Secretary of State for Business and Trade v Greensill

In March 2024 the Secretary of State for Business and Trade brought disqualification proceedings under s 6 against Alexander David Greensill in connection with the insolvencies of Greensill Capital UK Limited and its subsidiary, Greensill Limited. Both companies were part of a group of which an Australian company, Greensill Capital Pty Limited, is or was the parent (it too is also now in liquidation in Australia).

The allegations against Mr Greensill in the substantive proceedings are, broadly:

(i) That between November and December 2020 he caused the companies to enter into transactions with companies from the SoftBank Group to the detriment of investors in a construction firm called Katerra, causing noteholders losses of over $440 million.

(ii) From September 2018 he made or caused to be made a series of dishonest misrepresentations and non-disclosures to trade credit insurers providing cover in respect of finance provided to Catfoss Renewables Ltd and Catfoss DBT Ltd, thus exposing Greensill Capital and its investors to the risk of policies being avoided and insurers refusing further cover which would not be replaceable elsewhere.

(iii) From August 2020 he made a series of misrepresentations and non-disclosures to the boards of Greensill Capital and Greensill Capital Pty about the status of the trade credit insurance, including that the insurers were investigating policies and endorsements with a value of over US$11.5 billion, had refused to acknowledge that they were on risk and that notice of non-renewal had been served, as a consequence of which the boards of the companies were unaware of these issues.

The proceedings are listed for trial in June 2026.

Mr Greensill applied to strike out the proceedings on a number of bases, the most interesting of which was the contention that, as a matter of law:

(i) the SoS had to prove that the conduct alleged to make him unfit to be concerned in the management of a company was responsible for the causes of the relevant company becoming insolvent;

(ii) the matters which were alleged by the SoS to make him unfit to act as a director were not matters that in this case were causes of the companies becoming insolvent; and

(iii) the SoS had not adduced evidence from which the court could conclude that they were.

Put simply, Mr Greensill’s proposition was that there had to be a connection (of a non-trivial kind) between the conduct relied on by the Secretary of State and the insolvency of the company or companies to which the conduct related. Trower J referred to this in his judgment as “the connectivity issue.” He rejected the contention:

“I have reached the clear conclusion that there are no grounds to strike out the claim form and/or the statement of matters determining unfitness against Mr Greensill on the basis that the SoS does not seek to prove as a threshold issue that Mr Greensill had some non-trivial responsibility for the causes of the insolvencies of GCUK and GL. Nor do I consider that Mr Greensill is entitled to relief by way of summary judgment under CPR 24.3 on the basis that the SoS has no real prospect of succeeding on the claim and there is no other compelling reason why the case should be disposed of at trial.”

Trower J’s reasons for rejecting reliance on the connectivity issue were, briefly summarised, as follows:

(i) There was no support for a need to establish connectivity in the language of s 6 CDDA. Section 6 identified only two jurisdictional pre-conditions: that the person concerned either was or had been a director of a company which had become insolvent (s 6(1)(a)(i)), or had been a director of a company which had been dissolved without becoming insolvent (s 6(1)(a)(ii)); and that the person’s conduct as a director made them unfit to be concerned in the management of a company (s 6(1)(b)). There was nothing in s 6(1) which made it a pre-requisite to the exercise of the jurisdiction that the person’s conduct must have been responsible for the causes of the relevant company’s insolvency.

(ii) Section 6(1A) recognised that not all s 6 cases involved the relevant company becoming insolvent, but then provided that, where it had, the relevant person’s conduct as a director included a particular category of conduct to be taken into account (i.e., that in relation to any matter connected with or arising out of the insolvency). It did not mandate that there must have been such conduct, nor did it supply a definition of what was conduct within the meaning of s 6. It simply identified what that conduct would include, where it occurred in cases in which a company had become insolvent.

(iii) A comparison of the circumstances in which s 6 was engaged with those in which s 8 was engaged did not assist: “Although, there is no doubt that the circumstances are different, those differences do not support a conclusion that, while proof that the defendant had some responsibility for the causes of insolvency is not required for an application under section 8, it is a threshold issue for an application under section 6.”

(iv) Falk J, as she then was, had noted in Keeping Kids CO, Official Receiver v Batmanghelidjh that the extent of a director’s responsibility for the causes of a company becoming insolvent was only one factor for the court to consider, albeit one to which it should have “particular” regard.

(v) A prerequisite of connectivity would give rise to practical difficulties, which made it unlikely that Parliament had intended it:

“It is one thing to have a clear-cut jurisdictional distinction between cases where a company has become insolvent (or has been dissolved without becoming insolvent) and cases where it has not. That is easy to apply. It is quite another to have to ask whether there are non-trivial connections between the conduct alleged against the director and the company becoming insolvent (or being dissolved without becoming insolvent) as a pre-condition to making the application or granting the relief. While fairness requires the extent of the responsibility to be taken into account when the jurisdiction is exercised, I regard it as much more logical for that exercise to be carried out at the stage of weighing up the significance of all the matters referred to in section 12C and Schedule 1 than as a threshold issue.”

(vi) There was no authority which supported the submission that, for the jurisdiction to arise under s 6, the misconduct alleged had to be, to some extent, responsible for the causes of the company becoming insolvent: “That is not the language in which any of the judgments [cited on behalf of Mr Greenshill] were couched.”

Reliance on the part of Mr Greensill on a need to connect the conduct relied on to a cause of insolvency thus failed. He similarly failed in contending that the Secretary of State’s decision to proceed against him had been unlawful and in allegations doubting the fairness of the investigation conducted by the Secretary of State and the Insolvency Service and in a complaint about the Secretary of State’s failure to obtain relevant material from third parties.

The application was dismissed.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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