Official Receiver v Stern & Anor

A person subject to a disqualification order should apply for leave to act under sections 1 and 17 of the Company Directors Disqualification Act 1986. Such an application is not a substitute for a declaration determining whether a foreign company falls within the Act’s winding-up jurisdiction. A civil declaration ordinarily concerns the position disclosed by the evidence at the time of the application. That may differ from the question later arising in criminal proceedings, where the court must decide whether the company was within the jurisdiction when the alleged offence occurred, potentially on fuller or later evidence. The court should therefore be cautious about making declarations of this kind.

Mr William Stern was subject to a 12-year disqualification order under section 6 of the Company Directors Disqualification Act 1986. He applied under sections 1 and 17 for leave to act as director of six companies incorporated overseas. The Companies Court, on an application heard shortly after the disqualification order, declined to grant leave because it was not satisfied on the limited evidence that the companies fell within the Act, while declining to decide that issue conclusively.

Mr Stern sought permission to appeal, contending that the court should determine whether the companies were within the Act and make an appropriate declaration. The central issue was whether the application was properly treated as one for leave to act, or whether it should determine the companies’ status for the purposes of the English winding-up jurisdiction.

1. The application for permission to appeal was refused, with costs. The Court of Appeal agreed with the Companies Court’s order dismissing the application for leave in relation to the six overseas companies.

2. Section 22(2)(b) of the Company Directors Disqualification Act 1986 defines a company for the Act’s purposes by reference to a company which may be wound up under Part V of the Insolvency Act 1986. The question whether a particular overseas company satisfies the requirements for the English court to assume winding-up jurisdiction may require fuller evidence concerning the company and its connection with England and Wales.

3. The statutory scheme provides a person affected by a disqualification order with a mechanism for obtaining leave to act. It does not provide, through an application under sections 1 and 17, a general procedure for obtaining a declaration that another company is outside the Act’s scope. The reference in Regina v Campbell [1984] BCLC to resolving ambiguity through an application for leave did not establish such a declaratory jurisdiction. It concerned obtaining leave so that the proposed conduct would not constitute a breach.

4. The complaint was in substance about the form of the Companies Court’s reasoning, rather than its operative order. The judge was entitled to refuse leave without deciding conclusively whether the companies were within the Act, particularly where the evidence was limited and the disqualification order carried criminal consequences.

5. The Court of Appeal gave a broader caution. A declaration would address the existing evidence and state of affairs before the civil court. If the person later faced criminal proceedings, the criminal court would have to determine whether the company was within the winding-up jurisdiction when the alleged offence occurred, potentially on evidence that had since emerged or was not previously before the civil court. The utility of such a declaration was therefore doubtful, although a future application was not absolutely excluded.

• Court of Appeal (Civil Division): Permission to appeal refused, with costs.
• Chancery Division, Companies Court: Mr Justice Lloyd refused leave under sections 1 and 17 of the Company Directors Disqualification Act 1986 to act as director of six overseas companies, without conclusively determining whether they fell within the Act.