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	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> The Secretary of State for Trade and Industry v Jonkler & Anor [2006] EWHC 135 (Ch) (10 February 2006) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2006/135.html Cite as: [2006] WLR 3433, [2006] 1 WLR 3433, [2006] EWHC 135 (Ch)

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IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
COMPANIES COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		10 February 2006

Mr Justice Hart :

1. This an application by Judith Spencer-Jonkler ("the applicant") by application notice dated 20^th June, 2005 for an order pursuant to Section 8A(1)(b) of the Company Directors Disqualification Act 1986 ("the CDDA") that a disqualification undertaking which she gave to the Secretary of State on 22^nd March, 2002 should "immediately cease to have effect". The period of disqualification specified in the undertaking was 5 years and commenced on 12^th April, 2002. The undertaking was accepted in the context of disqualification proceedings brought under section 6 of the CDDA. When the application first came before the Registrar on 5^th July, 2005, the applicant appeared in person and the application was not actively opposed by the Secretary of State. The application was adjourned with a view to the jurisdiction under section 8A being considered by a High Court Judge. The Secretary of State now opposes the application.

The Factual Background

2. Inscribe Limited, later called INS Realisations Limited, ("the company") was incorporated on 2 September 1965 and operated a business supplying arts and craft products. On 19^th January, 2000, Mr. Simon Freakley and Mr. Andrew Stoneman of Kroll Buchler Phillips were appointed to act as administrative receivers by GMAC Commercial Credit Limited and NatWest Bank plc to whom the company owed in excess of £2,000,000. Mr. Joseph Jonkler had been a director of the company from the date of its incorporation and the applicant, who married Mr. Jonkler in July 1982, had become a director on 26^th October, 1984. As at the date of the receivership, there were three other directors, Mr. Barry Davies, the Sales Director, Mr. Michael Pearce, the Finance Director, and a Mr. Paul Griffin. There was an issued share capital of £100,000 divided into 100,000 shares of £1.00 each of which Mr. Jonkler held 80,000 and of which the remainder were held by Mr. Davies. By that date the marriage between Mr Jonkler and the applicant had broken down, divorce proceedings having been commenced by the applicant in 1999.
3. Pursuant to section 16 of the CDDA, by letters dated 2^nd January 2002, the Secretary of State gave notice to the applicant and to Mr. Jonkler of the intention to apply for disqualification orders under section 6 in respect of their conduct as directors of the company seeking to disqualify each of them for a 6 year period. The Secretary of State's case against Mr Jonkler and the applicant was based on the allegations that

i) Mr Jonkler and the applicant had received excessive remuneration from the company in the period from April 1998, at a time when the company was unable to pay its VAT, PAYE and NIC liabilities to the Crown Departments, as and when they fell due, resulting in an outstanding liability to the Crown as at the date of the administrative receivership of at least £364,280;

ii) Mr Jonkler and the applicant had caused or allowed a misuse of the company's funds in that they caused or allowed the company to provide their son, Mr L Jonkler, and their daughter, Ms S Jonkler (actually Mr Jonkler's children and the applicant's step-children) with motor vehicles when they were not employees of the company and when the expense of the provision of these motor vehicles was not reimbursed to the company.

4. The Secretary of State's allegation of excessive remuneration against the applicant was that:

i) she had received a monthly salary of at least £4,250 (annual £51,000) and was provided with a company car;

ii) she had caused or allowed the company to pay her personal expenses amounting to at least £3,445;

iii) she had allowed the company to pay the personal expenses of her husband, amounting to at least £103,649 and allowed the company to provide her husband with an interest free loan from the company of a value of between £284,919 as at 31 January 1999, and £88,065 as at 30 November 1999, which was not to the benefit of the company.

5. On 4 January 2002, the applicant called the Secretary of State's solicitors. The purpose of her telephone call is not entirely clear from the attendance note but it is apparent that she stated that the company was her ex-husband's business and she did not know what was going on; that she was never asked to Board meetings; that she did not mind being "knocked off as a [director]" but wanted to make sure that this was where the "buck stop[s]"; that she was a "fool, letting [her] husband run cars for [the] step children". It is not clear to what extent the option of a disqualification undertaking was discussed during that telephone conversation. The Secretary of State commenced disqualification proceedings against Mr Jonkler and the applicant on 18 January 2002. No such proceedings were ever commenced against the other directors of the company.
6. Mrs Spencer-Jonkler wrote to the Secretary of State on 5 February 2002 setting out the reasons why she felt that should not be disqualified as a director. In essence, the letter outlined the abuse she claimed to have suffered from her husband, his representations that her involvement in the company was on the advice of his accountants, his refusal to provide her with any detailed information on the company and her total exclusion from its management and operation, saying

"7. In hindsight I should have sought independent legal advice and taken action to remove myself as a director. But at the time I was trying to keep my marriage together for the sake of my two young sons and I therefore regrettably took the line of least resistance. I know this to be wrong now.

…

10. I do not believe I am an unfit person to be a company director. I feel that the circumstances of my association with Inscribe Limited were out of my control although in hindsight I realise that I should have taken action much earlier. I believe that if I were a director in my own company or in a company which I was involved I would be responsible and a proper and fit person."

7. "The Secretary of State's solicitors responded on 8 February 2002 stating that

"…you were appointed a director of the company and as a director you had duties which you did not fulfil. The fact that you did not take any part at all in the management of the company is in itself a matter in respect of which the Court will impose a Disqualification Order. Our client also notes that you took a significant salary from the company during its period of trading."

The letter stated that the Secretary of State intended to pursue its application against her.

8. At the time, the applicant could not afford legal advice or representation. She agreed to provide a disqualification undertaking of 5 years. The Secretary of State required her to sign an undertaking, enclosing a schedule of unfit conduct. She was not content with the schedule as drafted and asked for various amendments to be made. She asked for the removal of the word "excessive" in relation to the payments made, and the insertion of the word "unbeknowingly" to reflect the fact that she was unaware at the time that the alleged benefits had provided to Mr Jonkler and his children. The Secretary of State insisted that the schedule contain as an explanation as to why the benefits were provided without her knowledge the fact that she took no part in the running of the company. She signed the undertaking on 16 March 2002. The Chief Examiner of the Disqualification Unit signed the undertaking on 22 March 2002. The undertaking commenced on 12 April 2002.

The undertaking

9. The undertaking not for a period of 5 years to act inter alia as a director without the leave of the court was expressly stated to be:

"on the basis set out in the schedule attached to this disqualification undertaking"

10. The schedule itself read as follows:

"For the purposes solely of the CDDA and for any other purposes consequential to the giving of a disqualification undertaking I do not dispute the following matters

1. I was a director of I.N.S. Realisations Limited (formerly known as Inscribe Limited (company number: 858132)

2. Which went into administrative receivership on 19^th January 2000

3. With assets of £2,747,710

4. Liabilities of £4,315,347

5. A deficiency as regards creditors of £1,567,637

6. Share capital of £100,000; and

7. Revaluation reserve of £183,000

8. Making a total deficiency of £1,850,637.

"MATTERS OF UNFITNESS

1. I received the following remuneration from I.N.S. Realisations Limited in the period from April 1988:

(a) I received a monthly salary of at least £4,250 (annual £51,000) and was provided with a company car; and

(b) I allowed I.N.S. Realisations Limited to pay my personal expenses amounting to at least £3,445. I also allowed I.N.S. Realisations Limited to pay the personal expenses of my husband at the time, Joseph Oswald Jonkler, amounting to at least £103,649 and allowed I.N.S. Realisations Limited to provided [sic] Joseph Oswald Jonkler with an interest free loan from I.N.S. Realisations Limited of a value of between £284,919 as at 31 January 1999 and £88,065 as at 30 November 1999 which was not to the benefit of I.N.S. Realisations Limited

at a time when I had no involvement with the company and at a time when I.N.S. Realisations Limited was unable to pay its VAT, PAYE and NIC liabilities to the Crown Departments as and when they fell due resulting in an outstanding liability to the Crown as at the date of the administrative receivership of I.N.S. Realisations Limited of at least £364,280.

2. I took no part in the running of I.N.S. Realisations Limited and unbeknowingly allowed a misuse of the funds of I.N.S. Realisations Limited in that I.N.S. Realisations Limited provided my step-son, Mr L Jonkler, and my step-daughter, Ms S Jonkler with motor vehicles when they were not employees of I.N.S. Realisations Limited and when the expense of the provision of these motor-vehicles was not reimbursed to I.N.S. Realisations Limited."

11. Subsequently, the proceedings against the Applicant were discontinued and she was ordered to pay costs in the sum of £1,397.25.

The proceedings against Mr Jonkler

12. The claim against Mr. Jonkler, however, continued. On 10^th June, 2002, he swore an affidavit in opposition. He attributed the collapse of the company to the acquisition in about July, 1999, of its major supplier, Oasis Arts & Crafts Limited, by its major competitor, Colart Limited, which led to the cessation of supply by Oasis with effect from the end of the year. He described the steps taken to deal with the loss of supply, referring to meetings held in July and October, 1999, with the other directors including the applicant, and with the company's financial advisors, Menzies Accountants, who advised that Kroll Buchler Phillips should be instructed to produce an independent review. Although a survival plan was proposed, administrative receivers were appointed on 19^th January, 2000. In respect of the allegations of misconduct made against him, Mr. Jonkler's evidence was:

i) Pursuant to his contract of employment he was entitled to payment of £175,000 per annum, pension contributions, medical cover, death in service benefit, a motor car, payment of school fees and shooting expenses. He did not consider these to be excessive;

ii) In about July, 1999, his salary was reduced by an unidentified amount, and was in part compensated for by payment of a dividend, also in an unidentified amount;

iii) Although he accepted that he received a loan from the Company, and did not dispute that it was free of interest, he claimed to have reduced it by more than £220,000 between the end of August and the end of October, 1999. He claimed that eventually it was repaid in its entirety by being set-off against unpaid salary;

iv) The payments which he received in respect of expenses were made in respect of expenses properly incurred on behalf of the company;

v) Finally, although Mr. Jonkler accepted that his children were each allowed by the company to use a car, he claimed that these arrangements in fact saved money, meaning that the company did not need to hire replacements when a vehicle was off the road and that in respect of the Renault Laguna, the company did not need to terminate a lease;

vi) Mr. Jonkler was not able to dispute the accuracy of the Secretary of State's evidence about the company's financial position.

13. On 7^th October, 2002, Mr. Freakley swore a second Affidavit, in response to that of Mr. Jonkler. He made a number of comments, including the following: that the company had been in financial difficulty from the middle of 1998 until receivership; that even if Mr. Jonkler's contract of employment had entitled him to various sums and benefits, that did not necessarily make it appropriate for them to be paid in the circumstances which existed; that although the interest free loan was reduced from time to time, sums continued to be lent despite the company's inability to pay its creditors; that although Mr. Jonkler's loan account was settled as part of the agreement by which the company's business was sold after receivership, it was not by virtue of a set-off against unpaid salary.
14. The claim against Mr Jonkler was fixed for trial commencing on 18^th March, 2003. On 6^th March, 2003, Mr. Jonkler's solicitors wrote to Wragge & Co: They enclosed bank statements showing that Mr. Jonkler had received certain sums from the company and paid various sums to the company. They said that these were the only sums received from the company during the relevant period and that they would rely on this as evidence to dispute the allegations made about excessive remuneration. The letter made no further statement about payment of expenses or the provision of cars. In the light of this information, in about March, 2003, the Secretary of State discontinued the proceedings against Mr. Jonkler.

The background to this application

15. Subsequently, on 25^th April, 2003, the applicant telephoned Wragge & Co to investigate whether her undertaking could survive the discontinuance of proceedings against her former husband. Wragge & Co wrote to her on 6^th May, 2003, telling her that she could if she wished make an application under section 8A. On 5^th July, 2004, the applicant wrote again, this time to Mr. Beckett at the Disqualification Unit. She said that when she gave her undertaking she was "getting divorced and being left to bring up two children so was unable to fight this action financially". She wrote again on 2^nd August, 2004. Wragge & Co were instructed on 27^th August, 2004, and Lucy Montgomery of that firm spoke to the applicant on 14^th October 2004 and wrote on 26^th October indicating that the Secretary of State would not oppose an application under section 8A for the undertaking to cease to be in force. The applicant instructed Ram & Co Chartered Accountants who sent a draft of the Applicant's evidence under cover of a letter dated 29^th November, 2004. Wragge & Co replied on 26^th January, 2005, to say that the application to avoid the undertaking ab initio was misconceived, and that, in any event, it was not justified by the facts but re-iterating that the Secretary of State had agreed not to oppose the application. In the event the Applicant issued her application on 20^th June, 2005. When it came before Registrar Nicholls on 5^th July 2005, the Secretary of State maintained a position of neutrality in respect of the application, but drew the Registrar's attention to considerations which might militate against making the order sought. The Registrar took the view that the application raised issues of principle which merited the decision of a High Court judge. Since then the applicant has obtained the services of Mr Shivji of counsel, acting pro bono, who has appeared on her behalf before me. Since then the stance of the Secretary of State has shifted from one of neutrality to one of opposition.

The statutory background

16. Disqualification undertakings were introduced by section 6 of the Insolvency Act 2000 which inserted, among other things, a new section 1A into the CDDA, setting out the form of a disqualification undertaking. The general background history to the introduction of undertakings is set out in the judgment of Chadwick LJ in Re Blackspur Group (No 3), Secretary of State for Trade and Industry v Davies & Others (No 2) [2001] EWCA Civ 1595, [2003] 2 BCLC 263 ("the Blackspur decision").
17. In summary, the ability of the Court to make orders prohibiting persons from acting in connection with companies on the grounds of certain types of misconduct goes back to the Companies Act, 1928. (Chadwick LJ in paragraph [3] of the Blackspur decision refers to section 33 of the Companies Act, 1947. This is the statutory successor to the provisions in the Companies Act, 1928). The current form of disqualification order is set out in CDDA section 1.
18. Prior to the Insolvency Act 2000 there was no ability to dispose of disqualification proceedings on the basis of a consent order embodying the agreement of the parties to an appropriate period of disqualification. The court itself had to be satisfied that the jurisdictional conditions for the making of a disqualification order were met, that it was appropriate to make (or the Act required the making of) a disqualification order, and as to the relevant period of order that should be made on the facts of the case.
19. To temper that difficulty, the summary procedure approved in the Carecraft decision (Re Carecraft Construction Co. Ltd [1994] 1 WLR 172 with slight amendment and the approval of the Court of Appeal in Secretary of State for Trade and Industry v Rogers [1996] 1 WLR 1569, [1996] 2 BCLC 513) was developed. Under that procedure a statement of facts was put before the Court on an agreed basis and no oral evidence was called by either party. The parties generally submitted to the Court that the agreed facts satisfied the conditions of the relevant section of the CDDA 1986 and submitted what would be an appropriate period of disqualification. The court was not bound either to determine that the conditions of the relevant section were met nor that an order should be made for the period suggested.
20. Concerns as to the costs and court time consumed by the Carecraft process led to the enactment of the disqualification undertaking regime. The key elements of that regime are:

i) the definition of a disqualification undertaking in section 1A CDDA 1986, mirroring the definition of a disqualification order and, by other amendments to the CDDA 1986, having the same effect in terms of civil and criminal sanctions for breach (see ss13-15 CDDA 1986, as amended);

ii) the circumstances in which a disqualification undertaking can be accepted are set out in sections 7(2A) and 8(2A) CDDA 1986, requiring the Secretary of State to be satisfied that the conditions for the Court making a disqualification order are satisfied (essentially that the person concerned was a director, that the company at some point became insolvent and that the person's conduct as director makes them unfit to be concerned in the management of a company) and of the expediency in the public interest of accepting the undertaking;

iii) the ability of the Court to reduce the period of the disqualification imposed by the undertaking or to provide for it to cease to be in force as provided for by section 8A CDDA 1986.

21. Since the Insolvency Act 2000 there have been two further developments flowing from the enactment of the Enterprise Act 2002. The first (irrelevant for present purposes) was the amendment of the CDDA 1986 to insert new sections 9A to 9E, which sections extend the disqualification regime specifically to misconduct relating to breaches of competition law. The second development was the insertion into the Insolvency Act 1986 of a new Schedule 4A, providing for bankruptcy restrictions orders ("BROs") and bankruptcy restrictions undertakings ("BRUs"). In broad terms these provisions are modelled on the CDDA regime and give rise to a regime where relevant misconduct by bankrupts, either before their bankruptcy or during it, may give rise to certain restrictions, including, under (the amended) section 11 CDDA 1986, restrictions from relevant involvement in companies without (in some cases) the leave of the court. Although the scope of these restrictions is wide many of them also flow, under the relevant legislation, from disqualification orders or disqualification undertakings. For present purposes the relevance of BRUs is the power in the Court, parallel to that under s8A CDDA 1986 in relation to disqualification undertakings, to annul a BRU or to provide for it to cease to be in effect.

Section 8A CDDA

22. Section 8A is in the following terms:

"8A Variation etc of disqualification undertaking

(1) The court may, on the application of a person who is subject to a disqualification undertaking—

(a) reduce the period for which the undertaking is to be in force, or

(b) provide for it to cease to be in force.

(2) On the hearing of an application under subsection (1), the Secretary of State shall appear and call the attention of the court to any matters which seem to him to be relevant, and may himself give evidence or call witnesses.

………

(3) In this section "the court"—

(a) in the case of an undertaking given under section 9B means the High Court or (in Scotland) the Court of Session;

(b) in any other case has the same meaning as in section 7(2) or 8 (as the case may be)."

The grounds of the present application

23. The applicant advanced the following grounds in her affidavits sworn in support of the application:

i) no proceedings were brought against Messrs Pearce, Davies and Griffin, the other directors;

ii) the proceedings against Mr. Jonkler were discontinued;

iii) it was unfair to have accepted an undertaking on the basis that the applicant had not played any role as a director when this allegation had not been made in the affidavit sworn in support of the original claim;

iv) in any event 5 years was not an appropriate period of disqualification. The appropriate period of disqualification was 2 years, which had now passed;

v) that the disqualification had been the cause of embarrassment and pain;

vi) that when she offered to give the undertaking she did not have access to the company's books and nor any means of obtaining information from the company's other directors;

vii) that she relied on an implied representation that the Secretary of State had a prima facie case against her and Mr. Jonkler, which representation has transpired to be false;

viii) that in light of the deficiency in the Secretary of State's case it "may be that the Secretary of State entered the undertaking on the same mistaken basis that I did.".

24. These grounds have been further developed before me by Mr Shivji on her behalf, with particular reference to material obtained from Mr Jonkler's evidence in the proceedings (which only became available to the applicant shortly before the hearing before me). Mr Shivji sought to develop a thesis, based on that evidence, that the schedule of agreed facts had contained a materially inaccurate statement of the position which had obtained in relation to the amounts paid by the company to Mr Jonkler and the applicant by way of loans, remuneration and expenses, and as to the time when the company was unable to meet its Crown liabilities as and when they fell due. He also submitted that the evidence showed that her admission in the agreed schedule that she had not had an involvement with the company at the material time was incorrect.
25. Those submissions raise the initial question as to the extent to which it is permissible for an applicant under section 8A to seek to controvert the facts agreed at the time of the undertaking as the basis on which the undertaking is given.
26. Mr Shivji submitted that an applicant was free to challenge the agreed facts on any application under section 8A. He submitted that the hearing of an application under section 8A should be approached on the analogy of a Carecraft hearing. Where, at such a hearing, the applicant sought to resile from the agreed factual basis, the court should simply treat the matter as one going to credit: if satisfied that there was a credible explanation for the inconsistency, the court should be prepared to look at the facts afresh. In support of that submission Mr Shivji made the following points: first, that it was appropriate that there should be a court-based scrutiny of the basis on which undertakings had been accepted by the Secretary of State. That was, he submitted, supported by the fact that undertakings had the same effect as disqualification orders. A disqualification order was itself subject to court-based review, either by way of appeal or by way of review under Rule 7.47(1) of the Insolvency Rules 1986, and it was to be expected that Parliament should have provided a similar mechanism of protection in the undertaking regime. This was particularly so given the inequality of bargaining power between the Secretary of State and a director facing disqualification, and the inherent possibility that a director may feel obliged for practical or financial reasons to accept what he knows to be an incorrect schedule of agreed facts. Secondly, he pointed out that the section assumes that there may be contested issues of evidence on an application under it. Thirdly, he observed that the apparent scope of the discretion under the section would be reduced almost to vanishing point if, as was contended by the Secretary of State, the agreed statement of facts was regarded as contractually binding.
27. For the Secretary of State Mr Davis-White submitted that the agreed schedule of facts had the status of a private law contract between the parties, with the consequence that the applicant should not be entitled to resile from it unless she was able to show some conventional ground for impugning a contract. He suggested that there were only two other possible analyses. One was that the court should only allow a re-visiting of the facts in a narrow range of circumstances by analogy with Rule 7.47 of the Insolvency Rules 1986 (or its near relative section 375 Insolvency Act 1986). The other was that the court should consider the whole matter afresh on the section 8A application on the evidence then before it. He submitted that this latter approach was not correct.
28. In considering these submissions it is important to keep two distinctions in mind. First, the question which I am currently considering is the extent to which the applicant is entitled to resile from her agreement not to dispute the facts set out in the schedule. The question of how the court should approach the exercise of its discretion in the light of whatever facts may be admissible before it on the application is a distinct one. Secondly, the question of the extent of the court's jurisdiction under section 8A must be kept separate from principles upon which, as a matter of discretion, it exercises that jurisdiction – a point to which I return below.
29. I am unable to accept Mr Shivji's submission that the enactment of section 8A could be viewed as providing some statutory equivalent to a Carecraft hearing. The function of the Carecraft hearing was to enable the court by a summary procedure, where there was a sufficient measure of agreement between the parties, to exercise the jurisdiction which it alone had to determine whether the conditions for disqualification were present, whether it was right to make an order, and if so for how long. Where the agreement between the parties broke down, those questions had to go to full trial. Subject to any application to enforce the undertaking that would be the case even where the director concerned had committed himself by undertaking to the court to agree a particular Carecraft statement of facts and where the court refused to release him from that undertaking: see Re Blackspur Group plc and Others, Secretary of State v. Eastaway [2001] 1 BCLC 653. The new regime of undertakings replaced the Carecraft procedure by substituting for the decision of the court at the Carecraft hearing a decision by the Secretary of State to accept undertakings. To the extent that analogy is helpful at all, the Secretary of State's decision to accept the undertaking is the equivalent of the court's decision at the Carecraft hearing, and the section 8A application is the equivalent (albeit not an exact one) of a subsequent application by a director who has been disqualified by an order of the court made at a Carecraft hearing to "review, rescind or vary" that order under Insolvency Rule 7.47(1). The issue then would have been as to the extent to which on such an application the director could seek to go behind the facts which he had agreed and on the basis of which the court's order had been made.
30. It cannot be doubted that, as a matter of construction, the agreement of the applicant in the present case not to dispute certain facts for purposes consequential to the giving of a disqualification undertaking applies to the present application. On the Secretary of State's analysis that agreement amounts to, and has the force of, a private law contract between the parties. Mr Shivji pointed out that there were difficulties in such an analysis: the agreement between the parties was part and parcel of the undertaking itself; the parties could not agree to rescind or vary the "contract" thus concluded; and the giving of the undertaking had penal and civil consequences.
31. I accept that there are some theoretical difficulties in analysing the agreement not to dispute the schedule in purely contractual terms. However, I cannot see any good reason why the court should not, in the exercise of its jurisdiction under section 8A, treat the agreement as binding on the applicant unless either some ground is shown which would be sufficient to discharge a private law contract or some ground of public interest is shown which outweighs the importance of holding a party to his agreement. That is the approach which the court would have adopted to facts agreed in a Carecraft statement on a subsequent application under section 17 CDDA to act as a director: see Secretary of State for Trade and Industry v. Collins and Others [2000] 2 BCLC 223 at 228g-I per Peter Gibson LJ. It is also, broadly speaking, the approach taken by the court when asked to release a party from an undertaking given to the court as part of the consensual settlement of proceedings: see the approach taken by the court in Re Blackspur Group plc and Others, Secretary of State v. Eastaway [2001] 1 BCLC 653, and cf Di Placito v Slater and Others [2003] EWCA Civ 1863, [2004] 1 WLR 1605 especially at para 32.
32. I return to the question whether in this case the applicant should be permitted to seek to prove facts which are inconsistent with those which she has agreed not to dispute for the purposes of an application such as the present. The area of potential challenge is in fact relatively limited. The applicant has not sought to put forward a positive case that she did not receive the salary and the expenses relied on in the charge. She does, however, query whether her husband received the improper expenses payments. She also seeks to make a case that the impugned payments were not, for the most part, made at a time when the company was unable to pay its Crown liabilities when they fell due. Through her counsel she also makes the point relying on Mr Jonkler's evidence (and contradicting her own assertions at the time of the undertaking) that in the latter stages of the company's life she did attend some meetings.
33. Even where the challenge is thus made the applicant is not able to show that any of the facts relied on by the Secretary of State were incorrect, but simply that they may be capable of challenge in whole or in part. The possibility of challenge arises not from the emergence of some new information not available at the date of the original undertaking but from the fact that the Secretary of State, for reasons which have not been disclosed and are not obvious from the papers, subsequently decided not to proceed to test the potentially contentious issues of fact in the proceedings against Mr Jonkler.
34. That does not seem to me to provide the applicant with a justification for resiling from her agreement not to dispute those facts. It cannot be said that she entered into that agreement on the basis of some misrepresentation or mistake which entitles her to avoid that agreement.
35. I turn then to the general approach to be taken under section 8A. The only case on the subject noted by text writers, Patrick Queen v. Secretary of State for Trade and Industry, Court of Session, 6^th December 2001, is insufficiently reported to offer any useful guidance: see the discussion in Mithani, Directors Disqualification (October 2005 Issue), [2538]-[2539]. The following points may be noted about the section at the outset. First, it gives the court an apparently unfettered discretion. Secondly, it does not empower the court to annul an undertaking from the start. That disposes of any idea that the court, on a section 8A application, is acting as a court of appeal from the Secretary of State's decision to seek and accept an undertaking in the first place. Thirdly, there is no obvious difficulty in construing it. The question which it raises is as to the principles on which the court should act in deciding whether or not to exercise the discretion given to it.
36. The first and third of those points are relevant to a submission made by Mr Shivji, based on Pepper v. Hart [1993] AC 593, HL(E), that the meaning of the section could be clarified by reference to Ministerial statements made at Committee stage rejecting a proposed amendment to the bill which, if accepted, would have restricted the ability of the court to accede to an application under section 8A to cases where there had been a material change of circumstances. I do not consider that the legislation as enacted is sufficiently ambiguous or obscure to permit such recourse. So far as jurisdiction is concerned Parliament has imposed no fetter on the court. So far as discretion is concerned, Parliament has left it to the court to determine the principles upon which the discretion should be exercised.
37. No doubt in taking that course Parliament had well in mind the equally unfettered jurisdiction to review vary or rescind disqualification orders conferred by Rule 7.47(1) of the Insolvency Rules (given generally to the insolvency court and which apply to disqualification orders) and the similar provision (of long standing in bankruptcy legislation) in section 375 Insolvency Act 1986. In relation to those provisions the courts have consistently regarded the jurisdiction as unfettered but, as a matter of discretion, have confined the occasions for its exercise relatively narrowly. In relation to Rule 7.47(1) the most authoritative recent statement of the position is to be found in Mond v Hammond Suddards [2000]Ch 40 at p.49B-C per Chadwick LJ:

"But, since the point has been raised and may be of importance in other contexts, it is appropriate that I indicate that I can see no basis why the words used in rule 7.47(1) should not be given the very wide effect which, as a matter of language, the meaning which they naturally bear would indicate that the rule-making body intended. The rule is in terms which are indistinguishable from the parallel provision applicable in bankruptcy: see section 375(1) of the Insolvency Act 1986; and, in that context, there is no reason to doubt that Parliament intended to preserve the unlimited jurisdiction to conduct a rehearing which, as Sir James Bacon C.J. observed in Ex parte Keighley; In re Wike (1874) L.R. 9 Ch.App. 668n., was "of very considerable antiquity" and which had been enshrined in successive Bankruptcy Acts: see section 71 of the Act of 1869 (32 & 33 Vict. c. 71), section 104(1) of the Act of 1883 (46 & 47 Vict. c. 52) and section 108(1) of the Act of 1914. As Hoffmann J. pointed out in In re Calmex Ltd. [1989] 1 All E.R. 485, 486, the power is expressed in completely general terms. But, although I would hold that, as a matter of jurisdiction, the power to review conferred by rule 7.47(1) is unfettered, it is, of course, a power which is to be exercised judicially. It would, in my view, be inappropriate - save in the most exceptional circumstances - for a judge to exercise that power in order to substitute his own decision for that of another judge of co-ordinate jurisdiction reached on the same material after a full consideration of the arguments. The power to review is not to be used in order to hear an appeal against a judge of co-ordinate jurisdiction. The exercise of the power should be confined, as a matter of discretion, to cases in which there has been some change in circumstances (which may, perhaps, include the consideration of material which was not previously before the court) since the original order was made: see the observations of Millett J. in In re A Debtor (No. 32-SD-1991) [1993] 1 W.L.R. 314, 318-319."

38. The principal policy reasons in play in that passage for limiting the scope of review are the undesirability of allowing a review by one judge of the decision of another of coordinate jurisdiction on the same material, and the need to draw a line between the review jurisdiction on the one hand and the appellate jurisdiction on the other. Neither of those considerations apply as such to an application under section 8A. There is no question of the court being asked to review a decision by another court of coordinate jurisdiction. Nor is there any need to distinguish between the process of review and an appeal: there is no ability to appeal a disqualification undertaking.
39. Another possible justification for limiting the scope of review under Rule 7.47(1) is the desirability of there being finality to litigation. The very existence of the jurisdiction might be thought to exclude such a rationale (cf the remarks of Millett J in Re a debtor (No 32/SD/1991) [1993] 1 WLR 314 at 318-319), but there is plainly a good policy ground for limiting the circumstances in which the court is asked to re-traverse terrain which it has already covered. Again such a justification does not apply in terms to an application under section 8A. Something, however, very similar in my judgment does. One of the purposes of the undertakings regime is to enable court proceedings to be avoided altogether. That purpose could not sensibly be achieved if a director who has given an undertaking were able, in an unrestricted way and without having to show some special circumstances, to apply to the court to be relieved of it.
40. Mr Davis-White submitted that the court should be guided by the approach taken by the court to the release of undertakings given to the court or to the setting aside or variation of consent orders, citing Purcell v Trigell [1971] 1 QB 358, Chanel v F.W. Woolworth & Co Ltd [1981] 1 WLR 484, Ropac Ltd v Inntrepeneur Pub Co (CPC) Ltd [2001] L&TR 10, S v S (Ancillary Relief: Consent Order) [2002] 3 WLR 1372, Eronat v. Tabbah [2002] EWCA Civ 950, and Di Placito v Slater [2004] 1 WLR 1605. The most helpful of these, in my judgment, are the last two authorities dealing with the release of undertakings given to the court, and, in particular the judgment of Potter LJ in the latter case where, preferring the test of "special circumstances" to "good cause" he said (at para 31)

"..it is more apt to emphasise that the discretion is not simply a discretion at large, but is to be exercised only in a situation where circumstances have subsequently arisen, which by reason of their type or gravity, were not circumstances which were intended to be covered or ought to have been foreseen at the time the undertaking was given."

41. In my judgment such special circumstances do exist in the present case. The essential fact which caused the Secretary of State to conclude that it was expedient in the public interest to seek and accept a disqualification undertaking from the applicant was that the matters complained of had taken place at a time when, in breach of her duties as a director, the applicant was taking no part in the affairs of the company. The essential sin was therefore one of omission not of commission. The unspoken premise of such a charge must have been that the person or persons who had actually caused the matters complained of was or were at least as culpable, or believed to be at least as culpable, as the applicant herself and that if it was in the public interest for her to be subject to a disqualification it was likewise in the public interest for the actual perpetrator or perpetrators to be similarly subject.
42. The discovery that, in the light of evidence presented by the alleged perpetrator, the Secretary of State no longer believed that it was in the public interest for the perpetrator to be subject to a disqualification order was, in my judgment, a new event (uncontemplated at the date of the applicant's undertaking) which entitled the applicant to ask the court to consider whether there remains any good reason why she should continue to be subject to the undertaking which she voluntarily gave. In considering that question, the court is not being asked to say that the Secretary of State was wrong to have sought or accepted the undertaking in the first place. The court is simply being asked to say whether or not the undertaking should cease to have effect or the period of the undertaking reduced.
43. How should that question be answered in this case? On the basis of the facts which the applicant agreed not to dispute the Secretary of State would have been justified in seeking an undertaking for a lesser period than that which was in the event offered. The omissions which the applicant conceded rendered her culpable, when seen in the context of the marital relationship and its breakdown, arguably merited no more than an admonitory minimum disqualification period of two years. The Secretary of State does not advance any argument of public interest as to why the applicant should continue to be the subject of disqualification: opposition to my reducing the period is based rather on the undesirability in general terms of acceding to applications which seek to re-open disqualification undertakings which have been voluntarily agreed. Those general considerations are in my judgment powerful ones. There will be many cases in which the director will be able to plead that he only gave the undertaking because he could not afford legal advice and assistance. There may also be many cases where undertakings are given for periods in excess of those subsequently found appropriate by the court in relation to other directors involved in the same insolvency and the same misconduct. I agree with the Secretary of State that the jurisdiction should only be sparingly exercised where the application is based on arguments of that general kind. However in this particular case, where the result which has been achieved by an unusual combination of events is that the only director of the company who ends up being subject to the continuing disability of disqualification is the one director who had nothing active to do with the insolvency of the company, and where there is no continuing public interest to be served by maintaining that disability, I consider it right to accede to the application, and to declare that the undertaking should cease to be in force.