Director’s appeal against disqualification fails

Published on
2 min read

A director (D) had been disqualified from acting as a director for a period of seven years after he had caused a company to continue to trade while insolvent when there was no reasonable prospect that creditors would be paid.

D obtained permission to appeal on two grounds. Firstly, that the judge had applied the wrong legal test, in that she failed to find that D ought to have concluded that there was no reasonable prospect of creditors being paid. Secondly, that in any event, the period of seven years was grossly disproportionate.

D’s appeal was dismissed by Mr Justice Fancourt on both grounds.

In relation to the first ground, the only questions which had to be decided by the judge at first instance were whether the matters alleged were proved by the evidence (questions of fact) and if so whether (as an evaluative judgment) those matters made D unfit to be concerned in the management of a company. There was no requirement to ask whether the director knew or ought to have known that there was no reasonable prospect of creditors being paid, or of the company avoiding insolvent liquidation.

In relation to the second ground, the task for an appellate court was not to re-make the decision but to consider whether the period of disqualification decided by the judge was wrong in principle, or whether she erred in law in the exercise of her discretion. Although a period of seven years is at the upper limit of what could be a reasonable exercise of discretion on the facts of this case, it was not so excessive as to be beyond the scope of the discretion afforded to the judge. Further, the judge confirmed that a finding of dishonesty is not a prerequisite for a case falling into the middle bracket of Sevenoaks.

The Official Receiver v Nduka Obaigbena [2022] EWHC 1399 (Ch)

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