined in s.8(1A)(b)(i) of the 1986 Act to include information or documents obtained under s.447 of CA 1985. Such information and documents were obtained in 2000 in respect of Rescue, ACS, Amba plc and Nextime.

[46]Section 8(2) of the 1986 Act provides that the court may make a disqualification order against a person where, on an application under s.8, it is satisfied that his conduct in relation to the company makes him unfit to be concerned in the management of a company. Section 8(4) provides that the maximum period of disqualification under s.8 is 15 years.

[47]Section 9(1) of the 1986 Act provides that, where it falls to a court to determine whether a person’s conduct as a director of any company or companies makes him unfit to be concerned in the management of a company, the court shall have regard to the matters in Part 1 of Schedule 1 to the 1986 Act, and, where the company has become insolvent, to the matters mentioned in Part II of that Schedule.

[48]For the purposes of the present proceedings, there are two significant differences between the provisions of s.8 of the 1986 Act (disqualification after investigation of the company) and the provisions of s. 6 of the 1986 Act (disqualification of unfit directors of insolvent companies). First, s.6(1) provides that the court must make a disqualification order on an application under that section against an unfit director of a company which has become insolvent, whereas the court has a discretion under s. 8(2) whether or not to make a disqualification order against an unfit director. Second, although both s. 6(4) and s. 8(4) provide for a maximum period of disqualification of 15 years, s. 6(4) also specifies a minimum period of 2 years, whereas s. 8(4) does not specify any minimum period.

[49]I invited the parties before me, and especially counsel, to consider and advance submissions whether those two differences affect the approach of the court and, if so, as to the principles that should guide the court, on an application under s. 8 in general and the present proceedings in particular, in the determination of unfitness, the making of a disqualification order in the light of that determination, and the period of disqualification that should be set.

[50]No party has suggested any particular principles that should guide the court in relation to those matters on an application under s. 8, save that, rather to my surprise, both counsel were agreed that the same approach and principles should apply as in cases under s. 6 in respect of the determination of unfitness and fixing the period of disqualification.

[51]The approach and principles applicable to cases under s. 6 are now well established. They may be shortly stated, as follows.

[52]The question is whether, viewed cumulatively and taking into account any extenuating circumstances, the director’s conduct in relation to the company has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies: Re Grayan Building Services Ltd

[1995] Ch. 241

, 253 (Hoffman LJ).

[53]So far as incompetence is concerned, a high level of incompetence is required to satisfy s.6 of the 1986 Act. In Re Barings plc (No.5)[1999] 433 at pp. 483-484 Jonathan Parker J said:

“Where, as in the instant case, the Secretary of State’s case is based solely on allegations of incompetence (no dishonesty of any sort being alleged against any of the respondents), the burden is on the Secretary of State to satisfy the court that the conduct complained of demonstrates incompetence of a high degree. Various expressions have been used by the courts in this connection, including “total incompetence” (see Re Lo-Line Electric Motors Ltd [1998] BCLC 325 at 337, [1988] Ch 477 at 486 per Browne-Wilkinson V-C), incompetence “in a very marked degree” (see Re Sevenaoks Stationers (Retail) Ltd [1991] BCLC 325 at 337, [1991] Ch 164 at 184 per Dillon LJ) and “really gross incompetence” (see Re Dawson Print Group Ltd [1987] BCLC 601 per Hoffmann J). Whatever words one chooses to use, the substantive point is that the burden on the Secretary of State in establishing unfitness based on incompetence is a heavy one. The reason for that is the serious nature of a disqualification order, including the fact that (subject to the court giving leave under section 17 of the Act) the order will prevent the respondent being concerned in the management of any company.”

[54]On appeal from the decision of Jonathan Parker J, Morritt LJ, giving the judgment of the Court of Appeal, said at

[2000] 1 BCLC 523

, 534: “…the judge made a number of observations on the proper construction and application of the Act to which we refer, not because we disagree with the judge, but because we wish to emphasise the propositions to which he referred. … Third, where the allegation is incompetence without dishonesty it is to be demonstrated to a high degree… This follows from the nature of the penalty. Nevertheless the degree of incompetence should not be exaggerated given the ability of the court to grant leave, as envisaged by the disqualification order as defined in s.1, notwithstanding the making of such an order”.

[55]The fact that the director may be unlikely to offend again may be relevant to the length of the period of disqualification, but not to whether or not he should be disqualified: Re Landhurst Leasing plc

[1999] 1 BCLC 286

, 344h-345b.

[56]The disqualification is mandatory under s.6 in order to protect the public, raise standards and to act as a deterrent. Hoffmann LJ expressed the position as follows in Re Grayanat pp.253H-254D:

“Parliament has decided that it is occasionally necessary to disqualify a company director to encourage the others. Or as Sir Donald Nicholls V.-C. said in In re Swift 736 Ltd. [1993] B.C.L.C. 896, 899: “Those who make use of limited liability must do so with a proper sense of responsibility. The directors’ disqualification procedure is an important sanction introduced by Parliament to raise standards in this regard.”

If this should be thought too harsh a view, it must be remembered that a disqualified director can always apply for leave under section 17 and the question of whether he has shown himself unlikely to offend again will obviously be highly material to whether he is granted leave or not. It may also be relevant by way of mitigation on the length of disqualification… It follows that I agree with the approach of Vinelott J in In re Pamstock Ltd

[1994] 1 BCLC 716

when he said that it was his duty to disqualify a director whose conduct “fell short of the standard of conduct which is today expected of a director of a company which enjoys the privilege of limited liability” even though he did so with regret because, he said, at p. 737:

“The respondent seemed to me (so far as I can judge from the evidence before me) to be a man who today is capable of discharging his duties as a director honestly and diligently.”

But the court is required to disqualify a director whose conduct has made him unfit, as

the judge said:

“even though the misconduct may have occurred some years ago and even though the court may be satisfied that the respondent has since shown himself of capable of behaving responsibly.” “Those who make use of limited liability must do so with a proper sense of responsibility. The directors’ disqualification procedure is an important sanction introduced by Parliament to raise standards in this regard.” “The respondent seemed to me (so far as I can judge from the evidence before me) to be a man who today is capable of discharging his duties as a director honestly and diligently.” “even though the misconduct may have occurred some years ago and even though the court may be satisfied that the respondent has since shown himself of capable of behaving responsibly.”

[57]Lord Woolf MR summarised the policy behind the legislation as follows in Re Blackspur Group plc

[1998] 1 WLR 422

CA at p. 426:

“The purpose of the Act of 1986 is the protection of the public, by means of prohibitory remedial action, by anticipated deterrent effect on further misconduct and by encouragement of higher standards of honesty and diligence in corporate management, from those who are unfit to be concerned in the management of a company.”

[58]The relevant period of disqualification is in the discretion of the judge, to be exercised under s.6 in accordance with the relevant principles set down in Re Sevenoaks Stationers (Retail) Ltd

[1991] Ch. 164

at p. 174 E-G (Dillon LJ) (particularly serious cases: 11-15 years; serious cases which do not merit the top bracket: 6-10 years; relatively, not very serious cases: 2-5 years).

[59]Although both counsel submitted that, in fixing the period of disqualification under s. 8(4), the court should apply the principles in Sevenoaks, that does not presently seem to me to reflect the fact that, under s. 8, the court has a discretion whether or not to make a disqualification order even if unfitness has been established, and that there is no minimum period of disqualification under s.8(4).

[60]That concern can be considered further in due course. The parties are agreed that I should limit this judgment to a determination of whether or not, as against Jayson, Adrian and Mrs. Hollier, unfitness has been established and whether or not a disqualification order should in principle be made. The question of the length of any disqualification will be dealt with at a subsequent hearing in the light of my findings.

De facto director

[61]Section 22(4) of the 1986 Act provides that the expression “director” includes “any person occupying the position of director, by whatsoever name called”. It is common ground, and is now well established, that, for the purposes of the 1986 Act, “director” includes a person who acts as a director even though never validly appointed as such (commonly referred to as a “de facto” director).

[62]Section 8(1) extends, on its express wording, to a shadow director. The expression “shadow director” is defined in s.22(5) of the 1986 Act, as in s.251 of IA 1986, as:

“a person in accordance with whose directions or instructions the directors of the company are accustomed to act (but so that a person is not deemed a shadow director by reason only that the directors act on advice given by him in a professional capacity).”

[63]Mr Caddick confirmed early in the trial that the SoS’s case against Jayson, Adrian and Mrs Hollier does not rest on any allegation that they were shadow directors of Amba or Nextime.

[64]The authorities are not entirely consistent in defining a de facto director. The critical issue, and the jurisprudential difficulty, is to distinguish a de facto director from someone who acts for, or otherwise in the interests of, a company but is never more than, for example, a mere agent, employee or adviser.

[65]In Re Hydrodam (Corby Ltd)

[1994] 2 BCLC 180

, which concerned proceedings for wrongful trading under s. 214 of IA 1986, Millett J described a de facto director, and distinguished such a director from a shadow director, as follows at p.183:

“A de facto director is a person who assumes to act as a director. He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such. To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director. It is not sufficient to show that he was concerned in the management of the company’s affairs or undertook tasks in relation to its business which could properly be performed by a manager below board level. A de facto director, I repeat, is one who claims to act and purports to act as a director, although not validly appointed as such. A shadow director, by contrast, does not claim or purport to act as a director. On the contrary, he claims not to be a director. He lurks in the shadows, sheltering behind others who, he claims, are the only directors of the company to the exclusion of himself. He is not held out as a director by the company. To establish that a defendant is a shadow director of a company it is necessary to allege and prove: (1) who are the directors of the company, whether de facto or de jure; (2), that the defendant directed those directors how to act in relation to the company or that he was one of the persons who did so; (3) that those directors acted in accordance with such directions; and (4) that they were accustomed so to act. What is needed is first, a board of directors claiming and purporting to act as such; and secondly, a pattern of behaviour in which the board did not exercise any discretion or judgment of its own, but acted in accordance with the directions of others.”

[66]There are two difficulties with that description of a de facto director. First, it seems wrong in principle that it is a necessary characteristic of a de facto director that he or she “is held out as a director by the company”. Such “holding out” may be important evidence in support of the conclusion that a person has in fact acted a director, but it would appear to be far too narrow a test to embrace all those who have discharged functions normally and most appropriately carried out by a director: see Jacob J in SSTI v Tjolle

[1998] BCC 282

, 291 to the same effect. Second, Millett J’s statements that the functions or actions of a de facto director must be those which can properly be discharged only by a director and must not merely be those which can properly be performed by a manager below board level do not help identify what such functions or actions may be.

[67]In Re Richborough Furniture Ltd

[1996] BCC 155

, which were disqualification proceedings under s.6 of the 1986 Act, Mr Timothy Lloyd Q.C., sitting as a deputy High Court Judge, said (at p.168) that like Warner J in ReMoorgate Metals Ltd

[1995] BCC 143

he did not believe that the statement of Millett J in Hydrodam was intended to be an exhaustive statement of the test. Mr Lloyd expressed the test in the following way at p.170:

“It seems to me that for someone to be made liable to disqualification under s.6 as a de facto director, the court would have to have clear evidence that he had been either the sole person directing the affairs of the company (or acting with others all equally lacking in a valid appointment, as in Morris v Kanssen) or, if there were others who were true directors, that he was acting on an equal footing with the others in directing the affairs of the company. It also seems to me that, if it is unclear whether the acts of the person in question are referable to an assumed directorship, or to some other capacity such as shareholder or, as here, consultant, the person in question must be entitled to the benefit of the doubt.”

[68]I respectfully agree with the emphasis in that passage on the necessity for the de facto director to participate in directing the affairs of the company. Mr Caddick, for the SoS, expressed caution and reservation on the need to show that the de facto director was acting “on an equal footing” with any de jure directors. He observed that directors have different levels of involvement and different areas of responsibility. He further emphasised that, “in a case where there is a person who is primus inter pares, Parliament cannot have intended that only the dominant director should be liable for disqualification” (his closing written submissions para 10). It seems to me, however, that Mr Lloyd was rightly concentrating on the distinguishing feature that directors have a joint responsibility to the company and, unlike mere employees or agents or advisers, are not accountable to a line manager or other individual.

[69]That was also the interpretation of Lloyd J’s judgment by Mr Anthony Mann Q.C, sitting as a deputy High Court Judge, in SoS v Ashby (No. 1915 of 1992) (unreported), in which the deputy

Judge said:

“I very much doubt that Mr Lloyd Q.C. meant that in all respects a de facto director had to be on an exactly equal footing to all the other directors. For example, I would expect a de facto finance director to defer to the properly appointed marketing director in matters of marketing in the same way as a de jure appointed finance director would. I think that all Mr Lloyd was trying to do was to encapsulate the notion that, in investigating the qualities of the acts performed by the person whose status is in question, one is looking for someone who is essentially operating at the same level as the properly appointed directors, that is to say they are not in reality subordinate to them at all times.”

[70]This seems to have been the same interpretation placed on Mr Lloyd’s “equal footing” test by His Honour Judge Cooke in Secretary of State for Trade and Industry v Elms (16 January 1997, unreported). Judge Cooke said:

“It is not I think in any way a question of equality of power but equality of ability to participate in the notional board room. Is he somebody who is simply advising and, as it were, withdrawing having advised, or somebody who joins the other directors, de facto or de jure, in decisions which affect the future of the company?”

[71]In Secretary of State for Trade and Industry v Tjolle

[1998] BCC 282

, which was also a case under s.6 of the 1986 Act, Jacob J expressed the view that it may be difficult to postulate any one decisive test. He said, at p.290:

“I think what is involved is very much a question of degree. The court takes into account all the relevant factors. Those factors include at least whether or not there was a holding out by the company of the individual as a director, whether the individual used the title, whether the individual had proper information (e.g. management accounts) on which to base decisions, and whether the individual has to make major decisions and so on. Taking all these factors into account, one asks ‘was this individual part of the corporate governing structure?’, answering it as a kind of jury question. In deciding this, one bears very much in mind why one is asking the question….. There would be no justification for the law making a person liable to misfeasance or disqualification proceedings unless they were truly in a position to exercise the powers and discharge the functions of a director. Otherwise they would be made liable for events over which they had no real control, either in fact or law.”

[72]That passage is helpful in identifying what, I respectfully agree with Jacob J, is the critical issue, namely whether the individual is part of “the corporate governing structure”. That isolates in a clear and simple fashion the distinction between someone who participates, or has the right to participate, in collective decision making on corporate policy and strategy and its implementation, on the one hand, and others who may advise or act on behalf of, or otherwise for the benefit of, the company, but do not participate in decision making as part of the governance of the company.

[73]That is not to say that an individual cannot be a de facto director, for the purposes of the 1986 Act, unless he or she participates in such decision making over the whole field of the company’s activities: compare Morritt LJ’s observation to similar effect in relation to shadow directors at para [35] of Secretary of State for Trade and Industry v Deverell

[2001] Ch. 340

at p.354. A person may be a de facto director even though that person does not have day to day control over the company’s affairs, and even though he or she acts as a director only in relation to part of the company’s activities.

[74]In Tjolle Jacob J appears to have considered that a right of access to important company information, such as its financial state, is an essential pre-requisite to a person being a de facto director. He said at p.290:

“In this regard I think it very important to remember that an alleged de facto director can only be such by reason of the factual position. De jure directors have both common law and statutory powers and duties. In particular they are entitled to be at the heart of the company, and to have proper details of its financial position. They cannot be heard to say: ‘I had no way of knowing what the position was’. But an alleged de facto director is in a different position. De facto they may have had no knowledge and no right or means to have that knowledge. This is important in this case, because the Secretary of State’s case in part relies on what he alleges Mrs Kenning ought to have known. Mr Davies contends that one is either a director or not. He says there are no different rules for de facto directors as opposed to de jure directors. I think that must be right, but I think it follows that someone who has no, or only peripheral knowledge of matters of vital company concern (e.g. financial state) and has no right, legal or de facto, to access to such matters is not to be regarded by the law as in substance a director.”

[75]I respectfully cannot agree that a “right, legal or de facto, to access to [matters of vital company concern]” is in all cases a necessary condition of a de facto directorship. On the actual facts of Tjolle the person alleged to have been a de facto director was physically unable to access all the financial records of the company, which were kept “under lock and key”: p.294. While I can quite see that, as in Tjolle, a deliberate policy of preventing a person from gaining access to relevant information is likely to preclude a finding that such person was a de facto director, there may be circumstances in which it would be open to the court to find that a person who participated in corporate decisions on policy and strategy and in the implementation of such decisions was a de facto director, notwithstanding that he or she had no right to relevant information. Unlike Jacob J, I can see no reason why, for example, in appropriate circumstances, it would not be consistent with the policy and the purpose of the legislation for a person to be capable of being disqualified as a director if that person, irrespective of any right to access relevant information, has in fact, alone or with others, committed the company to an unwise or improper policy or course of action, but never made any attempt or had any desire first to acquire knowledge of relevant information. Committing the company to an unwise or improper course without seeking to establish the relevant facts seems to me no less culpable, and within the policy of the 1986 Act, as someone who commits the company to such a course despite knowledge of all relevant facts, or the right of access to such facts.

[76]Jacob J’s approach in Tjolle of identifying, as the central issue, whether the defendant was part of the corporate governing structure, and rejecting any one decisive test in relation to that issue, and describing what is involved as very much a question of degree in relation to which the court takes into account all relevant factors, was endorsed by Robert Walker LJ in Re Kaytech International plc

[1999] BCC 390

, 402. The other members of the Court of Appeal agreed with him. He went on to observe at p.402, by way of commentary on the observation of Millett LJ in Hydrodam that de facto and shadow directorships do not overlap but are alternatives and in most cases are mutually exclusive, that the two concepts do nonetheless: “have at least this much in common, that an individual who was not a de jure director is alleged to have exercised real influence (otherwise than as a professional adviser) in the corporate governance of a company. Sometimes that influence may be concealed and sometimes it maybe open. Sometimes it may be something of a mixture, as the facts of the present case show”.

[77]In Deverell, a case concerning shadow directors, Morrit LJ, with whom the other members of the Court of Appeal agreed, employed similar language when, at para [35], he stated that the purpose of the 1986 Act is “to identify those, other than professional advisors, with real influence in the corporate affairs of the company.” This led Mr Caddick to submit, in his closing written submissions, that the test is whether, in all the circumstances, it can properly be said that the defendant has exercised “real influence” over the corporate governance of the company in question. In my judgment, it is plain that neither Jacob J in Tjolle nor Morritt LJ in Deverell intended any such test. It is obvious that a person may have real influence over the affairs of a company without ever assuming the role or functions of a director. Such a test would not distinguish between those who are part of the corporate governing structure, that is to say who participate in making decisions, and those, however influential, who give advice to others, but do not make or implement decisions as part of the corporate governance structure. As Mr Carlisle, for Jayson, rightly observed, a de facto director, by virtue of being such, exercises real influence in the corporate affairs of the company, but the exercise, or ability to exercise, such influence is not restricted to de facto directors.

[78]It was common ground before me that the issue whether a person has so acted as to become a de facto director is to be judged objectively: compare proposition (3) at para [35] in Deverell. The issue must be determined in the light of all relevant facts. Mr Carlisle, nevertheless, criticised the statement of Jonathan Parker J in Secretary of State for Trade and Industry v Jones

[1999] BCC 336

at p.349 that:

“… the correct approach in deciding whether or not a respondent is a de facto director is to look at his conduct as found by the court in the round and, so approaching it, to reach a conclusion as to whether or not the Respondent in fact assumed the role of a director of the company, notwithstanding that he had not been formally appointed as such.”

That approach, however, seems to me to be perfectly orthodox in resolving the critical issue whether the defendant was part of the corporate governing structure.

[79]Mr Caddick rightly observed that a person may properly be found to have been a de facto director even though there is no direct evidence of the defendant’s actual participation in an occasion of collective decision making, such as a board meeting or indeed any other meeting of all or some of the other directors. The question in every case is whether it is proper to conclude, from an examination of all the facts, that the defendant did in fact participate in decision making about strategic or policy issues, including their implementation, not merely as an agent or employee or adviser, but as part of the corporate governing structure.

[80]Each case turns upon its own special facts. In different cases, the same facts may pull in different directions. The fact that the defendant is a relative of a de jure director may enable the court to conclude, as did Lightman J in proceedings under s.6 of the 1986 Act in Re Red Label Fashions Ltd

[1999] BCC 30

, in relation to the wife of the de jure director, that the defendant acted as a dutiful relative rather than as a director. On the other hand, it is common ground before me that a person who participates in the affairs of a company out of family loyalty may, in appropriate circumstances, act as a de facto director. Similarly, the fact that the defendant has invested financially in a company, as a shareholder or otherwise, and was concerned to protect that investment, could either support or tend to negative the inference that the defendant’s conduct in the company’s affairs was that of a de facto director. It is, for example, commonplace for investors to seek information about, and often to influence, the strategy of a company, without any intention or consequence of assuming the role of a director. On the other hand, as Jonathan Parker J observed in Jones at pp 349- 350, if a substantial shareholder in a small company, such as a quasi-partnership company, takes an active part in running the affairs of the company in order to protect his investment, it raises the very question whether in doing so he may not be constituting himself a de facto director of the company.

[81]On the basis of the analysis above, I would summarise as follows the principles to be applied in determining in proceedings under the 1986 Act whether the defendant was a de facto director.(1) The touchstone is whether the defendant was part of the corporate governing structure.

(2) Inherent in that touchstone is the distinction between someone who participates, or has the right to participate, in collective decision making on corporate policy and strategy and its implementation, on the one hand, and others who may advise or act on behalf of, or otherwise for the benefit of, the company, but do not participate in decision making as part of the corporate governance of the company. Accordingly, the test is not satisfied by someone who was at all times and in all material decisions subordinate to the de jure directors.

(3) The defendant may have been a de facto director even though he or she did not have day to day control of the company’s affairs, and even though he or she was only involved in part of the company’s activities

(4) The issue is to be determined objectively on the basis of all relevant facts. Whether the defendant was held out by the company, or claimed or purported, to be a director, and whether the defendant had access or the ability to obtain access to relevant company information is likely to be highly relevant and may be decisive. Factors such as a family relationship with other admitted directors and the defendant’s financial interest in the company may also be relevant, sometimes supporting and sometimes negating the allegation that the defendant was a de facto director.

(5) De facto directorships and shadow directorships are alternatives, although there may be cases, particularly where the defendant’s influence in the corporate governance was partly concealed and partly open, where it may not be entirely straightforward which of the two descriptions is most apposite.

The burden and standard of proof

[82]The burden of proving the matters necessary to obtain a disqualification order under the 1986 Act lies on the SoS. The standard of proof is the ordinary civil standard of balance of probabilities.

[83]A disqualification order carries significant consequences for the defendant, not only in respect of the business reputation of the director but also as a serious interference with the freedom and ability of the director to pursue a business career. Further, the allegations necessary to establish unfitness are lack of probity or a high level of incompetence. The cogency of the evidence required to discharge the burden of proof to the requisite standard must be such as reflects the seriousness of the allegations and of the consequences: Re H

[1996] AC 563

, 586-587 (Lord Nicholls), and Jones at pp. 339-340 citing and applying Laddie J in Re Living Images Ltd

[1996] BCC 112

and 116. Jayson Amba Was Jayson an investor in Amba?

Jayson

[84]Jayson’s case is that he made no financial investment in any of the Amba companies, and was not interested in the shares of those companies, and never received or had any expectation of receiving any financial gain from those companies. The essence of his defence to the allegations against him in these proceedings is that he was concerned only to provide, as a son, support and assistance to his father, Dennis, and that he did no more than any dutiful son with business experience and facilities might have been expected to do.

[85]The SoS rejects outright that explanation and account of Jayson’s role. The SoS maintains that Jayson was effectively an equal owner of Amba with Mr Clarkson and Dennis. The SoS claims that Jayson’s shareholding in Rescue was held in the name of his nominee, Mr Blundell, and that he was a one third beneficial owner of the issued shares in ACS and Amba plc, which remained at all times in the name of the original subscribers, Mr Reynolds and Mr Lewington of Shoosmiths. The SoS maintains that Jayson’s beneficial interest in the Amba companies’ shares was the reason for Jayson’s conduct in the affairs of, and on behalf of, Amba, which was the conduct of a de facto director. The SoS claims that it was only after Mr Cox produced his reports on Amba in December 1999 and January 2000, highlighting Amba’s parlous financial state, that Jayson sought to distance himself from the Amba companies. If the SoS is correct on those fundamental assertions, Jayson’s defence will have been based upon a wholesale tissue of lies about the real nature of his interest in the Amba companies and the purpose of his conduct in relation to them.

[86]On the other hand, Jayson’s case (that he only ever sought to provide support and assistance out of a sense of duty and affection as Dennis’s son and that he never intended to become and never acted as a director) would receive significant reinforcement if the SoS fails to establish that Jayson had any beneficial interest in any of the Amba companies or that Jayson gained or stood to gain any financial return from them,

[87]Neither the SoS nor Jayson adduced any evidence of Mr Blundell. Hearsay evidence of Mr Blundell’s views on the SoS’s allegation that he was Jayson’s nominee in respect of his shares in Rescue is contained in the following passage in paragraph 61 of the 3rd affidavit of Jayson sworn on 4 October 2004:

“I have contacted Mr Blundell whom will gladly confirm that he was not holding any shares for me. It is clear that the shareholding structure was in a comprehensive mess, and this is just another example of why I refused to become involved with this shambles.”

[88]Direct evidence on the SoS’s case that Mr Blundell held his shares in Rescue as nominee for Jayson was given by Jayson himself and Dennis. They both denied, in cross examination by Mr Caddick, that Mr Blundell was acting as Jayson’s nominee. Dennis gave evidence as to the circumstances in which Mr Blundell acquired his shareholding in Rescue. Dennis said that he offered Mr Blundell (effectively by way of gift) the shareholding in Rescue in the belief and hope that Mr Blundell would work for Amba. He explained (transcript 18.5.06 pp. 91-95) that he had known Mr Blundell since he was a boy, knew him “almost like a son”, and regarded him as extremely intelligent. He said that, even when Mr Blundell had been at university, Mr Blundell did part-time jobs for him. Dennis said that he felt that Mr Blundell would have been an asset. He said that, in the initial stages of setting up Amba, Mr Blundell spent many hours going through matters with him. He said that Mr Blundell then decided not to join him in Amba, but he, Dennis, never changed the shareholding due to his “lapseness”. Dennis acknowledged that, at the time, Mr Blundell was working for Jayson at CIA and indeed continued to work for Jayson at CIA subsequently, but he rejected the inference that Mr Blundell was a nominee for Jayson on the ground that:

“the simple fact is that Elliot Blundell is too strong a person to be a nominee for anyone and I think his working record from this date to date would show that”

. In answer to a question by Mr Caddick as to why Dennis had not adduced evidence from Mr Blundell, Dennis explained that, following criminal proceedings against Dennis in relation to the Amba companies, he had thought that “it was a nightmare that was going to go away” and that, until 2 weeks prior to the trial in these proceedings, he had never really looked at the bundles and so had not called any witnesses. He said that he was sure that Mr Blundell would only be too happy to come down and explain the situation (transcript 18.5.06 pp.95-96).

[89]Mr Robertson, who set up Rescue, gave oral evidence that he was unaware of any intention of Jayson to take an interest in the shares of that company.

[90]The only shares issued in Amba plc and ACS were the subscriber shares issued to Mr Lewington and Mr Reynolds. Neither the SoS nor Jayson adduced any evidence from them. It was Jayson’s sworn written evidence and his oral evidence at the trial that he never had any beneficial interest in those shares, and he never decided to be a shareholder of those companies.

[91]The SoS’s case that Jayson was at all relevant times intended to be, and was in fact, a beneficial owner of one third of the issued shares in Rescue, Amba plc and ACS, rests on inference from a wide-range of matters. They include, in particular, the following.

[92]Prior to the commencement of trading by Rescue, Jayson, together with Adrian and Dennis, visited Independent Recovery Services Limited (“IRS”) to consider whether to make an investment in that company. IRS carried on a vehicle recovery business. IRS started trading in November 1995, but by 1998 needed a cash injection. The SoS submits that Jayson seriously considered making a substantial investment in that business together with Dennis and Mr Clarkson. In the event, no such investment ever took place. The SoS contends, however, that the similarity of IRS’s business plan to Amba’s business, and Jayson’s interest in making an investment in IRS, provide a revealing background to the issue of Jayson’s true business and financial interest in Amba.

[93]The SoS relies principally, in this context, on what purports to be a report by IRS’s chairman attached to a notice dated 13 January 1999 of a meeting of the creditors of IRS on 10 February 1999 to consider whether to place IRS in voluntary liquidation, and also on the contents of a Shoosmiths’ attendance note of a meeting with Jayson on the morning of 28 June 1999. That note recorded (purportedly on the basis of what Jayson told Mr Reynolds in the meeting) that Mr Clarkson had introduced IRS to Jayson, and that it was proposed that Jayson “sell policies for this through the broker’s market and put in accident management services on the back of it”. The note further recorded that, in return for an investment of £500,000 in IRS, “[Jayson] and the others would receive 60% of the shares”. The attendance note went on to record that none of that took place in fact, and no shares were issued or directorships given.

[94]Jayson did not deal at all with IRS in his affidavit evidence. In cross examination, he explained that omission on the ground that he did not think that IRS was relevant since, as indeed is not disputed, he had decided not to make any investment in that company. Jayson accepted, in cross examination by Mr Caddick, that he was interested in exploring involvement in the market in which IRS operated since IRS had a reasonably large network of vehicle recovery operators, all of which had insurance. Jayson denied in his oral evidence that there was ever any understanding or agreement that he would acquire with others 60% of the shares in IRS, or that he ever told that to Shoosmiths.

[95]The SoS claims that the manner in which Jayson has dealt with the issue of IRS, and in particular his failure to do so in his voluntary statement and in his affidavit evidence, undermines Jayson’s credibility. I accept Jayson’s explanation of his attitude to the issue of IRS prior to the trial, and I do not consider that any adverse inference can fairly be drawn against him in relation to it.

[96]Neither the person who wrote the IRS chairman’s report, on which the SoS relies, nor Mr Reynolds, who presumably wrote the attendance note of the meeting with Jayson on 28 June 1999, has given evidence. Further, one significant difference between Amba’s business, on the one hand, and the proposals for Jayson’s involvement in IRS recorded in Shoosmiths’ attendance note, on the other hand, is that the attendance note recorded the proposal was that CIA would sell memberships of IRS. In all the circumstances, including the direct oral evidence of Jayson, I do not consider that any useful inference can be drawn from Jayson’s interest in IRS as to whether or not the beneficial interest in one third of the issued shares in the Amba companies was vested in Jayson.

[97]The SoS relies heavily on Jayson’s involvement with Shoosmiths in connection with the incorporation of ACS and Amba plc. In the context of Jayson’s alleged beneficial interest in the Amba companies, the SoS relies particularly on Shoosmiths’ documents indicating that Jayson, Dennis and Mr Clarkson were to be equal one third shareholders in Amba plc, which was intended to be the 100 per cent owner of ACS and Rescue. Jayson denied, in his sworn written evidence and in cross examination, that he ever told Shoosmiths or otherwise acknowledged that he was to own one third of the Amba companies. He said that was no more than a proposal of Dennis and Mr Clarkson, which he never accepted.

[98]I am satisfied from Shoosmiths’ documentation, including attendance notes and a draft shareholders’ agreement relating to Amba plc prepared by Shoosmiths, that Shoosmiths believed that Jayson was to be a one third owner of the Amba companies, through Amba plc as the parent company. I am not satisfied, however, in the light of Jayson’s oral evidence and the absence of any evidence from Mr Reynolds or any other relevant person at Shoosmiths at the time, that Jayson ever told anyone at Shoosmiths that he had agreed to have any beneficial interest in Amba.

[99]The SoS further relies on a Lloyds’ Business Customer Review of Rescue dated 30 October 1999, prepared by Mr Paul Summerton, and a Lloyds’ Customer Contact Report dated 29 November 1999, prepared by Mr Chris Buckle. Those reports record Lloyds’ belief that Jayson was a shareholder of Rescue in consequence of a payment of £127,000 for share capital. I am satisfied from the evidence given at the trial that Jayson did not give any such information to Lloyds, and was at all times unaware that such information had been given. I accept Jayson’s oral evidence that he never had any meeting with any bank about Amba. The information recorded in Lloyds’ records most likely came from Dennis or Mr Clarkson. It is common ground, in any event, that the information recorded in the Business Customer Review and the Customer Contact Report in relation to the shareholders and paid up share capital of Rescue is incorrect. They incorrectly record that D. Oliver, John Talbot and Simpson Miller were shareholders, which they were not; and they also incorrectly record that Mr Clarkson, Dennis and Jayson paid £127,000 each in respect of share capital, which they did not. In all those circumstances, I do not consider that Lloyds’ records provide reliable, that is to say cogent, evidence that Jayson was beneficially interested in the Amba companies’ shares.

[100]The SoS claims that Jayson has a history of operating companies through nominees. Reliance is placed, in this context, on a fax from Mr Reynolds of Shoosmiths to Jayson dated 15 November 1999 in which Mr Reynolds said: “with regard to the potential for Rodney Letchford to hold shares on your behalf, I am investigating the consequences of a nominee shareholder in more detail. Certainly with public companies there are requirements on disclosure of interests in shares where holdings exceed certain levels where families are involved”.

[101]Rodney Letchford was Jayson’s step-father. Although there is no evidence that Rodney Letchford ever in fact held any shares in any company as nominee for Jayson, the SoS contends that it is clear from that fax that Jayson was willing to consider and to promote the holding of his interests by nominees.

[102]Jayson’s evidence was that Shoosmiths were indeed seeking to advise him at that time on tax efficient structures. Jayson’s evidence was that he did not initiate any such advice, and in any event no such nomineeship was ever implemented. In the light of Jayson’s direct oral evidence, and the absence of any evidence from Mr Reynolds, I do not consider that the faxed letter of 15 November 1999 is cogent evidence of a practice generally by Jayson to operate through nominees, or of his decision to do so in the case of Rescue through Mr Blundell.

[103]The SoS contends that Jayson has used Mr Andrew Booth and Bentley Group Limited (“Bentley”) as his nominees. The SoS’s case is that Bentley, which Mr Booth claims he established, and which purported to acquire Shakespeare Underwriting Ltd (“Shakespeare”) and CIA from Jayson in May and December 2002 respectively, and CIA Insurance Services Ltd (“CIAL”), which was set up by Mr Booth and through which Bentley operated the business of CIA, were mere ciphers or creatures of Jayson designed to hide his continuing ownership and control of CIA and Shakespeare. The SoS claims that Jayson used Mr Booth and Bentley in that way in order to shield Jayson’s business from the adverse reputational and business consequences of the DTI’s inquiry in Amba.

[104]I have considerable sympathy with the SoS’s criticism of the way in which this allegation has been dealt with by Jayson and Mr Booth, which has inevitably fuelled the SoS’s suspicions. Mr Keith clearly alleged in his 2nd affirmation of 7 April 2004 that Jayson controls companies through nominee directors and shareholdings, including, in particular, Mr Booth and Bentley; and he expressly mentioned in that context Shakespeare, CIA and CIAL, and noted the absence of any documents to support Jayson’s claim that he had sold his interest in Shakespeare. None of those allegations was answered with any particularity by Jayson in his affidavits.

[105]It was only at the trial that Mr Booth and Jayson gave detailed evidence as to the incorporation and business of Bentley and CIAL, and the sale of Shakespeare and CIA to Bentley. Further, it was only during the course of the trial that Mr Booth and Jayson produced documents relating to the sale of Shakespeare and CIA to Bentley in May and December 2002 respectively, and the subsequent sale of CIAL to LEM Ltd (“LEM”) in January 2006. The documents produced included evidence of a debenture over Bentley’s assets dated 26 January 2006 in favour of Jayson (“the Debenture”) and personal guarantees by Mr Booth to Jayson in respect of the outstanding purchase price for the sales of Shakespeare and CIA.

[106]Mr Caddick, in cross examination of Mr Booth and Jayson and in his submissions, skilfully highlighted various features of the evidence, including that documentation, apparently casting some doubt on the reality of those sales to Bentley and supporting the SoS’s case that, notwithstanding those apparent sales, Jayson had a continuing connection with CIA, Shakespeare and CIAL through Mr Booth and Bentley. Those matters included the circumstances in which CIAL was incorporated, confusion over the ownership of CIAL and evidence about CIAL’s trading activities prior to the transfer of CIA to Bentley in December 2002, the carrying out of consultancy work for CIA by Jayson after its sale, the non-payment of any, or at any event the overwhelming majority, of the stated consideration for the sale of Shakespeare and CIA, the absence of any reference to the consideration or deferred consideration for the sale of those businesses in the accounts of Bentley or CIAL in evidence, and the location of the registered office from time to time of Bentley, CIAL and Shakespeare at addresses with a connection to Jayson, and non-registration of the Debenture. It also appears that Jayson and Mr Booth have been involved together in a property business.

[107]Notwithstanding all those matters, the SoS has failed to establish, to the civil standard of proof, that Mr Booth or Bentley have acted as nominees of Jayson in respect of any business carried on by CIAL, or, following Jayson’s sales of CIA and Shakespeare, in respect of CIAL, Shakespeare or Bentley or any business or transactions effected by any of them. In the light of the actual documents produced in the course of the trial that I have mentioned, and the direct oral evidence of Jayson and Mr Booth, and in the absence of any direct contradictory evidence from any other person in relation to those transactions, to those businesses and to the accounts of the relevant companies, I am satisfied that those documents produced by Jayson and Mr Booth reflect genuine transactions. I accept the explanations and generally the evidence of Jayson and Mr Booth as to the reasons for the various transactions and the terms of those transactions, including the amount and method of payment of the purchase price. In so far as there remains inconsistency in some of the evidence and a lack of clarity about certain aspects, including the incorporation and conduct of the business of CIAL prior to the sale of CIA to Bentley in December 2002, I consider that this is due to the passage of time that has elapsed since the transactions in question. Further, in the absence of any expert accounting evidence, and in particular evidence from the accountant who drew up the relevant Bentley and CIAL accounts, I do not consider that it is safe or wise to draw from the accounts in evidence any adverse inferences against Jayson sufficient to undermine his evidence. Further, in my judgment, the consultancy services performed by Jayson for CIAL and Shakespeare, after he sold CIA and Shakespeare to Bentley, were genuine services provided for good business reasons, and were not part of sham arrangements for which the SoS contends.

[108]Finally, on this aspect, it was not suggested on behalf of the SoS that the sale of CIAL to LEM was a sham or otherwise not genuine, notwithstanding that the directors of LEM include Ms Martin and Mr Blundell, who were formerly Jayson’s employees at CIA.

[109]The SoS further contends that Mr Robertson held his 49 per cent shareholding in Shakespeare Boxing Promotions Limited (“Shakespeare”) as nominee for Jayson. In support that that claim, the SoS relies particularly on certain press articles and Jayson’s acknowledged role as a boxing promoter. Mr Robertson and Jayson gave direct oral evidence to the contrary. I accept the evidence of Jayson and Mr Robertson on this point.

[110]The SoS also claims that Mr Russell and Mr Marcus Stobart acted as nominees of Jayson, but those allegations were not pursued with any vigour or detail in cross examination or in Mr Caddick’s submissions. They were not, in my judgment, established to the requisite standard of proof.

[111]So far as concerns Mr Blundell, Mr Caddick emphasised that he was an employee of Jayson at CIA, his address was stated in Companies House documents to be Sherbourne Hill House, which was Dennis’s address, Dennis effectively gifted the shares in Rescue to Mr Blundell, Mr Blundell was not involved in the discussions with Shoosmiths concerning Amba plc, and the information recorded in Shoosmiths’ attendance notes that Jayson, Mr Clarkson and Dennis were to be equal one third shareholders in Amba plc, which was to be the parent company of Rescue, was consistent with Mr Blundell being Jayson’s nominee.

[112]Notwithstanding the skilful and attractive way in which those points were made, I accept the evidence and explanations of Jayson and Dennis in relation to Mr Blundell’s shareholding in Rescue.

[113]As I have said, the SoS’s case is that it was only in January 2000, when Jayson saw Mr Cox’s second report, that Jayson decided to distance himself from Amba. It is clear, however, that Jayson knew of the £50,000 minimum capital requirements for Amba plc (pursuant to CA 1985 ss.101, 117-118) well before then, and I am quite satisfied that he never intended to put money into Amba to meet those capital requirements and to be a shareholder.

[114]For all those reasons, in the light of all the relevant evidence, and particularly the direct evidence of Jayson and Dennis mentioned in paragraphs 88 and 90 above, the SoS has failed to establish to the requisite standard of proof that Jayson has ever had any beneficial interest in any of the issued shares of Rescue, ACS or Amba plc.

[115]For the sake of completeness, in so far as the SoS relies upon the conduct of Jayson in the affairs of any of those companies, or upon the conduct or perception of any of the employees of those companies or other third parties dealing with them, as evidence in support of the existence of any such beneficial interest of Jayson, I do not consider that either on their own or together they provide cogent proof, on a balance of probabilities, of any such beneficial interest. I address those matters in the next part of this judgment in the context of Jayson’s conduct as a de facto director.

Did Jayson act as a de facto director of Amba?

[116]Irrespective of any beneficial interest of Jayson in the issued shares of the Amba companies, the SoS relies upon a wide range of facts and matters in support of the SoS’s case that Jayson was, until about January 2000, a de facto director of those companies.

[117]The SoS accepts that it was never intended that Jayson would be involved in the day to day management of the Amba companies, but submits that he nevertheless exercised a very considerable degree of influence over their affairs.

[118]The SoS claims that Jayson gave instructions to Shoosmiths for the incorporation of ACS and Amba plc. Shoosmiths’ instructions were that Amba plc was to become the parent company of Rescue and ACS. Shoosmiths in due course caused Amba plc and ACS to be incorporated, and Shoosmiths personnel were the subscriber shareholders and remained the only registered shareholders throughout. In support of the allegation that it was Jayson who gave the instructions, the SoS relies upon the contents of Shoosmiths’ notes of two meetings with Jayson on 28 June 1999 (the first on his own and the second with Mr Clarkson), and written communications from Shoosmiths to Jayson regarding Amba, including client care correspondence, requests for instructions, and invoices for Amba work. The SoS also relies on evidence that Jayson gave instructions to Shoosmiths regarding commercial van insurance in connection with Amba.

[119]Jayson’s case, in relation to Shoosmiths, is that the decision to incorporate Amba plc and ACS was not his decision, and that his intention was to do no more than effect an introduction of Dennis and Mr Clarkson to Shoosmiths.

[120]The SoS has not, in my judgment, made out its case that Jayson acted as a de facto director in relation to the incorporation of Amba plc and ACS, and in his communications and contact with Shoosmiths. I do not accept the SoS’s claim that the Shoosmiths documents, and Jayson’s explanation of them in his first affidavit, reflect very badly on Jayson’s credibility. No one from Shoosmiths gave evidence at the trial. I am not satisfied that Shoosmiths’ file in evidence is in all respects complete. Nor is it entirely clear precisely how relevant events at Shoosmiths developed and who, at material meetings, was present and said what, and to whom. Mr Caddick himself appeared to accept that at least one of the Shoosmiths’ attendance notes is not entirely clear. There was no direct evidence to challenge Jayson’s written and oral evidence as to the circumstances in which he became involved with Shoosmiths in connection with the Amba companies. I can see no cogent basis for rejecting Jayson’s evidence that he never signed and returned the client care letter (a draft or copy of which is in evidence) which was addressed by Shoosmiths to Dennis, Mr Clarkson and Jayson. There is no signed copy of the letter, or any reference to a signed copy, in the file in evidence. Indeed, it is possible that, if such a client care letter was sent to Jayson, he never received it. I accept Jayson’s evidence as to the arrangements at CIA for the receipt of correspondence concerning the Amba companies: that is to say, anything marked in connection with Amba would go straight into a tray for Dennis to collect when he came to the office. It is, therefore, uncertain whether Jayson ever saw all the correspondence from Shoosmiths which is in evidence and is addressed to him.

[121]Further, it is quite clear that Shoosmiths were aware that it was not the intention that Jayson should be concerned with the day to day management of the Amba companies or be a director of them. The draft shareholders’ agreement that was prepared by Shoosmiths in relation to Amba plc, and was sent by Mr Reynolds to Jayson under cover of a letter dated 25 August 1999, makes it clear (from the particulars in Schedule II) that Shoosmiths’ understanding was that Jayson was not to be a director (cf. the signatories and Schedule I which show that they thought he was to be a shareholder).

[122]Further, as Jayson and Mr Carlisle observed, there is no evidence of any written communication from Jayson to Shoosmiths in respect of the Amba companies whether in reply to letters to him from Shoosmiths or otherwise. On the contrary, I accept Jayson’s evidence that he was keen to see a change of retainer, on behalf of the Amba companies, from Shoosmiths to other solicitors, Keeler & Co (“Keelers”), specifically because he was very frustrated by the extent of which Shoosmiths sought to involve him in matters concerning those companies.

[123]The SoS claims that Jayson also acted as a director of Amba in his dealings with Keelers, and in particular Mr Michael Keeler of that firm (subsequently of Moore & Tibbits). The SoS particularly relies on evidence that Jayson recruited Mr Keeler to be the company secretary of ACS and of Amba plc and that the setting up of Amba Recovery Limited was charged to CIA’s account, and on documentation from Mr Keeler’s file concerning the possibility of Jayson becoming a director of Amba plc, and on correspondence sent or copied by Keelers to Jayson. The SoS places particular weight on evidence that Jayson accepted he had the responsibility and authority to ask Shoosmiths to release the company books of ACS and Amba plc to Mr Keeler.

[124]The SoS has not, in my judgment, made out the case that Jayson acted as a de facto director of all or any of the Amba companies in his dealings with Mr Keeler. Neither Mr Keeler nor anyone else from Keelers gave evidence at the trial. I accept Jayson’s evidence of his longstanding personal friendship with Mr Keeler, and that the reason for involving Mr Keeler in Amba matters, and suggesting Mr Keeler as company secretary, was to enable Jayson to distance himself from the affairs of the Amba companies. I accept Jayson’s evidence that it was Dennis’s decision whether or not to appoint Mr Keeler as company secretary, and that it was Dennis who actually agreed with Mr Keeler his appointment as company secretary and the terms of his appointment. I do not accept that there is any written material which indicates that Mr Keeler was ever told by Jayson, or by some other person to Jayson’s knowledge, that Jayson was willing to be, or even willing to consider becoming, a director of any of the Amba companies. The written evidence of Mr Keeler’s initial instructions (a hand written note dated 16 September 1999) refers to Mr Clarkson as the chairman, Mr Dudley Smith as vice-chairman, and Dennis as managing director, but, significantly, without any reference to Jayson as a director. What is certainly clear is that, by 24 November 1999 at the latest, Mr Keeler was specifically instructed that Jayson was not to be a director of Amba plc.

[125]The strongest point in the SoS’s favour, in relation to Jayson’s dealings with Mr Keeler, is the evidence that Jayson authorised the release of the statutory books, seal and documents of Amba plc by Shoosmiths to Mr Keeler. This is a matter which must be brought into the overall balance in deciding whether Jayson was acting as a de facto director. It must be placed in the context, however, that Dennis was very happy for Mr Keeler to take over the conduct of Amba’s affairs, and that Jayson plainly regarded Shoosmiths as principally his own solicitors, whom he had introduced to Dennis and Mr Clarkson for the purpose of incorporating Amba plc and ACS.

[126]I accept the SoS’s submission that Jayson’s involvement in the grant of the lease to Amba plc of the Romford premises is capable of supporting a case that Jayson was acting as a de facto director. The evidence is that Dennis and Mr Clarkson were content to leave to Jayson the negotiations over the terms of the lease with the owners of the premises, and that Jayson took charge of the retainer of Willson Hawley & Co (subsequently Willson Letchford) and the giving of instructions to them for the preparation and completion of Amba’s lease of those premises. I accept, however, the evidence of Dennis and Jayson that Jayson’s involvement was due to the fact that Dennis was unable to devote the necessary time and attention to the grant of the lease of the Romford premises, and that Jayson was, in his own interest, very concerned to find and secure those premises for partial occupation by his own company, Shakespeare.

[127]Until about the end of 1999 CIA personnel, in particular Mr Wayman and Ms Martin, provided book-keeping and banking facilities for the Amba companies. Among other aspects of the arrangements between Amba, Lloyds and CIA, Mr Wayman held Amba’s chequebooks and paid its bills, and Ms Martin signed Amba cheques as an authorised signatory on Amba’s bank mandate. It is the SoS’s case that Jayson thereby controlled the payment of Amba’s creditors and generally exercised control over Amba’s bank account. Taking the evidence as a whole, I am satisfied that the purpose of those arrangements was not as suggested by the SoS, but was rather the provision of a book-keeping and debt payment facility answerable to Dennis. The arrangement was, in practical terms, the outsourcing of a facility which otherwise Amba would have had to provide for itself. It was a facility provided by Jayson purely to assist his father.

[128]I am satisfied that, although in the provision of that facility instructions were given from time to time by Jayson to CIA personnel, including Mr Wayman, Jayson only did so on the instructions of his father in relation to particular transactions, including one occasion on which Mr Wayman, invoking Jayson’s name, sought to persuade Lloyds to process a Chaps payment, in the absence of an authorised signatory, and another when a payment to Mr Stobart of £1500.00 is said to have been authorised by Jayson. I am satisfied that it would have been equally true of a list of expenses in a memorandum dated 2 November 1999 from Carl Cripps of ACS (who did not give evidence) to Mr Wayman asking for Jayson to authorise the same and transfer the funds.

[129]Mr Wayman’s oral evidence was that, when his immediate instructions came from Jayson, he acted on the assumption that Jayson had obtained the authority of Dennis. His oral evidence (transcript 16.5.2006 p.2) was that the only people who could authorise a payment or transaction on behalf of Amba were Dennis and Mr Clarkson. Ms Martin’s evidence, which I accept, was that when she signed a cheque or requested a transfer she consulted Dennis to obtain authority, rather than Jayson. I am satisfied that neither Ms Martin nor Mr Wayman exercised a discretionary or management or strategy role with regard to Amba’s affairs, on behalf of Jayson or as instruments for his control of Amba’s business. They were providing their functions and services for Amba for practical reasons, including the fact that Dennis was often uncontactable and lacked secretarial support, and the fact that resources for providing accounting and book-keeping services were already available at CIA. I accept Jayson’s evidence that the reason he withdrew the CIA accounting and book-keeping facility for Amba was precisely because of the difficulty of contacting his father when there were complaints or enquiries about Amba matters.

[130]The evidence shows that other CIA personnel contacted Jayson from time to time for instructions in relation to Amba matters, but those were occasions on which it was difficult for the personnel to contact Dennis or Mr Clarkson or for some other reason it was perceived by the CIA personnel that it was more convenient to seek authority from Jayson. I am satisfied that in those cases Jayson authorised the transactions only on the authority of his father, save possibly in one or two exceptional circumstances.

[131]The SoS relies on the inclusion of Jayson’s name and contact details on various Amba contact and distribution lists. It is not known who prepared those lists and in what circumstances. In the absence of evidence from any Amba personnel, other than Mr Wayman and Ms Martin and Mr Marks (on whose credibility I comment below), I do not consider that those lists are sufficiently cogent evidence to advance the SoS’s case. The same applies to memoranda to Jayson (among others) from Mr Clarkson about Amba matters, and a memorandum from Dennis to Jayson (among others) about a re-scheduled board meeting of Rescue.

[132]Jayson appears to have been invited to board meetings of Amba. He never attended them, however. Nor did Jayson attend the first formal meeting of Amba.

[133]I accept the SoS’s submission that Georgina Laurie (“Ms Laurie”), who was in charge of Amba’s customer complaints department, believed that Jayson was a director of one or more of the Amba companies and had authority in relation to Amba’s affairs. It is not at all clear how or why she came to hold such a belief; but I am satisfied that Jayson himself did not promote any such notion with Amba personnel and that he was unaware that she or any other Amba employee held such views about him. It is possible that some people came to hold those views as a result of what they were told by Dennis, who was prone to embellish his business relationship with Jayson and to encourage the idea that Jayson was involved in Amba’s business.

[134]Various items were purchased and services, in particular telephone facilities, were supplied for Amba in, or using, Jayson’s name and using his credit card. Taking the evidence as a whole, I am satisfied that, save in relation to a payment of £6,747.00 paid on Jayson’s credit card on 18 September 1999 to prevent the telephones being cut off, this was done without the authority or consent of Jayson and without his knowledge, and without any belief that Jayson had or would have agreed to such conduct. I am also satisfied that, when those matters were discovered by Jayson, he remonstrated with his father.

[135]The Lloyds’ Business Customer Review of Rescue dated 30 October 1999 and the Lloyds’ Customer Contact Report dated 29 November 1999 describe Jayson as a director of Rescue. As I have said in paragraph 99 above, I accept Jayson’s evidence that he never had any meeting with any bank about Amba and that the information contained in those records was not given by him. That information was, in any event, as I have explained in paragraph 99, manifestly inaccurate in important respects. Further, I am satisfied that Jayson was at all material times unaware that Lloyds was told that he was or was to be a director of Amba.

[136]Mr Caddick sought to advance the SoS’s case by contending that there is no evidence in any document that Jayson sought to correct the impression created by Dennis that Jayson and he were in business together. I have found, however, that Jayson was unaware that Lloyds, Shoosmiths, Keelers and Amba personnel regarded him in that way, and that he rebuked his father for the unauthorised use of his credit card and personal details to secure supplies and services for Amba.

[137]I am satisfied that Jayson never received any financial benefit of any kind from the Amba companies.

[138]It is common ground that Dennis regularly sought Jayson’s advice on business matters, including Amba, and he sometimes asked Jayson for personal loans. He regarded Jayson as a successful and talented business person. Such evidence does not, in my judgment, in any way assist the SoS’s case that Jayson was a de facto director of the Amba companies.

[139]The SoS relies, in support of the case against Jayson, on the evidence of Mr White, who founded and ran React. Mr White’s affidavit evidence was that he always understood Rescue to be the business of Dennis, Mr Clarkson and Jayson, and that Jayson was a “regular and active participator in the setting up of the joint venture”. He also said in his affidavit that he had numerous meetings with Jayson, and that, at his first meeting attended by Jayson at the Belfrey Hotel, Sutton Coldfield, a verbal agreement was reached concerning the trading relationship between Rescue and React, with Jayson playing an active role in the negotiations. He said that Jayson’s participation was not limited to insurance. He said in paragraph 55 of his affidavit that, although he had no doubt that Jayson did not take part in the day to day running of Rescue, Jayson played an important part in the setting and overseeing of strategy and policy for Rescue’s business and their coming to fruition. He added that everyone involved seemed to look to Jayson for guidance and to solve any problems.

[140]In my judgment, Jayson’s evidence is to be preferred to that of Mr White where they conflict in relation to Jayson’s role in Amba. Mr White’s oral evidence varied significantly from his affidavit. Among several points of difference, I am satisfied that the initial meeting attended by Jayson at The Belfrey was a short meeting, and that Jayson left the meeting before its conclusion. I am satisfied that no final agreement with Mr White was reached at that meeting, and that the details were agreed subsequently with Dennis and Mr Clarkson. I am satisfied that thereafter there were no business meetings of any significance or substance between Mr White and Jayson, although they may have met briefly on about 4 other occasions.

[141]Significantly, contrary to the SoS’s case, Mr White’s perception was that Jayson was far less involved in Amba by April or May 1999.

[142]Further, in paragraph 34 of his affidavit Mr White said that on 8 October 1999, at the request of both Adrian and Jayson, React’s ledgers, cheque books, and sales and purchase files were all taken to CIA’s offices in Rugby for audit, because Adrian and Jayson wished to check the financial state of React before proceeding with the purchase of its shares. In his oral evidence in chief, however, Mr White initially said that it was Dennis who asked for the papers. When the discrepancy was pointed out to him, he said that, if his affidavit said it was Adrian and Jayson, then it was they who asked for the papers. In cross examination he said that “all” were requesting him to present the documents at CIA in Rugby and that he was receiving “phone calls by the minute, virtually every day”. I do not accept that Mr White has or had any clear recollection of React’s papers being requested by Jayson for audit. I accept Jayson’s oral evidence that Dennis asked Mr Wayman to audit React’s books because he thought Mr White had paid for his daughter’s wedding out of the business, and that Jayson does not know who made the request for the materials to be sent to CIA.

[143]The SoS also relies on the evidence of Mr Marks, who was employed at Rescue for a short period in January and February 2000. The evidence in his affidavit was that he had no doubt that Jayson was fully involved in the establishment and financing of Rescue and setting its operational strategies and direction.

[144]In my judgment, Jayson’s evidence is to be preferred to that of Mr Marks where they conflict in relation to Jayson’s role in Amba. Mr Marks’ evidence in his affidavit was that Jayson had asked him in August 1999 to join Rescue; and that in November 1999 Dennis spoke to him at the motorcycle show at the NEC in Birmingham about the job offer, and Dennis said that he should speak to Jayson about the details. Mr Marks said in his affidavit that the offer made by Jayson was for £50,000 pa, a top of the range car, shares in Amba plc and a place on the board. I am satisfied, however, from the evidence he gave in cross examination and the contemporaneous documentation, that that account is substantially incorrect. In particular, it is clear from the oral and documentary evidence that, not only did he have discussions with Dennis about a job, but also he discussed and agreed with Dennis all the important aspects of his terms of employment. In my judgment, this critically undermined his credibility and objectivity. Moreover, his oral evidence was that Mr Cox, the operational director of Amba from October 1999 until March 2000, was managing the business.

[145]The SoS also relies on what Mr Keith was told by Mr Clarkson and Mr Cox during the s.447 enquiry about Jayson’s role in Amba. Neither Mr Clarkson nor Mr Cox gave admissible evidence. Their reported comments in Mr Keith’s affirmation evidence are hearsay, untested by cross examination. I prefer the direct evidence of Jayson, and those who gave oral evidence on his behalf, to the hearsay evidence of the observations of Mr Clarkson and Mr Cox.

[146]Taking the evidence as a whole in relation to Jayson’s role in and on behalf of the Amba companies, the strongest evidence in support of the SoS’s case that Jayson was a de facto director are Jayson’s assumption of responsibility and authority for the release of the files from Shoosmiths to Keelers and his conduct of the negotiations and instruction of Willson Hawley in connection with the lease of the Romford premises. I am nonetheless satisfied, in the light of the totality of the evidence, that the SoS has not discharged the burden of proving that Jayson was a de facto director of any of the Amba companies. In my judgement, he was never part of the corporate governance of those companies, although he assisted the business of those companies in giving advice and providing facilities by CIA personnel. He never had any financial interest of any kind in the companies, and I am satisfied that he was at all times solely motivated by a wish to assist his father in his father’s business venture without ever wishing, intending or acting so as to participate in strategic or policy decisions or their implementation on a par with any other directors of those companies. I conclude that he always regarded his actions and services for Amba as subject to the directions and control of his father and Mr Clarkson, and that he never regarded himself, and was never regarded by them, as an equal participant with them in the control and management of Amba. Nextime Was Jayson a de facto director of Nextime?

Nextime

[147]The SoS claims that Jayson was a de facto director of Nextime from late June 2000. In my judgment, that claim is, on the evidence, plainly unsustainable.

[148]The SoS relies upon a wide range of matters, including, in particular, the following evidence and allegations. In late June 2000 Mrs Hollier asked Jayson for help in relation to Nextime, and he advised her to obtain a report into Nextime’s affairs. Mr Wayman was involved in the subsequent report by Mrs Letchford. There were discussions between Jayson and Mrs Hollier following the report. There is a reference in Nextime’s SAGE records to a payment to Mr Robertson (for his assistance in the production of Mrs Letchford’s report), with the narrative “Robertson – report for jayson/annie”. Jayson continued to assist and support Mrs Hollier after the report. Jayson attempted to find an investor for Nextime. Lloyds’ note of a meeting between Mr MacKay and Jayson on 14 August 2000 recorded that Jayson had agreed to become chairman of Nextime, Mrs Letchford’s report had been prepared for him, and over the previous few weeks he had effected a number of changes at Nextime, including reducing the salary of the managing director, Mr Bell, sacking the finance director, Mr Huges, and bringing in new staff, namely Mr Robertson and Mr Booth, to assist him. Plans were made for a subsequent meeting or meetings between Lloyds and Jayson. A subsequent file note of Lloyds dated 31 October 2000 recorded Mr MacKay’s view that Jayson was acting as a director. There is also a reference in that file note to a request by Jayson, through Mr Roberston, that Lloyds make a payment to a company called Payless Car Hire (“Payless”) from Nextime’s account.

[149]I am satisfied from the oral evidence of Jayson, Mrs Hollier and Mrs Letchford that Jayson did not act as a director of Nextime, and that his efforts were directed only to advising and assisting Mrs Hollier. In this connection, I make the following findings of fact.

[150]Mrs Letchford was instructed by Mrs Hollier, and not by Jayson, to prepare a report on Nextime. Mrs Letchford regarded her authority as coming from Mrs Hollier and not Jayson. Jayson played no part whatever in the assistance given by Mr Wayman in connection with Mrs Letchford’s investigation into Nextime and the preparation of her report.

[151]Mrs Hollier was responsible for the reduction in the salary of Mr Bell and the sacking of Mr Hughes, and for requesting Mr Robertson’s assistance. Jayson was not responsible for those matters.

[152]Jayson was asked, and indeed placed under some pressure, to become chairman of Nextime, but I am satisfied that it was never within his contemplation to do so. He was fully aware that, as a public limited company, Nextime was carrying on business without the lawfully required minimum share capital. He was also aware from Mrs Letchford’s report that Nextime required very substantial investment in order to carry on a viable business. He was unwilling to make any such investment himself, and, despite his efforts and, doubtless, the efforts of others, no investor was found.

[153]Mr MacKay, who made the Lloyds’ note of the meeting with Jayson on 14 August 2000, could not independently recollect the meeting, which took place over 5 ½ years ago. Moreover, he accepted, in cross examination, that the Lloyds’ documents in evidence with regard to Nextime are probably not complete. I prefer the oral evidence, to which I have referred in paragraph 149 above, to the contents of Mr MacKay’s note. For the same reasons, the observation recorded in the file note of Mr MacKay dated 31 October 2000 that he thought Jayson was acting like a director is of limited assistance. Moreover, Mr MacKay gave oral evidence that his impression that Jayson was acting as a director was based on discussions with others; but his evidence in that regard was too general and unparticularised to carry any significant weight. In cross examination Mr MacKay said he was confused about Jayson’s role and did not know who was running the company. What is clear is that Mr MacKay was fully aware that Jayson had never been formally appointed a director of Nextime. Jayson did not in the event attend the board meeting on 26 August 2000 when he was formally invited to become chairman. Nor, significantly, did he sign the revised bank mandate which showed him as a director.

[154]So far as concerns the reference in Lloyds’ note of 31 October 2000 to instructions regarding a payment to Payless, the very same file note recorded Jayson’s denial of any such instructions. I am not satisfied that any such instructions were given by Jayson.

[155]There is evidence that Jayson paid some expenses of Nextime, but I am satisfied that this was to help Mrs Hollier, and did not involve him acting as a director. In effect, he was making an unsecured loan of a modest amount to the company.

[156]Neither Jayson’s continued wish to support and advise Mrs Hollier, his step-mother, with whom he plainly shares a strong bond of affection, nor specifically his attempts to find an investor in Nextime, take the matter any further.

[157]In conclusion, having regard to all the evidence, the cogency of that evidence falls far short of what is required to sustain the case of the SoS that Jayson was acting at any time as a de facto director of Nextime. Mrs Hollier Was Mrs Hollier a de facto director of Nextime?

Mrs Hollier

[158]In my judgment, it is clear that Mrs Hollier was a de facto director of Nextime from the outset. Although the SoS concedes that she was never formally appointed and registered as a director, she signed a Form 288a (Appointment of director or secretary) on 7 March 2000 and was recorded in Nextime’s register of directors as a director. On 16 March 2000 she signed, as chairman of Nextime, Lloyds’ standard form of certification for the operation of Nextime’s Lloyds’ account, and she was shown on that documentation as a director of the company authorised to sign on behalf of the company. She attended the first board meeting of the company on 26 April 2000.

[159]The SoS accepts, however, that Mrs Hollier did not play any part in the active management of Nextime until June 2000. The position was very different from then until the winding up of the company in November 2000. She wrote a letter dated 22 June 2000 authorising Mrs Letchford to have access to Nextime’s cheque books and bank statements, and to enable Mrs Letchford to remove such documents. She expressly gave that authority as chairman of Nextime, and described herself, under her signature, as chairman. On 26 June 2000 Mrs Hollier wrote to Nextime’s finance director, Mr Hughes, placing a stop on all payment transactions until further notice. She unilaterally changed the bank mandate and took possession of all the cheque books. Mr Bell and Mr Hughes accepted her authority to give all those instructions. Mr Robertson, who “did the books” for Nextime from August 2000 until November 2000 was accountable to Mrs Hollier. In effect, after late June 2000 she took overall control over Nextime and made all the important decisions about the conduct of its business. The fact that she did so to protect her investment does not avoid the clear conclusion that she was acting as a de facto director.

Unfitness

[160]The SoS has, in my judgment, made out a case of unfitness against Mrs Hollier within s.8(2) of the 1986 Act.

[161]Mrs Hollier was aware, from Mrs Letchford’s report, of the £50,000 minimum share capital requirements for Nextime pursuant to CA 1985 ss.101, 117-118. She nevertheless permitted the company to continue to trade in breach of the statutory requirements.

[162]Further, she permitted Nextime to continue to trade, and incur liabilities, even though she was aware of Nextime’s serious financial difficulties. She accepted in her evidence that she was aware of the mounting pressure from creditors and of the outstanding PAYE and NIC indebtedness. Mrs Hollier accepted, in her cross examination, that the existing and anticipated level of sales of Nextime could not justify continued trading, and that only a very substantial investment would be able to save the company. Mrs Letchford’s report estimated that Nextime would need in the region of £1m minimum to survive. Mrs Hollier’s evidence was that she thought that Mrs Letchford was excessively cautious in that regard. On the other hand, Mrs Hollier’s oral evidence was that Jayson refused to be chairman of the board because he thought and told her - “the business is going nowhere and it will not go anywhere, you will be hung, draw and quartered by Freeserve. They have never put any money in. They have done nothing right…” (Transcript 23.5.2006 p.32). In my judgment, having regard to all the admissible evidence, there was never any realistic prospect after June or July 2006 of sufficient investment by a third party to warrant the continued trading of the company at the risk of creditors.

[163]Mrs Hollier gave evidence that she was repeatedly assured, and anticipated, that Nextime would receive substantial funds from FMC. I have seen no evidence, however, of anything from FMC which could represent anything in the nature of a legally enforceable promise. It was not right or reasonable for Mrs Hollier to rely on so tenuous a prospect.

[164]The evidence is that, even after she was told by Jayson that he did not wish to become chairman or otherwise be involved in running or investing in Nextime, she encouraged or permitted Lloyds to believe the contrary, and thereby encouraged Lloyds to continue to extend facilities to Nextime, despite the company’s account being in excess of its overdraft limit and in excess of Mrs Hollier’s £250,000 guarantee to Lloyds.

[165]Further, and finally, Mrs Hollier did not co-operate with the DTI enquiry to the extent that she should have done. She did not produce all relevant documents to the DTI, as the DTI requested, and she denied that she had received any report into the state of Nextime. A reasonable search would have disclosed Mrs Letchford’s report.

[166]Other grounds of unfitness were alleged against Mrs Hollier by the SoS, including the failure by Mrs Hollier to ensure her appointment as a director was properly recorded, excessive remuneration, causing or allowing Nextime to make payments in settlement of debts of third parties, and the payment by Nextime of her personal employees. I do not consider that those allegations or alternatively Mrs Hollier’s involvement in, or responsibility for, those matters were established as grounds of her unfitness within s.8(2).

[167]In all the circumstances, I consider that a disqualification order should be made against Mrs Hollier.

[168]Three particular matters are raised against the appropriateness of a disqualification order. First, on the SoS’s own case, Mrs Hollier’s culpable conduct, on which the SoS relies, lasted for no more that some 5 months, from the time of Mrs Letchford’s report until the winding up of the company. Second, Mrs Hollier has suggested that no one was prejudiced by the continued trading of Nextime after June 2000 since she paid the bank overdraft, pursuant to her guarantee, and she claims that FMS has paid money to the liquidator. In fact, no clear or reliable evidence has been produced to the court as to whether there is any deficiency as regards Nextime’s creditors. Third, Mrs Hollier says that, in relation to certain matters, she was entitled to rely on the advice and expertise of Shoosmiths and Mr Robert Kilpatrick, who was Nextime’s company secretary.

[169]None of those matters, in my judgment, detracts from the appropriateness of a disqualification order, although they may be relevant to the duration of the period of disqualification. The matters of unfitness which have been established were serious matters, and were matters resulting from deliberate decisions of Mrs Hollier herself, including the decision to continue to trade for several months in breach of the statutory requirements for minimum share capital.

Adrian Hollier

[170]The position of Adrian in these proceedings is very unsatisfactory. As I said earlier in this judgment, he did not appear in person or by any legal representative at the trial. There was evidence that he has been, and is being, treated for mental illness, but no application has been made by him or on his behalf for any adjournment generally or of the case against him in particular. As I have said, I was informed at the outset of the trial that he had refused to be examined by a medical practitioner appointed by the SoS.

[171]Under the pre-trial directions I have mentioned earlier, Adrian’s affidavit is to be excluded from the admissible evidence since he has not attended for cross-examination.

[172]Notwithstanding my strong encouragement for the SoS and Adrian to come to some practical solution as to how to deal with the case against Adrian, they have been unable to reach agreement. In the circumstances, but with regret, I reluctantly conclude that I have no alternative but to proceed to give judgment in relation to the case against Adrian.

Was Adrian a de facto director of Amba?

[173]In the light of all the admissible evidence, I conclude that the SoS has discharged the burden of proof, to the requisite standard, that Adrian acted as a de facto director of the Amba companies.

[174]Mr White’s affidavit evidence was that from September 1999 Adrian had total control of the day to day running of Amba, and that it was to Adrian that Mr White looked for financial and logistical support. Mr White also gave evidence that creditors were referred to Adrian because he was in control of Amba’s financial affairs.

[175]The evidence shows that it was Adrian who dealt with Mr White in connection with Amba’s negotiations for the acquisition of React, and it was Adrian who instructed Mr Keeler in that connection. Although Dennis said in his oral evidence that Adrian’s negotiations with Mr White were subject to Dennis’s final authority, the weight of the evidence is that Adrian had a free hand.

[176]Mr White wrote to Mr Cox and Adrian on 7 December 1999 with details of overdue accounts and rent arrears, and asked for advice as to how those issues were to be resolved. Mr White’s evidence was that Mr Cox required Mr White to report to him on the basis that Mr Cox would forward the information to Adrian.

[177]Mr Marks’ affidavit evidence was that Adrian gave instructions, signed cheques, authorised bank transfers and dealt with credit card payments. His oral evidence was that, because Adrian was dealing with Amba’s financial affairs, he (Mr Marks’) took various documents, including bank statements and other files, to Adrian’s house, where Adrian was working on his laptop.

[178]Generally, there is cogent admissible evidence that people dealing with Adrian in connection with Amba, such as Mr Keeler, Mr White, Mr Marks and Ms Laurie assumed that Adrian had authority to resolve any problem arising with regard to Amba.

[179]A number of witnesses gave evidence that Adrian had a narrower role. Dennis’ evidence was that Adrian’s role was confined to introducing or otherwise helping with computer systems. Ms Martin gave oral evidence that her understanding was that Adrian was very unwell at the time, and “was purely helping out ad hoc duties as and when asked” (transcript 15.5.2006 p.128). Mr Wayman’s oral evidence (transcript 15.5.2006 p.170) was that, so far as he knew, Adrian was involved in “helping to set the systems up”. Jayson’s oral evidence was that Adrian reported to Dennis and acted purely on his father’s instructions. Mr Talbot said, in paragraph 79 of his affidavit, that at no time did he see any evidence that Adrian was acting in a manner which would lead him to believe that Adrian had management or control, and that he rarely saw Adrian, who seemed to be acting as a mere employee. Mr Feeney, in paragraph 73 of his affidavit, said that in all his dealings with Amba he had no reason to suppose that Adrian had anything to do with the running or ownership of Amba, and that, if he had, it is inconceivable that Mr Feeney would not have been made aware in view of his frequent and “somewhat intense” involvement with Amba.

[180]It must be borne in mind that neither Mr Talbot nor Mr Feeney gave oral evidence, and so their affidavit evidence was contested by cross examination.

[181]It is apparent, moreover, from the evidence as a whole, including contemporaneous written material, that Adrian’s work for Amba extended well beyond a purely technical role in connection with computer systems. It included trying to reconcile the figures from sales agencies and from Amber Credit Limited (“Amber Credit”), and involvement in the decision whether to recruit an accounts clerk. A faxed message from Ms Laurie to Adrian dated 16 November 1999 covers a wide range of issues, such as Amber Credit, membership cards, welcome packs, payroll, and administration costs; and in other faxed messages she asked Adrian about the payment of rent, commissions, sales figures, and authorising expenditure. Adrian communicated with, and gave instructions to, Mr Keeler regarding Amba plc. There is also in evidence an inter office memorandum dated 1 September 1999 from Mr Clarkson, as “Group Finance Director”, in which Mr Clarkson stated that, in his absence, all requests for expenditure should be addressed to Adrian.

[182]It is significant that, in an attendance note prepared by Mr Keeler of a conversation with Adrian on 10 January 2000, Mr Keeler recorded that Adrian, Dennis and Mr Clarkson were to be equal shareholders and directors of Amba plc. A file note of Mr Keeler of 11 January 2000 recorded that the statutory declaration necessary to obtain a CA 1985 s.117 certificate was to be sworn by Adrian. There is subsequent correspondence from Mr Keeler about the appointment of Adrian as a director of Amba plc, and pressing Adrian with regard to the need for a s.117 certificate, and envisaging that Adrian would make the statutory declaration, and that the shares in Amba plc would be issued to Dennis and Adrian.

[183]I accept the SoS’s submission, in the light of all that evidence, that Adrian was exercising real control and giving instructions over a wide range of Amba’s activities. Even if Adrian’s only motivation was to assist Dennis, as his father, his acts were those of a director.

Unfitness

[184]The evidence is that Adrian assumed day to day responsibility for Rescue in about September 1999. In my judgment, he knew, or ought to have known, of the extent of its severe financial problems. Amba was undercapitalised from the outset. On the basis of the reports prepared by Mr Cox in December 1999 and January 2000 Amba appears to have been at least £245,000 in debt at the beginning of January 2000. It is against all probabilities that Adrian was unaware of those reports. The evidence is that Rescue was under continual pressure from creditors, and there was a complete failure to pay any PAYE or NIC. Rescue was also in arrears with commission due to sales agencies from November 1999, and failed to pay the operators of the breakdown services provided to its clients (to the extent of £60,000 indebtedness by February 2000). Many of the operators consequently simply stopped providing further services to Amba’s clients. Amba had a very poor record, from as early as August 1999, of dishonouring cheques and direct debits on its bank accounts. On the balance of probabilities, on the available evidence before me, I conclude that Adrian knew or ought to have known of those dishonoured payments. Again, Adrian was aware of, or ought to have been aware of, and must bear responsibility for the non payment of PAYE and NIC.

[185]Dennis has given evidence of potential investors in Amba, including A.P. Borg & Beck and MacArthurs Limited, but I am satisfied that from January 2000 at the latest there was no reasonable ground for Adrian or any of the other directors to believe that there would be sufficient investment or other payment from third parties that would enable Amba to pay its creditors for past and present debts.

[186]I am satisfied, accordingly, that Adrian permitted Rescue to continue to trade at a time when there was no reasonable prospect that creditors would be paid.

[187]Further, Amba was carrying on business in a manner which was deceptive to its customers. From August 1999 Amba advertised itself, through the Brochure, as providing breakdown cover and accident claims assistance throughout the United Kingdom and Europe. There were never, however, any legally enforceable written contractual arrangements between Amba and React or any suppliers of any of the services Amba promised its members. Further, Amba continued to use the Brochure and to promote the services in it notwithstanding the breakdown of its relationship with React and the closure of ACS in about January 2000. From that time the Brochure was not simply filled with sales puffs. It seriously misrepresented Amba and its services to the public and Amba’s members. I am satisfied that Adrian was probably aware of those matters.

[188]There is evidence of payments to Adrian totalling £16,300 which, notwithstanding the enquiries of the DTI, Adrian has failed to explain adequately. They are not shown as remuneration in Amba’s books, no PAYE or NIC appears to have been deducted in respect of them, and no invoices have been produced to show that they were expenses. Further, there were payments by Amba to Mrs Hollier, Dennis, Mr Clarkson, Mrs Clarkson, and C.J. Enterprises which, despite the enquiries of the DTI, have never been fully explained and justified. I conclude, on the evidence as a whole, that it is probable that those payments or some of them were improper and Adrian knew, or ought to have known, those matters.

[189]At and since the time of the DTI inquiry, there appears to have been a serious lack of proper accounting and financial records for the Amba companies. Dennis’s evidence is that this has been caused by the improper removal or destruction of such records by Mr Cox in February 2000. The SoS challenges that explanation. It is unnecessary to resolve that conflict in view of the other plainly established matters of unfitness.

[190]The evidence, both written and oral, supports the SoS’s case that Adrian has not fully co-operated with the DTI inquiry. The admissible evidence discloses that Adrian has probably not provided relevant documents and has been elusive in attempts by the DTI to arrange a meeting between Adrian and the DTI. That evidence, and my conclusion, are not negated by the evidence of Mrs Letchford that she arranged for a letter to be drafted by Mr Keeler on behalf of Adrian and that she posted the letter in May 2000. The letter did not disclose Adrian’s full role in Amba, and claimed that Adrian had no relevant documents, a claim which I reject.

[191]With regard to ACS, the evidence before me is that payments were made from ACS’s bank overdraft for the benefit of Mr Clarkson, Dennis and Mr McCann, which were not for the purposes of ACS. Adrian knew, or ought to have known, of those matters.

[192]In relation to Amba plc, Adrian was warned by Mr Keeler of the need to obtain a s.117 certificate and of the minimum share capital requirements. Notwithstanding that advice, Amba plc was permitted to continue to remain in business, including acting as tenant of the Romford premises and the Sittingbourne premises.

[193]I conclude from the above that the SoS has made out the case of unfitness of Adrian under s.8(2) of the 1986 Act, and a disqualification order should be made against him.

Decision

[194]For the reasons I have given, I dismiss the case against the Second Defendant, Jayson Hollier.

[195]I hold that the Secretary of State has established the case for a disqualification order against the Third Defendant, Adrian Hollier, and the Fourth Defendant, Barbara Ann Hollier.

[196]I shall hear further argument as to the period of disqualification that should be ordered in respect of the Third Defendant and the Fourth Defendant.

Cited in 10 later judgments

and 1 more case

Hirst v Revenue & Customs 2014