Commissioners of Customs and Excise v Hedon Alpha Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE STEPHENSON,LORD JUSTICE ACKNER,LORD JUSTICE GRIFFITHS |
| Judgment Date | 23 January 1981 |
| Judgment citation (vLex) | [1981] EWCA Civ J0123-3 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | 81/0055 |
| Date | 23 January 1981 |
and
and
[1981] EWCA Civ J0123-3
Lord Justice Stephenson
Lord Justice Ackner
and
Lord Justice Griffiths
81/0055
79 C 5682 and 80/SC/2376
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
(Sir Douglas Frank, Q.C.)
Royal Courts of Justice
MR. JOHN G. LAWS (instructed by the Solicitor for H.M. Customs & Excise, London) appeared on behalf of the Respondent (Plaintiff).
MR. CHARLES PUGH (instructed by Messrs Clark & Son, solicitors, Reading) appeared on behalf of the Appellant (Third Defendant).
This appeal raises a short preliminary point on the construction of two statutes. Does s.448 of the Companies Act 1948 apply to proceedings under s.2 (2) of the Betting and Gaming Duties Act 1972? The judge has answered that question in the negative.
It arises out of the failure of a limited company named Hedon Alpha Limited (the defendant company), which carried on the business of an off course bookmaker, to pay general betting duty on bets made with the company between 1st April 1978 and 2nd May 1979. For the purposes of this appeal it is proved or admitted that in respect of that period the balance of duty due and unpaid is £18,080.15, the defendant Gough (the appellant) and his co-defendant, Lotinga, were directors of the defendant company, and the defendant Lotinga was the holder of a bookmaker's permit and betting office licence.
The respondent Commissioners by writ dated 29th August 1979 claimed this balance from the defendant company, from Lotinga and from the appellant as recoverable jointly and severally from them all by virtue of s.2(2) of the Act of 1972. S.2 of that Act deals with two things, payment and recovery of general betting duty, and provides:
"2 (1) The general betting duty in respect of any bet shall, without prejudice to any regulations made under paragraph 2 of Schedule 1 to this Act, be due on the making of the bet, and shall be paid—
(a) in the case of a bet with a bookmaker, and without prejudice to subsection (2) below, by the bookmaker;
(2) The general betting duty chargeable on any bet made with a bookmaker shall be recoverable jointly and severally from all or any of the following persons—
(a) that bookmaker;
(b) the holder of the bookmaker's permit or betting office licence relating to the business in the course of which, or the premises at which, the bet was made;
(c) any person responsible for the management of that business or those premises;
(d) where the bookmaker is a company, any director of that company."
Judgment was entered against the first and second defendants in default, but the appellant served a defence on 10th March 1980 on which the Master gave him unconditional leave to defend and directed the question I have already stated to be tried as a preliminary point of law. It was raised by para.5 of the appellant's defence in this form:
"Further or alternatively in regard to all the acts and matters referred to in the Statement of Claim the Third named Defendant says that he acted throughout honestly and reasonably and if (which he denies) he has been guilty of any negligence default or breach of duty he will submit that having regard to all the circumstances of the case he ought fairly to be excused therefor and be relieved from his liability by Order of the Court pursuant to Section 448 of The Companies Act, 1948."
That paragraph was amended on 28th May 1980 to add (with certain other matters) these sentences:
"The relevant circumstances of the case including those connected with the appointment of the third-named Defendant as a Director are as follows:
(a) he was told by the second named Defendant that his appointment was merely 'as a formality'
(b) he did not receive extra salary or any fee as a result of the appointment;
(c) he was never invited to attend at any Board meeting;
(d) he never saw any accounts;
(e) he never held any relevant permit or licence;
(f) he was never consulted concerning financial matters;
(g) he was not permitted to execute a cheque unless it was countersigned by the second-named Defendant, Lotinga, or the Company Secretary."
S.448 of the Act of 1948 provides:
"(1) If in any proceeding for negligence, default, breach of duty or breach of trust against an officer of a company or a person employed by a company as auditor (whether he is or is not an officer of the company) it appears to the court hearing the case that that officer or person is or may be liable in respect of the negligence, default, breach of duty or breach of trust, but that he has acted honestly and reasonably, and that, having regard to all the circumstances of the case, including those connected with his appointment, he ought fairly to be excused for the negligence, default, breach of duty or breach of trust, that court may relieve him, either wholly or partly, from his liability on such terms as the court may think fit.
(2) Where any such officer or person aforesaid has reason to apprehend that any claim will or might be made against him in respect of any negligence, default, breach of duty or breach of trust, he may apply to the court for relief, and the court on any such application shall have the same power to relieve him as under this section it would have had if it had been a court before which proceedings against that person for negligence, default, breach of duty or breach of trust had been brought."
The defendant company being insolvent and the defendant Lotinga having disappeared, the appellant is hopeful of obtaining relief in the exercize of the court's discretion under s.448, but we are concerned only with the court's jurisdiction to grant him relief. It may be hard on him if the judge was right in holding that he had no jurisdiction, and the appellant has therefore to pay all or part of this large sum without any help from his co-defendants, but if this statutory relief is not available to the defendant as a director of a limited company which is a bookmaker, who is sued for unpaid betting duty under s.2(2)(d) of the Act of 1972, he must pay what the respondents can prove to be due and unpaid.
The appellant's case presented by Mr. Pugh has an attractive simplicity. The court can relieve an officer of a company against whom any proceeding for default is brought; the appellant is an officer of the defendant company: see s.455(l) of the Act of 1948; a default is a "failure to perform some legal requirement or obligation" or "to pay a sum due"; see the Shorter Oxford Dictionary and Osborne's Concise Law Dictionary; the defendant company is guilty of a default in failing to pay the betting duty due, and so is the defendant; the respondents' claim to recover what the defendants are legally obliged to pay is a proceeding for default; the court may relieve the appellant from the liability which is or may be his in respect of the undischarged legal obligation.
He submits that there is no reason in principle or authority for restricting the material meaning of the words "in any proceeding for….. default". The words are, as Mr. Justice Astbury said of the language of the section's predecessor, s.279 of the Companies (Consolidation) Act 1908, "perfectly wide and general": Re Claridge's Patent Asphalte Company 1921 1 Ch.543, 548. Proceedings to which the section applies are not restricted to proceedings in respect of a director's negligence, default, etc., or to proceedings in respect of his negligence, default, etc., in relation to the company of which he is a director; they cover proceedings initiated by strangers, e.g., an informer or the Board of Trade: Re Barry and Staines Linoleum Ltd. 1934 Ch.227 and Re Gilt Edge Safety Glass Ltd. 1940 Ch.495, decisions on s.372 of the Companies Act 1929, which was the immediate predecessor of s.448 of the Act of 1948 and introduced the word "default" between "negligence" and "breach of duty".
Mr. Pugh supported this construction of s.448 by the general rule that directors acting as such within their powers and within the powers of the company and without negligence or breach of fiduciary duty, incur no personal liability (7 Hals. Laws, 4th Ed. para 516) and by the severity of the exception to the rule which s.2(2)(d) of the Act of 1972 would create if it were not mitigated by the relief which s.448 of the Act of 1948 could provide. He pointed out that the Social Security Act 1975 S.152 (4) provides that contributions or premiums which a body corporate fails to pay "shall be a debt due to the Secretary of State jointly and severally from any director of the body corporate who knew, or could reasonably be expected to have known, of the failure to pay the contributions or premiums in question". This provision repeats a restriction on a director's liability which was enacted by s.95(8) of the National Insurance Act 1965, does not exclude the application of s.448 from proceedings to recover such contributions or premiums, but makes the imposition of unrestricted liability on a director for betting duty due from a company so unlikely as to require the court to restrict it by the application of s.448.
The learned judge...
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