Ncg Trading Ltd v The Official Receiver
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE LLOYD |
| Judgment Date | 25 October 2004 |
| Neutral Citation | [2004] EWHC 3203 (Ch) |
| Court | Chancery Division |
| Date | 25 October 2004 |
| Docket Number | No 3678 of 2003 |
[2004] EWHC 3203 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
The Strand
London
WC2A 2LL
Mr Justice Lloyd
No 3678 of 2003
THE APPELLANT appeared in person
MISS REBECCA STUBBS (instructed by ABS Law) appeared on behalf of THE RESPONDENT
Monday 25 October 2004
This is an appeal by Mr Stuart Mansell against an order of Mr Registrar Baister dated 10 June 2004, by which he ordered that Mr Mansell be disqualified for a period of four years from acting as a director and from all the various other matters that arise under the Company Directors Disqualification Act 1986.
Most of the matters relied on by the Official Receiver as showing that Mr Mansell was unfit to act as a director arise from the business of a company called NCG Trading Limited, of which he was the only director. That company was incorporated on 5 November 1999. It started trading, so far as I can gather, at the beginning of 2000. It was unsuccessful in its trading business. In February 2001 a winding-up petition was issued against it. On 4 April 2001 a compulsory winding-up order was made. The creditor was Thompson Publishing with whom NCG had placed orders for advertising.
So far as appears from the papers, NCG had two other significant creditors, one a company called Bonds and the other the Royal Mail, both having been used by NCG for the purposes of deliveries of flowers. The company, first of all, used Bonds. In July 2000 it opened an account with the Royal Mail. According to the Official Receiver's contentions, by October 2000, particularly when Bonds refused further credit, Mr Mansell ought to have been aware that NCG was insolvent and unable to pay its debts as they fell due. It already had an account with the Royal Mail, but it continued to use that account—indeed it possibly used it to a greater extent—and thereby incurred credit which for the most part it was unable to discharge.
Another relevant element in the history is that Mr Mansell himself was the subject at this time of an individual voluntary arrangement ("IVA"), the second of two that have been approved in relation to him. The second of the two IVAs failed for reasons, Mr Mansell tells me, in various ways connected with the factors that underlay the failure of NCG. On 21 February 2002, Mr Mansell was made bankrupt.
The disqualification proceedings were commenced on 21 January 2003. The charges put against Mr Mansell fall into three categories: first, the failure to maintain, preserve or deliver up proper accounting records of NCG; secondly, trading in NCG to the detriment of the Royal Mail; and thirdly, failure to file returns. That related not to NCG, but to a series of 30 other companies used for a different aspect of the trading in flowers, which was Mr Mansell's then current activity. The failure to file returns has featured to a much lesser extent in the proceedings before me and in the proceedings before the Registrar.
Mr Mansell took before the Registrar, and pursues before me, a preliminary point, namely that the disqualification proceedings were out of time. Section 6 of the 1986 Act refers in subsection (1) to the court's obligation to make a disqualification order against a person in a case where, on an application under this section, it is satisfied of certain matters. The first of those matters is that he is or has been the director of a company which has at any time become insolvent. Subsection (2) goes on to say:
"For the purposes of this section and the next a company becomes insolvent if—
(a) the company 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;
(b) the company enters administration;
(c) an administrative receiver of the company is appointed.
…."
Section 7(2) provides as follows:
"Except with the leave of the court, an application for the making under that section [section 6] of the disqualification order against any person shall not be made after the end of the period of two years beginning with the day on which the company of which that person is or has been a director became insolvent."
On the face of it, therefore, the respondent needs to show that the appellant is or has been a director of a company which has at any time become insolvent and has to bring the proceedings two years, beginning with the day on which the company in question became insolvent.
When does a company become insolvent? Section 6 (2) provides the answer. The answer is not given by reference to ordinary tests of insolvency, for example, for the purposes of the presentation of a winding-up petition that the company is unable to pay its debts as they fall due, but is defined in the special way by reference to an event in relation to which a specific date can be identified. It is clear from section 6(2) that the company becoming insolvent means its entering into one or another of these various forms of insolvency proceeding.
Mr Mansell submits that while that is there and clear, the section does not say "if and only if", nor does it say "if and when", and that the section cannot and should not be construed as excluding the ordinary meaning of insolvency, namely the inability to pay its debts as they fall due. Pressed with the decision of Hoffman J in Re Walter L Jacob & Co Ltd [1993] BCC 512, which is to the effect that, in relation to a company which has gone into a compulsory winding-up, such a company became insolvent on the making of the winding-up order rather than on the presentation of the petition, Mr Mansell says that no one argued in that case that it became insolvent at a much earlier date when it first became unable to pay its debts as they fell due. I daresay that is correct as an observation. It is plain to me that that would have been an impossible argument. The whole point of section 6(2) is to define a moment and an event (with a number of alternatives) at which the company becomes insolvent and by reference to which one can tell whether the company has become insolvent. It would be entirely inconsistent with that statutory provision to say that a company can be regarded for the purposes of these sections as becoming insolvent at the first moment when it is unable to pay its debts when they fall due.
Accordingly, it seems to me that Mr Mansell is wrong in this preliminary point. The two years runs from the date in this present instance of the compulsory winding-up order, April 2001, and the proceedings were within time being commenced in January 2003.
Mr Mansell then challenges the judgment of the Registrar on a number of grounds, some dealing with the finding of unfitness and others dealing with the period of disqualification. I propose to divide the points in that way, but otherwise to treat them in the order in which they appear in Mr Mansell's helpful skeleton argument.
The second point, after the preliminary point on time, arises from a passage in the judgment where Mr Registrar Baister referred to a bank account through which such financial dealings as the company had were conducted. In paragraph 18 of the judgment he says:
"The reference to personal bank statements clearly identifies that paragraph as applicable to this case because, as we shall see later, this company maintained no separate accounts. Its transactions went through what has been euphemistically called a pooled account, but in reality was Mr Mansell's personal account."
Later, in the very last paragraph of the judgment, the Registrar says:
"The total absence of books and records is to my mind a serious matter and a particularly serious one when the affairs of multiple companies are being conducted through the director's personal bank account."
Mr Mansell says that the Registrar was importing his prejudices from another case which he heard relating to Mr Mansell's own bankruptcy—an order which had been set aside on appeal. That matter was before the court, not only because, I daresay, the Registrar remembered something about it, but because Mr Mansell put the judgment into evidence. He goes on to say in his statement that this was in fact not a personal account, but a jointly held business account through which the funds of a number of flower businesses passed. It was accurately described as a pooled account and no adverse inference should properly be drawn from its nature.
It is clear from what Mr Mansell says, and has said to me this morning, that it was a personal account in the sense that he was the account holder. He was, so far as I know, the only authorised signatory. The account was in his name. It was in a name which was used not only by him but had also been used by two other people—one person and one company—but they were long since off the scene. So in effect it was his own account. He makes no bones about the fact that, because of the constraints of the individual voluntary arrangement, he was only able to have one bank account, which he used for all purposes—personal and business, and for the business purposes not limited to this one company.
As I read the Registrar's judgment it does not seem to me that he does draw an adverse inference against Mr Mansell from the fact that he had only the one bank account which he used for the purposes of a number of different businesses. There is no sentence or other passage in the judgment that seems to me to bear out that inference. What the Registrar does say—and in my view entirely justifiably—is that in relation to the charge of the failure to maintain proper accounting records, that is particularly serious in a case where the affairs...
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