Secretary of state bringing disqualification proceedings against former company director - evidence in support of proceedings and procedure followed unfair and defective - court unable to strike out evidence in its entirety

Secretary of State for Trade and Industry v Swan and others: ChD (Mr Justice Laddie): 22 July 2003

After a company and its subsidiaries had gone into administrative receivership, the claimant, the Secretary of State for Trade and Industry, caused a claim form to be issued under part 8 of the Civil Procedure Rules 1998 (CPR), seeking the disqualification of the defendant directors, including the first defendant who was the company's former chief executive (the director), pursuant to section 6 of the Company Directors Disqualification Act 1986.

The evidence in support of the application, in the form of an affirmation, contained allegations that the director had 'caused' two of the subsidiaries to engage in 'cheque kiting' (the passing of cheques between the subsidiaries so as to take advantage of the two-to-three-day delay for the cheques to clear) on a daily basis and on an extensive scale.

The director received only one day's notice of the proceedings, contrary to section 16(1) of the 1986 Act, which required ten days' notice.

The director applied for the whole of the affirmation to be struck out.

Michael Green (instructed by ASB Law, Brighton) for the secretary of state; Stephen Davies QC and Jeremy Bamford (instructed by Gordons Cranswick, Leeds) for the director.

Held, dismissing the application, that it was inappropriate for the court to strike out the entirety of the affirmation, even if there were defects in that affirmation and in the procedure followed; that since the secretary of state had failed to treat the director fairly, both in the way that the proceedings were commenced and in the inclusion in the affirmation of unjustified allegations, the correct relief would have been either to strike out the proceedings in their entirety, if they were thereby rendered an abuse, or to strike out the offending passages of the affirmation, neither of which was sought by the director.