Feld v The Secretary of State for Business, Innovation And Skills

On 25 March 2014 I heard the appeal of Mr Robert Philip Feld against the disqualification order made by Registrar Derrett on 30 July 2013 against Mr Feld under section 6 of the Company Directors Disqualification Act 1986 (the “CDDA”) on the application of the Secretary of State for Business, Innovation and Skills (the “Secretary of State”) in relation to Mr Feld’s conduct as a director of Aerospace & Technical Engineering Ltd (“ATEL”). At the conclusion of the hearing, I dismissed the appeal, briefly giving my reasons and indicating that I would provide a written judgment in due course. This is that judgment.

At the beginning of the hearing I was asked to rule on an application by Mr Feld dated 24 March 2014 seeking an adjournment of the appeal on the basis that he would be absent for business reasons and unrepresented by counsel. I refused the application for an adjournment, giving detailed reasons, and then proceeded to hear the appeal.

In her order dated 15 October 2013 giving permission to appeal, Mrs Justice Proudman had directed Mr Feld to prepare a full appeal bundle within 35 days of the service of the order, complying with the provisions of PD 52B para. 6.4. He failed to do this within the time stipulated or, indeed, at all. I had, however, the benefit of an appeal bundle prepared by the Secretary of State. This bundle appeared to include all of the documents required under PD 52B para. 6.4(1) and a number of other documents permitted to be included under PD 52B para 6.4(2).

In particular, for the purposes of this appeal, I had the benefit of Registrar Derrett’s written judgment dated 30 July 2013 giving her reasons for making the disqualification order, in which, in addition to giving her reasons, she carefully set out the procedural background ([4] to [14]) and factual background ([15] to [21]) of the matter and dealt in some detail with the submissions of both the Secretary of State and Mr Feld at the trial on 13 June 2013 of the Secretary of State’s application for a disqualification order against Mr Feld. I also had the benefit of the Appellant’s Skeleton Argument for permission to appeal, the Appellant’s Notice dated 19 August 2013 and the Appellant’s skeleton argument on its application for permission to appeal, the Amended Appellant’s Notice dated 26 September 2013 and the Appellant’s supplemental skeleton argument for permission to amend the Appellant’s Notice.

Mr Feld filed his Notice of Appeal on 19 August 2013, setting out his grounds of appeal, and prepared an Amended Notice of Appeal dated 26 September 2013, which was considered by Proudman J at the hearing of the application for permission to appeal on 15 October 2013. In her order giving permission to appeal, Proudman J expressed doubt about the additional ground (which I shall refer to as the “serious procedural irregularity ground”) that had been added in the Amended Notice of Appeal dated 26 September 2013, but she concluded that it was right to permit Mr Feld to advance all of his arguments in a case of this seriousness. The appeal was listed and came before me on 25 March 2014, together with an application by Mr Feld to adjourn, which I refused, as I have already noted.

Regarding the factual background, I cannot materially improve upon or shorten Registrar Derrett’s admirably concise summary in her judgment I set it out below: “15. On 1 April 1997 Mr Feld was disqualified from acting as a director of a limited company for a period of ten years by order of Wood Green Crown Court. The order was made pursuant to section 2 of the CDDA in criminal proceedings arising out of Mr Feld’s directorship of Resort Hotels Plc. Mr Feld was found to have issued an inflated profit forecast and was jailed for eight years for fraud. The sentence was reduced to six years by the Court of Appeal.

“16.

Mr Feld conducted business as a sole trader under the trading name of ‘Aerospace and Technical Engineering’ since about 1 December 2003. His business was that of precision manufacturing, serving various industrial sectors.

“17.

ATEL was incorporated on 11 November 2003 and traded as a precision subcontract engineering machinist business. Its directors from incorporation were Mr Swan and Mr Scott The company’s incorporation arose out of the fact [that] the lease of the premises from which Mr Feld traded had to be held in the name of the limited liability company and, as a result the employees and business of the sole tradership had to also be transferred.

“18.

By application dated 13 April 2004, Mr Feld sought permission to act as a director pursuant to section 17 CDDA. Mr Feld’s application was supported by affidavits from himself, Mr Swan and Mr Scott. The application came before District Judge Parker in the Croydon County Court on 22 June 2004. The order gave permission (the Order):

a.

for Messrs Swan and Scott to appoint Mr Feld as a director of ATEL; and

b.

for Mr Feld to serve as a director of ATEL.

“19.

The permission given to Mr Feld was subject to the following express conditions:

‘i) That the Third Claimant [Mr Feld] will (provided that the Third Claimant is at the time a director of the First Claimant),

a.

Cease trading as a sole trader under the name of Aerospace and Technical Engineering.

b.

Pay off, in full, his creditors.

ii)

Transfer his business, without consideration, to the First Claimant, [ATEL]. That the First Claimant will trade in place of Aerospace and Technical Engineering.

iii)

That as from the appointment of the Third Claimant as a director of the First Claimant, the following conditions will apply -

a.

That the Second Claimant Stephen Swan will at all times remain a director of the First Claimant and will remain responsible for the finances of the First Claimant

b.

That the Third Claimant will be eliminated from any responsibilities for, or to have any hand in, the finances of the First Claimant save those responsibilities imposed by law on the Third Claimant by virtue of being a director of the First Claimant and in attending board meetings.

c.

That the Second Claimant Fraser Scott will at all times remain a director of the First Claimant.

d.

That the Third Claimant and his wife Tam Feld wil continue to be shareholders of the First Claimant’

“20.

Mr Feld was appointed director of ATEL on 13 January 2005. On 17 January 2005 he ceased to trade as a sole trader. At the material times ATEL’s accountants were Sterling Milne LLP (latterly Reeves & Neylan) and its bankers were Barclays Bank.

“21.

ATEL was placed into liquidation on 17 January 2008, The statement of affairs showed a total deficiency as regards creditors of £1,103,180.32. The largest category of creditors claims were HMRC and trade and expenses creditors at £480,000 and £296,548 respectively.”

To make a disqualification order against Mr Feld under section 6 of the CDDA, Registrar Derrett had to be satisfied that Mr Feld was a director of a company which at any time had become insolvent and that his conduct as a director of that company made him unfit to be concerned in the management of a company. It was not in dispute that Mr Feld was a director of ATEL and that ATEL became insolvent. The sole issue for the judge to determine, therefore, was whether Mr Feld’s conduct as a director of ATEL was such as to make him unfit to be concerned in the management of a company.

The Secretary of State made his application on the basis that Mr Feld’s unfitness to be concerned in the management of a company was demonstrated by his having breached the terms of the order made by District Judge Parker on 22 June 2004 in the Croydon County Court (the “Order”), and in particular his breach of the restriction in condition (iii)(b), which is set out in full along with the other conditions in the Order, in Registrar Derrett’s judgment at [19].

The Secretary of State submitted that there were numerous instances of Mr Feld’s activity as a director of ATEL showing that he had “responsibility for” or a “hand in” (in the sense of being involved in) the finances of ATEL that did not fall within the words “save those responsibilities imposed by law on the Third Claimant [Mr Feld] by virtue of being a director of the First Claimant [ATEL] and in attending board meetings”.

The Claimant’s evidence of these instances was ultimately unchallenged by Mr Feld and was summarised by Registrar Derrett in [35] to [40] of her judgment. She concluded at [41] that “it appears that the only aspect of the Company’s finances that [Mr Feld] did not undertake was the signing of cheques. I am satisfied that his involvement is evident from the face of the various documents (including key finance documents) which have been exhibited and the evidence of the three parties who had contemporaneous dealings with Mr Feld in his capacity as a director of ATEL. In my judgment the unchallenged evidence demonstrates that Mr Feld exercised an element of responsibility over these matters, whether that was to the complete exclusion of his co-directors or not.”

At the trial, Mr Feld put his case, in summary, as follows:

Counsel for Mr Feld conceded that the draft of the Order made by District Judge Parker had been prepared by Mr Feld (and his co-applicants, Mr Swan and Mr Scott) and that District Judge Parker had made the Order in the terms requested. Mr Feld had also given an undertaking on that occasion (as had at least one, if not both, of the other applicants) to go back to the court within 7 days of becoming aware that any of the conditions of the Order were not being met or could not be met. He never did. In relation to this undertaking, Registrar Derrett said (at [123]):

“I accept that if you did not appreciate that what you were doing did not comply with the order you would not know that you needed to go back to court, but it suggests that the District Judge having taken account of the background was concerned to ensure that the public was adequately protected and placed a further obligation on the applicants. It does in my judgment mean that if Mr Feld was in any doubt about what he was allowed to do he should have gone back to the court.”

In their submissions below, Counsel for both parties addressed in some detail the proper approach to interpreting a court order, on which there is apparently little direct authority. As these arguments were raised again for the appeal, I will consider them further below.

Registrar Derrett concluded that the Order was not incoherent and that it could be easily understood by reference to the plain and ordinary meaning of the words used in the Order. I have already noted her conclusion that the undisputed evidence presented by the Secretary of State demonstrated Mr Feld’s having responsibility for the finances of ATEL beyond those responsibilities imposed by law and involvement in the finances of ATEL beyond attending board meetings. At [126] of her judgment, she concluded that the Secretary of State’s evidence contained “many examples of Mr Feld operating outside the terms of the permission which he was granted” by the Order.

Registrar Derrett concluded that these breaches formed a sufficient basis for her conclusion that Mr Feld’s conduct as a director of ATEL made him unfit to be concerned in the management of a company, and that she was therefore obliged by section 6(1) of the CDDA to make a disqualification order under that section against Mr Feld.

As to the length of the disqualification, section 6 requires a minimum period of two years’ disqualification and permits a maximum period of 15 years’ disqualification. Registrar Derrett concluded that the appropriate disqualification period was one of 12 years, in light of the fact that:

Registrar Derrett gave Mr Feld credit of 14 months against the 12 years’ disqualification in light of the undertaking he gave the court in May 2012 not to act as a director pending resolution of the disqualification proceedings, reducing the remaining period of the disqualification at the time she made her disqualification order to 10 years and 10 months.

Mr Feld appealed the disqualification order of Registrar Derrett on the following grounds:

Mr Feld added a further alternative ground of appeal to his Amended Appellant’s Notice dated 26 September 2013, which I have referred to above as the “serious procedural irregularity” ground. The Secretary of State made no attempt to agree the trial bundles with Mr Feld, as a result of which failure the only legible copy of the Order appeared in a place where it was not referred to or identified by any witness during the trial. The only copy of the Order that was referred to by a witness was “illegible and/of incomplete”.

In the event that the appeal did not succeed in relation to the making of the disqualification order, Mr Feld asked this court to reduce the length of disqualification imposed by Registrar Derrett on the grounds that the judge, in determining the length of disqualification, did not take into “proper account” (meaning, presumably, take into account or, if taken into account, give proper weight to):

Judging by the detailed accounts of the submissions made by counsel during the trial in the judgment below, there was considerable discussion before the judge as to the correct principles to apply to the interpretation of the Order and whether the subjective intention and understanding of Mr Feld as to the Order was relevant to that interpretation.

Dealing first with the proper approach to interpretation of the Order, Registrar Derrett relied in her judgment on the principles for the interpretation of contractual documents outlined by Lord Hoffmann in his speech in the case of Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896, 912F-9I3E. In his Amended Appellant’s Notice and in his Skeleton Argument in support of his application for permission to appeal, Mr Feld says that this was the wrong approach to interpretation of a court order, and this therefore led her into error. In my view, there is little substance in this argument.

It is, strictly speaking, correct that in West Bromwich Building Society Lord Hoffmann was concerned with principles applicable to the interpretation of a contractual document rather than a court order. There appears to be little direct authority on the proper approach to interpretation of a court order, but the Court of Appeal decision in R v Evans [2004] EWCA Crim 3102 at [15] provides support for the proposition that the proper approach to interpretation of a court order is, broadly, to apply the principles of statutory interpretation. I say “provides support” because Lord Justice Dyson in his judgment in Evans at [15] does not state the foregoing proposition directly. He refers to observations of Lord Reid in Cozens v Brutus [1973] AC 854 and of Lord Hoffmann in Moyna v Secretary of State for Work and Pensions [2003] 1 WLR 1929, which are concerned with a narrower point (namely, the distinction between the meaning of a word, which is a question of fact, and the construction of a sentence using that word, which is a question of law) in the context of statutory interpretation and says that those observations “apply equally to the interpretation of a court order as they do to a statute”.

In her judgment at [118], Registrar Derrett refers to Wood v Rost [2007] EWHC 1511 (Fam), which concerns the proper approach to interpretation of a consent order. This provides some assistance in that it confirms that, when construing a consent order, one should have regard to the “surrounding circumstances” or the “relevant background”. She describes this as consistent with the fourth principle enunciated by Lord Hoffmann in West Bromwich Building Society (at p 913C), namely, that the meaning of a document is what the parties using the words in the document against the relevant background would reasonably have been understood to mean.

Mr Feld’s counsel in his skeleton argument on the application for permission to appeal distinguishes West Bromwich Building Society and Wood v Rost on the basis that, in each case, the court is seeking to give effect to the intention of the parties. The principles in these cases are not, therefore, the correct principles to use in interpreting a court order that is not a consent order, such as the Order in this case.

There is some force in this argument, although it is worth noting that Registrar Derrett found, as Mr Feld’s counsel had conceded, that the terms of the Order were drafted by Mr Feld and his co-applicants, and that the Order was made by District Judge Parker essentially as requested, bringing this case closer to the position of a consent order than would be the case in relation to other court orders where the party to whom the order is directed has not been involved in the drafting of it.

In a court order; one is concerned with the intention of the court in making the order, and this is closer to the exercise involved in construing the intention of the legislature when enacting a statute than it is to construing the intention of parties to a contract. On the other hand, it would be a rare and unusual case where a person to whom a statutory provision was to be applied (in a civil or criminal proceeding where the meaning of the statutory provision was at issue) had been involved in the drafting of that provision. But where a court order is to be applied to a person, such as Mr Feld, who had a hand in drafting the terms of the order, the court should be entitled to have regard, as part of the exercise of construing the order, to what that person could reasonably have been thought to have intended in drafting the order in a particular way, as far as that may be objectively determined on the basis of the evidence presented to the court.

The interpretation of a court order cannot be entirely assimilated to the exercise of interpreting a contract nor can it be entirely assimilated to the exercise of interpreting a statute. In all three cases, however, the common starting point is the natural and ordinary meaning of the words used in light of the syntax, context and background in Which those words were used. What additional principles and factors come into play as part of the court’s exercise of interpretation will depend on the nature of the writing to be interpreted (contract, court order or statute) and, of course, will be highly dependent on the facts of the specific case. In the context of statutory interpretation, Lord Reid pointed out in Cozens v Brutus, and Lord Hoffmann in Moyna, the importance of interpreting the natural and ordinary meaning of the words used in the relevant statute in light of the “syntax, context and background” in which those words were used (Moyna at [24], quoted by Dyson LJ In Evans at [14]).

Dyson LJ, as already noted, confirmed in Evans that these observations also apply to interpretation of a court order. It is quintessentially the job of the relevant tribunal to carry out this exercise based on its findings of fact on the basis of the evidence it accepts. It seems to me that, while the reference of Registrar Derrett to the principles of contractual interpretation in West Bromwich Building Society is not entirely apposite to the exercise of interpreting a court order, for the reasons given above, her actual approach to the interpretation of the Order is entirely consistent with the proper approach to interpretation of a court order as outlined by Dyson LJ in Evans, In other words, she applies the principles that she draws from West Bromwich Building Society that are also relevant to interpretation of a court order to interpretation of the Order in this case, namely, what she refers to (at [115] to [117]) as the first, fourth and fifth principles of interpretation set out by Lord Hoffmann (in West Bromwich Building Society at pp 912H- 913E). Of course, to do so in relation to a court order one must read the references in those principles to “the parties” as a reference to the court making the relevant order. Lord Hoffmann’s second principle would also apply. The third principle would not be relevant, but there is no indication in Registrar Derrett’s judgment that she considered Lord Hoffmann’s third principle as somehow relevant to her exercise.

Mr Feld says that a court order that prohibits a person from taking some action should be capable of being understood, and that if a person is to be held to account for failing to comply with the order, the order should be capable of being understood without significant difficulty. Registrar Derrett found that the Order was capable of being understood Without significant difficulty. I agree.

Mr Feld says that Registrar Derrett should have interpreted the Order without reference to the understanding of Mr Feld. Registrar Derrett made it clear at [116] of her judgment that she did not have regard to the subjective understanding of Mr Feld as to the meaning of the Order in construing the Order. She was of the view, however, that she was entitled to consider the position of a reasonable person in the position of Mr Feld as part of her exercise of construing the Order. That is a separate exercise from the exercise of determining Mr Feld’s understanding of the Order for the purpose of determining the degree of his culpability in breaching the Order.

As Dyson LJ pointed out in Evans at [21], “Acting under a reasonable misapprehension as to the scope and meaning of the order is capable of being a reasonable excuse for acting in a manner which is prohibited by the order.” Although Dyson LJ was considering this question in the context of an order made under a statutory provision (in that case, section 5(5) of the Protection from Harassment Act 1997) which requited the prosecution to prove that the defendant acted “without reasonable excuse”, it is clearly generally relevant to the culpability of a person who has acted in breach of an order (as Registrar Derrett found in relation to the Mr Feld) whether and, if so, to what extent that person was under a reasonable misapprehension as to the scope mid meaning of the order. That, in turn, is related to the question, discussed above, whether the order is capable of being understood without significant difficulty. Registrar Derrett found that it was (correctly in my view), and therefore she has quite properly taken into account her finding that Mr Feld “knew exactly what the Order meant” as part of her determination of his culpability for purposes of fixing the length of the disqualification order, to which I shall return below.

In short, I find no merit in the argument put forward by Mr Feld that Registrar Derrett was led into error in her interpretation of the Order by virtue of her having had regard to Mr Feld’s understanding of the Order. She explained the limited extent to which it was relevant to her construction of the Order, as I have already discussed, and confirmed that his subjective understanding of the Order was not relevant to her construction of the Order.

Registrar Derrett found, as a matter of law, that the words used in condition (iii)(b) of the Order bore their ordinary and natural meaning, interpreting those words in light of the relevant syntax, context and background, which includes looking at the Order as a whole (taking into account, for example, the fact that Mr Swan will “remain responsible for the finances of the First Claimant [ATEL]” under condition (iii)(a)).

Registrar Derrett rejected the argument that the Order is “obtuse” and the alternative argument that it is conceptually incoherent. Given that the construction of the Order is a question of law and I am equally capable of reading the Order, I could, in principle, come to a different view. I do not

Based on the undisputed evidence presented by the Secretary of State, Registrar Derrett found numerous clear instances of Mr Feld’s apparent responsibility for or involvement in the finances of ATEL that did not fall within the exception in condition (iii)(b) which reads “save those responsibilities imposed by law on [Mr Feld] by virtue of being a director of [ATEL] and in attending board meetings”.

Those findings are not undermined by the possibility that there could be instances, other than the ones relied on by Registrar Derrett, in which the precise extent of the application of the Order would have been unclear. In other words, it is not essential (or, arguably, even possible) for a court order (or a statute, for that matter) to be clear - as to its application in all possible circumstances in order for it to be capable of being Understood without significant difficulty.

Registrar Derrett found numerous instances of acts by Mr Feld that were clear breaches of condition (iii)(b) of the Order and therefore of his permission under section 17 of the CDDA to be a director of ATEL, by reference to the natural and ordinary meaning of the words used in condition (iii)(b) in light of the relevant syntax, context and background. Those breaches were sufficient in her view to found her conclusion that his conduct in committing those breaches was such as to make him unfit to be concerned in the management of a company with the meaning of section 6 of the CDDA. As already noted, having reached that conclusion, Registrar Derrett was obliged under section 6 of the CDDA to make a disqualification order, whether or not she was of the view that disqualification is necessary in the public interest.

I note in passing that Mr Feld decided, apparently at the last moment before trial, not to challenge the evidence presented by the Secretary of State, but to argue his case before Registrar Derrett on the basis of the linguistic points that I have already discussed. This led to a discussion at trial as to whether the judge was entitled to draw an inference adverse to Mr Feld’s case. Registrar Derrett concluded at [125] of her judgment that she was entitled to draw such an inference “and to conclude that Mr Feld knew exactly what the Order meant, he knew what he was applying for [when he made the application in the Croydon County Court for permission under section 17 of the CDDA] and if he had any doubt he had an obligation to go back to the court”.

Registrar Derrett also found that Mr Feld did not volunteer to ATEL’s bank that he was subject to a disqualification order, but with permission under section 17 of the CDDA, until the bank discovered his disqualification by other means, and he then needed to clarify the position. She considered that this supported her conclusion that he knew that he was operating outside of the terms of his permission. These matters tend to undermine Mr Feld’s argument that he did not understand the Order (as it was either not capable of being understood without difficulty or, worse, not conceptually incoherent), but also, perhaps more importantly, go to an assessment of his conduct and the degree of his culpability in breaching the Order, strengthening the judge’s conclusion as to his unfitness to be concerned in the management of a company.

Mr Feld’s substantive grounds of appeal are therefore rejected.

I can dispose more briefly of the serious procedural irregularity ground of Mr Feld’s appeal. This ground is, in my view, wholly devoid of merit. There was no dispute between the parties as to the terms of the Order. Although in his Amended Appellant’s Notice, Mr Feld refers to “the order alleged to have been made by District Judge Parker” (emphasis added), this is patently disingenuous. Mr Hodkinson on behalf of Mr Feld did not raise a doubt as to whether the Order had been made in his submissions to Registrar Derrett, nor did he raise a doubt regarding the terms of the Order. The trial proceeded on the basis of a common understanding of the parties and the court of the terms of the Order. As I have already noted, Registrar Derrett found that the Order had been made by District Judge Parker in the terms requested by Mr Feld and his co-applicants. She noted that Mr Feld referred to those terms himself in his correspondence with Barclays Bank. Registrar Derrett set out virtually the whole of the Order in her judgment, including condition (iii)(b), which was the focus of Mr Feld’s case.

Even assuming that it is true, which the Secretary of State does not accept, that a complete and fully legible copy of the Order was never formally “referred to or identified by any witness” during the course of the trial, as Mr Feld states in his Amended Appellant’s Notice, it is clear that there was no injustice to Mr Feld resulting from this. If this “procedural irregularity” occurred, it was certainly not serious. This ground of appeal is rejected. Mr Feld’s appeal as to the making of the disqualification order by Registrar Derrett therefore fails.

This leaves the question of the length of the disqualification period. This is a matter for the discretion of the judge, who read and heard the evidence and made her findings of fact, on the basis of which she determined that a disqualification period of twelve years was appropriate. In order to disturb her conclusion on this point, I would need to find that she had erred in the exercise of her discretion to an extent exceeding the generous ambit within which reasonable disagreement is possible.

In reaching her conclusion that a disqualification period of 12 years was appropriate, Registrar Derrett had regard to the fact that Mr Feld had already been subject to a disqualification order imposed by Wood Green Crown Court, in connection with his conviction for fraud, for which he was sentenced to a lengthy term of imprisonment. She also took into account that he was granted relief under the Order from the full effect of his original disqualification and then, notwithstanding the exercise in his favour of judicial discretion made upon his application in the terms and subject to the conditions he had himself requested, he deliberately, repeatedly and knowingly breached the principal condition under which he had been granted that relief. She concluded on the basis of authority that this is a serious matter, putting Mr Feld’s case in the top bracket for length of disqualification period under a disqualification order under section 6 of the CDDA. She did not give much weight to the lack of evidence, conceded by the Secretary of State, that his breach of the Order had contributed to the failure of ATEL, nor was she obliged to given the seriousness of his breach in light of the other factors I have mentioned. Registrar Derrett’s judgment in this regard is in accord with principle and authority, and therefore Mr Feld’s appeal also fails as to the length of his disqualification period.

Mr Feld’s appeal is dismissed.