IN THE MATTER OF ASSET LAND INVESTMENT PLC

In disqualification proceedings, unfitness is a value judgment based on the director’s personal conduct, assessed against the standards of probity and competence expected of a fit director. A director’s mere status, or the fact that a company acted unlawfully, does not establish personal responsibility. Delegation and division of responsibility are permissible, although they cannot amount to total abrogation of duty.

Where incompetence or inadequate supervision is alleged, the claimant must identify a coherent criticism, show what the director ought to have done, and prove incompetence of a high degree. Allegations must be sufficiently clear to allow the defendant to know the case to be met. On the evidence, the Secretary of State failed to prove that the defendant’s conduct made him unfit.

The Secretary of State applied under section 6 of the Company Directors Disqualification Act 1986 for disqualification orders against three directors of Asset Land Investment plc.

Two defendants gave three-year disqualification undertakings under section 7 shortly before trial. The substantive hearing therefore concerned Mr Nigel Lord alone. The company had operated an unauthorised collective investment scheme involving land banking and had made misleading statements to investors. The Secretary of State alleged that Mr Lord had allowed those matters to occur by failing to discharge his supervisory responsibilities.

The central issues were whether the allegations were fairly and sufficiently advanced, whether Mr Lord had personal responsibility for the relevant conduct, and whether his conduct made him unfit under section 6(1)(b).

1. The application was dismissed. The Secretary of State failed to establish that Mr Lord’s conduct made him unfit to be concerned in the management of a company.
2. Under section 6 of the Company Directors Disqualification Act 1986, unfitness is a question of fact and value judgment. The court must compare the director’s conduct, considered individually and cumulatively and with any extenuating circumstances, against the standards of probity and competence appropriate for a fit director. Lack of moral probity is unnecessary, while ordinary commercial misjudgment is insufficient.
3. The claimant is confined to the case and evidence advanced. The allegations need not resemble an indictment, but they must identify the essential facts and the general nature of the case so that the defendant can understand and answer it. The Second Allegation, as advanced at trial, was materially different from the case set out in the evidence and was therefore not fairly open to the Secretary of State.
4. Personal responsibility cannot be inferred merely from directorship or from the company’s unlawful conduct. Delegation and division of responsibility are permissible, though total abrogation is not. Where the case is one of incompetence or culpable failure to supervise, there must be an identifiable criticism of what the director failed to do, and the conduct must demonstrate incompetence of a high degree.
5. Mr Lord had a dual role. He was materially involved in dealing with solicitors, the FCA and the Insolvency Service, and had particular responsibility for taxation and fiscal matters. Day-to-day executive responsibility for the land banking business lay principally with Mr Banner-Eve. Mr Lord had taken substantial steps in response to the FCA’s concerns, including assisting in obtaining and communicating legal advice and implementing changes to documents and the business model.
6. Although the company continued to make core representations inconsistent with its revised documentation, the evidence did not establish that Mr Lord had totally abrogated his duties or that any partial failure of supervision amounted to high-degree incompetence rendering him unfit. The long passage of time and absence of relevant documents also materially weakened the Secretary of State’s proof.

First-instance decision. The judgment states that related FCA proceedings had previously been determined by the High Court, Court of Appeal and Supreme Court, but those proceedings were not an appeal from the present application.