Re Sevenoaks Stationers (Retail) Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLORD JUSTICE DILLON,LORD JUSTICE BUTLER-SLOSS,LORD JUSTICE STAUGHTON
Judgment Date31 Jul 1990
Judgment citation (vLex)[1990] EWCA Civ J0731-12
Docket Number90/0734

[1990] EWCA Civ J0731-12

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

COMPANIES COURT

(Mr. Justice Harman)

Royal Courts of Justice

Before:

Lord Justice Dillon

Lord Justice Butler-Sloss

and

Lord Justice Staughton

90/0734

In The Matter of Sevenoaks Stationers (Retail) Ltd. and

In The Matter of The Company Directors Disqualification Act 1986.

Between:
Michael Charles Cruddas
Appellant (Plaintiff)
and
The Official Receiver
Respondent (Respondent)

MR. A. STEINFELD and MISS J. WALKER (instructed by Messrs Jeffrey Green Russell) appeared on behalf of the Appellant (Plaintiff).

MR. M. KEENAN and MR. A. W. H. CHARLES (instructed by The Treasury Solicitor) appeared on behalf of the Respondent (Respondent).

LORD JUSTICE DILLON
1

Mr. Michael Cruddas, a chartered accountant, appeals against an Order made by Harman J. on the 15th November 1989 under section 6 of the Company Directors Disqualification Act 1986 whereby the judge disqualified him for a period of seven years from being, without the leave of the court, a director of a company or in any way concerned or taking part in the promotion formation or management of a company.

2

Section 6(1) provides as follows:

"6. Duty of court to disqualify unfit directors of insolvent companies.

(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 (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."

3

Section 6(4) provides that the minimum period of disqualification is two years and the maximum period is fifteen years.

4

Section 9 provides that where it falls to a court to determine whether a person's conduct as a director of any particular company or companies makes him unfit to be concerned in the management of a company the court shall have regard in particular to the matters mentioned in schedule 1 of the act. I abbreviate the section since nothing turns in this case on its wording.

5

It follows that the judge, if he is going to disqualify a person under section 6, has to be satisfied that that person's conduct in relation to the company or companies in question "makes him unfit to be concerned in the management of a company."

6

The first point taken on this appeal is that the judge made no such finding against Mr. Cruddas. Therefore it is submitted that the order ought to be set aside, whatever the shortcomings in Mr. Cruddas' conduct as a director.

7

It is correct that the judge did not actually state in so many words that he was satisfied that Mr. Cruddas' conduct as a director made him unfit to be concerned in the management of a company. What he actually said was:

"The respondent to the summons is Mr. Michael Charles Cruddas. It is in some ways an easy matter to decide because Mr. Cruddas has frankly admitted to me upon oath both in chief and in cross-examination by Mr. Keenan, and has admitted to me in his submission at the end, that the conditions of section 6 requiring the court to make a disqualification order against a person, are satisfied in this case. The conditions are that he is or has been a director of a company which has become insolvent. In this case there are five companies each of which has become insolvent and of each of which Mr. Cruddas was a director, although in one case a director it may be only until a few months before it actually went into liquidation. Secondly, that his conduct as a director makes him unfit to be concerned in the management of a company. In particular by section 9, the court has to have regard to the matters mentioned in Schedule 1, in particular paragraph (4) sub-paragraph (a) refers to section 221, the duty on companies to keep accounting records and under sub-paragraph (f) the duty to make annual returns, and the duty to prepare annual accounts and to sign balance sheets, and so forth.

As I say, all that makes it in one sense an easy decision to reach. I must make a disqualification order."

8

Taking the judgment as a whole, however, I have no doubt at all that the judge was satisfied that Mr. Cruddas was unfit to be concerned in the management of a company. This first point taken for Mr. Cruddas therefore fails. I would add, though I appreciate it is not an answer to the technical point taken, that on the facts of this case a finding by the judge that Mr. Cruddas was fit to be concerned in the management of a company would, in my judgment, have been perverse.

9

The main point urged for Mr. Cruddas on this appeal was however that the period of seven years' suspension imposed by the judge was too long. In that regard this appeal has an importance beyond its own facts, since it is the first appeal against a disqualification order which has come to this court.

10

Counsel for Mr. Cruddas and counsel for the Official Receiver both took the view that the disqualification order was an order made by the judge in his discretion with which an appellate court could only interfere on the grounds set out in G -v- G [1985] 1 WLR 647 or Hadmor Productions -v- Hamilton [1983] AC 191.

11

I do not, however, wholly share that view in this particular case because guidelines have not yet been laid down, and fairness requires that there should be a degree of similarity between the periods of disqualification imposed by different judges or different courts for similar offences. Of course no two cases are entirely similar and it is fundamental that every case must be decided on its own facts and circumstances. But I found certain statistics produced by the Official Receiver somewhat disturbing, viz:

In 1989, of 115 disqualification orders made in the High Court under section 6, only one—that against Mr. Cruddas—imposed disqualification for more than five years, whereas of 123 such orders made in county courts 18 involved disqualification for more than five years. In the first six months of 1990, of 79 disqualification orders made in the High Court under section 6 only four imposed disqualification for more than five years whereas of 96 such orders made in county courts again 18 imposed disqualification for more than five years.

12

Under section 6 the court having jurisdiction to make a disqualification order is, where the company is in compulsory liquidation, the court by which the company is being wound up. That is likely to depend under section 117 of the Insolvency Act 1986, on where the petitioning creditor found it most convenient to present the petition for winding up. It seems surprising if it were the case that the applications for disqualification orders under section 6 made in the High Court should have been in significantly less serious cases than those made in the county courts.

13

I would for my part endorse the division of the potential 15 year disqualification period into three brackets, which was put forward by Mr. Keenan for the Official Receiver to Harman J. in the present case and has been put forward by Mr. Charles for the Official Receiver in other cases viz:

  • (i) The top bracket of disqualification for periods over ten years should be reserved for particularly serious cases. These may include cases where a director who has already had one period of disqualfication imposed on him falls to be disqualified yet again.

  • (ii) The minimum bracket of two to five years' disqualfication should be applied where, though disqualification is mandatory, the case is, relatively, not very serious.

  • (iii) The middle bracket of disqualification for from six to ten years should apply for serious cases which do not merit the top bracket.

14

I will come back to the appropriate bracket and period of disqualfication when I have considered the facts and other issues.

15

Over the five years from December 1981 to December 1986, Mr. Cruddas was a director, as was a Mr. Hooker, of no less than five trading companies which became insolvent and went into liquidation. Mr. Cruddas is, as I have said, a chartered accountant. Mr. Hooker's original occupation was, we were told, as a lorry driver. A three year disqualification period was imposed on Mr. Hooker by Mr. Registrar Buckley before Mr. Cruddas' case was heard by Harman J. The five companies were Hoo Paper Company Ltd. ("Hoo Paper"), Hoo Waste Paper Company Ltd. ("Hoo Waste Paper"), Sevenoaks Stationers Ltd. ("Sevenoaks Stationers"), Rochester Paper Company Ltd. ("Rochester") and Sevenoaks Stationers (Retail) Ltd. ("Retail"). The application for disqualification was made in the matter of Retail, but the court was required to consider the complaints of the Official Receiver as formulated in his report in respect of Mr. Cruddas' conduct as a director of each of the five companies.

16

The total net deficiency of all five companies as regards creditors (disregarding lost share capital) comes to over £559,000 according to the Statements of Affairs prepared by directors. That involves an element of double-counting in that the deficiency in Sevenoaks Stationers duplicates to the extent of some £50,000, because of a guarantee, the net deficiency in Hoo Paper. But the evidence indicates that the net deficiency in Rochester could be up to £193,000 more than was allowed for in the statement of affairs. In effect Rochester restarted, albeit with a significant fresh paid up share capital, the business which had failed in the hands of Hoo Paper and Hoo Waste Paper, and Retail...

To continue reading

Request your trial
246 cases
  • Joseph Arkins v David Murphy and Another
    • Ireland
    • High Court
    • 13 January 2015
    ...MCLAUGHLIN (LIQUIDATOR OF TRAVELODGE LTD) v LANNEN 2006 2 ILRM 217 2005/43/8968 2005 IEHC 341 SEVENOAKS STATIONERS (RETAIL) LTD, IN RE 1991 CH 164 1991 3 AER 578 1990 3 WLR 1165 1991 BCLC 325 1990 BCC 765 FERRIS (OFFICIAL LIQUIDATOR OF CARECA INVESTMENTS LTD) v FARRELL & COADY UNREP CL......
  • Secretary of State for Trade and Industry v Sullman and Another
    • United Kingdom
    • Chancery Division
    • 19 December 2008
    ...is a question of fact —what used to be pejoratively described in the Chancery Division as “a jury question”….” (per Dillon LJ in Sevenoaks Stationers Retail Ltd [1991] Ch 164 at 176B-F). As Timothy Lloyd J put it in ( Re Atlantic Computers PLC unreported 15 Jun 1998) summarising the authori......
  • Re Carecraft Construction Company Ltd
    • United Kingdom
    • Chancery Division
    • Invalid date
  • Re Asegaai Consultants Ltd; Wood and another v Mistry
    • United Kingdom
    • Chancery Division
    • 10 July 2012
  • Request a trial to view additional results
2 books & journal articles
  • Employee Insolvency Priorities and Employment Protection in France, Germany, and the United Kingdom
    • United Kingdom
    • Journal of Law and Society Nbr. 44-2, June 2017
    • 1 June 2017
    ...of Modern Company Law (2016,10th edn.) 217±18.97 Company Directors Disqualification Act 1986.98 id., s. 699 Sevenoaks (Stationers) Retail [1991] Ch 164; Secretary of State for Trade andIndustry v. McTighe [1997] B.C.C. 224; Official Receiver v. Barnes [2001] B.C.C.578; Official Receiver v. ......
  • Restriction, Disqualification and the Companies Act 2014: A Reformatory Analysis
    • Ireland
    • Cork Online Law Review Nbr. 14-2015, January 2015
    • 1 January 2015
    ...have on them, such as their ability to earn a livelihood.74Drawing a comparison 67Ahern (n 12) para 16-198. 68Courtney (n 3) 28.199. 69[1991] 3 All ER 578. 70ibid 581 (Dillon J). 71[2002] 1 IR 372 (SC). 72Courtney (n 3) para 28.199. 73[2005] IEHC 85. 74ibid (Finlay Geoghegan J). 95 [2015] C......

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT