Secretary of State for Trade and Industry v Woolf [2005] EWHC B22 (Ch) (29 November 2005)

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Cite as: [2005] EWHC B22 (Ch)

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		BAILII Citation Number: [2005] EWHC B22 (Ch)
		CASE NO: 80144 of 2004

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
NEWCASTLE UPON TYNE DISTRICT REGISTRY

29 November 2005

B e f o r e :

HIS HONOUR JUDGE BEHRENS QC
____________________

	IN THE MATTER OF BRAMPTON MANOR (LEISURE) LIMITED
	AND
	IN THE MATTER OF THE COMPANY DIRECTORS DISQUALIFICATION ACT 1986
	THE SECRETARY OF STATE FOR TRADE AND INDUSTRY	Claimant
	AND
	DAVID HARRY WOOLF	Defendant

____________________

HTML VERSION OF JUDGMENT
____________________

Introduction

This is an application by Mr Woolf dated 8^th September 2005 for a stay of proceedings brought by the Secretary of State for a disqualification order under section 6 of the Company Directors Disqualification Act 1986 pending the determination of an action brought in the High Court of Justice Chancery Division by the above named Brampton Manor (Leisure) Limited ('Leisure') against its administrative receivers, Joseph Peter Francis McLean and Michael Edward George Saville ('the Receivers'), and the bank which appointed them, Clydesdale Bank plc ('the Bank'), Claim No. HC02C03851 ('the London Action').
The basis of the application is that in the London action Leisure, acting by Mr Woolf, seeks to assert that the appointment of the Receivers was invalid. If the argument succeeds and the court determines that the appointment was void, there would be no insolvency within the meaning of section 6(2) of the Act and thus no jurisdiction to make a Disqualification Order.
There is no jurisdiction within these proceedings to determine whether or not the appointment of the Receivers was valid. Accordingly it is submitted that these proceedings should be stayed pending the hearing of the London action.
The Secretary of State accepts that there is jurisdiction to grant a stay but contends that as a matter of discretion there should be no stay or adjournment on the facts of this case. Miss Wilson-Barnes, on behalf of the Secretary of State makes 3 points on his behalf. She says that similar principles apply to those that apply when there is an application for a stay of concurrent criminal or civil proceedings. In particular she says that Mr Woolf cannot establish sufficient serious prejudice to justify a stay. Second she asserts that the London action will not necessarily determine the question of whether the appointment was void. Finally she draws my attention to delay by Mr Woolf both in making the application and in prosecuting the London action. She contends that the delay is such that Mr Woolf has brought any problems on himself.
2. Representation
The Secretary of State was, as I have noted, represented by Miss Wilson-Barnes instructed by Dickinson Dees; Mr Woolf was represented by Mr Maynard-Connor instructed by hlwcommercial lawyers LLP ("HLW"). Both Counsel produced full and helpful skeleton arguments and argued the case with conspicuous ability. I am most grateful to them.
3. Evidence
The only evidence filed in support of the application was an affidavit from Mr Woolf dated 8^th September 2005 and a short witness statement from Mr Lockley – the solicitor acting for him. However I was in the course of the hearing referred to the original affidavit of Miss Sanderson in support of the disqualification, and to the pleadings in the London action.
The Facts

4. 1. The Appointment of the Receivers
Leisure was incorporated on 13^th November 1997. Mr Woolf was the principal shareholder and a director. On the 6^th August 1998 Leisure executed a Debenture in favour of the Bank.
By the middle of 2002 there were serious differences between Leisure and the Bank. On 17^th June 2002 Leisure and Mr Woolf issued proceedings against the Bank. According to Miss Sanderson Mr Woolf had discovered a fraud of a fellow director – Mr Marples. Some of the cheques signed by Mr Marples were not countersigned as required by the mandate. Mr Woolf's claim against the Bank was compromised but he sought to re-open it by alleging further losses. The Bank sought to strike out this claim. The matter was heard after the appointment of the Receivers who did not oppose the application. The action was duly struck out.
On 20^th August 2002 the Bank made a demand for £847,452.93. On 30^th August 2002 the Bank made a further demand for £24,488.15 requiring it to be paid by 4 p.m on 2^nd September 2002. The monies were not paid. On 6^th September 2002 the Bank appointed the Receivers.
It is common ground that Mr Woolf protested immediately in writing ^[1] at the appointment of the Receivers. It was his case that no monies were due. He also was of the view that the appointment was not made in good faith. Mr Maynard-Connor suggested that the Bank may have been influenced by the proceedings that had been commenced against them.
The Receivers had difficulty in taking possession of the assets that were subject to the debenture. They took the view that Mr Woolf was not co-operating with the Receivership by allowing them into possession and delivering up relevant papers. In the result there were a number of proceedings in the High Court in Leeds designed to enable them to carry out the Receivership.
It is not necessary for me to refer to all of the correspondence and Court orders relating to this matter.^[2] It is perhaps worth pointing out that on 20^th September 2002 I approved a consent order in Leeds under which Mr Woolf agreed to allow the Receivers to the premises and to co-operate with them. On 11^th November 2002 I made a further order permitting Leisure to continue to run the business on terms pending the trial of the Leeds action. On 13^th January 2003 Judge Langan QC made an order requiring amongst other things Mr Woolf and Leisure to vacate forthwith
4. 2. The London action
On 10^th December 2002 Leisure instituted the London action against the Bank. It has been funded by Mr Woolf. In the light of the allegations made by the Secretary of State it will be necessary to look at the nature of the claim and its progress quite carefully.
The proceedings were not served until April 2003; the Bank served its Defence in June 2003. It followed this with an application to strike out the claim and/or for summary judgment. The application came before Chief Master Weingarten in February 2004. It was argued over 3 days. In the result the Master refused to strike out the claim and ordered it to go to trial. He ordered the Bank to pay £38,000 in costs. Following the application for summary judgment it is accepted that matters could have moved rather faster. An Amended Particulars of Claim was served in April 2004; an Amended Defence in August 2004 and an Amended Reply in October 2004. In June 2005 Leisure served its list of documents. A Case Management Conference was heard by Master Bragge on 19^th September 2005 although the order was not drawn up till 8^th November 2005. The order, which was settled by Counsel contains a detailed timetable to get the action to trial. The following points are to be noted:
1. It records that the Receivers will resign their office or submit to an order of the Court removing them once the litigation is resolved. This reflects a letter sent by the Receivers' solicitors dated 13^th September 2005. That letter made the point that the allegations were all made against the Bank, and that the Receivers had completed their functions as Administrative Receivers. They had no wish to remain as parties to expensive litigation.

2. It directed the trial of a preliminary issue of all issues save for issues as to the quantum of the alleged loss and damage and any remedies.

3. It timetabled the trial for the hearing of the preliminary issue for a trial lasting 12 days in a trial window between 1^st July 2006 and 30^th November 2006. Built into that timetable (and criticised by Miss Wilson-Barnes) was a stay of 6 weeks following the exchange of expert reports to allow the parties to consider settlement. I was informed that the trial has now been fixed for the week commencing 16^th October 2006.
Mr Woolf accepts that there has been some delay in the prosecution of the London action. In paragraph 16 of his affidavit he gives this explanation:
A proportion of the delay has been caused due to funding problems experienced by Leisure. In short Leisure has legal expenses insurance which it has sought to invoke in order to finance its claim but, unfortunately, significant problems have been experienced with its insurers, Capita, and as yet they are still refusing to confirm that the London action will be funded by them. I can confirm, however, that even if the insurers remain intransigent, I intend to cause Leisure to pursue the London action, which I have funded to date, and that all steps will be taken to avoid any additional delays.
In the course of the hearing Mr Maynard-Connor took me through the allegations in the Amended Particulars of Claim. It is a lengthy document extending to some 16 pages. It is unnecessary to summarise it in full. It alleges in paragraph 13 that the Bank was in breach of its equitable and contractual duties in issuing demands when there were no arrears. Alternatively it alleges that the power to appoint the Receivers was exercised recklessly in bad faith and/or for a collateral purpose.
There are 9 pages of Particulars to this paragraph. In paragraph 14 Leisure contends that but for the matters set out sufficient additional sums would have been available to meet the loan repayments in July and August 2002 and thus prevent the demands being issued. In paragraph 16 Leisure alleges that the Bank engineered the default in order to neutralise the action commenced by Leisure in June 2002. In paragraph 17 Leisure alleges that it has suffered loss. In paragraph 19 it claims an order for the removal of the Receivers and discharge of the receivership together with an account. The prayer for relief includes claims for damages and for the removal of the Receivers and discharge of the Receivership. It does not, however, contain an express prayer seeking a declaration that the Receivership was void.
4. 3. The Disqualification Application
On 3^rd September 2004 the Secretary of State issued the application to disqualify Mr Woolf as a director. It was supported by an affidavit by Miss Sanderson, a Chief Examiner of the Disqualification Unit. In paragraph 60 she summarises the allegations against Mr Woolf:
1. Mr Woolf caused Leisure to enter into transactions to the detriment of the floating charge holder - the Bank by causing Leisure to enter into a lease with associated companies in contravention of the floating charge. He also failed to disclose in the Statement of Affairs the fact that the premium of £900,000 payable on the execution of the lease had not been paid to Leisure.

2. Mr Woolf failed to co-operate with the Receivers following their appointment. The summary lists 6 specific items of complaint including a failure to allow access until ordered to do so by the Court, to produce the lease, to provide information and accounting records when requested.
Miss Sanderson gives more details of these allegations in the preceding paragraphs of her affidavit but it is unnecessary for me to consider the allegations further.
On 19^th November 2004 D J Goudie gave detailed directions for the filing of evidence. There has been some slight slippage in the dates but in substance his order has been complied with.
On 8^th February 2005 Mr Woolf filed his evidence in opposition. In summary he contends that the Bank knew all about the granting of the lease. He accepts some of the allegations in relation to the lack of co-operation but makes the point that his actions have to be seen in the context of a person who was challenging the validity of the appointment of the Receivers.
On 21^st April 2005 Miss Sanderson filed a relatively short affidavit in Reply. There is some suggestion that Mr Woolf may wish to file a further witness statement but there is no reason to believe that it would cause any significant delay to the application. Miss Wilson-Barnes thus points out that the application is ready for trial.
The best time estimate for the application is 3 – 4 days. Enquiries at Leeds and Manchester have revealed that a 3 – 4 day trial before a District Judge or (more likely) a Deputy High Court Judge would be listed in February or March 2006.
4. 4. The application for a stay
On 12^th November 2004 HLW asked Dickinson Dees if the Secretary of State would be willing to agree to stay the proceedings pending the outcome of the London action. The letter made the point that Mr Woolf's Counsel (Mr Maynard-Connor) was engaged in a case likely to last till Christmas and it was not in Mr Woolf's interest to instruct separate Counsel.
On 16^th December 2004 Dickinson Dees asked for a clarification of Mr Woolf's instruction. On 4^th January 2005 HLW stated that Counsel's case was running into the New Year and that they would be reviewing the matter with Counsel. Following the service of Mr Woolf's affidavit HLW stated that Mr Woolf reserves his position with regard to a stay. On 29^th April 2005 Dickinson Dees wrote a letter making a number of suggestions as to the hearing date. At that time it was being suggested that the hearing would take place between September and December 2005.
On 10^th May 2005 HLW formally applied for a stay. The letter gives detailed reasons. In particular it states that Mr Woolf has realistic prospects of success in the London action and that issue ought to be tried first.
It is not wholly clear when the Secretary of State rejected the proposal as there were without prejudice negotiations between the parties. In any event on 27^th July 2005 the Secretary of State made an open to Mr Woolf as follows:
1. Mr Woolf should offer a disqualification undertaking to the Secretary of State

2. Mr Woolf should then make an application under section 17 of the Act for leave to act as a director of Leisure to the extent necessary to prosecute the London action

3. If Mr Woolf is successful in the London action he should then make an application under section 8A to discharge the undertaking.
The letter makes the point that the Secretary of State would not be able to consent to either application but would not oppose the section 17 application.
These terms were not acceptable to Mr Woolf. As he points out in paragraph 19 of his affidavit he does not see why he should have to be formally disqualified when he has real prospects of a complete defence if the London action is successful.
Thus it was that on 8^th September 2005 the application for a stay was made. It is, however right to point out that Mr Woolf is not making an application for an unconditional stay. As he points out in paragraph 20 of his affidavit he is willing to undertake as a condition of the stay that he will not act as a director or be involved in the management of a company apart from acting as a director of Leisure for the purpose of ensuring the London action is prosecuted to its conclusion. It is, of course, to be noted that the Receivers have sold all the tangible assets of Leisure so that there is no question of its trading. The only remaining asset is the London action. Mr Woolf will, however, need to be involved as a Director in the prosecution of the London action especially as he is funding it.
He is also willing to keep the Secretary of State informed as to the progress of the London action so that if there are any problems he can apply to vary or lift the stay. At the hearing there was some discussion as to the meaning of this undertaking given that there is now a timetable set for the London action. It seems to me that it would be sufficient to keep the Secretary of State informed as to whether the steps in the proposed timetable have been adhered to. If they have not been adhered to or if there is any matter likely to affect the proposed trial date a prompt and adequate explanation should be given to the Secretary of State.
5. The Jurisdiction to stay under the Company Directors Disqualification Act
In the course of the hearing I was referred to section 6 of the Act. Section 6 provides
6(1) – 'The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied—(a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and (b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.'

6(2) – 'For the purposes of this section and the next, a company becomes insolvent if—(a) the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up, (b) an administration order is made in relation to the company, or (c) an administrative receiver of the company is appointed;'
It is to be noted that it is for the Secretary of State to establish that the Company has become insolvent. Under section 6(2)(c) one way of doing that is to establish that an administrative receiver has been appointed. If therefore it can be established that the appointment ought not to have been made and is void it would follow (in the absence of a winding up or an administration order) that there was no insolvency within the meaning of section 6(1) and no jurisdiction to make a disqualification order
5. 1. The decision in Secretary of State for Trade and Industry v Jabble^[3]
The effect of section 6 was considered by the Court of Appeal in Jabble. In that case the Secretary of State had sought a disqualification order relying on the appointment of an Administrative Receiver as the relevant act of insolvency. There had been no challenge to the appointment at the time and the Receivership was completed some 2 years before the application by the Secretary of State. In the disqualification proceedings the directors took the point that the appointment of the Receivers was invalid. It was ordered that this be tried as a preliminary issue. At first instance it was determined that the appointment was valid. On appeal the Court of Appeal determined that it was not appropriate to be determined in the disqualification proceedings. The Secretary of State was entitled to rely on the appointment until it was set aside. The leading judgment was given by Millett LJ. Two paragraphs of his judgment are relevant
Where, however, the Secretary of State relies upon the making of an administration order or the appointment of an administrative receiver the position is different. Unless or until the order or appointment is discharged in proceedings properly constituted for the purpose, the Secretary of State is entitled to rely upon it.

In my judgment the preliminary issue should not have been ordered; and having been ordered it should not have been determined in these proceedings. The proper course, should circumstances justify it were a similar case to arise in future, is to stay or adjourn the disqualification proceedings in order to allow the company to bring appropriate proceedings properly constituted against the debenture holder for the necessary declaration. In those proceedings the court would be concerned with the narrow question whether the debenture was valid or the appointment was proper and whether, in all the circumstances, it ought to exercise its discretionary power to set aside the debenture or the appointment or to declare them invalid. In the present case where four years had elapsed between the date of the appointment and the date when application to the court was first made for the question to be decided, it was, in my opinion, out of the question that the court would intervene in an administrative receivership long since spent to declare that the appointment was invalid.^[4]
It is to be noted that Millett LJ expressly contemplates that the proper course is to stay or adjourn the disqualification proceedings to enable the Company to bring proceedings for the necessary declaration. That is precisely what Mr Woolf is seeking here. However Millett LJ uses the elliptical phrase "should circumstances justify it were a similar case to arise in future". As Miss Wilson-Barnes pointed out Millett LJ gave no clue as to what circumstances are relevant.
There is in fact some limited further assistance contained in the decision of Rimer J and the Court of Appeal in Re Kaytech^[5].
Re Kaytech was also a disqualification case. Much of the report is taken up with matters of no relevance to the present issue. However one of the challenges to an order related to the validity of the liquidation. At page 395 of the report Rimer J considered the decision in Jabble. After summarising the facts and citing the paragraph to which I have already referred he stated that the principle in that case applied. He went on:
If following the service of these proceedings on Mr Potier, he wanted to challenge the applicant's assertion that International went into liquidation in August 1993, then his correct course was to apply promptly for a stay or adjournment of these proceedings so that he could in the meantime start separate proceedings challenging Mr Alexander's status as liquidator ……
The leading judgment in the Court of Appeal was given by Robert Walker LJ. He dealt with the issue at page 420:
Jabble was a case under s 6 (2)(c) and Millett LJ contemplated that in some circumstances there might be a stay or adjournment in order to permit separate proceedings to be taken by a company to challenge the validity of a debenture or the propriety of the appointment of a receiver. … But on the facts of the case before him Millett LJ regarded it as out of the question that the court would intervene in an administrative receivership which was long since spent, and that observation seems to me even more apposite in the circumstances of the present case. I would not hold out to Mr Potier any hope at all of success in some future application to the Companies Court.

6. The Discretion
It is to be noted that both of the above cases recognise that there is jurisdiction to stay proceedings where there is a challenge to the Receivership. It is also to be noted that on the facts of each of the above cases Millett LJ and Robert Walker LJ felt that it was out of the question that a court would intervene. No other guidance as to the circumstances in which a court would intervene save for the use of the word "promptly" by Rimer J.
In those circumstances Miss Wilson-Barnes felt it appropriate to draw to my attention the principles which have emerged where applications have been made to stay disqualification proceedings because of the existence of other proceedings.
She referred me first to the decision in Re Rex Williams Leisure^[6]. One of the points raised in that case was an application for a stay of the disqualification proceedings pending the trial of a separate action against Mr Warren on the ground that the Secretary of State was relying on many of the points that were in issue in the separate civil proceedings. The action however had been allowed to go dormant. An application for summary judgment had not been resolved. The application for a stay was refused.
At first instance Sir Donald Nicholls V-C said:
I am not impressed by these submissions. The proceedings are brought by the Secretary of State in the public interest. There is a public interest in disqualification orders being made in respect of unfit directors of insolvent companies. Section 6(4) of the Disqualification Act prescribes a minimum period of disqualification of two years. It cannot, in general, be right that disqualification proceedings should await the outcome of parallel private litigation. The protection afforded to the public by a disqualification order should not have to wait on the determination of other claims against a director and the speed at which the parties choose to proceed with them. Here there has been no movement in the administrators' action for almost two years. Mr Warren has taken no step to hasten on those proceedings. I can see no justification for staying the disqualification proceedings because of the existence of this presently dormant action. The disqualification proceedings may prove to be mistaken. The allegations of misconduct against the defendants may turn out to be without substance. That is a matter to be determined at the hearing of the disqualification application. The application should proceed to that hearing in the ordinary way.
The last 3 sentences of the judgment are important. The crucial difference between that case and this is that it is not possible in this case for the validity of the appointment of the Receivers to be determined in the disqualification proceedings.
In the Court of Appeal the leading judgment was given by Hoffmann LJ he dealt with this matter quite shortly ^[7]:
In this court, Mr Jones put forward the more modest proposal that there should be a stay of these proceedings until the action had been concluded. Even this was not pursued with great enthusiasm. For my part, I think it would be quite absurd. The Secretary of State has a public duty to apply for the disqualification of unfit directors. He cannot be held up indefinitely by other proceedings over which he has no control.
Miss Wilson-Barnes then referred me to Secretary of State v Crane^[8]. In that case Mr Registrar Simmonds had stayed disqualification proceedings on the ground that there were pending criminal proceedings. An appeal to Ferris J succeeded. In fact the Defendants had not been charged at the time of the appeal but they had been told that the police were intending to prosecute them. In any event at paragraph 9 of his judgment Ferris J summarised the most relevant principles that applied to the decision to stay of civil proceedings because of concurrent criminal proceedings. The judgment of Ferris J was itself considered by David Richards J in Secretary of State v Carr & Others^[9]. At paragraph 20 of his judgment he summarised the principles:
1) There is no principle of law that a claimant in a civil action is to be debarred from pursuing that action in accordance with the normal rules merely because to do so would, or might, result in the defendant having to disclose his defence.

2) The judge in criminal proceedings has extensive powers to control those proceedings in order to ensure a fair trial, and the responsibility for doing justice in the criminal proceedings lies primarily with the criminal court.

3) That is not to say that the civil court has no responsibility in the matter. It has powers, including a power to stay the civil proceedings, which will be exercised if justice so requires, having regard to the concurrent criminal proceedings. Ferris J cited the following statement of Neill LJ in R v Panel on Takeovers and Mergers, ex p Fayed [1992] BCLC 938 at 947:

"It is clear that the court has power to intervene to prevent injustice where the continuation of one set of proceedings may prejudice the fairness of the trial of other proceedings…But it is a power which has to be exercised with great care and only where there is a real risk of serious prejudice which may lead to injustice"

Ferris J observed that while the civil court will clearly strive to avoid a manifest risk of injustice, it should not go out of its way to anticipate the existence of a mere possibility of injustice.

4) The Secretary of State has a public duty to apply for the disqualification of unfit directors. Such proceedings are brought in the public interest and the purpose of a disqualification order is the protection of the public. The public interest in bringing such proceedings to a substantive hearing is particularly strong in those cases where serious misconduct is alleged, as will be the case where there are concurrent disqualification and criminal proceedings arising from the same conduct.
Miss Wilson-Barnes submitted that there needed to be a real risk of serious prejudice before the Court would stay the disqualification proceedings. She stressed that the court should not anticipate the existence of a mere possibility of injustice.
Before leaving the decision in Secretary of State v Carr it is right to note that one of the Defendants offered an undertaking to the Court in terms similar to that offered by Mr Woolf. The other Defendant was not living or working in the UK. Mr Justice David Richards still refused to stay the proceedings. He dealt with the position in paragraph 49 of his judgment:
I accept Mr Davis-White's submission that it would not be right to order a stay of the disqualification proceedings on case management grounds. Such proceedings are brought in the public interest and they serve an important purpose. The public interest is best served by such proceedings being brought to a conclusion as soon as reasonably practicable. While Mr Carr's proposed undertaking is designed to achieve as much as possible of the effect of a disqualification order, Mr Jones accepts that it achieves less than an order. For example, breach of the undertaking would be a civil contempt of court with a maximum penalty of 2 years' imprisonment, while breach of a disqualification order is an offence punishable by a maximum of 5 years' imprisonment. There is no public register on which the undertaking could appear. While Mr Carr is willing to give an undertaking to be personally liable for debts as provided by section 15 of the 1986 Act as if a disqualification order had been made, there can be no similar liability imposed on his associates (cf section 15(1)(b)). Moreover, if a respondent is to be prohibited from acting as a director, the public is entitled to know as early as reasonably practicable the grounds on which he has been found unfit.
Finally Miss Wilson-Barnes referred me to Secretary of State v Bannister ^[10] The question for determination was whether the High Court or the Court of Appeal had power to suspend a disqualification order pending appeal. The leading judgment was given by Morritt LJ. He first held that the Court did have power to suspend a disqualification order. He went on to hold that it was a power to be used in exceptional cases. His reasoning is at page 277 b-e:
The second point is allied to the first. Section 17 prescribes a method by which a person disqualified may nevertheless obtain leave to act as a director. Further as Chadwick J observed in Re Auto Electro and Powder Finishers the grant of such leave would not have the effect which I assume, for it is not necessary to decide, a stay or suspension would have of shortening the period of the disqualification. Though, as I have already observed, such a dispensation pending appeal may not do justice in all cases in my view, in agreement with Chadwick J, it is the relief which the disqualified director should normally pursue. The usual practice is to require the applicant to give details of the financial standing and management structure of the company concerned. The leave, if granted, may be on condition or subject to undertakings and is confined to the company in respect of which the leave is sought. It seems to me that the interests of the disqualified director and the protection of the public can be more suitably considered on an application for leave to act under that section rather than on an application for a stay pending appeal. The flexibility which it permits is shown by the order of Hoffmann J in Re Ipcon Fashions Ltd (1989) 5 BCC 773 at 776.

Thus the discretion to stay or suspend the disqualification order would, in practice, only be exercised in favour of the applicant if he showed that his case was one of those exceptional cases in which the alternative remedy under s 17 was inadequate. This is not one of those cases; Mr Bannister has not applied to the court prescribed by s 17 for leave to act and has not filed any evidence on this application such as the court deciding whether such leave should be given would require. Accordingly in my judgment this application should be refused for that reason alone.

7. Submissions
Miss Wilson-Barnes developed her submissions under 3 heads – prejudice, relevance, and delay. She submitted that each led to the conclusion that there should be no stay.
7. 1. Prejudice
Miss Wilson-Barnes submits that the mere existence of a disqualification order or undertaking is not serious prejudice to Mr Woolf within the meaning of the cases set out above. She further submits there is an analogy between Mr Woolf's situation and that of a director subject to an order pending appeal. She submits there is no reason why Mr Woolf should not submit an application under section 17. She makes the point that it is for Mr Woolf to establish prejudice and none has been shown.
Mr Maynard-Connor submits that in the circumstances of this case the existence of the disqualification order is prejudice to Mr Woolf. He points out that the question of whether the Receivers were validly appointed goes to the jurisdiction to make a disqualification order. It is thus a defence to the proceedings. If a stay is not granted he will be denied the opportunity to raise a genuine defence which cannot be raised in the disqualification proceedings. He points out that the London action was instituted some 2 years before the disqualification proceedings. It has been the subject of a 3 day hearing before Master Weingarten. In those circumstances it cannot be said that they do not have a reasonable or realistic prospect of success.
Mr Maynard-Connor draws my attention to the position on costs. If Mr Woolf submits to a disqualification undertaking he will be liable for the Secretary of State's costs. If he makes an application under section 17 he will have to pay the Secretary of State's costs. He will be prejudiced at having to find those costs. There is no guarantee that he would get them back even if the undertaking is subsequently revoked in an application under section 8A.
Mr Maynard-Connor makes the point that it is by no means certain that an application under section 17 would succeed even if it is unopposed. If it is granted it may be granted under conditions that are expensive to comply with. If it is not granted Mr Woolf would not be able to give instructions in relation to the London action.
7. 2. Relevance
Miss Wilson-Barnes draws to my attention the fact that the hearing on October 2006 is on preliminary issues excluding the question of remedy. She further makes the point that there is no express claim for a declaration that the appointment was invalid. In those circumstances she says it is not certain that the hearing will determine whether the appointment was or was not valid. She makes the point that the Receivers have finished the receivership and are in any event anxious to be discharged. It makes no difference to them how they are discharged. The present indications are they will take no part in the trial.
Mr Maynard-Connor drew my attention to the pleadings. He pointed out that it is at the heart of the pleaded case against the Bank that there was no money due at the date of the appointment. If that plea is upheld the appointment was void. Similarly there is an argument that the appointment was in bad faith. He submits that the judge in the London action will inevitably have to make adequate findings to determine whether or not there was a valid receivership so as to give the necessary jurisdiction to the Secretary of State.
7. 3. Delay
Miss Wilson-Barnes reminded me of the use of the word "prompt" by Rimer J. She said that there had been delays in the London action and in the making of this application. She criticised the inactivity in the London action from August 2004 till September 2005. She further criticised the timetable for getting the London action to trial including the 6 week stay after exchange of expert reports.
She criticised the delay in making this application. It should have been made in November 2004 when the matter originally came before D J Goudie. She made the point that the proceedings are now ready for trial. The London proceedings will not be heard till October 2006 and it is possible that they will be further delayed. If a stay is granted it will in effect put back the hearing of the case by at least a year.
She draws to my attention the public interest in having these applications speedily. She says that this application has been made necessary by Mr Woolf's own defaults and that it should thus be refused.
Mr Maynard-Connor accepted that there had been some delay. He drew to my attention the funding difficulties experienced by Mr Woolf. He made the point that the validity of the appointment was fundamental to the defence of the application. In those circumstances the delays were not such as to deny Mr Woolf the opportunity of having determined a genuine defence to the application. He made the point that this was not the most serious disqualification application the court has seen. It was not suggested that the evidence would be significantly less cogent in 2007 than in 2006. In particular he made the point that there were documents surrounding the granting of the lease and the knowledge or lack of knowledge of the Bank. The activities of Mr Woolf following the appointment of the Receivers are also well documented. Thus it is not suggested that there cannot be a fair hearing in 2007.
Finally he made the point that Millett LJ had clearly contemplated that in some circumstances a stay would be granted. If a stay was to be refused in this case it was difficult to see in what circumstances a stay would be granted.
8. Conclusions
I have set out the arguments in some detail as it will enable me to express my views quite shortly. I find myself substantially in agreement with the arguments put forward by Mr Maynard-Connor. In my view there should be a stay subject to the undertakings being offered by Mr Woolf. My reasons are as follows:
1. I do not accept that there is a true analogy between this application and the cases cited by Miss Wilson-Barnes in relation in relation to the stay of concurrent civil and criminal proceedings. The crucial distinction between this case and those cases is that the validity of the appointment of the Receivers is a defence to the disqualification proceedings that cannot be determined in those proceedings.

2. I do not therefore accept that before a stay can be granted in a case such as this an applicant must establish serious prejudice. In my view it should be enough that there is a genuine triable issue as to the validity of the receivership which is being prosecuted with due diligence. Both of the decided cases would have failed this test.

3. If I am wrong about this and it is necessary for an applicant to establish serious prejudice then I think Mr Woolf will suffer prejudice in the ways identified by Mr Maynard-Connor. The order itself and the additional expense coupled with the risk of not obtaining an order under section 17 amount to prejudice.

4. In this case Mr Woolf/Leisure commenced their proceedings in December 2002 – some 2 years before the disqualification proceedings were instituted. The proceedings have survived an application to strike out lasting 3 days before the Chief Chancery Master. There has been no appeal. It cannot be said that they do not raise genuine triable issues. Indeed Miss Wilson-Barnes did not so submit. In my view the pleaded allegations make it almost inevitable that the court will have to determine whether the appointment was valid.

5. It is true that there have been delays both in the London action and in making this application. I have given this aspect of the case anxious consideration. The position now is that the London action is now back on track with a trial date next autumn. There is no reason to believe that Mr Woolf is not now prosecuting it with diligence. If there is slippage the undertaking given will be sufficient to enable the Secretary of State to apply to remove the stay. The effect of a stay will not mean that there cannot be a fair hearing of the application in 2007. In all the circumstances I do not think it would be right as a matter of discretion to refuse a stay because of the delays in this case.

6. I accept that there is a public interest in having disqualification applications dealt with speedily and efficiently. I also accept that the Secretary of State has no control over the London action. It seems to me that there is also a public interest in the Court not making disqualification orders when it has no jurisdiction to do so. Thus a balance has to be struck between these 2 public interests. In the circumstances of this case that balance can be accommodated by the undertakings offered by Mr Woolf in his affidavit. In so deciding I am not overlooking the views of David Richards J cited above.
In my view therefore this application succeeds subject to the undertakings being offered by Mr Woolf.
I have not heard full argument on the questions of costs or permission to appeal. In order to save costs I am however prepared to indicate my provisional views. In my view this case involves a question of principle. In those circumstances I would be minded to grant the Secretary of State permission to appeal.
Some costs would have had to have been incurred by Mr Woolf and the Secretary of State even if the Secretary of State had not opposed the application. Those costs should be costs in the Disqualification Application. Some additional costs have been incurred as a result of the opposition by the Secretary of State; in my view the Secretary of State should pay those additional costs. I can only guess the appropriate percentage without submissions. My provisional guess would be 50%.
Thus I would provisionally order 50% of Mr Woolf's costs and 50% of the Secretary of State's costs to be costs in the Disqualification Application and 50% of Mr Woolf's costs to be paid by the Secretary of State in any event. I would be prepared to make a summary assessment of the 50% of Mr Woolf's costs or order a sum to be paid on account of them.
JOHN BEHRENS

Note 1   See the letter of 6th September on p 119 of KAS1    [Back]

Note 2   Miss Wilson-Barnes took me to documents at pp 258, 268, 261, 201, 250, and 229 of KAS1    [Back]

Note 3   [1998] 1 BCLC 598    [Back]

Note 4   At p 601e - h    [Back]

Note 5   [1999] 2 BCLC 352    [Back]

Note 6   [1993] 2 AER 741 and [1994] Ch 350    [Back]

Note 7   At p 368    [Back]

Note 8   [2001] 2 BCLC 226    [Back]

Note 9   [2005] EWHC 1723    [Back]

Note 10   [1995] 2 BCLC 272    [Back]

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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Secretary of State for Trade and Industry v Woolf [2005] EWHC B22 (Ch) (29 November 2005) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2005/B22.html Cite as: [2005] EWHC B22 (Ch)