The Secretary of State sought a disqualification order. The director argued that one shoul not be made in the absence of some breach of legal duty, some dishonesty should be shown.
Held: The answer was a mixture of fact and law. A breach of duty alone was neither necessary nor sufficient. Unfitness by reason of incompetence might alone be enough. Though honesty was essential in a director, proof of dishonesty was not necessary where a breach of duty had not been shown. A standard nevertheless had to be used, even within a broad brush approach. A court must be very careful before making an order where the conduct complained of was not dishonest, and involved no breach of duty. However in this case, the standard had been met.
Judges:
The Honourable Mr Justice Lewison
Citations:
[2003] EWHC 2843 (Ch), Times 02-Dec-2003
Links:
Statutes:
Company Directors Disqualification Act 1986 1A
Jurisdiction:
England and Wales
Citing:
Cited – Re Bath Glass Ltd CA 1988
A requirement that the court must have regard ‘in particular’ to the matters listed in a schedule means that the court is not confined to looking at those matters: ‘To reach a finding of unfitness the court must be satisfied that the director has . .
Cited – Secretary of State for Trade and Industry v Christopher Paul Reynard CA 18-Apr-2002
A company director was examined in court, in the course of company director disqualification proceedings. The judge was so concerned by his behaviour as a witness, as to extend the period of disqualification. He had appealed, and the Secretary of . .
Cited – In re Sevenoaks Stationers (Retail) Ltd CA 1990
The court gave guidelines for the periods of disqualification to be applied for company directors under the Act. The maximum period of ten years should be reserved for only the most serious of cases. Periods of two to five years should apply to . .
Cited – Lagunas Nitrate Co v Lagunas Syndicate CA 1899
The standard of behaviour expected of a company director was described: ‘As directors, I am not aware that there is any difference between their legal and their equitable duties. If directors act within their powers, if they act with such care as is . .
Cited – Re D’Jan of London Ltd; Copp v D’Jan ChD 1-Sep-1993
Directors liability to compensate on insolvency for own negligence. ‘In my view, the duty of care owed by a director at common law is accurately stated in s 214(4) of the Insolvency Act 1986. It is the conduct of – ‘a reasonably diligent person . .
Cited – In re Grayan Building Services Ltd CA 1995
The degree to which an appellate court will be willing to substitute its own judgment for that of the tribunal will vary with the nature of the question. Hoffmann LJ said: ‘The concept of limited liability and the sophistication of our corporate law . .
Cited – In Re Living Images Ltd ChD 7-Aug-1995
Director must have intended fraudulent preference for creditor to be disqualified. Trading whilst insolvent amounts to trading with creditors’ money. . .
Cited – Secretary of State for Trade and Industry v McTighe (No 2) CA 1996
The court accepted that it was misconduct for a director to pursue: ‘the policy of not paying the debts of creditors who are not pressing when it is known that the company has insufficient reserves enabling it to trade except at the risk of such . .
Cited – Winkworth v Edward Baron Development Co Ltd HL 1986
A company director has duties to the company’s creditors as well as the shareholders. ‘Equity is not a computer. Equity operates on conscience . .’ . .
Cited – West Mercia Safetywear Ltd v Dodds CA 1988
If a company continues to trade whilst insolvent but in the expectation that it would return to profitability, it should be regarded as trading not for the benefit of the shareholders, but for the creditors also. If there is a possibility of . .
Cited – Secretary of State for Trade and Industry v McTighe (No 2) CA 1996
The court accepted that it was misconduct for a director to pursue: ‘the policy of not paying the debts of creditors who are not pressing when it is known that the company has insufficient reserves enabling it to trade except at the risk of such . .
Cited – Secretary of State for Trade and Industry v Gash 1997
The court considered the possible propriety of a company continuing to trade whilst insolvent: ‘The companies legislation does not impose on directors a statutory duty to ensure that their company does not trade while insolvent; nor does that . .
Cited – Secretary of State for Trade and Industry v Creegan and others CA 27-Nov-2001
‘It is well established on the authorities that causing a company to trade, first, while it is insolvent and, secondly, without a reasonable prospect of meeting creditors’ claims is likely to constitute incompetence of sufficient seriousness to . .
Cited – Secretary of State for Trade and Industry v Griffiths; Conway and Wassell; In Re Westmid Packing Services Ltd CA 16-Dec-1997
Guidance given on what evidence should be admitted to affect the length of disqualification and conditions of Director’s disqualification.
A director’s duty to exercise his powers in the best interests of the company and to recognise the . .
Cited – Facia Footwear Ltd v Hinchliffe 1998
A director owes duties to the company’s creditors. . .
Cited – In Re Barings Plc, Secretary of State for Trade and Industry v Baker (No 5) ChD 25-Nov-1998
A person disqualified from acting as a company director might exceptionally be given permission to act as non-executive director in named companies where this appeared necessary and the cause of the original disqualification was unrelated.
As . .
Cited – In re Barings plc (No 5) CA 2000
A finding of breach of duty is neither necessary nor of itself sufficient for a finding of unfitness. As the judge (at first instance) observed a person may be unfit even though no breach of duty is proved against him or may remain fit . .
Cited – Re Pantone 485 Ltd ChD 2002
It is not a breach of duty if directors of an insolvent company act consistently with the interest of the creditors generally, but inconsistently with the interests of a particular creditor or section of creditors. . .
Cited – Secretary of State for Trade and Industry v Arif and Others ChD 25-Mar-1996
The length of a director’s disqualification is not to be discounted for the time elapsed up to the hearing of the case. As to section 221 of the Companies Act, it : ‘has, at the least, two purposes. First, to ensure that those who are concerned in . .
Cited – Mothew (T/a Stapley and Co) v Bristol and West Building Society CA 24-Jul-1996
The solicitor, acting in a land purchase transaction for his lay client and the plaintiff, had unwittingly misled the claimant by telling the claimant that the purchasers were providing the balance of the purchase price themselves without recourse . .
Cited – Secretary of State for Trade and Industry v Ivens and Another ChD 24-Sep-1997
Evidence of activities of director in non-insolvent but associated company admissible in disqualification proceedings. . .
Cited – Secretary of State for Trade and Industry v Ettinger 1993
The court discussed the standards required of company directors. ‘Those who take advantage of limited liability must conduct their companies with due regard to the ordinary standards of commercial morality. They must also be punctilious in observing . .
Cited – Secretary of State for Trade and Industry v Ivens and Another ChD 24-Sep-1997
Evidence of activities of director in non-insolvent but associated company admissible in disqualification proceedings. . .
Cited – In Re Dawson Print Group Ltd 1987
Proof of dishonesty in a company director is not a strict requirement before a disqualification can be ordered. Hoffmann J said: ‘There must, I think, be something about the case, some conduct which if not dishonest is at any rate in breach of . .
Cited – Paragon Finance Plc (Formerly Known As National Home Loans Corporation Plc v D B Thakerar and Co (a Firm); Ranga and Co (a Firm) and Sterling Financial Services Limited CA 21-Jul-1998
Where an action had been begun on basis of allegations of negligence and breach of trust, new allegations of fraud where quite separate new causes of claim, and went beyond amendments and were disallowed outside the relevant limitation period. . .
Lists of cited by and citing cases may be incomplete.
Company, Insolvency
Updated: 01 October 2022; Ref: scu.188253