England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
CIVIL DIVISION
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(COMPANIES COURT)

		The Royal Courts of Justice The Strand London Thursday 30 May 2002

Thursday 30 May 2002

1. LORD JUSTICE ROBERT WALKER: This is a renewed application for permission to appeal made by Mr Downes on behalf of Mr James McAvoy. Mr McAvoy wishes to appeal from an order of the Vice-Chancellor made in the Chancery Division on 12 March 2002 in proceedings under the Company Directors Disqualification Act 1986. The proceedings relate to the affairs of Crystal Palace FC (1986) Ltd ("Crystal Palace") and some other companies which I need not name. The Vice-Chancellor dismissed Mr McAvoy's appeal against an order of Mr Registrar Rawson made on 30 November 2001, dismissing Mr McAvoy's application for further information under Part 18 of the Civil Procedure Rules.
2. The background to this matter that Mr McAvoy, the second defendant in the proceedings, is a chartered accountant. On 4 June 1998 he became a director of Crystal Palace after Mr Mark Goldberg, the first defendant, had acquired control of that company. Mr McAvoy was at first a non-executive director, but after a period became chief executive, and was chief executive for a relatively short period before Crystal Palace went into administration on 31 March 1999. The Secretary of State started these proceedings on 9 March 2001, just within the two-year limit.
3. The Secretary of State's application was supported by a lengthy affidavit, 373 paragraphs long, sworn on 9 March 2001 by the Official Receiver, Mr Michael Boyall. As is customary, the affidavit had an introductory narrative which was largely uncontentious and then set out facts alleged in relation to identified "charges" against the two defendants, the charges being summarised at the end of the affidavit and amounting to a total of 15 allegations against Mr Goldberg and 12 against Mr McAvoy.
4. On 24 September 2001 Mr McAvoy's solicitors made a request under Part 18 of the Civil Procedure Rules for further information in 27 numbered paragraphs which referred to 15 specified paragraphs of the affidavit. On 19 October 2001 the Secretary of State's solicitors responded with a statement of truth (signed by Mr Boyall) to the effect that the request was premature. There was a reference to the case of Re Sutton Glassworks Ltd [1997] 1 BCLC 26. Without prejudice to the general contention that the request was premature, the Secretary of State's solicitors responded in one way or another to the 27 questions. Two were requests for copies (or complete copies) of documents; these were to be supplied. Nine other requests received more or less substantive answers. To the remaining 16, the response was (echoing paragraph 1.2 of the Practice Direction to Part 18):

"The request is not confined to a matter which is reasonably necessary and proportionate to enable the Second Defendant to prepare his case or to understand the case he has to meet."

5. When the matter came before the Registrar on 30 November, Mr McAvoy had put in his evidence in answer, but only four or five days before. The Registrar said (after referring to Re Sutton Glassworks Ltd) that if Mr McAvoy had not put in his evidence the application would clearly have been premature because until then it was uncertain what was in issue. In the ordinary case, he said, it would still be premature to make an application under Part 18 before the Secretary of State's evidence in reply. He explained his reasons for that:

"In the ordinary case I consider that it will be premature to request further information until the Secretary of State has replied to the Defendant's evidence. The reason for this is that the affidavit in support of the claim will usually be made by the liquidator, who in the nature of things, will have no firsthand knowledge of the matters to which he deposes. Where he relies on the evidence of third parties and the Defendant challenges that evidence, the Secretary of State may well decide to ask those third parties to put in written evidence themselves as part of his evidence in reply. It is only then that the matters in issue will emerge and it would not be fair to the Secretary of State to require him to state precisely what his case is until he has approached the third parties in question."

6. The Registrar then gave individual consideration to the requests. He thought that nine were premature until after the Secretary of State's reply evidence was in, two were unnecessary and three were for other reasons inappropriate. The remaining 13 had either been answered or were withdrawn (I include in this total question No 22, which does not appear in the transcript of the Registrar's judgment at all).
7. Although the application before me is for permission to appeal from the Vice-Chancellor's order, I have thought it right to describe the Registrar's decision in a little detail because it was the initial exercise of the Companies Court's case-management discretion.
8. On the appeal the Vice-Chancellor described the matter as falling into two parts:

"first, whether the requests were, as the Registrar thought, premature; and secondly, if not, whether the information sought should be given at this stage."

9. The Vice-Chancellor referred to a question which had arisen as to whether the appeal should be adjourned until the reply evidence was in. (The appeal was not adjourned.) He referred to the appeal being by way of review (that was and is common ground) and to the procedural requirements of the Insolvent Companies (Disqualification of Unfit Directors) Rules 1987. He rejected a submission that the Secretary of State's reply evidence could never provide grounds for disqualification not put forward in the Secretary of State's first round of evidence, provided that that could be done without injustice. That observation was not, I think, necessary to the Vice-Chancellor's decision on the case management issue.
10. Justice certainly requires that a director facing disqualification proceedings, which are a very serious matter, should know the case which he has to meet, although without the technicalities associated with criminal charges. That is established by some well-known decisions to which the Vice-Chancellor referred, including Re Rex Williams Leisure Plc [1994] Ch 1, and in this court 350; re Westmid Packing Services [1998] 2 All ER 124; and Re Sutton Glassworks. The last-mentioned case was a decision on interrogatories under the old Rules of the Supreme Court.
11. In paragraphs 29 and 30 of his judgment the Vice-Chancellor said:

"The principles to be observed I have touched on already. First, is the information requested reasonably necessary and proportionate? What is reasonably necessary and proportionate for that purpose must be judged as at the time when the request was made. That is to say, in this case, before the affidavit in answer, or at the very latest, when the matter came before the Registrar; that is to say, before the evidence in reply.

The Registrar took the view that they were premature and I agree with him. There is no suggestion in this case that Mr McAvoy was unable to answer the allegations made against him. The allegations that were made against him were in this respect details of the matters upon which the Secretary of State relied, and which were adequately and properly summarised in paragraphs 368 and subsequent. I will nevertheless deal with them individually."

12. The Vice-Chancellor then proceeded to do so in some detail. He concluded that the Registrar had made no error in the exercise of his discretion, and he dismissed the appeal.
13. Mr Downes in his skilful submissions in this court has submitted that an important point of principle does arise on what the Vice-Chancellor said; and that there, and later in paragraph 42, dealing with one of the particular matters which is still pressed, the Vice-Chancellor made an error of principle. He submits that it is important that permission to appeal should be granted in order that the errors which he perceives in the Vice-Chancellor's judgment should be corrected and not followed by other courts hearing disqualification proceedings up and down the country.
14. In seeking permission for a further appeal, Mr Downes, on behalf of Mr McAvoy, has limited his target to only three of the original 27 requests; that is, those numbered 12, 13, and 15. These relate to two matters in paragraphs 68 and 86 respectively of Mr Boyle's affidavit: in paragraph 68, a statement by Mr JR Cole, a non-executive director of Crystal Palace (who was also a director of a company called Tramp Group Ltd, which was negotiating to provide substantial finance to Crystal Palace) that, with the benefit of hindsight, the Crystal Palace management accounts shown to him were "misleading"; and in paragraph 86, what is described as an aide memoire dated 19 April 1999 made by Mr PL Morley, another non-executive director of Crystal Palace, suggesting that his fellow directors should state that the board had been misled, and that information had been withheld from them by Mr McAvoy.
15. Mr Downes has pointed out, to my mind correctly, that the first allegation is lacking in any particularity and that the second allegation, which is also unparticularised, is wholly refuted. Indeed, it seems to me that the second allegation is a piece of pure prejudice whose inclusion in the affidavit may well assist Mr McAvoy at trial.
16. I am not without sympathy for Mr Downes' submissions. However, the test for a second appeal imposed by section 55 of the Access to Justice Act 1999 is quite a stringent one and I am not persuaded, despite Mr Downes' submissions, that these two outstanding points, which are essentially case-management points, make this a proper case for a further appeal to the full Court of Appeal. Indeed, it seems to me that these points are essentially case-management points and that to seek to elevate them into a series of rules to be applied across the whole wide variety of disqualification cases would be an error.
17. For those reasons, while expressing some sympathy for the application, I feel bound to dismiss it, since otherwise the quite strict test imposed by section 55 would be eroded. In the circumstances, I need not consider the question of an extension of time.
ORDER: Applications refused