The Secretary of State for Trade and Industry v Jonkler & Anor

Section 8A of the Company Directors Disqualification Act 1986 gives the court an unfettered jurisdiction to reduce or terminate a disqualification undertaking. It does not permit retrospective annulment or operate as an appeal from the Secretary of State’s decision to accept the undertaking. The jurisdiction should be exercised sparingly. An agreed schedule of facts is binding unless a ground sufficient to discharge a private-law contract, or an overriding public-interest ground, is shown. Special circumstances may arise where the alleged active perpetrator is no longer regarded as warranting disqualification and no continuing public interest supports maintaining the applicant’s disability.

The applicant had given a five-year disqualification undertaking after proceedings under the Company Directors Disqualification Act 1986. The allegations concerned remuneration, personal expenditure and benefits to family members while the company could not meet Crown liabilities. Her proceedings were later discontinued. Proceedings against her former husband, said to be the active perpetrator of the misconduct, were also discontinued after evidence was produced.

The applicant applied under section 8A for the undertaking to cease or its period to be reduced. The issues were whether she could challenge the agreed schedule of facts and how the court should exercise its statutory discretion.

1. Agreed facts. Section 8A was not a statutory equivalent of a Carecraft hearing. The undertaking regime replaced the court’s role in that consensual procedure with the Secretary of State’s decision to accept the undertaking. The applicant’s agreement not to dispute the schedule therefore applied to the section 8A application. It was binding unless a ground sufficient to discharge a private-law contract, or a public-interest ground outweighing the importance of holding her to the agreement, was established.
2. Jurisdiction. The section 8A jurisdiction is unfettered, but the discretion must be exercised judicially. Section 8A does not permit the court to annul an undertaking retrospectively or to act as an appellate court reviewing the original decision to seek or accept it. The purpose of avoiding litigation supports a cautious approach.
3. Special circumstances. Relief should be granted only in special circumstances, involving subsequent events of a type or gravity not intended to be covered or reasonably foreseeable when the undertaking was given. The later discontinuance of proceedings against the alleged active perpetrator was such an event. It showed that the Secretary of State no longer considered continued disqualification of that person to be in the public interest.
4. Disposition. The applicant’s admitted misconduct was one of omission: failing to participate in the company’s affairs. It arguably warranted no more than an admonitory minimum period of two years. No continuing public-interest case was advanced for maintaining her disqualification. The court declared that the undertaking should cease to be in force.