The Secretary of State for Business and Trade v Daniel Singh Sekhon
[2024] EWHC 674 (Ch)
The Secretary of State for Business and Trade v George Edward Goring & Anor
2 May 2024
[2024] EWHC 1024 (Ch)
High Court
A company sold bonds claiming they were secured by a bank guarantee. The bank later said this was false. The directors said they relied on advisors, and the court believed them. The directors weren't punished because they made mistakes, not serious wrongdoing.
Key Facts
- •Active Ticketing Limited (the "Company") issued £5,060,000 of bonds to 213 investors, representing itself as "fully secured" by a Sberbank guarantee.
- •The bonds were marketed to high-net-worth individuals, with a significant portion of funds allocated to marketing and advisory fees.
- •Following the Company's insolvency, Sberbank denied issuing any guarantee.
- •The Secretary of State for Business and Trade brought a claim to disqualify directors George Goring and Lee Booth under the Company Directors’ Disqualification Act 1986.
- •The directors claimed they relied on professional advice, particularly from Trend Advisors, who allegedly arranged the Sberbank guarantee.
- •Evidence suggests the directors visited Sberbank in Belgrade to execute the guarantee but lacked physical copies.
Legal Principles
Section 6 of the Company Directors’ Disqualification Act 1986: A court must make a disqualification order if the director's conduct makes them unfit to manage a company.
Company Directors’ Disqualification Act 1986, section 6
Unfitness is a question of fact, involving a value judgment comparing conduct to appropriate directorial standards. Ordinary commercial misjudgment is insufficient; the touchstone is lack of regard for proper standards.
Secretary of State for Business, Innovation and Skills v Chohan [2013] EWHC 680; Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164; Re Grayan Building Services Ltd [1995] Ch 241; Re Lo-Line Electric Motors Ltd [1988] Ch 477
A director's reliance on professional advice has limits; it is not a defense if the advice is obviously wrong or the director has relevant professional experience.
Mithani on Disqualification [775]
The court must consider the fallibility of human memory, especially when events are distant, checking recollections against contemporaneous documents.
Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm); Blue v Ashley [2017] EWHC 1928 (Comm); Kogan v Martin and Others [2019] EWCA Civ 1645
Outcomes
The claim to disqualify the directors was dismissed.
The court found it more likely than not that a guarantee from Sberbank existed, despite the bank's later denial. The directors reasonably relied on professional advice, and their actions, while containing mistakes, did not demonstrate a lack of judgment sufficient to warrant disqualification. The second allegation regarding misallocation of funds was also dismissed.
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