| Evidence — Expert evidence — Directors disqualification proceedings — Financial services company going into administration — Investigation by Financial Services Authority — Secretary of State seeking disqualification orders against defendant company directors — Secretary of State seeking to rely on expert report at disqualification hearing — Whether expert evidence admissible
Secretary of State for Trade and Industry v Aaron and others
ChD: Robin Knowles QC, sitting as a deputy High Court judge: 7 June 2007
In directors disqualification proceedings, the court might at times need expert assistance on issues of fact, but, generally speaking, it was hard to see why a court should need expert evidence that was simply expert opinion when considering the key question of whether a director was unfit to be concerned in the management of a limited company.
Robin Knowles QC, sitting as a deputy judge of the Chancery Division, so held when granting the Secretary of State for Trade and Industry permission to rely on expert evidence contained in a report which the Secretary of State wanted to be admitted at a hearing for disqualification of the defendant directors of a company under section 6 of the Company Directors Disqualification Act 1986. However, the judge confined reliance on the expert report to a certain technical issue only.
In December 2005, the Secretary of State applied for disqualification orders to be made against the defendant directors, based on alleged breaches of their fiduciary duty, specifically the way in which they had dealt with the company’s sales of Structured Capital at Risk Products (SCARPS). The Secretary of State argued that as the defendants specifically disputed the admissibility of opinions expressed by the Financial Services Authority (FSA) and the Financial Ombudsman Service (FOS) at the hearing, there was more need for the court to have expert evidence before it as to whether those opinions were correct.
ROBIN KNOWLES QC said that in the context of directors disqualification proceeding, the issue for the court was not whether on the facts before them the FSA and FOS were correct in their decisions, but, whether, the court was of the opinion that the director was unfit to be concerned in the management of a limited company. In a particular case, a particular point that was before the FSA or FOS might need reviewing and facts might need to be proved to the court that might also have been before the FSA or FOS. It might be that those facts would include facts, the proof of which required the court to have access to expert knowledge. However, that all suggested limited rather than wide ranging use of an expert in the context of disqualification proceedings. Given the nature of such proceedings, the court might at times need expert assistance on fact, for example, an enhanced factual understanding of a complex business product, or to understand why a directors conduct had a certain consequence in the context of managing a specialised business. But generally speaking it was hard to see why a court should need expert evidence that was simply expert opinion when it came to applying the standard laid down by the courts to the facts.
Further, as a general proposition in such cases, the careful selection of allegations was to be encouraged. The more complex the case arguably the more important it was to consider choosing between allegations. Generally speaking it was positively undesirable for any party to simply cross refer to an expert report for details of their case, rather than use an expert report to supply evidence for a specific part of the case that required expert evidence to be reliably proved. The approach of stating in an affidavit that the details of the allegations were “set out in the report” was to be discouraged. In a complex case, the use of affidavits as the vehicle through which the parties set out their case might add difficulty to the task of identifying, at the earliest point, what was common ground and what was in issue. However, the settled procedure did contemplate the use of affidavits rather than, for example, statements of case. It was all the more important that affidavits used were directed to the particular issues that arose. Consideration might also be given to the settling of a provisional list of matters of common ground and of the important issues at the earliest stage in a complex disqualification case. Preparing expert evidence to be served as part of the evidence in support of, or opposition to, proceedings might mean that such evidence preceded the identification of true expert issues. That was undesirable, not least in terms of costs. In so far as the present system was seen to encourage early service of expert evidence, then early case management discussion or procedural agreement between parties might seek to discourage it in an appropriate case.
The Secretary of State would be permitted to rely on the expert evidence, but confined to the issue of the nature of SCARPS and the investment risks they posed.
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