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

In a director-disqualification claim under section 6 of the Company Directors Disqualification Act 1986, the court must decide whether the individual director’s own conduct makes him unfit. Serious regulatory failures by the company do not, without more, establish that conclusion. The Secretary of State must prove responsibility for the relevant failures and, where incompetence is alleged, incompetence of a high degree. The evidence must identify the essential facts relied upon and give the defendant a fair opportunity to answer them. General responsibility arising from office is insufficient where the claim does not identify the director’s relevant knowledge, acts or omissions. Delegation may be relied upon, although it does not permit unquestioning reliance and requires supervision. The court dismissed the claim because the Three Grounds were not proved against the defendant personally.

The Secretary of State sought the defendant’s disqualification under section 6 of the Company Directors Disqualification Act 1986 following the insolvency of CFO Lending Ltd, a regulated payday lender. The claim relied on three grounds: misuse of customer banking information, excessive use of continuous payment authorities, and inadequate records of customer balances.

The evidence included investigations and reports by the OFT and FCA. The defendant accepted that he was the head of CFO’s management structure but relied on delegation, professional advice, a communication policy requiring customer contact before use of new card details, and technical explanations for the accounting problems. The central issues were whether the company’s failings were attributable to his conduct and whether they demonstrated incompetence of a high degree.

1. Claim dismissed. The insolvency requirement was satisfied, but the Secretary of State failed to establish that the defendant’s conduct made him unfit to be concerned in the management of a company.
2. The court applied the requirement that the claim be decided only on the pleaded or identified grounds and essential facts. Under Re Finelist Ltd & Another, the evidence had to identify the case sufficiently to give the defendant a fair opportunity to answer it. The court therefore refused to fill gaps by relying on specific acts or omissions which had not been identified.
3. Under section 6 of the Company Directors Disqualification Act 1986, unfitness concerns the individual director’s conduct. The court assessed the conduct cumulatively, with relevant extenuating circumstances, and required proof of incompetence of a high degree where incompetence was alleged. Responsibility could not be inferred merely from the fact of office or overall responsibility for compliance.
4. The inaccurate-balance ground failed because the errors resulted from technical IT and migration failures. No act or omission by the defendant causing, continuing or failing adequately to address those failures was established.
5. The excessive-CPA ground failed. Although the use of CPAs was a serious regulatory issue, the evidence did not establish that the defendant was responsible for the relevant policy or practice, knew of the particular failings, or acted incompetently in response to them. The 20-file review was not a representative sample and could not support the necessary inference.
6. The banking-information ground also failed. The defendant was responsible for adopting the policy of using new card details for existing debts, but the evidence established that he acted on legal advice and had introduced a communication policy requiring contact with customers. Breaches of that policy were shown, but the Secretary of State did not prove the defendant’s knowledge of particular breaches, or a failure to take competent steps after acquiring that knowledge. Evidence addressing those matters was essential and had not been presented.
7. The court recognised that a properly particularised sample of complaints could potentially establish knowledge and incompetence. It did not do so on the evidence presented. A cumulative assessment could not cure the failure to prove any individual ground.