MANI v REGISTRAR OF COMPANIES [2016] NZHC 3002

MANI v REGISTRAR OF COMPANIES [2016] NZHC 3002 [12 December 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2016-404-1846[2016] NZHC 3002UNDER The Companies Act 1993IN THE MATTER of an appeal against the decision of theRegistrar of Companies pursuant to s 370of the Companies Act 1993BETWEEN RITESH MANIAppellantAND REGISTRAR OF COMPANIESRespondentHearing: 31 October 2016Appearances: R B Hucker and H P Holland for the AppellantR S May for the RespondentJudgment: 12 December 2016JUDGMENT OF THOMAS JThis judgment was delivered by me on 12 December 2016 at 3pmpursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate:.Solicitors:Hucker & Associates, Auckland.Luke Cunningham Clere, Auckland.Table of Contents ParagraphNumberBackground [2]Approach on appeal [5]Structure of the decision [6]Onus and standard of proof [10]Natural justiceAppellant's submissions [18]Principles [22]Particularisation [28]Quality of evidence [32]Was Mr Mani a director of the Company?What constitutes a director? [35]The Decision [57]Analysis [59]Conclusion [69]Was Mr Mani concerned in or did he take part in themanagement of the Company?Submissions [76]What constitutes involvement in management ofa company?[81]Analysis [91]Conclusion [97]Was the manner in which the affairs of the Company weremanaged wholly or partly responsible for it being acompany to which s 385 applied?[98]Section 385(4) – Interpretation [106]Exercise of the discretionInvolvement in mismanagement [111]Reasons to disqualify [116]Result [125][1] The appellant, Ritesh Mani, appeals from a decision of the Registrar of Companies disqualifying Mr Mani from being a director or promoter of a company, or being concerned in, or taking part, whether directly or indirectly, in the management of a company, for a period of three years and six months, pursuant to s 385 Companies Act 1993 (the Act).Background[2] Mr Mani was employed by a property development company, Tribeca Homes Ltd (the Company), which was placed in liquidation on 1 May 2015 upon acreditor's application. The Company had one named director, Mr Richards.[3] The Deputy Registrar of Companies,1 determined by his decision dated 22 June 2016 (the Decision) that he was satisfied the requirements of s 385(4) of the Act were met in that:(a) Mr Mani was a director of, or concerned in, or a person who took part in, the management of a company to which s 385 applied; and(b) the manner in which the affairs of the Company were managed was wholly or partly responsible for the Company being a company to which s 385 applied.[4] The Registrar then imposed the disqualification, effective from the date of the Decision.Approach on appeal[5] The appeal is under section 370 of the Act and is a hearing de novo. The Court must consider the merits of the case afresh. The weight which is given to the reasoning of the body below is a matter for the Court's assessment.2 This will depend both on the reasoning of the body below, and whether it had any particular1 Pursuant to s 357 of the Act, a Deputy Registrar may exercise the powers and duties of the Registrar under the Act.2 Davidson v Registrar of Companies [2011] 1 NZLR 542 (HC) at [83]; Austin Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.advantages such as technical expertise or the opportunity to assess the credibility of witnesses (where that is important).3Structure of the decision[6] The appeal is on the basis the Registrar erred in applying the correct test to determine whether there was jurisdiction to disqualify Mr Mani. Mr Mani says the Registrar:(a) failed to apply the correct standard of proof.(b) failed to apply the principles of natural justice.(c) wrongly relied upon statements which lacked specificity, detail and particularity.(d) wrongly relied upon his own assessments of credibility on the basis of written documentation.(e) failed to apply s 27 of the New Zealand Bill of Rights Act 1990.[7] Mr Mani asks the Court to quash the decision of the Registrar.[8] I consider first, the Act and the onus and standard of proof. I then consider Mr Mani's complaints about the level of natural justice accorded to him in thedecision-making process, before considering the ultimate question (given this appeal is a de novo appeal), namely, whether the requirements of s 385 were met in order to justify disqualification. In making that assessment, I consider first, Mr Mani'seligibility for disqualification, either as a de facto director or as someone who took part in, directly or indirectly, the management of the Company. I then consider the evidence about Mr Mani's role and contribution to the failure of the Company and the Registrar's exercise of discretion in disqualifying him.[9] This analysis is in accordance with s 385 of the Act, which provides:3 Austin Nichols & Co Inc v Stichting Lodestar, above n 2, at [5].385 Registrar or FMA may prohibit persons from managing companies(1) This section applies in relation to a company—(a) that has been put into liquidation because of its inability to pay its debts as and when they became due:(b) that has ceased to carry on business because of its inability to pay its debts as and when they became due:(c) in respect of which execution is returned unsatisfied in whole or in part:(d) in respect of the property of which a receiver, or a receiver and manager, has been appointed by a court or pursuant to the powers contained in an instrument, whether or not the appointment has been terminated:(e) in respect of which, or the property of which, a person has been appointed as a receiver and manager, or a judicial manager, or a statutory manager, or as a manager, or to exercise control, under or pursuant to any enactment, whether or not the appointment has been terminated:(f) that has entered into a compromise or arrangement with its creditors:(g) that is in voluntary administration under Part 15A.(2) This section also applies in relation to a company the liquidation of which has been completed whether or not the company has been removed from the New Zealand register.(3) The Registrar or the FMA may, by notice in writing given to a person, prohibit that person from being a director or promoter of a company, or being concerned in, or taking part, whether directly or indirectly, in the management of, a company during such period not exceeding 10 years after the date of the notice as is specified in the notice. Every notice shall be published in the Gazette.(4) The power conferred by subsection (3) may be exercised in relation to—(a) any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after the commencement of this section), a director of, or concerned in, or a person who took part in, the management of, a company in relation to which this section applies if the Registrar or the FMA is also satisfied that the manner in which the affairs of it were managed was wholly or partly responsible for the company being a company in relation to which this section applies; or(b) any person who the Registrar or the FMA is satisfied was, within a period of 5 years before a notice was given to that person under subsection (5) (whether that period commenced before or after thecommencement of this section), a director of, or concerned in, or a person who took part in, the management of, 2 or more companies to which this section applies, unless that person satisfies the Registrar or the FMA—(i) that the manner in which the affairs of all, or all but one, of those companies were managed was not wholly or partly responsible for them being companies in relation to which this section applies; or(ii) that it would not be just or equitable for the power to be exercised.(5) The Registrar or the FMA must not exercise the power conferred by subsection (3) unless—(a) not less than 10 working days' notice of the fact that the Registraror the FMA intends to consider the exercise of it is given to the person; and(b) the Registrar or the FMA considers any representations made by the person.(6) No person to whom a notice under subsection (3) applies shall be a director or promoter of a company, or be concerned or take part (whether directly or indirectly) in the management of a company.(7) Where a person to whom the Registrar or the FMA has issued a notice under subsection (3) appeals against the issue of the notice under this Act or otherwise seeks judicial review of the notice, the notice remains in full force and effect pending the determination of the appeal or review, as the case may be.(8) The Registrar or the FMA may, by notice in writing to a person to whom a notice under subsection (3) has been given,—(a) revoke that notice; or(b) exempt that person from the notice in relation to a specified company or companies.Every such notice shall be published in the Gazette.(9) Every person to whom a notice under subsection (3) is given who fails to comply with the notice commits an offence and is liable on conviction to the penalties set out in section 373(4).(10) In this section, company includes an overseas company that carries on business in New Zealand.Onus and standard of proof[10] Mr Hucker appeared for Mr Mani. In his submission, there was, in effect, an onus on the Registrar under s 385(4)(a) and, in contrast to an evaluation under s 385(4)(b), Mr Mani had no obligation or onus to satisfy the Registrar of any matter.[11] Mr Hucker suggested that the test imposes an obligation on the Registrar tobe "certain" that the elements of s 385 have been met. He referred to the standard of proof required in First City Corporation Ltd v Downsview Nominees Ltd, in which Gault J held that, because of the gravity of the allegations and consequences, a higher degree of probability than the civil standard of proof on the balance of probabilities was required.4 If there were any doubt as to whether Mr Mani was de facto director, he was entitled to the benefit of that doubt, said Mr Hucker.[12] First City Corporation involved the predecessor to the current s 383 of the Act, which allows the Court to disqualify directors in certain circumstances. The ground relied on for disqualification covered conduct including "persistent failure tocomply with the Act, fraud on, or breach of duty to, the company, and reckless orincompetent performance of the duties of an officer".5 It is to be expected that, when serious allegations such as fraud are concerned, stronger evidence will be required.[13] Mr Hucker then said, if the standard is the balance of probabilities, there wasan added "gloss" whereby the quality of the evidence had to be to a higher standard.6This was particularly so, because there was no opportunity for formal evidence to be called and witnesses cross-examined. Neither of the cases Mr Hucker referred to for this proposition were decided under s 385.[14] The wording in s 385(4) is plain. In order to exercise the power ofprohibition the decision maker must be "satisfied" as to certain matters. Asexplained in Davidson v Registrar of Companies:74 First City Corporation Ltd v Downsview Nominees Ltd [1989] 3 NZLR 710 (HC) at 766.5 At 766.6 Citing Delegat v Norman [2012] NZHC 2358 at [32] and First City Corporation Ltd v Downsview Nominees Ltd, above n 4, at 766.7 Davidson v Registrar of Companies, above n 2, at [102].Under subs 4(a) there is no onus, indeed no prosecutor on whom the onus might fall. The subsection simply requires that the Registrar be satisfied, having given the respondent notice and considered any representation that he or she may make, that prohibition is appropriate. An onus is imposed on the respondent under subs 4(b), which applies when the respondent was adirector or manager of two or more qualifying companies [15] In Z v Dental Complaints Assessment Committee, the Supreme Courtconsidered the term "satisfied" and its relationship to the standard of proof requiredin a particular circumstance.8 The Court explained that the term satisfied requiredthat the relevant body came to "the required affirmative conclusion" or had "made up its mind", and did not bear on the standard of proof.9 The only standards of proof available are the civil standard or the criminal standard.[16] However, the majority of the Supreme Court held that, where civil proceedings involved serious allegations with serious consequences, there will be a natural tendency to require stronger evidence before being satisfied to the balance of probabilities standard.10[17] Although the purpose of giving the Registrar the power to disqualify directors is directed at protection of the public, as acknowledged by Miller J in Davidson, thedirector or manager "inevitably experiences prohibition as a punishment; it is an adverse consequence of an inquiry into his or her involvement in an insolventcompany".11 While criminal charges are not involved, there are serious consequences of an order under s 385 which will have a significant effect on the person subject to the order. In those circumstances, and given the summary process, higher quality evidence may be necessary for the decision-maker in order to be satisfied in terms of s 385(4).Natural justiceAppellant's submissions[18] Mr Mani took issue with paragraph 4.5 of the Decision which said:8 Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1.9 At [54] and [96].10 At [102].11 Davidson v Registrar of Companies, above n 2, at [91].Therefore, consideration of hearsay statements or statements from third parties are permitted and, in doing so, does not amount to a breach of Mr Mani's right to natural justice.[19] In Mr Hucker's submission, the Registrar failed to apply the principles of natural justice required by the Privy Council in Re Erebus Royal Commission; Air New Zealand v Mahon,12 in that there was no material of probative value on which the Registrar based his decision, largely because the evidence included hearsay.[20] Mr Hucker stressed that this was a final decision with effect on Mr Mani'slegal rights and status, and contrasted the position with the cases relied on by the respondent which, he said, involved investigations prior to a decision.13[21] The nature of the evidence was, in Mr Hucker's submission, lacking anyprobative value, and conclusory in nature, with no factual basis and no real opportunity to test it. In such a case, the correct approach was to conclude that the allegations were not made out.14 He noted that the Registrar criticised Mr Mani for his bare denial of many of the allegations but said, given the lack of particularity, Mr Mani had no option.Principles[22] The principles of natural justice are set out in Re Erebus Royal Commission.The Privy Council described the "first rule" of natural justice as:15 that the person making a finding in the exercise of such a jurisdictionmust base his decision upon evidence that has some probative value in thesense described below What is required is that the decision to makethe finding must be based on some material that tends logically to show the existence of facts consistent with the finding and that the reasoning supportive of the finding, if it be disclosed, is not logically self- contradictory.[23] The second rule requires that:1612 Re Erebus Royal Commission; Air New Zealand Ltd v Mahon [1983] NZLR 662 (PC).13 Including Re Erebus Royal Commission, above n 12, Serco New Zealand Ltd v Chief Inspector of Corrections [2016] NZHC 1859, [2016] NZAR 1280, and A v Attorney-General [2013] NZCA 289, [2013] 3 NZLR 630.14 Relying on Dotcom v United States of America [2014] NZSC 24, [2014] 1 NZLR 355 at [260] –[261] per Glazebrook J.15 Re Erebus Royal Commission, above n 12, at 671.16 At 671. any person represented at the inquiry who will be adversely affected bythe decision to make the finding should not be left in the dark as to the risk of the finding being made and thus deprived of any opportunity to adduce additional material of probative value which, had it been placed before the decision-maker, might have deterred him from making the finding even though it cannot be predicated that it would inevitably have had that result.[24] The requirements of natural justice depend on context – they "vary with the power which is exercised and the circumstances."17[25] The requirements of natural justice in the particular circumstances of an enquiry under s 385 were considered by Miller J in Davidson. He described the process as "simple and swift, with no provision for a hearing" and encompassing thefollowing:18 the National Enforcement Unit of the Companies Office prepares a reportand recommendations; that report is given to the respondent with the notice required under s 385; communications may ensue between the respondent and the Unit; if the Unit maintains that prohibition is warranted, the reportand the respondent's representations are submitted to a specially appointedDeputy Registrar of Companies for decision.[26] Miller J considered the second rule of natural justice directly:19The Registrar must give the respondent reasonable notice of the case he or she is to meet. In circumstances where the respondent normally knowsmuch more about the company's management than does the Registrar, that requirement is unlikely to be onerous; it may suffice that the respondent knows the general nature of the allegations.[27] The legislative history and policy of s 385 makes clear that the genesis of s385 was Parliament's recognition of the need for a "speedier and more efficient means of dealing with the problem" of those who have demonstrated that they arenot fit and proper persons to be involved in the management of companies.20Particularisation[28] Mr Hucker submitted Mr Mani was not properly informed of the case against him. Mr Hucker did not accept that the other cases to which he referred, being in the17 Daganayasi v Minister of Immigration [1980] 2 NZLR 130 (CA) at 141.18 Davidson v Registrar of Companies, above n 2, at [105]19 Davidson v Registrar of Companies, above n 2, at [107].20 Davidson v Registrar of Companies, above n 2, at [87] quoting from the Rt Hon GeoffreyPalmer's (then Minster of Justice) speech introducing the bill containing s 385 to Parliament.nature of civil proceedings or criminal prosecutions, made any difference as to the need for particularisation. While he acknowledged the standard of proof was different from the criminal jurisdiction, in his submission, the need for particulars was the same.[29] Mr May appeared for the respondent. In his submission, a party cannot be said to have been surprised in circumstances in which they were aware of the substance of the allegations against them, notwithstanding that they were not aware of the detail of specific information on which those allegations were based. He referred to A v Attorney General, where the appellant had sought, inter alia, the logs of photocopiers where it was alleged that he had copied certain documents in orderto "check and correct [that information]".21 The Court held that:22We do not see that as necessary component of the obligation to meet the principles of natural justice: what is required is that the appellant be told of the evidence against him so that he can respond, not so that he can second guess the investigation.[30] As was said in Davidson, the Registrar must give the respondent reasonable notice of the case he or she is to meet.23 Instances of company mismanagement orfeatures of the director's conduct of concern should be identified. Whileidentification of specific events is not essential, as a matter of fairness, as much specificity as possible should be given to the person under investigation to provide him or her with a meaningful opportunity to make representations to the Registrar. The detail of the allegations as included in the report to the Registrar should be provided to the person under investigation. The paucity or absence of particulars of the alleged behaviour is then a matter to be taken into account in the decision making process.[31] While adverse inferences can be drawn if there is unreasonable refusal to provide particular information of potential cogency,24 there was no such failure in this case. This reflects the general nature of the actual allegations against Mr Mani, as discussed below.21 A v Attorney-General [2013] NZCA 289, [2013] 3 NZLR 630 at [65].22 At [65].23 Davidson v Registrar of Companies, above n 2, at [107].24 Dotcom v United States of America, above n 14, at [239] per William Young J.Quality of evidence[32] Mr Mani criticises the reliance on hearsay evidence, saying that the Registrar should have held an oral hearing to test the credibility of witnesses. As noted, there is no provision for a hearing. Parliament has established a summary process whereby a decision can be made within 10 days of notification.[33] There is no prohibition on the admissibility of hearsay. Again, I refer to the explanation by Miller J in Davidson, which emphasises the precautionary and protective nature of s 385:25Prohibition is aimed not at remedying wrongs done to shareholders and creditors of the insolvent company but at protecting the public from unscrupulous or incompetent directors in future, deterring others, and setting appropriate standards of behaviour. At the same time, any given director or manager inevitably experiences prohibition as a punishment; it is an adverse consequence of an inquiry into his or her involvement in an insolvent company.The section establishes a simple and swift process, with no provision for a hearing. That suggests the power has a protective, even precautionary, purpose.[34] There is nothing to preclude the Registrar from taking into account hearsay or generalised statements. It is, however, a matter of assessing the probative value of the evidence and the weight to be attributed to it and that is for the decision maker to evaluate.Was Mr Mani a director of the Company?What constitutes a director?[35] Section 126 of the Act sets out the meaning of director:126 Meaning of director(1) In this Act, director, in relation to a company, includes—(a) a person occupying the position of director of the company by whatever name called; and25 Davidson v Registrar of Companies, above n 2, at [91] and [99].(b) for the purposes of sections 131 to 141, 145 to 149, 298, 299, 301, 318(1)(bb), 383, 385, 385AA, 386A to 386F, and clause 3(4)(b) of Schedule 7,—(i) a person in accordance with whose directions or instructions a person referred to in paragraph (a) may be required or is accustomed to act; and(ii) a person in accordance with whose directions or instructions the board of the company may be required or is accustomed to act; and(iii) a person who exercises or who is entitled to exercise or who controls or who is entitled to control the exercise of powers which, apart from the constitution of the company, would fall to be exercised by the board; and(4) Paragraphs (b) to (d) of subsection (1) do not include a person to the extent that the person acts only in a professional capacity.[36] Directors can be classified as either "de jure" directors, being those actuallyappointed as a director, or de facto directors, being someone held out by the company and who purports to act as a director without actually being appointed.26 In the case of Mr Mani, the Registrar said in the Decision the allegation was that he was a de facto director under s 126(1)(b)(iii), in that he was a person exercising powers which would otherwise fall to the Board. The letter to Mr Mani advising him of theRegistrar's investigation under s 385 stated:In these circumstances we consider that you are subject to consideration for prohibition in respect of THL as you were either a director pursuant to section 126(1)(b)(iii) of the Companies Act 1993 in that you exercised powers of management over the company that would usually be exercised by a director and/or you took part in the management of the company.[37] In Mr Hucker's submission, the Registrar had to demonstrate that:27(a) there was a particular identified power exercised;(b) the power was one which ought to have been exercised by the Board;(c) Mr Mani, in fact, exercised the specific power;26 Re Hydrodam (Corby) Ltd (in liq) [1994] 2 BCLC 180 (Ch D).27 Drawing on Delegat v Norman, above n 6, at [31] – [32]; Gilles Bakery Ltd v Gillespie [2013] NZHC 1608, [2013] NZCCLR 21 at [56].(d) Mr Mani exercised the power on a continual basis such that he was directing the affairs of the company on an equal basis with any other director.[38] The s 126(1)(b)(i) and (ii) definitions of a director refer to "shadow directors": those who do not openly adopt the role of director but who "from the wings" control the persons who do purport to act as directors.28 However by contrast, s 126(1)(b)(iii) has been interpreted as capturing those who are not directors but who have managerial powers conferred on them by the company constitution.29[39] Fatupaito v Bates directly addressed s 126(1)(b)(iii).30 In that case, with only one appointed director, that director constituted the board of the company for thepurposes of the Act. O'Regan J held that, although the alleged director, Mr Bates,did exercise powers which would normally be exercised by the board (or was entitled to do so), the wording of the section required him to exercise powers which"apart from the constitution of the company, would fall to be exercised by the board". His Honour stated:[46] The precise meaning of those words is unclear. There was no equivalent of s 126(1)(b)(iii) in the Law Commission's Draft Companies Act(NZLC R9, "Company Law Reform and Restatement" (1989), p 238). Thelearned authors of Anderson's Company and Securities Law say that s126(1)(b)(iii) refers to "the exercise of powers which would be exercised bythe board were it not for the constitution of the company providingotherwise". That seems to imply a requirement that, in order for a person tobe caught by s 126(1)(b)(iii), there needs to be a provision in the constitution giving that person powers which would otherwise have been exercised by directors. The learned authors of Morison's Company and Securities Law refer to "the exercise of the powers which would normally be exercisedby the board", without referring to the constitution of the company.[47] The interpretation of s 126(1)(b)(iii) suggested in Anderson appears to me to be the correct one and it is clear that Mr Bates did not have any authority in terms of the constitution of the company in this case. I find that s 126(1)(b)(iii) does not apply to him.28 Peter Watts Directors' Powers and Duties (2nd edition, LexisNexis, Wellington, 2015) at 7.29 Arcadia Homes Ltd (in liq) v More to this Life Ltd [2013] NZCA 286 at [41].30 Fatupaito v Bates [2001] 3 NZLR 386 (HC) at [20].[40] In Arcadia Homes, the Court of Appeal accepted that interpretation, and found that s 126(1)(b)(iii) could not apply because the company had no constitution.31[41] There was no suggestion from the Registrar that Mr Mani had authority under the company constitution. His assessment was focused on whether Mr Maniexercised control over "some aspects of the company's business". The Registrar stated, "[f]or example, if a person exercised control in the sales and marketing areathat would be sufficient to invoke s 126(1)(b)(iii)," saying that a person couldexercise some functions as a de facto director and others as an employee. That is not what s 126(1)(b)(iii) requires.[42] The cases referred to by the Registrar in relation to s 126 (Gilles Bakery andDelegat v Norman) do not refer to s 126(1)(b)(iii). The Registrar's focus appears tohave been more broadly on whether Mr Mani was exercising directorial functions, under s 126(1)(a).[43] This is because s 126(1)(b)(i) and (ii), as noted, primarily cover shadowdirectors, such as a "behind the scenes" director who directs or instructs the actionsof an appointed director. To the extent there is an allegation Mr Mani's behaviourcould come within this category, it would need to be shown that Mr Richards may have been required or was accustomed to act in accordance with Mr Mani'sinstructions, or that the board of the company was required or accustomed to act in accordance with Mr Mani's directions.32 The term "may been required" implies anelement of obligation on Mr Richards to follow Mr Mani's directions.33 There must be a course of conduct, or pattern of such behaviour, to show that a person is a shadow director. The focus of the analysis was not on this type of behaviour.31 Arcadia Homes Ltd (in liq) v More to this Life Ltd, above n 29.32 He v Chen [2014] NZCA 153, (2014) 11 NZCLC 98-027 at [24]; Delegat v Norman , above n 6, at [28].33 Gilles Bakery, above n 27, at [55].[44] The Registrar's analysis in fact focused on whether Mr Mani was a de facto director under s 126(1)(a). That section applies more broadly. It refers to a person occupying the position of director despite not being appointed as such.34[45] The classic English case on de facto directors, Re Hydrodam (Corby) Ltd,states:35"A de facto director is a person who assumes to act as a director. He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such. To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director. It is not sufficient to show that he was concerned in the management of the company's affairs or undertook tasks in relation to its business which can properly be performed by amanager below board level."[46] The Registrar correctly relied on Gilles Bakery and Delegat for the proposition that determining whether someone is a deemed director under s 126 of the Act requires the decision maker to make a factual assessment, taking into account a number of factors, such as the size of the company and the level of involvement of other directors. The finding of a de facto directorship therefore depends on assessing the true nature of the relevant relationships, and understanding who undertook what functions.36[47] In Delegat v Norman, Woolford J stated:37There needs to be clear evidence that the person was either the sole person directing the affairs of the company or if there were others who were true directors that he or she was acting on an equal footing with the others in directing the affairs of the company. If it is unclear whether the acts of the person are referable to an assumed directorship or to some other capacity, such as shareholder or consultant, the person must be entitled to the benefit of the doubt.[48] Delegat was a civil proceeding for damages against an alleged director. Inthe respondent's submission, the emphasis in Delegat on the necessity for clear evidence is less applicable in the summary-type procedure exercised by the34 Delegat v Norman, above n 6, at [26].35 Re Hydrodam (Corby) Ltd (in liq), above n 26, at 163.36 Delegat v Norman, above n 6, at [32].37 At [32].Registrar. In my assessment, it is not necessary to draw distinctions in this way. The Registrar must be satisfied that the person, either alone or with others, was directing the affairs of the Company and undertaking functions which could properly be discharged only by a director.[49] Despite the truncated process under s 385, in my view, a finding that a person is a de facto director requires a more detailed analysis of the circumstances than when making a finding about a named director, whose responsibilities are set out in Part 8 of the Act.38 A named director is at all times aware of their duties, whereas a"deemed" director may genuinely not realise they have undertaken the role of adirector at the time at which they do so.39 The fact that the same duties apply to de facto directors under the Act regardless, as they did at common law, is another reason for requiring both voluntariness in assuming the role of director under s 126(1)(a),40and a careful evaluation of the evidence before making such a finding.The Decision[50] In his Decision, the Registrar referred to the three strands of evidence on which the Liquidators based their conclusion that Mr Mani "managed the day-to-day running of the Company and made the majority of the business decisions on behalfof the director."[51] The first strand was Mr Richards' statements to the Liquidators, statingMr Richards had very little to do with the Company's affairs and Mr Mani"essentially ran the Company and made key decisions on its behalf".[52] The Registrar said, had that been the sole information in support of theallegations, it would be "unwise" to rely on it alone. He was satisfied Mr Richards had made the statement but was not satisfied that, of itself, it was necessarily a correct statement. The reason for that observation was that Mr Richards was not anindependent, disinterested commentator and it might have been in Mr Richards'38 See Companies Act 1993, Part 8.39 See, for example, Fatupaito v Bates, above n 30, in which the genuine belief he was acting as a receiver did not prevent Mr Bates being found to in fact be operating as a director under s 126(1)(c).40 Peter Watts, Neil Campbell and Chris Hare Company Law in New Zealand (2nd edition, LexisNexis, Wellington, 2016) at 258 - 259.interests to down play his own involvement and to put the blame elsewhere. The Registrar was also alive to the counter-argument that such a statement was against Mr Richards' interests because it demonstrated he had abdicated his responsibilities.[53] The second strand of information referred to by the Liquidators was Mr Mani's alleged comments to the Company's landlord stating that, he, Mr Mani,had been running the Company since day one and that Mr Richards was "only a director by name".[54] The third strand of information was the Liquidators' statement that:Creditors and other parties who carried out business with Tribeca have allmade similar assertions that Ritesh Mani was the decision maker and "face"of the Company for any transactions the Company entered into.[55] The Liquidators had provided an email from a creditor, which apparently included this type of observation. The email was initially not provided to Mr Maniand, although it was provided later, the Registrar decided not to attach any "specific weight" to it.[56] The Registrar also had before him the Liquidators' views, including the observation that Mr Richards had limited knowledge of the Company's financialposition, and referred their queries to Mr Mani.[57] Mr Hucker referred to the Registrar's finding that Mr Mani did not actively participate in the management of the Company, submitting it was inconsistent with a finding he was a de facto director. In his submission, there was also no evidence of Mr Mani directing Mr Richards or the board being the "puppet" of Mr Mani, as a shadow director. He stressed that Mr Richards was a chartered accountant.[58] In Mr May's submission, there was evidence upon which the Registrar wasentitled to conclude that Mr Mani was either the sole person directing the affairs of the Company, or acting on (at least) an equal footing with Mr Richards in directing the affairs of the Company. Weighing this evidence against Mr Mani's assertion thathe was solely an employee was a matter for the Registrar, Mr May said. The Registrar was satisfied the relevant statements had been made by the creditors andlandlord, and that Mr Richards did make the statement to the Liquidators ascribed to him. The Registrar said he would not have relied upon the truth of Mr Richard's statement in isolation, and this was a proper approach, in Mr May's submission.Analysis[59] The Liquidators had completed a questionnaire which was focussed on their investigation of Mr Richards. The Liquidators were of the opinion:(a) The Company took on too many building contracts without having the resources to execute them, made worse by the Company paying out substantial sums to related parties from build deposits received from clients.(b) The overall cause of the Company's failure was poor governance bythe director and misuse of Company funds.(c) Mr Richards was largely uncooperative. While he did not intentionally obstruct the liquidation, he was not involved enough in the management of the Company to provide information.(d) Based on their discussions with Mr Richards and various creditors/suppliers who were involved with the Company, Mr Mani managed the day to day running of the Company and essentially made the majority of the business decisions on behalf of the director.(e) Due to poor accounting records, it was difficult to pinpoint exactly when the Company became insolvent. The Company fell behind in its payments to suppliers and commitments to clients towards the end of 2013. Correspondence from June 2014 indicated that Mr Richards and Mr Mani were aware the Company was not able to meet its debts as they fell due. The Company continued to trade past this time until December 2014/January 2015.(f) The Company continued to use construction companies and contractors through to the end of December 2014, despite being aware as early as June 2014 that it was unable to meet its debts. Build deposits were accepted from clients at a time when Mr Richards was well aware that the Company would not be in a position to honour these contracts.(g) Throughout this period, Mr Mani utilised considerable Company funds for personal use.[60] The Liquidators noted:It became evident during our attempts to obtain company information from Mark Richards that he had limited knowledge of the Company's financialposition, and most of our queries were either redirected to Ritesh or passed on to Ritesh by Mark.[61] Mr Mani relied on two matters in his response to allegations about his use of Company funds. First was his entitlement under his employment contract, in respect of which the Registrar stated:I believe that it was not in the best interests of the Company to enter into an agreement with an employee where it would pay the personal expenses of anemployee Because I cannot be sufficiently satisfied on this point I cannottake it any further without further information and analysis. Nothing in this Minute can be taken in support or denial of the liquidator's claim for themoneys used for payment of personal expenses to be reimbursed to the Company.[62] The second matter concerned $116,400 paid to a family trust (the Trust) between April 2012 and September 2014, of which $63,400 remained owing at the date of liquidation. The Trust was described by the Registrar as connected to Mr Mani's parents, who were majority shareholders in the Company. The Registrarwas satisfied this was not the type of transaction which would have been entered into on an arm's length basis. It was not documented and no security was provided.[63] The Registrar noted that Mr Mani was not a trustee or beneficiary of the Trust. I note from reading the Trust deed, however, that Mr Mani was a discretionary beneficiary as a child of the primary beneficiaries.[64] The Registrar said:Also there is no information provided to me which shows that Mr Mani actively participated in mismanagement as alleged by MBIE. Furthermore, there was no information provided to me that Mr Mani was personally involved in the payments to [the Trust]. This is a positive factor for Mr Mani and I have taken it into account.[65] Mr Mani essentially accepted he was the point of contact for clients and suppliers, going beyond the sales-related activities in his employment contract, and extending to dealing with builders and other contractors and suppliers. However, he denied he had key decision-making power.[66] Mr May criticised Mr Mani for not providing any substantive response to the allegations put to him, saying his response read more like a civil statement of defence than a consultation response. I agree that in large part his responses amounted to a bare denial of the statements made by others.[67] In Mr May's submission, the circumstances were such that, if Mr Mani were truly just an employee, he could reasonably have been expected to provide evidence, or some explanation, of how and when he reported to Mr Richards and acted on his instructions; why all other parties were under the impression he ran the Company; and how Mr Richards exercised decision-making power. Furthermore, every creditor said the same thing about Mr Mani's role. Mr Mani simply denied he made the comment alleged by the landlord.[68] Mr May surmised that the Registrar was faced with the situation of having to consider why all the creditors would lie about Mr Mani's role. He suggested that, ifthere were any personal animosity between a particular creditor and Mr Mani, Mr Mani could be expected to have identified that to the Registrar.Conclusion[69] The Registrar said:I am satisfied that Mr Mani had an employment contract and there is a reasonable basis to conclude that if they were the sole activities undertaken by Mr Mani that would not make him a de facto director. I am satisfied thatMr Mani did not assume control over all aspects of the Company's business.I am satisfied he largely restricted his activities to sales and marketing.I am satisfied there were some aspects of Mr Mani's involvement with theCompany which were that of an employee and some which were as exercising powers that would fall to a director. I am satisfied Mr Mani was a de facto director of the Company.[70] The issue is whether the Registrar could properly have been satisfied that the statements attributed to Mr Richards, the creditors, and the landlord, together with the opinion of the Liquidators, reflected the reality of the situation. While there is no prohibition on hearsay evidence per se, the weight to be given to it depends on its probative value.[71] In this case, in large part the only information provided to the Registrar wascomments passed on by the Liquidators about creditors' impressions, with no detailor examples of behaviour to substantiate those impressions.[72] The comments attributed to the landlord, and what Mr Mani allegedly said to him, were absent of context which would have assisted in analysing the weight and significance of those comments. For example, it was impossible to know whether, assuming Mr Mani did make the comments as alleged, Mr Mani was accurately reporting the reality, was a fantasist engaged in self-aggrandisement, or in fact did have a degree of authority to discuss certain matters with the landlord. If the latter were the case, then it was important to know the particular issue in respect of which Mr Mani made the comment, as that would have been relevant to an assessment of whether he was acting as a director. For example, Mr Mani could have been discussing with the landlord a minor repair to the building, or a forthcoming rent review. Knowledge of the topic under discussion was vital to an interpretation of the significance of what was said.[73] These deficiencies were compounded by reliance on the Liquidators' opinionof Mr Mani. It was for the Registrar to be satisfied as to the role played by Mr Mani.He could not simply adopt the Liquidators' conclusion. In this regard, theinformation provided to him for the purpose of his decision was inadequate – lacking particulars, context, and reasons for the opinions proffered. The result was asuspicion as to Mr Mani's role, a suspicion which on further investigation andevidence, might well have been confirmed, but might not.[74] In addition, the director's powers said to have been exercised by Mr Mani should have been identified in order to make a finding under any provision of s 126.However, neither the Liquidators' report, nor the evidence, nor the Decisionidentified the aspects of Mr Mani's involvement in the Company which constitutedthe exercise of director's power. Nor did the Decision clearly identify what type of deemed director Mr Mani was being found to be, or the various tests for different forms of deemed directorship.[75] In these circumstances, the Registrar could not properly be satisfied Mr Mani acted in fact as a director of the Company. I am in no better position.Was Mr Mani concerned in or did he take part in the management of the Company?Submissions[76] Mr Hucker suggested that Mr Mani was unaware he was to be investigated under this particular heading and that the notice referred to s 126 only. It is, however, clear from the letter dated 24 February 2016 from MBIE to Mr Mani that the enquiry included the allegation of involvement in management.[77] The same criticisms levelled towards the section 126 finding are said to apply to the finding of Mr Mani's involvement in management.[78] Mr Hucker referred to various cases which in his submission, showed theextent of particularisation required before a decision on an individual's "management" of a company could be reached.41 He conceded the cases all involved the criminal jurisdiction. He said, however, that the Registrar did not provide any analysis or set out any consideration of the factors from the Sanson case on which41 R v Sanson DC Auckland T020800/00, 18 November 2003; Thompson v District Court at Christchurch (2002) 9 NZCLC 262,824 (HC); Tregurtha v Police HC Auckland AP123/93, 15 October 1993; Waters v Ministry of Economic Development [2013] NZHC 3463.the Registrar said he had relied. Neither did he analyse any specific act of Mr Mani said to constitute involvement in the management of the Company.[79] In Mr Hucker's submission, there would need to be an analysis of the conductrelied on, how that conduct constituted management, in what manner and when Mr Mani exercised the power and whether it was exercised with such a degree of continuity that there was ongoing involvement in the management of the Company.Given the Registrar's finding that there was no information showing Mr Mani actively participated in the mismanagement, Mr Hucker queried how the Registrar could have concluded that Mr Mani was involved in management of the Company.[80] Mr May did not uncover any cases which have considered the standard for"management" under s 385, but referred to a line of New Zealand and Australian cases which considered the same words as used in s 382 of the Act, its predecessors, and Australian equivalents. He submitted those cases identified certain principles which are equally appropriate when interpreting s 385. First, a broad interpretation is appropriate. The drafting is deliberately wide and any overreach caused by thebroad drafting can be addressed by the decision maker's discretion not to impose apenalty, he suggested. Secondly, a distinction is drawn between management of the company and taking part in day-to-day business functions. This is a question of fact and degree, and there is likely to be little distinction in small companies.What constitutes involvement in management of a company?[81] Section 385(3) and (4) allow the Registrar to prohibit someone from being an officer or promoter of a company, or being concerned in, or taking part (whether directly or indirectly) in the management of, any company for a ten year period if they were "concerned in, or a person who took part in, the management of, acompany" to which the section applies.[82] The previous legislative provision was s 189A of the Companies Act 1955 (in force from 21 December 1988 onwards). It contained the same provisions, with a maximum five year period of suspension.[83] The definition of the management of a company was authoritatively considered by Ormiston J in the Victorian Supreme Court case Commissioner for Corporate Affairs (Vic) v Bracht, and this definition has been drawn on by a number of relevant New Zealand authorities.42 Relevantly, Ormiston J said:43" the concept of 'management' for present purposes comprehendsactivities which involve policy and decision-making, related to the business affairs of a corporation, affecting the corporation as a whole or a substantial part of the corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on the financial standing of the corporation or the conduct of its affairs. I would see the prohibition as covering a wide range of activities relating to the management of a corporation, each requiring an involvement of some kind in the decision-making processes of that corporation. That involvement must be more than passing, and certainly not of a kind where merely clerical or administrative acts are performed. It requires activities involving some responsibility, but not necessarily of an ultimate kind whereby control is exercised. Advice given to management, participation in its decision-making processes, and execution of its decisions going beyond the mere carrying outof directions as an employee, would suffice."[84] Advice given to management, participation in decision-making processes, and execution of decisions, even if joint decisions, suffices as "participation" in themanagement of the company if it goes beyond carrying out directions as an employee.44[85] In the New Zealand context, the cases discussing the definition of"management" have primarily related to convictions under s 382 of the Companies Act, which prohibits those convicted of dishonesty offences (or offences related to management or formation of the company) from taking part in the management of a company for five years following conviction. The Company Law commentarysuggests the reference to "management" in the context of s 382 is to be interpreted broadly, "to catch any person who takes part in the management or central direction of the company's affairs".4542 See Tregurtha v Police, above n 41; Bird v Pain HC Auckland AP52/92, 2 June 1992;Henderson v Official Assignee [2015] NZHC 1341; Thompson v District Court at Christchurch(2002) 9 NZCLC 262,824 (HC) amongst others.43 Commissioner for Corporate Affairs (Vic) v Bracht (1988) 14 ACLR 728 (VSC) at 733—734, 736.44 Waters v Ministry of Economic Development, above n 41, at [34]; Bird v Pain, above n 42, at 4.45 Company Law (online looseleaf edition, Thomson Reuters) at [CA382.06].[86] In the context of s 385, there is not necessarily a similar policy rationale at the first stage of the enquiry, as there is no requirement for a link between thebusiness' failure and the performance of the specific manager being considered bythe Registrar. Someone who has been convicted of the necessary offences under s 382 has, by contrast, already demonstrated behaviour of concern.[87] Ormiston J's dicta has, however, also been applied in the context of s 62 ofthe Insolvency Act, which requires that a discharged bankrupt obtain the consent of the Official Assignee before directly or indirectly entering into, carrying on, or taking part in the management or control of, any business.46[88] In Thompson v District Court at Christchurch, reviewing a decision not to dismiss a charge brought under s 382 of the Companies Act, Chisholm J considered the distinction between business and management functions.47 His Honour said the dividing line between management and non-management could be blurred, and would be more difficult clearly to ascertain in small companies. He stated:At the best judicial attempts to define the concept provide general guidance. During his extensive analysis of the Victorian equivalent of s 382(1) Ormiston J made the following observations in Bracht:"It may be difficult to draw the line in particular cases, but in my opinion the concept of 'management' for present purposescomprehends activities which involve policy and decision making, relating to the business affairs of the corporation, affecting the corporation as a whole or a substantial part of that corporation, to the extent that the consequences of the formation of those policies or the making of those decisions may have some significant bearing on thefinancial standing of the corporation or the conduct of its affairs."To my mind those observations capture the essential nature of the "management" concept. Some decisions, for example, R v Campbell (1984) 78 CrAppR 95, have confined the concept to the central direction of the company's affairs. Like Fisher J and Ormiston J in Tregurtha and Bracht respectively, I have doubts about that refinement because it might exclude branch management functions in situations where those functions can be properly regarded as being part of the management concept.[89] However Chisholm J said that, although in some situations both the running of the business of a company and the management of it would be performed by the46 See Knight v Official Assignee [2009] NZAR 235 (HC).47 Thompson v District Court at Christchurch, above n 42.same person, a broad brush test equating the two would be inappropriate: actual management needed to be shown, even in a small company. It is necessary, then, to focus the analysis on the actual behaviour of the individual and to assess what it demonstrates.[90] Overall, the assessment is a question of degree,48 and a factual assessment taking into account issues such as the nature of the duties to be performed but also the management structure of the business and the level of supervision.49 Whenconsidering whether the person has "taken a hand in the real business affairs of thecompany" a non-exhaustive list of relevant factors was set out by District Court Judge Thorburn in R v L:50(a) Without there being a need for the person to be a director or office holder, did he or she exercise any supervisory control which reflected the general policy of the company?(b) Was the person's involvement more than a passing one consistent onlywith clerical or administrative acts?(c) Did the person's involvement include activities of responsibility andassumption of some control albeit not necessarily of an ultimate kind?(d) Did the person give advice to management and/or participate in decision-making processes?(e) Did the person partake in the execution of or implementation of decisions made – beyond the mere carrying out of instructions as would be required of a mere employee?(f) Were the opinions of the accused given any weight in the decision- making process of management?48 Tregurtha v Police, above n 41.49 Knight v Official Assignee, above n 46, at [13].50 R v L [1998] DCR 229.Analysis[91] On Mr Mani's own evidence, his involvement included all aspects of the Company's business except accounting, overseeing building work, and signing off large contracts. His involvement included the following:(a) Meeting clients, "often as a sole point of contact".(b) Liaising with builders and other contractors "in order to ensure that the client's requirements were met". As the core business of the Company was housing development, this was an important role.(c) Communicating with suppliers given his knowledge of building specifications and client design choices.(d) Attending meetings with suppliers and other parties (given the relatively small nature of the Company).[92] This degree of involvement in the Company's business went beyond theterms of his employment contract and what would ordinarily be expected of asalesperson. It showed "a considerable level of autonomy" in areas of "criticalimportance".51[93] Mr May pointed out that the Company was owned 90 per cent by Mr Mani'sparents and the Registrar was entitled to draw inferences from that. I am not satisfied there was sufficient information before the Registrar to draw the inference Mr May suggested and the Registrar quite properly did not do so.[94] In terms of the factors identified in R v L, Mr Mani's acknowledgedinvolvement in the business of the Company included:(a) aspects of supervisory control of parts of the Company's corebusiness;51 Knight v Official Assignee, above n 46, at [18].(b) more than a clerical or administrative role;(c) activities of responsibility, including the assumption of some control, albeit not necessarily of an ultimate kind; and(d) inevitably, in my assessment, giving advice to the director, Mr Richards.[95] Previous cases show findings of involvement in the management of a company (whether directly or indirectly) at a level equivalent to that of Mr Mani.52[96] The management chart provided by Mr Mani in his submission to the Registrar showed Mr Richards at the top and directly underneath him, all on the same level, were three names with responsibilities for accounting, project management and sales (the latter being Mr Mani). That in itself a suggestive of a degree of involvement in management. It is true that, particularly in a small company, the lines can be blurred.Conclusion[97] In the circumstances, the evidence before the Registrar was sufficient to allow him to be satisfied that Mr Mani was concerned in, or took part in, the management of the Company.Was the manner in which the affairs of the Company were managed wholly or partly responsible for it being a company to which s 385 applied?[98] To make an order for prohibition under s 385, the manner in which the affairs of the Company were managed must have been wholly or partly responsible for the Company becoming a company to which the section applies.[99] The Company was put into liquidation on 1 May 2015. In the Liquidators'view the Company could not pay its debts as they fell due from at least October/November 2013. The Company continued to trade to the end of the52 See, for example, R v Sanson, above n 41; Waters v Ministry of Economic Development above n41.December 2014, despite being aware as early as June 2014 that it was unable to pay its debts. Build deposits were accepted from clients at a time when the director was well aware that the Company would not be in a position to honour the contracts.[100] The Company did not file GST returns past September 2013, or PAYE returns past 2014. The IRD claimed approximately $2 million of unpaid tax.[101] Financial statements were not completed past the 2012 financial year, and bank reconciliations had not been done for a number of years. Further, the Liquidators considered that there were a large number of transactions which were reported incorrectly. This constitutes a breach of s 194 of the Act.[102] The Registrar said:I am satisfied that the Company traded while it was insolvent; that the insolvent trading was mismanagement and that this mismanagement was at least a partial reason why the company was placed in liquidation.[103] The test for reckless trading under s 135 of the Act requires that the conductis "well outside orthodox business practice".53 I agree with the respondent'ssubmission that it was not difficult to see how the Registrar came to the conclusion that the Company had traded recklessly where it had consciously accepted deposits for contracts it knew could not be honoured, and failed to file tax returns.[104] The Registrar considered that each of the failures, the failure to act in good faith and best interests, reckless trading, and failure to keep accounting records, werecontributing factors to the Company's failure. He concluded:(a) The loan to the Trust was at least partly responsible for theCompany's liquidation. A loan of up to $116,000 is not aninconsiderable sum where all cash is needed to meet ongoing obligations.(b) The failure to keep tax records and to pay tax when due were at least partial reasons for the failure of the Company.53 Delegat v Norman, above n 6, at [106].(c) The failure to keep proper accounting records meant that theCompany was "flying blind" with regard to its financial position.[105] I concur with the Registrar's conclusions. The manner in which the Company's affairs were managed was clearly wholly or partially responsible for the liquidation.Section 385(4) – Interpretation[106] Miller J in Davidson said:54I accept that the section is aimed at those who through some want of integrity, skill, judgment or industry are not suitable directors or managers.They may well have behaved in ways that breach a director's duties andstandard of care under ss 131-137, and the Registrar must recognise that under s 138 a director is entitled to rely on others. But ss 131–137 address an individual director's accountability to shareholders and creditors of acompany which the director has already served, while s 385 is protective and forward-looking. The Registrar's inquiry is addressed initially to mismanagement of the company's affairs and its causal connection to insolvency, not the behaviour of individual directors. Such mismanagementhaving been identified, all of the company's directors and managers areeligible for prohibition. The power to prohibit them is broad and discretionary in nature. When exercising it the Registrar is not confined toconduct that caused the company's insolvency; all of the individual director's attributes and conduct in office may be taken into account.[107] In Mr Hucker's submission, the Davidson case described the test under s 385 incorrectly. He said the comments might be right in so far as a named director was concerned where there was collective responsibility for board decisions. It was different, in his submission, in the case of s 385(4)(a). Section 385 was, he said, a protective measure in relation to a particular person and the mismanagement must relate to that individual director. In his submission, considering the Davidsondecision in the context of a de facto director showed the difficulty with the interpretation adopted in that case. For example, a deemed director could not resign, as it had been suggested Mr Davidson should have done.[108] The relevant words in s 385(4)(a) and (b) are identical and a different interpretation between the two sub-sections is therefore not possible.54 Davidson v Registrar of Companies, above n 2, at [97].[109] While s 385(4) requires a casual connection between the failure of the company and the manner in which the affairs were managed, the decision maker is not required to be satisfied that there was any nexus between the failure of the company and the conduct of the person whose prohibition is in contemplation. Ifany mismanagement is identified, all of the company's directors and managers areeligible for prohibition.[110] The conduct of the person whose prohibition is in contemplation becomes relevant when the decision maker turns to the question of whether to exercise his or her discretionary power to prohibit a person under s 385(3), and if so, for how long.Exercise of the discretionInvolvement in mismanagement[111] In Mr Hucker's submission, there was a duty on the Registrar in the exerciseof the discretionary power to disqualify to identify the precise involvement of Mr Mani in any act of mismanagement and provide reasons as to why the discretion would be exercised in any particular manner.[112] Mr Hucker suggested that Mr Mani had no involvement in or responsibility for any of the aspects of mismanagement identified by the Registrar. This was in contrast to Mr Richards, a chartered accountant, whose business had prepared theCompany's 2012 financial statements. There was no evidence, he said, of Mr Mani having any involvement in the incurring of debt or the authorisation of expenditure on behalf of the Company.[113] Mr Hucker emphasised that the Registrar did not identify any specific conduct on the part of Mr Mani which constituted misconduct or a breach of duty and did not make any finding as to any particular decision, act or omission on the part of Mr Mani which constituted mismanagement. He noted that the Registrar found Mr Mani had largely restricted himself to sales and marketing.[114] I agree generally with Mr Hucker's submissions. The Registrar should haveidentified Mr Mani's role in the mismanagement. In that regard, there was noanalysis of the role of the accounts person or the project management company, bothshown on the Company's structure chart as being at the same level as Mr Mani. Given the factors identified as contributing to the failure of the Company, the actions of the individuals in those positions would seem to be highly relevant. In contrast, as the salesman, Mr Mani could be considered as primarily focussed on new business. If he were stepping outside of his described role into the areas of concern, that was not identified. In fact, the Registrar specifically stated that Mr Mani did not assumecontrol over all aspects of the Company's business and had largely restricted hisactivities to sales and marketing.55 Given this, there was a particular need for the Registrar to identify how Mr Mani's actions contributed to the Company's failure.[115] Before considering whether or not to disqualify Mr Mani, the Registrar should have identified his role in the mismanagement of the Company which contributed to its liquidation. That exercise should have been carried out to providea platform for the Registrar's consideration of whether or not to disqualify Mr Mani. While the Registrar might not be confined to that conduct in his consideration, it was vital context. This was particularly so in circumstances where Mr Mani was not a named director with statutory responsibilities for the entirety of the Company.Reasons to disqualify[116] Mr Mani complained that the Registrar failed to give any reasons for deciding to exercise his discretion to disqualify, other than that, on reviewing theinformation, it was "appropriate".[117] Mr Hucker said it was clear the Registrar decided as he did because he was influenced by Mr Mani's having been declared bankrupt twice previously. In thiscase, there was no link, said Mr Hucker, between Mr Mani's involvement in theCompany and its insolvency, and the bankruptcy could be relevant only if Mr Mani had been actively involved in mismanagement.55 See [69] above, describing the Deputy Registrar's comments in the Decision at paragraph 6.10.[118] In Mr May's submission, the Registrar was not concerned with Mr Mani'sbankruptcy but with the collapse of the Company. It was entirely proper that the Registrar considered Mr Mani's two previous bankruptcies as an aggravating factor.[119] The Decision makes it clear that the Registrar considered the following:(a) Mr Mani's previous bankruptcies;(b) His conclusion that Mr Mani had not cynically set out to become a defacto director while having "the trappings of an employee" (althoughrecognising this was possibility);(c) The absence of information showing that Mr Mani actively participated in the mismanagement (as a positive factor); and(d) The need to consider deterrence and the setting of standards.[120] The Registrar said:All persons who are directors or manage a company must have it reinforced to them that they must exercise proper governance and not ignore the basic duties imposed on them. It is also important that there is consistency in treatment of candidates and that the public is aware that where a bankrupt breaches their obligations to not be involved in the management company such a breach will be treated as serious.[121] Although the Registrar provided reasons to disqualify Mr Mani, because there was no identification of the actions of Mr Mani which contributed to the liquidation, the assessment was undertaken without context.[122] The Registrar was faced with a difficult situation. The information with which he was provided was simply inadequate for the assessment he was required to carry out. That is perhaps unsurprising as the initial investigation and theLiquidators' report were centred on the behaviour of the named director. It was really as a consequence of the observations about Mr Mani in the report that his position then came under scrutiny.[123] In hindsight, the enquiries as to Mr Mani's conduct should have begun with afresh report from the Liquidators specifically addressing Mr Mani's position.Although the Liquidators provided more information about Mr Mani by email dated 16 December 2015, which included particulars about his personal use of Company funds, there was no specific information about Mr Mani's contribution to the failure of the Company. A fresh report would have been more likely to elicit the detail and context of the various allegations against Mr Mani which were necessary for a decision as to whether he was a de facto director. It would also have enabled an enquiry into what, if any, contribution Mr Mani made to the Company's liquidation.In the absence of sufficient evidence, the identification of any such contribution is not possible. That identification is essential to the exercise of the discretion to disqualify or not, and the term of any disqualification.[124] In these circumstances, I am in no better position than the Registrar to make a decision on whether or not Mr Mani should be prohibited from being a director or involved in the management of a company, or the term of any such prohibition.Result[125] For these reasons, I allow the appeal and quash the decision. I have considered whether to send the decision back for rehearing, but as there is insufficient information on which to base the decision, no such order is made.[126] Mr Mani is entitled to costs. If the parties cannot agree costs between them, memoranda are to be filed within 20 days and will be dealt with on the papers._______________________Thomas J