UK: Scotland: directors' disqualification and the requirement to give notice

Section 16(1) of the Company Directors Disqualification Act (1986) provides that a person applying for a disqualification order must give no less than ten days' notice of his intention to the person against whom the order is sought. In Secretary of State for Trade and Industry v Langridge; Re Cedac Ltd [1991] Ch 402, a majority in the English Court of Appeal held that the ten day requirement was not mandatory but directory. This position has been adopted in Scotland (see Secretary of State for Trade and Industry v Lovett 1996 SC 32).  More recently, in Secretary of State for Trade and Industry v Swan [2003] EWHC 1780 (Ch), Laddie J. held that "although failure to give 10 days notice does not, per se, render the disqualification proceedings a nullity, taken with other factors, including the shortness of the notice, it may do so" (para. [58]).

The operation of Section 16 was considered towards the end of 2008 in Scotland by Sheriff Principal Lockhart in Secretary of State of Business, Enterprise and Regulatory Reform v Smith and Smith (19 November 2008, conjoined cases B412/07 and B410/07). What makes this decision interesting is that it was argued that the directory status of Section 16(1) should be reconsidered given the enactment of the Human Rights Act (1998). More specifically, it was argued that the failure to regard Section 16(1) as mandatory amounted to a breach of articles 6 and 8 of schedule 1 of the 1998 Act. Sheriff Principal Lockhart rejected this argument stating that he was bound by Lovett. What was also significant was the fact that the directors had not been prejudiced by the failure to give no less than days' notice.  Indeed, the Sheriff Principal stated that where there was proof of the notice being sent, its receipt may be presumed unless evidence existed rebutting that presumption.