Law Report: Disqualification of company directors

9 October 1998

Re Barings plc and others

Secretary of State for Trade and Industry v Baker and others; Chancery Division (Sir Richard Scott, Vice-Chancellor) 29 September 1998

WHEN CONSIDERING the grant of leave to act as a director of a particular company under section 17 of the Company Directors Disqualification Act 1986 to an applicant who had been disqualified under section 6 of the Act from acting as a director, the court should balance the importance of protecting the public from the conduct which had led to the disqualification, against the need that the applicant should be able to act as a director of the particular company.

The court gave its reasons for having granted an application by Peter Michael Russell Norris under section 17 of the Company Directors Disqualification Act 1986, following his disqualification under section 6 of the Act.

Mr Norris was one of the 10 former directors of Barings plc against whom the Secretary of State for Trade for Trade and Industry had taken disqualification proceedings and he had been disqualified for a period of four years. The directorships he sought to be able to continue were non-executive and unpaid.

Elizabeth Gloster QC (Treasury Solicitor) for the Secretary of State; Mr Norris appeared in person.

Sir Richard Scott V-C said that one of the particular matters to which the court's attention had been drawn on behalf of the Secretary of State was the extent to which "need" on the part of Mr Norris to be able to act as a director, or "need" on the part of the company in question to be able to have Mr Norris's services as a director, had to be shown in order for the court to be justified in granting leave.

It had been suggested on behalf of the Secretary of State that the tenor of the authorities was that, in the absence of demonstrated need of one or other of the varieties mentioned, leave ought not to be given, and that in the present case there was no clear evidence of the requisite need.

It was important to emphasise that the case for the disqualification order made against Mr Norris did not involve any imputation of dishonesty or fraudulent impropriety in his conduct as a Barings director: the charge was that he had not given a number of highly significant events arising out of Nick Leeson's trading activities in Singapore the attention required by his senior position and responsibilities in Barings.

It had been emphasised that leave should not be granted under section 17 in circumstances in which the effect of its grant would be to undermine the purpose of the disqualifiction order. However, the present case was not one in which the disqualification order was made necessary by a need to keep Mr Norris out of the boardroom in order to protect the public from dishonesty or impropriety.

If Mr Norris were not granted the leave he sought, he would have to relinquish his directorships of the companies in question, but would remain available, as a consultant, to advise them. It was clear, therefore, that he did not need section 17 leave in order to continue to earn his living, and that the companies did not need to have him as a member of their respective boards in order to continue to have the benefit of his advice on their respective management problems.

That was not, however, sufficient reason why section 17 leave should be withheld. The protection of the public from the conduct which had led to the disqualification should be kept in balance with the need for Mr Norris to act as director of a particular company.

The circumstances of the present case disclosed no sound reason of policy or practice why Mr Norris should not be able to continue, subject to certain safeguards, as a director of the three companies, and leave was granted on condition that in each case he remain a non-executive director, that he should not enter into any contract of employment, and that his directorship remain unpaid.