The Secretary of State for Business and Trade v Carl Thomas Roderick

This is a first instance disqualification claim under sections 1 and 6 of the Company Directors Disqualification Act 1986. The Secretary of State alleged that, as managing director of Insight Development & Consultancy Ltd, Mr Roderick failed to ensure compliance with the ESFA funding agreement (in particular clause 5 and related Funding Rules) which resulted in inaccurate funding claims and a substantial funding shortfall. The court applied the Schedule 1 factors of the CDDA 1986 and the standard in section 174 of the Companies Act 2006 when assessing whether the defendant's conduct made him unfit to be concerned in the management of a company.

Key material grounds for the decision:

• The Secretary of State did not allege dishonesty; the claim concerned alleged incompetence/ failure to exercise reasonable care, skill and diligence.
• The allegation was pleaded at a high, non-specific level and the court applied the principles in Re Finelist and Secretary of State v Keeble as to how such general allegations should be approached.
• Contemporaneous documents and witness evidence showed primary operational responsibility for delivery, record keeping and engagement with the ESFA was delegated to a senior operations manager, Ms Barton, who, on the evidence, had board-level management responsibility.
• The Secretary of State did not adequately particularise any supervisory failures by Mr Roderick or show that the errors identified by the ESFA could only be attributable to his personal misconduct; therefore the requisite culpable failure to justify disqualification was not established.

Background and parties: The Secretary of State brought a claim under sections 1 and 6 of the Company Directors Disqualification Act 1986 seeking a disqualification order against Mr Carl Thomas Roderick, who was a director of Insight Development & Consultancy Ltd (trading as Levytate/Levytate Skills). Insight entered creditors' voluntary liquidation after the ESFA terminated its funding agreement following an audit that identified significant errors in funding claims for 2017-2018 and 2018-2019.

Nature of the claim / relief sought: The Secretary of State sought a disqualification order (between two and fifteen years) under section 6 on the basis that Mr Roderick's conduct as a director made him unfit to manage a company because Insight submitted inaccurate and unsupported ESFA funding claims totalling substantial sums.

Issues framed by the court:

• Whether the matters relied upon amounted to misconduct and, if so, whether they made Mr Roderick unfit under Schedule 1 to the CDDA 1986;
• How the Secretary of State’s general (non-specific) pleading should be approached and what evidence a defendant must reasonably be expected to give in answer (principles drawn from Re Finelist and Keeble);
• Whether delegation of operational responsibilities (including record keeping and ILR submissions) to a senior operations manager displaced personal responsibility for the errors; and if not, whether there was culpable failure by Mr Roderick to supervise such delegation consistent with section 174 Companies Act 2006.

Court’s reasoning and findings:

• The burden remained on the Secretary of State to prove unfitness on the balance of probabilities. The court reiterated the three-stage inquiry (misconduct; unfitness; appropriate period).
• The pleading in high-level terms required the court to assess responsibility at that level rather than pursue specific acts not pleaded. The court followed the approach in Re Finelist and Keeble when evaluating a non-specific allegation of responsibility.
• Evidence (board minutes, organisational chart provided to the ESFA, email signatures, contemporaneous audit correspondence and the manner in which the ESFA engaged) established that operational responsibility for delivery, record keeping and ESFA liaison rested with a senior operations manager, Ms Barton, who was held out as having board-level responsibility and who led the audit engagement. The judge found she had primary responsibility for operations (and likely was a de facto director), although there was no evidence from her before the court.
• The ESFA audit identified multiple categories of errors (unsupported start dates, incorrect functional skills levels, ILR inconsistencies and issues arising from apparent recruitment/ILR activity after a Stop Notice). The court accepted that there were material errors and resultant financial consequences, but emphasised that the Secretary of State did not allege dishonesty and had not particularised how those errors were attributable to Mr Roderick personally.
• The Secretary of State failed to identify specific supervisory failures by Mr Roderick or to explain what enquiries or steps he ought to have taken beyond general assertions that he should have "liaised further" or done "better". The Secretary of State also did not adequately explore or put to proof whether the delegation to and role of Ms Barton itself showed a selection or supervision failure by Mr Roderick.
• On the evidence, the court could not infer that the widespread errors were necessarily caused by culpable failure on Mr Roderick’s part. Consequently the Secretary of State did not prove on the balance of probabilities that Mr Roderick’s conduct made him unfit to be concerned in the management of a company.

Disposition: The claim was dismissed. The judge directed counsel to agree consequential orders or return for a short hearing if necessary.

The claim is dismissed. The court held that, on the balance of probabilities, the Secretary of State had not proved that Mr Roderick's conduct made him unfit to be concerned in the management of a company. The judge found that primary responsibility for operational matters, including ESFA engagement, record keeping and ILR submissions, had been delegated to a senior operations manager (Ms Barton) whose role in the audit demonstrated board-level operational control; the Secretary of State did not adequately particularise supervisory failings or otherwise show culpable failure by Mr Roderick to justify disqualification under the CDDA 1986 and Schedule 1 factors and therefore the statutory threshold for disqualification was not satisfied.