Law report: Guidelines for cases of director's disqualification

In dismissing a cross-appeal by the Secretary of State for Trade and Industry to increase the period of disqualification imposed on former company directors under section 6 of the Company Directors Disqualification Act 1986, the Court of Appeal gave general guidance on the relevance and admissibility of evidence for the purpose of determining the length of the period of disqualification.

Secretary of State for Trade and Industry v Griffiths and ors; Court of Appeal (Lord Woolf, Master of the Rolls, Lord Justice Waller and Lord Justice Robert Walker) 16 December 1997

The Court of Appeal dismissed, by consent, the appeals of Roy Conway and John Wassell against disqualification orders for two years made under section 6 of the Company Directors Disqualification Act 1986, and dismissed the cross-appeal by the Secretary of State to increase the period of disqualification.

The appellants had been, with Sidney Griffiths, directors of Westmid Packing Services Ltd. The judge had made findings in relation to the appellants that they had failed to keep themselves properly informed about the company's financial position.

Nigel Davis QC and Martha Maher (Osborne Clarke, Bristol) for the Secretary of State; Michael Briggs QC and Abbas Mithani, solicitor advocate (Lee Crowder, Birmingham) for the appellants.

Lord Woolf MR handed down the judgment of the court.

In the present case the court did not accept that the judge had erred in principle in imposing the minimum period of disqualification, or that he was plainly wrong to do so. That was sufficient to dispose of the appeal, but the court was anxious to ensure that its dismissal of the Secretary of State's cross-appeal did not convey the wrong message, and wished to give the following general guidance as to what was relevant and admissible evidence for the purpose of deciding the length of the disqualification period:

1) It was of the greatest importance that any individual undertaking the statutory and fiduciary obligations of being a company director should realise that they were inescapable personal responsibilities;

2) the power to grant leave to act in respect of a specified company under section 17 of the Act was irrelevant in determining the proper period of disqualification;

3) although the primary purpose of disqualification of directors was to protect the public, there must also be an element of deterrence;

4) negotiation as to the acceptability of an admission on a certain basis of fact would seem to be as sensible in the context of disqualification of directors as in the criminal context, but the question whether a discretion was likely to be exercised under section 17 should not come into the calculation of a discount in the period of disqualification;

5) there was no complicated, arcane or inflexible code of evidential rules applicable in disqualification cases: the essential thing would be for the court to use common sense and adopt a practical and flexible approach to case management, so as to confine the evidence to that which was probative;

6) when it came to matters of mitigation and to applications under section 17 the court was not restricted to the facts of the offence;

7) a wide variety of matters, including the former director's age and state of health, the length of time he

had been in jeopardy, whether he had admitted the offence, his general conduct before and after the offence, and the periods of disqualification of his co-directors that might have been ordered by other courts, might be relevant and admissible in determining the appropriate period of disqualification, and to an application under section 17;

8) the principles applicable to thecourt's jurisdiction under the 1986 Act were now reasonably clear, and the application of those principles to facts of a particular case was a matter for the trial judge: the citation of previous cases as to the period of disqualification would, in the great majority of cases, be unnecessary and inappropriate;

9) over-elaboration in the preparation and hearing of disqualification cases and a technical approach to the admissibility of evidence was contributing to delay: what was required was sufficient evidence to enable the court to adopt a broad-brush approach.

- Kate O'Hanlon, Barrister