Law Report: Decision on abuse of process upheld

Thursday Law Report: 11 June 1998 Re Barings plc; Secretary of State for Trade and Industry v Baker and others Court of Appeal (Lord Justice Swinton Thomas, Lord Justice Waller and Lord Justice Chadwick) 9 June 1998

PROCEEDINGS BROUGHT under section 6 of the Company Directors Disqualification Act 1986 against a respondent who had been exonerated in disciplinary proceedings by the Securities and Futures Authority did not constitute an abuse of process, since the issues involved in the two sets of proceedings were different, notwithstanding that they arose out of the same factual background.

The Court of Appeal refused the application of Ronald Allwyn Baker for leave to appeal against a decision of Mr Justice Jonathan Parker refusing his application for a stay of proceedings against him under section 6 of the Company Directors Disqualification Act 1986 (Law Report, 9 June 1998).

The Secretary of State for Trade and Industry issued proceedings against 10 former directors of companies in the Barings Group, including Mr Baker, seeking disqualification orders under s 6 of the1986 Act.

Mr Baker applied for a stay of the disqualification proceedings on the ground that the prosecution of the proceedings against him would infringe the principle of double jeopardy, since he had already successfully resisted disciplinary proceedings brought by the Securities and Futures Authority (the SFA) in which the same, or substantially the same charges were made against him as were made in the disqualification proceedings. The application was refused, and the judge refused leave to appeal. Mr Baker applied to the Court of Appeal for leave to appeal.

Charles Hollander and Jasbir Dhillon (Fox Williams) for Mr Baker; Elizabeth Gloster QC, Malcolm Davis-White and Edmund Nourse (Treasury Solicitor) for the Secretary of State.

Lord Justice Chadwick said that in the course of the SFA proceedings Mr Baker had attended a 16-day oral hearing and a five-day appeal. All charges against him had been dismissed, and he had been awarded pounds 50,000 costs.

It was understandable that he felt that the Secretary of State was acting oppressively in pursuing the disqualification proceedings. It was impossible not to feel sympathy for a respondent faced with the enormous stress of resisting prolonged disqualification proceedings brought by a government department with all the resources of the state behind it, in circumstances where no allegation of dishonesty had been made.

However, as the judge had appreciated, sympathy for Mr Baker's predicament was not a ground for staying proceedings brought against him under the Company Directors Disqualification Act 1986.

The decisions whether or not to commence, and thereafter to pursue, applications to the court for disqualification orders had been entrusted by Parliament to the Secretary of State, and the court was not entitled to intervene and stay proceedings because it took the view that the Secretary of State was acting in a manner that it might regard as over-zealous.

Proceedings should be stayed where to allow them to continue would bring the administration of justice into disrepute among right thinking people, and right thinking people would not rush to a conclusion that the court was allowing its process to be abused without taking care to understand the nature both of the SFA proceedings and of the disqualification proceedings, and the inter-relation between them.

The charges against Mr Baker in the SFA proceedings were that he had failed to act with the due care and skill of a prudent manager; in effect, that he was guilty of professional negligence. By contrast, his conduct as a director was central to the disqualification proceedings, the relevant question being whether that conduct had fallen so far short of the competence required of a director that the court ought to reach the conclusion that he was unfit to be concerned in the management of any company.

The judge had appreciated that distinction. An appeal against his decision could not succeed and, accordingly, the application would be refused.