Lime and Black BPS Limited (in liquidation) v Dharminder Singh Gill & Ors
[2024] EWHC 1898 (Ch)
Dominik Thiel-Czerwinke & Anor (Joint Liquidators of Courtside Recycling Limited) v Nicholas James Crabb
21 February 2024
[2024] EWHC 337 (Ch)
High Court
A company director, Nicholas Crabb, was found guilty of cheating the taxman and stealing money from his company. He hid the money and destroyed records to cover his tracks. The court ordered him to pay back all the missing money.
Key Facts
- •Nicholas Crabb, sole director and shareholder of Courtside Recycling Limited, was accused of fraudulent trading and misfeasance.
- •Courtside Recycling Limited was wound up compulsorily due to an HMRC petition.
- •HMRC alleged under-declaration of VAT totaling £800,443 and challenged cash withdrawals of £2,547,370.
- •Crabb destroyed Courtside's books and records.
- •Crabb claimed Courtside operated under a VAT margin scheme, but no supporting documentation was found.
- •Liquidators presented three claims: fraudulent trading under s.213 IA86, misfeasance under s.212 IA86, and void payments under s.127 IA86.
Legal Principles
Fraudulent trading under s.213 IA86 requires: (1) business carried on with intent to defraud creditors or for a fraudulent purpose; (2) defendant knowingly participated; (3) defendant knew transactions were intended to defraud or were fraudulent.
Re BCCI SA; Morris v Bank of India [2003] EWHC 1868 (Ch)
Section 213 IA86 requires dishonesty, assessed objectively using the Ivey v Genting Casinos test.
Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67
In civil cases, the standard of proof is the balance of probabilities, but more cogent evidence is needed for fraud due to its inherent improbability.
JSC BM Bank v Kekhman [2018] EWHC 791 (Comm)
It's not a bar to s.213 that only one creditor was intended to be defrauded.
Morphitis v Bernasconi [2003] EWCA Civ 289
Section 212 IA86 misfeasance involves fraudulent breach of director's duties (e.g., s.171 and s.172 CA06).
Companies Act 2006
Directors have a fiduciary duty to maintain proper company records.
Re Mumtaz Properties Ltd [2011] EWCA Civ 610, Re GHLM Trading Ltd [2012] EWHC 61 (Ch), Re Shahi Tandoori Restaurant Ltd [2021] EWHC 337 (Ch)
Section 127 IA86 voids dispositions of company property between petition presentation and winding-up order, unless authorized by court.
Insolvency Act 1986
Outcomes
Crabb liable for fraudulent trading under s.213 IA86.
Crabb deliberately underdeclared VAT and extracted large sums of cash, destroying records to conceal his actions. His claims of a VAT margin scheme were unsubstantiated.
Crabb liable for misfeasance under s.212 IA86.
Crabb breached his fiduciary duties by failing to maintain proper records and acting in a manner detrimental to Courtside's creditors.
Crabb liable for void payments under s.127 IA86.
Payments made to Crabb and third parties after the winding-up petition were void due to lack of court authorization.
Crabb ordered to contribute £2,547,370 (cash withdrawals), £15,500 (payments to himself), and £12,926 (payments to others).
These sums represent the direct financial consequences of Crabb's fraudulent actions.
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