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Secretary of State for Trade & Industry v Andrew Russell Ashman (1998)

Summary

Whether directors involved in collapse of Atlantic Computers plc and British & Commonwealth Holdings plc should be disqualified under s.8 Company Directors Disqualification Act 1986.

Facts

Atlantic Computers plc ('ACP'), a computer leasing company, was bought by British & Commonwealth Holdings plc ('B&C') for #408 million on 1 September 1988. In April 1989 Atlantic was found to be subject to contingent liabilities estimated at #150 million in respect of its computer leasing business, mostly within Atlantic Computer Systems plc ('ACS'), none of which had been disclosed or provided for in its accounts. ACP's 1988 accounts and, in due course, B&C's 1988 accounts were approved by their respective boards without having made their auditors aware of this discovery. Attempts to assess and deal with the underlying problem were lengthy and ultimately unsuccessful. This was by no means the only problem within Atlantic and in April 1990 administrators were appointed in respect of ACP. In June 1990 an administration order was also made in respect of B&C. Following the collapse of these companies, the Secretary of State for Trade and Industry appointed Inspectors under s.432(2) of the Companies Act 1985 to investigate the affairs of ACP and ACS. Their investigation was broadened to cover the relevant affairs of B&C as well. The report was published in July 1994. On 13 March 1995 the secretary of state commenced these proceedings under s.8 of the Company Directors Disqualification Act 1986 against nine respondents, contending that their conduct as directors of one or more of ACP, ACS and B&C showed them to be unfit to be concerned in the management of a company and that they ought each therefore to be disqualified from so acting for a period. Three of the respondents had been disqualified for different periods by orders made before the start of the trial and this hearing was therefore concerned with six, of whom one, Mr Tompkins (the ninth respondent) had admitted the charges against him for the purposes of the proceedings, and only argued about the period of any disqualification. The others were: Mrs Cheng, (second respondent) group finance director of ACP in 1988 and 1989, Mr McCormick, (seventh respondent) chief executive of ACP in 1988 and 1989, Mr Penny, (eighth respondent) chief executive of ACS in 1988, Mr Ashman, (first respondent) group finance director of B&C in 1988 and 1989 and Mr Gunn, (fifth respondent) chief executive of B&C in 1988 and 1989.

Held

(1) These proceedings were not a review of the fate of Atlantic and B&C and the causes thereof or of the correctness of the Inspectors' conclusions. Nor was it the task of the court to consider whether the conduct of the respondent directors generally, in relation to B&C, ACP and ACS made it appropriate that they should be disqualified from being a director for a time. (2) The court was concerned with whether the conduct of each respondent, in specific respects identified in charges put forward by the secretary of state, showed him or her to be unfit to be concerned in the management of a company and, if so, whether he or she should be disqualified for some period. (3) The judge accepted most of the 24 findings of fact which the secretary of state invited him to accept and used these as the underlying factual basis when considering the charges. (4) Six of the nine charges against Mrs Cheng were found proved. Five out of the eight charges against Mr McCormick were found proved in whole or in part. The conduct so proved showed each of these respondents to be unfit to be concerned in the management of a company. (5) The charges against Mr Penny, Mr Ashman and Mr Gunn were not proved, the secretary of state not having satisfied the judge that any of these three were unfit to be concerned in the management of a company. (6) The judge considered the various discretionary factors put to him by Mr Tompkins and on behalf of Mrs Cheng and Mr McCormick. It was right that each of Mr Tompkins and Mrs Cheng should be disqualified under the 1986 Act for a period of seven years and Mr McCormick for six years. (7) No aspect of the lapse of time relied on should be grounds for refraining from disqualifying a respondent found to be unfit. The proceedings were substantial and onerous but arose from a full investigation by the Inspectors of a very serious and substantial corporate collapse and did not render it unfair or inappropriate to follow the proper prima facie course of disqualification. The lapse of time was however borne in mind when fixing the period of disqualification.

Judgment accordingly.

Chancery Division (Companies Court)
Lloyd J
Judgment date
15 June 1998
References

LTL 15/6/98

Practice areas