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actions which are committed with a degree of culpability 283 or ignorance,
undermining the principle of limited liability. 284
A director could be held as unfit within the meaning of the Act if their conduct
involved cynical exploitation of the privilege of limited liability either through
disregard for proper responsibility, or gross incompetence. 285 The decision is
consistent with Re Bath Glass 286 which calls for either culpability on the part of the
director on the one hand or ignorance of the facts at the other extreme. In Re
Churchill Hotel (Plymouth) Ltd and others 287 the court decided that gross
incompetence is sufficient to prove unfitness without any breach of commercial
morality. Thus, a director who failed to comply with the obligations to file audited
accounts and annual returns, even if due to pressure of work, had committed
misconduct. 288
The public is entitled to be protected, according to Re Stanford Services Ltd and
others, 289 against a director who has failed to appreciate or observe the duties within
the limits of the privilege of limited liability, and not only of the most obvious
breaches of commercial morality. As such, if a director allows a situation to arise
283 Re Lo-Line Electric Motors Ltd [1988] Ch 477 at 492 , the judge requires the display of ―lack of
commercial probity, although in extreme case of gross negligence or total incompetence.‘‘
284 This is also clear from the decision of Re Bath Glass [1988] BCLC 329 at 333 which stated ―The
court must be satisfied that the conduct in question must be sufficiently serious to lead it to the
conclusion that the director is unfit and that is emphasized by the mandatory disqualification for
at least two years to be imposed by the court if that conclusion is reached. To reach a finding of
unfitness, the court must be satisfied that the director has been guilty of a serious failure or
serious failures, whether deliberately or through incompetence, to perform those duties of
directors which are attendant on the privilege of trading through companies with limited
liability.‖
285 Re Douglas Construction Services Ltd and another [1988] BCLC 387.
286 [1988] BCLC 329.
287 [1988] BCLC 341 at 347.
288 Re Churchill Hotel (Plymouth) Ltd and others [1988] BCLC 341 at 347.
289 [1987] BCLC 607 at 619.
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