The Secretary of State for Business and Trade v James Bernard Low
[2024] EWHC 1812 (Ch)
The Secretary of State for Business and Trade v Daniel Singh Sekhon
28 March 2024
[2024] EWHC 674 (Ch)
High Court
A company director didn't pay the government its taxes but paid other bills instead. He said he thought he didn't have to pay the taxes. The court didn't believe him and banned him from being a company director for four years.
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.
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