Secretary of State for Trade and Industry v Ashcroft
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE MILLETT,LORD JUSTICE HUTCHISON,LORD JUSTICE HIRST |
| Judgment Date | 26 February 1997 |
| Judgment citation (vLex) | [1997] EWCA Civ J0226-3 |
| Date | 26 February 1997 |
| Court | Court of Appeal (Civil Division) |
[1997] EWCA Civ J0226-3
Lord Justice Hirst
Lord Justice Millett
Lord Justice Hutchison
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
LEEDS DISTRICT REGISTRY
Royal Courts of Justice
MR. A.W.D. CHARLES and MR. P.M. CAWSON (Messrs Dibb Lupton
Broomhead, Leeds) appeared on behalf of the Appellant/Applicant.
MR. E. BANNISTER Q.C. (instructed by Messrs Addleshaw Sons & Latham, Manchester) appeared on behalf of the Respondent/Respondent Mr. John Ashcroft.
In Re Rex Williams Leisure plc [ 1994] Ch. 350 this Court held that the Secretary of State can rely upon hearsay evidence obtained in the course of an official investigation into the affairs of a company in support of an application by him for a disqualification order when the application is made under section 8 of the Company Directors Disqualification Act 1986 ("the 1986 Act"). The question on this appeal is whether he may rely upon similar hearsay evidence obtained from an office-holder in support of an application by him for a disqualification order when the application is made under section 7 of the 1986 Act.
The Background
The facts can be shortly stated. The case concerns a company called Survival Group Limited ("the Company"). The name of the company was singularly inappropriate, for it was made the subject of an Administration Order in March 1993, went into creditors' voluntary liquidation shortly afterwards, and was eventually ordered to be compulsorily wound up. Mr. Ian Clarke and Mr. Ronald Robinson were first appointed joint administrators and later joint liquidators. They were thus "office-holders" of the company within the meaning of section 7(3) of the 1986 Act.
The Respondent to the present appeal is Mr. John Kevin Ashcroft. He is a former director of the company. At the date of the administration order he was its Chairman. Until two months previously he had been its managing director. There were three other executive directors, a Mr. Copp-Barton, a Mr. Corbett, and a Mrs. Sutcliffe. There were also two non-executive directors, a Mr. Hodkinson and a Mr. Winterbottom. They took no part in the day to day running of the Company.
In January 1994 Mr. Robinson interviewed Mr. Hodkinson. From the information supplied by him and other material and information which he obtained in the course of his duties as liquidator, Mr. Robinson formed the opinion that Mr. Ashcroft and the other executive directors had been guilty of conduct which made them unfit to be concerned in the management of a company. He reported his findings to the Secretary of State as he was required to do by section 7(3) of the 1986 Act.
In due course the Secretary of State came to the conclusion that it was expedient in the public interest that a disqualification order should be made against Mr. Ashcroft and each of the other executive directors of the company. He accordingly made an application to the Court under section 7 of the 1986 Act. The originating summons was issued in the High Court on 2nd March 1995 and was supported by two affidavits. One was sworn by the Official Receiver, who deposed to the fact that the Secretary of State had received information from Mr. Robinson from which it appeared to him (the Secretary of State) expedient in the public interest that a disqualification order should be made under section 6 of the 1986 Act against each of the executive directors of the company; and identified the matters by reference to which they were, in the opinion of the Secretary of State, unfit to be concerned in the management of a company. These were the matters contained in paragraphs 93 to 95 and 133 to 134 of the accompanying affidavit of Mr. Robinson. The Official Receiver also deposed to the fact that the Secretary of State had directed him to make the application on his behalf.
The other affidavit was sworn by Mr. Robinson. Paragraphs 93 to 95 and 133 to 134 of his affidavit summarised his findings in relation to the conduct of the executive directors. They constitute the allegations which the Secretary of State makes against them. It is not necessary to summarise them. They are very serious. The rest of the affidavit contained the evidence on which the allegations were based. This consisted of extracts from the company's books and papers and information obtained by Mr. Robinson in the course of his inquiries. This included information provided to him by others, including Mr. Hodkinson. Such evidence is, of course, hearsay.
The Secretary of State later served additional evidence in support of his application. This did not include evidence from Mr. Hodkinson. He was not at that time willing to swear an affidavit to confirm the truth of what he had told Mr. Robinson.
The Secretary of State later discontinued the proceedings against Mr. Copp-Barton. The other executive directors filed evidence in answer. Mr. Ashcroft, however, did not. Instead, he applied to the Court to strike out all such parts of Mr. Robinson's affidavit as consisted of hearsay. His Honour Judge Roger Cooke, sitting as a Judge of the High Court, acceded to the application. The Secretary of State now appeals to this Court against the Judge's order.
Since the date of the Judge's order Mr. Hodkinson has sworn an affidavit in these proceedings in support of the Secretary of State's application for a disqualification order, and the Secretary of State is proposing to apply to the Court for leave to file it. If granted, this will make the present appeal largely academic. But it raises a point of principle of general importance, for there are far more applications for disqualification orders under section 6 of the 1986 Act than under section 8, and we understand that a number of similar cases are presently awaiting the outcome of this appeal.
The legislation
1986 Act
Section 6 (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."
Section 6(4):
"Under this section the minimum period of disqualification is 2 years, and the maximum period is 15 years."
Section 7 (1):
"If it appears to the Secretary of State 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."
Section 7(3):
"If it appears to the office-holder responsible under this section, that is to say —
(a) in the case of a company which is being wound up by the court in England and Wales, the official receiver,
(b) in the case of a company which is being wound up otherwise, the liquidator,
(c) in the case of a company in relation to which an administration order is in force, the administrator, or
(d) in the case of a company of which there is an administrative receiver, that receiver,
that the conditions mentioned in section 6(1) are satisfied as respects a person who is or has been a director of that company, the officer-holder shall forthwith report the matter to the Secretary of State."
Section 7(4):
"The Secretary of State or the official receiver may require the liquidator, administrator or administrative receiver of a company, or the former liquidator, administrator or administrative receiver of a company —
(a) to furnish him with such information with respect to any person's conduct as a director of the company, and
(b) to produce and permit inspection of such books, papers and other records relevant to that person's conduct as such a director,
as the Secretary of State or the official receiver may reasonably require for the purpose of determining whether to exercise, or of exercising, any function of his under this section."
The provisions of section 7 are supplemented by the Insolvent Companies (Reports on Conduct of Directors) No. 2 Rules 1986. These were the Rules in force at the date of the application, but they have now been replaced. They impose a duty on the responsible office holder to furnish returns to the Secretary of State in relation to the conduct of directors of an insolvent company. Failure to comply renders the office holder liable to penal sanctions. The office holder in turn enjoys statutory powers to compel officers of the company and other persons with relevant information to co-operate with him and provide him with such information: see sections 235 and 236 of the Insolvency Act 1986. There are penal sanctions for non-compliance.
Section 8 reads:
"(1) If it appears to the Secretary of State from a report made by inspectors under section 437 of the Companies Act [or section 94 or 177 of the Financial Services Act 1986], or from information or documents obtained under section 447 or 448 of [the Companies Act or section 105 of the Financial Services Act 1986] [or section 2 of the Criminal Justice...
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