QUEEN'S BENCH DIVISION
Strand, London, WC2A 2LL
B e f o r e :
| The Queen on the application of Peter Roy Hollis
|- and -
|The Association of Chartered Certified Accountants
Nigel Giffin QC & Christopher Knight (instructed by Herbert Smith Freehills LLP) for the Defendant
Hearing date: 15/7/14
Crown Copyright ©
Mr Justice Sales:
"58. Correspondence then continued with Italy, and in the course of the next few days agreement was reached with Sixty SpA on the final form of the proposal. Meanwhile, Mr Hollis informed Davies Arnold Cooper [the solicitors for the Mourant companies] that the "wrong Appendix C" [the appendix to the CVA proposals setting out the assumptions for valuation of the guarantee given by Sixty SpA for the purposes of the CVA] had been included in the draft proposal sent to them. On 10 March, they asked for the right version of the appendix to be supplied. In reply, Mr Hollis said this: "
"The amendments to the CVA are likely to be slight. Your clients' claim has been uplifted to £300k, to match [Appendix C]. This too has been amended in the light of advice on current market conditions/options. I attach a copy (still draft, of course at this stage)."
The attached revision of Appendix C was in the reduced form subsequently included in the final proposal. There is no trace in the papers disclosed by the administrators of the "advice on current market conditions/options" which was said by Mr Hollis to justify the amendment. I am driven to conclude that this was a deliberate misrepresentation of the true position, and that Mr Hollis was unwilling to disclose the truth, which was that the level of the payment offered to the landlords was being dictated by Sixty SpA and bore no relation whatever to the only advice which had been obtained on the subject, namely Mr Cartwright's report. The inclusion of the original Appendix C in the draft proposal sent to Davies Arnold Cooper must have been a mistake, and the administrators now had to invent a justification for the reduced version which eliminated (for each unit) the reverse premium of £275,000 payable to the new tenant and the yield up costs of £40,000."
I have supplied italics, to indicate one of the passages in the judgment admitted into evidence by the Disciplinary Committee under regulation 11(2)(d).
"Even if my conclusion on the above point is wrong, the applicants' challenge to the value of £300,000 assigned to their claim is in my judgment unanswerable. Both the expert evidence of Mr Wright, and the advice which Sixty itself obtained from Mr Cartwright, show that a figure in the region of £1 million was the least that could fairly be regarded as appropriate. The position is made worse by the fact that £300,000 was not, in fact, a genuine estimate of the value of the applicants' claim, but was instead dictated to the administrators by Sixty SpA, the company which stood to benefit from the release of the guarantees. Mr Arden [for the Mourant companies] submitted, and I agree, that the picture disclosed by the documentary evidence is a disquieting one. The administrators appear to have abdicated their responsibilities as office holders and put forward a proposal for the CVA which they must have known could not be objectively justified, and which was based on a cynical calculation by Sixty SpA of what it hoped it could get away with. The administrators then compounded their dereliction of duty by falsely representing in the proposal that the figure of £300,000 was based on advice they had received. The shameless substitution of the reduced version of Appendix C for the original version used by Mr Cartwright speaks for itself, and on the material before me is impossible to justify. Furthermore, if there were a justification, one would expect the administrators to have explained what it was in evidence, and to have appeared at the trial to ensure that the court had a full understanding of all the relevant circumstances."
"89. Unfortunately, the administrators in the present case seem to have lost a proper sense of objectivity, and they allowed themselves to side with the Sixty group against the interests of the guaranteed landlords of the closed stores. They permitted Sixty SpA to dictate the crucial terms of the CVA, and they misrepresented the true position to the creditors. It is only thanks to the persistence of the applicants and their legal advisers that this regrettable state of affairs has come to light.
90. I am conscious, of course, that I have not heard the administrators' side of the story, because of their decision not to participate in the trial. Nevertheless, I am satisfied that there is a prima facie case of misconduct on their part which ought to be considered by the professional bodies to which they are answerable. I therefore propose to direct that copies of my judgment should be sent to the appropriate bodies by which they are licensed to act as insolvency practitioners."
Regulation 11(2) and Bye-law 8
Subject to this regulation 11 and to these regulations generally, the Disciplinary Committee shall conduct the hearing in its discretion having regard to the interests of justice, the public, of the relevant person, and of the profession as a whole.
(a) Subject to the requirements of justice and of fairness to the relevant person, a Disciplinary Committee considering any allegation may admit oral or documentary evidence whether or not such evidence would be admissible in a court of law. As a general principle, the Disciplinary Committee shall take into account the fact that any disputed oral evidence of a witness has not been tested in cross-examination when considering what weight, if any, should be attached to it.
(b) Where any witness who has been required to attend for cross-examination is not in attendance, the Disciplinary Committee shall continue to hear the case on the available evidence but may admit the written evidence of the witness if it is satisfied that it is in the interests of justice to do so, and if admitted shall attach such weight to the written evidence of the witness as it considers appropriate, taking into account the lack of opportunity given to challenge the contested evidence of the witness.
(c) The status of any criminal conviction, court judgment or finding of fact in any court proceedings is as set out in the bye-law 8 which was in force at the time the matters complained of took place, and the Disciplinary Committee shall apply the provisions of that bye-law to its proceedings.
(d) Subject to the requirements of the applicable bye-law 8, any other finding of fact in any civil proceedings before a court of competent jurisdiction in the United Kingdom or elsewhere shall be admissible as prima facie evidence in the proceedings."
"(e) The following shall be conclusive proof of misconduct:
(i) the fact that a member, relevant firm or registered student has pleaded guilty to, or been found guilty of, any offence discreditable to him or, as the case may be, it, or derogatory to the Association or the accountancy profession, before a court of competent jurisdiction in the United Kingdom or before a court of competent jurisdiction in any other country where such court's judgments are in the opinion of Council (or relevant committee of Council) relevant;
(ii) the fact that a member, relevant firm or registered student has been found to have acted fraudulently or dishonestly in any civil proceedings before any court of competent jurisdiction in the United Kingdom or before a court of competent jurisdiction in any other country where such court's judgments are enforceable in the United Kingdom."
The Disciplinary Committee's Decision
"21. The Legal Adviser advised the Committee that it had to consider whether the finding in paragraph 58 of the Judgment relied on by ACCA was properly to be regarded as a finding of fact within the meaning of regulation 11 (2) (c) [of the Regulations]. As part of its decision making process, the Committee had to consider the scope of the words 'finding of fact ' in sub-paragraph (c).
22. The words 'finding of fact' had potentially a broad meaning. For example they could include any finding of dishonesty, even if it was not central to the case, or necessary to be made to determine issues raised in the case. Such a broad scope of 'finding of fact' was to be contrasted with the far narrower scope of the words preceding it, namely 'conviction; and 'court judgment'. The preceding words were narrower in scope because in the case of a conviction or judgment, any finding of dishonesty would be central to the conviction or court judgment.
23. The Legal Adviser advised the Committee that as a matter of construction, the words 'finding of fact' were limited by the preceding words and were, as a result, to be given a narrow construction. Thus a 'finding of fact' contemplated by regulation 11 (2) (c) was a finding of dishonesty that was necessary to be made or resolved in order to determine the ultimate issue in the case being decided. It was not just any finding of fact. The matter in issue in the proceedings before Henderson J was whether creditors' interests had been unfairly prejudiced by the CVA, with the result that it should be set aside.
24. The Committee therefore had to decide whether paragraph 58 constituted a 'finding of fact' for the purposes of regulation 11 (2) (c) having regard to the ultimate issue in the proceedings before Henderson J and to the entirety of the Judgment.
25. The Legal Adviser advised the Committee that it should also consider what, if any effect it should give to the judge's cautionary words at paragraph 90 of the Judgment, namely that he was satisfied that there was 'a prima facie case of misconduct '"
"31. The Committee noted ACCA's submission that any finding of dishonesty would suffice for the purposes of regulation 11(2)(c) , whether or not it was necessary to be made or resolved in order to determine the ultimate issue in the Mourant case, namely whether the CVA should be set aside on the grounds that it unfairly prejudiced creditors' interests. Following the advice of the Legal Adviser, the Committee did not accept this submission. The Committee accepted that it ought to take a narrower construction of the words and decided that a 'finding of fact' contemplated by regulation 11(2)(c) was one that was necessary to be made in order to determine the ultimate issue in the case before Henderson J.
32. The Committee did not consider that the finding of dishonesty against Mr Hollis made in paragraph 58 of the Judgment was necessary to determine the ultimate issue in the Mourant case. For these reasons the Committee decided that the finding in paragraph 58 of the Judgment was not a 'finding of fact' within the meaning of regulation 11(2)(c).
33. The Committee considered however that the same conclusion could be reached by an alternative route. The Committee noted Mr Davis-White QC's [the prosecutor's] submission that the finding of dishonesty in paragraph 58 of the Judgment was crystal clear: a deliberate lie had been told. Looking only at paragraph 58, that submission was plainly correct. The Committee considered however that it was necessary also to have regard to what Henderson J had said in paragraph 90:
'I am conscious of course that I have not heard the administrator's side of the story because of their decision not to participate in the trial. Nevertheless, I am satisfied that there is a prima facie case of misconduct on their part which ought to be considered by the professional bodies to which they are answerable.'
34. As noted above, Mr Hollis had not attended the trial. The Committee had been told that this was a decision made on legal advice that he had received. The Committee noted also that no express allegation of dishonesty had been made against Mr Hollis prior to the commencement of the trial and neither had there been any express notice to him that such an allegation might be made. The skeleton argument put in by the Applicants (which the Committee was told Mr Hollis had in fact never seen) had described Mr Hollis' conduct in relation to Appendix Committee as 'misleading' and no more than that. The fact that Mr Hollis had not had a chance to answer any suggestion that he had acted dishonestly was clearly a point that Henderson J had very much in mind, and his description of a 'prima facie' case of misconduct emphasises this. It seemed to the Committee very likely that Henderson J, in making his observations in paragraph 90, had in mind the concerns relating to the necessity for compliance with the principles of natural justice that Lord Diplock had discussed in his speech in Mahon v Air New Zealand  3 All ER 884, to which Mr Davies QC had referred the Committee. It seemed to the Committee also that awareness of the necessity to comply with those principles had prompted the judge to make the comments he did make in paragraph 90. The view of the Committee was that taking paragraph 90 of the Judgment into account, the finding in paragraph 58 was properly to be treated as no more than a conditional or prima facie finding of dishonesty. It was, and was intended by Henderson J to be one which Mr Hollis should have the opportunity to rebut. Thus it did not fall within the definition of a finding of dishonesty for the purposes of 11(2)(c) , even giving 'finding' the wide definition contended for by ACCA.
35. In consequence, whether or not Mr Hollis had acted dishonestly in relation to Appendix Committee was a matter that the Committee itself would have to resolve at the final hearing. The findings of Henderson J in paragraph 58 were, in the view of the Committee, admissible as prima facie evidence under 11(2)(c) . The weight to be given to such a finding would be a matter for the Committee to assess at the final hearing."
"In conclusion the Committee decided that the finding of dishonesty, as set out in paragraph 58 of the Judgment, was not a finding falling within regulation 11(2)(c) . However this finding, together with other findings of fact identified in Appendix 1 [to the directions issued by the Committee], was admissible as prima facie evidence under regulation 11(2)(d) . Further, the comments, statements of reasoning or opinion of Henderson J, also identified in Appendix 1, were admissible under regulation 11(2)(a) ".
The Grounds of Challenge