THIRD SECTION

FINAL DECISION

AS TO THE ADMISSIBILITY OF

Application no. 42007/98 by Vernon John DAVIES against the United Kingdom

The European Court of Human Rights, sitting on 23 October 2001 as a Chamber composed of

Mr J.-P. Costa , President , Mr W. Fuhrmann , Mr P. KÅ«ris , Mrs F. Tulkens , Mr K. Jungwiert , Sir Nicolas Bratza , Mr K. Traja , judges , and Mr T .L. Early , Deputy Section Registrar ,

Having regard to the above application lodged with the European Commission of Human Rights on 29 October 1997 and registered on 1 July 1998,

Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the application was transferred to the Court,

Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicant,

Having deliberated, decides as follows:

THE FACTS

The applicant, Vernon John Davies, is a United Kingdom national, who was born in 1944. He lives in Essex, and is represented before the Court by Messrs Peters and Peters, solicitors, of London, and by Mr. J.P. Gardner, solicitor, of London.

A. The circumstances of the case

The facts of the case, as submitted by the parties, may be summarised as follows.

1. The Atlantic proceedings

The applicant was co-founder and director of Atlantic Computers Ltd and a number of subsidiary or associated companies (together, “Atlantic”) from 6 July 1976 until 21 May 1986. In September 1988 Atlantic was taken over by British and Commonwealth Holdings Plc (“B&C”) for GBP 408 million. Following the take-over B&C injected approximately GBP 485 million into Atlantic, but in April 1990 Atlantic was placed in administration with an estimated deficiency in excess of GBP 90 million. B&C was subsequently placed in administration, with an estimated group deficiency in excess of GBP 1 billion.

On 15 June 1990 the Secretary of State for Trade and Industry (“the Secretary of State”) appointed inspectors under section 432 of the Companies Act 1985 to investigate and report on the affairs of Atlantic. The inspectors’ report was completed on 22 April 1994. It found, inter alia, that the applicant had been one of those responsible for the adoption and retention of unsound accounting policies which had failed to disclose the existence of large potential liabilities, and that he had been jointly responsible for a misrepresentation in Atlantic’s 1983 flotation prospectus.

On 13 March 1995 the Secretary of State issued proceedings (“the Atlantic proceedings”) under section 8 of the Company Directors Disqualification Act 1986 (“the CDDA”) against the applicant and eight other respondents.

The Secretary of State’s evidence in chief was served with the proceedings on 13 March 1995. The applicant’s last item of evidence was served some 13 months later, on 12 April 1996. The Secretary of State’s evidence in reply was served on 2 October 1996. Thereafter, a number of further affidavits were filed by the other respondents.

On 23 April 1997 one of the other respondents, D.M. , applied for the evidence contained in the inspectors’ report to be struck out on the ground that it was obtained under compulsion. The application was dismissed by the court on 30 April 1997. D.M. then invited the Secretary of State to exercise his discretion not to rely on the evidence in question. The Secretary of State refused, and on 21 May 1997 D.M. applied for judicial review of the Secretary of State’s refusal. The application was dismissed at first instance on 18 December 1997 and by the Court of Appeal on 5 February 1998. D.M.’s application for leave to appeal to the House of Lords was rejected on 29 March 1998.

Meanwhile, by a letter dated 28 June 1996 the applicant offered to the Secretary of State to undertake not to be a company director, in exchange for the withdrawal of the Atlantic proceedings, although he refused to admit any of the allegations against him. The Secretary of State rejected this proposal. On 2 October 1996 the applicant applied for a stay of the proceedings and on 5 November 1996 he applied for judicial review of the Secretary of State’s decision not to accept his undertakings. The two applications were consolidated and dismissed by the High Court on 22 November 1996. The applicant’s appeal was heard by the Court of Appeal on 13 October 1997 and judgment was delivered, dismissing the appeal, on 19 November 1997.

In the meantime, on 12 January 1998, the date set down for the trial in the Atlantic proceedings, the applicant and the Secretary of State made a joint application to the court for settlement of both the Atlantic and the Blackspur proceedings against the applicant (see below) under the “ Carecraft procedure” (after the case of Re Carecraft Construction Co. Ltd [1994] 1 WLR 172). In the application, the applicant and the Secretary of State agreed that, if the court approved, a disqualification order could be made for six years on the basis of undisputed (but not agreed) facts. In addition, an order would be made for the applicant to pay an agreed sum in respect of the Secretary of State’s costs. The court approved the proposals made by the applicant and the Secretary of State, and the applicant was disqualified from involvement in the management of companies for a period of six years, and ordered to pay the Secretary of State’s costs.

2. The Blackspur proceedings

The Blackspur group of companies (collectively, “ Blackspur ”), was formed by the applicant and others in September 1987 and at various times the applicant acted as director and chairman. Blackspur went into receivership in July 1990 with an estimated deficit of GBP 34 million.

On 1 July 1992, on the last day of the applicable two year limitation period, the Secretary of State issued proceedings against the applicant and four others (“the Blackspur proceedings”) under section 6 of the CDDA.

The Secretary of State’s evidence was not complete at the time he commenced proceedings, and he applied for an extension of time for the serving of evidence. The applicant refused to consent to an extension being granted and instead, on 13 October 1992, together with two other defendants, applied to strike out the proceedings.

The Secretary of State’s evidence was completed and served on the applicant on 14 December 1992. The application for permission to file the evidence out of time, and the cross-application to strike out the proceedings, were not heard by the Registrar until 20 May 1993, when they were adjourned to 29 July 1993. On 27 January 1994 the Registrar granted the Secretary of State’s application for an extension of time and dismissed the applicant’s strike-out application. The applicant appealed to the High Court.

Related criminal charges had been brought against the four other defendants in the Blackspur proceedings, but not the applicant, on 1 July 1992. The criminal trial took place between March and June 1994, during which period the disqualification proceedings were adjourned generally, with liberty to restore. At the conclusion of the criminal trial, two defendants were acquitted and two were convicted. On appeal, the two convictions were quashed in February 1995.

By letters dated 19 July and 16 September 1994 the defendants to the Blackspur disqualification proceedings wrote to the Secretary of State inviting him to reconsider whether to carry on with the proceedings. On 15 December 1994 the Treasury Solicitor replied that the Secretary of State had decided that it remained expedient in the public interest to continue.

Once the criminal trial had been concluded, the applicant’s appeal to the High Court against the Registrar’s decision of 27 January 1994 could proceed and was dismissed on 2 May 1995. In November 1995 the applicant was granted leave to appeal out of time to the Court of Appeal, and his substantive appeal was dismissed by that court on 24 May 1996. The Court of Appeal found that the reasons for the Secretary of State’s failure to complete his evidence before the proceedings were commenced had been “far from satisfactory”, but considered nonetheless that the case should proceed since it was in the public interest to determine the “particularly serious” allegations of false accounting and trading while insolvent made against the defendants. In addition, the court observed that the delay by the Secretary of State had not affected the timing of the hearing or prejudiced the applicant, and that, once the proceedings had commenced, “the respondents’ main concern was to delay the proceedings until after the conclusion of the criminal trial, not to hurry them on”.

On 1 July 1996 the Registrar directed that the defendants should serve their evidence in response to that of the Secretary of State by 29 November 1996. That order was not complied with, and on 9 December 1996 the Registrar ordered that if the defendants had not served their evidence by 17 January 1997, they would be debarred from adducing any evidence.

The defendants served their evidence on 17 January 1997. On 20 January 1997 the Registrar directed that the Secretary of State should serve his evidence in reply by 17 March 1997. On 14 April 1997 the Registrar granted the Secretary of State a time-extension for the serving of evidence in reply until 30 June 1997, and this evidence was in fact served on 10 July 1997. At a further directions hearing on 4 August 1997 the defendants were given permission to adduce additional evidence in rejoinder by 1 December 1997. The applicant failed to comply with this order and on 8 December 1997 he was granted an extension of time until 9 February 1998.

In the event, however, the Blackspur proceedings against the applicant were discontinued on 12 January 1998, when they were settled together with the Atlantic proceedings (see above).

B. Relevant domestic law and practice

The Company Directors Disqualification Act 1986 (“the CDDA”) empowers the court, in specified circumstances, to disqualify a person from being a director, liquidator or administrator of a company, a receiver or manager of a company’s property or in any way, whether directly or indirectly, to be concerned in the promotion, formation or management of a company for a specified period starting from the date of the order (section 1(1)).

Under section 6 of the Act, it is the duty of the court to make a disqualification order against a person,

“... in any case where, on an application under this section, it is satisfied - (a) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and, (b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of any other company or companies) makes him unfit to be concerned in the management of a company.”

The minimum period of disqualification under this section is two years, and the maximum is fifteen years.

Section 7(1) of the CDDA provides, inter alia, that the Secretary of State may apply for a section 6 order to be made against a person if it appears to the Secretary of State that such an order would be expedient in the public interest. Under section 7(2), proceedings under section 6 may not be commenced more than two years after the insolvency of the company.

Section 8 of the CDDA, headed “Disqualification after investigation of company”, provides in subsection (1):

“If it appears to the Secretary of State from a report made by inspectors under section 437 of the Companies Act 1985 that it is expedient in the public interest that a disqualification order should be made against any person who has been a director or a shadow director of any company, he may apply to the court for such an order to be made against that person.”

Under subsection 8(2) the court has a discretion to make a disqualification order of up to fifteen years,

“against a person where, on an application under this section, it is satisfied that his conduct in relation to the company makes him unfit to be concerned in the management of a company”.

According to section 441 of the Companies Act 1985, investigative reports prepared under section 437 of the same Act are admissible in legal proceedings, notwithstanding that the evidence contained in them may have been obtained under compulsion.

Rule 3 of the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 reads as follows:

“(1) There shall, at the time when the summons is issued, be filed in court evidence in support of the application for a disqualification order, and copies of the evidence shall be served with the summons on the respondent.

(2) The evidence shall be by one or more affidavits, except where the applicant is the official receiver, in which case it may be in the form of a written report (with or without affidavits by other persons) which shall be treated as if it had been verified by affidavit by him and shall be prima facie evidence of any matter contained in it.

(3) There shall in the affidavit or affidavits or (as the case may be) the official receiver’s report be included a statement of the matters by reference to which the respondent is alleged to be unfit to be concerned in the management of a company.”

COMPLAINT

The applicant complained under Article 6 § 1 of the Convention that the disqualification proceedings against him were not concluded within a reasonable time.

THE LAW

The applicant complained about the length of the proceedings against him under Article 6 § 1 of the Convention which provides, as relevant:

“In the determination of his civil rights and obligations ..., everyone is entitled to a ... hearing within a reasonable time by [a] ... tribunal...”

It was not disputed between the parties that the proceedings under the CDDA determined “civil rights and obligations” and the Court is of the same opinion (see also D.C., H.S. and A.D. v. the United Kingdom (dec.), no. 39031/97, 14 September 1999, unpublished, and E.D.C. v. the United Kingdom (Commission Report), no. 24433/94, 26 February 1997, unpublished).

The Court recalls that the reasonableness of the length of proceedings is to be assessed in the light of the circumstances of the case, having regard in particular to its complexity and the conduct of the parties to the dispute and of the relevant authorities (see, among many other authorities, the Robins v. the United Kingdom judgment of 23 September 1997, Reports of Judgments and Decisions 1997-V, § 33). It will examine the length of each set of proceedings in relation to these criteria. The Court must also bear in mind that, given that the applicant was a company director and that disqualification proceedings would have had a considerable impact on his reputation and his ability to practice his profession, special diligence was called for in bringing the proceedings to an end expeditiously (see the above-mentioned E.D.C. Report).

1. The Atlantic proceedings

The Government submitted that the Atlantic proceedings commenced on 13 March 1995 and ended on 12 January 1998. They pointed out that, despite the size and complexity of the case against the applicant, these proceedings against him took less than three years to reach a conclusion.

The applicant accepted that the proceedings were factually complex. However, he disputed that the starting point should be taken as 13 March 1995, when the Secretary of State commenced the proceedings under section 8 CDDA, contending instead that the material date was 15 June 1990, when the Secretary of State appointed inspectors under section 472 of the Companies Act 1985 to investigate and report on the affairs of Atlantic. In support of this submission he pointed out that, in contrast to section 6 CDDA, section 8 CDDA specifically provides that the Secretary of State may apply for a disqualification order where a Companies Act investigative report discloses that this would be expedient in the public interest. Moreover, such investigative reports are admissible in evidence in the disqualification proceedings. The applicant reasoned that the Atlantic proceedings against him under section 8 CDDA were prompted by, and a continuation of, the findings of the investigation, which therefore formed an integral part of the proceedings.

The Court recalls its finding in the Fayed case (Fayed v. the United Kingdom, judgment of 21 September 1994, Series A no. 294-B, §§ 61 and 63) that an investigation by inspectors under the Companies Act 1985 cannot be said to “determine” civil rights and obligations, and that such an investigation does not, therefore, fall within the field of application of Article 6 § 1. It considers that the proceedings in question commenced on the date that the Secretary of State made the application under section 8 of the CDDA, namely 13 March 1995, and ended on 12 January 1998, when the court approved the “ Carecraft ” agreement concluded between the parties.

The Atlantic proceedings therefore lasted two years and ten months. Such a period cannot be said to be unreasonable under Article 6 § 1, given the admitted complexity of the case and that the first thirteen months elapsed while the applicant was preparing his evidence in response to that of the Secretary of State.

It follows that this part of the application is manifestly ill-founded within the meaning of Article 35 § 3 of the Convention and must be rejected pursuant to Article 35 § 4.

2. The Blackspur proceedings

The Government submitted that the Blackspur proceedings were extremely complex. They commenced on 1 July 1992 and ended on 12 January 1998. The Government attributed a substantial proportion of the delay to the applicant’s unsuccessful attempts to strike out the proceedings and his refusal to consent to the Secretary of State’s late filing of evidence. Further delay was inevitably caused by the criminal proceedings. It had been open to the applicant to agree to a “ Carecraft ” settlement at any time during the course of the proceedings. Instead he delayed the proceedings by attempting to persuade the Secretary of State to accept his undertaking not to act as a company director.

The applicant submitted that he could not be held responsible for the delays in the proceedings. He pointed out that, despite the fact that the proceedings were commenced on the very last day of the two year limitation period, the Secretary of State failed to comply with the requirement to file his evidence at the same time, and therefore needed the leave of the court to file it out of time. That application, together with the applicant’s cross-application to have the proceedings struck out, was first before the court on 20 May 1993, when it was adjourned to 29 July 1993, and again until 27 January 1994, that is, over a year and a half after the proceedings were commenced. The applicant appealed against the Registrar’s decision, but the appeal was adjourned pending the criminal trial of his co-defendants. At the conclusion of the trial the applicant and his co-defendants wrote to the Secretary of State asking whether he still wished to pursue the disqualification proceedings; the Secretary of State took five months to reply to that letter. The applicant’s appeal was not therefore heard by the High Court until 2 May 1995 (15 months after the Registrar’s decision). The applicant then appealed to the Court of Appeal, which, in its judgment on 24 May 1996, found that the Secretary of State’s reasons for failing to file his evidence in time were “far from satisfactory”. The proceedings were finally concluded only when the applicant agreed to make various admissions. By that time they had lasted five and a half years, coming to an end almost seven and a half years after the events on which they were based.

The Court considers that this part of the application raises complex issues of law and fact under Article 6 § 1 of the Convention, the determination of which should depend on an examination of the merits. It concludes, therefore, that this complaint is not manifestly ill-founded within the meaning of Article 35 § 3 of the Convention. No other grounds for declaring it inadmissible have been established.

For these reasons, the Court unanimously

Declares admissible, without prejudging the merits, the applicant’s complaint about the Blackspur proceedings ;

Declares inadmissible the remainder of the application.

T.L. Early J.-P. Costa Deputy Registrar President