The Official Receiver v Duckett

The Official Receiver sought a disqualification order under section 6 of the Company Directors Disqualification Act 1986 for Mr Howard Duckett in respect of his conduct as a de facto director of Focus 15 Trading Limited. The court found that Mr Duckett occupied the position of a director despite no formal appointment. He failed to ensure that the company maintained and preserved adequate accounting records (Companies Act 2006, sections 386 and 388), or otherwise caused the records to be produced, so that HMRC and the liquidator could not establish the company’s trading, VAT liability and the destination of substantial payments from the company bank accounts.

Applying the statutory test of unfitness under section 6 CDDA (and having regard to Schedule 1 factors), the judge concluded that the failures made Mr Duckett unfit to be concerned in the management of companies. Aggravating features included the scope of the deficiencies and the judge’s finding that Mr Duckett gave untruthful evidence. The court therefore made a disqualification order for 10 years.

Background and parties: Focus 15 Trading Limited was incorporated in 2015, registered for VAT and wound up on HMRC's petition in May 2017 for unpaid VAT. The Official Receiver (OR) applied under section 6 CDDA for a disqualification order against Mr Howard Duckett, alleging that as a de facto director he failed to ensure adequate accounting records were maintained or delivered.

Nature of the application: An application for a disqualification order under section 6 Company Directors Disqualification Act 1986 on the basis that Mr Duckett, as a de facto director, was unfit by reason of failures to maintain/preserve/deliver adequate accounting records. The OR did not pursue a fraud allegation as part of the disqualification claim, though HMRC suspected MTIC-type fraud.

Key factual findings:

• Mr Duckett assisted with the company’s incorporation, recommended bankers, engaged accountants, communicated with HMRC and solicitors and received payments from the company bank accounts.
• The evidence of a third individual, "John Deere/Deer", who was said to run the business, was rejected as fictitious or unreliable; the judge found that the activities attributed to that person were in fact carried out by Mr Duckett.
• Books and records produced to the OR were incomplete or inconsistent; there was no clear audit trail, and significant sums paid from company accounts (over £1.4m) could not be reconciled to paperwork provided.
• Invoices and documents submitted in support of payments to Mr Duckett were found to be ex post facto fabrications in part.
• HMRC correspondence and visits were described in detail and showed the company’s VAT registration was suspended, reinstated and later cancelled, and assessments were raised based on missing or deficient records.

Issues framed by the court: (i) whether Mr Duckett was a de facto director; (ii) if so, whether his conduct made him unfit under section 6 CDDA; (iii) what period of disqualification should be imposed.

Reasoning and conclusions: Applying authorities on de facto directorship and the statutory unfitness test, the judge considered the totality of conduct including holding-out, the extent of Mr Duckett’s involvement in governance, his communications with accountants, HMRC and solicitors, his receipt of payments from the company, and the documentary evidence. The judge concluded objectively that Mr Duckett had assumed the status and functions of a director. He breached duties to ensure adequate accounting records (Companies Act 2006, sections 386 and 388), and that breach made him unfit to be concerned in the management of a company. In fixing sanction the court placed the case in the middle bracket for disqualification and assessed an appropriate period of 10 years, noting aggravating conduct including false sworn evidence.

Procedural posture: First instance determination; the court made a disqualification order for 10 years and invited representations on costs.

Application by the Official Receiver succeeded. The court made a disqualification order under section 6 Company Directors Disqualification Act 1986 prohibiting Mr Howard Duckett from acting as a director or being involved in company management for 10 years. Rationale: the judge found on the facts that Mr Duckett was a de facto director, that he failed to ensure adequate accounting records (Companies Act 2006 ss 386, 388), that this conduct rendered him unfit under section 6 CDDA (having regard to Schedule 1 matters), and that aggravating features (including false evidence) justified a ten-year period in the middle bracket of disqualification periods.