Portland Place (Historic House) Ltd, Re

This is an application under sections 1 and 17 of the Company Directors Disqualification Act 1986 by a person subject to a ten year disqualification order made under section 2 following a fraud conviction. The applicant sought permission to give instructions to solicitors acting for a company which is the registered freehold owner of a valuable London property and is defendant in possession proceedings brought by its mortgagee.

The court identified and applied the familiar discretionary balancing exercise: protection of the public and the deterrent purpose of disqualification weighed against the legitimate interest of the disqualified person and any practical need for the permission sought. The judge accepted that the freehold had been vested in the company on a bare trust and that the deed of trust purported to entitle the applicant to direct the company.

The court granted a limited permission: the applicant was permitted to give instructions to the company in accordance with the deed of trust, but only if and insofar as that deed of trust is effective as between him and the company. The court refused to permit the applicant to act as the company’s agent or to conduct the litigation or negotiations on the company’s behalf, noting practical disadvantages, the presence of company directors and the need to avoid undermining public protection or the deterrent effect of the disqualification.

Background and parties. The applicant (Mr Davenport) had been convicted of fraud and disqualified for ten years under section 2 of the Company Directors Disqualification Act 1986. The freehold of 33 Portland Place ("the Property") was registered in Portland Place (Historic House) Limited ("the Company"). The Company had executed a deed of trust declaring that it held the Property as nominee for the applicant. The mortgagee bank appointed LPA receivers and brought possession and repayment proceedings against the Company. The applicant applied to the Companies Court for permission under sections 1 and 17 of the 1986 Act to give instructions to solicitors acting for the Company in that litigation.

Nature of the application (i). The applicant sought leave to give instructions to the Company and effectively to participate in and conduct the Company’s defence and any negotiations with the mortgagee; he relied on his beneficial interest under the deed of trust and argued that his factual knowledge and status as beneficial owner made his involvement necessary or advantageous.

Issues framed by the court (ii). The court had to determine (a) whether the second application was an impermissible challenge to an earlier refusal by the Registrar; (b) whether the deed of trust was sufficiently established on the evidence; (c) whether permitting the applicant to give directions or otherwise act for the Company would breach the disqualification order or undermine public protection and the deterrent purpose; and (d) whether the court should permit the applicant to act as the Company’s agent and conduct litigation/negotiations.

Reasoning and decision (iii). The judge held that a disqualified person may renew applications when circumstances change and that this narrower application was not an abuse of process despite a prior Registrar decision refusing broader relief. The judge emphasised evidential caution, prefacing any permission with the qualification "if and insofar as the deed of trust is effective as between Mr Davenport and the Company". The court accepted that, if effective, the deed entitled the beneficial owner to direct the nominee company and that permitting the applicant to give directions under the trust posed no real risk to the public. However, the court rejected the application to allow the applicant to act as the Company’s agent or to conduct litigation and negotiations, observing the disadvantages of a convicted and imprisoned person managing litigation from prison, the availability of company directors to manage the litigation and take instructions from the applicant as a witness, the restraint order and SFO controls over funds, and the need to retain the deterrent and protective purposes of the disqualification regime. The claim for broader permission was refused and the limited permission to give instructions under the trust was granted.

Procedural posture. The judge dealt with an application in the Companies Court after an earlier Registrar decision had refused wider relief; the present court allowed the more limited relief sought.

Application allowed in part. The court granted permission under sections 1 and 17 of the Company Directors Disqualification Act 1986 for Mr Davenport to give instructions to the Company in accordance with the deed of trust, but only if and insofar as that deed of trust is effective as between him and the Company. The court declined to permit Mr Davenport to act as the Company’s agent or to conduct the Company’s litigation or negotiations on its behalf, for reasons of public protection, practical inefficiency and the availability of company directors to conduct the proceedings.

Prior to this hearing the applicant had made an earlier application in the Companies Court which was heard by Mrs Registrar Derrett on 14 December 2011; the Registrar refused leave for the applicant to remain a director and to act in relation to the companies, and that decision was not appealed. This present application (Claim No: CH/8097/2011; Neutral Citation: [2012] EWHC 4199 (Ch)) was brought subsequently and determined by Morgan J on 22 June 2012.