Secretary of State for Trade and Industry v Reynard

Under the Company Directors Disqualification Act 1986, conduct in disqualification proceedings may constitute conduct connected with, or arising out of, the company’s insolvency. It may therefore be relevant to both unfitness and the period of disqualification.

The court must assess the director’s conduct as a whole. It must not impose an additional period merely to punish poor performance in the witness box. Any misconduct relied on must be raised fairly and the director must have a proper opportunity to respond.

The Secretary of State applied under section 6 of the Company Directors Disqualification Act 1986 to disqualify Christopher Reynard, formerly sole director of Howglen Limited, after the company became insolvent. The Registrar found the allegations of unfitness proved and imposed a 10-year disqualification.

Blackburne J upheld the finding of unfitness but reduced the disqualification to five and a half years. The Secretary of State appealed on whether evidence given by the director in the proceedings could be relevant to unfitness or sentence, and on the length of the order.

1. Appeal dismissed. The court declined to interfere with the five-and-a-half-year disqualification imposed by Blackburne J.
2. Section 6(2) of the Company Directors Disqualification Act 1986 is sufficiently wide to include a director’s conduct in disqualification proceedings. Those proceedings are connected with, or arise out of, the insolvency of the company. Subject to procedural fairness, misconduct in the proceedings may therefore be considered when determining unfitness and the period of disqualification.
3. The relevant inquiry remains the defendant’s conduct as a director and his fitness to be concerned in company management. Evidence given in the proceedings may provide additional evidence of unfitness where it concerns his management of the company or reveals his failure to understand financial warnings and directors’ obligations.
4. The matters listed in Schedule 1 are not exhaustive. They are matters to which the court must have particular regard, but other relevant matters are not excluded.
5. The court must not assess witness-box performance as a separate punishment or simply add a period for unsatisfactory evidence. It must assess the director’s conduct as a whole. Evidence may nevertheless illuminate fitness and the appropriate period of disqualification.
6. The court approved the analysis in Re Godwin Warren Control Systems Plc and noted that it had been followed in Re Moorgate Metals Ltd and Re Living Images Ltd. It explained that Re Sevenoaks Stationers (Retail) Limited concerned fair notice of the charges and did not prevent consideration of evidence given on charges of which the director had notice.
7. Although the Secretary of State succeeded on the point of principle, the limited second-tier permission did not justify a fresh detailed review of the discretionary period. The appeal was dismissed with costs, subject to detailed assessment if not agreed. Permission to appeal to the House of Lords was refused for want of jurisdiction.

• Court of Appeal (Civil Division): Appeal dismissed. The court held that conduct in disqualification proceedings could be relevant under section 6(2), but declined to reopen the five-and-a-half-year period.
• High Court, Chancery Division: Blackburne J upheld the finding of unfitness but reduced the Registrar’s 10-year disqualification to five and a half years.
• Registrar: Mr Registrar Simmonds imposed a 10-year disqualification after finding the allegations of unfitness proved.