[1974] 1 w.l.r. 1192

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The Weekly Law Reports, October 4, 1974

Robinson v. Post Office (C.A.) [1974]

liable for the consequences of the treatment applied although he could notreasonably foresee those consequences or that they could be serious.

For these reasons this appeal fails and must be dismissed.

Appeal of first defendants dismissed with costs.

Plaintiff's appeal dismissed with coststo be paid direct by the first defendants.

By consent, first defendants to payinterest at 1\ per cent, on £ 15,000 from December 2, 1972, until today.

Leave to appeal granted.

Solicitors: Solicitor to the Post Office; Shaen, Roscoe 8j Bracewell; Le Brasseur S>- Oakley.

E. M. W.

B

C

D

[QUEEN'S BENCH DIVISION]

* STOCKDALE v. COULSON

1974 June 25 Lord Widgery C.J., Melford Stevenson and Waller JJ. g

Company — Annual return — Balance sheet — No balance sheet

prepared by auditor — Company holding no general meeting — Whether failure by director and secretary to annex balancesheet — Whether offence committed — Companies Act 1948 (11& 12 Geo. 6, c. 38), s. 127 (1) (a)*

The defendant was a director and the secretary of a pcompany which held no general meeting for three years. Thecompany filed annual returns at the Companies Registry but did not annexe to any return a certified copy of its balance sheet.The defendant had instructed auditors of the company to pre pare the accounts for filing but no accounts were prepared.The defendant was charged with failing to annex to the annualreturn a written copy duly certified of every balance sheet laid before the company in general meeting, contrary to sections 127 Q(1) (a) and (3) and 440 of the Companies Act 1948. The

justices convicted the defendant in absentia. The defendantappealed to the Crown Court which dismissed the appeal.

On appeal against conviction: — Held, allowing the appeal, that, in the, absence of any

balance sheet or the holding of general meetings, the defendantwas unable to perform her duty, under section 127 (1) of theAct, of annexing a copy of the balance sheet laid before the JJcompany in general meeting to the annual returns and, since itwas impossible for her to perform that duty, she should nothave been prosecuted for non-compliance with the subsection.

Park v. Lawton [1911] 1 K.B. 588, D.C. distinguished.

[Reported by MRS. GREER S. KERRIGAN, Barrister-at-Law]1

Companies Act 1948, s. 127 (1): see post, p. 1195c-D.

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1 W.L.R. Stockdale v. Coulson (D.C.)

^ The following cases are referred to in the judgment:

Dorte v. South African Super-Aeration Ltd. (1940) 20 T.L.R. 425, D.C.Park v. Lawton [1911] 1 K.B. 588, D.C.

The following additional cases were cited in argument:

Edmonds v. Foster (1875) 45 L.J.M.C. 41.

Gibson v. Barton (1875) L.R. 10 Q.B. 329, D.C.B Reg. v. Newton (1879) 48 L.J.M.C. 77, D.C.

CASE STATED by Inner London Crown Court.

The defendant, Anna Mary Elizabeth Stockdale, was convicted onFebruary 6, 1973, on three summonses in that, being a director of FrillplusProperty Co. Ltd., she failed on September 13, 1971, and on each day

_ between that day and September 11, 1972, to annex to the annual return(1) for the year 1968, (2) for the year 1969 and (3) for the year 1970, awritten copy duly certified of every balance sheet laid before the companyin general meeting during the period to which the return related, contrary tosection 127 (1) (a) and (3) and section 440 of the Companies Act 1948.

By a misunderstanding between the defendant's solicitors and theDepartment of Trade and Industry solicitor as to the date of the hearing

D (the facts of which were not relevant to the case) the defendant did notappear and was not represented at the hearing before the magistrate atWells Street and was convicted in absentia and fined £ 15 on the firstsummons and £ 5 on each of the second and third summonses and ordered to pay £5 costs.

An appeal against those convictions was made by the defendant to theg Inner London Crown Court which was heard on June 19, 1973, and the

court found the following facts. The defendant was at all material timesa director and also the secretary of Frillplus Property Co. Ltd. No general

meeting of the company was held during the years 1968, 1969 and 1970and no balance sheet was laid before the general meeting of the companyduring those years. Annual returns were filed at the Companies Registryfor each of the years 1968, 1969 and 1970 but to none of those returns

F was a duly certified copy of any balance sheet annexed. No accounts of the company were prepared or audited by the auditors of the company,Messrs. Lewis Golden & Co., chartered accountants of 40 Queen AnneStreet, London, W.l, during any of the three years in question. The defendant had entrusted the preparation of the accounts and the filing of copiesthereof to the accountants. They had attended to the filing of the annual

Q return for each year. On each occasion that she received a letter from

the registrar she spoke to a partner of that firm and was given an explanation why the accounts were not ready. The business of the companyconsisted of the development and sale of houses on a site in Marsh Lane,Mill Hill, N.W.7 and flats in High Road, Whetstone, N.20. The housesand flats were being constructed on the company's behalf by a firm of builders named Coates on a cost plus share of profit basis. The company's

H accounts could not be prepared without detailed figures from Coates toshow what the building costs were and those figures were the " instructions "which the accountants were awaiting. The accountants did not act for Coates. The defendant made no attempt to prepare the accounts herself (in any event she could not audit them) nor did she see or speak to Coatesto press him for the figures. All she did was to instruct the accountants

to press Coates and to reply to the registrar's letters giving him anexplanation for the absence of the accounts.

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The.Weekly Law Reports, October 4, 1974

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Stockdale v. Coulson (D.C.) [1974]

It was contended by counsel for the defendant that she was not an ^officer of the company who was in default in that she did not wilfully

permit the default: section 440 (2) of the Companies Act 1948. Thedefendant had reasonable ground to believe and did believe that a com

petent and reliable person, namely, Messrs. Lewis Golden & Co., wascharged with the duty of preparing accounts and laying them before the

company in general meeting, and was in a position to discharge that duty:section 148 (3) (a) of the Companies Act 1948. It was impossible for the Bdefendant to certify and file a copy of an account which had to be anaudited account which did not exist. It was impossible for the defendantto certify and file a copy of an account laid before the company in generalmeeting when no such account had been so laid. The defendant was nota party to the default in preparing the accounts and laying them before thecompany in general meeting and was not, therefore, relying upon her own Qdefault in her plea of impossibility of performance.

It was contended by counsel for the prosecutor, Roger Coulson, thatthe defendant wilfully permitted the default in that she knew of it and

failed to take sufficient steps to prevent it; that she was a party to thedefault in that she failed to take sufficient steps to obtain the informationrequired in order to give full instructions to the accountants; that thedecision in Park v. Lawton [1911] 1 K.B. 588 applied.

D

The court were of the opinion that the defendant was an officer of thecompany who was in default, that she had not taken sufficient steps tocomply with the Act, and that Park v. Lawton applied. The court,accordingly, dismissed the appeal, without costs.

The defendant appealed. The questions for the opinion of the HighCourt were (1) whether a director of a company who took insufficient Esteps to prevent a default knowingly and wilfully authorised or permitted

that default so as to render him an " officer who is in default" within thedefinition set out in section 440 (2) of the Companies Act 1948. (2) Whether it was a defence to proceedings brought under sections 127 (1) (a), (3) and 440 of the Companies Act 1948 that the defendant could prove that he had reasonable ground to believe and did believe that a competent and reliable

person was charged with the duty of seeing that the provisions of section143 of the Companies Act 1948 were or could be complied with and wasin a position to discharge that duty. (3) Whether the decision in Park v.

Lawton and the other cases cited, where the offence charged was failureto file a list of members within 14 days of the annual general meeting whichhad never been held, would apply to the present charge of failing to annexto a return which had been filed a duly certified copy of an account laid G

before the company in general meeting, which account had never been solaid. (4) Whether Park v. Lawton (argued in the absence of the respondentwho was not represented) was correctly decided. (5) Whether the CrownCourt was wrong in rejecting the appeal of the appellant.

Gavin Lightman for the defendant. H Robin Auld for the prosecutor.

LORD WIDGERY C.J. I will ask Melford Stevenson J. to give the first judgment.

MELFORD STEVENSON J. This is an appeal by way of case stated from adecision of the Crown Court at Newington Causeway, by which they dis-

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1 W 1 H . Stockdale v. Coulson (D.C.) Melford Stevenson J.

A missed an appeal from the Wells Street Magistrates' Court in February1973.

The matter arose out of three summonses against the defendant, in her capacity as a director of a company called Frillplus Property Co. Ltd.,alleging that she failed during a period between September 1971 and 1972to annex to the annual return of the company for the years 1968,1969 and

1970 a written copy duly certified of every balance sheet laid before theB company in general meeting during the period to which each such return

related, or should have related, and that was said to be a contravention of section 127 (1) (a) and (3) of the Companies Act 1948. The defendant did not appear at the hearing of the summonses at the Wells Street Magistrates'Court, and she was fined £15 on the first of the three summonses and £5on each of the second and third summonses, and ordered to pay a sum by

Q way of costs.Section 127 of the Companies Act 1948 is, so far as material, in these

terms:

" (1) Subject to the provisions of this Act, there shall be annexed to

the annual return—(a) a written copy, certified both by a director and by the secretary of the company to be a true copy, of every balancesheet laid before the company in general meeting during the period towhich the return relates (including every document required by lawto be annexed to that balance sheet); and (b) a copy, certified asaforesaid, of the report of the auditors on, and of the report of thedirectors accompanying, each balance sheet; . . ."

I need not I think read any more of the section.The findings of the Crown Court on which their decision was based

Bare set out in the case. From them it appears that the defendant was at allmaterial times a director and the secretary of the company; no general

meeting of the company was held during the years 1968, 1969 and 1970;and no balance sheet was laid before the company during those years. Theannual returns were filed at the Companies Registry for each of those years,

but to none of these returns was a duly certified copy of any balance sheetF annexed, and no accounts of the company were prepared or audited by the

auditors of the company, who are named, during any of the three years inquestion.

There follows in the findings of fact set out in the case a summary of thecorrespondence between the Companies Registry, the company and thedefendant, which I do not think it is necessary to examine for the purposeof this judgment. It suffices to say that the lady did instruct, or seek to

instruct, accountants to prepare the necessary documents, and it seems atleast doubtful whether they did so. But with that aspect of the case I donot think it is necessary for this court to concern itself.

It is, however, relevant to say that the Part of the Act which has thesub-heading " Annual Return " contains a series of sections which imposeon companies and on officers of companies a number of duties, the general

H purpose of which is to enable both the public and any personally interested individual to find out how the affairs of the company are being conducted.Section 124 provides for the making of the annual returns, and section 126imposes a duty to lodge the return when made with the Registrar of Companies together with the documents which are required to accompanyit, in other words the process that is usually referred to as filing the return

with the registrar. It is also, I think, worth pausing for one moment to saythat the failure to file such a return does provide what has been called in

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Melford Stevenson J. Stockdalc v. Coulson (D.C.) [1974]

argument by Mr. Auld in this case a flag which may indicate to the registrar Athat the duties imposed by the statute are not being observed, or at anyrate gives him an opportunity to invite explanation.

There follows section 127, to which I have already referred, which isthe basis of the prosecution in the present case. It is also worth mentioning that section 131 contains provisions requiring the holding of the annual

general meeting of the company and lays down what is to be done at thatmeeting. The series of duties imposed on a company and its officers by *the sections to which I have referred are each accompanied by and containsanctions for the breach or non-performance of such duties.

As I have said, there was here no balance sheet and profit and lossaccount of the company which could be annexed to the return in the presentcase, and seeing that the charge against the defendant was a failure toannex to the annual return a copy duly certified of every balance sheet claid before the company in general meeting, one is tempted and perhaps justified in approaching this case by saying that the problem is to be solved by saying: you cannot annex to a return something that does not exist,

and that nobody ought to be prosecuted for that which it is impossible to do.The matter is not quite as simple as that. It would not perhaps be right

to dispose of the case on that ground alone, because when one looks atsome of the authorities to which reference has been made in the course of argument, one finds Park v. Lawton \\9W\ 1 K.B. 588, which involved an information that the officers of the company had knowingly and wilfully

permitted default to be made by the company in forwarding to the Registrar of Companies a copy of the list of members, with summary as to capitaland shares etc. for the year 1909 as required by section 26 of theCompanies Act 1908. That section is set out in full at the foot of pp. 588 Eand 589 of the report.

The judgment of the court in that case, which related I may say onlyto the information to which I have just referred, which was the second information the subject of the appeal, appears to have been based on thecontention that the defendant could not rely on his own default in relation to failure to hold a company meeting, and other breaches of the _ duties imposed by the section, because having done so, although they could not annex the relevant documents, that ought not to provide a defence.It is just worth observing that that argument was delivered with a formidable armoury of forensic talent against a respondent who was not there,and the judgment of Lord Alverstone C.J. referred to Dorte v. South African Super-Aeration Ltd. (1904) 20 T.L.R. 425, where, as he observes,the report is very scanty and the reasoning of the argument and the G

judgment is difficult to collect from the report.It is not for me to discuss the merits or otherwise of the proposition

that an earlier default cannot be relied upon by way of a defence to acriminal charge. I prefer to rest my view in this case on the propositionthat the defendant could not observe the particular duty on which thesummons in this case was based because there was nothing to annex. As „I have already said, you cannot be punished for failing to annex somethingwhich does not exist, and on that ground alone in my view this appeal oughtto be allowed and this defendant ought to be relieved of the penalties thatwere imposed upon her.

It is perhaps right that I should refer very briefly to the South

African case, which was an appeal by way of special case from a decisionof one of the aldermen sitting at the Guildhall dismissing a summons

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1 W.L.R. Stockdale v. Coulson (D.C.) Melford Stevenson J.

A against the company for non-compliance with section 26 of the CompaniesAct 1862. Again there was a failure to comply with the duty imposed bythat Act, but earlier breaches of the duties imposed on companies and their officers had equally been neglected, and it was not possible in that case for the person prosecuted to comply with the requirements of the section.

The Divisional Court, consisting also of Lord Alverstone C.J., Darling

and Channell JJ., affirmed the decision of the alderman, and the appeal" brought by the prosecuting authority was dismissed. It is quite true the

judgment in the report is not full, it is contained indeed in four lines, and counsel for the respondent were not called on, but there it is; it seems tofollow, therefore that there are two decisions which appear on the face of them to conflict.

However, I prefer to base my view on the simple proposition thatC you cannot annex to a return a document which does not exist. It is

also worth saying this, I think: there is not in the Companies Act 1948any provision of the kind found in other branches of the criminal lawwhich enables a person to be convicted of an offence other than that charged if the evidence which emerges at the hearing justified such a conviction. A provision of that kind is absent from the code contained in the part of theAct to which I have referred, and I do not think it would be right to treat

" this Act as if it contained such a code. That is an additional reason, if onerequires one, in my view for allowing this appeal and relieving the defendantof the consequences of this conviction.

WALLER J. I agree. I had initial doubts because of the history of these provisions. In the various Companies Acts which preceded the Act of

E 1948, that is to say the Act of 1862, the Act of 1908 and the Act of 1939,there were sections requiring returns to be made within a certain time of theannual general meeting, and then to be forwarded forthwith to the registrar,

and the authorities, to which Melford Stevenson J. has referred, show thatfailure to hold a general meeting was no defence to a charge of failing toforward those reports. Section 127 of the Act of 1948, however, is infundamentally different terms and requires a written copy of every balance

F sheet laid before the company in general meeting to be forwarded to theregistrar. It seems to me that those words are compelling, and if there wasno general meeting, no balance sheet could be put before it, and thereforenobody can comply with that section. For those reasons I agree with theview Melford Stevenson J. has expressed that this appeal should be allowed.

Q LORD WIDGERY C.J. I agree with both judgments and there is nothing

which I wish to add. The appeal will therefore be allowed and the conviction quashed. Appeal allowed.Conviction quashed.Order for payment of defendant's

costs out of central funds.H

Solicitors: Manches & Co.; Solicitor, Department of Trade.

[1974] 1 w.l.r. 1192

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