Scottish Court of Session Decisions

OUTER HOUSE, COURT OF SESSION

[2015] CSOH 45

P839/14

OPINION OF LORD DOHERTY

In the petition of

HER MAJESTY’S SECRETARY OF STATE FOR BUSINESS, INNOVATION AND SKILLS

Petitioner;

against

ANDREW PAGE DRUMMOND

Respondent:

For a disqualification order under the Company Directors Disqualification Act 1986

Petitioner:  Thomson;  Burness Paull LLP

21 April 2015

[1]        Her Majesty’s Secretary of State for Business, Innovation and Skills (the petitioner) seeks a disqualification order in terms of section 6 of the Company Directors Disqualification Act 1986 in respect of Andrew Page Drummond (the respondent).  The present application comes before me unopposed, as the respondent has not lodged answers.  I am satisfied that it has been duly served and that the application is properly before me.

[2]        The respondent was a director of West Court Developments (Dundee) Limited (“the company”) from its incorporation on 10 August 2007 until he resigned as a director on 11 November 2010.  Following the respondent’s resignation the company was without appointed officers until its dissolution on 3 February 2012.

[3]        The principal activity of the company was the carrying on of property development, letting and sales.  The principal asset of the company is a portfolio of over 40 flats and townhouses at a property development site at 26 Milton Street, Dundee.  The company acquired and developed the portfolio using funds loaned to it by AIB Bank.  The company also owns land at the rear of 337 and 339 Strathmore Avenue, Dundee.  That land consists of car parking and it lies adjacent to the development site at 26 Milton Street.

[4]        On 23 August 2007 the company granted a floating charge in favour of the AIB Bank over the whole of its property.  Clause 8.3 of the floating charge provided:

“Except with the written consent of [AIB Bank], no part of the heritable, real or leasehold property of the company … shall be sold or otherwise disposed of …”

On the same date the company also granted a standard security in favour of AIB Bank over the properties at 26 Milton Street.  The standard security was registered in the Land Register of Scotland on 7 September 2007.  It was a condition of the standard security that the company was not to grant any conveyance, transfer or assignation of the properties to any person without the prior written consent of AIB Bank.

[5]        The respondent executed dispositions on behalf of the company in breach of the said conditions in the floating charge.  First, on 15 October 2010 he signed a disposition on behalf of the company disponing properties at 26 Milton Street to Mylnefield Properties Ltd.  The properties had a value of between £6.5 million and £7 million.  No consideration was paid to the company in respect of the transfer.  That disposition was in breach of the floating charge and the standard security.  On 27 September 2010, 22 October 2010, 22 November 2010 and 17 January 2011 the respondent executed four dispositions transferring its interests in the land at the rear of Strathmore Avenue to Zala Properties Ltd.  Those dispositions were in breach of the floating charge, and no consideration was paid to the company for them.  Mylnefield Properties Ltd and Zala Properties Ltd were companies which were connected to the respondent.  In relation to the dispositions executed after 11 November 2010 the respondent was acting as a de facto director of the company.

[6]        At the date the various dispositions were granted the company’s debt to AIB bank was of the order of £5 million.  (As at August 2014 the debt to AIB was £5.7 million and there were ordinary creditors of £137,732.99: see 6/91 of process).

[7]        It is clear that the aim of the various dispositions was to remove the company’s assets from the reach of its creditors, and in particular, its secured creditor.  The respondent knowingly and deliberately attempted to achieve that end.  In doing so he also knowingly and deliberately granted dispositions in breach of the prohibitions contained in the floating charge and the standard security.  All of the transactions had as their object denuding the company of its assets to the benefit of connected persons and to the detriment of its secured creditor.

[8]        On 1 August 2012 the company was restored to the register.  On 21 August 2012 joint administrators were appointed to the company at the instance of AIB Bank.  As a direct result of the respondent’s actions AIB Bank was forced to take steps to appoint the joint administrators and raise proceedings in this court in order to reduce the disposition to Mylnefield Properties Ltd and prevent its registration in the Land Register.  AIB Bank also had to raise proceedings in order to reduce the dispositions to Zala Properties Ltd and seek rectification of the Land Register.

[9]        I have no hesitation in concluding the respondent’s actions amounted to grave misconduct, and that they displayed a serious want of commercial probity such as to render him unfit to be concerned in the management of a company.  The issue therefore is the period of disqualification.

[10]      Having considered Mr Thomson’s submissions together with the petition, the productions and the authorities to which he referred me (In Re Sevenoaks Stationers (Retail) Ltd [1991] Ch. 164; Mithani, Directors’ Disqualification, (2^nd ed.), Vol. 1, paras. 1512, 1518, 1542 - 1551 and the cases discussed therein) I have concluded that any disqualification of less than 10 years would fail to mark adequately the gravity of the respondent’s conduct.  Had the respondent ultimately succeeded in his aim of thwarting the secured creditor I would have disqualified him for 13 years.  Having regard to the way matters have turned out it appears to me that the appropriate course is to disqualify him for a period of 10 years.  Accordingly, I shall grant the prayer of the petition, order that the respondent be disqualified for a period of 10 years, and find him liable to the petitioner in the expenses of the application.