Re Manlon Trading Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE STAUGHTON,LORD JUSTICE PETER GIBSON,LORD JUSTICE BELDAM
Judgment Date12 Apr 1995
Judgment citation (vLex)[1995] EWCA Civ J0412-11
Docket NumberNO: 94/1221/B

[1995] EWCA Civ J0412-11

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM: CHANCERY DIVISION

(Mr Justice Evans-Lombe)

Before: Lord Justice Staughton Lord Justice Beldam and Lord Justice Peter Gibson

NO: 94/1221/B

The Official Receiver
and
Haroon Abdul Aziz

MR A W M CHARLES and MR M CUNNINGHAM (instructed by The Treasury Solicitors)) appeared on behalf of the Appellant

MR M COLLINGS (instructed by Messrs Simons Platman & Rechnic, 8 Wimpole St, W1))appeared on behalf of the Respondent/Mother.

1

Wednesday, 12th April 1995

2

JUDGMENT.

LORD JUSTICE STAUGHTON
3

Lord Justice Peter Gibson will give the first judgment.

LORD JUSTICE PETER GIBSON
4

This is an appeal by the Official Receiver from the dismissal by Evans-Lombe J of disqualification proceedings brought against Haroon Abdul Aziz. Whilst this case, like others of its kind, ultimately turns on its own particular facts, an important issue raised on this appeal is the correct approach to applications to strike out such proceedings for want of prosecution.

5

Manlon Trading Ltd ("Manlon") was incorporated in 1972 and initially traded as a steel exporter, its principal area of business being Africa and in particular Malawi. Mr Aziz and his family had been in business in Malawi, but he was deported from there. In 1976 Mr Aziz's family acquired a shareholding in Manlon and in September 1977 Mr Aziz was appointed general manager. It would not have assisted Manlon's business in Malawi if the company's filed records showed him, a deportee, as a director. However, he accepts that he acted as a shadow director of Manlon from 1977 until it was wound up, the nominal directors having no executive function. By early 1978 Manlon's business had become exclusively that of a confirming agent, acting as an intermediary between businesses, primarily in the UK and businesses in Africa, and particularly Nigeria. Manlon's bankers were Johnson Matthey Bankers Ltd ("the Bank").

6

In 1983 there was a military coup in Nigeria. Rigid exchange control was imposed by the new regime, and this prevented Nigerian debtors from paying their substantial indebtedness directly to Manlon. Those debtors paid the Nigerian Government which gave Manlon promissory notes. In 1984 the Bank, being in financial difficulties, called in its loans. In 1986 the Bank obtained judgment against Manlon for some £4.5 million and against Mr Aziz for some £100,000 in respect of a guarantee by him of part of Manlon's debt. On 28 February 1988 Manlon ceased trading and on 30 March 1988 it was compulsorily wound up. On 4 April 1988 the Bank obtained a bankruptcy order against Mr. Aziz. He was discharged from his bankruptcy on 4 August 1991.

7

In the meantime on 7 June 1990 the Official Receiver commenced disqualification proceedings against Mr Aziz as a shadow director of Manlon under ss. 6 and 22(4) of the Company Directors Disqualification Act 1986 ("the Act"). The Originating Summons was supported by a report to the court of the Deputy Official Receiver. In the report he alleged that by reference to the following matters Mr Aziz was unfit to be concerned in the management of a company:-

8

(A) Mr Aziz misapplied company assets by causing Manlon—

(i) to transfer a property at an undervalue to a connected company on 31 March 1988;

(ii) to make substantial payments to companies and individuals not in the normal course of business and for which no explanation had been received, including a payment on 9 September 1987 to his cousin Mr. Ibraimo and a payment on 27 May 1987 to one Latif;

(iii) to make payments to relatives after the presentation of the winding up petition without explanation or consideration;

(iv) to assign promissory notes both before and after commencement of the winding up to relatives, a friend and banks whose loans were guaranteed by him or by relatives of his;

(v) to make payments to his brother Abdul within 2 years of the commencement of the winding up for no consideration.

9

(B) He caused Manlon in June 1981 to apply monies in financing the subscription for its own shares.

10

(C) He withdrew monies from Manlon on 13 May 1986 for his own purposes for no consideration.

11

(D) He failed to ensure that adequate accounting records were kept by Manlon, the complaint being that whilst all transactions were entered in the records there was often no proper explanation of the payments and receipts (and numerous examples of the alleged failures dating from 1980 onwards are referred to in the report).

12

(E) He failed to provide the liquidator of Manlon with information and in particular with adequate explanation of the circumstances leading to many of Manlon's transactions, some of which took place many years before the commencement of the liquidation.

13

(F) He caused the failure of Manlon by failing to arrange ECGD cover and by failing to ensure that its transactions were of a genuine nature (the report refers to transactions going back to 1983).

14

(G) He knowingly continued Manlon's business beyond a date when there was no reasonable prospect of all creditors being paid, that date being said to be in 1983.

15

None of these allegations is accepted by Mr Aziz (and we have been told that one allegation forming part of (A)(ii) is not being pursued by the Official Receiver). Mr Aziz responded to the report by an Affirmation on 12 April 1991. Other evidence sworn of his behalf came from Manlon's bookkeeper, Mr. Patel, and a partner in Manlon's auditors, Mr. Ling.

16

Notwithstanding that the commencement of these proceedings was delayed until the very last day of the 2—year period allowed by s.7(2) of the Act the Official Receiver did not pursue the proceedings with any expedition. At a hearing on 15 April 1991 the Official Receiver was directed by the Companies Registrar to file and serve evidence in reply by 13 May 1991. At each of five subsequent hearings before the Registrar, successive extensions of time were sought and obtained for the filing of that evidence in reply. Mr Aziz was given no notice of any save the first of those hearings nor were the orders made at those hearings communicated to Mr Aziz save the order made at the last of those hearings on 11 November 1991.

17

By letter dated 11 November 1992 the Treasury Solicitor on behalf of the Official Receiver served on Mr Aziz notice of intention to proceed after the expiration of one month by serving and filing the evidence in reply. Mr Aziz was also sent a copy of the order for directions made one year earlier. The solicitors then acting for Mr Aziz on 21 January 1993 wrote to the Treasury Solicitor, saying that Mr Aziz had rebutted every allegation made against him, that proceedings brought by the liquidator of Manlon against Mr Aziz had been settled out of court, and continued:

"In these circumstances, it is wholly unfair and inequitable to have disqualification proceedings hanging over our client's head like the sword of Damocles. The proceedings brought by you have laid dormant for the past eighteen months. Please inform us whether it is your intention to either withdraw or prosecute the claim.

In the absence of any satisfactory response and/or action from you by 11 February 1993, we reserve the right to make an Application to strike out the proceedings for inexcusable delay."

18

The Treasury Solicitor on 26 January 1993 replied that he was instructed to proceed with the application. But despite all the extensions of time for service of the evidence in reply, and although the final extension granted on 11 November 1991 was only for one week to 18 November 1991, that evidence was not filed and served until 24 January 1994. As the Judge records, all that such evidence consisted of was an Affidavit of six paragraphs by the liquidator, largely devoted to bringing up to date the most recent statement of affairs of Manlon, and a further report of 28 paragraphs by the Deputy Official Receiver, containing very little new information and largely consisting of argument. On 27 March 1994 Mr Aziz applied to strike-out the proceedings for want of prosecution.

19

The Official Receiver surprisingly applied, and even more surprisingly the Registrar acceded to the application, for liberty that the deponents on each side on Mr Aziz's application be cross-examined. That order is not under appeal before us, but I feel bound to comment that in my opinion it would require highly exceptional circumstances, which do not apppear to me to have been present in this case, to justify such an order. The rules and practice of the court allow interlocutory applications to be made for the purpose of bringing to an end or reducing the scope of proceedings. It would destroy the utility of such applications if they became occasions for lengthy trials within trial, extended by oral evidence.

20

At the hearing before the Judge, Mrs. Oliver, the head of the Disqualification Unit in the Treasury Solicitor's department, who had sworn an Affidavit in which she explains the delays that had occurred, and Mr Aziz, who in an Affirmation had claimed to have suffered specific prejudice caused by the delays (such as that he would have become a director of seven named companies but could not do so because of the pending disqualification proceedings), were cross-examined. The Judge found that there was no substantial risk that it was impossible to have a fair trial of the issues in the proceedings and that Mr Aziz had not discharged the burden on him of satisfying the Judge of the specific prejudice that had been claimed. However, the Judge said that disqualification proceedings were sui generis, so that the rules for striking out for want of...

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