The Secretary of State for Business and Trade v Nyema Chima James [2023] EWHC 3214 (Ch)

[2023] EWHC 3214 (Ch)Case No CR-2022-000554IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES INSOLVENCY AND COMPANIES LIST (ChD)IN THE MATTER OF TUNDRILL LTDAND IN THE MATTER OF THE COMPANY DIRECTORS DISQUALIFICATION ACT 1986Venue Royal Courts of Justice, Rolls Building, London, EC4A 1NLDate 15/12/2023
Before
INSOLVENCY AND COMPANIES COURT JUDGE BURTON
Between
THE SECRETARY OF STATE FOR BUSINESS AND TRADEClaimantNYEMA CHIMA JAMESClaimant
Charlotte Cooke (instructed by the Insolvency Service) for ClaimantPatrick Wise-Walsh instructed on a direct access basis by the DefendantHearing Hearing dates: 18-19 October 2023
Approved JudgmentI direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic..............................INSOLVENCY AND COMPANIES COURT JUDGE BURTONICC Judge Burton :
[1]The Secretary of State seeks, by claim form issued on 1 March 2022, an order to be made against Nyema Chima James (“Mr James”) pursuant to section 6 of the Company Directors Disqualification Act 1986 disqualifying Mr James from acting as a director or being concerned in the management of a company for a period of 12 years.[2]The allegations of unfitness made against Mr James are set out in the first and second affidavits of Robert Thomas Sheils, a Senior Investigator in the Companies Investigations team at the Insolvency Service dated 25 November 2021 and 17 November 2022. His first affidavit explains that the disqualification order is sought by reference to Mr James’s conduct as a director of Tundrill Limited (the “Company”). The Secretary of State is of the opinion that Mr James is unfit to be concerned in the management of a limited company by reference to the following matters: i) On 16 May 2020 Mr James caused the Company fraudulently to apply for a bounce back loan of £15,000 (the “BBL”) and used at least £13,000 of the funds for his personal benefit when he knew or ought to have known that the Company was not eligible for the loan in that: a) on 1 May 2020 a petition was filed at court to wind up the Company; b) when submitting the BBL application form on behalf of the Company, Mr James certified that the Company’s turnover was £65,000 whereas its bank records show that for the year ended December 2019, its income was £3,992; c) following payment of the BBL into the Company’s bank account on 20 May 2020, five days later, on 25 May 2020 £2,000 was transferred to Mr James’s personal account and on 27 May 2020 a further £11,000 was paid to Mr James as salary; d) the Company was not eligible for the BBL as(i) the amount loaned was based on the provision of a false turnover figure,(ii) the Company was subject to a winding-up petition at the date of the application; and(iii) the loan was used for personal purposes and not to bring economic benefit to the Company; and e) the BBL has not been repaid.[3]In his second affidavit, Mr Sheils explains that following further enquiries of the petitioning creditor, he learned that whilst the winding-up petition was indeed filed with the Court on 1 May 2020, it was not served on the Company until 1 June 2020. Consequently, the Secretary of State accepts that when Mr James applied for the BBL on 16 May 2020, he would not have been aware that the petition had been issued, nor of the date of the hearing, nor would he have been aware of the same when he transferred the £2,000 and £11,000 to his personal account. The affidavit explains that the Secretary of State relies instead on Mr James being aware that: i) a statutory demand dated 27 February 2020, was served on the Company; ii) on 23 March 2020 the Company received formal notification of the assignment of the debt on which the petition was subsequently based,; and iii) formal demand for payment of £20,816 was sent to the Company on 31 March 2020.[4]Mr James denies any conduct which makes him unfit to be a director or concerned in the management of a company. He maintains that: i) the BBL application was made in good faith; ii) the Company suffered a severe set back as a result of the Covid-19 pandemic; iii) he did not know at the time the application was made, nor when the loan monies were received, that a winding-up petition had been issued against the Company; iv) he relied on the advice of the Company’s accountant regarding the Company’s eligibility to apply for the BBL by reference to projected as opposed to actual turnover; v) the projected turnover stated in the BBL application form was realistic; vi) were it not for the Covid-19 pandemic the Company would have reached and exceeded the figures provided for projected turnover which can be seen not to have been unrealistic as Mr James states he has already exceeded the projected annual turnover; vii) the Company’s accountant completed the online application form; and viii) the BBL was used for legitimate Company purposes.

Background

[5]Mr James was a director of the Company since its incorporation on 4 December 2015. Between 2015 and June 2019, three other individuals were appointed and resigned as directors, none holding office for more than two years. Mr James was the Company’s sole director when it was wound up by the court.[6]In both his written answers to the Official Receiver’s preliminary information questionnaire and during a telephone interview with Ms Brooker, a member of the Official Receiver’s staff, Mr James described the Company’s business as management consultancy and real estate.[7]The Official Receiver and the Secretary of State’s investigators come as strangers to an insolvent company. Much of their knowledge of the background to a company’s affairs is provided by the company’s directors and creditors. During his interview with Ms Brooker on 27 August 2020, Mr James provided further information about the circumstances leading to the Company’s liquidation. Ms Brooker provided a note summarising the information given to her during the interview (the “Interview Statement”).[8]Before addressing the information set out in the Interview Statement, it is appropriate that I record that in his affidavit dated 20 October 2022, Mr James states that during his telephone interview with Ms Brooker he felt:
“pressurised by the persistence of her leading questions. It appeared to me that Megan Brooker had a planned direction in which she wanted the interview to go and it felt like she was bent on pushing me to accept a degree of fault.”
[9]He also complained that: “I do not accept the details within that statement to be factual. I was not given an opportunity to review Megan Brooker's notes from the telephone meeting. She also gave me the impression that I had to accept her conclusion, in order to lessen any adverse impact that the matter may have on me. I believe she handled this matter unfairly and in contradiction to the conduct expected of an individual in her capacity at the time of the interview”.[10]When giving evidence during the trial, Mr James again stated that he felt Ms Brooker asked leading questions and that he felt under pressure to accept and sign the Interview Statement. He said that in hindsight he did not understand the potential consequences of signing it and that there were “areas I didn’t agree with”.[11]However, I also note that on 19 August 2020, Ms Brooker sent Mr James a copy of the Interview Statement and asked him to advise whether it contained any errors. Having received no reply, she wrote again on 25 August 2020. On that occasion, Mr James replied requesting an amendment. Ms Brooker sent Mr James the amended statement on 26 August 2020 and he returned it, signed at the bottom of each page. The document clearly sets out on the first page, section 5 of the Perjury Act 1911 and the following:
“The attached statement, consisting of 3 pages has been read by me and I confirm that it is true to the best of my knowledge, information and belief. I confirm that I made this statement after Section 5 of the Perjury Act 1911 was read by me and that I understood its meaning.”
[12]During cross-examination, Mr James confirmed that he understood the meaning and purpose of a statement of truth and the consequences of signing a document incorporating a statement of truth. Consequently, in my judgment at the time Mr James returned the signed Interview Statement to Ms Brooker, he was content that the information provided by him and set out in it was accurate. It provides helpful background information:
“I set up Tundrill Ltd in 2015 when I saw a gap in the market for management consultancy around tunnelling and ground engineering. The idea was to assist companies that wanted to expand into this market abroad, but didn't have the resources, knowledge or contacts. I had left a job at Santander to concentrate on Tundrill Ltd full time. Whilst trying to build up this business, and in order to supplement the company's income, I also got involved with the marketing of real estate. I didn't advertise the real estate marketing side of the business; but used my network of contacts. When Mrs Hla joined the company she also brought with her a network of contacts that I used, and I was picking up business here and there. However, neither the management consultancy or real estate market made any profits -just enough to keep the company going. I met Mrs Hla several years ago when she wanted some support on an issue she was having with an estate agency with whom she had a rental property. We had a mutual friend who introduced us. She showed a keen interest in us doing business together. Her idea was to connect UK businesses with businesses in Myanmar in Burma (where she is from) and take an introduction fee. She asked to become a director of Tundrill Ltd and was going to manage its administration. She was also going to be Tundrill's representative in Asia. Mrs Hla had a commercial premises in London and wanted us to set Tundrill Ltd up there to trade out of. My Aunt had a residential property in Stratford that I was marketing, so we were picking up work here and there. I also got into contact with Russell Quirk, one of the Directors of Keller Willams Ltd, to set up an arrangement where Keller Williams would set up a website and supply marketing materials for the real estate side of the business. However, Tundrill Ltd has not made any profit since its incorporation. In April 2018 Mrs Hla agreed to invest £15,000 in the business. We talked about a 30% return on her investment as well as a directorship and a 15% stake in the business - although I am not sure this 15% was ever formalised. Mrs Hla become a director but within three months she resigned. I am not sure why and I still don't understand why she did this. I assume she took advice on it. However, she still continued to engage with me as a partner, so not much really changed - she was just not officially a director any more. l have a law degree and I am still a licensed paralegal, so I drew up an agreement with Mrs Hla for the investment. At that time of drafting the contract there were opportunities with Tundrill Ltd for the brokering of crude oil. I was speaking to a director of Nigerian National Petroleum Corporation (NNPC) to secure a meeting where we get the requirements for us to act as a licensed NNPC broker. I showed Mrs Hla details of projects we had been involved with in Cameroon prior to her investing, and her £15,000 investment paid for business trips to Abuja in Nigeria for meetings and information gathering. I didn't manage to secure a meeting with the director of NNPC, but I found out what requirements a potential broker needed to have in order to enter the bid to become licenced. This bid happens once a year but Tundrill Ltd did not have all the requirements needed at the time (such as a minimum annual revenue) so we spoke to other companies about a joint venture, but it came to nothing. Mrs Hla felt at the time that my contacts would be enough for Tundrill Ltd to enter into a joint venture with another company that had the credentials needed to obtain a license. Had Tundrill Ltd not been wound up then I am confident we would have obtained this NNPC license. I was not as organised as I should have been and Tundrill Ltd paid for some of the business trips and some I paid for myself. Those l paid myself I paid with a view to the company paying me back once it had the funds to do so. I never disputed the fact that the return of at least £19,500 was due to Mrs Hla in April 2019, but the company was unable to make the payment on the date agreed. I made 3-4 small payments of £100 or so to Mrs Hla from my own funds to show her that I was still committed to the agreement. In Jan 2020 Mrs Hla and I had conversation about setting up a supporting contract that would allow for the return on her investment due to be paid in instalments. However, we never put finalised it. I think by this time she was in contact with the Insolvency & Law Ltd and I think they advised her not to do this. I received the emails including the Deed of Assignment and formal demand from Insolvency Law Ltd on 31 March 2020 however I didn't respond to them or challenge as I was not comfortable with them contacting me. Mrs Hla called me and stated that she hoped the matter could be resolved. I believe Insolvency Law Ltd took advantage of her and did not talk to me about getting the debt paid. I had a telephone conversation with my accountant Egbert Blackman, but he said he wasn't an expert in insolvency matters and wasn't sure how to proceed. He said it wasn't necessary to attend winding up hearing however I did attend. I have been asked about how the investment monies from Mrs Hla were used and have been emailed statements from the company Barclays account. These show that, after Mrs Hla's payment of £15,000 was paid in on 25 April 2018, I made a payment of £4,900 the same day to my personal account. I made another payment of £8,000 on 22 May 2018 also to my personal account. I paid myself these monies as I didn't have any other source of income, and to repay expenses I had made for the business from my own funds. I have been asked how the £15,000 was intended to further the business when the majority of the monies were paid into my bank account. This was to ensure I could survive as an individual, but I accept I would have done things differently. There was no intention to manipulate and this was an error of judgement. I had not kept a tally of my own money that I was spending on the business due to poor management, and I am not sure how I arrived at the £4,900 and £8,000 figures. l can provide evidence of expenditure from my own accounts, but I don't know that they will tally with these amounts. I admit that I did not keep proper records. I kept receipts, but that was it.”
[13]Mr James referred during the interview to Mrs Hla advancing £15,000 to the Company. The terms of this arrangement are set out in a contract drafted by Mr James, who describes himself at Companies House as a corporate lawyer. The agreement is called a “Mutual non-disclosure non-circumvention and partnership agreement” and is dated 26 April 2018 (the “Hla Agreement”). The Hla Agreement provides for Mrs Hla to be entitled to a 30% return on her £15,000 investment plus, “from time to time, special commissions and bonuses for business opportunities”. It also provides for “compound interest of £4,500 plus the original £15,000” to be repaid on 1 April 2019.[14]The repayment due on 1 April 2019 was not made.[15]It appears from the documents exhibited to Mr Sheils’ second affidavit that Mrs Hla instructed solicitors, Statutory Law Ltd in Knutsford who prepared a statutory demand addressed to the Company and dated 27 February 2020. The demand claims £19,200 (the amount due to be repaid on 1 April 2019 less £300 received from Mr James) plus interest and a service fee, totalling in all, £20,862.15. There is no evidence of the statutory demand having been served on the Company.[16]On 23 March 2020 a letter was sent on behalf of Mrs Hla to the Company headed “Formal Notice of Assignment of Debt” stating that £20,862.15 plus interest and costs, defined together as “the Debt” was due and outstanding to Mrs Hla and that with effect from 23 March 2020, the Debt had been assigned to Insolvency & Law Limited (“I&L”). The notice concluded with directions for payment in cleared funds to I&L’s account with Barclays Bank.[17]I&L wrote to the Company again on 31 March 2020. This time the letter was headed “Formal Demand of Assigned Debt”. The letter states that despite repeated requests for payment by Mrs Hla, the Debt remained due and payable. The letter concludes with a warning that I&L reserved all its rights, in the event that payment were not made within three business days, to take legal proceedings against the Company and/or to pursue any available remedies without further recourse to the Company including the immediate commencement of winding-up proceedings.[18]As part of a government initiative during the Covid-19 pandemic, companies could apply to borrow up to 25% of their turnover by way of a “bounce-back loan” (a “bbl”). The application would be made to a participating bank and whilst, subject to certain checks, the bank would be responsible for advancing the loan, its repayment would be guaranteed by the government. No repayments would be due for one year.[19]On 16 May 2020, the Company applied for a bbl with Starling Bank. Mr James appears to have signed the loan agreement on 19 May 2020 and on 20 May 2020 the BBL was paid into the Company’s bank account. Whilst Starling Bank has not been able to provide a copy of the online application form, by email dated 16 November 2020 it informed one of the investigators working with Mr Sheils that the figure provided as the Company’s turnover to support its bbl application was £65,000.[20]The Company was served with I&L’s winding-up petition on 1 June 2020 and the court made a winding-up order on 8 July 2020.[21]At the time of its liquidation, Mr James informed the Official Receiver that the Company had issued and paid-up capital of £100, no assets and liabilities of £39,254.

Procedural background

[22]On 24 December 2020, the Insolvency Service sent a letter to Mr James pursuant to section 16 of the Act setting out the grounds upon which the Secretary of State considers him to be unfit to be concerned in the management of a limited company, and notifying him of his intention to commence disqualification proceedings against him. The letter explained the basis of the proposed proceedings, which were later repeated in the claim form. The letter includes the usual notice explaining the procedure to be followed if Mr James wished voluntarily to offer a disqualification undertaking.[23]No reply was received. On 6 August 2021 an email was sent to Mr James reminding him that court proceedings were being prepared but that it remained open to him to offer an undertaking.[24]The first hearing of the claim, which Mr James attended in person, took place on 17 May 2022. On that occasion an order was made providing that unless Mr James filed evidence in answer by 21 June 2022, he would be debarred from relying on any evidence in these proceedings without the permission of the Court.[25]Whilst not complying with the Court’s directions, Mr James filed a letter, received by the Claimant on 20 June 2022. On 4 October 2022, the Court made a further unless order requiring Mr James to file and serve evidence in the form of an affidavit by 18 October 2022. Mr James served an undated, unsworn affidavit on 11 October 2022 and, whilst it was not in the bundle, it does not appear to be in dispute that Mr James eventually swore a copy of the same document on 20 October 2022. This post-dated the deadline set by the latest debarring order. However the Claimant did not object to Mr James relying upon it as evidence.

Relevant Law

[26]The relevant legal principles were not in dispute. Section 6 of the Act provides insofar as relevant: “(1) The court shall make a disqualification order against a person in any case where, on an application under this section (a) the court is satisfied— (i) that the person is or has been a director of a company which has at any time become insolvent (whether while the person was a director or subsequently) … (b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of one or more other companies or overseas companies) makes him unfit to be concerned in the management of a company. (1A) In this section references to a person’s conduct as a director of any company or overseas company include, where that company or overseas company has become insolvent, references to that person’s conduct in relation to any matter connected with or arising out of the insolvency. (2) For the purposes of this section, a company becomes insolvent if – (a) the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up… … (4) Under this section the minimum period of disqualification is 2 years, and the maximum period is 15 years.” …[27]Consequently, to satisfy the requirements of section 6, the Secretary of State must show that Mr James was: i) a director, ii) of a company which became insolvent (as defined in section 6(2)), iii) whose conduct as a director of that company makes him unfit to be concerned in the management of a company.[28]Schedule 1 to the Act sets out the matters to be taken into account when determining unfitness:
“Matters to be taken into account in all cases 1. The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement; 2. Where applicable, the extent to which the person was responsible for the causes of a company or overseas company becoming insolvent; 3. The frequency of the conduct of the person which falls within paragraph 1 or 2; 4. The nature and extent of any loss or harm caused, or potential loss or harm which could have been caused, by the person’s conduct in relation to a company or overseas company; Additional matters to be taken into account where person is or has been a director 5. Any misfeasance or breach of duty by the director in relation to the company or overseas company; 6. Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company; 7. The frequency of conduct of the director which falls within paragraph 5 or 6”
. Additional matters to be taken into account where person is or has been a director[29]Section 6(1) of the Act provides that if the Court is satisfied that a defendant to disqualification proceedings comes within section 6, it must make a disqualification order. Section 6(4) provides that the minimum period for such an order is 2 years, and the maximum is 15 years.[30]In Re Grayan Building Services Ltd [1995] Ch 241, at paragraph 253 of his judgment, Hoffmann LJ said that the test is essentially:
“whether that conduct, viewed cumulatively and taking into account any extenuating circumstances, has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies.”
[31]The Court must decide whether the conduct complained of makes the defendant unfit, and not whether it is more generally in the public interest that a person be disqualified. The question is whether the evidence of the director’s past misconduct makes him unfit, not whether the defendant is likely to behave wrongly again in the future (see Secretary of State for Business Innovation and Skills v Chohan [2013] EWHC 680 (Ch)).[32]Ms Cooke referred to the recent decision of Chief ICC Judge Briggs in Secretary of State for Business, Energy and Industrial Strategy v Deea Construction Ltd [2023] EWHC 2084 (Ch), in which the Secretary of State similarly claimed that the defendant was liable for providing false and inaccurate information about Deea Construction Ltd’s turnover when applying for a bbl and that the defendant failed to use the loan monies for the company’s economic benefit but used them instead for his own benefit. In that case the loan was for £50,000 and the defendant’s signed statement of affairs in the company’s subsequent liquidation showed a deficiency to creditors (including the loan) of £92,000. The defendant did not defend the claim and judgment was given at an uncontested disposal hearing. Chief ICC Judge Briggs found that on the balance of probabilities the Secretary of State had made out her case. He stated:
“20. The director knew or should have known that Deea Construct did not have a turnover of £200,000 at the time the company applied for a loan. It was either incompetent not to have ensured that the representation made to Santander was accurate at the time it was made or worse deceitful. Deea Construct obtained a loan that it was not entitled to by making a false representation as to turnover. Furthermore, the false representation was made at a time when the government placed trust and confidence in directors of companies for the purpose of honestly representing their financial status in order that they may obtain financial support to allow companies to be maintained and survive government-imposed restrictions to social and business movement of people. 21. The loan obtained under the special scheme was not used for the purpose for which it was made. The loan advanced was not spent on corporate survival but personal gain.”
[33]The Chief ICC Juge concluded his judgment saying:
“30. If the 1986 Act is to have teeth, act as a deterrent, maintain the ambition of improving standards while protecting society from misbehaving directors taking them off the road to prevent them from inflicting further harm on society through their continued involvement in the management of companies, then Mr Ghimpu should be disqualified for a long period. The appropriate period, in my view, is 13 years.”
Witness evidence Mr Sheils

Witness evidence

[34]Mr Sheils has no direct knowledge of the facts leading up to the Company’s insolvency. He gave his evidence on the basis of the documents available to him from public records, documents provided by the Official Receiver and further information provided in reply to enquiries carried out by the Insolvency Service. Mr Sheils explains in his first affidavit that to the extent that he expresses opinions, in particular about accountancy matters, he is not purporting to give, nor holding himself out as being qualified to give expert evidence.[35]My impression of Mr Sheils as a witness was that he engaged honestly with the questions put to him, providing answers that were consistent with his evidence in chief. However he appeared to be reluctant to apply an open mind to questions that required him to contemplate an alternative interpretation of the documentary evidence that could potentially support Mr James’ account of the circumstances surrounding the Company’s application for the BBL. Consequently, I found his answers, on occasion, to be inappropriately defensive. One example arose when Mr Wise-Walsh asked Mr Sheils whether he accepts that if Mr James had been given and relied on advice from the Company’s accountant, Mr Blackman, that when applying for a bbl, the Company could rely on projected turnover figures, then it would not be correct to characterise the Company’s application for the BBL as dishonest. Mr Sheils refused to engage with the question. His reply rigidly relied on the information set out in a letter dated 28 October 2020 from Mr Blackman to one of Mr Sheils’ fellow investigators, Mr Wright. On 15 October 2020, Mr Wright put the following questions to Mr Blackman:
“I understand that advice was sought from you with respect to the company obtaining a government backed "bounce back" loan intended to assist businesses detrimentally affected by the Covid-19 epidemic. If this is correct, I will be grateful if you would advise: (i) Who requested the information and when? (ii) What information were you provided with about the company's financial position on which to base your advice? (iii) What did you understand the purpose was to which the loan was to be applied? (iv) What was the advice given and when?”
In his reply dated 28 October 2020, Mr Blackman stated: “I was contacted in order for me to explain the government backed ‘bounce back’ loan and this was explained thoroughly with Mr James. He was told to go to the government website where he can find all the necessary information. I did not give any advise as to whether he should apply as I was not privileged to the accounts for the year ended 30/11/19 as mentioned above.” (sic)[36]Mr Sheils’ reliance on Mr Blackman’s statement that he did not advise Mr James whether he should apply for the BBL, appeared to be absolute. That remained the case throughout cross-examination, despite conceding that: i) there is a difference between(a) giving advice as to whether a company should apply for a loan, and(b) advising how the application should be completed once the decision whether or not to apply for it has been made; and ii) the Claimant’s investigators do not appear to have made further enquiries of Mr Blackman.

Mr James

[37]Mr James’s affidavit sworn on 20 October 2022 comprises only two pages. It did not exhibit any documents. Up to the commencement of the trial, no application was made to adduce further evidence. The night before the first day of trial, Mr James - who I understand, up to that point, had represented himself - instructed counsel, Mr Wise-Walsh. At the start of the trial, Mr Wise-Walsh advanced an informal application pursuant to CPR 32.5, for Mr James to be permitted to amplify his evidence. The application was resisted by the Secretary of State. For the reasons given in a short, separate judgment, I permitted the evidence in these public interest proceedings, to be amplified, strictly by reference only to the matters raised in Mr Sheils’ second affidavit.[38]Save where his evidence is consistent with reliable contemporaneous documents, or the inherent likelihood of the situation, I am unable to find that Mr James was a satisfactory or reliable witness. During cross-examination, there were several occasions when his evidence was shown to be directly contradicted by the documentary evidence. The first example concerns a statement in his affidavit that he was not given an opportunity to review the Interview Statement. When referring to the Interview Statement in the background section of this judgment I noted that the documentary evidence clearly shows that Ms Brooker emailed a draft version of the Interview Statement to Mr James, asked him to confirm whether he wanted to make any changes and Mr James replied, requesting just one amendment. Mr James conceded that that amendment was incorporated before he signed the Interview Statement. He also confirmed that when he signed the Interview Statement, he knew it contained a statement of truth and that he understood the effect of signing a statement of truth. He nevertheless persisted in disputing the accuracy of the Interview Statement without, at any time prior to cross-examination, explaining what he considered not to be correct.[39]During cross-examination he referred to a telephone call with Ms Brooker and “Sarah” both of whom he said had put him “under immense pressure”. He said that he recalled them stating during one call that the loan had been taken out fraudulently. He said that he only latterly realised that he “could have sought further clarification and not signed it at the time”. Ms Cooke highlighted that the Interview Statement does not include, anywhere, the words “fraud” or “fraudulently”, nor any other suggestion that the BBL was taken out fraudulently: the bulk of the Interview Statement sets out Ms Brooker’s summary of the information provided by Mr James in relation to the monies originally due to Mrs Hla that were subsequently assigned to I&L, not the BBL. Mr James appeared to acknowledge this, but persisted in saying that he “should have sought clarification”.[40]A second example can be seen in the answers provided by Mr James to the Official Receiver’s questionnaire. His response to a question asking when the Company first became aware that it was unable to pay its debts, stated:
“The company always fulfilled its credit arrangements. The matter which led to the insolvency case is in dispute.”
This is entirely contradicted by his own evidence that he does not dispute, and continues to recognise, the Debt due to Mrs Hla that was subsequently assigned to I&L.[41]A third example centres around the reasons given by Mr James for transferring money from the Company’s account to his personal account. He said twice during cross-examination, that he used his personal account to meet the Company’s expenses because, as a challenger bank, Starling did not provide a debit card and that he remembered only being able to use the account for online payments. When I drew his attention to the Starling Bank account statements which include “chip and pin” transactions, he accepted that in fact, the Company did have a Starling Bank debit card.[42]A fourth example can be seen in the Interview Statement that records Mr James saying that he did everything in his power to pay the Debt. This immediately struck me as at odds with a statement in the same document where he described receiving the BBL of £15,000 and transferring £13,000 of it to his own account, leaving approximately £1,300 in the account. Neither transferring the money to his own account, nor leaving the balance in the account are consistent with him apparently doing “everything in his power” to pay the Debt.[43]A fifth incident arose during cross-examination. Mr James claimed that the BBL monies transferred to his account were applied for the Company’s benefit. He was asked whether he meant that they were used to repay debts already owed to him by the Company or to enable him to use the money in order, prospectively, to advance the Company’s business. He replied that it was a mixture of both, as some of it was used to repay sums due to him. Ms Cooke asked whether he recognised that it could not be said to be in the Company’s best interests for the BBL monies to be used to discharge historic debts due to him personally. He then said that the monies were mainly used for the benefit of the business going forwards. Ms Cooke highlighted that this directly contradicted the information he gave to Ms Brooker, set out in the Interview Statement bearing a statement of truth in which he is recorded as saying:
“I paid £11,000 of the funds to myself as director’s pay (as I had been funding the company) and some of the rest went towards the company Barclaycard.”
[44]Hindsight featured heavily in Mr James’s evidence. He stated that with the benefit of hindsight he would have: i) corrected the Interview Statement, in particular he would not have described his efforts to procure a trading licence with the NNPC as ultimately coming to nothing. He has nevertheless not provided any evidence of those efforts being fruitful; ii) expanded upon his affidavit evidence and provided documents to support it; iii) ensured that he received a written note of Mr Blackman’s advice that the Company could apply for the BBL in reliance upon its projected turnover; iv) independently scrutinized the advice that he claims Mr Blackman gave regarding reliance on projected turnover; v) done things differently to ensure that the Company’s finances were healthy and that it made a profit for the benefit of those who invested in it; vi) kept better financial records to show what amounts he personally spent on the Company’s behalf; vii) not “deflected responsibility” to his accountant to allocate correctly items of personal and business expenditure; viii) obtained more clarity from Mr Blackman as to how the BBL monies could be used; and ix) better identified the use to which he put £13,000 of the BBL after transferring it to his personal account.[45]Mr James’s written and oral evidence referred opaquely to how successful he has been since a winding-up order was made against the Company. However, he has provided no documentary evidence to support these or any of the other assertions set out in his affidavit.[46]During cross-examination, Mr James referred to his robust network of contacts in Nigeria, of his ability “to secure a deal over a coffee” so that if a refinery in Great Britain was seeking to import barrels of oil from Nigeria, by using his contacts he would be able to get the refinery the best possible price. He said that such deals can be concluded reasonably quickly. He appeared to recognise that due to the Company’s inability to meet the NNPC’s financial requirements, it was not in a position to obtain a NNPC licence. However, he asserted that he had been engaged in conversations with prospective joint venture partners and that at the time the Company entered liquidation, there was a real prospect of entering into such a joint venture with a suitable business partner. Consequently, it is his case that by combining his network of contacts and skills with the financial backing that a desired partner could provide, the Company would readily have achieved the projected £65,000 turnover figure relied upon to obtain the BBL.[47]I find it striking that despite Mr James’s apparent conviction that such turnover could be achieved, apparently in short order, he seems also to have held the same belief when entering into the Hla Agreement in 2018 that required the Company to be in a position to repay her advance, together with compound interest, within less than two years. It failed to do so and despite Mr James’s professed conviction that within 12 months, with only £1,300 in the Company’s bank account, he could readily have achieved turnover of at least £65,000 – and has done so since - he has provided no evidence of such turnover nor that he has been able, since then, to secure an arrangement with an appropriate joint venture partner. His affidavit suggests that he has chosen to pursue an entirely different line of work. He states:
“Since August 2021, I have been a key part of the management board of a company that has positively benefited the public. The company is an employer of labour and has continued to provide a source of income to at least ten British workers.”

Analysis

[48]The first two requirements of the Act are met: i) Mr James was a director of the Company from its incorporation until it entered liquidation; and ii) it does not appear to be in dispute that at the time the winding-up order was made, there was a deficiency to creditors of at least £39,354. Consequently I am satisfied that at the time of the winding-up order, the Company was insolvent not only on a cash flow basis, evidenced by its failure to pay the petition debt, but also on a balance sheet basis.[49]The next issue for the Court to determine is whether, as claimed by the Secretary of State, Mr James fraudulently applied for the BBL. The burden of proving that Mr James made a fraudulent application lies with the Claimant.[50]Parts of the Claimant’s case rely on the information set out in Mr Blackman’s letter of 28 October 2020. Important parts of that information directly conflict with Mr James’s evidence. Mr James stated in cross-examination that he believes Mr Blackman lied. The Court would have been greatly assisted in determining the Secretary of State’s claim, if the information in the letter had been confirmed in evidence from Mr Blackman and if that evidence had then been tested by cross-examination. Its omission is striking, surprising and unhelpful. Did Mr Blackman advise Mr James regarding the eligibility requirements for the loan?[51]In my judgment, the Secretary of State failed to undermine Mr James’s evidence that he asked Mr Blackman to advise in further detail regarding the eligibility requirements for a bbl. It is Mr James’s case that he looked first at the Government’s website but then consulted Mr Blackman for further clarification. In my judgment, his sworn evidence on this point is supported by Mr Blackman’s letter dated 28 October 2020 in which Mr Blackman states: “I was contacted in order for me to explain the government backed bounce back loan and this was explained thoroughly with Mr James”.[52]Mr Blackman proceeds to say that Mr James was told to go the Government website “where he can find all the necessary information”. However, the eligibility requirements set out in the information included in the trial bundle from the Government’s bbl website focus on the type of business, it being engaged in trade but not, for example, a school or insurance company, it not having applied for another bbl and it not being in liquidation or debt restructuring proceedings. In relation to the turnover requirement, it simply states that: “the lender will ask you to fill in a short online application form and self declare that you are eligible. …The scheme helps small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan is £50,000”.[53]Notably, the extracts from the Government’s website included in evidence, do not provide any further explanation of the relevant period by reference to which an applicant’s turnover should be calculated. In my judgment, its absence is consistent with Mr James requiring further clarification, which he says he sought from Mr Blackman. Was the further clarification provided by Mr Blackman to the effect that the Company could rely on projected turnover?[54]Mr Blackman said in his letter dated 28 October 2020 that he did not give Mr James any advice as to whether he should apply for a bbl as he “was not privileged to the accounts for the year ended 30/11/19”. Mr Sheils’ written evidence summarises this part of Mr Blackman’s letter as follows:
“… a reply was received dated 28 October 2020 stating that no advice was given in respect of the Bounce Back Loan application other than where to look on the internet. Blackmans stated that they were not appointed to prepare the 2019 accounts and had no knowledge of the turnover.”
[55]Mr Wise-Walsh highlighted in cross-examination that Mr Blackman’s statement that he did not give any advice whether the Company should apply for a bbl is not the same as Mr Blackman saying that he did not give any advice at all to Mr James in respect of the bbl scheme, including possibly the criteria that the Company would need to meet in order to be eligible to apply.[56]The trial bundle includes the detailed information set out on Starling Bank’s website for prospective applicants for bbls. Under the heading “How much can I borrow?” the website states: “You can borrow up to 25% of your turnover in 2019 (minimum £2,000, up to a maximum of £50,000). If your business was established in 2019 or 2020, you can use your estimated annual turnover from the date you started your business”.[57]Mr James was asked during cross-examination when he first saw this statement. He replied that he may have seen it “in passing” when he first called Mr Blackman to get his advice. When asked whether he could remember having read it before the BBL application was made, he replied that he had seen it before the application was submitted but he wanted advice to see what was possible and what was not. He denied that Mr Blackman had simply told him to go to the Government website to find all the necessary information.[58]The BBL agreement dated 19 May 2020 bearing Mr James’s electronic signature provides, as a condition precedent, that the borrower satisfies the eligibility requirements of the bbl scheme and evidences it to Starling Bank’s satisfaction.[59]Starling Bank was not able to provide a copy of the online application form submitted on the Company’s behalf. A member of the Business Lending Team at Starling Bank informed the investigators by email dated 16 November 2020 that the annual turnover figure supplied in the Company’s application form was £65,000 but that: “It is not noted whether this is actual or projected turnover”.[60]Mr James states that his signature was applied electronically to the application form by Mr Blackman who had access to the signature via his access to the Company’s account with Starling Bank. He provided no documentary evidence to support this statement.[61]No evidence was tendered by the Secretary of State to undermine Mr James’s account of the advice that he sought from Mr Blackman, the advice that he says he was given, nor who completed the application form on behalf of the Company other than Mr Blackman’s brief letter, the contents of which are not supported by a statement of truth from Mr Blackman.[62]In my judgment, the Secretary of State has failed to meet the burden of proof, to the required standard, to undermine Mr James’s sworn evidence that Mr Blackman advised him that the Company could rely on projected turnover or to show that Mr James should have been aware that the only turnover figure relevant for companies that had been trading for several years was the figure for the most recent calendar year. Did Mr James fraudulently state (or authorise Mr Blackman to state) in the application form that the Company’s projected turnover was £65,000?[63]Mr James acknowledges that, as the Company’s sole director, having authorised Mr Blackman to complete the application form on behalf of the Company and to enter into the loan agreement on behalf of the Company by applying Mr James’s electronic signature to it, he remains responsible for the accuracy of the information provided in the form.[64]He said during cross-examination that he originally thought of applying for £8,000 to £10,000 but that it was Mr Blackman who suggested that he apply for a £15,000 loan. Mr James said that Mr Blackman arrived at this figure following several conversations with him about the prospects of winning work from the NNPC. My note records Mr James saying:
“There were conversations about the realistic prospects and he felt £65,000 was a realistic projection”
. Mr James stated that crude oil deals are worth millions of dollars and that just winning one such contract would have resulted in the Company far exceeding projected turnover of £65,000. Ms Cooke asked Mr James to confirm whether Mr Blackman was provided with any documentary evidence to confirm Mr James’s projections. Mr James simply replied that he has now learned that every conversation needs to be “backed up”.[65]Again, the Court would have been greatly assisted by Mr Blackman’s evidence on this point. However, even without it, for the following reasons, I have concluded that on the balance of probabilities, when submitting or authorising the submission of the application form, Mr James knew or ought to have known that the Company had no realistic prospect of achieving £65,000 in turnover for the next year but nevertheless made or authorised the BBL application and permitted the BBL to be paid to the Company before transferring the bulk of the funds to his own account. i) Even after receipt of the BBL, just a few days later, the Company only had £1,300 in its account: almost no money to entice a joint venture partner to choose to work with it, nor to fund the expenses of travelling to Nigeria and staying there whilst organising meetings with prospective joint venture partners and/or the NNPC. ii) Despite Mr James’s apparent confidence that at the time the Company was put into liquidation it was on the brink of success, Mr James has provided no verifiable information concerning the identity of potential joint venture partners, let alone the identification of one such partner that was ready, or even close to being prepared to work together with the Company. iii) There is no evidence before the Court to help it to understand how long it might take to put in place first the joint venture arrangements, once a suitable partner had been found, secondly to obtain with that partner the requisite licence and thirdly to attract clients and business. The Interview Statement records Mr James saying that at the time the Company entered into the Hla Agreement there were opportunities for the Company to broker crude oil contracts. He failed to obtain a licence or a joint venture partner to achieve this during the period of the Hla Agreement and very little appears to have changed since the date on which the sums due under that agreement became repayable. iv) There is no evidence before the Court that Mr James has been able to secure a joint venture partner since the Company entered liquidation. The only difference between him pursuing the pot of gold that he claims would have been readily attainable using the Company as the vehicle for a NNPC joint venture, if it had not entered liquidation, instead of any other company, appears to be that following receipt of the BBL, the Company had £1,300 in its bank account. However it was also saddled with significant debts (now swelled by the BBL) and was being chased for the Debt urgently to be repaid. v) Rather than pursuing such lucrative opportunities via another company unburdened by debts, Mr James appears to have abandoned altogether his business proposals that concern NNPC. He appears, from the vague description of his current work, now to be involved in some other line of work. In my judgment, this undermines Mr James’s evidence regarding his own belief in the value of his personal network that he claims, were it not for the Company’s liquidation, would so easily have secured lucrative work for the Company with NNPC-related work. vi) I do not consider it to be objectively credible that a trained accountant in Mr Blackman’s position would be prepared to submit, on behalf of a client, a finance document that included a figure for projected turnover for which there appears to have been no supporting evidence beyond Mr James’s assertions regarding the strength of the personal relationships that he professes to hold but of which he has provided no details nor supporting documentary evidence of any kind. vii) Mr James was already aware that the Company had defaulted in its obligation to repay the £19,500 due to be repaid on 1 April 2019 under the Hla Agreement. Whilst there is no evidence before the Court that the statutory demand dated 27 February 2020 was served on the Company (other than a letter from I&L saying that it was (despite I&L not apparently having any direct knowledge of the matter themselves)) Mr James was nevertheless aware that the Company had no immediate means to pay such a debt. And from at least 31 March 2020 when I&L demanded payment, he was aware that the Company was under threat of a winding-up petition being presented. He was also aware, on his own evidence, that he was then in no immediate position to apply to obtain a licence to work with the NNPC. He was hoping to find a partner with whom jointly to apply for such a licence, but he has not identified any such viable partner willing and able to enter such an arrangement at the time of the application for the BBL. His aspiration to obtain such a licence and to gain work from the Corporation was, in my judgment, nothing more than that, a mere hope, and one which he should have realised the Company was in no position to secure. viii) As the Company’s sole director and having signed its accounts, he should have been aware that its turnover during the past 2 years did not exceed £5000 and that the Company had made a loss during the past 2 years. Although Tundrill did not prepare formal accounts for its year ending November 2019, the Investigator’s examination of the Company’s bank account demonstrates that its total income for the year December 2018 to November 2019 was £3,992. Excluding the bounce back loan, total income for the period December 2018 to July 2020 was £6,165. ix) Mr James’s failure to provide any evidence to demonstrate how, realistically the Company could increase its turnover 13 fold when it had almost no working capital available to it and was saddled with a significant and pressing debt, leads me to conclude that he did not hold a genuine belief that it was possible, let alone likely to happen. x) The Government’s website information regarding bbls, which Mr James confirmed he read, very clearly stated that businesses would be required to declare that:
“They will use the loan only to provide economic benefit to the business, and not for personal purposes, they have understood the costs associated with repayment of the loan and that they are able and intend to complete timely repayments in future.”
In my judgment, Mr James consequently knew or ought to have known that applying £13,000 of the funds towards discharging debts which he claims to be due to him, but which he has entirely failed to specify or document, was in breach of the terms of the bbl scheme. The loan was not used to procure the Company’s survival. It was sought at a time when the Company was already under threat of winding-up proceedings and the monies were almost immediately diverted for Mr James’s personal benefit. Conclusion[66]I am satisfied that when, on 16 May 2020 Mr James caused the Company fraudulently to apply for the BBL and used at least £13,000 of the funds for his personal benefit, he knew or ought to have known that the Company was not eligible for the loan. As noted by Chief ICC Judge Briggs in Deea Construction Ltd, the false representations which Mr James made or authorised to be made on the Company’s behalf in order to obtain the BBL, most of which he almost immediately diverted to his own account, were made at a time when the Government placed trust in directors honestly to present their financial information in order that the Government could help companies to survive, notwithstanding the restrictions which it imposed on society and the businesses operating with it.[67]In my judgment, Mr James has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies. I must therefore make a disqualification order against him. It must be for a minimum of 2 years and no longer than 15 years.[68]The leading case on disqualification period is Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164. Dillion LJ gave guidance on period dividing the period between 2 years and 15 years into brackets of seriousness: i) the top bracket, for periods of more than ten years is reserved for particularly serious cases; ii) the middle bracket of between six to ten years, is for serious cases that do not merit the top bracket; and iii) the minimum bracket of between two and five years is for cases that are not, relatively speaking, very serious.[69]In Re Westmid Packing Services Ltd (No. 2) [1998] B.C.C. 836 the Court of Appeal reiterated that that the primary purpose of the directors’ disqualification regime is to protect the public against the future conduct of companies by people whose past record shows them to be a danger to creditors and others. Other factors may also come into play in the wider interests of protecting the public, such as a deterrent element in relation to the director himself and a deterrent element as far as other directors are concerned.[70]The period of disqualification must reflect the gravity of the offence. Mitigating factors can be taken into account such as the director’s age, health, whether he has admitted the offence and his conduct before and after the offence.[71]Mr Wise-Walsh submits that if the Secretary of State were to succeed on the issues at trial, as he has done, it would be open to the Court to find that Mr James acted negligently or incompetently to a degree that involved recklessness, rather than dishonestly, such that disqualification in the middle or lowest bracket would be justified. He urges the Court to take into account that the size of loan was relatively modest, bearing in mind that the total value of any bbl could have been as much as £50,000 and that Mr James cooperated with the Insolvency Service’s enquiries. He submits that Mr James’s conduct, since the Company’s failure, has been praiseworthy and worthwhile and he refers to Mr James being prepared to repay the BBL by instalments.[72]I have found that Mr James procured that the Company obtained the BBL at a time when he knew or should have known that the Company was not entitled to claim the amount borrowed and that he knew or should have known that he was not entitled to divert the monies received to his own bank account. Having obtained the loan at a time when the urgency of a national emergency required almost complete reliance on the integrity of the directors of companies applying for such loans, Mr James abused the trust placed in him, and made false representations regarding the Company’s projected turnover. That goes well beyond negligence or incompetence.[73]Whilst Mr James initially cooperated with the Official Receiver’s enquiries, he has since sought to distance himself from the information he not only provided but verified by a statement of truth. Despite the presence of directly contradictory evidence, he accused Ms Brooker of putting pressure on him and distorting his words.[74]Mr James failed to take any active steps in these proceedings against him until faced with a debarring order, and even then, failed technically to meets its terms. His evidence comprises a string of unsubstantiated assertions, including those regarding his apparently laudable conduct since the Company was wound up. It maintains a purported belief that if the Company had not been wound up, despite having almost no working capital, it could in less than a year have established itself sufficiently to broker multi-million dollar crude oil deals. Such conduct and statements fail to demonstrate any remorse for the public funds wrongly obtained and misapplied. At best, Mr James’s assertions regarding the Company’s anticipated turnover demonstrate a dangerous lack of commercial acumen, competence and probity from which the public should be protected.[75]I consider Mr James’s conduct to fall within the top bracket. It provides little comfort to say that he fraudulently obtained less than might otherwise have been possible and limited comfort that, at least initially, he cooperated with the Insolvency Service. However I take those two factors into account in determining that to prevent further harm being inflicted on society he should be disqualified for a period of 11 years.

Cited in 1 later judgment