Secretary of State for Business, Innovation And Skills v Marshall [2015] EWHC 3874 (Ch)

[2015] EWHC 3874 (CH)Case No B30MA848
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Venue MANCHESTER DISTRICT REGISTRY
Civil Justice Centre
1 Bridge Street West
Venue ManchesterDate Friday, 30 th October 2015
M60 9DJ
Before
HIS HONOUR JUDGE PELLING QCSitting as a Judge of the High Court
Between
SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLSApplicant-v-
Between
JAMES JOHN MARSHALLRespondent
Transcribed from the Official Tape Recording byApple Transcription LimitedSuite 204, Kingfisher Business Centre, Burnley Road, Rawtenstall, Lancashire BB4 8ESDX: 26258 Rawtenstall – Telephone: 0845 604 5642 – Fax: 01706 870838
Counsel for Applicant: MR DAVID MOHYUDDIN for The Respondent did not attend and was not represented.

JUDGMENT APPROVED BY THE COURT

[1]This is the hearing of an application by the Secretary of State for Business, Innovation and Skills for an order that Mr James John Marshall be treated as if he is in contempt of court pursuant to section 453C of the Companies Act.[2]Section 453C of the Companies Act provides that:(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 either of the following provisions— (a) section 447; (b) section 453A.(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”. Section 447 and 453A are well-known provisions which entitle the Secretary of State or an investigator appointed by the Secretary of State to demand delivery up of documents in the possession, custody or power of an individual pursuant to an investigation being carried out by or on behalf of the Secretary of State and/or to enter premises for the purpose of giving effect to such an order.[3]The position in this case is as follows. The Secretary of State appointed Ms Pauline Draper, Ms Deborah Moon and Ms Karen Clarke as investigators, pursuant to section 447(3) of the Companies Act 1985, by an authorisation to that effect dated 27th April 2015. By a letter dated 27th April sent to the director of Marshall Design and Print Limited, the company under investigation, Ms Draper enclosed copies of the authorisation to which I have referred, together with copies of the text of sections 447 and 453A and 453C of the relevant Act. Then, under a subheading: “Requirements imposed on you”, Ms Draper required the director of the company to: “...produce the documents set out in the enclosed list by 4pm on 5th May 2015 at 2nd Floor, 3 Piccadilly Place, London Road, Manchester, M1 3BN. If you have a reasonable excuse for not providing the documents as required you should contact me and I may consider changing the requirements as to time and place. If you do not hold any of the documents, I require you to inform me to the best of your knowledge where they are and who has custody of them. I require this information to be supplied to me by 4pm on 30th April 2015 using the contact details set out in this letter”.[4]Included with the letter, as I have said, was the authorisation, the text of which I summarised earlier in this judgment, together with copies of section 447 and 453C of the legislation. At the end there appeared in bold type the following:
“If you fail to comply with the requirement imposed by the investigator named overleaf or any other investigator authorised by the Secretary of State to conduct this investigation you may be held in contempt of court and imprisoned or fined”
. A similar letter was addressed to Mr James Marshall at what was then understood to be his residential address of 17 Endcott Close, Gorton, in Manchester.[5]The relevant list of documents attached to the letters was to the following effect: “The following records are required to cover the period from the commencement of the company’s trading to date.(1) Accounting records to include:• Cash book or similar record of daily income and expenditure.• Purchase day book, ledgers and invoices.• Sales day book, ledgers and invoices.• Bank records, mandate statements, cheque books and pay-in books.• Credit card statements.• Wages and PAYE records.• Financial statements, draft management and audited.• Directors’ loan account.• Bank statements.(2) A complete list of the company’s clients and database.(3) Advertising and promotional literature issued by the company.(4) Trading premises, lease agreement.(5) Sales scripts.(6) Publications produced.(7) Staff list.(8) Cancellation file...”• Cash book or similar record of daily income and expenditure.• Purchase day book, ledgers and invoices.• Sales day book, ledgers and invoices.• Bank records, mandate statements, cheque books and pay-in books.• Credit card statements.• Wages and PAYE records.• Financial statements, draft management and audited.• Directors’ loan account.• Bank statements.[6]There was no response to the initial letters. Further letters dated 14th May, were sent to each of the relevant addresses. These letters recorded at paragraph (3), the following:
“You have failed to respond to that letter. I have tried to contact you by telephone, on your personal mobile, to speak to you about the request for documents but as yet you have not returned my calls. Calls to your office have been met with a refusal to provide information with regard to the address of the company’s trading premises and a total lack of cooperation from your employees. You have not complied with the requirements that I imposed on you pursuant to sections 447(3) and 447(5) of the Companies Act 1985 and your failure to comply is hindering my investigation. The consequences of your non-compliance: (4) Please re-read the warning at the start of this letter. I inform you that in the past certification cases the court has imposed a fine of £7,500 and has imposed a custodial sentence of three months. It may also be ordered by the court to meet and contribute to the costs of the Secretary of State which can run into several thousand pounds... Compliance required by you: (6) Without prejudice to any future certification proceedings in respect of your current failure to comply I am willing to allow you another opportunity to: • Produce to me the documents I require. The documents should reach me by 4pm on 20th May 2015... • To attend for an interview at 11am on Thursday, 21st May 2015 at 3 Piccadilly Place...”
There was no response. The consequences of your non-compliance: Compliance required by you: • Produce to me the documents I require. The documents should reach me by 4pm on 20th May 2015... • To attend for an interview at 11am on Thursday, 21st May 2015 at 3 Piccadilly Place...”

Compliance required by you:

[7]The next relevant letter is a letter to Mr Marshall of 22nd May. It rehearsed the failure to comply with either the letter of 27th April or the letter of 14th May, each of which I have summarised earlier in this judgment. It refers to the lack of cooperation. It refers again to the consequences of non-compliance as hindering the investigation and then gives a further opportunity to Mr Marshall to produce the documents, this time by 1st June, and to attend an interview on 2nd June. That letter that was sent both to 17 Endcott Close and to the then registered office of the company. The letter sent to the registered office was signed for by an employee of the company that operates the suite of offices at which the registered office is located and the evidence in support of the proposition that that was a letter actually received by Mr Marshall is to be found at paragraph 48 of the statement of Ms Draper of 23rd June 2015, where she says:
“Later, on 2nd June 2015, I attended Mailbox Etc, and spoke to the receptionist, Bernadette, who confirmed to me that my letter of 22nd May had been collected. I asked her to describe the person who collected the post and she appeared to describe Mr Marshall from his driving licence, which Mr White had previously provided me with. In view of this, I asked Bernadette to check their mailbox service agreement file which contained a copy of Mr Marshall’s driving licence to verify that it was Mr Marshall who attended to collect the mail and she confirmed that it was”
. The other letter was signed for, being sent by recorded delivery, by someone whose signature is illegible but whose printed name was given as “Marshall”. This evidence satisfies me to the criminal standard of proof that these letters were received by Mr Marshall. Notwithstanding these various letters, the respondent failed to attend for interview or produce the relevant documents.[8]That failure led to the certification of the relevant failures on 2nd July 2015, on the form provided for by CPR rule 81.15. The relevant failures are set out in the schedule to that document.[9]These proceedings were commenced on the basis of the certificate, and an application was made for permission to serve the certification application and any other relevant documents on the defendant by personal service or first class post at 17 Endcott Close and 47 Sedgeborough Road, Hulme, in Manchester. This led ultimately to an order made by His Honour

Judge Hodge QC sitting as a judge of this court who directed as follows:

“The applicant has permission to serve the certification and any other document in these proceedings required to be personally served on the respondent by the alternative method of delivering those documents or leaving them addressed to the respondent at the following addresses: (a) 17 Endcott Close, Gorton, Manchester, M18 8BR; and (b) 47 Sedgeborough Road, Hulme, Manchester, M16 7EU...”
That has been complied with, as is evidenced by the first and second statements of Mark Docker, which are in evidence before me. (a) 17 Endcott Close, Gorton, Manchester, M18 8BR; and (b) 47 Sedgeborough Road, Hulme, Manchester, M16 7EU...”[10]On the basis of the material I have so far summarised, I am satisfied, first, that this application has been served on the respondent in accordance with the directions for alternative service made by His Honour Judge Hodge QC and I am so satisfied beyond reasonable doubt. Secondly, and as to the substance of the application, I am satisfied beyond reasonable doubt that the respondent has, without reasonable excuse, failed to provide documents requested by the Secretary of State or one of his investigators duly authorised to demand it and has further failed to attend for an interview as he was required to do. In those circumstances, I am satisfied, as is submitted on behalf of the Secretary of State that section 353C of the Companies Act has been engaged and in those circumstances that the respondent falls to be dealt with as if he had been guilty of contempt of court in accordance with section 453C(3) of the Act.[11]The next question which has to be determined is how best to proceed with the contempt that has been proved. As to that, it is well established that the penalties for contempt should both punish the contempt, whilst at the same time enforcing compliance. In my judgment, this is a case where there has been a significant failure on the part of the respondent to comply with what was required in circumstances where the evidence demonstrates to the criminal standard that he had actual knowledge of what was required of him. In those circumstances in principle a custodial sentence is inevitable. By the same token, however, the primary purpose of proceedings such as these is not to imprison people for contempt but to enable the Secretary of State to make progress in an investigation that has to be carried out in the public interest. In those circumstances, it seems to me that the appropriate way to proceed is by the imposition of a prison term but suspended on terms.[12]In those circumstances, what I propose to do is to impose upon the respondent an order imprisoning him for a term of three months but suspended upon condition that(a) he complies with the requirements set out in the letter of 27th April 2016 by providing the documents identified in the schedule thereto to the Secretary of State’s investigator at the address identified in the letter, namely, 2nd floor, 3 Piccadilly Place, London Road, Manchester, M1 3BN, by no later than 4pm on 19th November 2015, and(b) that he attend for interview at the same address at 11am on 24th November 2015 or on such other date as may be notified by or on behalf of the Secretary of State in writing to the respondent. In the event that these requirements are not complied with, then the sentence of imprisonment that I have imposed must take effect, subject of course to the ability of the respondent to apply to the court to purge his contempt.[13]I should say that I am required now by the practice directions to direct that a transcript of that judgment be drawn up on an expedited basis and I so direct. [Judgment ends]