Secretary of State for Trade and Industry v Rogers
| Jurisdiction | England & Wales |
| Judge | THE VICE-CHANCELLOR,LORD JUSTICE ROCH,LORD JUSTICE HENRY |
| Judgment Date | 30 July 1996 |
| Judgment citation (vLex) | [1996] EWCA Civ J0730-14 |
| Docket Number | CHANF 96/0265/B |
| Court | Court of Appeal (Civil Division) |
| Date | 30 July 1996 |
[1996] EWCA Civ J0730-14
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
(MR. JUSTICE HARMAN)
Royal Courts of Justice
Strand
London WC2
The Vice Chancellor
(Sir Richard Scott)
Lord Justice Roch
Lord Justice Henry
CHANF 96/0265/B
MR. D CHIVERS (Instructed by Messrs. Bunkers, Hove) appeared on behalf of the Appellant
MR. A W H CHARLES & MR. M CUNNINGHAM (Instructed by The Treasury Solicitor) appeared on behalf of the Respondent
Tuesday 30 July 1996
This appeal is brought in rather unusual circumstances.
By Originating Summons dated 30 June 1992, the Secretary of State for Trade and Industry applied to the Court for a disqualification order under section 6 of the Company Directors Disqualification Act 1986 against the Respondent, Mr Rogers.
The application was based upon Mr Rogers' conduct as a director of three companies in the Brombard group of companies. The companies in question were Brombard Securities Ltd ("Securities"), Brombard Financial Services Group PLC ("PLC") and Brombard Financial Services Ltd ("Limited"). Mr Rogers was the controlling director of the three companies and of the group as a whole.
The Security of State and Mr Rogers reached agreement for the proceedings to be dealt with by the summary form of procedure sanctioned by Mr Justice Ferris in In re Carecraft Construction Co Ltd [1994] 1 WLR 172).
The purpose of Carecraft procedure (as I will call it) is to enable disqualification proceedings to be summarily dealt with in cases where:—
(a) facts regarding the director's conduct in managing the company or companies in question are either agreed or, at least, are not disputed;
(b) the Secretary of State is willing for the case to be dealt with by the Judge on the agreed (or not disputed) facts and does not consider it necessary to endeavour to prove the additional facts that have been alleged in the evidence filed in support of the summons;
(c) the director is willing for the case to be dealt with by the Judge on the agreed (or not disputed) facts and does not dispute that those facts require the Court to make a disqualification order under section 6 of the Act; and
(d) the Secretary of State and the director have reached agreement either as to the length of the disqualification period that would be appropriate or, at least, as to the bracket of years into which the disqualification period should fall.
Where Carecraft procedure is employed, an agreed Statement of Facts is placed before the Court, no oral evidence is given (so no cross-examination takes place), the Court is informed of the bracket into which the parties agree the disqualification period should fall and the parties' Counsel address the Judge on that basis. The procedure enables the case to be disposed of expeditiously and with a substantial saving of costs that would be incurred in a full blown trial.
Some concern was expressed at the time re Carecraft was decided, and has been voiced in some quarters subsequently, as to the propriety of the Secretary of State and the respondent director presenting the Judge with a virtual fait accompli. Since this is the first occasion on which this Court has had to deal with an appeal against an Order made in a case in which Carecraft procedure has been employed, (and in the nature of things such appeals should rarely, if ever, be necessary) we should, in my view, take the opportunity to express our view on the concerns that have been expressed.
Section 1(1) of the 1986 Act provides that:—
"In the circumstances specified below in this Act a Court, may, and under section 6 shall, make against a person a disqualification order … for a specified period beginning with the date of the order".
Section 6 of the Act provides as follows:—
"(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.
(2) For the purposes of this section and the next, a company becomes insolvent if—
(a) the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up,
(b) an administration order is made in relation to the company, or
(c) an administrative receiver of the company is appointed; and references to a person's conduct as a director of any company or companies include, where that company or any of those companies has become insolvent, that person's conduct in relation to any matter connected with or arising out of the insolvency of that company.
…
(4) Under this section the minimum period of disqualification is 2 years, and the maximum period is 15 years.
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.
Section 8 enables the Secretary of State to apply for a disqualification order if it appears to him from a report made on information obtained under the various statutory provisions referred to in sub-section (1) that "it is expedient in the public interest that a disqualification order should be made …". Sub-section (2) provides that:—
"The court may 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.
Sub-section (4) prescribes a maximum disqualification period of 15 years but no minimum period for orders made under section 8.
Section 9 provides as follows:—
"(1) Where it falls to a court to determine whether a person's conduct as a director or shadow director of any particular company or companies makes him unfit to be concerned in the management of a company, the court shall, as respects his conduct as a director of that company or, as the case may be, each of those companies, have regard in particular—
(a) to the matters mentioned in Part I of Schedule 1 to this Act, and
(b) where the company has become insolvent, to the matters mentioned in Part II of that Schedule;
and references in that Schedule to the director and the company are to be read accordingly.
The matters mentioned in Part 1 of the 1st Schedule to the Act, to which the Court is required by section 9 to have regard, include:—
"(1) Any misfeasance or breach of any fiduciary or other duty by the director in relation to the company.
(2) Any misapplication or retention by the director of, or any conduct by the director giving rise to an obligation to account for, any money or other property of the company.
(3) The extent of the director's responsibility for the company entering into any transaction liable to be set aside under Part XVI of the Insolvency Act (provisions against debt avoidance).
and include, in addition, various failures to comply with book-keeping requirements of the Companies Act. The matters mentioned in Part II of the 1st Schedule include "the extent of the director's responsibility for the causes of the company becoming insolvent".
It is for the Secretary of State (or the official receiver) and those advising him to decide what evidence to place before the Court in support of an application under section 6 and in respect of the matters to which, under section 9, the Court is required to have particular regard. If, having done so, the Secretary of State decides that certain allegations made in the affidavits filed in support of the application need not be pursued, it is not, in my opinion, the proper function of the Court to insist that they be pursued. The function of the Court, in directors' disqualification proceedings as in civil litigation generally, is adversarial. It is for the applicant to decide what case to present to the Court, what allegations to make, and what allegations, once made, should be persevered with. It is for the respondent director to decide what allegations to dispute and what allegations to accept. If the Secretary of State and the respondent director place before the Court an agreed Statement of the facts that are agreed and of the facts that the respondent does not propose to dispute and invite the Court to deal with the case on the basis of that agreed Statement, it is not for the Court, in my judgment, to insist that other allegations be pursued (whether or not the allegations relate to section 9 matters) or that cross-examination of any deponent or of the director should take place. If the judge feels strongly enough that the course being taken by the Secretary of State is ill advised, he or she can, I would think, adjourn the case for a short period and invite the Secretary of State to reconsider. But, thereapart, the function of the judge is to deal with the case that is put before the Court by the parties. There is no impropriety in directors' disqualification cases or in any...
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