Jersey Unreported Judgments

Désastre - application for a disqualification order

[2022]JRC194

Royal Court

(Samedi)

20 September 2022

IN THE MATTER OF THE REPRESENTATION OF THE VISCOUNT

AND IN THE MATTER OF SPARC GROUP LIMITED, EN DÉSASTRE

AND IN THE MATTER OF ARTICLE 24(7) OF THE BANKRUPTCY (DÉSASTRE) (JERSEY) LAW 1990

Advocate J. P. Rondel for the Representor.

The Respondent was not present.

EX TEMPORE judgment

the deputy bailiff:

1.        Today we heard an application to make a disqualification order against Andrew Jeremy Mills, sole director of SPARC Group Limited ("the Company").  The Company was a property development business.

2.        The relevant statutory provisions are as follows: 

(i)        Article 24(7) of the Bankruptcy (Désastre) (Jersey) Law 1990 ("the 1990 Law") provides: 

"Where the debtor is a company, the Court may, on the application of the Viscount, make any order in respect of a person who is or was a director of the company that it would be permitted to make under Article 78 of the Companies Law in respect of such a person".

(ii)       Article 78 of the Companies (Jersey) Law 1991 ("the 1991 Law") says: 

"(1)  If it appears to the Minister, the Commission, or the Attorney General, that it is expedient in the public interest that a person should not without the leave of the court -

           (a) be a director of or in any way whether directly or indirectly be concerned or take part in the management of a company;

           (b) be a member of the council of a foundation incorporated under the Foundations (Jersey) Law 2009 or in any other way directly or indirectly be concerned or take part in the management of such a foundation; or

           (c) in Jersey in any way whether directly or indirectly be concerned or take part in the management of a body incorporated outside Jersey,

the Minister, the Commission, or the Attorney General may apply to the court for an order to that effect against the person.

(2)       The court may, on such an application, make the order applied for if it is satisfied that the person's conduct in relation to a body corporate makes the person unfit to be concerned in the management of a body corporate.

(3)       An order under paragraph (2) shall be for such period, not exceeding 15 years, as the court directs.

(4)       A person who acts in contravention of an order made under this Article is guilty of an offence.

(5)       On the making of an order against a person under this Article, the registrar may record the person's disqualification in a form approved by the Commission."

3.        This is the first case to be decided since the maximum period for disqualification under the 1991 Law was increased from 5 years to 15 years in September 2002. 

4.        The same maximum period of disqualification applies under the current equivalent UK legislation namely the Company Directors Disqualification Act 1986.  We were referred to the provisions of that Act, in particular section 12C which deals with the Court's power to determine unfitness and 12C provides inter alia that "whether a person's conduct as a director of one or more companies ... makes the person unfit to be concerned in the management of a company;" is to be determined in every case by the Court having regard to matters set out in paragraphs 1 to 4 of Schedule 1 to the Act.  We considered that Schedule and note that the matters to be taken into account in all cases are listed at paragraphs 1 to 4:

"1       The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement.

2         Where applicable, the extent to which the person was responsible for the causes of a company or overseas company becoming insolvent.

3         The frequency of conduct of the person which falls within paragraph 1 or 2.

4         The nature and extent of any loss or harm caused, or any potential loss or harm which could have been caused, by the person's conduct in relation to a company or overseas company."

And further there are additional matters to be taken into account where the person is or has been a director: 

"5       Any misfeasance or breach of any fiduciary duty by the director in relation to a company or overseas company.

6         Any material breach of any legislative or other obligation of the director which applies as a result of being a director of a company or overseas company.

7         The frequency of conduct of the director which falls within paragraph 5 or 6."

Plainly this Schedule and their paragraphs have no direct application in Jersey but nonetheless we agree with counsel for the Viscount that they are a useful reference point. 

5.        In particular it is important to refer to the contents of the Schedule as we were invited to have regard to the decision of the English Court of Appeal in Sevenoaks Stationers (Retail) Limited [1991] Ch 164.  In that case Dillon LJ giving the judgment of the Court at page 173 noted that:

"where it falls to a court to determine whether a person's conduct as a director of any particular company or companies makes him unfit to be concerned in the management of a company, the court shall have regard in particular to the matters mentioned in Schedule 1 to the Act."

The judge went on to say on page 174:

"I would for my part endorse the division of the potential 15-year disqualification period into three brackets, which was put forward by Mr Keenan for the official receiver to Harman J in the present case and has been put forward by Mr Charles for the official receiver in other cases, viz.: (i) the top bracket of disqualification for periods over 10 years should be reserved for particularly serious cases.  These may include cases where a director who has already had one period of disqualification imposed on him falls to be disqualified yet again.  (ii) The minimum bracket of two to five years' disqualification should be applied where, though disqualification is mandatory, the case is, relatively, not very serious.  (iii) The middle bracket of disqualification for from six to 10 years should apply for serious cases which do not merit the top bracket."  

6.        Plainly this case is not binding upon us but aspects of the Sevenoaks decision have already been referred to and indeed adopted by the Courts of Jersey.  The case of Dimsey [2000] JLR 401 is one such case.  Dimsey case was decided prior to the incorporation of the European Convention on Human Rights as a matter of domestic law but the Court of Appeal noted nonetheless that the objective of the relevant provisions of the 1991 Law is not punishment but protection of the public, and accordingly the disqualification provisions to do not constitute a "penalty" within the meaning of the Convention but a protective step.  In Dimsey, Smith JA giving the judgment of the Court of Appeal said this at page 409:

".. we refer to and adopt the remarks of Dillon LJ in Re Sevenoaks Stationers (Retail) Ltd on the similarly-worded portion of s.6 of the Company Directors Disqualification Act 1986 ([1991] Ch at 176):

"The test laid down ... is whether the person's conduct ... 'makes him unfit to be concerned in the management of a company'.  These are ordinary words of the English language and they should be simple to apply in most cases.  It is important to hold to those words in each case.""

7.        Having referred to the relevant principles, we now turn to the facts of this case.  Under Article 18 of the 1990 Law, the debtor has a duty to cooperate with the Viscount in the various ways set out in the article:. 

"18      General duties of debtor

(1)     In addition to every other duty imposed on the debtor by this Law or any other enactment or by law, the debtor shall, to the utmost of the debtor's power, aid the Viscount in the realization of the debtor's property and the distribution of the proceeds amongst the debtor's creditors, and, more particularly, shall -

(a)     give a complete and accurate list of the debtor's property and of the debtor's creditors and debtors and such other information as to the debtor's property as the Viscount requires, and attend before the Viscount whenever called upon to do so;

(b)     disclose to the Viscount as soon as practicable any property which may be acquired by the Viscount during the course of the désastre;

(c)     execute an assignment in favour of the Viscount of any property which has been acquired by, or has devolved upon, the debtor since the date of the declaration;

(d)     supply such information regarding his or her expenditure and sources of income after the declaration as the Viscount may require;

(e)     deliver on demand all or any of the debtor's property that is divisible amongst the debtor's creditors and is under the debtor's possession or control to the Viscount or anyone authorized by the Viscount to take possession of it or any part thereof;

(f)      deliver on demand to the Viscount or anyone authorized by the Viscount any property that is acquired by the debtor during the course of the désastre;

(g)     notify the Viscount immediately in writing of any change of the debtor's address, employment or name.

(2)     If the debtor is a company, an incorporated limited partnership or a limited liability company, a person who is or was at the time of the declaration any of the following must, as soon as reasonably practicable in writing, notify the Viscount of any change to the person's address, employment or name -

(a)     a director of the company;

(b)     a manager of the limited liability company or a member of the limited liability company involved in its management; or

(c)     a general partner of the partnership. [48]

(2A)   If a person without reasonable excuse fails to comply with a requirement of paragraph (1) or (2) he or she commits an offence and is liable to imprisonment for a term of 6 months and a fine."

8.        Mr Mills did not cooperate with the Viscount as he was required under Article 18.  He was the sole director and the controlling mind of the Company, which was declared en désastre on 24^th February 2020.  As a result, Mr Mills was required to assist the Viscount in the realisation of the Company's property and the distribution of its proceeds.  In fact Mr Mills, although he was prepared to discuss matters on the telephone with a representative of the Viscount from time to time, did not respond properly or (frequently) at all to the correspondence sent to him.  He repeatedly promised to provide the director's questionnaire to the Viscount, which was sent to him on 2^nd March 2020; he promised to do so "today" on more than one occasion but did not.  Despite further deadlines and failed promises, he eventually sent the information in terms of a partially completed questionnaire to the Viscount on 11^th June 2021 - over 15 months after he was first requested to do so.  The questionnaire was, as we have said, partially completed and was described by the Viscount as "woefully inadequate".  It led to a further extensive request for information in late June 2021 which Mr Mills has failed to reply to at all, although he has certainly received it and indicated that he would reply.  The Viscount was forced to incur the costs of instructing an English law firm to assist her in making contact with Mr Mills and forced to instruct an enquiry agent as at one stage he moved home without notifying the Viscount of his new address.  He repeatedly asked for additional time to assist the Viscount with her enquiries on the grounds of ill health, but he never evidenced that ill health despite being requested to do so.  The Viscount's officer who swore the affidavit in support of the application expressed the view, with which we agree, that Mr Mills was "evasive".

9.        The information requested in March 2020 has in large part not been received.  A chronology prepared to us on behalf of the Viscount was shown to us and is detailed proof of the extent to which Mr Mills delayed, prevaricated, misled and ultimately failed to assist the Viscount.  Furthermore, the Viscount discovered in November 2020 that Mr Mills had, shortly before he was initially contacted by the Viscount, and just after the declaration the Company was en désastre, incorporated an English company with a similar name to that of the Company.  The date of incorporation was 2^nd March 2020 and when Mr Mills last corresponded with the Viscount's representatives acknowledging receipt of this application he did so in his capacity (as recorded by the email) as CEO and Managing Director of SPARC Group Development Limited from an address at St James Place in London.  Mr Mills has failed to explain any connection between the activities of this new entity and those formerly carried out by the Company. 

10.      Mr Mills has failed to reply to any substantive correspondence from the Viscount since promising a "reply early next week" on 25^th June 2021, save to say that he was away until 9^th July 2021 "staying with family".  The Viscount did not hear from him again save in correspondence to acknowledge receipt of this application, in which he said that he was currently staying with friends in Somerset prior to leaving for South Africa and returning early next year.  He has not obtained representation in relation to this application or corresponded with the Court or the Viscount setting out any reasons as to why this application should not proceed or be dealt with on its merits. 

11.      In short, Mr Mills has not cooperated with the Viscount, nor has he provided information requested in relation to the Company.  He has, on the face of it, although there has been no investigation or prosecution, committed an offence under Article 18(2A) of the 1990 Law.

12.      No assets have been realised, notwithstanding the fact that the claims filed in the bankruptcy amount to £212,808.  The principal creditor provided indemnity funding of £10,000 to meet the costs of the administration of the bankruptcy.  This sum has now been exhausted and the Viscount has incurred additional costs exceeding £5,000. 

Our decision

13.      In our view Mr Mills has flagrantly breached the obligations he owed under the 1990 Law.  He has misled the Viscount on numerous occasions and breached the obligations that he owed to the Viscount.  This has affected the Viscount's ability to discharge her functions pursuant to the 1990 Law.  He has refused to engage properly with the bankruptcy process and as we have said, breached the obligations he owed under the 1990 Law, Article 18 in particular.  Bearing in mind that an order for disqualification is designed to protect the public and bearing in mind the position of Jersey as a finance centre and the need to ensure that directors in the place of Mr Mills comply with their obligations under statute a lengthy period of disqualification is warranted.  We have no doubt that Mr Mills is a person unfit to be concerned in the management of a body corporate. 

14.      The Viscount argued that the term of disqualification in this case should be no less than 10 years and drew our attention to a decision of the English courts in 2016 where a Mr Samuel Henriot was disqualified for 10 years for failing to cooperate with an investigation conducted by the UK insolvency service.  Unfortunately the reasoned decision in that case is not to hand but other authorities from Jersey and England and Wales have been drawn to our attention.

15.      We have come to the decision, independent of the findings of the English Court in the Henriot case that the appropriate period of disqualification in this case is 10 years.  Accordingly, Mr Mills is disqualified in accordance with Article 78 on the footing that he is unfit to be concerned in the management of a Jersey company for a period of 10 years and may not, without leave of the Court, be a director of or in any way whether directly or indirectly be concerned or take part in the management of a company; be a member of the council of a foundation incorporated under the Foundations (Jersey) Law 2009 or in any other way directly or indirectly be concerned or take part in the management of such a foundation; or in Jersey in any way whether directly or indirectly be concerned or take part in the management of a body incorporated outside Jersey. 

16.      In terms of the advertising of the Court's decision in respect of disqualification we order that the notice of disqualification be placed in the Jersey Gazette, the London Gazette and the equivalent publication in Dubai, and we order that Mr Mills pay the costs of this application on the standard basis to be taxed if not agreed. 

Authorities

Bankruptcy (Désastre) (Jersey) Law 1990. 

Companies (Jersey) Law 1991. 

Company Directors Disqualification Act 1986. 

Sevenoaks Stationers (Retail) Limited [1991] Ch 164. 

Dimsey [2000] JLR 401. 

Foundations (Jersey) Law 2009