The Weekly Law Reports, October 4, 1974 1192 Robinson v. Post Office (C.A.

) [1974] liable for the consequences of the treatment applied although he could not reasonably 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 costs to be paid direct by the first defendants. By consent, first defendants to pay interest 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.

D
[QUEEN'S BENCH DIVISION]

* STOCKDALE v. COULSON 1974 June 25 Lord Widgery C.J., Melford Stevenson and Waller JJ. g

CompanyAnnual returnBalance sheetNo balance sheet prepared by auditorCompany holding no general meeting Whether failure by director and secretary to annex balance sheetWhether offence committedCompanies Act 1948 (11 & 12 Geo. 6, c. 38), s. 127 (1) (a)* The defendant was a director and the secretary of a p company which held no general meeting for three years. The company 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 prepare the accounts for filing but no accounts were prepared. The defendant was charged with failing to annex to the annual return 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 defendant appealed 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 defendant was unable to perform her duty, under section 127 (1) of the Act, of annexing a copy of the balance sheet laid before the J J company in general meeting to the annual returns and, since it was impossible for her to perform that duty, she should not have been prosecuted for non-compliance with the subsection. Park v. Lawton [1911] 1 K.B. 588, D.C. distinguished. [Reported by MRS.
1

GREER

S. KERRIGAN, Barrister-at-Law]

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

The Weekly Law Reports, October 4, 1974

1193 ^ 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. 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 on February 6, 1973, on three summonses in that, being a director of Frillplus Property 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, a written copy duly certified of every balance sheet laid before the company in general meeting during the period to which the return related, contrary to section 127 (1) (a) and (3) and section 440 of the Companies Act 1948. By a misunderstanding between the defendant's solicitors and the Department of Trade and Industry solicitor as to the date of the hearing (the facts of which were not relevant to the case) the defendant did not appear and was not represented at the hearing before the magistrate at Wells Street and was convicted in absentia and fined 15 on the first summons 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 the Inner London Crown Court which was heard on June 19, 1973, and the court found the following facts. The defendant was at all material times a director and also the secretary of Frillplus Property Co. Ltd. No general meeting of the company was held during the years 1968, 1969 and 1970 and no balance sheet was laid before the general meeting of the company during those years. Annual returns were filed at the Companies Registry for each of the years 1968, 1969 and 1970 but to none of those returns 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 Anne Street, London, W.l, during any of the three years in question. The defendant had entrusted the preparation of the accounts and the filing of copies thereof to the accountants. They had attended to the filing of the annual 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 company consisted 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 houses and 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 accounts could not be prepared without detailed figures from Coates to show 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 Coates to 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 an explanation for the absence of the accounts.

The.Weekly Law Reports, October 4, 1974

1194
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. The defendant had reasonable ground to believe and did believe that a competent and reliable person, namely, Messrs. Lewis Golden & Co., was charged 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 defendant to certify and file a copy of an account which had to be an audited account which did not exist. It was impossible for the defendant to certify and file a copy of an account laid before the company in general meeting when no such account had been so laid. The defendant was not a party to the default in preparing the accounts and laying them before the company in general meeting and was not, therefore, relying upon her own default in her plea of impossibility of performance. It was contended by counsel for the prosecutor, Roger Coulson, that the 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 the default in that she failed to take sufficient steps to obtain the information required in order to give full instructions to the accountants; that the decision in Park v. Lawton [1911] 1 K.B. 588 applied. The court were of the opinion that the defendant was an officer of the company who was in default, that she had not taken sufficient steps to comply 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 High Court were (1) whether a director of a company who took insufficient steps to prevent a default knowingly and wilfully authorised or permitted that default so as to render him an " officer who is in default" within the definition 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 section 143 of the Companies Act 1948 were or could be complied with and was in a position to discharge that duty. (3) Whether the decision in Park v. Lawton and the other cases cited, where the offence charged was failure to file a list of members within 14 days of the annual general meeting which had never been held, would apply to the present charge of failing to annex to a return which had been filed a duly certified copy of an account laid before the company in general meeting, which account had never been so laid. (4) Whether Park v. Lawton (argued in the absence of the respondent who was not represented) was correctly decided. (5) Whether the Crown Court was wrong in rejecting the appeal of the appellant. Gavin Lightman for the defendant. 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 a decision of the Crown Court at Newington Causeway, by which they dis-

The Weekly Law Reports, October 4, 1974

1195
1 W1H. Stockdale v. Coulson (D.C.) Melford Stevenson J.

A missed an appeal from the Wells Street Magistrates' Court in February 1973. 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 1972 to 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 the B 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 5 on 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 balance sheet laid before the company in general meeting during the period to which the return relates (including every document required by law to be annexed to that balance sheet); and (b) a copy, certified as aforesaid, of the report of the auditors on, and of the report of the directors 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 B are set out in the case. From them it appears that the defendant was at all material 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. The annual 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 sheet F 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 in question. There follows in thefindingsof fact set out in the case a summary of the correspondence between the Companies Registry, the company and the defendant, which I do not think it is necessary to examine for the purpose of this judgment. It suffices to say that the lady did instruct, or seek to instruct, accountants to prepare the necessary documents, and it seems at least doubtful whether they did so. But with that aspect of the case I do not think it is necessary for this court to concern itself. It is, however, relevant to say that the Part of the Act which has the sub-heading " Annual Return " contains a series of sections which impose on 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 126 imposes a duty to lodge the return when made with the Registrar of Companies together with the documents which are required to accompany it, 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 say that the failure to file such a return does provide what has been called in

The Weekly Law Reports, October 4, 1974

1196
Melford Stevenson J. Stockdalc v. Coulson (D.C.) [1974]

argument by Mr. Auld in this case a flag which may indicate to the registrar that the duties imposed by the statute are not being observed, or at any rate gives him an opportunity to invite explanation. There follows section 127, to which I have already referred, which is the 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 that meeting. The series of duties imposed on a company and its officers by the sections to which I have referred are each accompanied by and contain sanctions for the breach or non-performance of such duties. As I have said, there was here no balance sheet and profit and loss account of the company which could be annexed to the return in the present case, and seeing that the charge against the defendant was a failure to annex to the annual return a copy duly certified of every balance sheet laid 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 at some 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 capital and shares etc. for the year 1909 as required by section 26 of the Companies Act 1908. That section is set out in full at the foot of pp. 588 and 589 of the report. The judgment of the court in that case, which related I may say only to the information to which I have just referred, which was the second information the subject of the appeal, appears to have been based on the contention 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 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 a criminal charge. I prefer to rest my view in this case on the proposition that the defendant could not observe the particular duty on which the summons in this case was based because there was nothing to annex. As I have already said, you cannot be punished for failing to annex something which does not exist, and on that ground alone in my view this appeal ought to be allowed and this defendant ought to be relieved of the penalties that were 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 decision of one of the aldermen sitting at the Guildhall dismissing a summons

The Weekly Law Reports, October 4, 1974

1197
1 W.L.R. Stockdale v. Coulson (D.C.) Melford Stevenson J.

A against the company for non-compliance with section 26 of the Companies Act 1862. Again there was a failure to comply with the duty imposed by that 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 to follow, 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 that C 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 1948 any provision of the kind found in other branches of the criminal law which 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 the Act 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 one requires one, in my view for allowing this appeal and relieving the defendant of 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 1948, that is to say the Act of 1862, the Act of 1908 and the Act of 1939, E there were sections requiring returns to be made within a certain time of the annual general meeting, and then to be forwarded forthwith to the registrar, and the authorities, to which Melford Stevenson J. has referred, show that failure to hold a general meeting was no defence to a charge of failing to forward those reports. Section 127 of the Act of 1948, however, is in fundamentally different terms and requires a written copy of every balance F sheet laid before the company in general meeting to be forwarded to the registrar. It seems to me that those words are compelling, and if there was no general meeting, no balance sheet could be put before it, and therefore nobody can comply with that section. For those reasons I agree with the view 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.