The Official Receiver v Zvonko Stojevic and Another
| Jurisdiction | England & Wales |
| Judge | JUDGE PELLING |
| Judgment Date | 19 April 2007 |
| Neutral Citation | [2007] EWHC 1186 (Ch) |
| Date | 19 April 2007 |
| Court | Chancery Division |
| Docket Number | 2007 Folio No 189 of 2005 |
[2006] EWHC 1186 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
His Honour Judge Pelling Qc
In the Matter of Stone & Rolls Limited and
In the Matter of the Company Directors Disqualification on Act
2007 Folio No 189 of 2005
MALCOLM DAVIS WHITE QC (instructed By Howes Percival Llp) Appeared On Behalf Of The Claimant
No Solicitors On The Record, But Dr Wolfgang Blaschitz Representing On Behalf Of The First Defendant.
Proceedings against the Second Defendant have been discontinued.
This is the second of two judgments I have given so far in this, the trial of an application for a disqualification order against the defendant under sections 6 and 7 of the Company Directors Disqualification Act 1986, the 1986 Act.
The essential background is set out in the opening paragraphs of my first judgment, given on an application by the defendant for an adjournment.
The issues I have to determine at this stage concern jurisdiction and the admissibility of evidence. It is, therefore, not desirable that I say anything more concerning the facts of the claim at this stage.
The terms “company” and “bank” defined in my first judgment have the same meanings in this judgment.
1. Jurisdiction.
The defendant lives and works in Austria. The company, in respect of which he admits he was a shadow director, was an English registered company.
His contention is that since his centre of main interest is Austria, the English Court has no jurisdiction to entertain the claim made in these proceedings.
I reject that submission and do so for the following reasons.
First, in re Seagull Manufacturing Company Limited [1994] Ch 91, Miss Mary Arden QC, as she then was, held that the reference to “company” in section 6(1) of the 1986 Act embraced any company wherever incorporated which could be wound up under the Insolvency Act 1986, and anyone, of whatever nationality, could be disqualified under the section for conduct rendering him unfit to be a director of a company, irrespective of where the conduct complained of occurred. The court had a discretion not to order service of disqualification proceedings out of the jurisdiction where there was a good arguable case that the conditions in section 6(1) had not been satisfied, but in the circumstances of the case before Miss Arden, the court could order service outside the jurisdiction for someone seeking disqualification of the director.
Whilst of course technically that judgment is not binding on me, nonetheless it would be wrong to depart from it unless I was satisfied that it was plainly wrong.
Not merely do I not think it was wrong, but I think it plainly right. As Miss Arden said at page 98, F:
“The court must enquire as to the person with respect to whom Parliament is presumed in this particular case to have been legislating.”
As she said at page 104, letters A to H:
“The word 'company' in section 6(1) includes any company which may be wound up under the Act: see section 22(2). In this way, companies incorporated in other jurisdictions are included: see sections 220 and 221 of the Insolvency Act 1986. In the case of foreign companies the likelihood is that some of the directors will not be persons resident here, or even foreigners present here, when the conduct relied upon as rendering them unfit takes place. Accordingly, in my judgment, Parliament must be presumed to have been legislating, not simply for British subjects and foreigners who happened to be here at the relevant time, but also for other foreigners who were out of the jurisdiction at the critical time. Likewise, in relation to conduct, section 6(1) contains no territorial restriction. Accordingly, the court must ask what is the conduct in respect of which Parliament must have been presumed to have been legislating.
“There are two factors which, in my judgment, indicate that the conduct in question in section 6(1) need not be conduct which occurred within the jurisdiction. The first such factor is the definition of 'company' to which I have already referred. This includes foreign companies and the acts of the directors of those companies are likely to have taken place abroad, and Parliament must have been presumed to have been legislating with that in mind. Secondly, in these days of modern communications, a person may conduct himself as a director in such a way as to affect persons within the jurisdiction without himself ever entering the jurisdiction. Again, in my judgment, Parliament must be presumed to have been legislating with this in mind, and, accordingly, by plain implication, to be taken to have been referring to conduct wherever committed.”
As I say, I find this reasoning compelling and have no hesitation in adopting it.
The defendant's point concerning centre of main interest, in my view is wholly irrelevant. That test applies and applies only in relation to proceedings to which the EC regulation on insolvency proceedings 2000 of the EC regulation applies.
Article 1 of the EC regulation limits the application of the regulation to “collective insolvency proceedings”. Article 2 defines such proceedings to be those listed in annex A to the regulation.
That list is comprehensive as to the proceedings to which the EC regulation applies. It does not include proceedings of the type now before me.
In those circumstances, I reject the defendant's contention that the court has no jurisdiction over him. The suggestion that because the defendant was merely a shadow director the court has no jurisdiction, is clearly wrong. See section 6(3)(c) of the 1986 Act.
Admissibility.
The Official Receiver applies for permission to rely upon three additional affirmations sworn by the solicitor acting for the Official Receiver. The defendant consents to an order in these terms and so I have already given permission orally and rehearse it formally at this stage.
The issue of principle that arises concerns the judgment of Toulson J given in the Commercial Court proceedings between the bank company and the defendant referred to in a little more detail in the opening paragraphs of my first judgment in these proceedings.
The Official Receiver seeks a disqualification order on the basis of the findings of fraud made by Toulson J in the Commercial Court proceedings and for that purpose seeks to rely upon the contents of the judgment given by Toulson J as prima facie evidence of the alleged fraudulent conduct on the part of the defendant.
The reasons for this are pragmatic. The trial before Toulson J took 17 days, by reference to a trial bundle consisting of 87 lever arch files. If the judgment of Toulson J is admissible then the hearing before me will be shorter, some two to three days, and cheaper.
The Official Receiver submits that the judgment constitutes prima facie evidence only, and that any risk of prejudice to the defendant is eliminated by it being open to the defendant to attack particular findings made by Toulson J if he is able to do so by reference to relevant and admissible evidence.
It is submitted on behalf of the Official Receiver that the judgment is admissible under one or more of:
(a) Rule 3(2) of the Insolvent Companies Disqualification of Unfit Directors Proceeding Rules 1987, as construed by Morritt J, as he then was, in re City Investment Centres Limited [1992] BCLC 956, and by Vinelott J in re Moonbeam Cards Limited [1993] BCLC 1099; and/or:
(b) the principles identified in re Rex Williams Leisure plc [1994] Ch 350, as applied to section 6 proceedings by Secretary of State for Trade and Industry v Ashcroft [1998] Ch 71, and re Barings (No 5) [1999], 1 BCLC 433; and/or:
(c) under section 1 of the Civil Evidence Act 1995, to the extent that the judgment constitutes hearsay as opposed to merely opinion evidence.
It is, I think, important at the outset to emphasise that in the context of a judgment like a report of a statutory or non-statutory inspector or a regulatory body, the material consists broadly of: hearsay; that is the recital of the contents of relevant documents and of oral evidence given in the course of the trial to the judge concerned; and opinion evidence, which will include findings of primary and secondary fact of the judge as well as evaluative judgments by the judge.
Where hereafter I use the expression “opinion evidence” or “opinion”, I refer to material which constitutes either a finding of primary or secondary fact by the judge or an evaluative judgment.
The effect of this analysis is that potentially two exclusionary rules are engaged where it is sought to rely upon a judgment in subsequent proceedings between different parties, the rule against hearsay and the rule against opinion evidence as set out in Hollington v Hewthorn [1943] KB 587.
As to the first of these, in my view, no real problem now arises. Section 1 of the Civil Evidence Act 1995 creates a very wide exception to the rule against hearsay in relation to civil proceedings. In my view, the exception is capable of applying to hearsay statements and judgments and there is no doubt that these proceedings come within the definition of proceedings to which the 1995 Act applies.
It is true that the Act contemplates the service of notices if hearsay evidence is to be relied on and that, in this case, formal notice was not given.
However, the court retains a discretion under the CPR to admit such evidence in the absence...
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Directors' Duties In Europe: On Insolvency, Where Do Directors Owe Their Duties When The Company's Centre Of Main Interests Is In Another Member State?
...was endorsed in the subsequent cases of Re Seagull Manufacturing Co Ltd (No.2) [1994] 1 WLR 453 and Official Receiver v Stojevic [2007] EWHC 1186 (Ch) which both concerned English registered companies in liquidation in England but with directors resident abroad. In these cases, the court co......