The Secretary of State for Business, Energy And Industrial Strategy v Domingo & Ors

Under section 6 of the Company Directors’ Disqualification Act 1986, the court must make a disqualification order where insolvency and unfitness are proved. Ordinary commercial misjudgement or a failure to exercise perfect care and skill is insufficient. The conduct must amount to a serious failure to perform the duties attendant on trading with limited liability, assessed cumulatively and in context. The assessment is fact-sensitive and must take account of the director’s role, expertise, responsibilities and the surrounding chronology. Deliberate misleading statements to investors, and a failure to maintain adequate accounting records, may establish unfitness. A director who reasonably relies on assurances and makes reasonable inquiries may avoid disqualification where the alleged failures are not serious.

The Secretary of State sought disqualification orders under section 6 of the Company Directors’ Disqualification Act 1986 against Anthony Domingo Armstrong-Emery and Xavier Wiggins. The proceedings concerned two insolvent companies involved in promoting Brazilian property investments. Mr Emery was a director of Developments; Mr Wiggins was a director of Group, which undertook marketing services.

The Secretary of State alleged misleading representations about land ownership, government approval, investment security, ISO 9001 accreditation and use of the Olympic logo. Mr Emery was also alleged to have failed to maintain adequate accounting records. The central issues were whether the conduct established unfitness and, for Mr Wiggins, whether his reliance on Mr Emery and professional advisers was reasonable.

1. Statutory test. The requirements in section 6(1)(a) and (b) of the Company Directors’ Disqualification Act 1986 were satisfied only if the relevant company had become insolvent and the director’s conduct made him unfit to be concerned in company management. Once both requirements were established, an order was mandatory.
2. Applicable standard. Ordinary commercial misjudgement is insufficient. The conduct must involve a serious failure, whether deliberate or caused by incompetence, judged cumulatively and against the standards of probity and competence appropriate to company directors. The assessment must reflect the director’s actual role and responsibilities.
3. Mr Emery. Mr Emery knowingly caused Developments and Group to issue inaccurate and misleading material stating or implying that Developments owned the land, that the projects were government-approved and that investors’ money was secure. He also insisted on including the unsupported ISO 9001 accreditation. He failed to maintain and produce adequate accounting records. These were deliberate and serious failures which demonstrated unfitness.
4. Mr Wiggins. Although the marketing representations were untrue, Mr Wiggins reasonably relied on Mr Emery’s assurances, the existing marketing material, professional advisers and his observations in Brazil. His inquiries and responses to warning signs were reasonable in the context of his part-time marketing role. His conduct did not amount to serious failures, gross negligence or total incompetence.
5. Orders. Mr Emery was disqualified for 14 years. The period reflected the upper-bracket seriousness of the conduct, the substantial creditor deficiency, the deliberate continuation of the misrepresentations and the protective and deterrent purposes of disqualification. The allegations against Mr Wiggins were dismissed.