The Official Receiver v Andrew Anthony Kelly
[2023] EWHC 1181 (Ch)
The Secretary of State for Business and Trade v James Bernard Low
12 July 2024
[2024] EWHC 1812 (Ch)
High Court
A company director, Mr. Low, let his company commit a large VAT fraud. Even though he was warned about this type of fraud, he didn't do anything to stop it. The court decided he was unfit to be a director and banned him from being one for 10 years.
Key Facts
- •James Bernard Low was a director of Bartletts Hi-Fi.
- •Bartletts Hi-Fi engaged in Missing Trader Intra-Community (MTIC) fraud.
- •HMRC rejected Bartletts Hi-Fi's input tax claims totaling £2,646,905.
- •Bartletts Hi-Fi entered insolvent liquidation.
- •The Secretary of State brought a claim against Mr. Low under section 6 of the Company Directors Disqualification Act 1986 (CDDA).
- •Mr. Low initially failed to engage with the proceedings and appeared in person.
- •Mr. Low claimed limited involvement in the company's affairs, primarily managing the Amazon account.
- •Evidence suggested Mr. Low knew or should have known about the MTIC fraud due to HMRC warnings and the nature of the transactions.
Legal Principles
Section 6 of the CDDA mandates a disqualification order if a director's conduct makes them unfit to manage a company.
Company Directors Disqualification Act 1986
The court considers a director's compliance with duties, using objective and subjective tests to assess reasonableness and honesty.
Secretary of State for Business Innovation and Skills v. Khan [2017] EWHC 288 (Ch)
Mere imprudence is insufficient; the director's conduct must be serious.
Re Bath Glass Ltd, The Official Receiver v Elliott and Sharp (1988) 4 BCC 130
The court considers factors outlined in Schedule 1 to the CDDA, including responsibility for contraventions, insolvency, loss caused, and breaches of duty.
Company Directors Disqualification Act 1986, Schedule 1
The court focuses solely on the conduct specified by the Secretary of State.
Re Grayan Building Services Ltd [1995] Ch 241
In MTIC fraud cases, the court assesses the director's knowledge and involvement in the fraud.
Secretary of State for Business, Innovation and Skills v. Warry [2014] EWHC 1381 (Ch)
Disqualification periods under s.6 CDDA range from 2 to 15 years, with guidance on appropriate brackets based on severity.
Re Sevenoaks Stationers (Retail) Ltd [1991] Ch. 164
A director's right to deduct input tax can be refused if they knew or should have known about participation in fraudulent VAT evasion.
Axel Kittel v Belgian State v Recolta Recycling SPPRL
Outcomes
Mr. Low was disqualified from acting as a director for 10 years.
The court found that Mr. Low knew or should have known about the MTIC fraud due to HMRC warnings, the nature of the transactions, and his failure to take appropriate steps to investigate. His claim of limited involvement was deemed not credible. His actions fell below the required standards of probity and competence for a company director.
Similar Cases
The Secretary of State for Business and Trade v Daniel Singh Sekhon
[2024] EWHC 674 (Ch)
Kevin John Hellard v Nizakat Khan & Anor (Re Phoenix Tech Limited)
[2024] EWHC 1130 (Ch)
Thomas Hanlon v The Commissioners for HMRC
[2024] UKFTT 175 (TC)
Francis Oluwafisayo Falodun v The Secretary of State for Business, Energy and Industrial Strategy
[2023] EWHC 182 (Ch)