Re Blackspur Group Plc ; Re Atlantic Computer Systems Plc and Others
| Jurisdiction | England & Wales |
| Judge | LORD WOOLF, MR |
| Judgment Date | 19 November 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J1119-6 |
| Docket Number | CHAN1 97/0242/B |
| Court | Court of Appeal (Civil Division) |
| Date | 19 November 1997 |
In the Matter of Blackspur Group Plc
And in the Matter of the Company Directors Disqualification Act 1986
In the Matter of Atlantic Computers Plc, Atlantic Computer Systems Plc and British and Commonwealth Holdings Plc
And in the Matter of the Company Directors Disqualification Act 1986
[1997] EWCA Civ J1119-6
The Master of the Rolls
(Lord Woolf)
Lord Justice Millett
Lord Justice Mummery
CHAN1 97/0242/B
CHAN1 97/0488/B
FC3 96/7649/D
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION (COMPANIES COURT)
(MR JUSTICE RATTEE)
Royal Courts of Justice
Strand
London WC2A 2LL
MR M BRIGGS QC and MR P GIROLAMI (Instructed by Messrs Peters & Peters, London W1R 9HB) appeared on behalf of the Applicants
MR R GILLIS (Instructed by The Treasury Solicitor, London SW1H 9JS) appeared on behalf of the Respondents
This is the judgment of the Court prepared by Lord Justice Mummery.
The Appeal
The issue is whether, in the face of undertakings offered to the court by Mr Vernon Davies, a respondent to two sets of proceedings under the Company Directors Disqualification Act 1986 (the 1986 Act), the Secretary of State for Trade & Industry (the Secretary of State) may properly continue the proceedings initiated with a view to obtaining disqualification orders against him. The refusal of the Secretary of State to discontinue the proceedings on those undertakings and her decision to press on with the proceedings have inspired two sets of applications. Both were dismissed by Rattee J. on 22 November 1996. His judgment is reported at [1997] 1 W.L.R. 710. The first set of applications seeks stays of the proceedings on the ground that it would be oppressive to Mr Davies, prejudicial to the interests of the public and a misuse of the procedure of the court for the Secretary of State to pursue them. The second is for leave to issue applications for judicial review of the decision to continue the proceedings and to refuse consent to stays on the basis of the undertakings offered. The ground of challenge is that that decision is unreasonable in the Wednesbury sense i.e.beyond the range of responses open to a reasonable Secretary of State; and/or evidences an impoverished appreciation of proportionality. Those applications are renewed in this court.
Although the propriety of the decisions of the Secretary of State is attacked both on private law and public law grounds, it was not suggested to Rattee J nor has it been suggested to this court that the outcome differs according to whether the challenge is determined on a stay application or on a judicial review application.
Statutory Background
The 1986 Act consolidates provisions formerly contained in the Companies and Insolvency Acts, empowering the court, in specified circumstances, to make a disqualification order against a person.
The scheme of the 1986 Act is as follows:
(1) A person against whom a disqualification order is made is prohibited, without the leave of the court, from being a director, liquidator or administrator of a company, a receiver or manager of a company's property or in any way, whether directly or indirectly, concerned or take part in the promotion, formation or management of a company for a specified period beginning with the date of the order: section 1(1).
(2) Disqualification may either be for general misconduct in connection with companies ( sections 2 to 5) or by reason of unfitness for office (sections 6,7 and 8).
(3) Under section 6 it is the duty of the court to 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 been insolvent (whether while he was a director or subsequently), and
(b) that his conduct as a director of that company ( either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.
The minimum period of disqualification is 2 years and the maximum is 15 years.
(4) Section 7 provides that:
"(1) If it appears to the Secretary of State that it is expedient in the public interest that a disqualification order under section 6 should be made against any person, an application for the making of such an order against that person may be made —
(a) by the Secretary of State, or
(b) if the Secretary of State so directs in the case of a person who is or has been a director of a company which is being wound up by the court in England and Wales, by the Official Receiver."
(5) Section 8 empowers the Secretary of State to apply to the court for a disqualification order after the investigation of a company by inspectors. It provides that:
"If it appears to the Secretary of State from the report made by inspectors under section 437 of the Companies Act…….. that it is expedient in the public interest that a disqualification order should be made against any person who is or has been a director or shadow director of any company, he may apply to the court for such an order to be made against that person."
Under sub-section (2) the court has a discretion to make a disqualification order:
"against a person where, on an application under this section, it is satisfied that his conduct in relation to the company makes him unfit to be concerned in the management of a company".
In those proceedings, which are heard by the High Court in England,the maximum period of disqualification is 15 years.
(6) Section 9 specifies those matters to which the court, in determining whether a person's conduct makes him unfit, must have regard: see Schedule 1.
(7) Other provisions spell out the consequences of contravention of a disqualification order and govern applications for leave under such an order. Section 13 provides that a person who acts in contravention of a disqualification order is liable, on conviction on indictment, to a maximum period of 2 years imprisonment or a fine or both. Liability is strict. Section 15 provides that a person is personally responsible for all the relevant debts of the company if, at any time, in contravention of a disqualification order, he is involved in the management of the company. Section 17 prescribes a procedure for applications for leave under a disqualification order: they must be made to the court and, on the hearing of the application for leave, the Secretary of State must appear and call the attention of the court to any matters which seem to him to be relevant and may give evidence or call witnesses.
(8) Finally, section 18 empowers the Secretary of State to make regulations requiring officers of courts to furnish him with such particulars as regulations may specify of cases in which disqualification orders have been made or leave granted by a court for a person subject to a disqualification order to do anything which the order prohibits him from doing. The Secretary of State, from the particulars furnished to him, must maintain a register of orders. Under section 18 (3) when an order entered in the register ceases to be in force, the Secretary of State must delete the entry from the register and all particulars relating to it which have been furnished to him. The register is open to public inspection.
General Observations on the 1986 Act
The instant issue should be viewed in the context of general considerations appearing in the regulatory scheme of the 1986 Act and in judicial decisions interpreting and applying it:
(1) The purpose of the 1986 Act is the protection of the public, by means of prohibitory remedial action, by anticipated deterrent effect on further misconduct and by encouragement of higher standards of honesty and diligence in corporate management, from those who are unfit to be concerned in the management of a company.
(2) Parliament has designated the Secretary of State as the proper public officer to discharge the function of making applications to the court for disqualification orders. There is a wide discretion to do so in cases where it appears, in the prescribed circumstances, that " it is expedient in the public interest that a disqualification order should be made." In any particular case it may be decided that the public interest is best served by making and continuing an application to trial; or by not making an application at all; or by not continuing a pending application to trial; or by not contesting at trial points raised by way of defence or mitigation. All these litigation decisions are made by the Secretary of State according to what is considered by her to be "expedient in the public interest." They are not made by the court or by other parties to the proceedings.
(3) Once proceedings have been brought to trial, it is for the court, not for the Secretary of State or for any other party, to decide whether a disqualification order should or should not be made. A court can only make a disqualification order if it is "satisfied" on the prescribed statutory matters. As the...
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