Secretary of State for Business, Energy and Industrial Strategy v Dudley Arnold Joiner

The Secretary of State applied under s.6 of the Company Directors Disqualification Act 1986 for a disqualification order against Mr Dudley Joiner for alleged unfit conduct as director of Team Property Management Limited. The court found proven that Mr Joiner allowed client funds (including sums credited to a Quadrangle client savings account) to be commingled and used for other client and company purposes in breach of Team’s management agreement and trust obligations, and that Team failed to keep and/or deliver adequate accounting records contrary to s.386 Companies Act 2006. The court held these failings amounted to serious breaches engaging Schedule 1 (in particular paragraphs relied on by the Secretary of State) and that Mr Joiner was unfit to be concerned in the management of companies. The judge ordered a 9-year disqualification period.

Background and parties

The Secretary of State for Business, Energy and Industrial Strategy brought an application under s.6 CDDA 1986 for a director disqualification order against Mr Dudley Joiner, sole director of Team Property Management Limited ("Team"). Team was wound up on 20 November 2017 following a winding-up petition presented by Quadrangle RTM Company Limited ("Quadrangle").

Nature of the application and relief sought

• The Secretary of State sought an order under s.6 CDDA 1986 disqualifying Mr Joiner from acting as a director, acting in the promotion or management of companies, or acting as an insolvency practitioner, for a period of 9 years.

Key factual issues and procedural posture

• Allegation 1: that Mr Joiner failed to ring-fence and protect Quadrangle funds held by Team (transfers totalling £82,286 into a savings account) and failed to return sums on termination, causing loss (later revised to a claimed shortfall of £76,816).
• Allegation 2: that Team did not keep adequate accounting records and/or failed to deliver up electronic Sage records, preventing explanation of large transfers (including payments to connected companies, to a family member, and to Mr Joiner) and frustrating the Official Receiver.
• The application was heard in the High Court after contested evidence; the defendant gave oral evidence and cross-examined the Official Receiver’s investigator. The defendant produced a letter agreement and other documents during/after the hearing which were considered by the court.

Issues framed by the court

• Whether Mr Joiner’s conduct as director of Team made him unfit under s.6 CDDA 1986, having regard to s.9 and the matters in Schedule 1 (and Part II where relevant), and the statutory and contractual duties to keep client service charge funds separate and to keep adequate accounting records (s.386 and s.387 Companies Act 2006; s.42 Landlord and Tenant Act 1987 and related guidance).
• If unfit, what period of disqualification was appropriate, applying the established bracket approach to periods of disqualification (Re Sevenoaks and authorities).

Court's reasoning and findings

• The court found that a second Barclays savings account (account 83877345) had been operated in practice as a Quadrangle client account and that Quadrangle funds totalling £82,286 were transferred into it; those funds were commingled with other client monies and used for payments unrelated to Quadrangle, contrary to the management agreement and trust obligations. The court accepted that the account was misused even if some documentary material (a later-produced letter) indicated a temporary postponement of reserve contributions.
• The judge found that Team failed to keep adequate accounting records and failed to deliver usable Sage electronic records to the Official Receiver: the hard-copy files and the electronic server were inadequate to explain large transfers and payments, including substantial payments to companies connected to Mr Joiner, to a family member and to Mr Joiner personally. Audited/accountant commentary in the bundle corroborated the inadequacy of records.
• These matters together demonstrated serious failures in commercial probity and medium-to-high risk to the public if Mr Joiner were permitted to continue in company management. The judge applied the relevant statutory framework (s.6, s.9 CDDA 1986; Schedule 1), caselaw on unfitness and the bracketed approach to disqualification periods, and concluded that a nine-year disqualification was appropriate.

Subsidiary findings and context

• The court did not make a definitive finding that a specific sum (the revised figure of £76,816) was positively retained and not returned but held that the commingling and absence of adequate records made it impossible to verify and so supported the unfitness finding. The judge noted concerns about unexplained payments to connected parties and family members and the failure to obtain client consent for contracts with connected parties.

Application allowed. The court found that Mr Joiner had engaged in serious breaches: client service charge monies were not properly ring-fenced and Team's accounting and audit arrangements were inadequate and/or records were not delivered, rendering Mr Joiner unfit under s.6 CDDA 1986 (having regard to s.9 and Schedule 1). A disqualification period of nine years was imposed to protect the public and reflect the seriousness of the failings.