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Secretary of State now exempt from providing draft evidence in Director Disqualification cases?

This is a worrying trend for directors threatened with disqualification

I may have missed it so I apologise in advance, but can somebody please point me in the direction of the provision or rule that apparently exempts the Secretary of State for Business, Energy and Industrial Strategy (SoS) in Director Disqualification proceedings from having to provide draft evidence to a targeted director, even in circumstances where the SOS has previously offered in correspondence to provide draft evidence to the director and his/her advisors? It is a recent trend we have come across – and a worrying one.

Until recently a request for the draft evidence was acted on – no longer, it seems

Here At NDP, we are seeing a number of cases where, as part of its section 16 pre-action letter to the director, an offer is made by the SoS to provide the director with the draft evidence that it is intended to rely upon against him if Director Disqualification proceedings have to be commenced.

Back in the day, a routine request for sight of that draft evidence and the exhibit bundle behind it would be met by the provision of those documents.

Worryingly, that appears to be no longer the case, depending on which member of the Insolvency Service team you find yourself corresponding with, on behalf of the director.

The situation varies from case to case

The position appears to vary from case to case. I have two cases on my desk at this time.

In the first case, my request for the draft evidence has (finally) been met with an agreement to provide the draft evidence so that the defendant director can know, understand and be advised about the precise wording of the case that he has been asked to respond to.

That does not seem to be too much to ask, does it?

However, in the second case that is on my desk this morning, the request for the draft evidence, as offered by the SoS, has been met by the following statement, which refuses to supply the requested evidence:

“……I have provided the draft exhibits in support of the allegation for your client’s consideration and whilst my turn of phrase that the allegation against your client is a “straightforward one” was perhaps not the most appropriate, the emphasis was that the exhibits themselves are comprehensive, clear and easy to follow in respect of the allegation and accordingly your client should be able to consider his position based on this information alone (i.e. without the draft evidence).”

The Director should be able to see, and be advised on, the case against him/her

Call me old-fashioned, but when the state is threatening to attack the ability of the director to earn a living and inflict huge reputational damage on the director, the director should be able to see and be advised on the precise case that he is being asked to respond to. Just as in any other litigation claim.

That is perhaps especially so when the Secretary of State offers to provide that evidence but then, for unspecified reasons (that may, of course, include an attempt at cost saving) refuses to provide that evidence.

We believe such actions will leave the SoS wide open to a judicial review

It seems to us that in such a case where evidence is offered but then the SoS declines to provide it, The Secretary of State is leaving himself wide open to a successful challenge by judicial review Application to the Court on application by an aggrieved director.

We have raised this issue with the Secretary of State, highlighting the inconsistent approach of the SoS to this matter. We will report on the response once received.  In the meantime, we would be interested to hear the experience of other practitioners that may have encountered this problem.

Contact us or call us on 0121 200 7040. I would be very interested to hear from you.

Neil Davies (Partner)