Claim No: 2313 OF 2010
Royal Courts of Justice
Strand
London WC2A 2LL
BEFORE:
MR JUSTICE DAVID RICHARDS
BETWEEN:
SECRETARY OF STATE FOR BUSINESS, INNOVATION & SKILLS
Claimant
- and -
MR BALJINDER CHOHAN & OTHERS
Defendant
Digital Transcript of Wordwave International, a Merrill Communications Company
165 Fleet Street, 8th Floor, London, EC4A 2DY
Tel No: 020 7422 6131 Fax No: 020 7422 6134
Web: www.merrillcorp.com/mls Email: mlstape@merrillcorp.com
(Official Shorthand Writers to the Court)
MR MARK CUNNINGHAM QC (Instructed by Howes Percival LLP) appeared on behalf of the Claimant
MR STEPHEN DAVIES QC & MR JEREMY BAMFORD (Instructed by Lupton Fawcett LLP) appeared on behalf of Defendant
Judgment
MR JUSTICE DAVID RICHARDS: This is an application made in proceedings under the Company Directors Disqualification Act 1986. The proceedings were issued on 19 April 2010. There are six respondents against whom disqualification orders were sought. The present application by the fifth respondent, Nigel Walter, seeks in paragraphs 1 and 2 of the application notice orders for clarification of the case of alleged unfitness made against him. The solicitors acting for Mr Walter sought, first in correspondence in the months following the commencement of the proceedings and then by formal requests dated 24 August 2010 and 1 October 2010, clarification and information pursuant to CPR part 18. They met little or no success in correspondence, but responses to the formal requests were served on or about 17 September 2010 and 15 October 2010. It is Mr Walter's case that the allegations against him and the essential evidence relied on in support of those allegations remain unclear. Accordingly the present application is made.
The facts relevant to the present application may briefly be summarised as follows. UKLI Limited ("the company") carried on a so-called land bank business, involving the establishment and marketing to the public of schemes whereby small parcels of land forming part of a larger site, which the company either owned or over which it had options to purchase, would be sold to investors. It was envisaged that the company would or might itself retain or acquire a significant part of the sites in question. The suggested attraction of investment by the purchase of small parcels of land on these sites was that the sites might receive planning permission, or be rezoned in area plans making it more likely that planning permission would be granted, in either case leading to a significant increase in value. The company's business was substantial. There was a sales force of some 60 to 80 people and approximately 5,000 plots were sold on some 17 sites. The company went into administration on 22 April 2008, and subsequently into liquidation on 21 November 2008, with an estimated deficiency as regard to creditors of over £70 million.
In February 2006 the Financial Services Authority published guidance on the application of the provisions concerning collective investment schemes in the Financial Services and Markets Act 2000 to land bank schemes. Only persons authorised under the financial services legislation may promote, market or operate a collective investment scheme and there are strict requirements imposed on authorised persons as regards such activities. These provisions exist for the benefit of the public who may wish to invest in such schemes. The company was not at any time an authorised person under the relevant legislation. Following publication of this guidance the company took advice as to whether a reformulated land bank scheme, differing in material respects from the scheme previously operated by it, would constitute a collective investment scheme as defined in section 235 of the Financial Services and Markets Act 2000. If so, it would be unlawful for the company to operate it, giving rise to both civil and criminal liabilities under the 2000 Act. The company received advice from leading counsel specialising in financial services law in consultation and in an opinion dated 4 May 2006. The advice was to the effect that the reformulated scheme, if implemented in the manner proposed by the company, would not constitute a collective investment scheme and accordingly would not attract the prohibitions and potential penalties under the financial services legislation.
The Financial Services Authority subsequently, in 2007, investigated the company and its business and as a result concluded that the reformulated scheme was not being operated or marketed in a lawful way but, as in fact marketed and operated by the company, constituted a collective investment scheme. The FSA agreed with the legal advice given by counsel in his opinion of 4 May 2006, but took the view that the company had operated the scheme contrary to that advice and hence unlawfully. The FSA's views on this were stated in a letter dated 23 May 2007 to the company in a passage under the heading "UKLI's Current Operations":
"In relation to UKLI's current operations, our attention has recently been drawn to various matters which have caused us some concern.
"We note that in your Proposal to the 'Financial Services Authority', sent to us in April 2006, you advised us at paragraph 2.1(d) that UKLI would apply for the 25% of the land that it owns on its sites to be re-zoned into a Local Development Framework, with the consequent likelihood that any freehold plots purchased by customers which adjoin UKLI's plot would also fall within the rezoning proposals.
"By a letter dated 11 May 2006 UKLI's solicitors, MacFarlanes, enclosed a copy of an opinion received from Michael Blair QC, in which he considered the lawfulness of UKLI's proposed plan. Mr Blair stated at paragraph 26 of that opinion that UKLI's new papers (literature, contractual and conveyancing documentation and telephone scripts) would refer to 'the advantages of the property being re-zoned'. At paragraph 27 however he qualified that statement, noting:
"'Further, the papers would carefully avoid giving the impression to any potential purchaser that the Company was intending to apply for re-zoning either for its retained land or for the land of any purchasers'.
"At paragraph 30 he further stated: 'As long as the substance of the transaction is one for the sale of the land for investment purposes with no element of collectivisation of any process for obtaining planning permission or rezoning, the Company has, in my view, successfully avoided the problems about planning permission that characterised the previous business models'.
"The FSA agreed with Mr Blair's views on this point, and considered that as he had given UKLI clear guidance as to how to avoid its new scheme having the element of collectivity that would lead to it falling within the ambit of section 235 of the Act. We therefore assumed that UKLI would comply with that guidance.
"Recently, however, our attention has been drawn to the manner in which UKLI actually markets its scheme to potential investors, and we are concerned to note that the guidance given by Mr Blair has not been adhered to. In particular we have seen a copy of a brochure entitled 'Guide to Buying Strategic Land'. That brochure contains the following statements:
• 'We reserve up to £500,000 per site to promote our retained land for re-zoning within its local authority framework. Once a site has been re-zoned, its value, as we will demonstrate in this guide, can increase significantly'.
• 'we do everything possible - reserving up to £500,000 of our resources per site - to promote our retained land to be re-zoned for residential development'
• 'the exceptional potential returns from land come with getting the site rezoned ... Achieving re-zoning is a very expensive, highly skilled process ... our land and planning team conducts a thorough investigation of the site ... our land and planning team submits its initial representation for the local authority to consider. A series of further submissions and public inquiry appearances follow as the local authority refines and finally adopts its development plan.'
• 'Once a site has been successfully re-zoned, the value of the land will increase dramatically. It is at this stage that we recommend all investors on the site sell to the highest bidding developer ... we strongly recommend you exit your investment at the same stage as we do'.
• 'By promoting our land for re-zoning with the local authority we are confident that we will increase its value significantly, should we be successful'.
• There is a calculation of the 'potential returns on your land' based on re-zoning of the 'parcel of land' being achieved, showing a potential new value for the parcel of land of £69,580 as against a typical cost of £20,000 (i.e. with a profit of £49,580) .
"The FSA is aware that extracts from this booklet form the basis of the regular seminars which UKLI invites members of the public to attend, and at which attendees are given the same message: that an investor can expect UKLI to achieve the rezoning of the site, including any plot which they buy, resulting in a large increase in value.
"The FSA has also seen two short marketing videos that UKLI distributes to potential investors. They contain statements from Brian Smith, the Planning Director for UKLI such as: 'We promote land with the local authorities to achieve its rezoning for development' and 'I also oversee the Planning Department to ensure that they use their strong expertise to promote the sites in the best possible way'. Nigel Walter states 'When we promote land to get rezoned there is a dramatic increase in value'. This statement is overlaid on screen with the figures '250% to 400%'. Further, UKLI's website also states that 'From our point of view we are looking to sponsor a site to be re-zoned (or allocated) for residential use'.
"The FSA is extremely concerned by the way in which UKLI is marketing its current scheme. The FSA considers that any form of representation or indication made to the participants that re-zoning will be sought by the firm in respect of the land that it retains is liable to make the arrangements a collective investment scheme because such steps will be essential elements in facilitating access to the profits that will be the main/sole factor behind the investor's decision to purchase the plot to begin with. In addition, we consider that seeking re-zoning of the land is management as a whole because the firm cannot realistically seek re-zoning only in relation to the land that it owns.
"We are particularly concerned as Mr Blair's opinion clearly stated that UKLI should not give the impression to any potential purchaser that it was intending to apply for re-zoning either for its retained land or for the land of its investors. The FSA advised UKLI that it was content with UKLI's proposals on the basis of this opinion, in the expectation that UKLI would comply with its Counsel's guidance. Clearly this is not the case. Investors to whom UKLI marketed on the above basis will have the clear expectation that UKLI will apply for rezoning of the retained land (although I note in this regard that only on some occasions does UKLI clarify which land will be the subject of its application) which will also inevitably benefit their own land, and that it is intended that once rezoning has been granted they will sell their land to a developer, thus achieving a profit. The FSA considers that this amounts to a collective investment scheme.
"Given the concerns outlined in this letter, please confirm that UKLI will cease selling plots of land to investors in the UK, and to cease seeking new investors in breach of the Act until this matter is resolved. Please will you let me have your confirmation of this by Friday 1 June 2007."
The disqualification application against all six respondents is supported by an affidavit of Elliott Burns, a chief examiner in the Investigations Directorate of the Insolvency Service. It is a long affidavit with 116 pages. The principal features of the affidavit are as follows. Paragraphs 7 to 34 set out as against each respondent the grounds of alleged unfitness. Paragraphs 39 to 63 set out, again as regards each respondent, the evidence that each was a director or a de facto director of the company. Paragraphs 79 to 89 give evidence of the land bank scheme operated by the company up to March 2006. Paragraphs 90 to 141 give evidence of the second land bank scheme operated from or about March 2006. Paragraphs 142 to 157 give evidence of unsecured loans allegedly made to companies owned or controlled by or affiliated to Mr Baljinder Chohan, the sole or principal shareholder of the company and the first named respondent to the disqualification proceedings. There are essentially two grounds of unfitness alleged against Mr Walter, one relating to the operation of the second land bank scheme from March 2006 to April 2007 and the other relating to the unsecured loans made to companies associated with Mr Chohan. The present application by Mr Walter is concerned with the first of these grounds, which is regarded as the main ground.
The need for a clear statement of the grounds of unfitness relied on against a respondent to disqualification proceedings and of the essential facts relied on in support of those grounds is required by the rules and has been repeatedly recognised and amplified in authorities over the last 20 years. Rule 3(3) of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 provides:
"There shall in the affidavit or affidavits or (as the case may be) the official receiver's report be included a statement of the matters by reference to which the respondent is alleged to be unfit to be concerned in the management of a company."
In Re Sutton Glassworks Limited [1996] BCC 174 Chadwick J said at page 176:
"It is not in dispute that the affidavits filed on behalf of the Secretary of State - or the report to be made by the official receiver - must set out the case against the persons sought to be disqualified with sufficient clarity and identification of the evidence being relied upon for the respondent to know where he stands. See the judgment of Nicholls V-C in Re Rex Williams Leisure plc [1993] BCC 79; [1994] Ch 1 at p. 87H to 88A; 15C."
Omitting the next paragraph, Chadwick J continued:
"That procedure, and, in particular, the mandatory requirement in r. 6, emphasises the importance to the respondent of being able to ascertain with clarity from the evidence filed on behalf of the applicant what are the criticisms laid against him, and upon what evidence the applicant intends to rely. It is on the basis of the applicant's initial affidavit evidence that the respondent is required to decide whether to advance any evidence of his own; and, if so, what issues he must address by that evidence. It should not be open to the applicant, by making general allegations of misconduct, to require the respondent to put forward his own account of events, and then to rely upon the respondent's own account to support the case for a disqualification order."
At page 178, and having concluded that an order for interrogatories was not an appropriate procedure for clarifying the case against a respondent, Chadwick J said:
"But it is not satisfactory to leave the matter there. Nothing that I have said detracts, in the least, from the requirement that the applicant must set out his case with sufficient clarity and identification of the evidence relied upon to enable the respondent to know where he stands. If the applicant's evidence does not satisfy that test, the respondent must have some remedy before he can be required to decide whether to file his own evidence."
Chadwick J suggested that the appropriate remedy was to strike out the offending passages from the applicant's evidence and, if that left nothing in support of the application, then the application as well. But he observes as follows:
"A respondent who has less confidence in the insufficiency of the applicant's evidence will be embarrassed, because he will be unable to risk filing no evidence of his own. In such a case he may apply to the court for an order that, unless the matters complained of are made clear, the offending allegations be struck out on the grounds that they embarrass a fair trial of the action. A sensible preliminary step in such a case must be to seek clarification in correspondence before making an application to the court."
In Re Finelist Limited [2003] EWHC 1780 Ch; [2004] BCC 877 Laddie J said at paragraph 17:
"It is not sufficient for the director to know and understand the allegations he has to meet. There is an obligation on the [Secretary of State] to set out in the affidavit or affirmation in support the main parts of the evidence on which she is to rely. This is all the more important because, as noted above, there is no particulars of claim which will identify the key facts upon which the court will be asked to exercise its powers. Fairness to the director demands that he knows not only the allegations of unfitness but also the essential facts which are relied on in support of them."
At paragraph 21 Laddie J said:
"No doubt the court should adopt a robust approach to criticisms of the affidavit evidence served on behalf of the [Secretary of State]. But none of this removes from her the obligation to ensure that the evidence filed is balanced, that the particular evidence relied on in support of the allegations is properly identified and that issues proved by direct evidence should be distinguished from matters of inference."
The ground of unfitness alleged against Mr Walter as regards the second land bank scheme is set out in paragraphs 27 to 29 of Mr Burns' affidavit:
Mr Walter caused or allowed UKLI to operate a land banking scheme between 26 April 2006 and 5 March 2007. In March 2006 UKLI obtained legal advice (confirmed in writing in May 2006) on how to operate a land banking scheme which was not a CIS and UKLI revised its operations, UKLI provided the FSA with this advice and commenced trading the Second Scheme. From March 2006 UKLI's land banking scheme was marketed to the general public in that:
UKLI identified and purchased sites that it would split into small plots and market these to the general public along with the unsold plots it still held in relation to its first land banking scheme which had traded from 5 March 2003 to 15 March 2006 ("the First Scheme") for prices between £7,000 and £55,000;
Customers would have legal title to their acquired plot or plots; UKLI would retain up to a third of each acquired site, with the intention to have the site it had acquired re-zoned from uses such as agricultural to housing for the benefit of the land retained by UKLI and the plots held by the plot holders;
the site would increase in value.
In this period, 15 March 2006 to 31 January 2008, UKLI sold plots under the Second Scheme with sales amounting to £27,698,430.
In May 2007 the FSA requested UKLI to cease trading its land banking scheme and subsequently notified UKLI that they considered its scheme was a CIS as UKLI's operations were not following that detailed in the advice obtained in May 2006:
UKLI has not, at any time, been authorised by the FSA;
The FSA advised UKLI that its operation of a CIS breached the general prohibition, section 19 of the FSMA, and was a criminal offence, section 23 of the FSMA;
On 1 April 2008 the FSA filed a winding-up petition against UKLI on the basis that:
UKLI had/was carrying on a regulatory activity in breach of a general prohibition;
UKLI was insolvent and unable to pays its debts, and
It was just and equitable that UKLI was wound up.
On 3 April 2008 the FSA was granted a restraining order against UKLI, preventing the dissipation of UKLI's assets and the continuation of UKLI's Second Scheme;
As UKLI was not authorised by the FSA, UKLI's Customers of either the First Scheme or the Second Scheme will not be compensated by either the FSA or the Financial Services Compensation Scheme;
UKLI has failed to inform any of its Customers of their rights under section 26 of the FSMA."
In paragraph 40 Mr Burns accepts that Mr Walter was not recorded at Companies House as a director but alleges that he acted as a director during the period of at least 26 April 2006 to 5 March 2007. In paragraphs 55 and following Mr Burns sets out evidence on which the Secretary of State relies to show that Mr Walter was de facto the managing director of the company from April 2006 to March 2007.
Paragraphs 90 to 141 contain the evidence on which the Secretary of State relies as regards the second land bank scheme. Paragraph 93 refers to quotations from counsel's opinion, dated 4 May 2006, dealing with the way in which the land bank scheme would be marketed and operated. The opinion had been sent to the FSA on 11 May 2006. Paragraph 94 reads follows:
"The FSA agreed with the substance of Mr Blair QC's views on the factual basis that he had identified in the May 2006 opinion. The FSA considered that, as Mr [Michael] Blair QC had given UKLI his clear views on how the proposed structure of the Second Scheme would avoid it having the element of collectivity that would lead to it falling within the statutory definition of a CIS, UKLI could operate the Second Scheme. In particular, UKLI said nothing to indicate that the summary of how the Second Scheme would operate, as contained in the May 2006 opinion, was inaccurate, or that they planned to make any changes to that model."
Paragraphs 102 and 103 read as follows:
"In approximately November 2006 the FSA received information from a consumer about the manner in which UKLI was promoting the Second Scheme. The Enforcement Division was concerned at this, and accordingly wrote to UKLI on 4 December 2006 (page 756 of ESB1), setting out the points that were of concern, namely that UKLI was stating to potential plot purchasers that it would retain up to one third of the site and that and a detailed strategy would be prepared by UKLI seeking residential allocation of this land. This form of promotion appeared to the FSA to run entirely contrary to the facts identified by Mr Blair QC in his May 2006 opinion to be the basis of his advice and therefore to undermine Mr Blair QC's views as expressed in the May 2006 opinion (with which the FSA had at the time agreed) that the Second Scheme did not amount to a CIS.
"Mr Walter of UKLI responded to the FSA's letter of 4 December 2006 by e-mail on the same day (page 757 of ESB1). He noted that UKLI did not believe that it was offering a CIS to the public, and stated that the land referred to in UKLI's promotion was UKLI's retained land and was not for sale."
Paragraph 106 refers to and quotes from an unsolicited e-mail, marketing the company's land bank scheme, sent out by a firm of financial advisors in early February 2007. The e-mail contained a link to a website listing seminars about the company's operations and a video featuring Mr Walter. Mr Burns states in paragraph 107:
"There was a quite clear statement in the promotional material that once an investor bought land from UKLI, the company would be responsible for re-zoning all of the land (both its retained share and also the plots sold off to purchasers) for its investors collectively."
Paragraph 109 refers to further marketing material. Paragraph 113 gives evidence as to what was said on behalf of the company at one of the seminars, held on 21 February 2007, to market the scheme. Paragraph 116 refers to the FSA's letter dated 23 May 2007, which I have quoted from earlier in this judgment. Paragraphs 137 to 140 contain evidence of further statements made in the course of marketing the scheme.
Having set out or referred to the most salient parts of Mr Burns' affidavit as it relates to the case against Mr Walter on the main charge, there are serious criticisms which can be made of the formulation of the grounds of alleged unfitness in paragraphs 27 to 29 of the affidavit. What was required, as it seems to me, was a statement of the grounds containing the following elements: (i) a clear allegation that the second land bank scheme was marketed or operated in a way which made it a collective investment scheme; (ii) by reference to the statutory definition of a collective investment scheme those aspects of the scheme's marketing or operation which, it is alleged, rendered it a collective investment scheme; (iii) references to the particular evidence contained later in the affidavit relied on in support of the allegation of such marketing or operation; (iv) a statement of the manner in which it was alleged that Mr Walter as a director or de facto director caused or allowed the company to market or operate the scheme in a manner which caused it to be an unlawful collective investment scheme; (v) an allegation that Mr Walter knew or ought to have known that the scheme as marketed or operated was a collective investment scheme and the grounds and evidence relied on in support of such an allegation. This would have allowed Mr Walter and the court to see clearly the way in which the case was put and would have made Mr Burns' rather cumbersome affidavit (much of which is taken up with a chronological recital of correspondence) a more useful document.
Having said that, it could reasonably be discerned that the Secretary of State was adopting as correct the position stated by the FSA in its letter of 23 May 2007 and was relying on the evidence to which I have earlier referred as regards the manner in which the scheme was operated and marketed and on the evidence that Mr Walter was de facto managing director of the company with particular responsibility for ensuring that the second land bank scheme was not operated or marketed as a collective investment scheme. Mr Walter and those acting for him very sensibly, and in accordance with the guidance given by Chadwick J in Re Sutton Glassworks Limited, sought clarification of the Secretary of State's case, as I have mentioned, first in correspondence and then by service of the requests for further information.
The issue on the present application is whether, with the responses to those requests, the Secretary of State's case is now sufficiently clear to enable Mr Walter to deal with it in evidence to be filed in opposition to the disqualification application. Mr Walter accepts for present purposes that the response to the first request provides sufficient clarification of the allegation that Mr Walter was a de facto director. It is not however accepted that even with the responses the case is sufficiently clear as to either (i) the grounds on which it is alleged that the second scheme was an unlawful collective investment scheme, or (ii) Mr Walter's conduct in relation to the scheme which it is alleged makes him unfit.
As to the first of these matters, it may be noted that information of this or relating to this was not sought in the first request but a request was made in the second request as follows:
"Please specify precisely (including by reference to specific paragraphs in Mr Blair QC's written Opinions dated 4 May 2006, 13 June 2007 and 20 July 2007) which aspects of Mr Blair QC's advice it is alleged the Second Scheme was run entirely contrary to, giving full particulars of each alleged contravention."
The response refers to the FSA's letter of 23 May 2007 as sufficient particularisation of the ways in which the second scheme was run contrary to counsel's advice. It is, in my judgment, clear that the Secretary of State adopts as his case that the second scheme constituted a collective investment scheme on the grounds set out in the FSA's letter and that he relies on the specific instances of marketing referred to in the letter and in Mr Burns' affidavit. It follows that I do not consider that an order should be made, as asked in paragraph 1.1 of the application notice, for a statement by way of clarification of the grounds on which the Secretary of State alleges that the second scheme was unlawful.
Paragraph 1.1 goes on to seek a statement (i) as to whether the Secretary of State agrees or disagrees with further opinions given by Mr Blair QC in June and July 2007 and, if he disagrees, explaining the reasons for his disagreement, and (ii) explaining how the second scheme was operated contrary to those further opinions. In my view it would be wholly inappropriate to make an order for such a statement. Mr Blair's further opinions in substance set out his view that it was not necessary, in order to avoid the scheme being a collective investment scheme, that it should be marketed and operated in the manner set out in his opinion of 4 May 2006. With respect, however, that is irrelevant. The position of the FSA in its letter of 23 May 2007 and the position now of the Secretary of State is that if the scheme was marketed and operated in contravention of the principles set out in Mr Blair's first opinion it would be a collective investment scheme. That is the basis on which the Secretary of State says that the second scheme was marketed or operated as a collective investment scheme and that will be an issue for the court. It is beside the point that in June and July 2007, after Mr Walter's involvement with the company had ceased, Mr Blair gave opinions disagreeing with that position.
I turn then to paragraph 1.2 of the application notice, which seeks a statement by way of clarification identifying the conduct of Mr Walter in relation to the scheme making him unfit, giving full particulars of what it is alleged he knew or ought to have known and did or ought to have done. The response to request 6 in the first request stated that Mr Walter caused or allowed everything done by the company in relation to the second scheme up to 5 March 2007 in that he was acting managing director in at least the period from 26 April 2006 to 5 March 2007 and his functions and responsibilities as acting managing director included the day to day management of the company's business and regularising the company's position as regards the land bank scheme. It is in my view clear that the Secretary of State's case that Mr Walter caused or allowed the company to market or operate a collective investment scheme is based on inference from his role and responsibilities as de facto managing director, which are the subject of evidence in paragraphs 55 to 60 of Mr Burns' affidavit and of detailed responses to requests 1 and 3 of the first request.
As to what it is alleged that Mr Walter knew or ought to have known, this is, in my judgment, adequately dealt with in the response to request 7 of the first request for information. In paragraph 2 of the application notice Mr Walter seeks an order that the Secretary of State identify in paragraphs 90 to 141 of Mr Burns' affidavit and/or clarify:
the precise conduct of the Fifth Defendant in relation to the Second Scheme which the Claimant alleges makes the Fifth Defendant unfit to be a director;
the facts relevant to that conduct of the Fifth Defendant that the Claimant claims to be established by direct evidence contained within paragraphs 90-141; and
the inferences the Claimant invites the Court to draw from the facts referred to in paragraph 2.2 above."
In view of what I have earlier said, I do not consider that an order in these terms is required. The Secretary of State's case is that Mr Walter as a de facto director and acting managing director caused or allowed the company to market and operate its second land bank scheme as an unlawful collective investment scheme. Mr Cunningham QC for the Secretary of State made clear, as I had assumed, that this involved an allegation that Mr Walter had actual knowledge of everything done by the company in relation to the second scheme up to 5 March 2007. The acts done by the company on which the Secretary of State relies are those set out within paragraphs 90 to 141 of Mr Burns' affidavit. I have referred to many of them earlier in this judgment and there is no difficulty in identifying them. The Secretary of State relies on Mr Walter's position as de facto director and acting managing director to establish by inference such knowledge. For the reasons which I have given, therefore, I refuse Mr Walter's application.
Paragraph 3 of the application notice seeks an order, further or in the alternative, that the allegation of unfitness in paragraphs 27 to 29 of Mr Burns' affidavit and the evidence in support in paragraphs 90 to 141 be struck out as:
"… disclosing no reasonable grounds for bringing the claim and/or as embarrassing a fair trial, alternatively that pursuant to CPR 24 summary judgment be entered for the Fifth Defendant in respect of that allegation on the grounds that the Claimant has no real prospect of succeeding on that allegation."
An application for this order was not made at the hearing.
Finally I should say this: I am concerned at the delay in this case. These proceedings were issued just over a year ago but Mr Walter has not yet filed any evidence in opposition. The responsibility for this delay is shared between the Secretary of State and Mr Walter. If the Secretary of State had included properly formulated grounds of unfitness in the original evidence, proper progress with the proceedings could then have been made. I have to say that I find it dispiriting that after so many statements made by judges in this court over the last 20 years about the need for a clear statement of grounds that one should find in a case of this seriousness, where disqualification orders are sought in the highest bracket and where the case raises matters of fact and law which are by no means straightforward, that no clear formulation of the grounds was contained in the affidavit. It seems to me that, particularly in cases of this importance, it is necessary that at least those parts of the affidavit should be drafted by someone with close knowledge and experience of the trial process, who knows the way in which courts require these matters to be addressed and who can draft them in a way which will clearly assist the defendant in formulating his defence and will assist the court in seeing the nature of the case. Equally, as will be clear from my judgment, Mr Walter should have accepted the Secretary of State's responses as sufficient clarification of the case against him.
I should also say that I am a little alarmed that this application, which once boiled down to its essentials was not in truth a complex application, took several months to come on for a hearing. After the application was issued on 5 November, in my view, steps should have been taken to seek an expedited hearing of the application. It is not in the public interest that serious applications of this kind should be delayed any longer than is necessary. The upshot though of the present application is that I refuse it.