Overview Of Disqualification Proceedings Successfully Defended
The case of The Secretary of State for Business Energy And Industrial Strategy v Keeble [2022] EWHC 2503 (Ch) shows director disqualification proceedings successfully defended by Mr Keeble.
It is important to look at how a case is presented. The key takeaway here is weighing up the evidence of acts or omissions that evidence unfit conduct.
The statutory regime is couched in terms that if the Court is satisfied a Director is unfit to be a Director they should be dethroned for a period of time up to fifteen years.
The Judge in his introduction to the case highlighted the need to determine the case based on the grounds of unfitness set out in the application for a disqualification order under Section 6 of the Company Directors Disqualification Act 1986.
It was notable that the evidence put forward by the Secretary Of State contained a lot of information that it appears did not go to the heart of the alleged unfitness:
There is a need for particular care to ensure that this claim under section 6 of the Company Directors Disqualification Act 1986 (“the CDDA“) is decided only upon the grounds relied upon to allege that Mr Keeble’s conduct as a director of CFO Lending Limited (“CFO”) makes him unfit to be a director of a company. That is because the claim for disqualification is supported by a vast array of evidence (including the contents of exhibits) which includes or is relevant to allegations, some potentially serious, that do not address those grounds for disqualification.
The Judge said:
…the claim must be judged on that basis without adding particulars of acts and omissions which are not part of the claim
You would expect an application for director disqualification to refer to an act or omission that evidence the particular unfitness suggestion alleged.
Mr Keeble’s Successful Defence
Mr Keeble was pursued by the Secretary of State on three grounds of alleged unfitness:
(i) misused customer banking information
(ii) excessive use of continuous payment authorities
(iii) records were inadequate to accurately account for the amounts due from debtors
The evidence in support should identify the basis for the claims and the facts relied upon so the respondent Director knows the case he or she has to meet.
In the Keeble case Insolvency And Companies Court Judge Jones put it this way when assessing that the evidence did not refer to specific acts or omissions to be assessed by the Judge to suggest unfitness:
Bearing in mind that the evidence in support should identify the grounds and the essential facts relied upon, it is hardly surprising that Mr Keeble’s evidence in answer largely responded to this “macro-approach” in a similar fashion. It was not for him to identify his actions or omissions which might be relied upon as evidence against him. I do not suggest that he took a conscious decision to avoid doing so but observe that this was the inevitable result of the evidence in support unless he wanted to extend his answers into matters not alleged or not identified as essential facts. Furthermore the evidence in support by adopting the approach of referring to detailed and wide ranging OFT and FCA regulations, industry and CFO investigations often makes it difficult for the Court, and presumably Mr Keeble, to decide what facts and matters is being relied upon as evidence in support of the Three Grounds.
In other words, perhaps, he (or she) who asserts must prove and properly particularise their case. This was perhaps particularly key for the Secretary of State because Mr Keeble was assessed by the Court to be an impressive witness and a reliable one.
Whilst the Court did acknowledge its role was to assess Mr Keeble from the vantage point of his time as a Director not his performance in the witness box, it cannot have harmed his case because the Judge said:
Nevertheless he starts with a favourable, overall assessment from me.
Inaccurate Customer Balances
There was an IT problem that culminated in £31.9 million in outstanding customer balances to be written off and £2.9 million in payments.
However, whilst the Secretary of State did identify a problem it seems it did not satisfy the Court why Mr Keeble was responsible for it with reference to an action or omission. This head of the claim was therefore dismissed.
Excessive Use Of Payment Authorities
Mr Keeble said that in respect of the allegation that customer banking information had been misused that he had relied upon legal advice and the drafting of lawyers to give rise to the relevant contractual entitlements to use the payment details. The Court accepted his evidence on this point notwithstanding that the Court expressed uncertainty as to whether the position was correct.
However, the point was not whether it was correct but whether Mr Keeble was competent in relying on the advice he had received. The Court said there was no basis for the proposition that he had acted incompetently.
Conclusions Of The Judge
The Judge said:
This is a claim where the evidence required to prove knowledge and incompetence is missing … it would also be wrong to reach any other decision because it would mean that incompetence had been assessed without Mr Keeble having had the opportunity to address specific evidence concerning his knowledge and actions or omissions in relation to the breaches of the Communication Policy. Even assuming he had the information available to descend into the detail for which the Secretary of State did not provide evidence, there was no obligation for him to do so. He did not have to prove he was not incompetent. He was entitled to have evidence of essential facts presented and identified within the Secretary of State’s evidence. The obligation explained in Re Finelist Ltd & Another was not fulfilled.
Oliver Elliot Observation Of The Case of Disqualification Proceedings Successfully Defended
Without having seen the evidence and watched the case develop in Court and with only the Judgment from which to assess matters any inferences drawn might be an oversimplification.
However, a concise stripped-back approach to the provision of pre-Trial evidence might perhaps be better than something akin to a kitchen-sink approach.
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