Secretary of State for Business, Innovation and Skills v Atkar
| Jurisdiction | England & Wales |
| Judge | Mr Justice Nugee |
| Judgment Date | 10 June 2016 |
| Neutral Citation | [2016] EWHC 3894 (Ch) |
| Docket Number | Case No: CH/2016/000107 |
| Date | 10 June 2016 |
| Court | Chancery Division |
[2016] EWHC 3894 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building
Fetter Lane
London EC4A 1NL
Mr Justice Nugee
Case No: CH/2016/000107
Mr Mark Mullen appeared on behalf of the Claimant
Mr Marc Glover appeared on behalf of the Defendant
(As Approved)
I have before me an application by the Secretary of State for Business, Innovation and Skills to set aside a stay which was granted by Rose J on paper of a disqualification order made under the Company Directors Disqualification Act 1986 ( “the Act”) against Mr Sewar Singh Atkar.
The disqualification order was made by Mrs Registrar Derrett. She heard in March of this year (over four days) an application for disqualification based on the fact that Mr Atkar was a director of a company called Realight Ltd ( “the Company”) and for a period of some months the company traded to the detriment of the Crown by not paying Revenue debts, in particular PAYE and National Insurance at a time when it was paying its other creditors. It was not in dispute that Mr Atkar had been a director of a company which had become insolvent, therefore satisfying section 6(1)(a) of the Act; the question for the Registrar was whether his conduct made him unfit to be concerned in the management of the company and that turned on her view of whether he was complicit in the trading to the detriment of the Crown. She heard oral evidence and her conclusion was an unfavourable one to Mr Atkar; she took a favourable view of a witness called Mr Nandhray who was the company secretary and he said that he acted on instructions from Mr Atkar in the Company's dealings with HMRC. Mr Atkar denied that, but Mrs Registrar Derrett took a less favourable view of his evidence. She handed down a reserved judgment on 22 April 2016 and, having agreed that the case fell within the lower bracket, for which the recommended length of disqualification is two to five years, she disqualified him for four years.
Mr Atkar sought permission to appeal. That permission application has not yet been determined, but, as I said on 13 May 2016, the application for a stay came before Rose J on paper and she granted the application pending determination of Mr Atkar's application for permission to appeal. And the basis upon which she did so was that although she thought the grounds of appeal served by Mr Atkar appeared to her rather thin, she said this:
“However, the submissions made as to why a stay should be granted have convinced me that it would not be appropriate for the disqualification order to come into force whilst the application for permission to appeal is pending. The Appellant states that he is the director of a number of successful trading companies, employing a large number of people and that this failure to pay his PAYE taxes and National Insurance contributions covered only a short period of an otherwise unproblematic career as a company director. The operation of the order may therefore cause hardship to him and others.”
She provided in her order for the Secretary of State to have liberty for the lifting of the stay by application notice and that is the application that has been made and which has come before me. Mr Mullen has appeared for the Secretary of State and Mr Glover for Mr Atkar.
Mr Mullen's submission is a simple one; it is that although the court retains a jurisdiction to grant a stay of a disqualification order, the usual practice is not to do so. He referred me to the decision of the Court of Appeal in DEFRA v Downs [2009] EWCA Civ 257 for the general principles applicable to a stay pending appeal, where Sullivan LJ said at paragraph 8 as follows:
“8. The approach to be adopted in respect of applications for a stay is clearly set out in the notes to CPR 52.7. A stay is the exception rather than the rule, solid grounds have to be put forward by the party seeking a stay, and, if such grounds are established, then the court will undertake a balancing exercise weighing the risks of injustice to each side if a stay is or is not granted.
9. It is fair to say that those reasons are normally of some form of irremediable harm if no stay is granted because, for example, the appellant will be deported to a country where he alleges he will suffer persecution or torture, or because a threatened strike will occur or because some other form of damage will be done which is irremediable. It is unusual to grant a stay to prevent the kind of temporary inconvenience that any appellant is bound to face because he has to live, at least temporarily, with the consequences of an unfavourable judgment he wishes to challenge in the Court of Appeal.”
So much for the general principle. When it comes to the stay of a disqualification order the authority on which Mr Mullen relied was Secretary of State for Trade and Industry v Bannister [1996] 1 WLR 118, a decision of the Court of Appeal, and in particular the judgment of Morritt LJ. Morritt LJ referred to section 17 of the Act which enables a person against whom a disqualification order has been made to apply to the court for leave for the purposes of section 1(1)(a). Section 1(1)(a) provides that when a person is subject to a disqualification order:
“he shall not be a director of a company, act as receiver of a company's property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court”.
As I say, section 17 enables the person subject to an order to make an application for leave and in Bannister's case Morritt LJ first decided that the existence of section 17 did not oust the general power for the court to grant a stay. He said this at 122H:
“Although this power may be sufficient in the normal run of cases it is not necessarily adequate for dealing with the extreme case in which the court below went badly wrong and the very existence of the disqualification order causes irreparable harm to the person apparently disqualified. In such hard though rare cases the power conferred by section 17 would not be sufficient to achieve justice. Accordingly in my view the question must be approached on the basis that clear words are needed to exclude the usual and necessary power to stay or suspend an order pending appeal.”
Mr Mullen pointed to that as indicating that Morritt LJ thought that it would only be in rare cases that the power to stay would be exercisable. Then at page 124E, Morritt LJ said this:
“Section 17 prescribes a method by which a person disqualified may nevertheless obtain leave to act as a director. Further, as Chadwick J observed in Secretary of State for Trade and Industry v Price, 5 May 1995, the grant of such leave would not have the effect which I assume, for it is not necessary to decide, a stay or suspension would have of shortening the period of the disqualification. Though, as I have already observed, such a dispensation pending appeal may not do justice in all cases in my view, in agreement with Chadwick J, it is the relief which the disqualified director should normally pursue. The usual practice is to require the applicant to give details of the financial standing and management structure of the company concerned. The leave, if granted, may be on condition or subject to undertakings and is confined to the company in respect of which the leave is sought. It seems to me that the interests of the disqualified director and the protection of the public can be more suitably considered on an application for leave to act under that section rather than on an application for a stay pending appeal. The flexibility which it permits is shown by the order of Hoffmann J in Re Ipcon Fashions Ltd (1989) 5 BCC 773, 776.
Thus the discretion to stay or suspend the disqualification order would, in practice, only be exercised in favour of the applicant if he showed that his case was one of those exceptional cases in which the alternative remedy under section 17 was inadequate.”
In those circumstances he refused a stay in Mr Bannister's case.
There is no dispute between the parties that that is the test which I should apply, namely whether this is a case where the section 17 order is adequate or whether there is a real risk of irreparable harm to Mr Atkar which cannot be addressed by him making a suitable application under section 17. I should add that Mr Mullen accepted that if I were to accede to his application to lift the stay, it should remain in place for 21 days to enable any application under section 17 that Mr Atkar might be advised to bring to be prepared and brought. And I was told by him that in the event of an application under section 17 being brought the usual practice is for interim leave to be granted where that is appropriate pending the full hearing of the application.
So the real question is whether a section 17 relief would be adequate to protect Mr Atkar against the risks of irreparable harm. That requires looking with some care at the particular matters which Mr Atkar relies upon as giving rise to a risk of irremediable harm and I will take them one by one. The first which was referred to by Mr Atkar in his first witness statement is that he is a director of a company called Loughton Care Centre Ltd. Loughton Care Centre Ltd is a company which has...
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