Cumbria Roofing Ltd. v Athersmith [2005] EWCA Civ 1442

Case No B2/2005/1104[2005] EWCA Civ 1442
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM LANCASTER COUNTY COURT
(HHJ APPLETON)
Venue Royal Courts of JusticeDate Friday, 4 November 2005
Strand
London, WC2
B E F O R E:
LORD JUSTICE CHADWICK
LADY JUSTICE SMITH
LORD JUSTICE WILSON
Between
CUMBRIA ROOFING LIMITEDRespondent-v-
Between
COLIN NORMAN ATHERSMITHAppellant
(Computer-Aided Transcript of the Stenograph Notes ofSmith Bernal Wordwave Limited190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400 Fax No: 020 7831 8838(Official Shorthand Writers to the Court)
MR MARTIN BUDSWORTH (instructed by Livingstons) appeared for AppellantMR WILLIAM HANBURY (instructed by Keeble Hawson) appeared for Respondent
J U D G M E N T

LORD JUSTICE CHADWICK:

[1]This is an adjourned application for permission to appeal from an order made on 13 April 2005 by HHJ Appleton, sitting in the Lancaster County Court, in proceedings brought by Cumbria Roofing Limited against Mr Colin Athersmith. The application came before Rix LJ at a hearing on 29 June 2005. He ordered that the application be adjourned, to be heard by a court of three on notice with the appeal to follow if permission were granted.[2]The proceedings were commenced by the issue of a claim form in the Sheffield County Court in February 2004. The sole defendant to the claim as issued was named as Telemeter Engineering Limited. The claim was for payment of an invoiced sum of £19,013.85 for the supply and installation of roofing materials. That supply and installation was by way of sub-contract; the main contract being a construction contract between a company called Drawglobe Limited and Cumbria County Council.[3]As originally pleaded, the allegations in the particulars of claim were these. On or about 6 November 2002, Mr Kevin Fisher, the director of the claimant company, Cumbria Roofing Limited, received a telephone call from Mr Athersmith, requesting a meeting at his office at Park Road, Barrow-in-Furness, Cumbria. That meeting took place on or about 8 November 2002. Mr Fisher and Mr Athersmith discussed the supply and installation of roofing materials at a Council owned store situated at Sowerby Wood Industrial Estate, Park Road. Mr Athersmith stated that he had taken over the defendant company (Telemeter Engineering Limited) and produced drawings and plans in respect of the main contract. By a written estimate dated 11 November 2002, Mr Fisher, on behalf of the claimant, gave the defendant company a price of £16,182 plus VAT for the contract. On or about 26 November 2002, Mr Athersmith, on behalf of the defendant, accepted the claimant's estimate and instructed the claimant to commence the contract.[4]As is now known, Telemeter Engineering Limited is a company incorporated on 11 September 2002 under the name of Ell Pee Dee Ltd. It changed its name to its present name of Telemeter Engineering Limited on 19 December 2002. At the time when it said the estimate was accepted, the 26 November 2002, Mr Athersmith was not a director of that company.[5]Indeed, at that time he was subject to an order made under section 6 of the Company Directors Disqualification Act 1986 on 2 December 1999. The order disqualified him from being a director of a company or in any way, directly or indirectly, being concerned in or taking part in the promotion, formation or management of a company for a period of three years, commencing 21 days from the date of the order. The position, therefore, was that that period of disqualification lasted from 23 December 1999 until 22 December 2002.[6]The disqualification order was made on the grounds of unfit conduct under section 6 of the 1986 Act. Mr Athersmith had been involved as director of a company, Direct Contract Engineering Limited, which had been placed in voluntary liquidation with an estimated deficiency of some £490,000. The court had found that while he had been a director, that company had engaged in trading while insolvent, and had failed to maintain adequate accounting records.[7]Notwithstanding that the period of disqualification which, as I have said, lasted until 22 December 2002, Mr Athersmith did in fact become a director of Telemeter Engineering Limited on 2 December 2002. At first sight, therefore, he was in breach of the order between 2 December and 22 December; but, in the present context, nothing turns on that.[8]On 22 March 2004, a defence was filed on behalf of Telemeter Engineering Limited. Paragraph 2 of that defence asserted that Mr Athersmith was acting in the negotiations in his capacity as an employee of Drawglobe Limited and not on behalf of Telemeter Engineering Limited, which (it was said) did not at that time exist. That latter assertion is plainly inaccurate. The company which became Telemeter Engineering Limited had existed under another name since 11 September 2002. The defence goes on to assert, at paragraph 4: "Mr K Andrews, the Manager Director of Drawglobe Limited, trading as Telemeter Engineering, placed a purchase order with the claimant on 12 November 2002 for work to the value of £15,860. Mr Athersmith did not accept the claimant's estimate and did not instruct the claimant to commence the contract either on behalf of Drawglobe Ltd (of which he was only an employee) or on behalf of Telemeter Engineering Ltd (which did not exist in November 2002).[9]A reply to that defence was served on 26 April 2004. By an order of 7 October 2004, Mr Athersmith was joined as the second defendant. That led to the amendment of the particulars of claim on 8 November 2004 to make the following allegations. First, that Mr Athersmith held himself out as a director of -- or, in the alternative, was involved in the management of -- the defendant company (which, in that context, is Telemeter Engineering Limited); and, second, at paragraph 7, that at the time of the contract between the claimant and the first defendant (again, Telemeter Engineering Limited), the second defendant, Mr Athersmith, was disqualified from being a director.[10]The claimant maintained that the second defendant was involved in the management of the defendant company at the time that the contract was made; so that, pursuant to section 15 of the Company Directors Disqualification Act 1986, he is personally liable for the contract debt, jointly and severally with the first defendant.[11]The matter came for trial before HHJ Appleton on 13 April 2005. He heard evidence from Mr Kevin Fisher and from Mr Athersmith. He accepted the evidence of Mr Kevin Fisher -- who he described as an honest witness, seeking to do his best to assist the court. He rejected the evidence of Mr Athersmith, whom he regarded as a wholly unreliable witness. His findings, therefore, stand or fall on the evidence of Mr Kevin Fisher.[12]The judge had before him the estimate of 11 November 2002 to which I have referred. That estimate is addressed to Telemeter Engineering Limited, for the attention of Mr J Knight. The judge had, also, a document described as a purchase order. That document is dated 12 November 2002 and is on the paper of Drawglobe Limited, "trading as Telemeter Engineering". As the judge observed -- and as appears from the document -- "Drawglobe Limited, trading as" in small type-script. "Telemeter Engineering" is in large bold print. Unless the document was read carefully, the reader might think he was dealing with Telemeter Engineering. But nothing turns on that, because the judge's finding was that that purchase order was not sent to Mr Fisher or his company on 12 October 2002; or at all, until much later in March or April 2003. I pause to observe that, if the purchase order had been sent on 12 October 2002, it would not have been an acceptance of the estimate that was addressed to Telemeter Engineering Limited. An offer made to A cannot be accepted by B. It is plain that Mr Fisher's intention was to contract with Telemeter Engineering Limited and not with Drawglobe Limited, trading as Telemeter Engineering.[13]In those circumstances, the judge found that this contract was made with Telemeter Engineering Limited, a company which at the time was known as Ell Pee Dee Limited, but which -- as Mr Fisher had been told by Mr Athersmith -- was about to change its name and take over the trade of Telemeter Engineering. On the evidence that was before him, that was plainly a finding of fact the judge was entitled to make.[14]It was then necessary for the judge to decide whether Mr Athersmith was a person involved in the management of Telemeter Engineering Limited. That is the requirement which gives rise to personal liability under section 15 of the Company Directors Disqualification Act 1986. The judge said this at paragraph 37:
"It follows from the findings I have made about whose version of events I accept, on the balance of probabilities, that at all material times he [Mr Athersmith] being disqualified to 2 December, he did act in that way on behalf of Telemeter Engineering Limited, which at that stage was still named LPD, in the active management of the company's affairs. He was letting or negotiating this significant subcontract with Mr Fisher so, for the reasons I have given, the claim succeeds ..."
[15]It is submitted on behalf of the appellant that, in that passage, the judge was placing reliance only on the letting or negotiation of the sub-contract for the supply and installation of roofing materials. But that is not a fair reading of that paragraph of the judge's judgment. What the judge is saying there is that, on the findings he had made as to whose version of events he accepted, Mr Athersmith was involved in the management of the company formerly named LPD and about to be re-named Telemeter Engineering Limited.[16]Mr Fisher's evidence was that Mr Athersmith was the only person he dealt with throughout; that he had been given the impression that Mr Athersmith was the man running the company; and that he had been told that Mr Athersmith had put his personal money -- some £90,000 -- into the business to keep it afloat. Mr Fisher's evidence was that it had always been his understanding that Mr Athersmith was the owner of the various businesses which he operated. He, Mr Athersmith, was responsible for negotiating prices, contracts and dealings in all contexts. He, Mr Athersmith, had taken Mr Fisher into the office -- described as the managing director's office -- and he, Mr Athersmith, had walked him around the factory. To all appearances, Mr Athersmith was the boss of whatever business was being carried on at the building which had "Telemeter Engineering" as a sign on its front wall. In those circumstances, it seems to me that the judge applied the correct test and reached a conclusion of fact that he was entitled to reach.[17]It was submitted to this court that the judge was wrong to ignore the purchase order of 12 November 2002 and was wrong not to give credence to a fax journal which showed that some document was sent from Drawglobe's premises to the Cumbria Roofing Limited fax number on 12 November 2002. But there was no evidence -- other than that of Mr Athersmith (which the judge did not accept) -- that whatever was sent on 12 November was the purchase order which bears that date; and there was evidence (which the judge did accept) that Mr Fisher never saw that document -- as he would have been expected to do if it had been received by Cumbria Roofing.[18]It is said, also, that Article 1 of Protocol 1 to the European Convention on Human Rights requires that section 15 of the 1986 Act should be read strictly -- so that a person is not deprived of his ability to earn a living. But it must be remembered that the Article yields to the economic needs of the United Kingdom; and that the need to exclude people found to be unfit to be directors from being involved in the management of companies is a proper and recognised economic need. It would be impossible to suggest that the United Kingdom was not entitled to exclude from the management of companies those who have been unfit because of their failure to have proper regard to the constraints under which limited liability is afforded under the Companies Act.[19]In those circumstances, there is no reason to give the words in section 15 any meaning other than that which those words naturally bear. The question is whether the person is involved in the management of a company. Of course, a person will not necessarily be involved in the management of a major trading company if all that he does is to negotiate a contract on its behalf. But the evidence in this case was that there was nobody else who had any involvement in Telemeter Engineering Limited. Mr Athersmith was the person purporting to run that company; so he made contracts on its behalf. The conclusion to which the judge came was, in my view, the only conclusion that he could have reached on the findings which he made on the evidence before him.[20]For those reasons, I would dismiss this application for permission to appeal.

LADY JUSTICE SMITH: I agree.

LORD JUSTICE WILSON: I also agree.

Order

application dismissed. Costs in favour of the respondents, summarily assessed at £8,000.