Thursday, 25 August 2011

UK: England and Wales: court stays disqualification order pending appeal and explains consequences of doing so

Judgment in Cathie v Secretary of State for Business, Innovation & Skills [2011] EWHC 2234 (Ch) was given in April this year but a copy of the decision has only recently been added to BAILII. This is an interesting decision in which the trial judge considered the consequences of staying a disqualification order pending an appeal.

The case concerned two directors against whom disqualification orders had been made by the District Judge in Manchester. Permission to appeal was subsequently granted and, before this hearing took place, one of the directors applied to stay his disqualification order. He did so to protect his reputation on the basis that the order might turn out to be wrongly made and argued that business connections might be lost as a result of the publicity that would follow the registration of the disqualification order. He did not, however, wish the order to be stayed so that he could act as a director because he proposed offering his services individually and not through a company.

The trial judge granted the director's application and the order was stayed. The consequences of doing so were explained by the trial judge as follows (at para. [13]):

... although certain submissions were addressed to me on the footing that a stayed order remains in force and time runs during the period of stay for the purpose of calculating the period of disqualification, I was not referred to any authority (rather than text-book commentary) which established that that was so. In my judgment, a stayed disqualification order ceases to have effect for the purpose of the [Company Directors Disqualification Act (1986)], and section 18 in particular. The fact that the stay may only be temporary is irrelevant. The order ceases to have effect for so long as the stay is in force, and the director cannot, when the stay is removed (if that eventually happens) claim the benefit of the period of the stay as counting towards the period of disqualification. If the stay is granted before the disqualification period commences, then the order does not come into effect until the stay is lifted or expires. Either way, an order which is stayed has no force and should not be on the register. As the stay order that I am now making will, it seems likely, be made before any entry on the register has got there, it seems to me that I clearly have power to give effect to the stay by directing the Registrar not to enter the disqualification order on the register because the result of the stay is that the order does not have effect pending appeal. Insofar as it may already have had effect, it ceases to have effect during the period of the stay, and should be removed on that ground".

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