The Secretary sought disqualification of the defendants. The second defendant had not been a director of the company, but director of another company which in turn held a directorship in the defaulting company.
Held: The claim failed: ‘i) As I have already pointed out the purposes of section 6 of the CDDA and section 214 of the Insolvency Act must be similar, namely, the protection of the public from errant directors. The term ‘director’ is similarly defined in both Acts: see section 22 CDDA and section 251 1A. There can therefore be no justification in giving that term a different construction for the purposes of section 6 than that which it was given in the Hydrodam case for the purposes of section 214.
ii) In the Hydrodam case, in the passage which I have set out above, Millett J finds that the director of a corporate director is not, without more, constituted a director, whether shadow or de facto of a subject company. However I do not read his judgment as saying that this can never happen. I can well accept that an individual through his control of a corporate director can constitute himself a de facto director of a subject company. It seems to me that whether or not he does so will depend on what that individual procures the corporate director to do. In theory I am not bound by the judgment of Millett J in the Hydrodam case. Even putting on one side the authority of that judge in this and other fields of the law, I would need convincing reasons for not following it. I can find none.
iii) It seems to me that in order to be constituted a de facto director of a subject company, a director of a corporate de jure director must cause the corporate director to take actions with relation to the subject company as would have constituted it a de facto director of that company were it not already a director de jure.
iv) In addition the degree of control which the director of the corporate director exercises over that company will be of relevance. In the present case Mr Nuttall’s control was absolute but the situation may be substantially different where the corporate director is controlled by a board with a number of members with different responsibilities. Equally the shareholder control of the corporate director may be relevant.
v) In the present case Mr Nuttall has not, either individually, or through his control of LDL taken any step which indicated that either he or LDL had ‘assumed the status and functions’ of a director of Mercury. They had positively declined to do so. It follows that Mr Nuttall, by contrast with LDL, was never subject to the duty to ensure that Mercury kept proper books of account, complying with section 221 of the Companies Act, or that the six companies made proper returns to the companies registry. As a de jure director LDL could be made subject to those duties.’
Evans-Lombe J
[2006] EWHC 1995 (Ch)
Bailii
Company Directors Disqualification Act 1986
England and Wales
Cited by:
Cited – Holland v Revenue and Customs and Another CA 2-Jul-2009
The appellant supported IT workers. Through his own company, he set up companies in which his company was a director, and which companies in turn employed the IT workers securing substantial savings in higher rate Corporation Tax.
Held: The . .
Cited – Holland v Revenue and Customs and Another SC 24-Nov-2010
The Revenue sought an order under section 212 of the 1986 Act, for payment of the tax debts of the insolvent company by a de facto director. H had organised a scheme under which IT contractors had worked through companies created by him under a . .
Lists of cited by and citing cases may be incomplete.
Company
Leading Case
Updated: 12 November 2021; Ref: scu.246076