The Secretary of State for Business, Energy and Industrial Strategy v Vipul Rajgor
| Jurisdiction | England & Wales |
| Judge | Mithani |
| Judgment Date | 23 April 2021 |
| Neutral Citation | [2021] EWHC 1239 (Ch) |
| Court | Chancery Division |
| Docket Number | CASE NO: F30BM170 |
| Date | 23 April 2021 |
[2021] EWHC 1239 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
COMPANIES AND INSOLVENCY LIST (CH.D)
HIS HONOUR JUDGE Mithani QC, SITTING AS A JUDGE OF THE HIGH COURT, remotely at the Birmingham Civil Justice Centre, Priory Courts, 33 Bull Street Birmingham, B4 6DS
CASE NO: F30BM170
In the Matter of Javazzi Limited (In Liquidation)
and
In the Matter of the Company Directors Disqualification Act 1986
Mr Christopher Buckingham (instructed by the Insolvency Service, Legal Services) for the Claimant
The Defendant, Mr Vipul Rajgor, appeared in person.
Judgment handed down remotely on 11 May 2021
Approved Judgment
THE CLAIM AND THE BACKGROUND CIRCUMSTANCES
This is an application by the Secretary of State for Business, Energy and Industrial Strategy for a disqualification order against the Defendant, Vipul Rajgor, pursuant to ss. 1 and 6 of the Company Directors Disqualification Act 1986 (“ CDDA 1986”), arising as a result of his conduct as a director of Javazzi Limited. I will refer to Javazzi Limited in this judgment either as “Javazzi” or “the Company”.
The application for the disqualification order (“the Claim”) is based on a single allegation of failing to keep and maintain adequate accounting records of the Company or to preserve those records (if they were kept and maintained) or to deliver them up (if they were kept, maintained and preserved) to the Joint Liquidators of the Company or the Insolvency Service, which brings the Claim on behalf of the Claimant.
Before it was incorporated, the Defendant and his wife, Mrs Manita Rajgor, ran what appears, on all accounts, to be a successful business, selling home-made sandwiches to hospitals and small shops in the Stanmore, Harrow (and subsequently) Bedford area. The success of this business led to the Company being incorporated on 4 July 2011. It was incorporated as a franchisor, selling sandwiches, beverages and other food products to franchisees with whom it had entered into franchise agreements. The franchise agreement provided that the franchisee would be entitled to use the brand name “Javazzi” in its shop and would be entitled to receive the supply of various food products and services from the Company, as specified in the franchise agreement, in return for the franchisee, among other things, paying an initial franchise fee of £35,000 and complying with the other obligations set out in the franchise agreement. Pages 401 onwards of the trial bundle contain a specimen copy of the franchise brochure and what a typical franchise store or shop (which the Defendant called a “concept” franchise) would look like.
The Company went into creditors' voluntary liquidation on 25 August 2016. The joint liquidators of the Company are Richard Frank Simms and Carolyn Jean Best (“the Joint Liquidators”). I have not seen the last progress report filed by them in relation to the Company. However, the progress report dated 12 October 2018 which is exhibited to the first affirmation of Martin Gitner (“Mr Gitner”), deputy head of Insolvent Investigations at the Midlands & West Region of the Investigations Directorate at the Insolvency Service, dated 24 May 2019, which was furnished in support of the Claim, states that the Joint Liquidators had, as at that date, made realisations of some of £4,200 against liabilities of over £245,141.39. There is, therefore, a deficiency, as regards the creditors of the Company, subject to the Joint Liquidators' costs, expenses and remuneration in the winding up, of a sum in excess of £240,000.
The sole director of the Company was the Defendant. His wife, Mrs Manita Rajgor, worked in the Company with him. It is not clear what her roles and responsibilities were in the Company. I tried to ascertain this from the Defendant in a series of questions I asked him when he was giving evidence. However, as with all the answers he gave, he was either evasive or gave completely inconsistent answers to the questions that were put to him. She plainly had some important function in the Company because her signature appears on several important company documents, such as the declaration contained in the business plan prepared by Franchise Finance Ltd for the Company: see pages 175–214 of the trial bundle. There were two or three other personnel who worked at the Company. However, none of them was an employee. They all contracted their services to the Company on a “self-employed” basis.
The Claim is supported by the affidavits or affirmations of Mr Gitner, Katie Marshall (formerly Katie Legge) (“Ms Marshall”), an investigating officer, at the Insolvency Service, Adrian Joseph (“Mr Joseph”), whose company, Fearless Hawks Limited, had a franchise agreement with the Company and Ashwin Patel (“Mr Patel”) who worked for the Company from 2011 to 2014 as a “contractor” – i.e., introducing customers to the Company who might have been interested in taking franchises from the Company. There is a dispute between the Defendant and Mr Patel about why Mr Patel left the Company. Mr Patel says it was because the Company stopped paying him. The Defendant says that Mr Patel left of his own accord. There are a number of other matters which are in dispute between them, such as whether the Company had made payments to Mr Patel in relation to a motor vehicle that he had hired to perform his functions for the Company and whether the information which Mr Patel gives in paras. 6 to 11 of his affirmation dated 9 December 2020 is correct. So far as the Defendant suggests that Mr Patel was guilty of misconduct in the performance of his duties while working for the Company, it is open to him to provide information to the Joint Liquidators about such misconduct with a view to the Joint Liquidators taking action against him. It does not seem to me to be material for the purpose of the determination of the Claim. The issue in this case is not how Mr Patel behaved but whether the allegation made against the Defendant is proved and whether it shows him to be unfit in the management of the Company. The same applies to the criticism he makes about the failure of the Insolvency Service to undertake investigations into Mr Patel and Mr Joseph's conduct, particularly in relation to an anonymous malicious email (see page 613 of the trial bundle) which he claims Mr Joseph could have sent to his customers that caused the ultimate demise of the Company. It is important to point out, in this context, that the Claim made by the Claimant is against the Defendant and not against any other person. The written and oral evidence upon which the Claimant relies in support of the Claim is plainly relevant in determining the veracity of the overall evidence which the court has seen and heard in this case. However, it cannot be a defence to the Claim for the Defendant to say that there were others who also behaved badly but against whom no proceedings have been brought or investigations conducted by the Claimant, particularly where “directorship” is an essential ingredient of any claim which the Claimant would be able to bring against them under the CDDA 1986 – at any rate under s. 6 or s. 8 of the CDDA 1986.
THE LAW
It is appropriate that before I deal with whether the charge brought by the Claimant is made out, and whether it demonstrates that the Defendant is unfit to be concerned in the management of a company, I give a short summary of the legal position which applies in the present case.
I have already referred to s.6 of the CDDA 1986 under which the Claim is brought. The relevant provisions of s. 6, for the purpose of their application to the Claim, state as follows:
“(1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied:
(a) that he is or has been a director of a company which has at any time become insolvent [within the meaning of s. 6(2) of the CDDA 1986] (whether while he was a director or subsequently), and
(b) that his conduct as a director of that company (either taken alone or taken together with his conduct as a director of one or more other companies or overseas companies) makes him unfit to be concerned in the management of a company.”
Section 6(2) of the CDDA 1986 defines what is meant by the expression “become insolvent”. The meaning of the expression does not require elaboration. That is because there is no issue that the requirements of that provision, and the additional requirement under s. 6(1)(a) that the Defendant must have been a director of the Company, are plainly satisfied: the Defendant was the sole director of the Company and the Company became insolvent within the meaning of s. 6(2)(a) of the CDDA 1986 by entering into a creditors' voluntary liquidation on 25 August 2016. The decision for the court is whether, pursuant to s. 6(1)(b), the charge (in other words, the single allegation referred to above) made by the Claimant against the Defendant can be proved and whether it makes him unfit to be concerned in the management of a company.
In deciding, pursuant to s. 6(1)(b), whether a person's conduct as a director makes him unfit to be concerned in the management of a company (and, if so, the period for which a disqualification order should be made against him), s. 12C of the CDDA 1986 specifies, by reference to Schedule 1 to the CDDA 1986, those matters to which the court is required to have regard. For the purpose of the Claim, the matters in Sch. 1 which are most relevant are the following:
• Under para. 1 of Sch. 1: “The extent to which the person was responsible for the causes of any material contravention by a company or overseas company of any applicable legislative or other requirement.”
• Under para. 2 of Sch. 1: “Where...
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