The Secretary of State for Business, Energy and Industrial Strategy v James Trevor Keeble

The court considered a claim under section 6 of the Company Directors Disqualification Act 1986 that Mr Keeble's conduct as a director of CFO Lending Limited rendered him unfit to be concerned in the management of a company. The Secretary of State relied on three principal grounds: (i) misuse of customer banking information; (ii) excessive use of continuous payment authorities (CPAs); and (iii) inadequate records to account accurately for debtor balances. The judge held that these grounds were pleaded and argued in a broad, non-specific way and that the Secretary of State had not identified particular acts or omissions by Mr Keeble such that he had fair notice of the essential facts relied upon.

Applying Re Finelist Ltd & Another and related authorities, the court emphasised the obligation on the prosecution to identify essential facts in affidavit evidence and to avoid importing fresh or unpleaded allegations in reply. The judge analysed the evidence on each of the Three Grounds and found:

• the inaccuracies in customer balances derived from technical IT and migration errors and were not shown to result from any specific failure by Mr Keeble;
• the alleged excessive use of CPAs was not proved to be attributable to him: the FCA sample evidence was limited and not representative, and there was no adequate evidential link to his knowledge or to particular acts or omissions; and
• as to misuse of card details, the court accepted that CFO maintained a policy of contacting customers before using newly supplied card details but that there was evidence of breaches; however, the Secretary of State failed to prove on the balance of probability that Mr Keeble knew of or caused those breaches or acted with the degree of incompetence required for disqualification.

For those reasons the claim was dismissed.

Background and nature of the claim: This was a first-instance claim under section 6 of the Company Directors Disqualification Act 1986 brought by the Secretary of State. The Secretary of State sought a disqualification order against Mr James Trevor Keeble arising from his conduct as sole director of CFO Lending Limited. The claim was supported by regulatory material arising from OFT and FCA investigations, internal CFO reports and the Skilled Person (Hogan Lovells) reports. Proceedings followed a section 16 CDDA notice.

Relief sought: A disqualification order under section 6 CDDA.

Principal issues for the court: (i) whether the Secretary of State had identified the essential facts relied upon in support of the three pleaded grounds so as to avoid unfairness (Re Finelist Ltd & Another); (ii) whether the Secretary of State had proved on the balance of probability that Mr Keeble's conduct made him unfit to be concerned in the management of a company; and (iii) evidential and burden issues where a general allegation of managerial responsibility is advanced without particulars of specific acts or omissions.

Facts and procedural posture: CFO was a payday lender whose business and regulatory compliance were repeatedly examined by the OFT and then the FCA. The Secretary of State relied on three categories of conduct identified in FCA material: alleged misuse of customer card details (use of new application card details to collect existing debt), excessive CPA usage and materially inaccurate customer balances arising from systems migration and calculation errors. Mr Keeble accepted he was the director responsible for compliance but asserted he primarily undertook marketing and that he relied on delegated staff and professional advisers; he relied on legal advice and on a company policy of contacting customers before using updated card details. The FCA and a Skilled Person report identified shortcomings in aspects of CFO's practice and record-keeping; CFO accepted and implemented remedial measures and engaged in a voluntary redress scheme.

Court’s reasoning and decision: The judge carefully reviewed the evidence and applicable law. Key elements of the reasoning were:

• procedural fairness: affidavit evidence supporting a section 6 claim must identify the grounds and the essential facts relied upon so the defendant can know the case to meet (Re Finelist). The court would not allow the Secretary of State to establish unfitness by adducing a mass of regulator material and then relying on general managerial responsibility without linking to essential facts;
• evidential burden and standard: the Secretary of State bore the civil burden of proof. Where the respondent adduces a positive evidential case (for example, that he relied on professional advice or delegated functions), the evidential burden may shift to require the respondent to prove those factual matters;
• analysis of each ground: the inaccurate balances derived from technical IT causes and the Skilled Person report did not attribute responsibility to Mr Keeble; the CPA complaints relied on small, non-representative samples and did not establish his knowledge or culpable failure to act; as to card details, the court accepted that CFO had a practice/policy of contacting customers before using new card details but that breaches occurred; nonetheless the Secretary of State did not prove that Mr Keeble caused or knew of those breaches with the degree of culpability or incompetence required for disqualification;
• consequence: because none of the Three Grounds was proved as showing incompetence to the requisite high degree, the statutory test under section 6 CDDA was not satisfied.

Subsidiary findings and wider comments: the judge gave detailed guidance on the interplay between regulatory findings and CDDA testing of individual director unfitness, emphasising that regulatory criticism of a firm's management does not automatically establish a specific director's unfitness; the judgment also commented on the relative rarity and seriousness of disqualification orders and the need to apply statutory tests rather than regulatory suitability reasoning.

The claim is dismissed. The court found that the Secretary of State had not proved on the balance of probability that Mr Keeble’s conduct made him unfit to be concerned in the management of a company under section 6 CDDA. The regulator and Skilled Person material identified serious problems at CFO Lending Limited but did not establish specific acts or omissions by Mr Keeble sufficient to demonstrate incompetence of the high degree required for disqualification, and the affidavit evidence did not identify the essential facts relied upon with adequate specificity.