Secretary of State for Business Innovation And Skills v Scaggs [2012] EWHC 3120 (Ch)

[2012] EWHC 3120 (Ch)

Case No 2MA30326

IN THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

Venue MANCHESTER DISTRICT REGISTRY, Manchester Civil Justice Centre

1 Bridge Street West

Venue Manchester

Date Thursday, 18 th October 2012

Before

HIS HONOUR JUDGE HODGE QC

sitting as a Judge of the High Court

___________________

Between

SECRETARY OF STATE FOR BUSINESSClaimant

INNOVATION AND SKILLSClaimant

-v-

Between

NORMAN JEVONS SCAGGSDefendant

___________________

Transcribed from the Official Recording by

AVR Transcription Ltd

Turton Suite, Paragon Business Park, Chorley New Road, Horwich, Bolton, BL6 6HG

Telephone: 01204 693645 - Fax 01204 693669

___________________

Counsel for Claimant: MR GILES MAYNARD-CONNOR Instructed by Cobbetts LLP, Manchester, M2 3HZ

The Defendant, Mr Norman Jevons Scaggs, was unrepresented and did not attend.

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JUDGMENT (References unchecked)

JUDGE HODGE QC:

[1]This is my extemporary judgment in the matter of a claim by the Secretary of State for Business Innovation and Skills against Mr Norman Jevons Scaggs, claim number 2MA30326.

[2]This is the adjourned hearing of a claim issued by the Secretary of State against Mr Scaggs as long ago as 10th July 2012. By a claim form under Part 8 of the Civil Procedure Rules, the claimant seeks an order that Mr Scaggs be committed to prison or that he be fined, or that such further or other order should be made as the court thinks just, and that Mr Scaggs pay the claimant’s costs, on the following grounds: 1. That Mr Michael Shepherd, an investigator with Company Investigations, has certified, in an affidavit sworn on 10th July 2012 pursuant to Section 453C of the Companies Act 1985 (as amended), that he imposed a requirement upon Mr Scaggs in pursuance of Section 447 of that Act and that Mr Scaggs has failed to comply with that requirement. 2. That Mr Scaggs has failed to provide the Secretary of State with a reasonable excuse as to why he is unable to comply with Mr Shepherd’s requirements in pursuance of Section 447. Initially, the Secretary of State relied, in support of that claim, upon an affidavit sworn by Mr Michael Shepherd on 10th July 2012 together with exhibit “MS1”.

[3]The background to the instant application was that on 19th December 2011 Mr Shepherd and his colleagues, Miss Karen Clarke and Miss Pauline Draper, were authorised under Sections 447 and 453A of the Companies Act 1985 to require Ryman & Partners Limited (“Ryman”), or any other person, to produce to them such documents and information as they might specify, and to require entry to any relevant premises to assist their investigations. Similar authorities were subsequently issued to the same individuals in relation to another company, Premier Data Sales Limited (“Premier”), on 18th January 2012. The evidence shows that Ryman was incorporated on 2nd February 2011 as a private limited company under the name NJS Industries Limited to carry on business as a general commercial company. Its name was changed to Ryman & Partners Limited on 9th March 2011. Mr Scaggs was appointed as a director of the company and acted as such until his resignation on 6th January 2012 whereupon a Belize company, Okami International Limited, was appointed in his place. Premier Data Sales Limited was incorporated on 7th January 2010 under the name Ink White Limited and changed its name to Premier Data Sales Limited on 26th August 2010. Mr Scaggs acted as a director of that company until his resignation on 19th January 2012 on which date Okami International Limited was, again, appointed director in his place. Until the appointment of Okami International Limited, Mr Scaggs was the sole director of the two companies whilst they had remained active. Ryman carried on business preparing trust deeds on behalf of its clients whereby designated assets held by the client could not be used by Local Authorities to defray care costs in the event of the client being taken into Local Authority care. According to a business description note provided to Premier’s landlords, that company was involved in the provision of sales leads to Ryman.

[4]It is unnecessary to set out in detail the evidence detailed in Mr Shepherd’s first affidavit of the various attempts made to secure information and documents from Mr Scaggs. Suffice it to say that I am satisfied on that evidence, which is unchallenged, that Mr Scaggs has been called to meetings convened by the Secretary of State’s investigators on no less than six separate occasions: four in relation to Ryman and three in relation to Premier. (One of those meetings, that on 20th January 2012, was intended, albeit at different hours, to relate to the affairs of each of the two companies.) I am quite satisfied, on the evidence, that Mr Scaggs has failed to attend meetings convened by the Secretary of State’s investigators in Manchester at 11 o’clock on 4th January 2012 in relation to Ryman; and in Manchester on 20th January 2012 in relation to Ryman at 11 am and Premier at 2 pm. He has failed to attend meetings in Leeds in relation to Ryman on 27th February and 14th March; and he has failed to attend meetings arranged in Leeds in relation to Premier on 5th March and 21st March. Meetings were arranged in Leeds, rather than Manchester, in order specifically to accommodate Mr Scaggs, who resides in Halifax.

[5]When the authorities to the investigators were handed to Mr Scaggs they had attached to them the provisions of Sections 447 and 453C of the 1985 Act. Moreover, when the investigators came to write to Mr Scaggs after his failure to attend the earlier arranged meetings, letters made it quite clear to him what the consequences of non-attendance would be. By way of example, the letter of 16th February, convening meetings on 27th February at Leeds (in relation to Ryman) and on 5th March at Leeds (in relation to Premier), both made it clear (in bold type) at the end of Mr Shepherd’s letter:

“Please note that any failure to comply with a requirement imposed on you by an investigator may result in you being certified to the court. If the court is satisfied that you have failed, without reasonable excuse, to comply with the requirement, you may be held in contempt of court and imprisoned or fined.”

Mr Scaggs did respond to the earlier of the Secretary of State’s letters. His first response was an undated letter received by Mr Shepherd on 21st December (at page 8 of exhibit “MS1”). That followed on from Mr Shepherd’s visit to Mr Scaggs’s home in Halifax at 14 Diamond Terrace on 19th December. That first undated letter said that Mr Scaggs had taken advice following Mr Shepherd’s visit, and respectfully asked him to take note of the following instructions:

“I will not attend any invitation for interview at this stage. If this view changes I will inform you in writing. This may be the case if the information requested from you below includes evidence that I should reasonably do so. Do not contact me by telephone or in person. Please address issues strictly in writing. Again, if this stance changes I will inform you in writing. I ask the above now in the knowledge that these matters can be complicated and to make sure I can comply fully wherever possible with the correct information. Please accept my intention not to be awkward or objectionable and understand these things can be stressful, especially in light of my ongoing medical conditions.”

He then went on to request certain information to be supplied to him. That request is addressed in later correspondence, summarised in Mr Shepherd’s first affidavit. That letter was followed by a second letter to Mr Shepherd dated 10th January 2012 (at pages 15 to 16 of exhibit “MS1”). That letter was written in response to further letters from Mr Shepherd. In that letter, Mr Scaggs said that Mr Shepherd had highlighted his position that he would not attend at that stage, but he had failed to recognise the merit in his standing to do so should it be shown that the information required was pertinent, and would not prejudice any proceedings or breach of confidentiality. Mr Scaggs went on to say that the company (that is to say Ryman) had been sold. He said that in advance of Mr Shepherd’s enquiry about such he was approached in November 2011 with an initial interest in the name Ryman, and matters were concluded on 6th January 2012. It was said that the whole share capital had been transferred to Okami International Limited, who were also appointed as director:

“My directorship was terminated. I handed over all books and records and relinquished authority to act on its behalf. The information will be on record with Companies House in due course but, again, in advance, their address should you wish to write is 5827 Corner of Graduate Crescent and Bachelor Avenue, Belize City, Belize.”

[6]A third letter was written by Mr Scaggs to Mr Shepherd and sent by fax. That letter was dated 19th January 2012 and is at page 18 of exhibit “MS1”. He said that his letter of 10th January – the wording of which he reproduced below – had been ignored; and Mr Scaggs requested a response to the complaints contained in his letter. He said that Mr Shepherd had now called at his home again. Mr Scaggs requested Mr Shepherd not to do so due to Mr Scaggs’s medical situation. It was said that Mr Scaggs could not attend Mr Shepherd’s appointment. As explained, he was awaiting a cataract operation, due imminently, and his sight was not functional. That was said to be on top of Mr Scaggs’s pre-existing medical situation that was heightened by stress. The situation regarding Premier Data Sales was said to be exactly the same as Ryman and Partners, and Mr Scaggs’s standing regarding information and documents followed the same path as the correspondence Mr Shepherd had received. That letter was written in response to an attendance by Mr Shepherd at Mr Scaggs’s home on 18th January, when the authorities in relation to Premier had been handed over to Mr Scaggs. It is noteworthy that the letter is dated 19th January and was, apparently, faxed to the Secretary of State’s investigators on 20th January. The 19th January was both the date after the investigation into Premier was launched, and also the date after the authorities in relation to that company were handed over to Mr Scaggs. 19th of January is also the date that Mr Scaggs resigned as a director of Premier and Okami was appointed in his place. It is noteworthy that the letter of 19th January contains no reference either to that resignation or to that appointment. There was no further written communication from Mr Scaggs to the Secretary of State’s investigators before the present claim form was issued. There were e-mail exchanges between the investigators and persons purporting to act on behalf of Okami. Those exchanges are included within exhibit “MS1”.

[7]I am entirely satisfied that Mr Scaggs has indeed failed to comply with the Secretary of State’s requirements, and that he did so without reasonable excuse. The Secretary of State had endeavoured to accommodate Mr Scaggs’s health needs by convening meetings in Leeds rather than Manchester. Mr Scaggs has, on two occasions, been able to attend court notwithstanding that his eye problems have not yet been resolved, as will become apparent.

[8]On 19th June 2012, the investigations supervisor, Mr Cronin, wrote to Mr Scaggs informing him that he had instructed Cobbetts to commence certification proceedings against Mr Scaggs. The claim form was issued on 10th July 2012. It contained, in bold type on its face, a note to the defendant in the following terms:

“The court has power to send you to prison and to fine you if it finds that any of the allegations made against you are true and amount to contempt of court. You should attend court at the appointed time given for the hearing of the claim. It is in your own interests to do so. If you consider the allegations are not true then you must tell the court why. If it is established that they are true, you must tell the court of any good reason why they do not amount to a contempt of court or, if they do, why you should not be punished.”

I am satisfied that the claim form and supporting evidence were served, personally, upon Mr Scaggs shortly before 9.30 on the morning of 11th July 2012 at Mr Scaggs’s home at 14 Diamond Terrace, Halifax. At the same time as the claim form was issued against Mr Scaggs, a further claim form was issued against Mr Justin Paul Woodhead seeking similar relief in relation to the same two companies. That matter was heard for the first, and only, time on 27th July. Mr Woodhead attended court; and he was fined £500 and ordered to pay the Secretary of State’s costs, which were summarily assessed at £4,250.50. In relation to Mr Scaggs, who did not attend on that day, I had been invited to make an order following an attendance by telephone between representatives of the Secretary of State and Mr Scaggs on 25th July 2012. Having read an e-mail recording that telephone attendance, I ordered Mr Scaggs to file and serve evidence in response to the claim by 4 o’clock on 15th August. I ordered the claimant to file and serve evidence in reply by 4 o’clock on 22nd August; and I directed that the matter should be listed for final hearing before me on Tuesday 4th September at 10.30 am, with a time estimate of four hours. Mr Scaggs served a brief witness statement in response to the Secretary of State’s evidence, and that witness statement is dated 8th August 2012. In it Mr Scaggs said that he contested the proceedings on the grounds that he had complied so far as reasonably possible. However, if that was not accepted, he would declare that there had been reasonable excuse, namely that Premier and Ryman had been held as dormant companies, they did not trade, and, therefore, it would be impossible to provide the records and documents requested by Mr Shepherd. It was said that both companies had been sold, and that Mr Scaggs was no longer a director and, therefore, could not provide any documentation. He was said to have agreed to confidentiality as part of the transfer. He said that he had not attended requested appointments because of the information which he gave in his witness statement, and he did not accept that there was no reason to do so if no information could be provided. He believed it was unreasonable to ask him to attend. He said that he had informed Mr Shepherd that he was unwell, and he had asked for further information to show any good reason why he must attend, but he had received nothing evidential, just threats of proceedings.

[9]In response to that, Mr Shepherd made his second affidavit, sworn on 22nd August, exhibiting various documents as exhibit “MS2”. He confirmed that the position as to failure to produce documents and information on the part of Mr Scaggs had not changed. He confirmed that Mr Scaggs had provided no further documents or information since Mr Shepherd had sworn his first affidavit, save for Mr Scaggs’s first witness statement. Mr Shepherd referred to Mr Scaggs’s assertion that Ryman and Premier had been held as dormant companies, so that he was unable to provide the records and documents requested. Mr Shepherd proceeded to refer to various documents and information which tended to contradict the assertion that Ryman and Premier had been dormant companies. That evidence was summarised at paragraph 4 of Mr Shepherd’s second affidavit, and the documents are contained within exhibit “MS2”. I am satisfied that both companies were not dormant, as asserted by Mr Scaggs. At paragraphs 5 and 6, Mr Shepherd proceeded to address Mr Scaggs’s claim that both companies had been sold. He commented that Mr Scaggs had, to date, failed to provide any documents to substantiate the sale, such as the purported confidentiality agreement. He went on to express his belief that Mr Scaggs had information, other than documents, which he, Mr Shepherd, required in pursuance of his Section 447 authority. Mr Shepherd made reference to his attempts to obtain information from Okami, a company claimed to be based in Belize, to which Mr Scaggs claimed Ryman and Premier had been sold. He referred to his letter to the person in charge of Ryman on 11th January at Mr Scaggs’s address. That letter was also sent by fax to a fax number appearing on documentation that Mr Shepherd had obtained from clients of Ryman. Mr Shepherd referred to the response, from an e-mail address on 16th February 2012, which had asked that he correspond with a UK e-mail address, Okami@live.co.uk. Mr Shepherd referred to his subsequent e-mail to that address, asking to speak to the best person regarding the investigation, and asking for a telephone number so that a discussion could take place. Mr Shepherd recorded that on 22nd February 2012 he had received an e-mail from a person called “Boris Boris”, who stated that he should write regarding his enquiry and not telephone. On 23rd February Mr Shepherd had written to Okami requesting documents, such as those concerning the acquisition of Ryman. On 21st March he had been advised that Okami did not consider that Mr Shepherd’s authority allowed them to disclose information concerning the transaction, which was confidential. On 21st March Mr Shepherd had e-mailed Okami back, explaining that the requirements of Section 447 superseded the issues of confidentiality. He had received a further e-mail on 28th March stating that Mr Shepherd should cease asking for telephone contact details and that he should:

“Desist this type. It is waste our time. Pay fee and do company searching. Okami has become director of Premier because purchase company same as Ryman.”

At paragraph 7, Mr Shepherd referred to the correspondence at “MS1” as evidence of the numerous attempts that had been made to explain to Mr Scaggs the necessity for him to provide the information requested. Mr Scaggs, however, had failed to produce the information and documents specified by Mr Shepherd. At paragraph 8, Mr Shepherd stressed that at all times he had endeavoured to make allowances for Mr Scaggs’s claims of ill-health. The Secretary of State’s investigators had offered for the meetings to take place at the Official Receiver’s office in Leeds. The investigators had stressed that Mr Scaggs could have a friend, relative or professional adviser with him, and that he would be able to take as many comfort breaks as he needed to. Alternatively, Mr Scaggs had been offered the opportunity of being interviewed by Mr Shepherd at his own home if that was more convenient to him. Despite appointments being made for Mr Scaggs, he had failed to attend an interview.

[10]On 30th August, Mr Scaggs made a second witness statement. In it he said that he no longer contested the proceedings. The examples of other cases served on him were evidence that had convinced him to change his position. I infer that that was a reference to the three previous authorities which had been produced in support of the skeleton argument for the Secretary of State. I shall return to those authorities in due course. In his second witness statement, Mr Scaggs said that he would attend the hearing on 4th September and accept the court’s penalty. He respectfully asked the court to take account of his not understanding the severity of the matter until he had received the evidence of those previous cases. He respectfully asked the court to take into account his medical condition, which had caused Mr Scaggs severe problems recently. Mr Scaggs said that he had not deliberately failed to comply, but he had not fully understood. He respectfully asked for the court’s leniency when deciding his penalty, taking into account the points listed in his second witness statement.

[11]That was the state of the evidence when the matter came before the court for the first time on 4th September 2012. On that occasion, the Secretary of State was represented, as he has been throughout this litigation, by Mr Giles Maynard-Connor of counsel. Mr Scaggs appeared as a litigant in person. The Secretary of State made it clear that the Secretary of State was not interested in locking people up. What he wanted was for people to comply with the requirements of his appointed investigators. At that point, Mr Maynard-Connor invited me not to impose an immediate custodial sentence, but rather to impose a period of imprisonment, to be suspended on terms of providing full cooperation from Mr Scaggs. In response to a suggestion from the Bench, what was eventually decided was that there should be an opportunity for Mr Scaggs to meet Mr Shepherd at an early point in time, and to make every effort to cooperate with Mr Shepherd, and provide the information and documentation which he required. It was against that background that the court made its order of 4th September. That order recorded that the defendant had agreed:

“1. To attend for interview at the Manchester office of Company Investigations at 2 o’clock the following Friday, 7th September, and at that interview to produce such documentation required by Mr Shepherd as Mr Scaggs by then had in his possession; and 2. By 4 o’clock on the following Monday, 10th September, to serve upon the claimant such further documentation as required by Mr Shepherd which by then he had in his possession.”

On that basis, it was ordered, first, that the time for service of Mr Shepherd’s second affidavit should be retrospectively extended to 5 o’clock on 23rd August; and, secondly, that the matter be adjourned to a further hearing before me on Tuesday 11th September at 2 pm; and, thirdly, that by 9 o’clock on the morning of Monday 10th September the claimant should serve on the defendant, by e-mail, a further affidavit from Mr Shepherd, in an approved but unsworn form, dealing with the information and document produced by Mr Scaggs. A sworn copy of that further affidavit was to be filed by 11 o’clock on Tuesday 11th September, and produced to the defendant at the adjourned hearing. That third affidavit was duly sworn by Mr Shepherd on 11th September. The affidavit was accompanied by exhibit “MS3”. The affidavit had, as it purpose, to up-date the court as to the information and documentation produced by the defendant pursuant to paragraph 3 of my order of 4th September. Exhibit “MS3” contained a paginated bundle of true copies of documents obtained since that hearing. Paragraph 4 of the third affidavit anticipated that a transcript of Mr Scaggs’s interview on 7th September would be made available to the court on the following day. Due to the fact that the interview had only concluded late on the Friday, it had not proved possible for that to be exhibited to Mr Shepherd’s third affidavit at the time of swearing. At paragraphs 6 and 7, Mr Shepherd addressed the further information obtained from Mr Scaggs on 4th September. Mr Shepherd recorded that, during his discussions with Mr Scaggs at the hearing on 4th September, he, together with the claimant’s solicitor, Miss Graham of Cobbetts, had discussed with Mr Scaggs whether he was able to obtain the necessary documents Mr Shepherd required. Mr Scaggs had been taken through the list of documents Mr Shepherd had requested from him during his investigation. Mr Scaggs apparently advised that he would need to involve third parties, including Mr Justin Woodhead and a formation agent called Turner Little. Mr Shepherd was previously aware of that formation agent as he had understood that they were Premier’s formation agents. Mr Scaggs went on to say that it was Turner Little who had registered Okami International Limited, the company which had purportedly bought Ryman and Premier, and were in some way connected with those two entities. Mr Scaggs said that Okami was nothing to do with him, but he then referred to funds that were payable to Turner Little as part of Okami’s arrangement with Ryman and Premier. At paragraph 8 of his third affidavit, Mr Shepherd recorded that, following on from the hearing on 4th September, he had written to Jonathan Downing of Turner Little and he had asked for information held by that entity in respect of Okami. He was provided with the documentation he exhibited at pages 1 to 48 of “MS3”. That documentation showed:

“1. That it was Mr Scaggs who had instructed Turner Little to incorporate Okami. 2. That Turner Little had been paid £3,995 in two instalments in September 2010 by cash direct into their HSBC bank account via a bank in Halifax. 3. That Mr Scaggs had also requested that a nominee director be appointed, a service which required the payment of renewal fees; and 4. That Mr Scaggs had failed to pay the renewal fees and, subsequently, the directorship of Okami had reverted back to Mr Scaggs on 7th September 2011.”

[12]Mr Shepherd then proceeded to address his contact with Mr Scaggs on 7th September. The interview, which was attended also by Miss Karen Clarke, one of the other appointed investigators, had lasted from 2 pm until 4.25 pm. Mr Shepherd proceeded to set out what he described as certain highlights from the interview:

“1. Whilst the documents forming Ryman showed it as having been incorporated by Mr Scaggs he had advised initially that he had no idea who had formed the company. He subsequently stated, ‘It has got to have been me.’ 2. Mr Scaggs confirmed that he had provided the identification documentation concerning the lease of Admirals Yard. 3. Mr Scaggs claimed not to be aware of the publicity document which had been sent out in Ryman’s name. 4. Mr Scaggs failed to provide information relating to Ryman’s website and, indeed, he told Mr Shepherd that he was not aware of any websites operated by Ryman. 5. Mr Scaggs claimed that he was not aware of the purchase of Ryman and Premier by Okami until January 2012, despite negotiations having purportedly taken place in November 2011. 6. Mr Scaggs confirmed that he was involved with Okami and that over a period of time he had, ‘Put money into Okami on behalf of other people and, on a couple of times, on his own behalf.’ 7. Mr Scaggs failed to explain his letter of 10th January and his later letter of January 2012 to Mr Shepherd whereby he referred to sales of Ryman and Premier to Okami. He said that he needed to speak to Turner Little in that regard. Mr Shepherd advised that he needed to do so before a certain time on Monday, 10th September 2012. 8. Mr Scaggs advised that he had no knowledge of what had happened to Ryman and Premier, despite being the sole director of Okami. 9. Mr Scaggs reiterated that all the books and records had been handed to Okami but when Mr Shepherd pressed him on this during interview on 7th September, Mr Scaggs was unable to name the person to whom the books and records were passed. Mr Shepherd advised Mr Scaggs that he needed to provide all documentary evidence relating to the arrangement between Okami, Ryman and Premier by Monday, 10th September.”

At paragraphs 10 through to 13, Mr Shepherd referred to the requirement for Mr Scaggs to produce documentation. During the interview on 7th September Mr Scaggs had not produced any documentation to Mr Shepherd. At approximately 4 o’clock on the afternoon of 10th September, Mr Scaggs had again attended at Mr Shepherd’s office. He had presented Mr Shepherd with a number of documents, but, on inspection of those documents, Mr Shepherd discovered that none of them related to Premier, Ryman or Okami and, as such, he returned those documents to Mr Scaggs. To date, therefore, none of the documents Mr Shepherd had requested had been provided to him by Mr Scaggs. Mr Shepherd concluded as follows:

“1. I consider that Mr Scaggs has continued to fail to comply with the requirement imposed by me in pursuance of my authority under Section 447C of the Companies Act 1985. 2. I consider that Mr Scaggs has failed to provide me with the information I have requested pursuant to my Section 447 authority, despite having been given a further opportunity following the hearing on 4th September.”

To date, none of the documents Mr Shepherd had requested have been provided to him by Mr Scaggs. That was despite Mr Scaggs claiming that they had been handed over to Okami, a company of which Mr Scaggs is the sole director. Mr Scaggs had failed to explain to Mr Shepherd satisfactorily why he had proven unable to provide documentation which ought to be within his control. “3. Mr Shepherd considered that Mr Scaggs had failed to provide an explanation of the circumstances regarding the incorporation of Ryman and Premier and the operation of those companies. 4. Mr Scaggs had also failed or had proven unable to explain the relationship between Okami, Ryman and Premier. Mr Scaggs failed to explain to Mr Shepherd why he was unable to provide information concerning a purported sale involving Ryman, Premier and Okami at a time when Mr Scaggs was involved in all three companies.” Mr Shepherd concluded by providing details of Mr Scaggs’s current directorships as recorded by Companies House. They were exhibited as pages 65 to 83 of Mr Shepherd’s exhibit “MS3”.

[13]I bear in mind that this is, effectively, an application to commit Mr Scaggs for contempt of court. As such the standard of proof which the Secretary of State has to bear is the criminal standard. He must satisfy the court so that the court is sure of the various matters of which the Secretary of State complains. I am satisfied, to the requisite standard, that the Secretary of State has discharged that burden in relation to all of the four matters identified by Mr Shepherd at the end of his third affidavit. Mr Shepherd made a fourth affidavit on 12th September to which he exhibited, as “MS4”, a paginated bundle of the transcript of his meeting with Mr Scaggs on the previous Friday, 7th September. He confirms that he has read that transcript and considers it to be an accurate transcript of the taped meeting which had taken place between himself, Miss Karen Clarke and Mr Scaggs on 7th September at 2 pm. That then is the evidence before the court.

[14]After the hearing on 4th September, and the two further affidavits from Mr Shepherd (his third and fourth), the matter came back before the court on 11th September at 2 pm. Mr Maynard-Connor again appeared for the Secretary of State and Mr Scaggs again appeared as a litigant in person. Mr Scaggs confirmed to me that he had made no efforts to obtain legal representation at that moment in time. After a short break, Mr Scaggs explained to me that he did want to obtain legal representation. He also drew my attention to the problems he was experiencing with his eyes. In answer to a query from the Bench, he said that, although he wanted to obtain legal representation, he had not then been to see a solicitor. Despite representations from the Secretary of State, pointing out that Miss Graham of Cobbetts had previously been told that Mr Scaggs had legal representation, I acceded to Mr Scaggs’s request for an adjournment to allow him to obtain legal representation. I impressed upon him the seriousness of the Secretary of State’s case against him; but I expressed the view that where the liberty of the individual was concerned, the court must ensure that the individual in question had every opportunity properly to address the court with the benefit, if he was able to secure the same, of legal representation. For those reasons, I adjourned the hearing until today, Thursday 18th October. At that time it was envisaged that the hearing would be before Mr Justice Briggs, sitting as the Vice Chancellor of the County Palatine. I directed that the matter should be listed for a full day’s hearing. I made further directions as follows: By paragraph 2 of my order, I directed that by 4 o’clock on Thursday 13th September the claimant should file and serve a further affidavit exhibiting the transcript of the meeting dated 7th September 2012 attended by Mr Shepherd, Miss Clarke and Mr Scaggs. By paragraph 3, I gave Mr Scaggs permission to file a further witness statement, such statement to be filed and served by 4 o’clock on Thursday 4th October. By paragraph 4, I gave permission to the claimant to file evidence in reply to that further witness statement, such evidence to be filed and served by 4 o’clock on Thursday 11th October. By paragraph 5 of my order, I directed that Mr Scaggs was, by 4 o’clock on Monday 15th October, to notify the claimant’s solicitors in writing whether he required Mr Shepherd to attend the adjourned hearing for the purposes of being cross-examined. By paragraph 6, I directed the claimant to file an agreed bundle for the adjourned hearing by 4 o’clock on Monday 15th October. By paragraph 7, the claimant was to file and serve his skeleton argument by the same time. By paragraph 8, I directed that the defendant, Mr Scaggs, was to file and serve his skeleton argument by 4 o’clock on Tuesday 16th October. Finally, I reserved the costs (as I had done in relation to the 4th September hearing).

[15]Following on from that order, the Secretary of State wrote to Mr Scaggs in the following terms. The letter is dated 12th September 2012:

“We write further to the hearing before His Honour Judge Hodge QC yesterday which was adjourned so that you can obtain legal advice and representation. You will shortly receive an order setting out the timetable for this matter with an immovable trial date of 18th October 2012. However, in the meantime a draft copy of the order is enclosed and we can confirm that the following timetable was made by the court yesterday.”

The letter then proceeded to reproduce the timetable provided in the court’s order. The letter continued:

“We take this opportunity to remind you of His Honour Judge Hodge QC’s advice that when this matter is adjourned if you can provide further assistance there is no reason why you should not do so. If information comes along for this matter you should contact Mr Shepherd. In light of this, should you wish to provide Mr Shepherd with further information you should do so.”

Then in bold type there is the following paragraph:

“We would also stress that His Honour Judge Hodge QC granted the adjournment so that you could obtain legal advice and representation before a final hearing on 18th October 2012. Judge Hodge indicated that the next hearing on 18th October should be considered as an immovable date. We would make it clear that at this hearing it is the intention of the Secretary of State to again seek your committal to prison. We, therefore, cannot stress enough that it is essential that you seek legal advice now as the hearing on 18th October 2012 has been listed as the final hearing, i.e. the date when the court makes its final decision which could result in you being sent to prison.”

Those final observations were underlined as well as being in bold type. The letter continued:

“In the event that you wish to obtain legal aid funding, we would ask you to ensure that you take steps immediately [‘immediately’ being in bold] to organise as this can be a lengthy process. In any application we would ask you to stress that the hearing on 18th October 2012 is an immovable date and the final hearing whereby there is a possibility that you will receive a custodial sentence. You will appreciate that you have had many opportunities to obtain legal advice previously and you advised Miss Graham on two occasions that you already had a solicitor acting for you. The Secretary of State seeks a final determination and, therefore, will strongly resist any further applications to adjourn the matter for lack of legal advice.”

In a postscript to the letter, it was recorded that, after the hearing, Mr Scaggs had advised Miss Graham that he had certain documents which were relevant to the matter. Cobbetts again requested Mr Scaggs to provide such documents as a matter of urgency; and they reminded him, once again, of my instructions to continue to comply with the claimant’s requests for information. A copy of the perfected order was sent to Mr Scaggs by letter of 19th September. On 26th September, in a hand-written letter, Mr Scaggs wrote as follows to Cobbetts:

“I telephoned back today to confirm I had received your letter and order. 3. I will not file a further statement 5. I do not require Shepherd to attend. 6. to 7. I await these documents on or before 15th October 2012.”

It is clear from that numbering that the numbers refer to the corresponding paragraphs of my order made on 11th September.

[16]I am told by Mr Maynard-Connor, on instructions, that subsequent to that letter, on Thursday 11th October, Mr Scaggs advised Cobbetts by telephone that he was arranging for legal representation, and was due to see his solicitors on Monday 15th October. Despite the Secretary of State’s solicitors asking Mr Scaggs to identify the lawyers who would be acting for him, and although Mr Scaggs advised that he would telephone back with the name of his solicitors, no information in that regard was provided. On Monday, 15th October there was a further telephone conversation with Mr Scaggs. He confirmed that he had received the trial bundle for today’s hearing. Mr Scaggs made no comment as to whether he would be represented at today’s hearing. He gave no indication that he was not intending to attend today. Mr Scaggs was notified that the skeleton argument would be coming to his e-mail address. It was, in fact, sent to his e-mail address at 18 minutes past three on the afternoon of Monday 15th October, within the time prescribed by my order. No failure notice has been received, nor has there been any complaint from Mr Scaggs that he has not received the Secretary of State’s skeleton argument as required by my order. Nothing more was heard from Mr Scaggs until this morning so far as the court is concerned. Shortly after 8 o’clock this morning, the court received an e-mail from Mr Scaggs. He referred to today’s hearing at 10.30 am. He indicated that he was copying his letter to Claire Graham of Cobbetts. His letter reads as follows:

“I am 67 and a quarter years old. I have ceased working. My only source of income is government pension in the sum of £324 per month. I am to have my eyes operated upon at 7.45 am on Wednesday 31st October 2012. I have not been able to obtain legal aid. I am unfit to attend this hearing and have attached my letter confirming the surgery due. As my previous statement said, I do not contest these proceedings and wish the case to be heard in my absence. I plead with the court for leniency. I have not deliberately failed to cooperate and do have reasonable excuse. I have been suffering severe medical problems. I did not understand this matter. The companies in question did not trade. The claimant says they did but the evidence shown to me I explained I had never seen before and none of it bears my signature. I did finally attend interview and spent over two and a half hours answering questions. I fail to see how this can be seen as still not complying. I ask the court to deal with this case on 18th October 2012 and send me a copy of the judgment. I will comply with any order made by the court. I am truly sorry for being unable to attend.”

With that fax was a letter from the Calderdale & Huddersfield NHS Foundation Trust, dated 4th October 2012, and addressed to Mr Norman Jevons at Mr Scaggs’s address at 14 Diamond Terrace Halifax. The letter reads as follows:

“Dear Mr Jevons, This letter is to confirm your ophthalmology surgery which is to take place on Wednesday 31st October 2012 to arrive at the Day Procedure Unit at 7.45 am.”

Directions are then given to the Day Procedure Unit. Fasting instructions before surgery for patients having local anaesthetic are then given. It is said that if Mr Jevons cannot attend for any reason, or if he has any queries, he is to ring on the direct line given.

[17]Mr Maynard-Connor again appears today for the Secretary of State. Mr Scaggs does not appear, as he indicated he would not in his letter to the court received this morning. The relevant statutory provision under which the court is invited to deal with Mr Scaggs is Section 453C of the Companies Act 1985 (as amended):

“(1) This section applies if a person fails to comply with a requirement imposed by an inspector, the Secretary of State or an investigator in pursuance of [amongst other provisions] Section 447. (2) The inspector, Secretary of State or investigator (as the case may be) may certify the fact in writing to the court. (3) If, after hearing: (a) any witnesses who may be produced against or on behalf of the alleged offender; (b) any statement which may be offered in defence, the court is satisfied that the offender failed without reasonable excuse to comply with the requirement, it may deal with him as if he had been guilty of contempt of the court.”

Mr Maynard-Connor has referred me for guidance as to the court’s approach to certification proceedings to three previous authorities. In order of time they are: (a) any witnesses who may be produced against or on behalf of the alleged offender; (b) any statement which may be offered in defence, the court is satisfied that the offender failed without reasonable excuse to comply with the requirement, it may deal with him as if he had been guilty of contempt of the court.” 1. A decision of His Honour of Judge Pelling QC, sitting as a Judge of the High Court at the Liverpool District Registry, in the case of Secretary of State v Bloxham on 20th September 2006. 2. A decision of His Honour Judge Pelling QC, sitting as a Judge of the High Court in the Manchester District Registry, on 23rd January 2008 in the case of Secretary of State v McCloskey; and 3. The decision of Mr Justice Arnold, sitting at the Royal Courts of Justice on 11th November 2009, in the case of Secretary of State v Murray

[2009] EWHC 3718 (Ch)

. In the latter case, where the defendant did not attend, Mr Justice Arnold was satisfied that the allegation against the respondent, Mr Murray, had been made out to the requisite standard of proof. As to sentence, he imposed one of three months immediate imprisonment.

[18]Mr Maynard-Connor submits that the court has a discretion, even where the matters referred to in Section 453C are established to the required standard, whether or not to impose any penalty. It should consider the nature and extent of the failure to comply, whilst remaining mindful of the purpose behind the relevant statutory provisions, and the fact that the public interest requires that the Secretary of State requires absolute cooperation in investigations of this sort. Mr Maynard-Connor submits that a deliberate failure to cooperate, without reasonable excuse, should, generally, justify a custodial sentence. He submits, and I accept, that it is beyond doubt that Mr Scaggs has failed to comply with Mr Shepherd’s requirements; and that he has done so without reasonable excuse. As explained by Mr Shepherd, despite: 1. Being fully informed of his obligations 2. Repeated warnings as to the consequence of a failure to comply; and 3. Efforts made by the Secretary of State to accommodate Mr Scaggs’s claims of ill-health, Mr Scaggs has refused to attend for interview on no less than six occasions, as outlined earlier in this judgment; and, further, he has failed to deliver up any of the documents requested by Mr Shepherd. Instead, I am satisfied to the requisite standard that Mr Scaggs has chosen to hide behind an alleged sale of the two companies’ businesses and assets to a Belize registered company. Mr Scaggs has failed to produce any documents substantiating that alleged sale. In any event, I am satisfied, on the evidence, that it is Mr Scaggs who stands behind that Belize registered company. Indeed, I am satisfied, on the evidence, that he is presently the sole director of that entity. Moreover, Mr Maynard-Connor makes the point that, even when Mr Scaggs was afforded an opportunity by the court to meet Mr Shepherd, in order to provide the information sought, he continued to be uncooperative and to obfuscate. Again, I am satisfied to the requisite standard that that submission is well-founded. Mr Maynard-Connor further submits that Mr Scaggs still refuses to comply, and that his recent claims that Ryman and Premier were dormant and did not trade have been shown to be false by the further evidence set out in, and exhibited to, Mr Shepherd’s second affidavit. Again, I am satisfied, to the requisite standard, that that submission is well founded. Mr Maynard-Connor, therefore, submits that, in all the circumstances, this is a case of a serious and deliberate failure to comply with the investigator’s requirements for which no reasonable excuse has been proffered, and that a custodial sentence should be imposed.

[19]For the reasons that I have given in this judgment, I am satisfied that the allegations made out against Mr Scaggs in the claim form that he has: 1. Failed to comply with requirements imposed upon Mr Scaggs by a company’s investigator pursuant to Section 447 of the Companies Act 1985 (as amended); and 2. Failed to provide a reasonable excuse for non-compliance have been made out. I will, therefore, deal with Mr Scaggs as if he had been found guilty of a contempt of this court. Turning to the question of the appropriate sentence, I bear in mind Mr Scaggs’s health problems. Nevertheless, he has attended court on two occasions. He did attend the offices of the Secretary of State’s investigator in Manchester on the afternoon of Friday 7th September. He has, however, failed to provide the information and documentation which has been reasonably required of him. I am satisfied that he has done so without reasonable excuse. I am satisfied that his reason for that is that he has no wish for the Secretary of State’s investigators to establish the full, and true, position with regard to the two companies, Ryman and Premier. I am satisfied that when Mr Scaggs became aware of the Secretary of State’s investigators’ authority to investigate these two companies, he has sought, in my judgment unsuccessfully, to distance himself from those two companies by devising the purported sale of the two companies to a Belize registered entity. I am satisfied, on the evidence, that Mr Scaggs is, in fact, the person behind that sale and that entity. I am satisfied that he has involved Okami in the matter in an attempt to frustrate the Secretary of State’s investigations. Those are all aggravating factors over and beyond the fact of Mr Scaggs’s complete failure to cooperate with Mr Shepherd since late December and January of this year. Taking those factors into account, whilst this case is not one in which the sentence should fall at the top end of the range, nor can it fall at the bottom end of the range either. I do bear in mind the fact that I have not had my attention drawn to any previous misfeasance on the part of Mr Scaggs. I have not had my attention drawn to any failures to respond to requests for information in relation to any other companies. I bear that in mind as a mitigating feature. Nevertheless, it seems to me that, bearing in mind the clear purpose underlying Sections 447 and 253C, and taking into account Mr Scaggs’s persistent failures, despite due warnings, and despite all the opportunities afforded to him by the court to do so, to comply with the requirements imposed upon him by Mr Shepherd, without reasonable excuse, a custodial sentence is inevitable. But for the fact of Mr Scaggs’s forthcoming eye operation, I would have imposed an immediate custodial sentence, notwithstanding Mr Scaggs’s absence from the court today. But, given that his eye operation is to take place, albeit only under local anaesthetic, and in the Day Procedure Unit, as imminently as 31st October, it seems to me that a merciful, and proportionate, course would be to impose a sentence of imprisonment, but to direct that the warrant to commit Mr Scaggs to prison should not be enforced until the Monday following the operation, 5th November. Given that the operation is to be performed only(1) under local anaesthetic, and

(2) as a day procedure, the interval between Wednesday 31st October and Monday 5th November should afford Mr Scaggs sufficient opportunity to recover from his operation, and, if appropriate, to address any complications that may result from it.

[20]The only remaining question is as to the length of the sentence, in the light of all the circumstances to which I have referred. Having considered the matter, I conclude that the appropriate sentence is one of six months’ imprisonment. In imposing that, I have in mind both the punitive, and the coercive, effects of a sentence of imprisonment. It seems to me, here, that those two elements are both engaged. Mr Scaggs requires punishment for his past failures to cooperate, without reasonable excuse; and also he should, if he is belatedly minded to do so, despite all the previous opportunities afforded to him, be allowed a further opportunity to cooperate; but, even if he does, he must still be punished for his past failures. Breaking it down, it seems to me that the appropriate elements to attach to each of the punitive, and the coercive, elements are three months each. Mr Scaggs will, of course, have the opportunity, if so advised, to apply to the court to purge his contempt; but I have given my indications as to the extent to which the sentence I am imposing contains a punitive, as distinct from a coercive, element.

[21]Therefore, the conclusion is that Mr Scaggs will be committed to the appropriate prison for six months; but that execution of that warrant of committal will be suspended until Monday, 5th November. Normally the prison would be Her Majesty’s Prison Manchester, because that is the prison to which people are taken from this court; but I am conscious that, since the warrant is likely to be executed in Halifax, where Mr Scaggs lives, it may be that some other prison, in or near West Yorkshire, may be more appropriate.

[22]So far as costs are concerned, Mr Scaggs has done his very best to ensure that this matter has had to proceed through no less than three court hearings. Those three court hearings were necessitated by the court’s wish to grant as much indulgence as it could to a litigant in person. It seems to me that there is no reason why the normal rule that costs should follow the event should not apply. It is the Secretary of State that has been entirely successful in these proceedings. There is no admissible offer to settle which falls to be considered. If matters of conduct fall to be considered, then the Secretary of State’s conduct, and that of its investigator and solicitor, are utterly unimpeachable - they have acted properly throughout – whilst Mr Scaggs has failed, properly, to engage with the investigation process, as evidenced by my finding against him. For those reasons, the defendant, Mr Scaggs, should pay the Secretary of State’s costs. I have been provided with a statement of costs. There can be no exception taken to the hourly rates because they are at the reduced rates specially negotiated by the Secretary of State with his solicitors, Cobbetts. I am satisfied that the large number of hours involved by different fee earners are both reasonable, and proportionate to the subject matter of this litigation, which has involved serious failures to cooperate on the part of Mr Scaggs with an investigation being carried out in the public interest, and which has resulted in the serious order of a person’s committal to court. I do not propose to make any reduction in the number of chargeable hours. I am satisfied that the disbursements are reasonable and proportionate. In particular, contrary to the normal practice, it seems to me that it was cost effective, within the arrangements between Cobbetts and the Secretary of State, for them to use external photocopying. After allowing for a reduction to reflect the fact that this has not been a full day’s contested hearing, I will summarily assess the Secretary of State’s costs in the slightly reduced sum of £12,204.30. That will, in the normal course, be payable at the expiry of 14 days from the date of this order, unless Mr Scaggs makes an application for some stay of execution of the costs order. If he does, such an application should be made to a District Judge, and not to a Section 9 Judge. (End of Judgment) ________________