Manolete Partners Plc v Ebrahim Dalal
| Jurisdiction | England & Wales |
| Judge | Stephen Jourdan |
| Judgment Date | 24 June 2022 |
| Neutral Citation | [2022] EWHC 1597 (Ch) |
| Docket Number | Case No: BL-2019-002026 |
| Court | Chancery Division |
[2022] EWHC 1597 (Ch)
Stephen Jourdan QC SITTING AS A JUDGE OF THE HIGH COURT
Case No: BL-2019-002026
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
BUSINESS LIST (CH D)
Peter Shaw QC (instructed by JMW Solicitors LLP) for the Claimant
Emma L Fisher (instructed by Ward Hadaway LLP) for the First and Fourth Defendants
Ghazan Mahmood (instructed by Ralli Solicitors LLP) for the Second and Third Defendants
Hearing dates: 4–7 and 11 April 2022
Draft judgment circulated to counsel: 20 June 2022
Judgment handed down: 24 June 2022
Introduction
This is the trial of a claim brought by the Claimant as assignee of Bolton Poultry Products Ltd (“the Company”) and its liquidator, Clive Morris.
The claim is brought against Ebrahim Dalal, Sajid Dalal, (his son), Anisha Dalal (Sajid's wife, and Ebrahim's daughter-in-law) and the estate of the late Johra Dalal (Ebrahim's wife and Sajid's mother). Without intending any disrespect, I will refer to them by their first names.
The Company traded for nearly 10 years, from April 2005 to January 2015. Shortly before it went into liquidation in January 2015, the Company sold its assets to a newly formed company called Bolton Halal Chicken Ltd for £20,000. I will refer to that as “the New Company”. Its shares were owned by Sajid and Anisha.
In brief outline, the Claimant alleges that:
(a) The Company made a great deal more money from its business than was recorded in its accounts, paid in cash, and the Defendants misappropriated that cash. The additional income which the Claimant alleges the Company made is referred to in the Particulars of Claim, and in this judgment, as “the Additional Sales Receipts”.
(b) Certain properties purchased in the name of the Defendants, or some of them, were acquired using money belonging to the Company, and the Company can trace that money into those properties and is entitled to a proprietary interest in them.
(c) In 2014, Ebrahim, Sajid and Anisha Dalal authorised the payment of Company money to themselves, in breach of duties they owed to the Company, and the money should be repaid.
(d) The New Company acquired valuable goodwill from the Company without paying for it. Ebrahim, Sajid and Anisha are liable to pay the Company the value of that goodwill and the Court should direct an enquiry as to the amount.
The chronology
The Company and its business
In this section I will give a brief summary of the main events relevant to this dispute, in chronological order.
The Company was incorporated on 18 April 2005. 10% of the shares were registered in the name of Ebrahim, 35% in the name of Sajid, 10% in the name of Anisha, and 45% in the name of Johra.
The Company took over an existing business which had been run by Ebrahim since the early 1980s under the name “Bolton Poultry Products”. Some documents refer to this business as having been conducted as a partnership.
The business which the Company took over and thereafter carried on comprised slaughtering chickens, and selling wholesale halal chicken meat. The business was carried on from premises at 3 Moncrieffe Street, Bolton. The Company supplied halal chicken meat to restaurants and retailers. The Company's main business was buying live birds, slaughtering them, removing the beaks, feet, feathers, blood and offal, and then preparing the birds for sale. Some birds were then sold whole. Other birds were cut up into parts — breast, thighs, drumsticks, niblets and legs. Those parts were then sold. The Company also purchased birds that had already been slaughtered, and cut those up into parts, and sold the parts, although this was a much smaller part of the business. I will refer to this as the “cut meat” part of the business. The Company also sometimes bought and sold live birds, but this was a relatively insignificant part of the business. The Company's business was to a very significant extent conducted in cash; about half of all sales were paid for in cash.
The directors
Ebrahim was a registered director of the Company from the date of its incorporation, 18 April 2005, and there is no dispute that he remained its director thereafter.
Sajid, Anisha and Johra were registered as directors of the Company from incorporation until 20 June 2008. After that, the sole registered director was Ebrahim. The Claimant alleged that Sajid and Anisha (but not Johra) continued to act as directors after 20 June 2008 and remained liable to comply with the duties imposed on company directors.
Throughout the period from April 2005 to November 2014, all four Defendants lived together in one house, with Sajid and Anisha's three children, who were born in 2002, 2004 and 2009.
In 2011, Ebrahim, Johra, Sajid and Anisha Dalal formed a partnership, called “A & Adam Holdings” with the purpose of rearing chickens to be sold to the Company. There were thereafter sales of chickens by A & Adam Holdings to the Company.
The purchase of the Thynne Street Property
On 12 July 2011, the registered leasehold titles to a property known as “land to the east side of Thynne Street and the west side of Moncrieffe Street, Bolton” were purchased in the names of the four Defendants and they were registered as proprietors. The proprietorship registers record that a price of £200,000 was paid. I will refer to this property as the “Thynne Street Property”. It was next to the Company's processing plant at 3 Moncrieffe Street, and was purchased to provide additional space for the Company's business. The Claimant alleges that this property was purchased with money belonging to the Company.
The HMRC investigation begins
In 2011, Robert Crompton of HMRC began an employer compliance enquiry into the PAYE affairs of the Company and referred the Company to HMRC's Civil Investigation of Fraud Team, which opened a corporation tax enquiry, initially dealt with by Peter Horrocks.
After considering information provided to him, Mr Horrocks formed the view that the Company's turnover reported in its accounts for the year ending 30 September 2009 did not appear nearly high enough, considering the number of birds it had slaughtered in that year. On 2 June 2011 he wrote to the Company saying that HMRC wanted to check the tax return for the period to 30 September 2009. On 25 November 2011, he referred the case to John Metcalfe, an officer in HMRC's Fraud Investigation Service.
The purchase of Borsdane Farm
On 9 February 2012, a property known as Borsdane Farm, Westhoughton (comprising two parcels registered under different title numbers) was purchased by the four Defendants for a purchase price of £1.2 million. This was purchased to be used for rearing chickens to be supplied to the Company, and thereafter used for that purpose. The Claimant alleges that this property, too, was purchased with money belonging to the Company.
The HMRC investigation continues
From about 2012 on, Mr Horrocks and Mr Metcalfe exchanged correspondence with the Company's then accountant, Mr Razzaq of Shacter Cohen and Bor (“SCB”). On 24 May 2012, Mr Horrocks sent Mr Razzaq copies of 5 sales invoices from 2009, and a spreadsheet summarising the entries in those invoices, with a list of questions about what various abbreviations in those 5 invoices meant. The questions were answered in the form of handwritten annotations on the spreadsheet and this was provided to Mr Horrocks in July 2012.
In October 2012, Mr Metcalfe wrote to each of the Defendants saying that HMRC had reason to suspect they had committed tax fraud, and that HMRC's Investigation of Fraud Code of Practice, known as “COP9”, applied. He offered them each the opportunity to make a full disclosure of any tax fraud that had been committed, by entering into a contractual arrangement to disclose and completing a form making full, open and honest disclosure of all relevant fraudulent activities. SCB then provided the Company's financial records to HMRC.
In January 2013, SCB sent to Mr Metcalfe completed Outline Disclosure forms on behalf of each of the Defendants.
Johra's form said she had not committed any fraud. Contractual disclosure forms signed by Ebrahim, Sajid and Anisha were provided. In each case the form stated “I have deliberately brought about a loss of tax, through conduct which HMRC may suspect to be fraudulent.” There were then headings: “Description of fraud”, “Individuals and entities involved”, “The period of time over which the fraud took place” and “Other information you think is relevant”.
Ebrahim's Outline Disclosure form said: “There appears to be an understatement of sales going back to the accounts for the year ended 30 September 2006. I am working to assess levels of understatement”, and “I believe there is understatement in the accounts for the year ended 30 September 2006 and in the accounts for the year ended 30 September 2007. It is less clear whether there were any understatements in subsequent years.” He also said: “I have come across one or two accounting irregularities during the course of the work, I have done thus far, which, whilst they are not particularly material, appear to fall into the category of matters which I should bring to your attention. It would appear in 2007 that VAT was reclaimed on certain items of expense which was incorrect and was changed in subsequent VAT Return to correctly account for VAT. In the accounts to 30 September 2007 there was an incorrect journal entry in respect of private use of stock in that an amount was debited to the sales account rather than credited, in the sum of £1,560”.
Sajid's Outline Disclosure form said that his Barclays Bank account had been used by the Company to facilitate receipt of monies from...
To continue reading
Request your trial
-
Manolete Partners Plc v Ebrahim Dalal
...JUSTICE, BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES, BUSINESS LIST (ChD) Stephen Jourdan KC sitting as a Deputy High Court Judge [2022] EWHC 1597 (ChD) Royal Courts of Justice Strand, London, WC2A 2LL Peter Shaw KC (instructed by JMW Solicitors LLP) for the Richard Leiper KC and Emma......