Hm Secretary Of State For Trade And Industry V. James Gerard
| Jurisdiction | Scotland |
| Judge | Lord Johnston,Lord Mackay of Drumadoon,Lord Wheatley |
| Neutral Citation | [2007] CSIH 85 |
| Docket Number | P1630/03 |
| Published date | 21 November 2007 |
| Court | Court of Session |
| Date | 21 November 2007 |
| EXTRA DIVISION, INNER HOUSE, COURT OF SESSION | |
| Lord Johnston Lord Wheatley Lord Mackay of Drumadoon | [2007] CSIH 85 P1630/03 OPINION OF THE COURT delivered by LORD JOHNSTON in RECLAIMING MOTION In PETITION of HER MAJESTY'S SECRETARY OF STATE FOR TRADE AND INDUSTRY Petitioner and Respondent; against JAMES GERARD Respondent and Reclaimer: _______ |
Alt: Stewart; Biggart Baillie (Petitioner and Respondent)
Alt: Mackenzie, solicitor advocate; Pinsent Masons (Respondent and Reclaimer)
21 November 2007
[1] In this petition the petitioner seeks a disqualification order in terms of the Company Directors Disqualification Act 1986 against the respondent and reclaimer ("the reclaimer"), arising out of and consequent upon the liquidation of Oakbank
(J & S) Limited ("the company"), of which, at the material time, the reclaimer was a director.
[2] The company was incorporated on 23 April 1998 and traded as suppliers of joinery and stone services. On 18 December 2001 an interim liquidator was appointed to the company on the making of a winding up order on 18 December 2001 at the instance of a petition by the Inland Revenue. At the material time the reclaimer was Managing Director and indeed the sole director of the company.
[3] Section 6 of the Company Directors Disqualification Act 1986 is in the following terms:
"(1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied --
(a) that he is or has been a director of a company which has at any time
become insolvent (whether while he was a director or subsequently), and
(b) that his conduct as a director of that company ... makes him unfit to be concerned in the management of a company.
(2) For the purposes of this section ..., a company becomes insolvent if --
(a) the company goes into liquidation at the time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up,
...
and references to a person's conduct as a director of any company ... include, where that company ... has become insolvent, that person's conduct in relation to any matters connected with or arising out of the insolvency of that company".
[4] Section 8 of the 1986 Act authorises the Secretary of State for Trade and Industry to make an application for a disqualification order against any person if he considers it expedient in the public interest that such an order should be made. Section 9 and Schedule 1 of the 1986 Act specify certain matters that are to be taken into account in determining whether or not a person's conduct as a director makes him unfit to be concerned the management of the company. In particular the court is directed by paragraph 10 of Schedule 1 to have regard to:
"Any failure by the director to comply with any obligation imposed on him by or under any of the following provisions of the Insolvency Act --
...
(e) section 131 (statement of affairs in winding up by the court);
...
(b) section 235 (duty to co-operate with liquidator, etc)".
[5] The provisions of the Insolvency Act 1986 referred to in paragraph 210 of Schedule 1 are as follows. Section 131 imposes a duty on inter alios directors to provide a liquidator or provisional liquidator with a statement of affairs. In relation to a Scottish winding up, the relevant parts are in the following terms:
"(1) Where the court has made a winding-up order ... the [liquidator or provisional liquidator] may require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.
(2) The statement shall be verified by affidavit by the persons required to submit it and shall show --
(a) particulars of the company's assets and liabilities;
(b) the names and addresses of the company's creditors;
(c) the securities held by them respectively;
(d) the dates when the securities were respectively given; and
(e) such further or other information as may be prescribed or as the
[liquidator or interim liquidator] may require.
(3) The persons referred to in subsection (1) are --
(a) those who are or have been officers of the company;
....
(4) Where any persons are required under this section to submit a statement of affairs to the [liquidator or interim liquidator], they shall do so ... before the end of the period of 21 days beginning with the day after that on which the prescribed notice of the requirement is given to them by the official receiver".
Section 235 imposes a general duty on inter alios directors to co-operate with any liquidator or interim liquidator. In terms of subsection (1), together with section 234(1), the section applies where a company goes into liquidation. In relation to a Scottish winding up, the relevant parts are as follows:
"(2) Each of the persons mentioned in the next subsection shall --
(a) give to the office-holder such information concerning the company and its promotion, formation, business, dealings, affairs or property as the office-holder may at any time after the effective date reasonably require, and
(b) attend on the office-holder at such times as the latter may reasonably require.
(3) The persons referred to above are --
(a) those who are or have at any time been officers of the
company, ..."
[6] After hearing a proof the Lord Ordinary in a lengthy and detailed judgment determined that the petitioner's case was made out, that the conduct of the reclaimer in certain specified matters rendered him unfit to be concerned in the management of a company as a director and that a disqualification order should be made for the minimum period available under the legislation, namely two years. It is against that determination that this reclaiming motion is taken.
[7] The issues canvassed before the Lord Ordinary and again before us were substantially questions of fact relating to the conduct of the reclaimer subsequent to the appointment of the liquidator and the liquidation of the company. In particular, the allegations against the reclaimer were based on the proposition that he had failed adequately to co-operate with the liquidator in the latter's investigation of the company's affairs.
[8] The Lord Ordinary heard evidence from four witnesses, the principal of which were Mr. Lewis Young, an employee of the firm Tenon Recovery, who had been appointed to manage the liquidation, as insolvency practitioners (the actual liquidator being a Mr. T.C. McLennan) and the reclaimer himself. The two other witnesses led at the proof were of lesser importance. The principal issues in the case were focused by Mr. Young and the reclaimer respectively. The substance of the Lord Ordinary's determination was that on any questions of fact where the evidence of Mr. Young and the reclaimer were in conflict, he, the Lord Ordinary, preferred that of Mr. Young and it was on the basis of that choice that he determined his decision.
[9] Before us the general position of Mr. Mackenzie, the solicitor advocate for the reclaimer, was that the Lord Ordinary had misdirected himself in respect of the reasons which he offered for his preference in respect of the crucial questions of fact of the evidence of Mr. Young to that of the reclaimer. Accordingly, the matter should be opened before us and the submission was that on the evidence led, properly understood, the issue in the case should be resolved in favour of the reclaimer. That was because the petitioner had not established the necessary material to warrant a disqualification order being pronounced against the reclaimer on the basis of his unfitness as a director.
[10] There was no basic dispute at the Bar as to the role and duties of an Appeal Court in considering the approach to be taken to determinations of fact by a Lord Ordinary. It is summarised by Lord Hamilton in Hamilton v Allied Domecq plc 2006 SC 221 where his Lordship says at paragraph 83 et, seq.:
"[83] In the context of the role of an appellate court in relation to issues of fact, counsel referred to Thomas v. Thomas, Caledonia North Sea Limited v. London Bridge Engineering Limited, Thomson v. Kvaerner Govan Limited 2004 S.C. (H.L.) 1 and Simmons v. British Steel plc 2004 S.L.T. 595. An appeal court should bear in mind not only the advantage which the first instance judge has, on questions of credibility and of findings of primary fact, in seeing the parties and other witnesses; that advantage applied equally to the judge's evaluation of those facts (Piglowska v. Piglowska [1999] 1 W.L.R. 1360, per Lord Hoffmann at page 1372). Accordingly, this court required to use extreme caution in its reading and analysis of Mr. Hamilton's evidence. The assessment of it, in its context, was pre-eminently a matter for the Lord Ordinary. He had found that at a meeting at Blackford on 27 May Mr. Beatty had made to Mr. Hamilton a negligent misrepresentation of fact as to Allied's then intention in respect of the strategy for marketing the product. This court was entitled to interfere with that finding only if it were demonstrated that the Lord Ordinary had, in his assessment and evaluation and in the context of the manner in which the proof had been conducted, plainly gone wrong.
[84] In approaching the task before this court I am acutely conscious of the constraints to which, on matters of fact, it is, as an appellate court, subject. These constraints are well-known and have recently been re-emphasised in a number of judgments of the House of Lords. But the existence of these constraints does not absolve this court from its obligation as a court of appeal on matters of fact to reconsider the evidence led before the Lord Ordinary and to determine upon such reconsideration whether critical findings of fact, both primary and secondary, made by the Lord Ordinary were...
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