Secretary Of State For Business And Trade v Tarquin Charles Spencer Barnsby (Re Pure Zanzibar Limited)

Under sections 15A and 15B of the Company Directors Disqualification Act 1986, a compensation order may be made where disqualification-related conduct caused identifiable monetary loss to creditors of an insolvent company. Causation is assessed by reference to the statutory language and the evidence. Hindsight and commonsense may be used without foreseeability, although the court left open whether common-law remoteness principles may also be relevant in other cases.

The court retains a judicial discretion over whether to grant relief and its amount. Impecuniosity is relevant but will rarely carry significant weight by itself, particularly where it reflects freely adopted lifestyle choices. Serious, wilful or reckless misconduct causing quantifiable loss may justify compensation for the full loss, with interest.

The Secretary of State sought a compensation order against the defendant under sections 15A and 15B of the Company Directors Disqualification Act 1986. A seven-year disqualification order had previously been made after the defendant, as sole director of Pure Zanzibar Ltd, allowed the company to take bookings and retain a customer deposit after its air travel organiser’s licence had expired.

The compensation hearing concerned whether the relevant conduct caused loss to identified customers, the amount of that loss, and whether the court should exercise its discretion to make an order. The defendant disputed causation, relied on possible alternative recoveries, and argued that his financial circumstances made an award disproportionate.

1. Threshold conditions. The court was satisfied that the defendant was subject to a disqualification order and that conduct for which he was disqualified had caused loss to five customers, engaging section 15A(3)(b) of the Company Directors Disqualification Act 1986. The ATOL regime was directed principally to protecting consumers, so the conduct did not cause compensatable loss to trade creditors.
2. Causation. The court applied the approach in Re Noble Vintners Ltd, namely that causation may be assessed using hindsight and commonsense without considering foreseeability. It left open whether foreseeability and other common-law remoteness principles may be relevant in cases founded on negligence or marked incompetence. On either approach, the customers’ losses were reasonably foreseeable and were directly caused by the defendant’s unlawful continuation of licensable bookings and failure to refund a booking which could no longer lawfully be performed.
3. The continued use of the ATOL logo and website references was not decisive. The claim independently succeeded on the free-standing misconduct involving unlawful bookings and failure to refund. The defendant produced no evidence that the customers had received further compensation. The recoverable losses totalled £81,405.
4. Discretion and amount. The court rejected the submission that compensation orders were confined to fraud. The regime also covers negligence or recklessness causing identifiable loss. The court had a discretion under sections 15A and 15B, but it had to be exercised judicially and with regard to the statutory policy of providing redress and reinforcing the disqualification regime.
5. Impecuniosity could be considered when tailoring relief, but mere impecuniosity would very rarely justify refusing relief or substantially reducing it. The defendant’s age, abilities, possible future earnings, the absence of any other recovery for the customers, the seriousness of the misconduct, and the lack of any recompense justified an order for the full loss.
6. The court ordered the defendant to pay £81,405 plus interest at 1.5% per annum from the date of liquidation, for collection by the Secretary of State and distribution to the customers in the stated proportions.

First-instance compensation hearing following an earlier disqualification judgment reported at [2022] EWHC 971 (Ch). The court made a compensation order in the present judgment.