Revenue & Customs v Walsh

J U D G M E N T

1. LORD JUSTICE JONATHAN PARKER: This is an application by Mr Sean Walsh, the defendant in an action brought against him by the Revenue, for permission to appeal from an order made by Laddie J on 7 June 2005, whereby he entered judgment for the Revenue for some £286,000 and costs. The judge refused permission to appeal.

2. Mr Walsh has been most ably represented before me, as he was before the judge, by a Mackenzie Friend, Mr Hennessey Thompson of Messrs Thompson & Co, accountants. I am grateful to Mr Thompson for his very clear and concise submissions.

3. In the action, the Revenue claims that by virtue of sections 216 and 217 of the Insolvency Act 1986 Mr Walsh is personally liable for the debt owed to the Revenue by a company called SG&T Walsh and Company Limited, which went into insolvent liquidation and was subsequently dissolved, and of which Mr Walsh was a director prior to its liquidation.

4. Section 217 of the 1986 Act provides that a person is personally liable for all the relevant debts of a company if (among other things) he has at any time been involved in the management of a company in contravention of section 216. Section 216 applies to a person who was a director of a company immediately before it went into liquidation. So it is not in dispute that it applies to Mr Walsh in relation to his directorship of SG&T Walsh Limited. Section 216(3) provides (so far as material) that, save with the leave of the court, such a person shall not at any time within five years of the commencement of the liquidation, act as a director of or take part in the management of another company that is known by a "prohibited name". The expression "prohibited name" is defined by section 216(2) to mean, in relation to such a person, a name by which the liquidating company was known at any time during the 12 months before its liquidation (see paragraph (a)), or "a name which is so similar to a name falling within paragraph (a) as to suggest an association with that company [that is to say the liquidating company]" (see paragraph (b)).

5. It is common ground that during the relevant five-year period Mr Walsh was a director of a company called Walsh Construction Limited. For the sake of clarity, I will refer hereafter to SG&T Walsh and Company Limited (that is the company which went into liquidation) as "the first company" and to Walsh Construction Limited as "the second company".

6. Thus, the only issue before the judge was whether the name of the second company was a prohibited name for the purposes of section 216(2) as suggesting an association with the first company.

7. In his judgment, the judge cited passages from the judgments of Mummery LJ and Simon Brown LJ in Ricketts v AdValorem Factors Limited[2003] EWCA Civ 1706 which make it clear, as I read them, that the question posed by section 216(2) is not to be addressed in the abstract, simply by looking at the names in question without any regard to context, but (as Mummery LJ put it in paragraph 22 of his judgment in Ricketts, "in the context of all the circumstances in which they were actually used or likely to be used".

He went on to say that that would include "the types of product dealt in, the locations of the business, the types of customers dealing with the companies, and those involved in the operation of the two companies".

8. The judge then turned to the facts. The facts which he considered to be of primary relevance in the present context were: (1) that both companies claimed to carry on business as building and civil engineering contractors (albeit their businesses were not identical); (2) that, for a period of time at least, both companies shared the same trading address (274 Wellington Road South, Hounslow); and (3) that Mr Walsh was part of the "face" of both companies.

9. The judge rejected Mr Walsh's argument (presented by Mr Thompson) that use of a common name such as Walsh could not constitute a breach of section 216. In paragraph 33 of his judgment the judge said this:

"I have considered all of the factors relied upon by Miss Markham [for the Revenue] in her submissions, and the clear and persuasive arguments from Mr Thompson advanced on behalf of Mr Walsh. I have come to the conclusion that those factors relied upon by Miss Markham, to which I have referred above, together make it likely or probable that the reasonable customer, or member of the public, who knows of these two companies would associate Walsh Construction Limited with SG & T Walsh Company Limited. It follows that the claimant succeeds on this action."

10. By his grounds of appeal Mr Walsh seeks to challenge the judge's judgment on two grounds. However, in his excellent oral submissions this morning, Mr Thompson has understandably abandoned those grounds; rather, he repeats, in effect, the submissions of law which he made to the judge. He contends that in order for the statutory scheme in sections 216 and 217 to be brought into play, there must be similarity between the two names. Absent the requisite degree of similarity one never gets as far as considering the wider context referred to in Ricketts. He submits that the names in question in the present case are not sufficiently similar to bring the statutory mechanism into play. He relies on a passage in the judgment of Simon Brown LJ in Ricketts, where he said this:

"As stated in section 271 of Bennion on Statutory Interpretation, 4th Edition, at p705, the court should strive to avoid adopting a construction which penalises someone where the legislator's intention to do so is doubtful, or penalises him in a way which is not made clear. With this well-established principle of construction in mind I would construe the phrase 'as to suggest' in s216(2)(b) rather more stringently than indicated by the judgment below. To my mind the similarity between the two names must be such as to give rise to a probability that members of the public, comparing the names in the relevant context, will associate the two companies with each other, whether as successor companies or, as here, as part of the same group."

11. Mr Thompson compares with that passage paragraph 33 of Laddie J's judgment in the instant case, which I quoted earlier. Mr Thompson submits that Laddie J has in effect allowed the context to superimpose itself upon the statutory test. He submits that the effect of Laddie J's judgment would be to find a similarity between two names which were essentially dissimilar, simply by reason of the factual context in which those names were likely to be used. He submits that that represents an arguable error of law on the part of the judge in respect of which permission to appeal should be granted.

12. The difficulty which Mr Thompson faces, as I think he readily acknowledges, is the decision of this court in Ricketts. As I read the judgments in that case, they state clearly (as I indicated earlier) that the test is not simply an abstract one, but one in which the wider context comes into play. Of course there must be a degree of similarity between the two names before any question of a wider context arises. But in the instant case, in my judgment, there is plainly that requisite degree of similarity to bring into play the wider context.

13. Having given every consideration to Mr Thompson's careful and persuasive submissions, I am nevertheless of the view that, faced with the decision of this court in Ricketts, a decision which would be binding on the full court on any appeal in this case, the proposed appeal raises no arguable point of law. Accordingly I conclude, despite everything that Mr Thompson has most ably said, that there is no real prospect of this proposed appeal succeeding.

14. Accordingly, for those reasons, I dismiss this application.

(Application dismissed; no order for costs).