Directors Disqualification and Permission to Act as Director

Author: Simon Hill
In: Article Published: Wednesday 27 October 2021

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The Company Directors Disqualification Act 1986 (“CDDA”) contains numerous provisions for disqualifying people from acting as company directors[1]. Under the various sections and depending on the circumstances[2] a person may be disqualified: (1) by Court order[3a](under mandatory or discretionary powers); (2) by disqualification undertaking [3b]- the person offering, and the relevant Secretary of State ('SOS'), Competition and Markets Authority ('CMA') or Specified Regulator (as the case may be) accepting the disqualification undertaking; or (3) by reason of being a undischarged bankrupt/other section 11(2) of the CDDA circumstance existing [4a]. The length of the disqualification will be stated in the Court order or disqualification undertaking.

During the currency of any such disqualification, the disqualified person is prohibited from various activities, including from acting as a company directors[4b], unless the disqualified person obtains ‘the leave of the Court’ (section 1(1)(a); section 1A(1)(a); section 9B(4)[4c]). 'Leave' can be equated and used interchangeably with the word 'permission'. Indeed: (1) the relevant part to the applicable practice direction, Practice Direction: Directors Disqualification Proceedings [2015] BCC 224 ('2015 Practice Direction') - Part 4, uses the language of 'permission'; and (2) Insolvency Rules 2016, r.1.2 says '“permission” of the court is to be read as including “leave of the court” in the Act and in the Company Directors’ Disqualification Act 1986'. Only the Court can grant leave; neither the SOS, CMA nor any Specified Regulator, can grant leave.

Leave/Permission to Act
Where a disqualified person wishes to act as a company director (or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company; or act as receiver over a company's property), during the currency of any such disqualification, the disqualified person can issue an application in court either by: (1) a claim form (Practice Form N208 under CPR Part 8); or (2) an application notice (within, if there still exists, extant disqualification proceedings) for leave to so act (see The 2015 Practice Direction, paragraph 17). Any such claim/application by a disqualified person, whether for leave under a disqualification order or disqualification undertaking (as the case maybe), must be made in accordance with section 17 of the CDDA. The statutory foundation[5a] for the relevant disqualification will determine which of section 17’s subsections is applicable. The 2015 Practice Direction prescribes that: (1) evidence in support of an application for leave to act must be by affidavit (The 2015 Practice Direction, paragraph 19)[5b]; and (2) how the application (in whatever form) is to be served (The 2015 Practice Direction, paragraph 20). See paragraphs 21-23 of The 2015 Practice Direction in respect to applications made in the course of the disqualification proceedings. As to timing, the law encourages early section 17 leave applications; indeed, anyone facing disqualification proceedings, who wishes, in the event of a disqualification order, that they be granted section 17 leave, is encouraged to issue their application within the disqualification proceedings themselves, so if the disqualification order is made, the same judge can immediately go on to consider the section 17 leave application (see Secretary of State for Trade and Industry v Collins [2000] BCC 998 ('Collins')[5c])

The phrase 'unless (in each case) he has the leave of the court' (section 1(1)(a); section 1A(1)(a); section 9B(4)) and the section 17 procedural provision are the only references in the CDDA to 'leave to act'. Parliament has provided not further definition or elaboration/guidance to aid interpretation and application. It has been left to the Court to construe the phrase and formulate the correct approach and criteria. 

This article will consider the law on such applications for leave under CDDA (which I shall label 'section 17 leave applications'), including the two recent authorities in this area:

(1) Rwamba v Secretary of State for Business, Energy and Industrial Strategy [2021] BCC 184 (‘Rwamba’), a decision of Miles J - a leading case in this area; and

(2) Sherling v Competition and Markets Authority [2021] EWHC 2463 (Ch) (also known as Re International Metal Industries Ltd) (‘Sherling’), a decision of Eason Rajah QC (sitting as a Deputy High Court Judge).

Initial Points
A few initial points can be made at this juncture:

(1) even when leave is granted, the person who receives that leave, does not cease to be a disqualified person; the recipient of leave will remain disqualified as before; the remaining period of their disqualification is also unaffected;

(2) leave cannot be granted for all aspects of the prohibition imposed by a disqualification. Leave cannot be obtained to act as an insolvency practitioner;

(3) the Court will not grant a disqualified person blanket leave, but only in respect to 'named' companies (Milman - Co. L.N. 2013, 331, at 4). In Sherling, the Deputy High Court Judge said, at paragraph 11:

‘It is well established that, when granted, any such leave ought only to be by reference to identify (sic) companies rather than by way of blanket permission.’ (‘identify’ perhaps should be read as ‘identified’ in this sentence)

The order, if granted, will be in respect to specifically identified companies[6a].

(4) the number of companies leave is likely to be granted for is likely to be modest. In Collins, leave as granted for 13 companies (at 1008). The 'application notably features an unusually large number of companies' (paragraph 25) and 'it is to be emphasised that ...the application does concern an unusually large volume of companies'  (paragraph 26) was the Deputy High Court Judge's view in Sherling in relation to an application, by 2 applicants, seeking section 17 leave to be a directors of, respectively, 8 and 9 companies (7 of which were the same companies). Emphasising, in essence, that this is towards the top end of what is likely to be acceptable to the Court, the Deputy High Court Judge in Sherling - while granting the leave sought (paragraph 36) stated: (1) 'that is only and exceptionally because they form an integral part of essentially one commercial enterprise and it should not be seen as any indication that the court will readily grant leave to disqualified directors.' (paragraph 26) [6b] and (2) 'indeed' (paragraph 26) the first applicant had discontinued seeking section 17 leave in relation to 4 additional companies within the wider commercial enterprise group of companies, after corresponding with the relevant respondent body (Competition and Markets Authority ('CMA'))[6c]. Theoretically though, there ought not to be a maximum number of specified companies section 17 leave may be granted in respect to; and

(5) leave can be, and usually is, granted on conditions. Where section 17 leave is granted on conditions, if the disqualified person then acts as a director outside of those conditions/not in conformity with those conditions, then the disqualified person has simply acted as a director whilst disqualified (without the excuse of holding relevant section 17 leave). See Rwamba, paragraph 20

(6) there are alternatives to a section 17 leave application: (a) in respect to disqualification undertakings (of whatever statutory foundation), but not court orders, a court may make a variation order under section 8A of the CDDA, to reduce the length of the undertaking, or terminate it prospectively; see Re I.N.S. Realisations Ltd [2006] EWHC 135 (Ch); [2006] BCC 307; Taylor v Secretary of State for Business, Innovation and Skills [2016] EWHC 1953 (Ch); [2016] 2 BCLC 350; Georgallides v Secretary of State for Business, Energy and Industrial Strategy [2020] EWHC 768 (Ch); Ahmed v Secretary of State for Business, Energy and Industrial Strategy [2021] EWHC 523 (Ch); and The 2015 Practice Direction, Part 8); and (b) the authors of Sealy & Milman: Annotated Guide to the Insolvency Legislation 24th Ed. - 2021 state 'No specific provision is made in the Act for the variation of a disqualification order; but that there is power to do so is perhaps confirmed by the Companies (Disqualification Orders) Regulations 2009 (SI 2009/2471) reg.4(b) and the Insolvent Companies (Disqualification of Unfit Directors) Rules 1987 (SI 1987/2023) r.8(2). This is in any case something which the High Court, at least, could do in its inherent jurisdiction.' before referring to Re Brian Sheridan Cars Ltd [1995] B.C.C. 1035, a case where the order itself reserved a power to vary the original order.

Turning to the authorities.

Rwamba Guidance
In the recent leading case of Rwamba, Miles J said, under the heading ‘Legal Principles’, that he was able to ‘…draw the following general guidance from…’ (paragraph 34) the authorities[7a] and section 17:

i) The court has a discretion under s.17 to allow a person who has been disqualified to be a director of a company or be concerned or take part in the promotion, formation, or management of a company.

ii) The onus is on an applicant under the section to persuade the court to grant permission. The starting point when approaching the jurisdiction is that the applicant has been held unfit to be a director for the period of the order (or has accepted the equivalent when giving an undertaking). Nonetheless leave may be given in a proper case.

iii) It is for the court (and not for the Secretary of State) to be satisfied that it is appropriate to give leave for the applicant to be a director etc.

iv) The discretion under s.17 to give leave is unfettered. It is wrong to seek to add glosses or preconditions. The question for the court is whether in all the circumstances it is appropriate to give leave; and in approaching this question the court balances all the relevant factors.

v) Though it is usual to establish that the company has a “need” for the applicant to be a director or involved in the management, this is not a precondition. For instance, the appointment may be made to allow the director to obtain a tax advantage.

vi) The court should, among other things, have regard to the nature and seriousness of the conduct that led to the disqualification order or undertaking and the length of the disqualification. Where that conduct was dishonest a court may be reluctant to give leave.

vii) The court should, when deciding whether to give leave for a director to act as a director have regard to the purposes of a disqualification order. These include (i) protecting the public directly by prohibiting the disqualified person from acting and (ii) deterring both the particular director and others from the kind of conduct that has led to the order.

viii) Leave should not be too freely given as this would tend to undermine the protective and deterrent purposes of a disqualification order. The court would not wish anyone dealing with a director to be misled as to the gravity of a disqualification order.

ix) On the other hand, the power of the court to grant leave under s.17 is inherent in the disqualification regime and in an appropriate case it may serve the public interest to allow a disqualified person to be a director of a specific company.

x) Moreover, the fact that the applicant for leave has agreed to the imposition of conditions designed to ensure high standards of corporate conduct may itself be seen as promoting the policy of deterring misconduct.'

(Miles J also gave an additional point of guidance, numbered xi), but this relates to appeals and can conveniently be left to the below section on appeals)

Seemingly, these principles apply across all types of section 17 leave applications. In Sherling, a competition disqualification undertakings case, the Deputy High Court Judge said, at paragraph 12, ’The court's approach to applications for permission pursuant to section 17 of the CDDA was summarised by Miles J in Rwamba…’ before the Deputy High Court Judge quoted the above general guidance (paragraph 12), and stated that ‘Those principles…are the principles which I intend to apply in this case’ (paragraph 13).

Purposes/Policy - Public Protection and Deterrent
In Rwamba, Miles J set out the two strands, or aspects to public protection policy, namely: (1) incapacity; and (2) deterrence. At paragraphs 39, Miles J said:

The authorities show that the public protection policy underlying disqualification orders has two strands or aspects. One is removing the risk of the disqualified person harming the public through the repetition of the corporate misconduct or abuse which led to the order. It does so by taking him or her off the road for the duration of the order. The second aspect is deterrence. Directors may be expected to maintain higher standards of corporate conduct if they potentially face disqualification for falling below them.[7b]

In Collins, Peter Gibson LJ considered 'protection of the public' to include '...all relevant interest groups such as shareholders, employees, customers, lenders and other creditors.' (1011)

The Court's enquiry, for this purpose, is broad. In Re Tech Textiles Ltd (also known as Secretary of State for Trade and Industry v Vane) [1998] 1 BCLC 259, Arden J said, at 268:

As regards the company of which the applicant is to become a director, the court must consider the nature of the company’s business, the size of the company, its financial position, the number of directors, the number of its employees and creditors and so on. and the risks involved in the company’s particular business so far as it can make any assessment of this. It must also look to see whether there is a potential for the matters which were held to constitute unfitness to recur.’

No Special Weight to Deterrence where Breach of Disqualification Leave Conditions
A small point but one that arose in Rwamba: there is no special weight to be attached to deterrence as a factor, merely because, without more, the section 17 leave applicant’s disqualification was for breach of the conditions of an earlier order granting section 17 leave.

Before considering what Miles J said in Rwamba on the issue, it is necessary to set down some of the facts in Rwamba. While the facts are rather convoluted[8a], in short, the section 17 leave applicant Mr Rwamba:

(1) gave a 4 year Directors Disqualification Undertaking (the ‘2009 Undertaking’) for causing a company to make investments overseas ‘…to the detriment of Her Majesty’s Revenue & Customs’ (paragraph 8);

(2) immediately sought after giving the 2009 Undertaking, and was subsequently granted, leave to act as a company director in relation to a specific company (MOL1), on 11 conditions (the ‘June 2010 Permission’);

(3) admitted to breaching the June 2010 Permission conditions, from August 2010, in respect to VAT/Corporation Tax payments (arrears and future payments) and filing returns, ‘…and as a result acted as a director of [MOL1] whilst I knew or ought to have known that I was disqualified from doing so…’ (paragraph 20);

(4) gave, in 2015, a 6 year Directors Disqualification Undertaking (the ‘2015 Undertaking’), because, by so acting outside the June 2010 Permission, he had acted as company director whilst disqualified; and then

(5) in relation to the 2015 Undertaking, he applied for leave to act as company director to two other companies, MOL2 and MOFL;

Mr Rwamba's application (5) failed (twice) before ICCJ Prentis - the first instance judge. Mr Rwamba’s appeal against ICCJ Prentis' (second[8b]) judgment, before Miles J, succeeded because the appeal court took the view that ‘…deterrence...was, in the end, why the judge refused leave' (paragraph 52); and that, ICCJ Prentis ‘…erred in giving special weight to the public policy of deterrence merely because the disqualification arose from the breach of an earlier permission order.’ (Paragraph 44)

Explaining why the appeal was allowed on this point, Miles J said (earlier), at paragraphs 40 to 42:

‘[Counsel for the section 17 leave applicant’s] submission was that the judge went wrong in thinking that deterrence has special weight merely because the disqualification was for breach of the conditions of an earlier order for s.17 leave, without more.

I accept this submission. The sequence of events (earlier leave order, breach, disqualification, fresh leave application) is no doubt relevant, but it does not justify putting greater weight into the scales against the applicant. Where the applicant has breached earlier s.17 leave conditions, been disqualified as a result, and again sought leave, a court will naturally wish to satisfy itself that there is no material risk of breach of the second leave order, including any conditions attaching to it. Someone who has breached one leave order may be thought more likely to breach a second. But if the court (having considered that point) is satisfied on the second application that there is no material risk of breach of the second order or its conditions, the case is the same as any other application for leave. The court must still consider the impact (if any) of giving leave on the general deterrence of disqualifications, but that is common to all leave applications.'

Deterrence is baked into the disqualification regime. It must be considered in every case. The court must consider the impact on deterrence whenever it is asked for leave. That is why the court should not be too ready to do so. But there is no reason to augment the weight to be given to deterrence merely because the disqualification arises from breach of any earlier permission. The court must always consider the reasons for the disqualification order but there is no reason to say, generically, that giving further leave to a director who has been disqualified for breach of an earlier permission will (without more) undermine the policy of deterrence. There will also be differences between cases: breaches of earlier permissions may be dishonest, reckless, or innocent, and the culpability of the applicant for what has happened, and the seriousness of the consequences are likely to feature in the court’s exercise of its discretion. But these are things that fall to be considered on any application for leave, for the court has always to consider the nature and seriousness of the conduct that led to the disqualification. The judge appears to me to have thrown the blanket too widely and concluded that any application for leave under a disqualification which itself arises from breach of an earlier order leave attracts a higher burden.'

Public Perception
An aspect of deterrence is the wider public perception of the disqualification regime, as being sufficiently robust and fit for purpose[9a]. It is important to note that the relevant perception is that of the fair minded and informed member of the public - informed of the relevant facts, rather than just aware of the bare headlines. This was made clear by Miles J in Rwamba. Disagreeing with ICCJ Prentis’ as to how the public would, on the facts, view granting Mr Rwamba section 17 leave, and setting out the relevant vantage point of the fair minded and informed member of the public, Miles J said, at paragraphs 43:

‘The judge appears to have considered that the public would perceive the system as unduly lax were the court to give permission in the present case. But any question of perception should be assessed by postulating a fair minded and informed member of the public, and not one who has been told the bare headlines. It may be tested this way: suppose leave were given and the fair minded observer were asked how this would affect his or her views about the seriousness and force of the disqualification regime and orders made under it. The observer would (being informed) understand some general things about the regime and some specific ones about this case. He or she would understand (generally) that leave is an inherent part of the disqualification regime, that it requires judicial scrutiny, and that it will only be granted where the court is satisfied on proper grounds; and (specifically) that the applicant had carelessly (but not dishonestly) breached the earlier permission order, had apologised, and had offered a series of conditions which imposed stringent controls on the business to minimise the risk of breach, that the Secretary of State did not oppose an order including those conditions, and that the court was satisfied that there was no material risk to the public of future breaches of the conditions or of further corporate misconduct were leave to be given. The observer would also understand that the process of agreeing and putting such conditions in place is time-consuming and costly and is not undertaken lightly. I do not think that the fair minded observer would think that the grant of leave would undercut or weaken the disqualification regime generally, or the disqualification of Mr Rwamba specifically. The observer would not, to my mind, attach special weight to the fact that the disqualification arose out of an earlier permission order.'

In a similar way, Miles J said, at paragraph 52:

'...I do not think that a fair minded observer would consider that the grant of leave in the present circumstances would go against the grain of the disqualification regime generally or diminish the seriousness of the 2015 undertaking by which Mr Rwamba was disqualified as a director. The giving of leave is inherent in the disqualification regime, the public is fully protected by the conditions of leave (which have been considered and commented on by the Secretary of State), and there are good reasons for allowing Mr Rwamba to act as a director of the companies.’

Seriousness of Prior Misconduct

In Dawes & Henderson (Agencies) Ltd (In Liquidation) (No.2), Re Shuttleworth v Secretary of State for Trade and Industry [2000] BCC 204; [1999] 2 BCLC 317 ('Re Shuttleworth') Sir Richard Scott said said, at paragraph 2 '...in all cases, the reasons for the making of the disqualification order are of the greatest importance.'

In Westminster Property Management Ltd (No.2) (also known as Official Receiver v Stern [2001] BCC 305 ('Westminster Property (1st Instance)') at 361, Lloyd J said, at paragraph 363:

'There is... in my judgment a presumption against the grant of leave. In a case where the circumstances of misconduct are as serious..., it is a heavy presumption.'

In Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch)('Re Morija'), Sir Andrew Park at paragraph 35 said:

‘In the balancing process the degree of seriousness of the misconduct on the part of the disqualified person who is applying for leave is relevant. The relevance seems to me not to rest on the notion that, if a person's misconduct has been serious enough, a refusal of leave serves him right. Rather the point is in part that, in the case of a person who has misconducted himself seriously in the past, the risk to the public of him misconducting himself again if he is granted leave is greater than would exist in the case of a person whose misconduct was less serious. A different aspect of the same point is that, if a disqualified director whose conduct has been significantly bad is seen by others to have been granted leave by the court to continue as a director of another company, the deterrent effect on other directors will be weakened.’

On discerning the level of seriousness, Ferris J in Collins said, at 1017:

'The assessment of the gravity of the misconduct established in disqualification proceedings inevitably involves the making of a value judgment which is unique to the circumstances of the particular case.'

But the length of the disqualification is an obvious indication of its seriousness. It is noteworthy that in December 2007, Sir Andrew Park said in Re Morija, obiter, that one of the factors against granting section 17 leave, was that the disqualification was 10 years '...a long period of disqualification' (paragraph 56) and that it was '...longer (if I recall correctly what I was told) than the term in any other case where leave has been granted.' (paragraph 56)

The nature of the misconduct/improprieties may range from inadequate management through to egregious dishonesty or want of probity[9b].

A whole range of phrases are used to describe the seriousness/gravity of misconduct. For instance, Ferris J in Collins used 'substantial misconduct, displaying a marked lack of commercial probity', 'highly reprehensible' and 'want of commercial probity' (1017-1018); Park J and Judge LJ in Collins used 'discreditable' and 'reprehensible conduct'. ICCJ Jones in Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424, spoke of behaviour/conduct which '...fell below the standards of probity and competence appropriate for persons fit to be directors of companies' (paragraph 99)

Remedying the consequences of past misconduct, for instance, by paying creditors any shortfall from the disqualified person's insolvent (former) company, will not necessarily satisfy the court hearing the section 17 leave application that the disqualified person poses no future risk.

Need Generally

A need in the company (or each company) that the applicant be its director/involved in its management, or vice versa, is potentially a important factor, though it is not a pre-condition to the success of any section 17 leave application (as was made clear in Miles J's general guidance). It is only 'usual' that this is established. The Court will want to know why the applicant's participation in running its business, doing what would would otherwise be prohibited, is said to be important/necessary/crucial (as the case maybe), to the company and/or the disqualified person. If not needed, logically, at least the company will want the disqualified person's services.

Company's Need for the Disqualified Person's to be Director/Involved in Company Management

It may be argued that the named company has a need for the disqualified person's services, because, for instance he has: (i) a detailed knowledge of the affairs and management of the company/industry, which is impossible/hard to develop in a replacement/another, within a reasonable time scale or at all; (ii) hard to replace skills, and/or (iii) a unique reputation in the market (which the company wants to exploit). It may be said that, without the disqualified person's involvement in the management of the company/as director, the company will not continue to trade, with 'knock on' consequences for stakeholders. 

The strength of need can, seemingly, affect what risk to the public is judged acceptable by the Court (very small risk to some slight risk). In Re Shuttleworth, Sir Richard Scott said, at 211:

'In a case where no need has been demonstrated on the company’s part to have the applicant as its director or, from a business point of view, on the applicant’s part to be a director, there would need, I think, to be only a very small risk to the public which the granting of the leave might produce to justify the refusal of the application. Per contra, if a substantial and pressing need on the part of the company, or on the part of the individual in order to be able to earn his living, could be shown in favour of the grant of leave then it might be right to accept some slight risk to the public if the leave sought were granted.’

However, in Westminster Property (1st Instance), notwithstanding the Court operating on the basis that the company needed the applicant's services, the Court assessed whether it was satisfied there was 'no risk' (paragraph 33) of the public suffering from the same or other misconduct. 

In both Rwamba and Sherling, the section 17 leave applicants contended that there was such a need, and in each, it was one of the factors in the Court's balancing exercise. For convenience, the 'need' identified on the facts in Rwamba and Sherling, respectively, will be set out as part of the overall final balancing exercise, in the relevant section below.

Disqualified Person's Need

Though rarer, a factor can be the disqualified person's need to be a director/involved in company management - as indicated by Rwamba - guidance v). In Shuttleworth, the section 17 leave applicant wanted to '...take advantage of the tax deferment that he has been advised is available under [Sch. 5B to the Taxation of Chargeable Gains Act 1992]' (page 6), achieveable by transferring his franchise business from his personal estate into a private (unlimited) company and investing money into the company. Such an assignment was only possible with the franchisor's consent, which the franchisor said would be forthcoming only if the disqualified person '...continues to be the person managing the business' (page 6). In addition 'naturally' the judge said, he also wanted to control the company that was to carry on the business. In short therefore the purpose of the section 17 leave application was '...simply to allow [the disqualified person] to obtain deferment of his liability to pay ....capital gains tax.' (page 6)[9c] - a disqualified person's need only.

Unlimited Liability Company

Where the named company (or companies) in the section 17 leave application is an unlimited company (or are unlimited companies), this will be a very material factor[9d].

Leave but with Conditions attached
An important factor in the success or otherwise of a section 17 application is likely [10a]to be whether any conditions could be attached to the section 17 leave, tailored so as to target and address the risk the applicant poses of commercial impropriety, and whether any such conditions imposed, will be effective and will, taken as a whole, provide sufficient protection to wider society; will any safeguarding conditions proposed to be deployed, be suitable, sufficient, practical/workable and effective, to protect the public interest. For instance, in Rwamba, a factor in granting section 17 leave, was ‘…the extensive and comprehensive conditions annexed to the draft order…’ (paragraph 51).

For instance, conditions may be directed towards:

(1) limiting the role/responsibilities the disqualified person may hold/undertake [10b];
(2) requiring the disqualified person to hold a position subordinate to another and require reporting to named superiors;
(2) monitoring the company’s activities while under the direction of the disqualified person; and
(3) raising the alarm, should the applicant's activities generate an unacceptable risk of further commercial impropriety;

The aim of the conditions being to reduce the chance of such commercial impropriety (recurrence of past misconduct, or new directorial/managerial misconduct) occurring, down to an acceptable risk level, presumably set in light of the nature and extent of any subsequent harm if the risk were to ripened.

Conditions might include the requirement that any specified company must have:
(1) certain named directors/minimum number of directors;
(2) appointed, company auditors;
(3) specific solicitors, who will attend each broad of directors meeting;
(4) board of director meeting at least to a minimum frequency (for instance, once a month)

In Rwamba, the conditions on the section 17 leave included:

‘…financial restraints; personal obligations on Mr Rwamba to ensure the filing of tax returns on time; an obligation to instruct independent auditors to report to the board any matters of concern within seven days and a duty to comply with any such concerns; an obligation on Mr Rwamba to provide a board report confirming compliance with the conditions; a duty on him to instruct solicitors to attend monthly board meetings and to ensure that Mr Rwamba has met his compliance reporting obligations, and to report any matters of concern to the board; an obligation to ensure that the companies hold monthly board meetings; and a condition that [a chartered management accountant director] shall remain as a director.’ (Paragraph 51).

As a result of these condition to section 17 leave, Miles J concluded that there was: (1) no material risk of a repeat; and (2) the risk of a recurrence had been minimised. Miles J said, at paragraph 51:

‘…I conclude that there is no material risk, in light of these extensive and prescriptive conditions, that Mr Rwamba will breach the terms of the proposed order or otherwise misconduct himself as a director of the companies for the duration of the leave order.

The imposition of section 17 leave conditions can have twin benefit. Miles J in Rwamba said, at paragraph 51:

As well as ensuring that the risk to the public of misconduct is minimised, I consider that these steps should be seen as a positive benefit as they will promote enhanced standards of corporate governance.’

Respondent to Application

Another factor will be the position of the relevant respondent to the proceedings, whether neutral or opposing (with or without conditions) any grant of section 17 leave.

The respondent may be the SOS, or CMA or a Specified Regulator, depending on the circumstances. Where a section 17 leave application is made, section 17(5) to (7) governs which ‘body’ shall (amongst other things) appear before the Court.

Where the section 17 leave applicant was disqualified under section 9A (competition disqualification order) or 9B (competition disqualification undertaking) of the CDDA, section 17(6) and (7) will apply. Otherwise, section 17(5) applies.

Section 17(5) of the CDDA reads:

‘(5) On the hearing of an application for leave for the purposes of section 1(1)(a) or 1A(1)(a), the Secretary of State shall appear and call the attention of the court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses.’

Whereas, section 17(6) and (7) of the CDDA read:

‘(6) Subsection (5) does not apply to an application for leave for the purposes of section 1(1)(a) if the application for the disqualification order was made under section 9A.

(7) In such a case and in the case of an application for leave for the purposes of section 9B(4) on the hearing of the application whichever of the Competition and Markets Authority or a specified regulator (within the meaning of section 9E) applied for the order or accepted the undertaking (as the case may be)

(a) must appear and draw the attention of the court to any matters which appear to it or him (as the case may be) to be relevant;

(b) may give evidence or call witnesses.’

By way of illustration, in Sherling, which involved competition law infringements, the section 17 leave application came within section 17(7), as leave was sought under section 9B(4), being leave sought against a competition disqualification undertaking given/accepted under section 9B. Whereas, in Rwamba, the section 17 leave application came within section 17(5), as leave was sought under section 1A(1), being leave sought against a disqualification undertaking given/accepted under section 1A(1).

Whichever relevant respondent is the appropriate respondent to the section 17 leave application, that body:

(1) must (mandatory) appear and must draw/call the attention of the court to any matters which appear/seem to it/him to be relevant; and

(2) may (optional) give evidence or call witnesses (though, in practice, it is not usual for the respondent to call witnesses).

Respondent Position on Section 17 leave application
Whichever of the SOS/CMA/Specified Regulator is the relevant respondent (the ‘Respondent’), he/it may adopt a number of positions on the section 17 leave application. For instance, the Respondent may oppose/resist[10c]the application, or may adopt a neutral position on the application provided the applicant agrees only to seek leave subject to certain conditions. Where the relevant Respondent takes a neutral position on the application, this can be a factor in favour of granting the section 17 leave application. In Sherling, the Deputy High Court Judge held that ‘…it is significant that after careful consideration of this application, including interactive dialogue on the terms on which leave might be granted, the CMA effectively does not oppose the application and invites the court to place reliance on its views.[11](Paragraph 17).

However, whatever position the relevant Respondent adopts [12a], as the Deputy High Court Judge in Sherling said ‘…it is for the court to determine whether the [applicants] should be granted any leave and, if so, on what terms.’ (paragraph 3)

Overall, it might be said that: (i) the respondent's role is less adversarial and more advisory to the court; (ii) the Court adopts a quasi-inquisitorial approach. The desirability of this all happening at a hearing, as made a Scottish Case: Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105[12b]

Exercise of Discretion - The Balancing of Factors For and Against
The Court must balance[13a] the various factors before determining whether or not to grant the section 17 leave application, whether in whole or in part, and whether subject to, and if so, on what conditions.

While each balancing exercise will be unique, involving different factors and weights, it is illustrative to consider the judgments in Rwamba and Sherling (esp. in light of the 'need' factor)

Rwamba

In Rwamba, because ICC Judge Prentis’ erred, ICC Judge Prentis’ decision was flawed and therefore Miles J undertook the task of exercising the discretion afresh (paragraph 45). In undertaking that task, Miles J first considered each companies' 'need' for Mr Rwamba to be a company director. Miles J balanced the fact that[13b]:

(1) allowing Mr Rwamba to act as a director gave the companies 'a better chance of raising funding' (paragraph 48) as they would be 'owner-managed' (paragraph 48); he would assist the companies' efforts to raise external funding, for use, expanding their businesses. While Mr Rwamba's wife (then a director of MOL2 and MOFL) would prime facie be able to undertake this role, she wished to step back from the businesses, and did not wish to lead the efforts to expand;

(2) the companies' expansion into the white collar employee market '...would be assisted ... by having a director with experience in accounting...Mr Rwamba has that experience. [Mr Rwamba's wife] does not.' (paragraph 49) and while '...it might be possible for Mr Rwamba to continue to promote the growth of this part of the business as a consultant,...as this aspect of the business expands, and his own involvement in it grows, it will become more difficult for him to ensure that he does not become involved in the management of the companies...' (paragraph 49) and that '...customers and franchisees ... often wish to come back to Mr Rwamba, who appears to be seen as integral to the business' (paragraph 49). It is not an answer to this to say that '... the companies have been able to trade profitably in the past using his services as a consultant' (paragraph 49). In essence, '...it would assist the companies’ ability to grow their business to have Mr Rwamba as part of their public face as a director.' (paragraph 49);

(3) while '...the companies have done little to seek an outside director, but that is understandable in light of Mr Rwamba’s close historical involvement in the business and the knowledge that has given him.' (paragraph 50) and '...the companies are not large businesses.' (paragraph 50). 

Miles J then considered leave with conditions, and whether the conditions brought down the risk to an acceptable level - namely 'no material risk' of misconduct:

(4) '...there are the extensive and comprehensive conditions annexed to the draft order. These include financial restraints; personal obligations on Mr Rwamba to ensure the filing of tax returns on time; an obligation to instruct independent auditors to report to the board any matters of concern within seven days and a duty to comply with any such concerns; an obligation on Mr Rwamba to provide a board report confirming compliance with the conditions; a duty on him to instruct solicitors to attend monthly board meetings and to ensure that Mr Rwamba has met his compliance reporting obligations, and to report any matters of concern to the board; an obligation to ensure that the companies hold monthly board meetings; and a condition that [an existing chartered accountant director] shall remain as a director. Like the judge I conclude that there is no material risk, in light of these extensive and prescriptive conditions, that Mr Rwamba will breach the terms of the proposed order or otherwise misconduct himself as a director of the companies for the duration of the leave order. As well as ensuring that the risk to the public of misconduct is minimised, I consider that these steps should be seen as a positive benefit as they will promote enhanced standards of corporate governance.' (paragraph 51)

Miles J returned to deterrence, stating:

(5) '...I do not think that a fair minded observer would consider that the grant of leave in the present circumstances would go against the grain of the disqualification regime generally or diminish the seriousness of the 2015 undertaking by which Mr Rwamba was disqualified as a director. The giving of leave is inherent in the disqualification regime, the public is fully protected by the conditions of leave (which have been considered and commented on by the Secretary of State), and there are good reasons for allowing Mr Rwamba to act as a director of the companies.' (paragraph 52).

Sherling

In Sherling, the Deputy High Court Judge undertook the balancing exercise:

(1) He addressed the argument on 'need', from paragraph 25, posing the question: 'Is there a need for the claimants to be directors of these companies or involved in their management?' (paragraph 25). Answering this, he noted, CMA accepted the applicants' position that the companies had a need for the applicants '...to be involved in the management of these companies...' (paragraph 27) and that 'If they are not permitted to be directors, then it is very likely that the companies will fail.' (paragraph 27); before holding that the Court accepted this as correct (paragraph 27):

'The main points that weigh with me are that:

(a) Both the [applicants] are and have been intimately involved with all operational aspects of the business and their continued involvement is key to the companies' continued operation. Only they have the necessary knowledge and experience in what appears to be a shallow leadership team. I mean that in terms of depth rather than in terms of the quality of the leadership team, obviously. They and only they have the confidence of their lenders and creditors and the necessary relationship with key customers and suppliers for continued successful trading;

(b) There are no suitable persons who can take on their role; and

(c) Significant further cash needs to be injected into the business. [The first applicant] has agreed to commit £3.8 million in addition to £2 million invested in April last year into the business. He is not willing to inject that cash unless he and [the second applicant] are directors for fear that the business would fail and the funds would be lost.'

(2) He considered the companies' failure would have wide implications. The Deputy High Court Judge said, at paragraph 28:

'If the companies fail, quite apart from the loss to its shareholders, there will be a loss of 247 jobs, including 142 in an economically deprived area of South Wales, as well as the reduction of competition in a market which only currently has three significant players.'

Drawing (1) and (2) together, the Deputy High Court Judge said, at paragraph 29 'I am satisfied, therefore, that the companies need the claimants as directors for their survival and there is a public interest to be served in their survival.'

(3) under Public Protection and conditions, the Deputy High Court Judge was '...satisfied that with these extensive and continuing requirements, the risk to the public of misconduct is minimised and high standards of corporate governance is promoted.' (paragraph 33). It was a matter of '...whether the public can be adequately protected if an order giving leave to act is made in light of the risk of a repetition of the anti-competitive conduct by the [applicants] which led to the infringement in the first place' (paragraph 30) and that the '...overarching point to make is that I am satisfied...that genuine attempts have been and are being made to ensure future compliance with competition law.' (paragraph 30). As to the compliance programme proposed by the applicants, he noted:

(i) it had been designed by an experienced external consultant and that 'I therefore expect that programme to be a robust one, not one which simply pays lip service to the principles of competition law.' (paragraph 30);

(ii) a competition compliance officer had (already) been appointed for the group for the next five years and, for this purpose, the officer had also been made a director of all the companies for which permission is sought (paragraph 31)

(iii) a solicitor (with relevant business experience) had (already) been appointed as an (independent) non-executive director of the companies (paragraph 31), with '...specific responsibility for overseeing competition law compliance supervising the [applicants'] compliance, carrying out regular searches and spot checks of email, text, and phone call records, and he has undertaken to report to the CMA any relevant concerns.' (paragraph 31). Such supervision and checks, 'tailored to the needs of this specific case', were, in the judge's view, 'an important safeguard.' (paragraph 31)

(iv) a 'formal written whistleblowing policy' (paragraph 32) had been adopted;

(v) each company board was to have three further directors added, each having received training in competition law and each confirming that they understand their duties as directors (paragraph 32);

(vi) each company would have monthly board meeting, which would be minuted (paragraph 32);

(vii) at the request of the group's bank, an independent consultant had been appointed, to monitor and advise. The bank was clear '...if he is uncomfortable with compliance and resigns, HSBC will withdraw its facilities', which would act, the judge said, as '...a further powerful incentive for the [applicants] and the companies to ensure compliance.' (paragraph 32)

(4) He considered the seriousness of the original offence, remarking, at paragraph 33:

'I have taken into account the seriousness of the original offence. It is a serious matter to have committed offences which make one unfit to be a director of a company and it is a serious matter to be disqualified from doing so. There is, nevertheless, a scale of seriousness of the offences for such disqualifications which was recognised in Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 and this offence falls within the minimum bracket of two to five years where though disqualification is mandatory, the case is, in the scale of seriousness of the offences, relatively not very serious.'

(5) he considered deterrence. The Deputy High Court Judge said, at paragraph 34: 'I am satisfied that a fair-minded observer would not regard the granting of leave in this case as undermining the disqualification regime or the seriousness of the disqualification undertakings which the [applicants] have given. There are good reasons, for the companies and the communities in which they operate, to allow the [applicants] to be directors of these companies representing, as they do, one commercial enterprise. The extensive conditions required by the proposed order take into account any concerns which the CMA have had and mean that the public is well protected from future misconduct.' Further, he said that the conditions to be imposed were '...rightly onerous. No one can sensibly think that these [applicants] have got this order easily. The deterrent objective of the regime is not, in my judgment, undermined by the proposed order.' (paragraph 35)

Costs 

The Respondent's attendance at Court/involvement is only required because the disqualified person/applicant seeks section 17 leave. Consequently, the disqualified person/applicant should pay the Respondent's costs. In Collins, Peter Gibson LJ said, at 1014:

'To my mind s. 17(2) shows that the Secretary of State is indeed placed in a special position whereby he has duties to perform on the application. He is not a party to the litigation in any ordinary sense and he is not like any other litigant. The costs incurred by him are a direct consequence of the misconduct of the applicant leading to a disqualification order and of the application for leave which the applicant has chosen to make. I cannot see why it should not be the ordinary consequence that the applicant pays the costs of the Secretary of State on the application.'

Appeals

The decision to accede (in whole or in part) or dismiss the section 17 leave application (as the case maybe) can be appealed (along with any other decision the Court makes). On appealing the substantive decision, Miles J's last general point of guidance was:

'xi) Where a judge has decided to give or decline leave under s.17 an appellate court will only allow an appeal where the judge has taken into account irrelevant factors or failed to take into account relevant ones or acted outside the generous ambit of his or her discretion or has come to a conclusion which is plainly wrong.’

In Collins, after stating that it was '...very doubtful that I would have granted leave', Peter Gibson LJ said, at 1012:

'But the discretion was not mine but that of the judge and it is not open to this court to interfere with the judge's exercise of discretion save on limited and well recognised grounds. I turn therefore to see whether the judge's conclusion was outside ‘the generous ambit within which a reasonable disagreement is possible’ (G v G [1985] 1 WLR 647 at pp. 651–652 per Lord Fraser approving the observations of Asquith LJ in Bellenden v Satterthwaite [1948] 1 All ER 343 at p. 345) or was otherwise plainly wrong ( G v G at p. 652).'[14]

Guidance can be found in: (1) The 2015 Practice Direction, paragraph 32[15]; (2) Insolvency Rules 2016, r.12.59; and (3) The Practice Direction: Insolvency Proceedings [2020] BCC 698, paragraph 17.4.

Sole Trader / Partnership

In Westminster Property (1st Instance) at 361, Lloyd J said:

'...the Act does not prohibit and therefore allows the disqualified person to carry on business as a sole trader, or in partnership for that matter, without the protection of limited liability...'

Conclusion
Ultimately, the question for the Court to determine, on any application for leave in accordance with section 17, is whether, in all the circumstances, it is ‘appropriate’ (or there are ‘proper grounds’ - paragraph 43 of Rwamba) to grant leave in respect to the specific identified company, or companies (respectively), balancing all the relevant factors.

On the one hand, what is ‘appropriate’ being constrained by a requirement not to grant leave ‘too freely’ so as to avoid: (1) undermining the protective and deterrent purposes of a disqualification; and (2) misleading directors as to the gravity of a disqualification.

On the other hand, recognising that leave in an appropriate case may serve the public interest and leave with conditions, properly tailored/calibrated, may promote the overall regime.

Usually, the applicant will need to establish, in relation to each company for which leave is sought, that that company has a ‘need’ for the applicant to be a director. Other factors for the Court to balance, include: (1) nature and seriousness of the conduct that led to the disqualification; an ingredient of which would be, whether the applicant’s acted dishonestly (culpability); (2) the length of the disqualification (reflecting factor (1) but also other then present circumstances); (3) any recognition of earlier misconduct (for instance, an apology); (4) the length of the remaining period of disqualification; (5) maintaining the purpose behind the disqualification regime, including (i) protection of the public from the disqualified person's behaviour (incapacity); and (ii) deterrence, both specific deterrence, directed at the disqualified person and his/her disqualifying behaviour, but also more widely, as general deterrence, directed at all directors, both in relation to the relevant disqualifying behaviour and, generally, in respect to any corporate governance misconduct; (6) solvency of the specific company or companies; (7) availability and likely efficacy of conditions being applied to the section 17 leave; (8) risk of breach of the proposed section 17 conditions, or of wider risks in the management of the companies; and (9) the Respondent's position on the application.

OUTSIDE THE SCOPE OF THIS ARTICLE

Inevitably, an article cannot deal with all aspects of a topic as wide as this one. Topics outside the scope of the article include:

(1) interim leave/permission orders - see Re TLL Realisations [2000] B.C.C. 998; [2000] 2 BCLC 223 (also known as Secretary of State for Trade and Industry v Collins); Re Amaron Ltd (also known as Secretary of State for Trade and Industry v Lubrani) [1998] BCC 264

(2) declaratory relief - see Westminster Property Management Ltd (No.2) (also known as Official Receiver v Stern [2001] EWCA Civ 111 [2002] BCC 937 - a permission to appeal judgment - wherein Chadwick LJ said of the utility of declaratory relief: '...seems to me extremely doubtful' (paragraph 22)).

SIMON HILL © 2021

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.

[1] A couple of points here:

1) the disqualification, where imposed by Court order at least, will be wider than simply prohibiting the disqualified person from acting as a company director. See footnote [3a] for the typical disqualification order wording.

(2) Whether the prohibition extends to being a director of an overseas company, was considered in the permission to appeal case of Re Westminster Property Management Ltd [2001] EWCA Civ 111; [2002] BCC 937 (also known as Official Receiver v Stern (No.2))('Westminster Property (Court of Appeal'). In Westminster Property (Court of Appeal), the Court of Appeal refused the applicant/would be appellant permission to appeal the decision of Lloyd J in [2001] BCC 305, wherein Lloyd J had refused the director's application for leave to act while disqualified in relation to, amongst other companies, six foreign incorporated companies. Westminster was in turn considered by the Deputy High Court Judge in Sherling v Competition and Markets Authority [2021] EWHC 2463 (Ch)(Sherling) and it is convenient simply to refer to Sherling. In Sherling, the section 17 leave applicant (subject to a competition disclosure undertaking i.e. a CDU) sought leave to act as director in respect 9 companies, one of which JMR, was registered outside England and Wales. In Sherling, it was common ground that:

‘...the court has jurisdiction to consider the claimants' application for leave to act in relation to JMR and that the CDUs would otherwise affect each of the claimant's ability to act as a director of JMR. "Company" is defined in section 22(2) of the CDDA and it includes a company that may be wound up under Part V of the Insolvency Act 1986 (unregistered companies - section 22(2)(b)). In Re Westminster Property Management Ltd (No. 2), Official Receiver v Stern [2001] BCC 305, Lloyd J applied the Latreefers test of the three core requirements which must be satisfied for asserting jurisdiction to wind up such a company. Firstly, there must be a sufficient connection to the jurisdiction which may but does not necessarily have to include assets within the jurisdiction. Secondly, there must be a reasonable possibility of benefit to someone applying for a winding up order, and, thirdly, one or more persons interested in the distribution of the assets of the company must be persons over whom the court can exercise a jurisdiction.’ (paragraph 19)

The Deputy High Court Judge continued, at paragraphs 20 to 21:

'There has been a debate between the court and counsel over how easy it is to apply all three requirements of that test, which is designed to be applied in the context of a winding up petition to wind up an unregistered company, to a situation such as the present where it is simply intended to found a jurisdiction to grant leave for a director to act notwithstanding qualification. The difficulty is that there is not a winding up petition, there is not someone applying for a winding up order, there will be no distribution of assets, and it therefore raises a difficult hypothetical question to answer whether the second and third requirements, in particular, are satisfied and I gather that there is some debate amongst academics such as Walters and Davies White QC as to whether that is the correct test to apply.

It is, in the end, not a question which I need to decide in this case. It seems to me that, in essence, the court is being asked to see whether there is some legitimate purpose to be achieved by the court if it were to assert its jurisdiction over a foreign company and if there is, then it has sufficient jurisdiction for the purposes of section 22(2) of the CDDA. However, as I say, it does not arise in this case because I am satisfied that all three of the requirements of the Latreefers test are, in this case, made out.

After setting out JMR's: (1) various transactions within England and Wales; and (2) substantial creditors and debtors in England and Wales, the Deputy High Court Judge the Sherling said, at paragraph 23:

'In these circumstances, it seems to me that JMR has a substantial connection with the jurisdiction through its trading relationship and lending relationship with persons in the jurisdiction. It had assets in the jurisdiction to be administered in the event of a winding up for the benefit of anyone who was interested in such a winding up and it is a wholly-owned subsidiary of a company within the jurisdiction who would be interested in any distribution of JMR's assets. In these circumstances, I accept that I have jurisdiction to grant leave as sought by the claimants in respect of JMR'

[2] The main disqualifying provisions include (a non-exhaustive list):

(1) section 1 - which provides for disqualifications orders ('DDOs')

(2) section 4 - disqualification route for fraud etc., in the course of a winding up; see for example, Re Asegaai Consultants Ltd; Wood v Mistry [2012] EWHC 1899 (Ch) Newey J;

(3) section 6 - disqualification orders against directors of company which has become insolvent, where director’s misconduct makes that person unfit to be concerned in the management of a company. It is this ground that is frequently used.

The matters to which the court is to have regard in determining unfitness are set out in section 12C (as from 1 October 2015; formerly section 9) of, and Sch 1 to, the CDDA.

While the whole of section 12C should be read, the most salient subsection is subsection 12C(4), which reads:

'In making any such determination in relation to a person, the court or the Secretary of State must

(a) in every case, have regard in particular to the matters set out in paragraphs 1 to 4 of Schedule 1;

(b) in a case where the person concerned is or has been a director of a company or overseas company, also have regard in particular to the matters set out in paragraphs 5 to 7 of that Schedule.'

Schedule 1 - Schedule 1 Determining Unfitness etc: Matters to be taken into Account - Section 12C - Matters to be taken into account in all cases

'1 The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement.

2 Where applicable, the extent to which the person was responsible for the causes of a company or overseas company becoming insolvent.

3 The frequency of conduct of the person which falls within paragraph 1 or 2.

4 The nature and extent of any loss or harm caused, or any potential loss or harm which could have been caused, by the person’s conduct in relation to a company or overseas company.

Additional matters to be taken into account where person is or has been a director

5 Any misfeasance or breach of any fiduciary duty by the director in relation to a company or overseas company.

6 Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company.

7 The frequency of conduct of the director which falls within paragraph 5 or 6.

Interpretation

8 Subsections (1A) to (2A) of section 6 apply for the purposes of this Schedule as they apply for the purposes of that section.

9 In this Schedule “director” includes a shadow director.'

For 2 recent cases reviewing section 6 directors disqualifications, see:

(i) Secretary of State for Business, Energy and Industrial Strategy v Rajgor [2021] EWHC 1239 (Ch) a decision of Judge Mithani QC sitting as a Judge of the High Court; and

(ii) Re Keeping Kids [2021] EWHC 175 (Ch)(also known as Official Receiver v Batmanghelidjh)(‘Keeping Kids’) a decision of Falk J;

(4) section 1A - disqualification undertakings (‘DDU’), where (a) the circumstances specified in sections 5A, 7, 8, 8ZC and 8ZE arise; (b) the director offers and the Secretary of State is willing to accept, such a disqualification undertaking;

(5) section 8 - disqualification orders where director’s conduct in relation to the company/ies makes him unfit to be concerned in the management of a company;

(6) section 9A - competition disqualification orders (‘CDO’), where (a) an undertaking which is a company of which he is a director commits a breach of competition law; and (b) his conduct as a director makes him unfit to be concerned in the management of a company;

In Sherling, the Deputy High Court Judge said, at paragraph 8:

‘…an order must be made under section 9A of the CDDA if the director's conduct:

"…viewed cumulatively and taking into account any extenuating circumstances has fallen below the standards of probity and competence appropriate for persons fit to be directors of companies."

(Re Grayan Building Services Ltd [1995] Ch 241 and see also Competition and Markets Authority v Martin [2020] EWHC 1751 (Ch)).’

(7) section 9B - competition disqualification undertakings (‘CDU’), where: (a) an undertaking which is a company of which he is a director has committed or is committing a breach of competition law; and (b) the conduct of the person as a director makes him unfit to be concerned in the management of a company; and the person offers to give a disqualification undertaking; and

(8) section 10 - disqualification where the court has found wrongful trading; see for example: Re Brian D Pierson Contractors Ltd [1999] B.C.C. 26

(9) sections 2 and 5 - for disqualifications linked to the commission of crimes.

Potter LJ in R v Edwards [1998] 2 Cr App R (S) 213 , 215–216, pithily stated:

“The rationale behind the power to disqualify is the protection of the public from the activities of persons who, whether for reasons of dishonesty, or of naivety or incompetence in conjunction with the dishonesty of others, may use or abuse their role and status as a director of a limited company to the detriment of the public.”

As to the length of disqualification, in Re Westmid Packing Services Ltd (also known as Secretary of State for Trade and Industry v Griffiths) [1998] 2 All ER 124, the Court of Appeal (Lord Woolf MR, Waller and Robert Walker LLJ) said, obiter, at 131, 'We also wish to give some general guidance as to what is relevant and admissible evidence for the purpose of determining the length of the disqualification period, and for the purposes of any application under s 17 of the Act.' The guidance involves long passages but it pays to set them out in full. Of particular relevance to the topic of this article - section 17 leave applications - is (i) point (2); (ii) the end of point (4); and (iii) end of point (5); (iv) the quote from Hoffman LJ in Re Grayan Building Services Ltd (in liq) [1995] 1 BCLC 276 in point (6); (v) the end of the In Re Barings plc Sir Richard Scott V-C quote in point (7) 

'(1) It is of the greatest importance that any individual who undertakes the statutory and fiduciary obligations of being a company director should realise that these are inescapable personal responsibilities. The appellants may have been dazzled, manipulated and deceived by [the controlling influence director] but they were in breach of their own duties in allowing this to happen. They can count themselves fortunate to have received the minimum period of disqualification and to have had the benefit of immediate orders under s 17 of the Act.

(2) Where the court knows or expects that an application under s 17 will be made immediately after, or soon after the making of a disqualification order, and the court is minded to grant leave under s 17, that is no reason for deciding to impose the minimum period of disqualification. An order under s 17 gives leave only in respect of one or more specified companies, and may be subject to quite stringent conditions. The power to grant leave under s 17 is irrelevant to determining the proper period of disqualification.

(3) In Re Lo-Line Electric Motors Ltd [1988] 2 All ER 692, [1988] Ch 477 Browne-Wilkinson V-C said that the primary purpose of s 300 of the Companies Act 1985 was to protect the public against the future conduct of companies by persons whose past records as directors of insolvent companies showed them to be a danger to creditors and others. That statement has often been approved by this court. But there is often a considerable time lag between the conduct complained of, its discovery and the disqualification proceedings actually coming to court. We return below (para 9) to what can be done to avoid delay. One result of delay when it does occur is that there are occasions when disqualification must be ordered even though, by reason of the director's recognition of his previous failings and the way he has conducted himself since the conduct complained of, he is in fact no longer a danger to the public at all. In such cases it is no longer necessary for the director to be kept 'off the road' for the protection of the public, but other factors come into play in the wider interests of protecting the public, ie a deterrent element in relation to the director himself and a deterrent element as far as other directors are concerned. Despite the fact that the courts have said disqualification is not a 'punishment', in truth the exercise that is being engaged in is little different from any sentencing exercise. The period of disqualification must reflect the gravity of the offence. It must contain deterrent elements. That is what sentencing is all about, and that is what fixing the appropriate period of the disqualification is all about. What Vinelott J (in Re Pamstock Ltd [1994] 1 BCLC 716 at 737) called 'tunnel vision', ie concentration on the facts of the offence, is necessary when considering whether a director is unfit. In relation to the period of disqualification the facts of the offence are still obviously important but many other factors ought (and in reality do) come into play (see further paras 5 to 7 below).

(4) As will appear hereafter there is much in the judgment of Sir Richard Scott V-C in Re Barings plc, Secretary of State for Trade and Industry v Baker (29 July 1997, unreported) with which we agree, but the following observation may in our view need qualification. Sir Richard Scott V-C said:

'There is in my view no real place for discounts to be allowed to a director who has assisted the court in its disposal of court business by not disputing that which is indisputable. Plea bargains have no place in this jurisdiction.'

In the criminal sentencing context (which is clearly what the Sir Richard Scott V-C had in mind) there is no room for plea bargaining if by that it is meant some form of agreement as to the sentence if a plea is entered. But there can be negotiation as to the acceptability of an admission on a certain basis of fact, and that would seem to be as sensible in this context as in the criminal context. That is indeed already recognised in the Carecraft procedure (see Re Carecraft Construction Co Ltd [1993] 4 All ER 499, [1994] 1 WLR 172). Furthermore in the criminal context very little discount is given if there is an admission of what is 'indisputable', but an admission of what might otherwise have taken a great deal of time and expense to prove surely merits some recognition, provided of course that the starting point correctly reflects the gravity of the conduct. We do not consider that it would send out a wrong message to fix the period of disqualification by starting with an assessment of the correct period to fit the gravity of the conduct, and then allowing for the mitigating factors, in much the same way as a sentencing court would do. It would not, however, be right to allow the question whether a discretion is likely to be exercised under s 17 to come into the calculation at all. That question should be considered separately after a period of disqualification has been fixed.

(5) That leads on to the question of what categories of evidence should be admitted on the three (logically and procedurally) distinct issues: (i) is a director unfit within the meaning of the Act? (ii) if so, how long should be his period of disqualification? and (iii) at what stage (if any) of his disqualification, in respect of what company or companies and on what conditions, should leave be granted under s 17? Here we wish to discourage the belief that there is a complicated, arcane and inflexible code of evidential rules applicable in these cases. In most cases the essential thing will be for the court, with the assistance of the parties, to use common sense and to adopt a practical and flexible approach to case management, so as to confine the evidence to that which is probative (see Re Dawes & Henderson (Agencies) Ltd (in liq), Secretary of State for Trade and Industry v Dawes [1997] 1 BCLC 329). While the director's general reputation may be relevant on questions of the appropriate period of disqualification and leave under s 17 detailed or repetitive evidence should not be allowed.

(6) What matters are relevant to the length of the period of disqualification has been considered (at least in passing) by this court in Re Grayan Building Services Ltd (in liq) [1995] 1 BCLC 276, [1995] Ch 241 and at first instance in Re Dawes & Henderson (Agencies) Ltd (in liq) and in Re Barings plc. In Re Grayan Building Services Ltd (in liq) [1995] 1 BCLC 276 at 285, [1995] Ch 241 at 254 Hoffmann LJ, after citing Re Swift 736 Ltd, said:

'it must be remembered that a disqualified director can always apply for leave under s 17 and the question of whether he has shown himself unlikely to offend again will obviously be highly material to whether he is granted leave or not. It may be relevant by way of mitigation on the length of disqualification, although I note that the guidelines in Re Sevenoaks Stationers (Retail) Ltd [1991] BCLC 325, [1991] Ch 164 are solely by reference to the seriousness of the conduct in question.'

Henry and Neill LJJ agreed. But it is clear from the report in the Re Sevenoaks Stationers (Retail) Ltd that Dillon LJ (with whom Butler-Sloss and Staughton LJJ agreed) was distinguishing between matters which (if admissible) would tend to increase the period of disqualification, and matters of mitigation. Dillon LJ's interlocutory question ([1991] Ch 164 at 170) must be read in the light of counsel's argument. That is clear from a passage in Dillon LJ's judgment ([1991] 3 All ER 578 at 584, [1991] Ch 164 at 177). When it comes to mitigation (and to applications under s 17) the court is not restricted to the facts of the offence.

(7) In Re Dawes & Henderson (Agencies) Ltd (in liq) [1997] 1 BCLC 329 at 340 Blackburne J said:

'Matters of mitigation [the phrase used by Dillon LJ in Re Sevenoaks Stationers (Retail) Ltd [1991] 3 All ER 578 at 331, [1991] Ch 164 at 177] refers to matters relevant to the conduct that has been established.'

That is no doubt so, but does not provide anything like a precise or exhaustive test. In Re Barings plc Sir Richard Scott V-C put it like this

'But once that conclusion has, on the evidence, been arrived at, and the question is what period of disqualification should be imposed, then the issue, subject to the minimum and maximum limits set by Parliament, is one for the discretion of the court. I do not for my part see how it can be said that the evidence relating to the general ability and conduct as a director of the individual in question is necessarily irrelevant to the exercise of this discretion. I do not believe that discretion can be put into a closet from which general evidence of the sort I have described is excluded. Of course, not all evidence of character would be relevant. It would not be relevant in the least whether the director was a good family man or whether he was kind to animals. But evidence of his general conduct in the discharge of the office of director goes to the question of extent to which the public needs protection against his acting in that office. It seems to me that evidence of that character is relevant to be taken into account by the court in exercising its discretion and cannot be excluded as being inadmissible.' So far as there is any substantial difference between Re Dawes & Henderson (Agencies) Ltd (in liq) and Re Barings plc (and it is probably little more than a difference in emphasis), it is the views expressed by the Sir Richard Scott V-C in Re Barings plc which should be followed. A wide variety of matters including the former director's age and state of health, the length of time he has been in jeopardy, whether he has admitted the offence, his general conduct before and after the offence, and the periods of disqualification of his co-directors that may have been ordered by other courts may be relevant and admissible in determining the appropriate period of disqualification. We disagree with the view (that any period of de facto disqualification is irrelevant) expressed by Chadwick J in Re Thorncliffe Finance Ltd, Secretary of State for Trade and Industry v Arif [1997] 1 BCLC 34 at 45. The same matters may be relevant to an application under s 17, together with particulars of the responsibilities which the disqualified director wishes to be allowed to assume.

(8) This court was referred to the decision of Nourse J in Re Civica Investments Ltd [1983] BCLC 456 at 457-458, in which he said:

'It might be thought that [the appropriate period of disqualification] is something which, like the passing of sentence in a criminal case, ought to be dealt with comparatively briefly and without elaborate reasoning. In general I think that that must be the correct approach. More important, as more of these cases come before the court, it is obviously undesirable for the judge to be taken through the facts of previous cases in order to guide him as to the course he should take in the particular case before him. No doubt in this, as in other areas, it is possible that there will emerge a broad and undefined system of tariffs for defaults of varying degrees of blame, but there must come a point when it is no longer either necessary or desirable to go through the facts of previous cases. For my part I think that that point has now been reached.'

That was one of the earliest cases under s 28 of the Companies Act 1976, under which disqualification was not mandatory and there was no minimum period. However Nourse J's approach should be adopted in all cases involving disqualification. Nourse J's expectation about 'a broad and undefined system of tariffs' has been fulfilled by the decision of this court in Re Sevenoaks Stationers (Retail) Ltd [1991] 3 All ER 578, [1991] Ch 164. Nourse J may not have foreseen how (with the advent of new and specialised law reports) large numbers of disqualification cases would continue to be the subject of detailed reports but their existence makes his remarks all the more important. The principles applicable to the court's jurisdiction under the Act are now reasonably clear. The application of those principles to the facts of the particular case is a matter for the trial judge. The citation of cases as to the period of disqualification will, in the great majority of cases, be unnecessary and inappropriate.

(9) We are concerned at the delay in the hearing of these cases. Sometimes delay is unavoidable because of pending criminal proceedings. Sometimes respondents obtain over-indulgent extensions of time for putting in their evidence. All such delays are deplorable, especially as there is no power to suspend a director on an interim basis, even in proceedings alleging serious misconduct. We feel that over-elaboration in the preparation and hearing of these cases and a technical approach as to what evidence is and is not admissible is contributing to delay. What is required and what the court should confine the parties to, is sufficient evidence to enable the court to adopt a broad brush approach. This should be regarded, especially in relation to the period of disqualification, as a jurisdiction which the court should exercise in a summary manner and the court should confine the parties to placing before it the material which is needed to enable it to exercise the jurisdiction in that way.'

[3a] While the form can vary, the wording of the Order will follow the wording of section 1 of the Company Directors Disqualification Act 1986. Subsection 1(1) giving the wording for the disqualification itself; subsection 1(2) providing that, unless the Court otherwise order, the disqualification shall begin 21 days after the date of the order.

A typical order might read:

'(1) Pursuant to sections 1 and [x] of the Company Directors Disqualification Act 1986 as amended the Defendant [Mr/Mrs X]:

(a) shall not be a director of a company, act as a receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) shall not act as an insolvency practitioner

for a period of [x] years

(2) Pursuant to section 1(2) of the Company Directors Disqualification Act 1986 as amended the period of disqualification shall begin at the end of 21 days beginning with the date of this order.'

In R v Ward [2002] BCC 953 (R v Ward), the Court of Appeal said, at paragraph 27:

'trial judges or justices who may be called upon to exercise their powers of disqualification under s. 1...should make clear that their order under s. 1 applies to all the categories which are identified in s. 1 as amended.'

Building on this:

(1) in R v Cole [1998] BCC 87, the Crown Court judge had picked and chosen between paragraphs (a), (b), (c) and (d) in imposing a disqualification under section 1. The Court of Appeal held that section 1 envisaged only one disqualification, with a number of different consequences and not a number of different categories of disqualification. That is apparent from the judgment of McCowan LJ at p. 92B;

(2) the prohibition in the order cannot be limited to the holding of a directorship in a public company; it must be in relation to all companies. In R v Ward (a case relating to section 1 of the CDDA), the Court of Appeal said, at paragraph 30:

'...there is no jurisdiction to limit a disqualification order made under the 1986 Act, to the holding of the directorships in a public company. A disqualification order made under s. 1 must apply to the holding of directorships in any company.'

In R v Goodman [1993] 2 All ER 789, Staughton LJ (giving the judgment of the Court) said, at 793:

'We, for our part, cannot see anything in the 1986 Act which enables a judge to make a disqualification order in relation to one class of company, that is to say those whose shares are publicly traded, but not in relation to another class of company....[counsel for Mr Goodman] is unable to point to a section in the 1986 Act which would enable us to make a general exception of the kind suggested by him, even if we were minded to do so.

In R. v Bramley [2004] EWCA Crim 3319, the Court of Appeal (Criminal Division) heard a (successful) appeal against a Crown Court judge purporting to impose a disqualification order upon a defendant, such order excluding from its scope, 4 named companies. As the Crown Court had no winding-up jurisdiction, the exclusions could not be characterised as elements of section 17 leave being granted at the same time as the disqualification. The Court of Appeal said, at paragraph 17, prosecuting counsel should have '...advised the judge that his powers were “all or nothing” so far as qualification was concerned...'

(3) Where an order is made under s. 1 of CDDA which is defective, in that it omits some of the matters in s. 1(1)(a)–(d), it nevertheless remains a valid order, capable of rectification under the slip rule. But such a defective order is, in any event, an effective disqualification order. In Official Receiver v Hannan [1997] BCC 644, a section 6 disqualification case, Morritt LJ said, 652–653:

‘…once the judge had concluded that Mr Hannan was unfit to be concerned in the management of a company he was obliged by statute to impose a disqualification order as defined in s. 1(1). Thus that result must, in law, be treated as his intention. If, contrary to my conclusion on the first point, his order did not achieve that result because of the omission of the other two capacities then that omission must be treated as accidental and may be corrected under [RSC] O. 20, r. 11. Alternatively if, as I have held on the first point, the incomplete order is nonetheless a disqualification order there is still an accidental omission, for the intention to be ascribed to the judge must be to achieve a disqualification order which is both valid and complete.’ (See R v Ward [2002] BCC 953, paragraph 20 onwards)

[3b]In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid noted, at paragraph 7:

'...it is not possible to give an undertaking subject to exceptions. If a person wishes, at the time of being made subject to a disqualification order, or giving an undertaking to continue to act as a director for one or more companies, it is necessary to seek the leave of the court under s.17 at the same time as, or after, the order is made or the undertaking given. There is therefore no inherent incompatibility between the undertaking having been given, and the present application.'

[4a] Section 11 of the Company Directors Disqualification Act 1986 is entitled 'Undischarged bankrupts' - a rather incomplete title - and subsections (1) and (2) read:

'(1) It is an offence for a person to act as director of a company or directly or indirectly to take part in or be concerned in the promotion, formation or management of a company, without the leave of the court, at a time when any of the circumstances mentioned in subsection (2) apply to the person.

(2) The circumstances are–

(a) the person is an undischarged bankrupt–

(i) in England and Wales or Scotland, or

(ii) in Northern Ireland,

(b) a bankruptcy restrictions order or undertaking is in force in respect of the person under–

(i) the Bankruptcy (Scotland) Act 1985 or 2016 or the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989,

(c) a debt relief restrictions order or undertaking is in force in respect of the person under–

(i) the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989,

(d) a moratorium period under a debt relief order applies in relation to the person under–

(i) the Insolvency Act 1986, or

(ii) the Insolvency (Northern Ireland) Order 1989.'

Also of particular note, is subsection (3), which reads:

'In England and Wales, the leave of the court shall not be given unless notice of intention to apply for it has been served on the official receiver; and it is the latter’s duty, if he is of opinion that it is contrary to the public interest that the application should be granted, to attend on the hearing of the application and oppose it.'

[4b] The prohibitions will be set out in the disqualification instrument. For Court orders, see Footnote 3 above, for an example of a typical order.

The main statutory prohibitions themselves can be found:

(1) for disqualification orders - within section 1; and

(2) for disqualification undertakings - within section 1A(a);

(3) for undischarged bankrupt, or other section 11(2) circumstance existing - section 11(1)

(4) for competition disqualification orders, being a subset of disqualifications orders (section 9A(1)), within section 1;

(5) for competition disqualification undertakings - within section 9B(3);

By way example, section 1 of the Company Directors Disqualification Act 1986 is entitled ‘Disqualification orders: general’ and subsection 1 set out the disqualification order:

‘(1) In the circumstances specified below in this Act a court may, and under sections 6 and 9A shall, make against a person a disqualification order, that is to say an order that for a period specified in the order

(a) he shall not be a director of a company, act as receiver of a company’s property or in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of a company unless (in each case) he has the leave of the court, and

(b) he shall not act as an insolvency practitioner.'

Section 1(2) of the Company Directors Disqualification Act 1986 sets out the maximum and minimum disqualification periods:

‘(2) In each section of this Act which gives to a court power or, as the case may be, imposes on it the duty to make a disqualification order there is specified the maximum (and, in sections 6 and 8ZA, the minimum) period of disqualification which may or (as the case may be) must be imposed by means of the order and, unless the court otherwise orders, the period of disqualification so imposed shall begin at the end of the period of 21 days beginning with the date of the order.’

A few points in relation to violating the prohibitions:

(i) Seemingly, the offences, for violating, are strict liability; by analogy with R. v Brockley [1994] BCC 131, a undischarged bankrupt case, considering the Lord Scarman in Gammon (Hong Kong) Ltd & Ors v A-G of Hong Kong [1985] AC 1 distillation of the law, at 14B. In Mithani  - Directors Disqualification - Division VI - VI-12 (Issue 82) [4], the authors considered R. v Brockley was authority for this proposition.

(ii) the 'Defence of innocent intention' provided by section 352 of the Insolvency Act 1986 does not apply to CDDA offences. Section 352 reads:

'Where in the case of an offence under any provision of this Chapter it is stated that this section applies, a person is not guilty of the offence if he proves that, at the time of the conduct constituting the offence, he had no intent to defraud or to conceal the state of his affairs.'

(iii) the disqualified person can be disqualified again;

(iv) a confiscation order can be made against the disqualified person - R v Seager [2010] 1 WLR 815 and Hill v Department for Business, Innovation and Skills [2012] BCC 151

Milman helpfully summarised the position in an article (Co. L.N. 2013, 331, at 4), under a subheading 'Sanctions for breaching a disqualification' as:

'The sanctions are quite muscular.

Firstly, under CDDA 1986 s.13 a breach of a disqualification constitutes a crime. Any conviction will have the potential to engage the Proceeds of Crime Act 2002 and may lead to the recovery of profits earned from holding the illicit directorship during the period of contravention: R. v Seager [2009] EWCA Crim 1303; [2010] 1 W.L.R. 815; [2012] B.C.C. 124. However the court is required to assess the actual benefit obtained by the defendant and cannot simply base its calculations on the turnover or profits of the company in the period in question. This conclusion was followed in Hill v Department for Business, Information and Skills [2011] EWHC 3436 (Admin); [2012] B.C.C. 151.

The financial penalties do not end there. So under the CDDA 1986 s.15 there is the risk of personal liability for relevant corporate debts incurred during the period in which the disqualification was in force. In IRC v McEntaggart [2007] B.C.C. 260, where a bankrupt individual continued to act as a director, the court ruled that it was no excuse that a bankruptcy order was later annulled. The nature of liability under s.15, which is joint and several in nature, was further reviewed in Re Prestige Grindings Ltd [2005] EWHC 3076 (Ch); [2006] B.C.C. 421. Sanctions may also be imposed upon a third party for assisting another to contravene a disqualification by willingly acting as a director on the instructions of a disqualified person (s.15(1)(b)). By virtue of s.15(5) a person is presumed to act willingly unless the contrary is proved.

All disqualifications, whether effected by court order or via undertaking, should be listed in a public register established pursuant to s.18. The public are encouraged to blow the whistle on directors who flout a disqualification.'

[4c] While the label 'section 17 leave' is used, for convenience, throughout this article, it is right to note leave is granted under the main relevant statutory provision. In Re Morija Plc [2007] EWHC 3055 (Ch), Sir Andrew Park said, at paragraph 41:

'...s.17 of CDDA contains provisions for the mechanics of the process when a court is asked to grant leave. If leave is granted it is, in my view, strictly given, not under s.17 , but under s.1(1)(a) if the disqualification arises by reason of an order or under s.1A(1)(a) if the disqualification arises by virtue of an undertaking.'

[5a] The statutory basis for the disqualification dictates which Court any application for leave must be made to. Subsections 17(1) to (4) of the Company Directors Disqualification Act 1986, provide:

‘(1) Where a person is subject to a disqualification order made by a court having jurisdiction to wind up companies, any application for leave for the purposes of section 1(1)(a) shall be made to that court.

(2) Where

(a) a person is subject to a disqualification order made under section 2 by a court other than a court having jurisdiction to wind up companies, or

(b) a person is subject to a disqualification order made under section 5, any application for leave for the purposes of section 1(1)(a) shall be made to any court which, when the order was made, had jurisdiction to wind up the company (or, if there is more than one such company, any of the companies) to which the offence (or any of the offences) in question related.

(3) Where a person is subject to a disqualification undertaking accepted at any time under section 5A, 7 or 8, any application for leave for the purposes of section 1A(1) (a) shall be made to any court to which, if the Secretary of State had applied for a disqualification order under the section in question at that time, his application could have been made.

(3ZA) Where a person is subject to a disqualification undertaking accepted at any time under section 8ZC, any application for leave for the purposes of section 1A(1)(a) must be made to any court to which, if the Secretary of State had applied for a disqualification order under section 8ZA at that time, that application could have been made.

(3ZB) Where a person is subject to a disqualification undertaking accepted at any time under section 8ZE, any application for leave for the purposes of section 1A(1)(a) must be made to the High Court or, in Scotland, the Court of Session.

(3A) Where a person is subject to a disqualification undertaking accepted at any time under section 9B any application for leave for the purposes of section 9B(4) must be made to the High Court or (in Scotland) the Court of Session.

(4) But where a person is subject to two or more disqualification orders or undertakings (or to one or more disqualification orders and to one or more disqualification undertakings), any application for leave for the purposes of section 1(1)(a), 1A(1)(a) or 9B(4) shall be made to any court to which any such application relating to the latest order to be made, or undertaking to be accepted, could be made.’

[5b] Various pieces of guidance as to the evidence expected with a section 17 leave application. For instance:

Peter Gibson LJ in Secretary of State for Trade and Industry v Collins [2000] BCC 998 said:

(1) 'The application for leave should be supported by clear evidence as to the precise role which the applicant would play in the company or companies in question and up-to-date and adequate information about that company or those companies.' (at 1010)

(2) '[the applicant] set out in his affidavit evidence in some detail his role in each of the companies in the Fairmont group. That role was not limited to purely accountancy-based work but he was required to be involved in the management of the various companies and he had a limited decision-making discretion. He also gave details of the financial position of each company.' (1009)

(3) 'No doubt the applicant will want to inform the court, if it be the case, that he has learnt his lesson,' (1009)

In terms of contents of the application, in Re Morija Plc [2007] EWHC 3055 (Ch), Sir Andrew Park heard an appeal, within which, the issue arose whether or not a disqualified person could be allowed to dispute the correctness of a particular fact that he had accepted by signing the disqualification undertaking. The fact being: when the disqualified person discovered someone in his business had committed a fraud on a bank. At first instance, the Registrar decided that the disqualified person could not do that, and Sir Andrew Park said, at paragraph 46 that '...he was absolutely right.', before explaining:

'[The disqualified person] was no more entitled on his leave application to reopen the issue of when he discovered about the letters of credit fraud than the Secretary of State would have been entitled to reopen the question of whether [the disqualified person] had known about the fraud all along, instead of only finding out about it after his return from holiday.'

Where the section 17 leave applicant has, impermissibly, attempted to adduce evidence to prove a fact contrary to the admissions with the directors disqualification undertaking, the relevance of this may be an issue. It maybe that the court takes the same view of such an attempt, as Sir Andrew Park did in Re Morija Plc [2007] EWHC 3055 (Ch). Sir Andrew Park said, at paragraph 55 '...I accept that that factor by itself ought not to have had any significant impact on whether leave should have been given.' At paragraph 48, he said:

'I agree that the Registrar was justified in being critical of [the disqualified person] for including it in his affidavits. But I cannot see that the fact that [the disqualified person] did attempt to adduce the evidence assists one way or the other on whether he did or did not appreciate the seriousness of his misconduct as a director of Morija, or on whether there would be a continuing risk to the public if he was given leave to continue as a director of [2 companies]. It could be that his legal advisers ought to have advised him that he should not seek to controvert any aspect of the admissions to which he had attached his signature in the disqualification undertaking. But if they did not (as seems possible...) I do not see that his application for leave is thereby rendered any weaker than it would have been if his affidavits had not raised the time of discovery issue. It is worth repeating that, in the skeleton argument of counsel for [the disqualified person] for the hearing before the Registrar, no reliance is placed on the issue in support of [the disqualified person]'s application to be granted leave.'

ICCJ Jones in Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424 ('Property Group'), said, at paragraph 107(a):

'As to resources, an applicant for permission when addressing the policy of protection for the public must normally commit resources for the purposes of: (i) identifying the findings of fact which resulted in disqualification; (ii) satisfying the court (potentially but not necessarily by proposing safeguards) that the removal of public protection through permission will not place the public at risk; and (iii) convincing the court that the policies of deterrence and/or maintenance/improvement of standards will not be damaged, at least not to an extent justifying the refusal of permission.'

Later, ICCJ Jones in Property Group said, just after starting 'As mentioned at paragraph 107(a) above, those are precisely the types of factor addressed when deciding whether to grant leave' (paragraph 108(c)), at paragraph 108(b):

'For example, if the section 6 CDDA misconduct was wrongful trading, whether that company is financially sound, its existing management and practices and/or whether there are others who will ensure continued compliance with the norms of corporate governance. If the misconduct involved competition law, whether that company is also infringing or whether there are safeguards in place to ensure infringement will not occur.

[5c] In Secretary of State for Trade and Industry v Collins [2000] B.C.C. 998; [2000] 2 BCLC 223, Peter Gibson LJ (with whom Judge LJ and Ferris J agreed) said, at 1010:

'In my opinion it is highly desirable that a person who faces the possibility of a disqualification order but who in the event of such an order wishes to seek leave should make that application early enough so that the same judge should consider both the application for disqualification and the application for leave (see Re Dicetrade Ltd [1994] BCC 371 at p. 373).'

And Judge LJ (with whom Ferris J agreed) said, at 1016:

'Justice is best served by simultaneous consideration of the disqualification order, and its length, and any appropriate relief from its full consequences...Sensible case management arrangements should ensure that [the judge's] views will be known to the parties and the substantive hearing prepared accordingly.'

The stages are, of course, separate: determining the issue of disqualification first, then determining the issue of whether or not to grant section 17 leave. The fact that section 17 leave might be granted, is irrelevant in relation to setting the length of the disqualification - see Re Westmid Packing Services Ltd (also known as Secretary of State for Trade and Industry v Griffiths) [1998] 2 All ER 124, at 131, paragraph (2) - quoted elsewhere in this article.

Explaining his approach, Judge LJ said, at 1015:

'An application for leave to mitigate the normal consequences of a disqualification order was contemplated before and during the period leading up to the hearing of the disqualification proceedings. Therefore questions of disqualification and leave should have been heard and decided together at a single hearing by the same judge. Although some applicants may hope to derive a tactical advantage from isolating the case for disqualification (which will inevitably highlight their misconduct) from their application for leave (which will tend to focus on the mitigation) the interests of justice overall are more likely to be served if both aspects of the case are investigated together. In any event separate proceedings also involve duplication and wasted resources.

In future, faced with an application for leave which was plainly in contemplation at the time of the disqualification proceedings, the judge should closely examine the explanations which purport to justify a second hearing. Quite apart from any consequential order for costs, unless satisfied that the delay arose for genuine reasons, and that a single hearing was truly impractical, he would be entitled to approach the evidence in support of the application for leave with a proper degree of healthy scepticism. Ultimately, of course, the responsibility for the eventual decision depends on his analysis of all the relevant facts of an individual case.

Assuming that separate proceedings are justifiably brought, and equally where the application for leave is made in the light of developments after the disqualification order has taken effect, the parties should not be permitted to relitigate the factual issues which led to the disqualification. In brief, the leave application is not and should not be treated as a rehearing, and certainly not as an appeal from the disqualification order. Second guessing the facts which gave rise to the Carecraft statement, or the judgment following disputed facts, is impermissible.

...

Where the application for leave arises at a later stage the facts agreed in the Carecraft statement, or where any facts were disputed, the court's judgment, should not be open to further investigation, save to the extent that the judge conducting the leave application personally requires it for the purposes of amplification or clarification. Sensible case management arrangements should ensure that his views will be known to the parties and the substantive hearing prepared accordingly.'

See also Secretary of State for Trade and Industry v Worth [1994] 2 BCLC 113

[6a] Interestingly, a similar approach is taken in respect to section 216(3) of the Insolvency Act 1986 ('Restriction on re-use of company names') leave. In Re Lightning Electrical Contractors Ltd [1996] BCC 950, E W Hamilton QC (sitting as a deputy judge of the Chancery Division) heard a section 216(3) application for leave to act as a director of a number of companies (or directly or indirectly, be concerned or take part in the promotion, formation or management of the companies), each having a similar name to a company (which the applicant was a director of) now in insolvent liquidation. The deputy judge granted leave in respect to one particular company, and then turned to the second part of the application, namely, for leave in respect to 5 dormant companies. At 956, the deputy judge said: '...in my judgment, in applying s. 216 the court is concerned with ensuring that there is no abuse of the phoenix variety, and in the absence of any suggestion of a misuse of the name or assets of the old company I see no reason why permission should not be granted under s. 216 in respect of dormant companies, provided that they are specified and that there is not simply a blanket permission to use the prohibited name in respect of any company to be formed in the future.'

[6b] To add to this, the Deputy High Court Judge in Sherling also said, at paragraphs 25 and 27:

'...whilst there are a number of corporate entities within the trading group, the reality is that they represent, to use the claimant's words, a single "end to end business" such that in respect of the seven trading companies for which both claimants seek leave, it would be extremely difficult to seek to compartmentalise their business activities in a way in which a de jure director of only one or some of them would not also be inadvertently acting as a de facto director of another.

...

...there is a need for both the claimants to be involved in the management of these companies and therefore, because of the difficulties of compartmentalisation referred to above, that means that they should be directors of these companies.'

[6c] In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid noted, at paragraph 1, that the original section 17 leave application had been in respect to 13 companies, '...but, during the course of proceedings, that has been whittled down to the following six companies...'

Later, Sheriff P J Braid said, at paragraph 23:

'As counsel conceded, this is a relatively unusual application in as much as leave is sought in respect of six companies. At first sight, it would drive a coach and four through any disqualification (or undertaking) were wholesale leave to be granted to enable the subject of a disqualification or the giver of an undertaking to continue to act as director of a large number of companies. Nonetheless, as counsel submitted, the 1986 Act makes clear that any disqualification operates merely so as to prevent a person from acting as a director without leave and there is no option, when an order is made or an undertaking given, to exclude one or more companies from that order or undertaking. The only means by which a person may continue to act as a director is to seek leave of the court, and for leave to be granted.'

[7a] In Rwamba v Secretary of State for Business, Energy and Industrial Strategy [2021] BCC 184, the authorities referred to Miles J, and from which he drew the general guidance set out in paragraph 34 of his judgment, included:

‘Re Tech Textiles Ltd [1998] 1 B.C.L.C. 259 ; Re Dawes & Henderson (Agencies) Ltd (in liq.) (No.2) [2000] B.C.C. 204 ; Re TTL Realisations Ltd [2000] 2 BCLC 223 ; Secretary of State for Trade and Industry v Baker ; Re Barings Plc [2000] 1 W.L.R. 634; [1999] B.C.C. 960 ; Re Morija Plc [2007] EWHC 3055 (Ch) ; Haughey v Secretary of State for Business, Energy and Industrial Strategy [2018] EWHC 3566 (Ch); [2019] B.C.C. 483.’

Whether the following was what Miles J in Rwamba use to formulate his general guidance, is unknown, but here are some illuminating extracts from the authorities:

[1] In Re Tech Textiles Ltd [1998] 1 BCLC 259, at 267e, Arden J said:

‘Leave … in my view is not to be too freely given. Legislative policy requires the disqualification of unfit directors to minimise the risk of harm to the public, and the courts must not by granting leave prevent the achievement of this policy objective. Nor would the court wish anyone dealing with the director to be misled as to the gravity with which it views the order that has been made.’

[2] In Secretary of State for Trade and Industry v Baker; Re Barings Plc [2000] 1 W.L.R. 634; [1999] B.C.C. 960, Sir Richard Scott VC said, at 637:

'...section 17 leave should not be granted in circumstances in which the effect of its grant would be to undermine the purpose of the disqualification order. As a general principle, and apart from any authority, I think that must be right. The improprieties which have led to and required the making of a disqualification order must be kept clearly in mind when considering whether a grant of section 17 leave should be made.

If the conduct of a director has been tainted by any dishonesty, if the company in question has been allowed to continue trading while obviously hopelessly insolvent, if a director has been withdrawing from a struggling company excessive amounts by way of remuneration in anticipation of the company's collapse and, in effect, living off the company's creditors, and if a disqualification order were then made, these circumstances would loom very large on any section 17 application. The court would, I am sure, have in mind the need to protect the public from any repetition of the conduct in question. That conduct, and the protection of the public from it, would have been the major factor requiring the imposition of the disqualification.'

In the event, Sir Richard Scott VC said the case before him was not of that character (at 637) - it was '...not a case in which the disqualification order was made necessary by a need to keep Mr. Norris out of the boardroom in order to protect the public from dishonesty or impropriety.' (at 637)

On the issue of whether 'need' (whether the named company's need for the applicant's services, or the applicant's need to work in the Company's management) is essential to the success of any section 17 leave application, Sir Richard Scott VC said, at 640:

'If [the disqualified person] were not to be granted the section 17 leave that he seeks, he would have to relinquish his directorships of [2 named companies] but would remain available, in his consultancy business, to be instructed to give advice on any issue or issues on which his advice was desired. There is no reason to suppose that [the disqualified person] will not be able to make a success of his consultancy business. The talents and expertise that [directors of the 2 named companies] plainly admire would continue to be available to the public whether or not [the disqualified person] obtains the section 17 leave he is seeking. It seems clear, therefore, first, that [the disqualified person] does not need section 17 leave in order to continue earning his living and, second, that [2 named companies] do not need to have [the disqualified person] as a member of their respective boards in order to continue to be able to have the benefit of his advice on their respective management problems.

Is that a sufficient reason why section 17 leave should be withheld? In my judgment, it is not. If [the disqualified person's] advice on management and related issues is wanted by these companies, and it obviously is, and if putting him on the board in a nonexecutive role is the most sensible way of making sure that that advice is easily obtainable, and [directors of the 2 named companies] have formed the opinion that it is, what public interest requires that leave be withheld? The protection of the public does not require it. It might do in some cases, but not in this.'

On a more general level, Richard Scott VC said, at 640-641:

'The starting point in this application, as in all section 17 applications for leave, is that the applicant has been disqualified and that the period of disqualification is still current. The reasons for granting leave, if leave is to be granted, must be consistent with the reasons why the disqualification was imposed in the first place. In In re Tech Textiles Ltd. [1998] 1 B.C.L.C. 259, Arden J. said at p. 267:

“As respects the exercise of the discretion to grant leave there is no express guidance in the statute. It is clearly relevant to the exercise of this discretion to consider the end which disqualification seeks to achieve and the reasons why that end is thought desirable.”

I respectfully agree. Arden J. went on to ask: “To what factors should the court have regard when it is considering the grant of leave?” She answered her question by saying:

“The courts have on many occasions made clear that they will have regard to two factors in particular: (1) the protection of the public; and (2) the need for the applicant to be a director.”

In In re Gibson Davies Ltd. [1995] B.C.C. 11 Sir Mervyn Davies said, at p. 14:

“On an application under section 17…the court must be satisfied that there is a need to make the order and, more importantly, that if the order is made the public will remain adequately protected.”

In In re Amaron Ltd. (unreported), 25 April 1997, Neuberger J. addressed the question of whether the applicant had established “need” and held he had not. This was a case in which the applicant had allowed the company to trade while insolvent and to retain money owed to creditors in order to fund continued trading. The need to ensure protection of the public from the management techniques of that character would, in my view, have made it virtually impossible for a section 17 application to have succeeded.

It seems to me that the importance of protecting the public from the conduct that led to the disqualification order and the need that the applicant should be able to act as director of a particular company must be kept in balance with one another. The court in considering whether or not to grant leave should, in particular, pay attention to the nature of the defects in company management that led to the disqualification order and ask itself whether, if leave were granted, a situation might arise in which there would be a risk of recurrence of those defects. In a case like the present there seems to me to be virtually no risk at all of such a recurrence.'

On the facts, the disqualified person would be taking up 2 non-executive directorships. So, Richard Scott VC concluded, '[i]n neither case does his directorship carry with it any executive responsibilities at all.' (at 641)

Later, he said, at 641:

'It is, of course, important that the seriousness of disqualification orders should be maintained. Section 17 leave should never be granted without careful consideration and I bear in mind that one of the purposes of disqualification orders is to promote “the parliamentary intention to improve managerial safeguards and standards for the long-term good of employees, creditors and investors…:” In re Grayan Building Services Ltd. [1995] Ch. 241 , 257, per Henry L.J.'

On the facts, leave was granted for the disqualified person to be a director of 3 companies (1 was a subsidary of the other) on 3 conditions:
(1) he remain a non-executive director;
(2) he does not enter into any contract of employment;
(3) his directorship remains unpaid.

[3] In Re Morija Plc [2007] EWHC 3055 (Ch), Sir Andrew Park said, under the subheading 'Leave applications: the principles to be followed', 'I will not say much in this part of my judgment, since the principles are well-established and not disputed on the appeal to me.' before summarising the law as follows, at paragraphs 32 to 35, and 37:

'It is accepted that there is no difference between applications for leave in cases where a disqualification order has been made under the CDDA s.1 and applications in cases where a disqualification undertaking has been given under s.1A. Sir Richard Scott V-C pointed out in re Dawes & Henderson Ltd [2000] BCC 204 at 211, that the statute puts no fetters on the discretion to grant leave and attaches no conditions. Nevertheless some broad principles have emerged from cases over the years.

The purpose of a disqualification order or undertaking is not to punish the director for his misconduct. Rather it is to protect the public. Partly it does that by restricting the ability of the person concerned to expose the public to the risk of loss from further misconduct on his part. It is worth adding that the possible further misconduct does not have to be of the same nature as that which has led to the disqualification: see observations of Lloyd J in the Stern case, re Westminster Property Management Ltd (No2) [2001] BCC 305 at 359 to 360. The observations were cited (appropriately so, in my judgment) by Registrar Jaques in the present case. Partly a disqualification order or undertaking achieves its purpose of protecting the public by deterring other directors from misconduct which might lead to disqualification proceedings against them. It also seems to me that the existence of the disqualification jurisdiction can have a beneficial effect in the form of maintaining and improving standards of integrity on the part of businessmen who become directors of companies.

Where a leave application is made the court has a balancing process to undertake. In favour of a grant of leave is the ‘need’ criterion: the need of the disqualified director to earn a living, and (a different matter, and usually more important) the need of some other person, typically another company, to have his services. Against the grant of leave may be the factors which I mentioned in the foregoing paragraph as purposes which the legislation is intended to serve: protecting the public by, to use a familiar metaphor drawn from another kind of disqualification, keeping off the road a person whose past conduct has fallen short of the standards to be expected; deterring other directors from similar misconduct; and maintaining and improving standards of integrity.

In the balancing process the degree of seriousness of the misconduct on the part of the disqualified person who is applying for leave is relevant. The relevance seems to me not to rest on the notion that, if a person's misconduct has been serious enough, a refusal of leave serves him right. Rather the point is in part that, in the case of a person who has misconducted himself seriously in the past, the risk to the public of him misconducting himself again if he is granted leave is greater than would exist in the case of a person whose misconduct was less serious. A different aspect of the same point is that, if a disqualified director whose conduct has been significantly bad is seen by others to have been granted leave by the court to continue as a director of another company, the deterrent effect on other directors will be weakened.

...

...the Registrar continued:

“On the basis of that assumption [that any need requirement was satisfied] I, therefore, proceed to consider the twin objectives of the disqualification regime, the protection of the public and the deterrent effect of a disqualification order or undertaking.”

I comment at this point that the Registrar correctly identified the principal factors which a court should evaluate when considering an application for leave: need, which is likely to point in one direction, and the protection of the public, which is likely to point in the other direction.

Though not a case Miles J expressly listed, in Re Westminster Property Management Ltd (No.2) (also known as: Official Receiver v Stern (No.2) [2001] B.C.C. 305, Lloyds J said, at 364:

'It seems to me that there would be a substantial onus on [the disqualified person] in the circumstances of this case to demonstrate that he ought to be granted leave for reasons of substantial need on the part of the particular corporate entity and that there was a very sure system to make sure that the public is protected against any possibility of suffering from any possible misconduct on his part. I am not satisfied of any of those matters and accordingly I refuse [the disqualified person's] application.'

In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid said, at paragraph 24:

'...in deciding whether to grant leave, the court has an unfettered discretion. Relevant in the exercise of that discretion are: the circumstances which led to the disqualification; the extent to which there is the need, be that of the person making the application, a company or employees, for the applicant to continue as director; and, last but not least the need to protect the public from a repetition of the conduct which led to the disqualification. The court must then carry out a balancing exercise.'

[7b] In Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424, ICCJ Jones in paragraphs 110(e) and (f) said:

'The aims of disqualification under sections 6 and 9A of the CDDA to justify its Article 8 restriction are: (i) to protect the public from misconduct, (ii) to provide a deterrence both specifically for the individual concerned and generally for all who act as directors and (iii) to maintain/improve the standards of corporate management.

It is established law that each is a legitimate aim capable of justifying the restriction a disqualification order imposes (see DC, HS and AD v United Kingdom [2000] BCC 710 at 717, or in WGS and MSLS v United Kingdom [2000] BCC 719 at 726). Subject to the issue of proportionality, the CDDA's use of a disqualification order to achieve those legitimate aims is lawful and necessary.'

[8a] In Rwamba v Secretary of State for Business, Energy and Industrial Strategy [2021] BCC 184 (‘Rwamba’), Miles J said, at paragraph 6, ’The factual background to the application may be taken from the full and clear history found in the first judgment’, before quoting ICCJ Prentis’ first judgment, paragraphs 5 to 20 and 32 to 43 inclusive. The neutral citation for ICC Judge Prentis’ first judgment, handed down 17 October 2019, is [2019] EWHC 2669 (Ch).

Condensing the convoluted facts down, it might be summarised:

On about 17 November 2009, the applicant accepted (i.e. gave, in agreement with the SOS) a first disqualification undertaking (‘the 2009 Undertaking’), to last 4 years (to 17 November 2013) for, Miles J gleaned, causing a company (Eulink), between 2003 and 2007, to ‘…to make investments totalling £525,000 to the detriment of Her Majesty’s Revenue & Customs’ (paragraph 8).

On 30 November 2019, the applicant applied under section 17 for permission to remain a director of Match Options Limited (‘MOL1’). Seemingly, interim orders were granted before, on 18 June 2010, the applicant’s application for section 17 leave was granted, on 11 conditions (the ‘June 2010 Permission’).

Condition 6.2 was that the applicant ‘shall procure that [MOL1] … files returns due to HM Revenue and Customs on time, and makes payments due to HM Revenue and Customs in accordance with the schedule of repayment set out in the letter … to HM Revenue and Customs dated 14 January 2010 and makes all other payments due to HM Revenue and Customs on time’.

On 11 October 2012, MOL1 entered administration (paragraph 14), and liquidation on 10 April 2013.

The applicant accepted that he breached the June 2010 Permission.

On 22 October 2012, MOL1’s business and assets were sold to MOL2. But the applicant did not join MOL2 board of directors. Following the 2009 Undertaking lapsing on 17 November 2013, the applicant was director of MOFL (as it later become known as) from 23 December 2013 to 15 July 2014.

On 28 May 2015, the applicant was disqualified again, under the CDDA, pursuant to a disqualification undertaking (the ‘2015 Undertaking’). The period this time was 6 years. The applicant accepted/gave the 2015 Undertaking because he accepted that, from 7 August 2010, he had breached the terms of the June 2010 Permission ‘…and as a result acted as a director of [MOL1] whilst I knew or ought to have known that I was disqualified from doing so…’ (paragraph 20). His breaches related to procuring/ensuring that MOL1: (1) filed its VAT returns; (2) complied with 14 January 2010 letter schedule of payments; (3) paid its VAT and Corporation tax.

It was upon that background that the applicant applied for leave to act as director of: (1) MOL2 and (2) MOFL, until the expiry of the 2015 Undertaking (namely: 28 May 2021).

As an aside, in this basis for the disqualification undertaking, use of language of ‘knew or ought to have known’ seems to bring in an ingredient of mens rea into whether or not a person has acting as a company director whilst disqualified. However, this is hard to square with commentary in Sealy & Milman: Annotated Guide to the Insolvency Legislation 24th Ed. - 2021. In their commentary to section 1 of the Company Directors Disqualification Act 1986, the learned authors state:

‘The offence of acting as a director while disqualified under this section is probably an absolute offence, on analogy with the position of an undischarged bankrupt: there is no requirement of mens rea. See R. v Brockley [1994] B.C.C. 131, and the note to s.11 below; and compare R. v Cole, Lees & Birch [1998] B.C.C. 87 (a decision on IA 1986 s.216).’

[8b] In Rwamba v Secretary of State for Business, Energy and Industrial Strategy, at first instance, ICCJ Prentis gave a first judgment ([2019] EWHC 2669 (Ch), wherein he was not persuaded to grant leave to act. However, rather than dismiss the (unopposed) application, ICCJ Prentis gave the applicant Mr Rwamba a further hearing and opportunity to persuade the Court.

Miles J records this, at paragraphs 4, 8, 15 and 16 of his judgment [2021] BCC 184, as:

The judge was not persuaded at the first hearing to give Mr Rwamba leave but gave him an opportunity to supplement his evidence and return for a continued hearing….

The first judgment was given on 17 October 2019….

The judge stated his conclusions.… He said the grounds for the application were, on the evidence, too fragile to ascribe them much cogency. To give leave would be to undermine the public protection policy within the Act. But, rather than dismissing the application at once, he gave Mr Rwamba the opportunity to pursue the application with further evidence.

Mr Rwamba took that opportunity…The second hearing took place in January 2020. The judge gave the second judgment on 25 February 2020.’

[9a]In Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch), Sir Andrew Park dismissed an appeal against a refusal to grant section 17 leave. In doing so, he said, at paragraph 54:

'What message about the disqualification regime would it convey to directors of similar companies if [the disqualified person] was given permission by the court to continue running (with two other directors, recently appointed from long term employees) the same sort of company, carrying on the same sort of business, as he had been running (with two other directors) before? The wrong message, I suggest. It would give the impression that the disqualification regime has no real teeth because, even in cases of serious misconduct, it is not difficult to obtain leave to continue to manage another company.'

[9b] An example of a summary of the seriousness of the breaches leading to the disqualification, can be found in Shuttleworth v Secretary of State for Trade and Industry (Re Dawes and Henderson (Agencies) Ltd) [2000] BCC 204, where Sir Richard Scott V-C said, at 206:

'The emergence of these improprieties in the conduct of the company's affairs led to disqualification proceedings... It was not suggested in the agreed statement that was placed before the court as part of the Carecraft procedure that [the disqualified person]... had acted dishonestly or with any want of probity or had deliberately allowed the company to breach ... out of any desire for personal gain. In short, the improprieties alleged were of inadequate management and not of any dishonesty or want of probity.'

[9c] In Shuttleworth v Secretary of State for Trade and Industry (Re Dawes and Henderson (Agencies) Ltd) [2000] BCC 204 ('Shuttleworth'), Sir Richard Scott V-C said, at 209:

'This application cannot, in my judgment, be presented on the footing that the s. 17 leave is required in order to satisfy a business need on the part of [the named company]. Nor can it be presented on the footing that the leave is needed for some business or commercial purpose of [the disqualified person]. The purpose is simply to allow [the disqualified person] to obtain deferment of his liability to pay ... capital gains tax.'

Later, at 213, Shuttleworth said:

'[The disqualified person] has, in my view, a legitimate interest, to borrow the expression used by Rattee J, in deferring tax if the statutory provisions allow him to do it. That interest is a personal interest. It is not a business or commercial interest. It may not represent a ‘need’ in the sense in which ‘need’ has been used in some of the previous cases. But I decline to shackle the statutory discretion of the court on applications under s. 17 by the creation or recognition of pre-conditions not contained in the legislation.'

The reference to Rattee J's expression, is to Rattee J in Secretary of State for Trade and Industry v Barnett [1998] 2 BCLC 64, where at 72a, he said:

‘In my judgment, the question I should ask myself is whether it is necessary for [the disqualified person]to be a director of a company in order to protect some legitimate interest of [the disqualified person] himself, or of any third party, which it is in all the circumstances of the case reasonable that the court should seek to protect. If it is so necessary, then the next question is whether that need can be met without infringing the protection of the public secured by the disqualification order. The extent to which it may be reasonable for the court to seek to protect the interests of the applicant himself in such a case must depend on all the circumstances giving rise to his disqualification. So must the court's ability to continue to protect the public adequately while mitigating the full rigour of a disqualification order.’

[9d] In Shuttleworth v Secretary of State for Trade and Industry (Re Dawes and Henderson (Agencies) Ltd) [2000] BCC 204, Sir Richard Scott V-C said, at 211-212:

'The next factor of importance...is that the company in question, of which the applicant wants to be allowed to be a director, is not a limited company. It has a share capital but the liability of its members is not limited to the amount outstanding on the shares they have taken up. As a sole trader [the disqualified person] is liable in respect of all the debts of the business. As the sole shareholder in an unlimited company carrying on that business he would retain the same liability, albeit that the procedure to enforce that liability would require a petition to have the company wound up. The liability of a member of a company without limited liability cannot be enforced short of a winding up.'

Later, Sir Richard Scott V-C said:

'‘‘[F]or my part I cannot see how the grant of leave to [the disqualified person] to be a director of a company with unlimited liability of which he is the only member can possibly undermine the importance and effect of the disqualification order that was made against him. It may well be arguable that a grant of leave to be a director of a limited company wholly owned by the individual in question would do that. Indeed, although this is not before me, if [the company] had been a limited company I think that this application would have been a very difficult one indeed for [the disqualified person] to have put forward.’ [bold added]

Crucial therefore is that, as the only member of an unlimited company, that disqualified person/applicant is and will be exposed, qua member, to unlimited liability for the company's debts. The risk of abuse of the limited liability privilege with limited companies, cannot exist with unlimited liability companies.

Is it a straightforward as that? No, it is not because there is some differences between a business operated with a personal estate (sole trader) and one operated within an unlimited company. Looking at what Sir Richard Scott V-C said in more detail, at 212-213:

'If this were a case in which there could be discerned no difference in substance between [the disqualified person] carrying on business in his own name and [the disqualified person] carrying on business through the medium of a company in which he owned all the shares and for whose debts he was, without limitation, liable, a refusal of leave to allow him to carry on business in the latter form would seem to me to elevate form above substance. The question whether leave should be granted must, in my opinion, depend on whether by granting leave something is going to be allowed to be done that would be different, significantly and substantially, from what can be done anyway.

So what is the difference that will follow if I grant [the disqualified person] the leave that he seeks? The difference will not be that, if the business is carried on by a company of which he is the shareholder and director, he will have some immunity from the debts of the business; he will not have that immunity. The difference seems to me to be simply that in order to obtain payment of their debts, if the company does not pay them, creditors would have to issue a petition for winding up and incur the expense, delay and inconvenience of that course before they could get into [the disqualified person's] wallet for the payment of what was due to them.

Does that difference justify or require that this s. 17 application be refused, or is there any other reason which should lead me to refuse the application? [Counsel for the Secretary of State] has rightly reminded me that the grant of leave must not undermine the purpose of disqualification orders. But for my part I cannot see how the grant of leave to [the disqualified person] to be a director of a company with unlimited liability of which he is the only member can possibly undermine the importance and effect of the disqualification order that was made against him. It may be well arguable that a grant of leave to be a director of a limited company wholly owned by the individual in question would do that. Indeed, although this is not before me, if [the named company] had been a limited company I think that this application would have been a very difficult one indeed for [the disqualified person] to have put forward. But the disadvantages of being under a disqualification order do not seem to me to be undermined by leave to be a director of a company with unlimited liability in which the director holds all the shares.

So I come back to the slight differences, and differences there certainly are, between the situation if I grant leave and [the disqualified person] becomes a director of [the named company] and [the named company] carries on the business and the position as it is at the moment. In both cases [the disqualified person] will be the manager of the business. In both he will be liable ultimately for all the debts of the business. But, with the company carrying on the business his liability cannot be brought home without winding-up proceedings.

In addition, with the company carrying on the business and with [the disqualified person] as the leading, if not the sole director (I do not know whether it is intended that his wife remain a director), he will come under the obligations to comply with the requirements of the Companies Act 1985 that all directors must comply with. They do not apply to him at the moment because he is carrying on the business in his own name. He will come under the obligations, for example, to see that there are no breaches of s. 151 and to see that there are no preferences given to creditors.

If this had been a case where circumstances leading to the making of the disqualification order had included any element of lack of probity, it might very well have been right to have hesitated a long time before putting [the disqualified person] once more in a position to commit breaches of duties owed under the Companies Act , duties he will owe if he becomes a director but does not owe at the moment. But in the absence of any improprieties of that sort, particularly bearing in mind that following the liquidation of Dawes and Henderson (Agencies) Ltd all the creditors of that company were paid in full, I do not think that an order placing [the disqualified person] once more in a position of owing those Companies Act duties and responsibilities is one which carries any significant danger to the public at all.'

So it is still important: (1) the seriousness of past misconduct; and (2) wisdom of providing an opportunity for further Companies Act 1985 breaches to occur.

On the facts of Shuttleworth, the absence of weighty protection of the public issues, meant the absence of a pressing need, was not decisive/fatal. Sir Richard Scott V-C said, at 213:

'The weight of the factors relied on by [the disqualified person] in favour of making the order do not seem to me to be particularly heavy. The only factor is his interest in obtaining the tax deferral. But I can see really nothing of any weight at all to put into the other side of the scale and in those circumstances the balance seems to me to come down in favour of the grant of leave.'

Conditions were imposed however on the section 17 leave, at 213:

(1) '[the disqualified person] will remain the 100 per cent owner of all the shares in [the named company]';

(2) '[the named company] will not convert to being a limited liability company and will have no subsidiary which is a limited liability company'; and

(3) Conditions that the disqualified person was to '...take and to follow advice in the event of any transaction being proposed which might possibly run foul of s. 151 or the provisions of the Companies Act relating to preference'

[10a] In Re TLL Realisations [2000] B.C.C. 998; [2000] 2 BCLC 223 (also known as Secretary of State for Trade and Industry v Collins), Ferris J agreed with Peter Gibson LJ and Judge LJ that the appeal should be dismissed, but sounded a very different note about the granting of section 17 leave with conditions. His comments do not form the ratio of the case, and do not seem to have been adopted later/further, by other judges (so far as the author is aware, save perhaps in one respect by Sheriff P J Braid in a Scottish case Lee, Applicant, 2019 S.L.T. (Sh Ct) 307 (2019)). They were (1018-1019):

'The second point which has troubled me is of a rather different order. The grant of conditional leave under s. 1 of the Act is not something which is specifically mentioned in either s. 1 or s. 17 . The court is, however, given an unfettered discretion to grant leave and I would accept that, speaking generally, the court has power to grant such leave subject to conditions. Mr Bompas helpfully included in an appendix to his skeleton argument a summary of a number of cases in which leave has been granted subject to conditions of one kind or another.

Nevertheless I consider that very great caution needs to be exercised in granting conditional leave. If it is felt that leave should not be unconditional this may suggest that the better view is that it should not be granted at all. Apart from this, conditions, if imposed, may be of such a nature that they are all too easily disregarded and almost impossible to police. The sanction for breach of a condition is a severe one, for the person in breach would commit a criminal offence under s. 13. But a breach might well not come to light unless and until a second company managed by the disqualified director has come to grief and by then it will be too late to secure the intended protection for the public.'

Ferris J then went on to criticise some of the 12 conditions imposed in the case before him, remarking: (1) 'A number of them are, however, expressed in somewhat general terms' (2) as to another 'This, to my mind, may well be less effective than it sounds.' and (3) 'the extent to which [the disqualified person] will in fact be supervised by [a named individual] seems to me to be doubtful.' (1019)

In Lee, Applicant 2019 S.L.T. (Sh Ct) 307 (2019), a Scottish case in Sheriffdom of Lothian and Borders at Edinburgh, Sheriff P J Braid was also concerns about the absence of any policing of compliance with section 17 leave conditions. As part of his balancing exercise, he said, at paragraphs 28 and 29:

'This leads on to the aspect of this application which troubles me most, which is that, while the undertakings and conditions appear stringent, there is in fact no means of policing them. The pursuer is willing to undertake to comply with the conditions but it seems to me that does not add anything because he requires to comply with the order of the court in any event. While it is the Secretary of State who suggested the conditions, he has no intention of monitoring compliance, and to that extent the insistence on conditions may on one view be seen as something of a cosmetic exercise, with no teeth attached in the event of non-compliance. In relation to some of the conditions, it may well be, as counsel suggested, that in the event of non-compliance the pursuer would be at risk of acting without the leave of the court, were he to continue acting as a director whilst in breach. Even if that is the case in relation to breach of some of the conditions (for example, in relation to No.4, which requires him to resign in certain circumstances, the pursuer might be acting in contravention of his leave were he not to resign where the conditions for his doing so had been triggered), it would clearly not be the outcome of every breach. Further, as I understand it, it was previously the Secretary of State’s practice to ask the court to include in any order granting leave, a formula of words to the effect that in the event of any of the conditions attached to the order being breached, the permission granted by the court would immediately cease. However, Lady Wolffe declined to approve such wording in Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105 on the grounds that it would lead to uncertainty. I respectfully agree with that approach, and the Secretary of State no longer requests that such wording be inserted into any interlocutor, but the consequence of that is that one possible theoretical safeguard which may have existed if such wording had been adopted, is no longer there. The fact is that the effect of a breach of any of the conditions remains unclear.

I did wonder whether one approach might be for the court to grant interim leave for a relatively long period — say six months or a year — to monitor compliance with the order, before eventually making a final order; but I do not consider that it is the court’s function to act as a monitoring agency. In any event, the conditions have, it seems, been largely (although not absolutely) complied with since the interim order was first made in the present case. That is sufficient to give some (albeit a small) measure of comfort that the pursuer will continue to comply with the conditions when the watchful eye of the court is no longer upon him.'

He then decided to grant the section 17 leave sought, on the conditions proposed, stating (amongst other things) as part of his reasoning, at paragraph 30:

'Taking account also of the lack of any monitoring of those conditions, I have also come to the view that the most effective safeguard is for this note to be available to the public, hence it will be uploaded to the SCTS website.'

[10b] In Secretary of State for Trade and Industry v Baker; Re Barings Plc [2000] 1 W.L.R. 634; [1999] B.C.C. 960, Sir Richard Scott VC, on the facts, leave was granted for the disqualified person to be a director of 3 companies (1 was a subsidary of the other) on 3 conditions:

(1) he remain a non-executive director;
(2) he does not enter into any contract of employment;
(3) his directorship remains unpaid.

[10c] For an example of where the relevant respondent opposed/resisted the section 17 leave application, see Re Liberty Holdings Unlimited [2017] BCC 298 (also known as Owen v Secretary of State for Business, Innovation and Skills)

[11] For instance:

(1) in Rwamba, the SOS: (1) adopted a neutral position; and (2) express in advance that the SOS did not wish to question the applicant, ‘…as long as [the applicant] agreed certain agreed conditions.' (Paragraph 3) Miles J said, 'The conditions are extensive and stringent, including an obligation on [the applicant] to report on his compliance with the conditions, the appointment of auditors with specific responsibilities and solicitors who will monitor [the applicant’s] compliance.’ (Paragraph 3).

(2) In Sherling, the Deputy High Court recorded the respondent Competition and Markets Authority's (‘CMA’) position ‘…provided the claimants limit their application to the particular company as identified in the draft form of order which I have been provided by the CMA, and provided the substantive conditions identified in the draft form of order are imposed, then the CMA says it has no further matters which it considers it should draw to the court's attention.'

[12a] In Sherling, the Deputy High Court Judge had also said, at paragraph 3:

‘…they both say that the CMA, in pursuance of its statutory role, has given careful consideration to the claim and, accordingly, I am invited to place reliance upon the CMA's position.’

[12b]In Buckley v Secretary of State for Business, Energy and Industrial Strategy [2017] CSOH 105, in Court of Session (Outer House), Lady Wolffe said, at paragraph 10:

'I agree with the Secretary of State's contention that a hearing should be fixed for an application for leave under section 17(5). The reference to calling of witnesses and leading of evidence, points to the assumption that applications for leave will be determined after a hearing in court. In my view a hearing is likely to be necessary for consideration of an application for leave under section 17(5) or a hearing in court is, at least, highly desirable. As with an application for a disqualification order, the court is being asked to weigh in the balance a variety of factors (which it is not necessary here to set out) and to determine what is in the public interest. Generally, the court will be greatly assisted by submissions in respect of such matters and for the opportunity to pose questions to, and seek explanations from, the applicant and the Secretary of State. There may be a particular need to do so if the court from which leave is sought is unfamiliar with the circumstances leading to the disqualification, as will inevitably be the case in the grant of an undertaking.' [Bold added]

In other words, the section 17 leave application cannot be dealt with by the Court administratively on the papers.

As an aside, Lady Wolffe also confirmed that the respondent is required to attend the hearing. At paragraph 11, she said:

At one point in oral submissions, it appeared to be suggested on behalf of the Secretary of State that, while a hearing was mandatory, the attendance of the Secretary of State at such a hearing was not. If that were the submission, I do not accept it. The language of section 17(5) - "shall appear" — could not be clearer. There is no good reason, consistent with the scheme of the Act, to construe those words as merely directory. As noted by the Court of Appeal in Re TLL Realisations, the first appeal against the grant of leave under section 17(5), the Secretary of State has a special position in relation to applications for leave. In my view, having regard to the language of the sub-section and the purposes of the hearing, the attendance of the Secretary of State is required at hearings on applications for leave under section 17(5). For completeness, I note that there are circumstances where persons other than the Secretary of State may appear in a like capacity (eg an official receiver in England). I express no concluded view on whether a like requirement to attend a hearing applies, though it would be surprising if the procedural requirements were different.'

[13a] In Re Barings plc. Secretary of State for Trade and Industry v Baker & Ors (No. 5) [2000] 1 W.L.R. 634[1999] BCC 960 ('Barings No.5'), Sir Richard Scott said, at 641:

‘It seems to me that the importance of protecting the public from the conduct that led to the disqualification order and the need that the applicant should be able to act as a director of a particular company must be kept in balance with one another. The court in considering whether or not to grant leave should, in particular, pay attention to the nature of the defects in company management that led to the disqualification order and ask itself whether, if leave were granted, a situation might arise in which there would be a risk of recurrence of those defects.

...

...Section 17 leave should never be granted without careful consideration and I bear in mind that one of the purposes of disqualification orders is to promote “the parliamentary intention to improve managerial safeguards and standards for the long-term good of employees, creditors and investors…:” In re Grayan Building Services Ltd. [1995] Ch. 241 , 257, per Henry L.J.'i

In Dawes & Henderson (Agencies) Ltd (In Liquidation) (No.2), Re Shuttleworth v Secretary of State for Trade and Industry [2000] BCC 204; [1999] 2 BCLC 317 ('Shuttleworth'), Sir Richard Scott quoted the first part of the above passage, and said, at 211:

‘I remain of the opinion expressed in that passage.'

Earlier, when referring to disqualification orders, Sir Richard Scott said, in Shuttleworth, at paragraph 2:

'The main reason why orders are made is for the protection of the public. An application under s. 17 for leave always raises the question whether the grant of leave would be consistent with the need to protect the public.'

In Re Westminster Property Management Ltd (No 2), Official Receiver v Stern [2001] BCC 305, Lloyd J gave a wider view of the likely balance, where he stated (after referring to Re TLL Realisations Ltd, Secretary of State for Trade and Industry v Collins), at 361:

‘It seems to me that the Court of Appeal was endorsing the position under which, while of course the Act does not prohibit and therefore allows the disqualified person to carry on business as a sole trader, or in partnership for that matter, without the protection of limited liability, where the question is whether an individual who has been disqualified should be allowed to act as a director of a company or be concerned in the conduct and management of a company, it seems to me that there is a burden on an applicant to show that that is justified. It seems to me to emerge from the judgment of the Court of Appeal in Secretary of State v Collins and also from the judgment of Sir Richard Scott in Re Barings (No. 5) that that is likely only to be satisfied if it can be shown that the corporate body in question has a need for the services of the person in question, that there is no risk to the public from the person in question acting as a director. and further that to allow the person in question to act as a director would not subvert or reduce the effect of the disqualification order, even if only in its deterrent effect. That seems to me to be a matter which the court must taken into account even if it is satisfied as to the protective effect of the order, as it may be sometimes, where the order is made subject to conditions and the conditions satisfy the court that, for example, someone who has not been suitably diligent in discharging duties is allowed to act as a director, but only as one of a board of perhaps a minimum size.'

ICCJ Jones in Re Property Group (2010) Ltd; Competition and Markets Authority v Martin [2020] 2 BCLC 424 ('Property Group'), said, at paragraph 110(i):

'An application for leave will enable the court to carry out a fair balancing exercise between the Article 8 rights of the individual and achieving the aims of sections 6 and 8 of the CDDA for the benefit of the general public. This is evident from the matters considered on an application for leave (see paragraph 107(a) above), which are the same matters as those required to achieve the fair balance of proportionality in an individual case.'

Later, at paragraph 109, ICCJ Jones in Property Group said that the section 17 leave application was '...when all the issues relevant to proportionality would be addressed.'

In Property Group, paragraph 107(a) read:

'As to resources, an applicant for permission when addressing the policy of protection for the public must normally commit resources for the purposes of: (i) identifying the findings of fact which resulted in disqualification; (ii) satisfying the court (potentially but not necessarily by proposing safeguards) that the removal of public protection through permission will not place the public at risk; and (iii) convincing the court that the policies of deterrence and/or maintenance/improvement of standards will not be damaged, at least not to an extent justifying the refusal of permission.'

[13b] The first 3 factors set out here are taken from paragraphs 48 to 50 of Miles J's judgment in Rwamba. Those 3 paragraphs are set out here in full:

'The first was that allowing Mr Rwamba to act as a director would assist in the companies’ efforts to raise external funding. All of the witnesses state that the companies wish to expand their businesses and that external funding would assist in this. The judge appears to have accepted this evidence but was concerned about the absence of compelling evidence that having Mr Rwamba as a director would assist the companies in raising finance. Having considered the emails of November 2018 Mr Sankey, the broker, I consider the companies would stand a better chance of raising funding if they were owner-managed. Mrs Kirigo fits this description, but she has said that she wishes to step back from the business and does not wish to lead its efforts to expand. It would to my mind assist fund raising efforts if Mr Rwamba was a director of the companies.

The second reason for seeking Mr Rwamba’s appointment as a director concerns the ability of the companies to expand their franchising business, particularly in the white collar employee market. The evidence shows that the companies would be assisted in these efforts by having a director with experience and expertise in accounting (both for internal reasons and to assist with training of franchisees). Mr Rwamba has that experience. Mrs Kirigo does not. It might be possible for Mr Rwamba to continue to promote the growth of this part of the business as a consultant, but I think there is force in the submission that, as this aspect of the business expands, and his own involvement in it grows, it will become more difficult for him to ensure that he does not become involved in the management of the companies. That may be a difficult line to draw and it is understandable that leave is sought. Mrs Kirigo explains that when she deals with customers and franchisees they often wish to come back to Mr Rwamba, who appears to be seen as integral to the business. I am satisfied that it would assist the companies’ ability to grow their business to have Mr Rwamba as part of their public face as a director. I do not think that it is an answer to this point to say that the companies have been able to trade profitably in the past using his services as a consultant: see Re Barings (No.3) where a similar argument was rejected.

The third area of evidence highlighted by Mr Sims was the wish of Mrs Kirigo to spend more time with her daughter, who has special educational needs. Mrs Kirigo has explained that she wishes to spend more time with her daughter and less time working at the companies. This consideration does not directly affect the business of the companies, but that does not render it irrelevant: see Re Dawes & Henderson. I also note that the companies have done little to seek an outside director, but that is understandable in light of Mr Rwamba’s close historical involvement in the business and the knowledge that has given him. I also note that the companies are not large businesses. I consider that the wish of Mrs Kirigo as director to step back from the business in favour of Mr Rwamba is a further factor I can take into account.’

Another example, this time from Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch), can be found inSir Andrew Park's obiter comments, at paragraph 56.

'In favour of a grant of leave are the following: that there is a particularly strong case of need on the part of [the 2 companies] for [the disqualified person] to be able to remain a director; that (perhaps a particular aspect of the same point about need) a satisfactory business which provides employment for several persons is seriously at risk of having to be closed if [the disqualified person] cannot remain as a director; and that [the disqualified person] did not himself perpetrate either of the two frauds. Against a grant of leave are the following: that when [the disqualified person] found out about the frauds he plainly ought to have revealed them instead of keeping quiet and hoping that noone would find out; that, although the frauds were perpetrated by [the disqualified person's] brother, [the disqualified person] would have taken a personal benefit from them if they had succeeded; that a grant of leave would (as I have said in paragraph 54 above) give altogether the wrong message to directors of private companies generally; and that ten years is a long period of disqualification, longer (if I recall correctly what I was told) than the term in any other case where leave has been granted.'

[14] In Re Morija PLC (also known as Secretary of State for Business, Enterprise and Regulatory Reform v Kluk) [2007] EWHC 3055 (Ch), Sir Andrew Park at paragraph 43 said:

'I begin by saying something about the nature of this appeal. The words in s.1A of the CDDA ‘unless he has the leave of the court’ confer a discretion on the court. Subject to what I say later in this paragraph, I agree with what [counsel for Secretary of State] said in his skeleton argument:

“…this is a true appeal which means that the decision can only be interfered with if the learned Registrar's exercise of discretion was outside the ‘generous ambit within which a reasonable disagreement is possible’ or was obviously wrong."

The quotation within that sentence is taken from the judgment of Peter Gibson LJ in the TLL Realisations case, and is the main basis on which the members of the Court of Appeal, while clearly unhappy about my first instance decision to grant leave, concluded that they ought not to set it aside. In that case the limited scope of an appeal worked in favour of the director concerned. In this case it works against him. [Counsel for the disqualified person], broadly accepted what [counsel for Secretary of State] said as to the nature of the appeal, but he added other circumstances in which the court could interfere with the Registrar's decision:

“On an appeal such as this it is necessary to show that the learned Registrar erred, in effect by reaching a conclusion outside the generous ambit within which a reasonable disagreement is possible or by misdirecting himself by taking into account matters that he should not have done or by failing to take into account matters that he should have done or by having failed to balance the various factors fairly in the scale.”'

[15] In Practice Direction: Directors Disqualification Proceedings [2015] BCC 224, in Part Nine: Appeals, paragraph 32 says:

'32. Appeals

32.1. Rules 7.47 and 7.49A of the Insolvency Rules , as supplemented by [Pt Five] of the Practice Direction: Insolvency Proceedings [2014] B.C.C. 502, apply to an appeal from, or review of, a decision made by the court in the course of:

(1) disqualification proceedings under any of ss.6–8A or 9A of the Act;

(2) an application made under s.17 of the Act for the purposes of any of ss.1(1)(a) , 1A(1)(a) or 9B(4), for permission to act notwithstanding a disqualification order made, or a disqualification undertaking accepted, under any of ss.6–10.

Any such decision, and any appeal from it, constitutes “insolvency proceedings” for the purposes of the Practice Direction: Insolvency Proceedings.

32.2. An appeal from a decision made by the court in the course of disqualification proceedings under any of ss.2(2)(a) , 3 or 4 of the Act or on an application for permission to act notwithstanding a disqualification order made under any of those sections is governed by CPR Pt 52 and Practice Direction 52.'