Secretary Of State For Trade & Industry v Eastaway

Under the Company Directors Disqualification Act 1986, the Secretary of State may accept a disqualification undertaking only where the statutory conditions are met, but the Act does not require him to accept every otherwise satisfactory undertaking offered.

In deciding whether acceptance is expedient in the public interest, he may take account of whether the undertaking records the unfit conduct on which it is based. Such a statement may provide a useful foundation for later applications to vary the undertaking or obtain leave to act as a director, and may identify the conduct which justified the sanction. A general policy requiring such a statement is not unlawful or irrational.

The Secretary of State brought disqualification proceedings against Mr Eastaway under the Company Directors Disqualification Act 1986. Following the introduction of disqualification undertakings by section 6 of the Insolvency Act 2000, Mr Eastaway offered a bare undertaking.

The Secretary of State indicated that he would accept an undertaking only if it incorporated a schedule of unfit conduct which Mr Eastaway would not dispute for the purposes of the Act and consequential matters. Patten J dismissed applications to strike out or stay the proceedings and refused permission for judicial review. The central issue on appeal was whether the Secretary of State could lawfully decline to accept an undertaking without such a schedule.

Appeal dismissed with costs.

1. The statutory scheme distinguishes between unfit conduct and the public-interest condition. The Secretary of State determines whether it is expedient in the public interest to accept an undertaking, while the statutory conditions concerning insolvency and unfitness must also appear to him to be satisfied. The court has no role in deciding whether an undertaking should be accepted.
2. The Act gives the Secretary of State power to accept an undertaking which has been offered, but no power to compel a person to offer one. The question was therefore not whether he could require a statement, but whether he acted unlawfully by refusing to accept a bare undertaking.
3. Section 7(2A) imposed no relevant restriction on the matters that could be considered in assessing what was expedient in the public interest. The Secretary of State could consider the usefulness of a schedule recording the grounds of unfitness. Such a schedule could assist applications under sections 8A and 17, identify the basis of the undertaking, and explain publicly the conduct attracting disqualification.
4. The policy of generally requiring a statement of unfit conduct was neither ultra vires nor irrational. It was unnecessary to decide whether the statement was legally essential for later applications; it was enough that the Secretary of State could reasonably regard it as useful.
5. The Article 6 argument failed. The statement was not made pursuant to a statutory requirement and, in any event, recorded that specified matters would not be disputed in later proceedings rather than constituting an admission of them. Laws LJ additionally observed that an Article 6 equality-of-arms complaint required concrete facts showing an actual detriment, not an abstract challenge to the statutory scheme.
6. The appellant’s proposed case-specific grounds were refused because they had been abandoned below, would unfairly introduce a new case, and had no merit in circumstances where the schedule substantially reflected an undertaking previously given to the court.

• Court of Appeal (Civil Division): appeal from Patten J’s order dated 25 May 2001 dismissed with costs.
• High Court, Chancery Division, Companies Court: Patten J dismissed applications to strike out or stay the disqualification proceedings and refused permission for judicial review.