P & P Design Plc v PricewaterhouseCoopers
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE FERRIS |
| Judgment Date | 05 March 2002 |
| Neutral Citation | [2002] EWHC 446 (Ch) |
| Date | 05 March 2002 |
| Court | Chancery Division |
[2002] EWHC 446 (Ch)
IN THE HIGH COURT OF JUSTICE
(CHANCERY DIVISION)
Royal Courts of Justice
The Strand
London WC2A
Mr Justice Ferris
MR C PARKER appeared on behalf of the Claimant
MR D RICHARDS QC and MR P GILLEN appeared on behalf of the Defendant
Tuesday 5 th March 2002
Until 6 th February, this year, the auditors of P & P Designs Plc, which I shall refer to as "the Company" were Price Waterhouse Coopers, which I shall refer to as "PWC". On 6 th February, PWC resigned as auditors of the company with immediate effect by giving written notice to the company.
They took the view that there were circumstances which ought to be brought to the attention of the members or creditors of the Company under Section 394 of the Companies Act 1985, and they deposited at the Company's office, at the same as their resignation, a statement setting out the circumstances which they considered it necessary to bring to the attention of the members or creditors. The Company takes exception to that statement and resists the need to circulate the statement, and resists the performance by PWC of what PWC claims to be its obligations to deposit a copy of the statement with the Registrar of Companies.
These proceedings have been brought in order to test the validity of the Company's objection. The matter turns almost entirely upon the terms of Section 394, which so far as material are as follows:
394(1):
"Where an auditor ceases for any reason to hold office he shall deposit at the Company's registered office a statement of any circumstances connected with his ceasing to hold office, which he considers should be brought to the attention of the members or creditors of the company, or if he considers that there are no such circumstances a statement that there are none."
394(2):
"In the case of resignation the statement shall be deposited along with the notice of resignation."
And I need not read the rest of sub-section (2). Sub-section (3), which is central to the present case, states:
"If the statement is of circumstances which the auditors considers should be brought to the attention of the members or creditors of the Company the Company shall, within 14 days of the deposit of the statement either (a) send a copy of it to every person, who under Section 238, is entitled to be sent copies of the accounts or (b) apply to the Court."
394(4):
"The Company shall, if it applies to the Court, notify the auditor of the application."
394(5):
"Unless the auditor receives notice of such application before the end of the period of 21 days, beginning with the day on which he deposited the statement he shall, within a further 7 days, send a copy of that statement to the Registrar."
394(6):
"If the Court is satisfied that the auditor is using the statement to secure needless publicity for defamatory matter (a) it shall direct that copies of the statement need not be sent out and (b) it may further order the Company's costs on the application to be paid in whole or in part by the auditor, notwithstanding that he is not a party to the application and the company shall, within 14 days of the Court's decision, send to the persons mentioned in sub-section (3)(a) a statement setting out the effect of the order."
I think I need not read sub-section (7), which relates to the case where the Court is not so satisfied. I must, however, go on to Section 394(A), which so far as material provides, is as follows:
394(A)(i):
"If a person ceasing to hold office as auditor fails to comply with Section 394 he is guilty of an offence and liable to a fine."
394(A)(iv):
"If a company makes default in complying with Section 394 the Company and every officer of it who is in default is guilty of an offence and liable to a fine and for continued contravention to a daily default fine."
In this case the statement of matters which PWC thought it necessary to draw to the attention of the members and creditors of the Company, was, as I have said, deposited on 6 th February. The 14-day period referred to in Section 394(3) thus expired at the end of 20 th February. Unhappily, the Company, although it wished to make an application to the Court, did not make its application until 21 st February, one day outside the 14-day period.
PWC have taken the view that although they, of course, have been given notice of the Company's application, the notice which is referred to in sub-section (5) must be a notice of a valid application, and they contend that an application made out of time is not a valid application for the purposes of Section 394. Accordingly, PWC take the view that it will be their statutory duty to deposit a copy of their statement with the Registrar by the end of today, which represents the expiration of the period of 21 days beginning with the date of the deposit of the statement.
The question of whether time limits prescribed by a statute have to be strictly complied with is one which has come before the Court not infrequently. In particular, I have been referred by both parties to the consideration of this matter in the judgment of Lord Justice Millett in Petch v Guerney [1994] 3 A11 E-R at 731, Lord Justice Millett said, at 736, just above "E":
"The question whether strict compliance with a statutory requirement is necessary has arisen again and again in the cases. The question is not whether the requirement should be complied with. Of course it should. The question is what consequences should attend a failure to comply. The difficulty arises from the common practice of the legislature of stating that something shall be done, which means that it must be done, without stating what are to be the consequences if it is not done.
The Court has dealt with the problem by devising a distinction between those requirements which are said to be mandatory (or imperative, or obligatory) and those which are said to be merely directory (a curious use of...
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