Glasgow City Council V. Gordon Craig+aristide Moccia
| Jurisdiction | Scotland |
| Judge | Lord Glennie |
| Judgment Date | 11 December 2008 |
| Neutral Citation | [2008] CSOH 171 |
| Published date | 11 December 2008 |
| Court | Court of Session |
| Date | 11 December 2008 |
| Docket Number | CA43/08 |
| OUTER HOUSE, COURT OF SESSION [2008] CSOH 171 | |
| CA43/08 | OPINION OF LORD GLENNIE in the cause GLASGOW CITY COUNCIL Pursuer; against GORDON CRAIG First Defender: and ARISTIDE MOCCIA Second Defender: ________________ |
Pursuers: Dalgleish, Edinburgh City Council
First Defender: McShane, Brodies LLP
Second Defender: In person
11 December 2008
[1] This case raises an interesting question as to the extent of the liability of a director of a company under s.217 of the Insolvency Act 1986 ("the 1986 Act") where a part of the business of the company, but only a part, is conducted using a "prohibited name" as defined in s.216(2) of the 1986 Act. The question raised here was considered in some detail, albeit obiter, by Arden LJ in ESS Production Ltd. v Sully 2005 2 BCLC 547 but, as far as I am aware, has not arisen for decision until now.
[2] The defenders were formerly directors of Arigo Limited. Arigo Limited was incorporated on 17 July 1996 and changed its name to Arigo Limited in August of that year. The defenders were appointed directors in July 1996 and continued as such until the company was placed into insolvent liquidation on 18 January 2005. Because of that insolvent liquidation, Arigo Limited is referred to in the relevant sections of the 1986 Act as "the liquidating company".
[3] Until just before its liquidation, Arigo Limited was the lessee of premises at 67 Kilmarnock Road, Glasgow in terms of a lease dated 12 November and 9 December 1996. It operated from those premises as an Italian restaurant, under the name "Arigo".
[4] The defenders were also directors of Degreefresh Limited ("Degreefresh"). Degreefresh was incorporated on 15 August 2002 and the defenders were appointed directors shortly thereafter. They remained directors until Degreefresh was placed into liquidation on 12 September 2007.
[5] In or about February 2003 Degreefresh opened a wine bar, under the name "Bar Vino", at 69 Kilmarnock Road, Glasgow, of which premises it was the sub-lessee. Bar Vino was next door to Arigo. Degreefresh also ran, and still run, a restaurant at 85 Renfield Street, Glasgow, now called "Mangiare".
[6] In December 2004 Degreefresh took an assignment from Arigo Limited of the lease of 67 Kilmarnock Road. From that time on, or possibly from November 2004 (the precise date does not matter), until it went into liquidation, it operated both the restaurant (under the name "Arigo") and the wine bar (Bar Vino) from adjoining premises. In January 2006 the wine bar was converted into a Spanish style tapas bar under the name of "Olé".
[7] The pursuers are the rating authority for the City of Glasgow. Their claim in this action is for the balance of non-domestic rates due in respect of both 67 and 69 Kilmarnock Road for the years 2004/5, 2005/6 and 2006/7. The sum claimed is £64,036.22 plus interest. There is no dispute as to the sums attributable to both properties, though parties are not agreed on the correct split (if that is relevant) between the two. By letter dated 10 January 2005 to the pursuers, Degreefresh pointed out that Arigo Limited was in liquidation and acknowledged that, with effect from 1 November 2004, it was responsible for the rates for both premises. The rates were originally claimed against Degreefresh and summary warrants were obtained addressed to Degreefresh at 67 Kilmarnock Road. With Degreefresh now in liquidation, and part of the rates demanded being unpaid, the pursuers in this action seek to hold the defenders personally liable for the unpaid balance. They do so in reliance on ss.216 and 217 of the 1986 Act.
[8] It is necessary to set out those sections in full. S.216, which imposes criminal sanction for use of a prohibited name, provides as follows:
"216. (1) This section applies to a person where a company ("the liquidating company ") has gone into insolvent liquidation on or after the appointed day and he was a director or shadow director of the company at any time in the period of 12 months ending with the day before it went into liquidation.
(2) For the purposes of this section, a name is a prohibited name in relation to such a person if:
(a) it is a name by which the liquidating company was known at any time in that period of 12 months, or
(b) it is a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company.
(3) Except with leave of the court or in such circumstances as may be prescribed, a person to whom this section applies shall not at any time in the period of 5 years beginning with the day on which the liquidating company went into liquidation:
(a) be a director of any other company that is known by a prohibited name, or
(b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company, or
(c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.
(4) If a person acts in contravention of this section, be is liable to imprisonment or a line, or both.
(5) In subsection (3) "the court" means any court having jurisdiction to wind up companies; and on an application for leave under that subsection, the Secretary of State or the official receiver may appear and call the attention of the court to any matters which seem to him to be relevant.
(6) References in this section, in relation to any time, to a name by which a company is known are to the name of the company at that time or to any name under which the company carries on business at that time.
(7) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.
(8) In this section "company" includes a company which may be wound up under Part V of this Act.
S.217 imposes civil liability for use of a prohibited name when there has been a contravention of s.216. It is in the following terms:
217. (1) A person is personally responsible for all the relevant debts of a company if at any time:
(a) in contravention of section 216, he is involved in the management of the company, or
(b) as a person who is involved in the management of the company, he acts or is willing to act on instructions given (without the leave of the court) by a person whom he knows at that time to be in contravention in relation to the company.
(2) Where a person is personally responsible under this section for the relevant debts of a company, he is jointly and severally liable in respect of those debts with the company and any other person who, whether under this section or otherwise, is so liable.
(3) For the purposes of this section the relevant debts of a company are:
(a) in relation to a person who is personally responsible under paragraph (a) of subsection (1), such debts and other liabilities of the company as are incurred at a time when that person was involved in the management of the company, and
(b) in relation to a person who is personally responsible under paragraph (b) of that subsection, such debts and other liabilities of the company as are incurred at a time when that person was acting or was willing to act on instructions given as mentioned in that paragraph.
(4) For the purposes of this section, a person is involved in the management of a company if he is a director of the company or if he is concerned, whether directly or indirectly, or takes part, in the management of the company.
(5) For the purposes of this section a person who, as a person involved in the management of a company, has at any time acted on instructions given (without the leave of the court) by a person whom he knew at that time to be in contravention in relation to the company of section 216 is presumed, unless the contrary is shown, to have been willing at any time thereafter to act on any instructions given by that person.
(6) In this section 'company' includes a company which may be wound up under Part V."
It can be seen that s.216 imposes a restriction on those who were, until its liquidation, directors of the liquidating company. The restriction is that, for a period of 5 years after the liquidating company has gone into insolvent liquidation, they are not allowed, except with the leave of the court or in the three excepted cases in Rules 4.80 to 4.82 of the Insolvency (Scotland) Rules 1986, to be directors of or otherwise concerned in the management of a company which has or carries on business under a prohibited name. A prohibited name is a name by which the liquidating company was known or which is so similar as to suggest an association with it. S.216 renders those who contravene that restriction subject to criminal sanctions. S.217, on the other hand, is not concerned with criminal sanctions. It makes such persons personally liable for the debts of the company which is known by the prohibited name.
[9] The pursuers' case is straightforward. They say that, in relation to the defenders, who had been at the material time directors of Arigo Limited, the name "Arigo" is a prohibited name. Accordingly, for a period of 5 years after Arigo Limited went into insolvent liquidation the defenders are not permitted to be directors of any other company that is known by the name "Arigo". From November or December 2004 until it went into liquidation in 2007, the defenders were directors of Degreefresh which was known by that prohibited name, in that it carried on the restaurant business at 67 Kilmarnock Road under the name "Arigo". Accordingly, the defenders were throughout that period in contravention of s.216 and are therefore personally liable for the relevant debts of Degreefresh under s.217(1)(a). The relevant debts of Degreefresh in relation to persons personally liable under s.217(1)(a) are such debts and other liabilities of the company as are incurred at...
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