The Secretary of State for Business, Energy And Industrial Strategy v Gregson & Ors

THE JUDGE: This judgment is given after the trial of contested director disqualification proceedings brought against the first defendant, Mr Gary John Gregson. The proceedings also included complaints against three other former directors. Those were concluded at an uncontested disposal hearing in June of 2017 when disqualification orders were made against those three defendants. The claimant is the Secretary of State for Business, Energy and Industrial Strategy. He has been represented at trial by counsel, Ms Lucy Wilson-Barnes. Mr Gregson has appeared in person.

The proceedings relate to Mr Gregson's conduct as a director of Gregson and Brooke Financial Services Limited ("GBFS") and One Tick Limited ("One Tick"). The allegations of unfit conduct in relation to GBFS are as follows: (1) on 10 July 2014 the Financial Conduct Authority ("FCA") conducted an audit during which GBFS was unable to provide a reconciliation of client accounts. On 23 July 2014 the FCA advised GBFS that the continued failure to provide a client account reconciliation was unacceptable and that one of the options open to the FCA was to close the business down completely. Mr Gregson gave a commitment to the FCA not to draw any fees from the bank accounts until the reconciliation had been completed. Thereafter, between 28 July and 21 August 2014, in the knowledge of the FCA's concern regarding segregation of client funds and an inability to reconcile the client accounts accurately as required by the FCA in a notice issued pursuant to section 165 of the Financial Services and Markets Act ("FSMA") 2000, Mr Gregson acted with a lack of commercial probity in making payments totalling £145,321 from GBFS's current account at the risk of and to the detriment of client creditors; (2) between March 2013 and March 2014 Mr Gregson failed to ensure that GBFS adhered to the debt management guidance issued in March 2012 by the Office of Fair Trading ("OFT") and between April 2014 and April 2015 he failed to ensure that GBFS adhered to the FCA handbook in that the company as required by section 27 of the Consumer Credit Act 1974: (1) failed to assess the suitability of products for clients, failed to act in the best interest of clients and operated a business model which was likely to be unfair; and (2) failed to maintain adequate records of each debt management plan with the result that when client account reconciliations were attempted they could not be relied upon as being accurate.

The allegations of unfit conduct in relation to One Tick are as follows: (1) The first allegation is identical to the first allegation against GBFS, save that the details are as between 1 August 2014 and 12 August 2014, Mr Gregson acted with a lack of commercial probity in making payments totalling £65,225 from One Tick's current account. (2) The second allegation is identical to the third allegation against GBFS, a failure to maintain adequate records of each debt management plan with the same consequence over the same periods. (3) The third allegation is that he failed to ensure that One Tick adhered to the debt management guidance and the FCA handbook in that he failed to ensure that payments totalling at least £281,805 from clients were deposited into a client account in the company's name, payments being held by third party companies which were therefore not protected.

In addition to those allegations, the claimant seeks that the conduct of Mr Gregson in relation to a third company, Gregson and Brooke Ltd, "GAB", which went into liquidation in July 2014 should be considered together with his conduct of GBFS and One Tick pursuant to section 61(b) of the Company Directors Disqualification Act (1986). The allegation of unfit conduct in respect of GAB is that between at least October 2010 and July 2011 Mr Gregson failed to ensure that GAB adhered to the debt management guidance issued in September 2008 by the OFT in respect of terms and conditions, letters and information booklet and other documents issued to clients as required by section 25 of the 1974 Consumer Credit Act.

Those then are the allegations which I have to consider. The evidence before the court is as follows. The claimant relied upon the affidavit evidence of Anthea Simpson, the chief investigator with the Insolvency Service, who set out the initial case against Mr Gregson in her affidavit. The claimant also relies upon the affidavit evidence of Howard Tobias, also with the Insolvency Service, and of Marie Whitley, a senior associate at the FCA, who both provided evidence in response to the affidavit evidence provided by Mr Gregson himself. District Judge Khan ordered that Mr Gregson should give formal notice if he required the claimant's witnesses to attend court to be cross-examined but he did not do so and therefore they did not attend court to be cross-examined. Accordingly, the only live evidence at trial was the evidence of Mr Gregson himself, who verified his affidavit and who was cross-examined by Ms Wilson-Barnes.

In so far as he also gave or sought to give further oral evidence in his closing submissions, which was not either in his affidavit or in his oral evidence I am unable to place any reliance upon that evidence save where corroborated by reliable documentary or other evidence from other sources. More generally, I am afraid to say that I was unable to place any real weight on the evidence of Mr Gregson where there was any significant issue as to its accuracy since in my judgment he was unreliable as to the details of his evidence and since his evidence was inconsistent with the contemporaneous documentary evidence in a number of significant respects.

I should also say that neither party sought to adduce any evidence from the former bookkeeper to the companies, a woman known as Sherry Jones, who Mr Gregson had suggested was responsible for a number of errors in entering details on invoices and on the Sage accounting system. It appears that she was in this country until recently, when according to Mr Gregson she departed for Australia. There is no information one way or the other about her whereabouts or availability and I draw no adverse inferences against either party from her absence. It is nonetheless unfortunate that she was unable in the circumstances to respond to the criticisms which Mr Gregson had made of her as a bookkeeper.

I will refer briefly to the companies. GBFS traded as Expert Money Solutions specialising in the provision of debt management and debt reduction plans with approximately 1,300 or 1,400 clients. It also managed reclaims of PPI insurance. It purchased its client list from GAB in March 2013. Mr Gregson was a director from August 2010 until 20 August 2014 and was also its major shareholder. It was the subject of an investigation by the FCA in July 2014. It went into administration in October 2014. The joint administrators agreed claims by clients or creditors of just over £2,500,000 and having completed a reconciliation of client account monies, there was a deficiency to creditors of just over £2.3 million, the estimated dividend being only 4.8 pence in the pound. Mr Gregson has disputed the accuracy of some of these figures and I will return to that later in this judgment.

One Tick traded as One Tick, also specialising in the same business. Mr Gregson was a director from May 2009 to August 2014 and was also a major shareholder. It was also the subject of the FCA investigation in July 2014 and also went into administration in October 2014. In its case the deficiency to creditors was £183,000 odd and an estimated dividend to clients of 8.2 pence in the pound.

GAB traded as a licence debt management company. It sold its client list to GBFS, as I have said, and went into liquidation in July 2014. Mr Gregson was a director until July 2011 and signed letters as managing director between at least May 2010 and July 2011.

Other relevant companies which feature in this case are as follows: Gary Gregson Limited, a company owned by Mr Gregson which was the corporate vehicle for him to receive payments for his services. It received £3,000 per month from GBFS and One Tick for services about which no complaint is made, but it also received more substantial one-off payments in August 2014 which are the subject of complaint. Reference has also been made to Money Factory Management Limited ("MFM"), a company of which Mr Gregson was also a director and which also received payments from GBFS which are the subject of complaint.

Other relevant individuals and firms who feature in this judgment are: (1) Sherry Jones, to whom I have already referred, the freelance bookkeeper who maintained the Sage accounting records and did other book keeping work for the companies; (2) Barlow Andrews Accountants who acted for the companies from July 2013 to September 2014, giving details in their letter to the Insolvency Service of 9 February 2016; (3) the recipients of three substantial payments from the companies and directed by Mr Gregson, namely: Georgina Gregson, his mother; a Ms Statter, a woman with whom Mr Gregson was in a relationship at the time; Shaun Gregson, Mr Gregson's brother.

I will explain briefly the business model of the two companies, GBFS and One Tick, as explained to me and as set out in the papers. In short, rather than simply seeking to agree a standard debt realisation plan with the creditors of a client they embarked on a two-pronged strategy. The first was to see if the client had a valid PPI claim or claims which it could pursue and use the proceeds to assist in making settlement proposals to creditors. The second was to take a more aggressive approach to creditors where appropriate by demanding the original or reconstituted copies of the relevant Consumer Credit Act agreements from the lenders to see if there were grounds to challenge their enforceability and, more generally, to make sufficient difficulty as regards these regulated liabilities with a view to seeking to persuade the lenders either to abandon their claims or to settle them for a much lower amount.

Its business model was to earn payment through taking a high percentage: 87.5 per cent of the monthly payments made by the client for the first 12 or 13 months of the lifetime of the agreement. I should say at the outset that although that percentage was said to be high, that is not a ground of complaint in this case, although it is said to be relevant to the suitability complaint. As to the remaining 12.5 per cent, the creditors would be paid a nominal amount at the outset with a view to reaching final agreement once the two-pronged strategy had been concluded. After 12 or 13 months, it appears that the percentage would reverse so that the companies would receive 12.5 per cent as fees and the creditors the remaining 87.5 per cent.

I am going to turn now with the question of compliance with the regulatory requirements about segregation of monies, the maintenance of records and accounts and reconciliations. As one would expect, debt management companies are, and always have been, intensively regulated. I have been referred to the OFT 2008 guidance which was revised in 2012 and under the section handling client money this required funds to be protected in a separate ring-fenced account in such a way as to be protected in the event of a licensee holding such monies ceasing to trade. From April 2014 the FCA handbook governed the business of the two companies. The client assets or CAS section of that handbook reinforced the status of client monies, trust money, the need for segregation and the requirement for records, accounts and reconciliations. So rule 11.11.1 states:

In his evidence and submissions, Mr Gregson suggested that because the version exhibited in the trial bundles was the 2016 version, it had not been established that the version enforced in 2014 contained the same obligations or indeed that any particular version was in force immediately in April 2014 when the FCA took over regulation. In my view, that was an opportunistic attempt to seek to derail the claimant's case. It was not a point which Mr Gregson had ever raised before in his affidavit evidence or otherwise and I am quite satisfied on the basis of the evidence which Ms Whitley had provided in an email previously sent to the claimant or its solicitors that these requirements were in place from 1 April 2014 and, in any event, even if they were not the fundamental importance of client segregation and of keeping full and proper records and of being able to reconcile was always in force regardless of when those rules specifically came into force. Indeed, it is obvious, given the business model, that it was imperative that there should have been a clear distinction between monies which were held for the client and the fees which were to go to the companies and that there would have to be clear internal records and accounts so as to be able to see what monies in what accounts were monies which were held for individual clients and on what basis and were separate from the monies which represented the fees which the companies were entitled to take.

The evidence is that the companies did have separate client accounts and firm accounts, but it is also clear in my judgment that no rigorous segregation was maintained between the client accounts and the firm accounts. It is accepted by Mr Gregson that funds were transferred from client accounts to firm accounts in round sums on an "as and when needed" basis with no identification of what amounts related to what fees which were entitled to be taken from which clients. The evidence is also clear in my judgment that the companies did not have any clear records or accounts as to which monies belonged to which client and which monies belonged to the firm and where those monies were to be found, nor did they undertake any periodical reconciliations, as again was admitted by Mr Gregson.

Mr Gregson sought to blame all this on shortcomings in the bespoke software system known as Tigersolv, which was designed to be used by debt management firms to, amongst other things, ensure that accurate records and accounts were available and reconciliations could be undertaken. He also claimed that paper records were always produced and provided to him at monthly meetings so that even though accurate electronic records were not available he was always able to know what the true position was. I am unable to accept these explanations. He provided no details as to the shortcomings in the software and there is no independent evidence to verify that. He also provided no explanation in any detail as to what was provided and by whom in paper form which would according to him have complied with the regulatory requirements. No such information has ever been provided either by the companies in the course of the FCA investigation nor was it located by the joint administrators when they took possession of the companies' books and records, not even with the co-operation of the company bookkeeper. When he was asked about this he said that the individual floor managers would produce a monthly record of monies coming in and monies going out and profit and loss details, but there was no indication that this information would include the details of what monies coming in or going out were allocated to which clients. It is difficult to see why the floor managers should have provided this information unless they had been properly trained or instructed to do so, as to which there is no evidence that they were aware that they needed to do so, and there is no evidence that they were made aware that these rigorous segregation and information recording requirements were their areas of responsibility. It seems to me to be clear that all that was really important to them - and what was important to Mr Gregson at the time - was the company performance in terms of what fees they were getting in and what they were spending the money on and how well they were doing for the clients. They simply were not interested in, and did not have any idea as to, its obligations in relation to the more rigorous information about client funds and the like.

Mr Gregson also suggested that the FCA brought about difficulties by refusing to accept a paper reconciliation and insisting that a reconciliation had to be provided electronically on the Tigersolv software package. There is simply no evidence whatsoever to support this and if one looks, as I have done, through all of the contemporaneous records and contemporaneous communications, including the formal requests for information and reconciliation, there is no suggestion at any time either the FCA said that it had to be in electronic form or on Tigersolv software or that Mr Gregson was ever suggesting that whilst he could not do that he could provide the equivalent information in paper format but that they refused to accept it.

Mr Gregson also referred to the fact that the FCA was not prepared to allow the accountants Barlow Andrews, who he had asked to provide a reconciliation, for the amount of time that they had asked for, which was four weeks, to do so. However, the position is that the FCA had effectively allowed the companies four weeks from the first investigation on 10 July until 6 or 7 August 2016, when the first draft reconciliations were provided by Barlow Andrews, to provide information which quite clearly could and should have been able to have been provided in a matter of days. It did not seem to me that they could possibly be criticised for not allowing the companies a further four weeks to get their accountants to start the process from scratch when they had completely failed to provide the information before, either in software Tigersolv format or in paper format. It is also right to note that when the preliminary reconciliations were produced by Barlow Andrews they said in terms that they were not confident about their accuracy and that further work was needed. Indeed in their later letter to the Insolvency Service in February 2016 they explained the difficulties they had faced and said they could not place total confidence in the figures provided by the companies for fees earned or drawn. It is also relevant that in that letter they did not accept that at this time they were being instructed to produce management accounts or indeed had done so, contrary to Mr Gregson's suggestion in the course of the trial. What this means is that there was simply no information at the time to indicate, as Mr Gregson had suggested, that these companies were all plainly solvent or indeed any information to verify what he said were the amounts of the directors' loans to which he was entitled at the time.

The reconciliations they did provide in August 2014 identified a number of serious potential problems. Firstly, in relation to GBFS, an apparent overpayment on the information then available of about £300,000 in management fees. In other words, about £300,000 more had been drawn or transferred from client account into firm account than was justified by the documentary records. Secondly, as regards GBFS an apparent discrepancy of £179,000 between the position as it was and as it should have been by reference to the information available. As regards OTL, a similar apparent discrepancy of £92,000 and as regards OTL, £141,000 of client funds which should have been in client account but which were retained by two companies, described as merchant facilities providers, and a further £140,000 of client funds which should have been in the OTL client account but in fact was in the GBFS client account. All this was the subject of a telephone conversation the next day on 7 August 2014. Mr Gregson was disputing that there had been an overpayment of management fees but was simply unable to explain why he was disputing it or to provide any explanation.

The subsequent more detailed analysis by the FCA revealed that the apparent shortfall in relation to GBFS was £162,000 and One Tick £34,000. I have been taken through the details in opening and in cross-examination, from which it is clear that eventually the FCA lost patience and wrote to the companies on 14 August 2014 saying that in effect the companies had simply been unable to provide in any sufficient timeframe any sufficient details and were unable to promise to provide them within any reasonable time. They also insisted, as they had done earlier, that the £300,000 apparent overpayment should be put back into client account until such time as the position had been resolved. They concluded that they were currently considering the full range of regulatory tools available to them to address the risks across the firms and to ensure client money was adequately protected.

I am satisfied on the balance of probabilities that these complaints in relation to the failure to maintain adequate records are made out and I am also satisfied that Mr Gregson, who is the sole director, must take the primary responsibility for this. It is clear from what he said that he had little or no knowledge of the relevant rules, which was quite unacceptable in my judgment in circumstances where he was the sole director of a company with 1,300 or 1,400 clients. It is also quite clear that he had little or no insight as to the importance of these rules. He did not appear troubled by the fact that the outcome of this failure to segregate according to the figures provided by the joint administrators was a very significant deficiency to the companies' clients, which was money which they could ill afford to lose. Although Mr Gregson, as I have said, sought to dispute the joint administrators' accounts as to the state of the deficiency, he has not provided any evidence whatsoever to do so and in fact the calculation they produced was made on a basis which was specifically approved by the court. Moreover, as Ms Wilson-Barnes submitted, the fact that the joint administrators had to spend so much time and effort in seeking to produce a final figure in itself demonstrates the complete unsatisfactory nature of the information which they had to go on. In those circumstances it is very difficult, if not impossible, to see how Mr Gregson now can suggest that they could have got it so badly wrong. In any event, I should say that the precise scale of the deficiency is not something which is directly relevant to this case, as opposed to the fact that there was an apparent deficiency and that the records maintained by the companies were inadequate to resolve the position one way or the other.

I should also say that there is simply no evidence that Mr Gregson instructed the companies' employees as to what was required and no evidence that he took any steps to ensure that they did comply. He did not appoint a compliance officer until April 2014 and there is no evidence that any steps were taken to address these problems before July 2014 when the FCA investigation began. They did stop taking on new clients after 1 April 2014 but did not stop accepting funds from existing clients or making substantial payments from client account to firm account. It is clear that the consequences of all this were serious in that it led to the significant overpayments. It also led to the FCA being justifiably concerned about what was going on and it led eventually to the eventual shutdown of the business with significant losses to clients.

I will turn now to the payments allegations. The background to these are that on 23 July 2014, according to the FCA's contemporaneous notes, Mr Gregson stated that he was not currently drawing down any fees from the bank accounts and gave a commitment not to do so until the reconciliations were completed but advised that he would need to access monies held in accounts in order to pay staff. This was confirmed in a subsequent email which, although it referred only to client bank accounts, in my judgment could only have been understood on the basis that until a proper reconciliation had been provided and agreed Mr Gregson could not safely make any payments out of any of the firm accounts other than in relation to paying staff or making other payments to proper creditors simply because at that stage no one could know with any confidence whether all of the money in the firm accounts was actually the firm's money or whether in part it was money which ought to have been in the client accounts. Mr Gregson suggested that this undertaking or commitment was effectively withdrawn or qualified in the course of a later oral telephone conversation where he says that one of the FCA supervisors said: "It is not for us to tell you how to run your business. You do what you need to do." However, he has given no detailed evidence about any of this nor indeed until cross-examination did he even say who he thought it was. He said in cross-examination he thought it was Ms Whitley but he had not asked, as I say, for her to attend to give evidence so that he could ask her about it. In any event, I am satisfied that in reality the only exchange that took place was by email on 30 July 2014 which is exhibited in the files where he simply asked for confirmation that it was acceptable to transfer money from one client account to another account to make creditor payments and the response from Ms Whitley was:

It is clear that from a balance on GBFS office account as at 21 July, £291,000 odd, in the period from 28 July to 21 August 2014 a total of £217,000 was debited from the accounts of which only just under £60,000 was spent on wages and payments to suppliers, leaving a net figure of £145,000 odd which was transferred to Mr Gregson or to individuals or companies connected with him. They were firstly two payments, £14,000 on 1 August and £20,000 on 11 August, to Mr Gregson's company Gary Gregson Limited, made on the very same date as invoices were issued by that company which simply stated: “services”. They were identical to the previous invoices rendered monthly from the start of the year claiming £3,000 per month for “services”. What is unusual about these two invoices is that there was no explanation as to what they related to, even though at the same time the monthly £3,000 invoices were also being sent and paid. Mr Gregson was asked for details about what services were being referred to, both by the Insolvency Service and the joint administrators, but did not provide an explanation. In his affidavit he said that in fact they were outstanding loans to Gary Gregson Limited and that was the explanation he gave in cross-examination. He suggested that it was a mistake by the company bookkeeper Sherry Jones who had mistakenly written “services” when that was in fact not the basis for these invoices being made or paid. I find that explanation impossible to accept since Mr Gregson was clearly the only person who could have given her the instructions as to what payments were to be made and on what basis they were to be made. If he had told her that these were all intended to be repayments of loans which he had made to the company then it seems to me quite impossible that she could simply have misunderstood that and treated them as services and entered them accordingly. Indeed, it is also inconsistent with the way in which she entered these details on the Sage nominal ledger accounts for Mr Gregson's director's loan accounts. That, as we will see, included other entries for loan or loan repayments but not these two. If they had been genuine pre-existing loans which were being repaid they would have been included in the nominal account as existing loans and would have been shown as loan repayments. Instead, what happened, as will be seen, is that on 12 and 13 August a number of further substantial payments were made with a series of equalising adjustments and it is quite clear in my judgment that he did instruct the bookkeeper to transfer these two amounts and to seek to treat them as payments or services when there was no obvious basis or justification for doing so. As Ms Wilson-Barnes observed, the context is that only the day before the first payment there had been a telephone conversation with the FCA where they said they were concerned that a crossroads had been reached and that the two options being given were (1) to cease trading all together, or (2) to make radical changes, including making substantial changes to the products. It seems clear to me that at that stage Mr Gregson realised that the businesses were no longer viable and decided therefore to ensure that he was going to exit the businesses and that he would ensure that what he regarded as due to him from the companies would be repaid before those businesses effectively collapsed or were transferred to other owners.

To be clear, the claimant's case does not depend on me being satisfied that there was no proper basis for these payments. Even if there were valid pre-existing loans, as to which there is no evidence, or even if Mr Gregson genuinely believed that he was entitled to pay these sums to his company, as to which there is no obvious reasonable basis, the fact is, and this is the essential thrust of the complaint, that these payments were being made at a time when Mr Gregson was aware that the FCA had real and justified concerns that client monies may well be intermingled with firm monies in firm accounts and that is why they had required him to give the commitment and not to pay out monies other than for wages or for other legitimate creditors until the reconciliations had been produced and agreed. For him to decide unilaterally, without prior reference to the FCA, to begin repaying himself these monies even if they were genuine loans, potentially - and actually as it transpired - to the prejudice of the clients was, I am satisfied, serious misconduct on his part.

I next refer to the three payments totalling £64,500 which were made on 12 and 13 August to Mr Gregson to his mother and to Ms Statter. The entries on the nominal ledger are misleading in themselves because they read as if they were repayments of three separate loans, whereas what Mr Gregson told me were that in fact they were all existing loans by him and he simply decided to pay some to his mother and some to his then girlfriend. It also seems clear to me that the balancing entries were inserted purely as a device to seek to balance the accounts. Again, there is no evidence whatsoever to justify these individual entries. Mr Gregson suggested that they related to monies which he had spent on behalf of the company in refurbishing the property which it was occupying. The difficulty with that is that firstly there is simply no documentary evidence of these payments, nor was any made available, it would appear, to the joint administrators, to justify these amounts. Secondly, there is no evidence whatsoever that they were entered on the company books as director's loans before this time. Thirdly, even on the face of the entries they do not justify all of them because a number of the other entries have nothing whatsoever to do with expenditure on premises. Furthermore, as Mr Gregson sought to explain further, it became apparent that there was a separate company FML, who was notionally the landlord, whereas GBFS was notionally the tenant and there appears to be no clear or obvious basis by which monies advanced by the landlord to fund these works should have been treated as director's loans to the tenant company. All of these amounts miraculously balanced each other. The overwhelming inference can only be that these were simply devices made to seek to justify the payments and to give them what appeared to be a spurious plausibility.

The position is also worse in my view in relation to these particular transactions because firstly by this time he had already seen the Barlow Andrews draft reconciliation and was aware that they were saying that there was an apparent £300,000 overpayment and secondly in a telephone conversation with the FCA on 7 August he specifically said that he had not been drawing down fees and he had been asked to immediately rectify the discrepancies by making good the shortfall, but he did not do so. Instead, he arranged for these substantial sums to be transferred to himself.

The third and final series of payments in relation to GBFS was just under £47,000 transferred to Money Factory Management Limited between 28 July and 21 August which again increased the indebtedness of that company to GBFS and which Mr Gregson was simply unable to explain other than to suggest that it was part of some device to protect company funds from hostile action by someone with whom he was in dispute. He expressed himself puzzled as to why those monies had not been re-transferred because, on his evidence, that would have been done if his reason was genuine. Again, it is clear that no explanation about this had ever been given either to the FCA or to the joint administrators, despite their lengthy and detailed request for information, and it seems on the face of it that these payments, made to a company with which Mr Gregson was connected, could not properly have been justified on the basis that prevailed at the time.

In the circumstances, I can only agree with the claimant that these payments were wholly lacking in probity. Exactly the same conclusions I reach in relation to One Tick. The payments in total amounted to £65,000. £34,000 was paid to Gary Gregson in two payments described as services and a further £31,000 was paid to Mr Gregson's brother. Again, in my view, all completely unacceptable in circumstances where it simply could not be said that these were all genuine firm monies rather than mixed client monies.

I can deal rather more briefly with the remaining allegations. The first allegation against One Tick is about client funds being held by third parties. It is clear that this was the case. Mr Gregson has explained that one of the merchant services companies in fact wrongly retained these monies because it appears firstly it was entitled to retain monies for a substantial period of time and to retain some form of deposit, and secondly that even after that, it simply refused to hand over the balance.

There is no positive evidence to disprove that evidence. Even if it is true, however, it seems to me to be unacceptable for the companies to enter into arrangements of this sort which did not effectively ensure that, if clients were allowed to make payments in this way, the funds did not, without any undue delay, reach the company's control. There were some question marks as to whether or not the other company was also a merchant services provider or some connected company but in reality that makes no difference. The plain fact is that, for whatever reason, that company was allowed to retain monies rather than them being paid into the company's accounts. Exactly the same position where monies which should have gone into OTL accounts went into GBFS accounts. In my judgment, this is all part and parcel of the same picture where the importance of the need to maintain clear segregation of funds was simply not understood and was not implemented.

I turn next to the separate allegation of breach by GBFS of the OFT guidance and the FCA handbook in selling its products to the clients. Paragraph 321 of the 2012 OFT guidance provided that all advice given to consumers at any stage and any action taken should be appropriate to the individual circumstances and examples of unfair or improper business practices included failing to carry out a realistic and reliable assessment, taking appropriate account of the consumer's financial position. It is said first that contrary to that guidance GBFS did not, prior to the purchase by it in March 2013 of GAB's client book, carry out a sufficient assessment of the client's circumstances in order to decide whether to administer the plan. I am not satisfied that this specific allegation is made out because it does not seem to me that there was a separate obligation to act in such a way at that stage, where on the available evidence all that was being done was that the existing contracts were being retained in place but administered by GBFS as opposed to GAB.

However, I do consider that the claimant is on stronger ground in relation to the circumstances in which GBFS sought to transfer the existing clients onto the new product known as “Credit Resolve” with GBFS in January 2014. It appears that GBFS issued letters to clients stating that following the transfer a review would be conducted in the near future but there is no evidence that this ever happened. Instead, there is evidence in a further letter to a client in February 2014 that although GBFS was promising to complete a review, in fact what it was actually doing was seeking to persuade clients to sign documents to enable the clients to be transferred to the Credit Resolve product without their needing to do anything and without the need for a review. The point made by the claimant is that there was a clear financial incentive for these clients to be transferred since, as I have said, under the existing agreements the 87.5 per cent fee would reduce down to 12.5 per cent, after a specified period whereas if a new contract was entered into, the fees would rise to 87.5 per cent again.

I accept that this might be justified in individual cases but only where there was still significant work to be done under the business model and not otherwise. There is simply no evidence that the position was separately considered with a separate review in relation to each separate client and there is no evidence that there were any alternative options considered, for example seeking to reach a full and final settlement or similar. If those reviews had been carried out, then it would appear that they ought to be recorded and available in Tigersolv, but there is simply no evidence that they were ever done and, I am quite satisfied on the balance of probabilities, they were not. There is evidence in the papers of complaints being made by disgruntled clients to the financial ombudsman service about all this at the time and those complaints being upheld. In those circumstances I am satisfied that this allegation is made out as well.

I can turn finally to the allegations in relation to GAB. These complaints relate to the content of advertising materials provided by GAB in the period in 2010 and 2011 whilst Mr Gregson was a director. He was clearly its managing director rather than its sales director, which is what he had said in his affidavit he was, although in cross-examination he suggested that he did not even know the difference between the two roles, which I have to say I found surprising. The 2008 OFT guidance set out a number of various requirements. I shall concentrate on the most important which was that advertisements must not mislead or claim or imply that the debt management company can guarantee an outcome favourable to the consumer in negotiations with creditors. The standard documentation issued by GAB included various advertising materials and it is clear in my judgment that the contents of those documents did not comply with the guidance to which I have referred. Most significantly, in respect of advertising the correspondence said: "We are able to dramatically reduce your level of debt and reduce your term of debt by one half". I am satisfied no basis for these clear and unequivocal representations existed and that they were misleading as GAB could not make such assurances. It seems to me that Mr Gregson, as the self-styled managing director, must take responsibility for these breaches. I find these complaints proved as well.

The consequence of these findings is that it is now for me to consider whether Mr Gregson's conduct in relation to the company is such as to make him unfit to be concerned in the management of the company. The court must consider whether the allegations as found proven as a whole amount to unfitness, that being a question of fact as set out by the Court of Appeal in the well-known case of Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164. I have to be satisfied that the director has been guilty of serious failures, whether deliberately or through incompetence, to perform duties which go with the privilege of trading with limited liability. I do not have to be satisfied that the director acted dishonestly and it is no defence that he was not incompetent or did his best. For the reasons I have already given, I am quite satisfied that the allegations in relation to segregation, records, accounts and reconciliations and the allegations in relation to payments are serious both in themselves and together and plainly justify a finding of unfitness. They are supported by the other findings, although I regard those of lesser comparative seriousness, and also the findings that I am entitled to and do take into account in relation to GAB.

In those circumstances, disqualification is mandatory. The period of disqualification is for the court to determine. Helpful guidance was given in Sevenoaks Stationers where the Court of Appeal endorsed what are effectively three separate brackets in relation to the disqualification period the maximum period of which is 15 years: a top bracket of over ten years for particularly serious cases; a middle bracket between six and ten years for serious cases which do not merit the top bracket; and a minimum bracket of between two and five years where the case is, relatively speaking, not very serious. I am quite satisfied that this case falls in the region of around ten years. The conduct is serious. In particular, the conduct in paying money which could not be known as not including client money out to Mr Gregson or his connected companies or individuals in the circumstances to which I have referred was serious conduct. I am also satisfied that the failures to ensure that clients' funds were segregated, records and accounts and reconciliations were available were also serious given the importance attached by the regulatory regime to compliance and which it is clear that Mr Gregson failed to take seriously and which had serious consequences so far as the clients were concerned. These companies were expected to show a high level of probity given their regulatory background and clients were entitled to depend on their integrity and good governance and yet that did not happen in this case. Mr Gregson is responsible for that.

I accept that there are some mitigating circumstances. It is clear that there were at least some difficulties with Tigersolv. I also accept that the failure to keep control of client monies was not in any way dishonest. It was a negligent failure to ensure that these records were kept. I am also satisfied, as Mr Gregson emphasised, that he was not simply someone who was seeking to wipe out the company's bank accounts. What he was seeking to do was, in a misconceived way, to pay himself what he may genuinely have believed he was in a rough and ready way entitled to take back from the companies and that that was not in those circumstances deliberately and flagrantly dishonest. I also accept that he did co-operate to some extent with the FCA in its investigations, although, as I have said, in my view he did act in an underhand way in failing to tell them what he was going to do in relation to the payments before he made them. I also accept, as is made clear, that the consequences to him of the FCA investigation have been unhappy. He lost his interest in the business and he has clearly had a difficult and stressful time since 2014. In the circumstances, I am satisfied that the appropriate period of disqualification is one of ten years, and that is the order that I will make.