Rwamba v The Secretary of State for Business, Energy And Industrial Strategy

Under section 17 of the Company Directors Disqualification Act 1986, the court has an unfettered discretion to grant a disqualified person leave to act as a director. The applicant must establish that leave is appropriate in all the circumstances. The court must balance the reasons for seeking leave against the protective and deterrent purposes of disqualification, including the risk of future misconduct and the effect on public confidence. A prior breach of section 17 conditions does not, without more, impose a heightened burden or require special weight to be given to deterrence. The court must assess the circumstances of the individual case, including culpability, seriousness, the proposed safeguards and the practical benefits of granting leave.

Mr Rwamba, who was subject to a six-year disqualification undertaking following breaches of an earlier permission order, applied under section 17(3) of the Company Directors Disqualification Act 1986 for leave to act as a director of Match Options Limited and Match Options Franchising Limited.

ICC Judge Prentis dismissed the application in judgments dated [2019] EWHC 2669 (Ch) and [2020] EWHC 352 (Ch). He accepted that the proposed conditions would substantially protect the public from future misconduct, but considered that the reasons for leave lacked sufficient cogency and that granting permission would weaken the deterrent and public-perception aspects of the disqualification regime. The appeal concerned the proper approach to deterrence and the judge’s assessment of the evidence.

1. Appeal allowed. The appellate court exercised the section 17 discretion afresh and granted Mr Rwamba leave to act as a director of both companies, subject to extensive conditions.
2. The public-protection policy underlying disqualification has two aspects: protecting the public from repetition of the misconduct and deterring directors generally from falling below acceptable standards of corporate conduct. Both aspects must be considered on every application for leave.
3. A prior breach of section 17 conditions is relevant, particularly to the risk of breach of any further order. However, once the court is satisfied that there is no material risk of breach of the proposed order or its conditions, the application is to be considered in the same way as any other application. The prior breach does not, without more, justify giving additional weight to deterrence or imposing a generally higher burden.
4. Public perception must be assessed by reference to a fair-minded and informed observer who understands that leave is an integral part of the statutory regime, is granted only after judicial scrutiny, and may be subject to stringent safeguards. On that basis, granting leave would not necessarily weaken the disqualification regime.
5. The relevant factors included Mr Rwamba’s recognition of his earlier errors, the absence of dishonesty, the remaining duration of the undertaking, the Secretary of State’s non-opposition, the companies’ solvency and profitability, the commercial benefits of his directorial involvement, the family circumstances relied upon, and the comprehensive proposed conditions. The conditions reduced the risk of misconduct and promoted enhanced corporate governance.
6. The first-instance judge’s error in giving special weight to deterrence because the disqualification followed breach of an earlier permission order materially affected the discretionary decision. It was therefore unnecessary to determine the separate challenge to the factual findings.

• High Court (Chancery Division), Insolvency and Companies List: ICC Judge Prentis dismissed the application in [2019] EWHC 2669 (Ch) and, after further evidence, in [2020] EWHC 352 (Ch).
• High Court (Chancery Division), Appeals List: The appeal was allowed. Leave to act as a director was granted subject to conditions.