Secretary of State for Trade and Industry v Arnold & Anor

For the purposes of jurisdiction under section 6(3)(c) of the Company Directors Disqualification Act 1986, the relevant question is whether a court had jurisdiction to wind up the company when the administrator or administrative receiver was appointed. The provision does not require the company still to be registered or extant when disqualification proceedings are issued. Accordingly, the company’s deemed dissolution under paragraph 84(6) of Schedule B1 to the Insolvency Act 1986 did not deprive the court of jurisdiction. This construction avoids the need for satellite applications to restore the company or suspend dissolution and prevents potentially disqualified directors remaining in control while proceedings are arranged.

The Secretary of State commenced disqualification proceedings under section 6 of the Company Directors Disqualification Act 1986 against the defendants arising from their management of a company that had entered administration. The company was subsequently deemed dissolved under paragraph 84(6) of Schedule B1 to the Insolvency Act 1986, although that fact was discovered after the proceedings began.

The proceedings were transferred from the Crewe County Court to the High Court. The central issue was whether section 6(3)(c) conferred jurisdiction despite the dissolution, or whether the Secretary of State first had to obtain an order under section 651 of the Companies Act 1985. A further issue concerned the validity of proceedings commenced before any such order.

1. Jurisdiction upheld. The High Court had jurisdiction to entertain the disqualification proceedings. Section 6(3)(c) of the Company Directors Disqualification Act 1986 gives jurisdiction to a court which had jurisdiction to wind up the company at the time an administrator or administrative receiver was appointed.
2. The word “has” in the phrase “has jurisdiction” relates back to the appointment event identified in the subsection. The same temporal construction is consistent with sections 6(3)(a) and 6(3)(b), which refer to the court having jurisdiction when the relevant winding-up or voluntary liquidation occurred.
3. The deemed dissolution mechanism in paragraph 84(6) of Schedule B1 to the Insolvency Act 1986 did not alter that conclusion. The legislative amendments to section 6(3) accompanying the new administration regime addressed the change from an administration order to the appointment of an administrator, but did not require further amendment to deal with deemed dissolution.
4. The court distinguished the reasoning in Re Lichfield Freight Terminal Limited [1997] 2 BCLC 109, because it concerned differently worded legislation and the present difficulty could not have arisen under the earlier wording. The court followed the timing approach in Re The Working Project Limited [1995] BCLC 226 as an alternative basis: jurisdiction is assessed when proceedings are commenced.
5. It was therefore unnecessary to decide the alternative section 651 issue. Had it arisen, an order declaring dissolution void would not have validated proceedings already commenced, and those proceedings would have been a nullity. Permission to commence fresh proceedings out of time under section 7(2) would nevertheless have been granted, having regard to the notice given, the absence of demonstrated prejudice, the seriousness of the allegations and the applicable delay.
6. The court granted a declaration in broadly the terms sought, subject to any necessary redrafting and further directions concerning continuation of the substantive proceedings.

First-instance decision. The proceedings had been commenced in the Crewe County Court and were transferred to the High Court by order of the District Judge.