Frederick Geraint Hawkes v (1) Simone Francesca Cuddy (2) Michael Cuddy (3) Neath Rugby Ltd (2007)


The jurisdiction existed to grant declaratory relief on a petition under the Companies Act 1985 s.459 in relation to a contravention of the Insolvency Act 1986 s.216. Such a declaration would be made where there was no reasonable prospect of an individual being able to deny that he had been in contravention of s.216 of the 1986 Act by having been directly or indirectly concerned and taken part in the management of a company of which his wife was a director, using her name as a means of concealing that he had been a de facto director.


The applicant (H) applied for summary judgment in respect of part of the relief claimed in a petition under the Companies Act 1985 s.459. The respondents (C, M and N) issued a cross-petition and applied to strike out the petition. H applied to strike out the principal claim for relief in the cross-petition. N was a company that owned and managed a rugby club (X) that played in the Welsh premiership. Prior to N's creation, X had been run by a company (G) owned and controlled by the Welsh Rugby Union, of which M had been a director. Following the re-organisation of Welsh rugby, regional teams were established to be owned by existing clubs, and X and another club agreed to own and promote one such team (Y), which was managed by a company of which M was also the director. Thereafter, N acquired X from G. H was the owner and registered holder of one of the two issued shares in N. C was the registered owner of the other share, which she claimed to hold on trust for M, her husband. H and C were the only directors of N. H conducted the daily management of X, whereas C acted as a cipher and mouthpiece for M, who had not been appointed a director because of the risk that he might thereby be acting in contravention of the Insolvency Act 1986 s.216, as he had been a director of G, with the result that he and H could incur personal liability for N's debts under s.217 of the Act. The relationship between H and M subsequently became strained leading to a breakdown of trust and confidence between them. H issued the petition under s.459 of the 1985 Act, which contained a large number of complaints about M's conduct, in particular that he had not advised or warned H that the appointment of C to the board of N, albeit as M's proxy, was not capable of shielding M from a contravention of s.216 if, through his wife, M had been concerned in any way in N's management. The relief sought by H included the making of certain declarations, and an order that H be permitted to purchase the other share in N, or C to buy it from him, at a fair value. C, M and N issued a cross-petition seeking an order that the assets of N, including its share in Y, should be divided and H sell the share in Y and purchase N. C, M and N contended that the whole petition should be struck out on the grounds that it failed to plead any unfair prejudice capable of conferring jurisdiction on the court to grant relief under s.459, and that the inclusion in the petition of claims for relief under s.216 and s.217 of the 1986 Act was objectionable for a variety of reasons, and that if struck out, no basis remained for the share purchase order sought in H's favour. H submitted that the cross-petition could not survive a finding or declaration that M had contravened s.216, and that the claims for "de-merger" relief should be struck out.


(1) The route to relief under s.459 was not confined by reference to equitable principles akin to those applied in partnership cases or cases involving want of good faith. Other types of case might warrant the intervention of the court's jurisdiction under s.459 based on equitable principles, O'Neill v Phillips (1999) 1 WLR 1092 applied. In any event, it was arguable that the statutory prohibition in s.216 had destroyed the foundation of the joint venture agreed by H and M, and M's endeavours to keep it going through C as proxy director had caused, and were causing, prejudice. The jurisdiction existed to grant declaratory relief on a s.459 petition, whether in relation to a contravention of s.216 or on any other ground. In those circumstances, the application to strike out H's petition was dismissed. (2) On the evidence, M stood no real prospect of being able to deny at trial that the name G had traded under prior to its liquidation was not similar to that of N as to suggest an association between them, and that M had been concerned or had taken part in the management of N by intervening in its affairs through, or purportedly on behalf of, his wife, so that the prohibition in s.216 was established. There was no jurisdictional bar to the making of such a finding of fact at the interim stage as the position was clear, and no jurisdictional bar to granting a declaration. On the application for summary judgment, therefore, the court granted a declaration that, in contravention of s.216(3) of the 1986 Act, M had been directly or indirectly concerned and taken part in the management of N or the carrying on of the business of N or both by performing the acts of a director of N in C's name, and using C' s name as a means of concealing that he had been a de facto director of N. (3) In the light of the conclusion that M had contravened s.216 of the 1986 Act, the cross-petition was unsustainable in its present form. The application to strike out the claim for de-merger relief would, therefore, be granted.

Judgment accordingly