Rashpal Singh Jabble v The Commissioners for HMRC
[2023] UKFTT 213 (TC)
Kevin John Hellard v Nizakat Khan & Anor (Re Phoenix Tech Limited)
14 May 2024
[2024] EWHC 1130 (Ch)
High Court
A company cheated on its taxes. One of its directors claimed he didn't know, but a court already decided he did. A judge agreed it was unfair to have another trial on that same point, so the director lost and has to pay back what the company owes.
Key Facts
- •Phoenix Tech Limited (in liquidation) participated in MTIC (missing trader intra-community) VAT fraud.
- •Mr. Nizakat Khan and Mr. Jasbinder Singh were directors of Phoenix.
- •The First-tier Tribunal (FTT) found Mr. Khan had actual knowledge of the fraud.
- •HMRC issued a misdeclaration penalty and denied input tax claims.
- •The liquidator sought declarations of fraudulent trading and breach of director duties against Mr. Khan and Mr. Singh.
- •Mr. Khan's defence claimed he believed the transactions were legitimate.
Legal Principles
Striking out a statement of case under CPR 3.4.
CPR 3.4
Summary judgment under CPR 24.3.
CPR 24.3
Issue estoppel/estoppel per rem judicatam; privity of interest.
Hollington v Hewthorn & Co Ltd [1943] KB 587; Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321; Allsop v Banner Homes Limited [2021] EWCA Civ 7; Secretary of State for Business, Innovation & Skills v Potiwal [2012] EWHC 3723 (Ch); Gleeson v J Wippell & Co Ltd [1977] 1WLR 510
Abuse of process: manifest unfairness or bringing the administration of justice into disrepute.
Secretary of State for Trade and Industry v Bairstow [2003] EWCA Civ 321; Re Thomas Christy (in liquidation) [1994] 2 BCLC 527; Re E-Tel (UK) Limited (in liquidation) [2023] EWHC 1214; Conlon v Simms [2006] EWCA Civ 1749; OMV Petrom SA v Glencore International AG [2014] EWHC 242 (Comm)
Fraudulent trading under section 213 of the Insolvency Act 1986.
Insolvency Act 1986, s.213
Misfeasance and breach of director duties under section 212 of the Insolvency Act 1986.
Insolvency Act 1986, s.212
Test for dishonesty: Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67
Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67
Kittel Test for VAT reclaim: Kittel v Belgium [2008] STC 1537
Kittel v Belgium [2008] STC 1537
Outcomes
Mr. Khan's defence struck out as an abuse of process.
Relitigating the issue of Mr. Khan's knowledge of the fraud would be manifestly unfair to the liquidator and bring the administration of justice into disrepute, given the previous FTT decision.
Summary judgment granted against Mr. Khan for dishonest participation in the fraudulent scheme.
Mr. Khan's knowledge of the fraud, established by the FTT, inevitably implies dishonesty given his actions as sole director in submitting the VAT claim.
Declarations granted regarding Mr. Khan's liability under sections 213 (fraudulent trading) and 212 (misfeasance and breach of duty) of the Insolvency Act 1986.
Mr. Khan knowingly participated in fraudulent trading and breached his director duties by allowing Phoenix's involvement in the scheme.
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