Summary

Where in disqualification proceedings under the Company Directors' Disqualification Act 1986 the question arose as to whether a company was operating a policy of non-payment of Crown debts the court should consider the treatment of other creditors and in the absence of cross-examination should accept the respondent's explanation where this was not inherently incredible.

Facts

Second respondent's appeal from a five year disqualification order made by Mr Registrar Rawson on 12 March 1999 against him pursuant to s.1 Company Directors Disqualification Act 1986. The second respondent ('S') was the financial director of Hopes (Heathrow) Ltd ('the company'), which went into liquidation in November 1994. When the company was incorporated in 1992 the driving force was a Mr Jonathan Hope. Mr Hope had been the director of another road haulage company which had committed repeated offences in contravention of the Road Traffic Act, incurring substantial fines. By the time the company began trading, Mr Hope's reputation as a road haulage contractor had been seriously damaged and the licensing authority were refusing to issue a road haulage licence to the company on the basis of Mr Hope's involvement. The Registrar ordered disqualification of S on two grounds: (a) that S had caused or permitted the company to operate a policy of non-payment of Crown monies, taking advantage of the Crown's forbearance as involuntary creditors to finance the company; and (b) that S in collusion with other directors, had submitted misleading information in the application for a road haulage licence, claiming that the role played by Mr Hope in the company was a subordinate one. At the hearing before the Registrar the secretary of state elected not to cross-examine S.

Held

(1) Although it was desirable that proceedings under the 1986 Act should be dealt with speedily, it was not right for the court to make findings of unfair or improper conduct against a person who denied the allegation unless the denial was self-evidently wrong eg because of other facts that were admitted or because of reliable documents that plainly contradicted it. The question of whether or not the company operated a policy of non-payment was to be judged from the "hard facts", including the company's financial situation and the identity of the creditors it paid and did not pay. The court could consider whether the company paid creditors who were in a position to pressurise the company, such as trade creditors or those who threatened to wind up the company, at the expense of other creditors such as the Inland Revenue who were involuntary creditors. Any explanation for the policy operated by the company which was not inherently incredible should normally be accepted by the court if the director was not cross-examined on it. On the facts of this case S's simple statement that the directors did not cause or permit the company to operate a deliberate policy of retention of monies was not a sufficient rebuttal of the allegation to justify over-turning the decision of the Registrar, Re Keypac Homecare Ltd (No.2) (1990) BCC 117 followed. (2) On the question of the application for the road haulage licence, in the absence of cross-examination, the appropriate conclusion to reach was that S had provided inaccurate information which he must have appreciated was of importance, in a way that fell well below the standard expected of a director and company secretary, particularly with his experience and responsibility, but that an intention to mislead would not be imputed and therefore the Registrar had been too harsh with respect to the length of the disqualification period.

Period of disqualification reduced to four years. No order for costs.