The Secretary of State for Trade and Industry v (First Defendant)
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE HART,Mr Justice Hart |
| Judgment Date | 10 February 2006 |
| Neutral Citation | [2006] EWHC 135 (Ch) |
| Docket Number | Case No: 288 of 2002 |
| Court | Chancery Division |
| Date | 10 February 2006 |
[2006] EWHC 135 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
mr Justice Hart
In The Matter Of I.n.s. Realisations Limited
And In The Matter Of A Disqualification Undertaking Dated 22 March 2002
And In The Matter Of The Company Directors Disqualification Act 1986
Case No: 288 of 2002
(1)joseph Oswald Jonkler
(2) Judith Spencer-jonkler
Mr Malcolm Davis-WhiteQC and Mr Paul Greenwood (instructed by Wragge & Co. LLP) for the Claimant/Respondent.
Mr Sharif A Shivji (instructed by Bar Pro-bono Unit) for the Second Defendant/Applicant.
Hearing dates: 7 th & 12 th December 2005
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
This an application by Judith Spencer-Jonkler ("the applicant") by application notice dated 20 th June, 2005 for an order pursuant to Section 8A(1)(b) of the Company Directors Disqualification Act 1986 ("the CDDA") that a disqualification undertaking which she gave to the Secretary of State on 22 nd March, 2002 should "immediately cease to have effect". The period of disqualification specified in the undertaking was 5 years and commenced on 12 th April, 2002. The undertaking was accepted in the context of disqualification proceedings brought under section 6 of the CDDA. When the application first came before the Registrar on 5 th July, 2005, the applicant appeared in person and the application was not actively opposed by the Secretary of State. The application was adjourned with a view to the jurisdiction under section 8A being considered by a High Court Judge. The Secretary of State now opposes the application.
The Factual Background
Inscribe Limited, later called INS Realisations Limited, ("the company") was incorporated on 2 September 1965 and operated a business supplying arts and craft products. On 19 th January, 2000, Mr. Simon Freakley and Mr. Andrew Stoneman of Kroll Buchler Phillips were appointed to act as administrative receivers by GMAC Commercial Credit Limited and NatWest Bank plc to whom the company owed in excess of £2,000,000. Mr. Joseph Jonkler had been a director of the company from the date of its incorporation and the applicant, who married Mr. Jonkler in July 1982, had become a director on 26 th October, 1984. As at the date of the receivership, there were three other directors, Mr. Barry Davies, the Sales Director, Mr. Michael Pearce, the Finance Director, and a Mr. Paul Griffin. There was an issued share capital of £100,000 divided into 100,000 shares of £1.00 each of which Mr. Jonkler held 80,000 and of which the remainder were held by Mr. Davies. By that date the marriage between Mr Jonkler and the applicant had broken down, divorce proceedings having been commenced by the applicant in 1999.
Pursuant to section 16 of the CDDA, by letters dated 2 nd January 2002, the Secretary of State gave notice to the applicant and to Mr. Jonkler of the intention to apply for disqualification orders under section 6 in respect of their conduct as directors of the company seeking to disqualify each of them for a 6 year period. The Secretary of State's case against Mr Jonkler and the applicant was based on the allegations that
i) Mr Jonkler and the applicant had received excessive remuneration from the company in the period from April 1998, at a time when the company was unable to pay its VAT, PAYE and NIC liabilities to the Crown Departments, as and when they fell due, resulting in an outstanding liability to the Crown as at the date of the administrative receivership of at least £364,280;
ii) Mr Jonkler and the applicant had caused or allowed a misuse of the company's funds in that they caused or allowed the company to provide their son, Mr L Jonkler, and their daughter, Ms S Jonkler (actually Mr Jonkler's children and the applicant's step-children) with motor vehicles when they were not employees of the company and when the expense of the provision of these motor vehicles was not reimbursed to the company.
The Secretary of State's allegation of excessive remuneration against the applicant was that:
i) she had received a monthly salary of at least £4,250 (annual £51,000) and was provided with a company car;
ii) she had caused or allowed the company to pay her personal expenses amounting to at least £3,445;
iii) she had allowed the company to pay the personal expenses of her husband, amounting to at least £103,649 and allowed the company to provide her husband with an interest free loan from the company of a value of between £284,919 as at 31 January 1999, and £88,065 as at 30 November 1999, which was not to the benefit of the company.
On 4 January 2002, the applicant called the Secretary of State's solicitors. The purpose of her telephone call is not entirely clear from the attendance note but it is apparent that she stated that the company was her ex-husband's business and she did not know what was going on; that she was never asked to Board meetings; that she did not mind being "knocked off as a [director]" but wanted to make sure that this was where the "buck stop[s]"; that she was a "fool, letting [her] husband run cars for [the] step children". It is not clear to what extent the option of a disqualification undertaking was discussed during that telephone conversation. The Secretary of State commenced disqualification proceedings against Mr Jonkler and the applicant on 18 January 2002. No such proceedings were ever commenced against the other directors of the company.
Mrs Spencer-Jonkler wrote to the Secretary of State on 5 February 2002 setting out the reasons why she felt that should not be disqualified as a director. In essence, the letter outlined the abuse she claimed to have suffered from her husband, his representations that her involvement in the company was on the advice of his accountants, his refusal to provide her with any detailed information on the company and her total exclusion from its management and operation, saying
"7. In hindsight I should have sought independent legal advice and taken action to remove myself as a director. But at the time I was trying to keep my marriage together for the sake of my two young sons and I therefore regrettably took the line of least resistance. I know this to be wrong now.
…
10. I do not believe I am an unfit person to be a company director. I feel that the circumstances of my association with Inscribe Limited were out of my control although in hindsight I realise that I should have taken action much earlier. I believe that if I were a director in my own company or in a company which I was involved I would be responsible and a proper and fit person."
"The Secretary of State's solicitors responded on 8 February 2002 stating that
"…you were appointed a director of the company and as a director you had duties which you did not fulfil. The fact that you did not take any part at all in the management of the company is in itself a matter in respect of which the Court will impose a Disqualification Order. Our client also notes that you took a significant salary from the company during its period of trading."
The letter stated that the Secretary of State intended to pursue its application against her.
At the time, the applicant could not afford legal advice or representation. She agreed to provide a disqualification undertaking of 5 years. The Secretary of State required her to sign an undertaking, enclosing a schedule of unfit conduct. She was not content with the schedule as drafted and asked for various amendments to be made. She asked for the removal of the word "excessive" in relation to the payments made, and the insertion of the word "unbeknowingly" to reflect the fact that she was unaware at the time that the alleged benefits had provided to Mr Jonkler and his children. The Secretary of State insisted that the schedule contain as an explanation as to why the benefits were provided without her knowledge the fact that she took no part in the running of the company. She signed the undertaking on 16 March 2002. The Chief Examiner of the Disqualification Unit signed the undertaking on 22 March 2002. The undertaking commenced on 12 April 2002.
The undertaking
The undertaking not for a period of 5 years to act inter alia as a director without the leave of the court was expressly stated to be:
"on the basis set out in the schedule attached to this disqualification undertaking"
The schedule itself read as follows:
"For the purposes solely of the CDDA and for any other purposes consequential to the giving of a disqualification undertaking I do not dispute the following matters
I was a director of I.N.S. Realisations Limited (formerly known as Inscribe Limited (company number: 858132)
Which went into administrative receivership on 19th January 2000
With assets of £2,747,710
Liabilities of £4,315,347
A deficiency as regards creditors of £1,567,637
Share capital of £100,000; and
Revaluation reserve of £183,000
Making a total deficiency of £1,850,637.
" MATTERS OF UNFITNESS
1. I received the following remuneration from I.N.S. Realisations Limited in the period from April 1988:
(a) I received a monthly salary of at least £4,250 (annual £51,000) and was provided with a company car; and
(b) I allowed I.N.S. Realisations Limited to pay my personal expenses amounting to at least £3,445. I also allowed I.N.S. Realisations Limited to pay the personal expenses of my husband at the time, Joseph Oswald Jonkler, amounting to at least £103,649 and allowed I.N.S. Realisations Limited to provided [sic] Joseph Oswald Jonkler with an interest free...
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