Secretary of State for Trade and Industry v Griffiths; Conway; Wassell

Under section 6 of the Company Directors Disqualification Act 1986, the period of disqualification is a judicial discretion within the statutory limits. The [1991] Ch 164 brackets guide that discretion. The Court of Appeal should not interfere merely because it would have imposed a longer period; an error of principle must be shown. Leave under section 17 is a separate matter and cannot justify shortening the disqualification period. Relevant evidence may include the director’s general conduct, age, health, admissions, subsequent conduct, time in jeopardy and de facto disqualification. The court should adopt a practical and flexible approach, focusing on probative evidence and avoiding unnecessary technicality.

Chadwick J made disqualification orders under section 6 of the Company Directors Disqualification Act 1986 against three former directors of Westmid Packing Services Ltd. Griffiths was disqualified for nine years. Conway and Wassell were disqualified for the statutory minimum of two years after the judge found that they had failed to keep themselves properly informed of the company’s financial position. The judge also granted them leave under section 17 to manage Conway Packing Services Ltd, subject to conditions. Conway and Wassell appealed, but later abandoned their appeal. The Secretary of State cross-appealed, seeking longer periods. The central issue was whether the judge had erred in fixing the minimum period.

The court, in a judgment delivered by Lord Woolf MR on behalf of the court, dismissed both the appeal and the cross-appeal by consent. Each was dismissed with costs.

1. Directorship involves personal statutory and fiduciary responsibility. Each director must inform himself about the company’s affairs and participate with fellow directors in supervision and control. Delegation is permissible, but total abdication of responsibility and domination by one director are not.
2. The period of disqualification is a judicial discretion within the limits in section 6 of the Company Directors Disqualification Act 1986. The broad brackets identified in Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 remain relevant. The appellate court must not interfere unless the judge erred in principle. Although a longer period might have been preferable, the judge had not erred in principle and the minimum period was not plainly wrong.
3. Leave under section 17 is logically and procedurally separate from fixing the period. It is limited to specified companies and may be subject to stringent conditions. The possibility of leave cannot justify imposing the minimum period.
4. Disqualification serves protective and deterrent purposes. The period should reflect the gravity of the misconduct, with mitigation considered separately. Admissions of facts which would otherwise require substantial proof may receive recognition. General conduct as a director and other matters relevant to public protection may be considered. De facto disqualification is not irrelevant.
5. Unfitness, the duration of disqualification and an application for leave involve distinct evidential questions. Courts should use common sense and flexible case management, admit sufficient probative evidence, exclude detailed or repetitive material, and determine these matters summarily where possible. Detailed citation of previous disqualification cases is usually unnecessary.

• Court of Appeal (Civil Division): The appellants abandoned their appeal. The Secretary of State’s cross-appeal against the two-year periods was dismissed by consent, with costs.
• Chancery Division: On 25 March 1997 Chadwick J made section 6 disqualification orders and granted Conway and Wassell leave under section 17 to manage Conway Packing Services Ltd subject to conditions.