Cumbria Roofing Ltd. v Athersmith

Personal liability under section 15 of the Company Directors Disqualification Act 1986 depends on whether the disqualified person was involved in the management of the company. The provision bears its natural meaning. Negotiating a single contract will not necessarily establish management of a major trading company. It may do so where the wider evidence shows that the person was the only individual dealing for the company and was purporting to run it. Article 1 of Protocol 1 does not require a narrower construction: excluding persons found unfit to be directors from company management is a recognised economic need. An appellate court will uphold a trial judge’s factual conclusion where it was open on the evidence.

Cumbria Roofing Ltd. v Athersmith claimed payment for roofing materials supplied and installed under a subcontract. Proceedings were initially brought against Telemeter Engineering Ltd. Mr Colin Norman Athersmith was later joined as a second defendant. The claimant alleged that he had been involved in the company’s management while disqualified and was therefore personally liable under section 15 of the Company Directors Disqualification Act 1986.

HHJ Appleton, sitting in the Lancaster County Court on 13 April 2005, found that the contract was made with Telemeter Engineering Ltd. and that Mr Athersmith was involved in its management. He entered judgment against him. The central issue was whether the evidence established management involvement within section 15 and whether Article 1 of Protocol 1 required a strict construction of that provision.

1. Application dismissed. Lord Justice Chadwick gave the leading judgment, with Lady Justice Smith and Lord Justice Wilson agreeing. The application for permission to appeal was dismissed, with costs summarily assessed at £8,000.
2. The trial judge was entitled to find that the contract was made with Telemeter Engineering Ltd., then known as Ell Pee Dee Ltd., rather than with Drawglobe Ltd. The purchase order and fax journal did not require a different conclusion. The judge had accepted Mr Fisher’s evidence and rejected Mr Athersmith’s evidence, and his findings were open to him on the evidence.
3. Under section 15 of the Company Directors Disqualification Act 1986, the question is whether the disqualified person was involved in the management of the company. The statutory words should be given their natural meaning. A person is not necessarily involved in managing a major trading company merely because he negotiates a contract on its behalf.
4. On the findings made, however, Mr Athersmith was the only person with whom Mr Fisher dealt. He appeared to be running the business, negotiated its prices and contracts, occupied the managing director’s office, and represented himself as responsible for the company’s affairs. Those circumstances established involvement in management. The judge was entitled to conclude that Mr Athersmith was personally liable for the contract debt jointly and severally with the company.
5. Article 1 of Protocol 1 did not require section 15 to be construed narrowly. The economic need to exclude persons found unfit to be directors from involvement in company management was a proper and recognised economic need.

1. Court of Appeal (Civil Division): On 4 November 2005, the court dismissed the adjourned application for permission to appeal and ordered costs of £8,000.
2. Lancaster County Court: HHJ Appleton made the order under challenge on 13 April 2005, finding Mr Athersmith personally liable under section 15 of the Company Directors Disqualification Act 1986.
3. Permission stage: Rix LJ adjourned the application on 29 June 2005 for consideration by a court of three, with the appeal to follow if permission was granted.