Key Facts
- •Mr. Sekhon was the sole director of Combat Construction Limited.
- •The company became insolvent.
- •The company failed to pay HMRC for CIS tax and VAT, totaling at least £226,002.
- •Other creditors were paid while HMRC was not.
- •Mr. Sekhon claimed he believed a subcontractor, Akshay, had Gross Payment Status (GPS), so deductions weren't necessary.
- •Evidence showed the company received an access code to check Akshay's GPS status but did not use it.
- •Mr. Sekhon's evidence was found unreliable due to inconsistencies and lack of supporting documentation.
Legal Principles
Failure to pay a creditor, including HMRC, is not unfit conduct in itself. The court must determine if the director fell below the standards of probity and competence.
Re Structural Concrete Ltd [2001] BCC 578; Cathie v Secretary of State for Business, Innovation and Skills (No2) [2012] EWCA Civ 739; Secretary of State for Business Innovation and Skills v Khan [2017] EWHC 288 (Ch)
A discriminatory practice of paying other creditors while not paying a specific creditor (e.g., HMRC) may constitute unfit conduct.
Re Sevenoaks Stationers (Retail) Limited [1991] Ch 164
Evidence of discriminatory practice can be direct or inferred from conduct (e.g., non-payment to one creditor while paying others).
Re Structural Concrete Ltd [2001] BCC 578; Cathie v Secretary of State for Business, Innovation and Skills (No2) [2012] EWCA Civ 739
Tax assessments establish liability but not necessarily director conduct.
Re Kazitula Ltd [2022] EWHC 2588 (Ch)
The burden of proof is on the claimant (Secretary of State) on the balance of probabilities.
Company Directors Disqualification Act 1986, section 6
Adverse inferences may be drawn from the absence of a witness who might have material evidence.
Wisniewski v Central Manchester Health Authority [1998] EWCA Civ 598
Outcomes
Disqualification order made against Mr. Sekhon for 4 years.
Mr. Sekhon's conduct, in causing the company to trade to the detriment of HMRC by not paying CIS contributions while paying other creditors, fell below the standards of probity and competence expected of a company director. His defense was rejected due to lack of credible evidence.