Cumbria Roofing Ltd. v Athersmith

Personal liability under section 15 of the Company Directors Disqualification Act 1986 depends on establishing involvement in the management of the particular company whose relevant debt is claimed. Negotiating or letting a single contract may amount to involvement in management, but the issue is fact-sensitive and requires proper consideration of the relevant authority. A finding that an individual contracted as agent for one company does not readily support a separate finding that he was involved in the management of another company. Where factual findings may support liability but the legal basis is materially uncertain, permission to appeal may properly be adjourned for a hearing on notice.

Cumbria Roofing Ltd obtained judgment in the County Court against Colin Norman Athersmith for approximately £22,000 arising from roofing works. The judge held him personally liable on two alternative grounds: he had contracted personally as agent for an undisclosed principal, Drawglobe Ltd; and he was personally responsible under section 15 of the Company Directors Disqualification Act 1986 because he had been involved in the management of Telemeter Engineering Ltd, formerly LPD Ltd.

Mr Athersmith applied for permission to appeal. He challenged the factual findings, the characterisation of the principal, the adequacy of the pleaded case, and whether negotiating a single contract constituted involvement in company management. The central issue was whether the judge’s findings supported the legal conclusions and, if not, what procedural course should follow.

1. Permission and factual findings. The application was not finally determined. Lord Justice Rix considered that there was no prospect of successfully challenging the judge’s preference for Mr Fisher’s evidence merely on the factual conflict. The judge had described Mr Athersmith’s evidence as incredible and thoroughly unreliable.
2. Agency ground. The findings indicated that Mr Athersmith was contracting for a company rather than appearing to contract for himself. If the company was Drawglobe, it was more naturally an unnamed or unidentified principal than an undisclosed principal. The legal distinction was material, and the judgment did not show that it had been explored at trial. The first ground therefore presented a real legal difficulty.
3. Section 15 ground. The judge found involvement in the management of LPD/TEL when the contract was let, although the first ground treated Drawglobe as the principal. That distinction created an inconsistency because the companies were separate. The fact that Mr Athersmith became a director of TEL on 2 December 2002 did not itself establish relevant involvement before that date. The question whether negotiating a single contract constituted involvement in management required consideration of In Re market Wizard Systems (UK) Ltd and In Re Insolvency Act [1998] 2 BCLC 282, at 299–300.
4. Disposition. The findings might ultimately support personal liability under section 15 in respect of Drawglobe, or on the basis that Mr Athersmith contracted for an unidentified company which he had not yet obtained. Those possibilities did not correspond clearly with the judge’s stated conclusions or potentially with the pleaded case. The permission application was adjourned for a hearing on notice to Cumbria, with an appeal to follow immediately if permission were granted by the full court. An extension of time was granted, reliance on fresh evidence relating to BM Trader was refused, and execution of the judgment was stayed pending the adjourned hearing.

• Court of Appeal (Civil Division) — The application for permission to appeal was adjourned to a hearing on notice to Cumbria Roofing Ltd, with the appeal to follow immediately if permission were granted by the full court.
• County Court — His Honour Judge Appleton’s judgment of 13 April 2005 held Mr Athersmith personally liable for approximately £22,000 on the agency ground and under section 15 of the Company Directors Disqualification Act 1986.