The Secretary of State for Business and Trade v George Edward Goring & Anor

Disqualification requires proof that the director’s conduct makes the person unfit to be concerned in company management. Ordinary commercial misjudgment, or mistakes revealed by hindsight, is insufficient. The court assesses the director’s personal conduct cumulatively against the standards of competence and probity appropriate for a fit director.

A director may reasonably rely on professional advisers where the director lacks relevant specialist experience and the advice is not obviously wrong. The assessment of whether checks were adequate depends on the context, including the adviser’s role, the information available and the surrounding circumstances.

Active Ticketing Limited issued convertible bonds to 213 investors, raising £5,060,000. The bonds were marketed as fully secured by bank guarantees said to have been provided by Sberbank. The Company later became insolvent and was wound up.

The Secretary of State sought disqualification orders against George Goring and Lee Booth under section 6 of the Company Directors’ Disqualification Act 1986. The principal allegation was that the directors had misrepresented the bonds as secured and had failed to carry out adequate checks confirming the existence of the guarantees. A secondary allegation concerned the use of bond proceeds.

The central issues were whether a Sberbank guarantee had been obtained, whether the directors’ reliance on Trend Advisors and other advisers was reasonable, and whether the expenditure fell outside the purposes described in the marketing material.

1. Claim dismissed. Neither defendant was disqualified under section 6 of the Company Directors’ Disqualification Act 1986.
2. The court found, on the balance of probabilities, that the Company had obtained a Sberbank guarantee. The evidence included the defendants’ attendance in Belgrade, execution-related documents, translations, the presence of a notary, contemporaneous correspondence and the continuing conduct of Trend Advisors as escrow agent. The later denial by Sberbank was powerful evidence but did not outweigh the totality of the evidence.
3. The allegation that the defendants failed to carry out adequate checks was not made out. Adequacy was context-dependent and was not a term of art. The defendants had no specialist experience in bond issuance or obtaining guarantees. It was reasonable for them to rely on Trend Advisors, Lochwood Capital and other advisers, particularly because the advice was not shown to be obviously wrong and Trend made consistent contemporaneous assertions that the guarantee was valid.
4. The defendants made mistakes, including leaving Belgrade without a signed copy of the guarantee and executing documents abroad without their appointed lawyer. Those mistakes did not show that they were so completely lacking in judgment as to be unfit. Hindsight was not a suitable tool for the required evaluative judgment.
5. The secondary allegation also failed. Payments to Mr Goring reimbursed legitimate business expenses, while expenditure on marketing, advisers, software development and fundraising fell within the broad purposes stated in the marketing material. The Secretary of State had not established what level of expenditure would have required further specification.
6. The court emphasised that personal responsibility must be assessed, while recognising that responsibility may include inadequate supervision or scrutiny. The allegations had to be considered individually and in the round.