Wednesday, 11 July 2012

UK: England and Wales: liquidator disqualified for 12 years

The High Court gave judgment yesterday in Wood v Mistry [2012] EWHC 1899 (Ch). The facts are somewhat unusual: an application by liquidators of various companies for the disqualification of a former liquidator of those companies under section 4(1)(b) of the Company Directors Disqualification Act 1986. The trial judge, Newey J., disqualified the liquidator for a period of twelve years and with regard to the scope and operation of section 4(1)(b) made these observations (at paras. [24], [27] and [28]):

I cannot envisage circumstances in which the Court would exercise its discretion to make a disqualification order against a liquidator without serious misconduct having been established. That is not to say that each breach of duty alleged must, individually, be serious if it is to be relevant. Were a serious breach of duty established, the Court could surely take other, less important breaches into account when deciding what, if any, order to make under section 4. A number of relatively minor breaches of duty could also, taken together, be thought serious enough to warrant a disqualification order ....

I do not think it can be the case that a liquidator can apply under section 4 of the CDDA only if he has a financial interest in a disqualification order being made. In the first place, it is difficult to think of a situation in which a liquidator would ever have such an interest. To require such an interest would thus mean that liquidators could not in practice make applications under section 4. That, however, would seem to run counter to section 16(2), which expressly provides for applications by liquidators. A second point is that it is hard to see why a financial interest should necessarily be a prerequisite of an application under section 4 of the CDDA. The purpose of disqualification is essentially, after all, the protection of the public, not private advantage. Why then need an applicant always have a personal financial interest? In fact, even the Secretary of State and the Official Receiver would presumably be unable to apply under section 4 if a personal financial interest were invariably required".

Update (11 July 2012): a summary of the decision has been published here by the ICLR.

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