The Secretary of State for Business, Innovation and Skills v Raymond Michael Cork
| Jurisdiction | England & Wales |
| Judge | Judge Hodge QC |
| Judgment Date | 10 October 2012 |
| Neutral Citation | [2012] EWHC 3284 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim No. 1MA02433 |
| Date | 10 October 2012 |
[2012] EWHC 3284 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
MANCHESTER DISTRICT REGISTRY
Manchester Civil Justice Centre
1 Bridge Street West
Manchester
M60 9DJ
His Honour Judge Hodge QC
sitting as a Judge of the High Court
Claim No. 1MA02433
Counsel for the Claimant: Miss Lucy Wilson-Barnes
Counsel for the Defendant: Mr. Christopher Cook
This is my extemporary judgment at the trial of a director's disqualification application brought by the Secretary of State for Business, Innovation and Skills by a claim form issued on 10 th October 2011 under claim number 1MA02433. Originally there were two defendants, Mr Raymond Michael Cork and Mr Charles Lindsay Melville Porter; but Mr Porter gave a disqualification undertaking for a term of six years on 19 th December 2011, and the claim has been discontinued as against him. Therefore the sole defendant is Mr Raymond Michael Cork. The Secretary of State is represented by Miss Lucy Wilson-Barnes of counsel, and Mr Cork is represented by Mr Christopher Cook of counsel. Both counsel have submitted helpful written skeleton arguments dated (in the case of Miss Wilson- Barnes) 3rd October 2012 and (in the case of Mr Cook) 4 th October 2012.
This claim relates to the affairs of a company called Landmark Publishing Limited. That company was a publisher of limited circulation, specialist interest and hobby books and niche travel guides. It was incorporated in September 1996, and it commenced trading in or about November 1996. The two equal 50 per cent shareholders in the company were Mr Cork and Mr Porter. Mr Porter was the company secretary and the full time managing director. He himself was a published author; and he was responsible for dealing with the printers of the books, and had all of the contacts with the company's list of authors. He, for example, dealt with the royalty payments to the authors. He was appointed a director of the company on 21 st February 1997. Mr Cork was a qualified accountant. His interest in the company was essentially as an investor. He worked very much on a part time basis for the company, dealing with its accounts, and working on average one day a month. He was appointed a director of the company after Mr Porter, on 15 th January 1998.
The company entered into administration on 15 th September 2009, and Mr Ronald Stanley Harding and Mr Joseph Gordon Maurice Sadler were appointed to act as joint administrators. The company exited from administration and was dissolved on 27 th December 2010. At the time the company entered into administration in September 2009, Mr Porter was 62 years of age and Mr Cork was 57. Notice of intention to commence disqualification proceedings against both Mr Porter and Mr Cork was sent out on 4 th August 2011. The claim form was, as I have stated, issued on 10 th October 2011 and it seeks a disqualification order under section 6 of the Company Directors Disqualification Act 1986. That section, as is well known, empowers the court to make a disqualification order against a person in any case where, on an application under section 6, the court 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. By section 9(1) of the 1986 Act, where it falls to a court to determine whether a person's conduct as a 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, have regard in particular—
(a) to the matters mentioned in Part I of Schedule 1 to the Act, and
(b) where the company has become insolvent, to the matters mentioned in Part II of that Schedule;
In his written skeleton argument, Mr Cook points out (at paragraph 13) that it is worthy of note that none of the matters in Part 1 apply except, arguably, paragraph 1 (relating to misfeasance); and only paragraph 6 of Part 2, which refers to the extent of the director's responsibility for the causes of the company becoming insolvent, has any application. Put another way, Mr Cook invites the court to note, as it does, that this is not a case in which there is any allegation of dishonesty, breach of fiduciary duty, mis-application or retention of company monies, debt avoidance, failure to comply with statutory provisions, failure to supply goods paid for, transactions at an undervalue or preferences, or failure to co-operate with an insolvency practitioner. Rather, the matters of which complaint is made are limited to those set out, as regards Mr Cork, at paragraph 9 of the first affirmation of Mr Robert Michael Richard Clarke, made on 12 th September 2011. Mr Clarke is currently the head of the Birmingham Investigation Team within the Investigation Directorate of the Insolvency Service. It is his first affirmation, together with exhibit RMRC1, which comprised the evidence in support of the directors' disqualification application in relation to both the original defendants. As regards Mr Cork, the single allegation identified at paragraph 9 is that of trading with knowledge of insolvency at the unreasonable forbearance of authors, and at the risk, and to the detriment, of creditors generally. Paragraph 9 reads as follows:
"Between at least 3 rd August 2008, when the accounts for the year ended 31 st December 2007 were signed as approved, and cessation of trading on or around 24 th August 2009, during which time he knew that the company was insolvent, Mr Cork allowed Landmark to trade at the risk, and to the detriment, of creditors generally, including taking unreasonable advantage of the forbearance of authors who were due royalty payments. As a consequence of continued trading, outside creditors increased from £244,780 at 31 st August 2008 to £314,262 at the date of administration. In particular:
(a) Landmark's accounts for the year ended 31 st December 2007 show an insolvent position, with net liabilities of £114,893, and were signed as approved on 3 rd August 2008. [I interpose to say that it was Mr Cork who approved those accounts as director of the company.] Draft accounts for the year ended 31 st December 2008 show a deteriorating position with net liabilities of £144,823. [In cross-examination, Mr Cork told the court that he had prepared the draft accounts for the year ended 31 st December 2008 in about April of 2009]
(b) As at 31 st August 2008, the company's management accounts show that Landmark was in arrears with payments to authors in respect of royalties in the total sum of £67,023, with claims in this regard dating from 2001. On the same date, trade and expense creditor liabilities amounted to £123,026, of which £76,423 was in excess of three months overdue for payment.
(c) As at 3 rd August 2008, the company's bank account shows an overdrawn balance of £45,730 against an authorised overdraft of £47,000, and the company as subject to additional financial monitoring by its bank at a cost of £100 per month.
(d) At least 39 authors from the 108 who were due royalties from the company at administration were unable to pursue payment because they were not adequately informed of the extent of book sales or the amount of royalty payments due to them by Landmark.
(e) Over the period 31 st August 2008 to 25 th September 2009, Landmark's indebtedness to trade and expense creditors increased from £123,026 to £147,185. The liabilities due to Her Majesty's Revenue and Customs increased from £7,005 to £30,951; and royalties due to authors increased from £67,023 to what is said to be at least £85,237."
I interpose to say that the £85,000 odd figure is one which has been extrapolated by Mr Clarke from claims submitted and questionnaires answered by the authors themselves. The figure shown as of 31 st December 2008 was £75,032; and it is that figure for which Mr Cork contended in the course of his evidence. I should make it clear that I am satisfied that the £85,000 odd figure is not an entirely reliable one, through no fault of the authors themselves because they had not been provided with sufficient information from the company; but it seems to me that it would be wrong to proceed on any basis other than the fact that royalties were, at the date of administration, in the order of at least £75,000 odd.
Returning to sub-paragraph 9(e) of Mr Clarke's first affirmation:
"(e) The sum due to the directors in respect of their outstanding loan account decreased from £18,375 to £16,621, and a payment of £3,000 was made to Mr Cork's co-director, Mr Porter, in this regard on 6 th August 2009."
Mr Clarke sets out the full extent of the evidence deployed against both Mr Cork and Mr Porter in the remainder of his first affirmation, which extends to 129 numbered paragraphs. Exhibit RMRC1 to Mr Clarke's first affirmation extends to over 500 pages of documentation.
Mr Cork filed an affidavit in response to Mr Clarke's evidence, which was sworn on 5 th March 2012. It forms the principal evidence in answer to the claim and comprises some 47 paragraphs, with an exhibit RMC1. At paragraph 4, Mr Cork sets out the principal aims of his affidavit which, he said, would be to demonstrate that he had given due consideration to whether a proposed investment to be made in the company, and said to be of £100,000, by Mr Porter was a realistic...
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