The Secretary of State for Business, Energy and Industrial Strategy v David Ian Selby
| Jurisdiction | England & Wales |
| Judge | Prentis |
| Judgment Date | 08 December 2021 |
| Neutral Citation | [2021] EWHC 3261 (Ch) |
| Docket Number | Case No: CR-2020-000518 |
| Year | 2021 |
| Court | Chancery Division |
[2021] EWHC 3261 (Ch)
ICC JUDGE Prentis
Case No: CR-2020-000518
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
RE: X E SOLUTIONS LTD (no.07025602)
AND RE: THE COMPANY DIRECTORS DISQUALIFICATION ACT 1986
Royal Courts of Justice, Rolls Building,
Fetter Lane, London EC4A 1NL
Jennifer Newstead Taylor (instructed by Gowling WLG (UK) LLP) for the Claimant
Max Cole (instructed by Moriarty Law Limited) for the Third Defendant
The Second Defendant and the Fourth Defendant appeared in person
The First Defendant did not appear
Hearing dates: 4–8, 11–15 October 2021
ICCJ
Introduction
Xziox and its sister products are used in the purification of water, particularly in agriculture and horticulture, and as decontaminants, particularly in the oil industry. Despite the merits of the product, and the averred success of the company which is currently marketing it, its exploitation has left a wake of failed companies. These disqualification claims concern one of those, X E Solutions Ltd (the “Company”). They arise not from its trade in Xziox but its alleged involvement in a Missing Trader Intracommunity (“MTIC”) fraud on Her Majesty's Revenue and Customs.
The first defendant is David Ian Selby, also known as Ian David Selby and as David Selby and as Ian Selby. Against him is alleged by the Secretary of State, through the evidence of Michael Smith, Deputy Chief Investigator at the Insolvency Service, that:
“Between at least 3 September 2012 and 12 March 2013… [he] caused or allowed [the Company] to participate in transactions which were connected with the fraudulent evasion of VAT, such connections being something which Mr Selby either knew or should have known about”;
and that he:
“caused or allowed [the Company] wrongfully to claim at least £1,129,579 from HM Revenue & Customs in relation to the VAT periods 09/12, 12/12 and 03/13 (inclusive)”.
Mr Selby was not a registered director of the Company at those times, although he became one later, but he is said to have acted as a shadow and/ or de facto director.
As with the other defendants, the “at least” tag was dropped by the Secretary of State in closing. It had apparently been intended to refer both to the start and end dates of the relevant periods. Without more explanation in the evidence it would have been insufficiently precise to have founded relief outside the specified periods.
The allegations against the second defendant, Al Sayed, also known as Altaf Sayed, are in the same form but with different dates: “Between at least 17 October 2012 and 12 March 2013” for the first part, and the VAT returns of 12/12 and 03/13 for the second: those amount to £995,812. The dates are different because Mr Sayed did not become a registered director until 1 October 2012.
That was the date on which the third defendant, Tahir Awan, was recorded at Companies House as having resigned as a director. The first ground against him therefore has the dates “Between at least 3 September 2012 and 24 September 2012”; the second ground has now been withdrawn, as no relevant VAT returns were filed during his directorship.
The allegations against the fourth defendant, Stephen James Bamford, are different. He was registered a director of the Company between 22 September 2009 and 1 October 2016. However, whether over that appointment period an executive or, as he says, non-executive director, between 3 September 2012 and 12 March 2013 he was not involved operationally. The claim against him is one of abrogation:
“Between at least 3 September 2012 and 1 January 2016 [he] abrogated his responsibilities as a director of [the Company]. During this period:”
and there then follow five bullet points:
• “[the Company] participated in transactions which were connected with the fraudulent evasion of VAT;
• [the Company] wrongfully claimed at least £1,129,579 from [HMRC] in relation to the VAT periods 09/12, 12/12 and 03/13;
• On 8 May 2013 Mr Bamford was involved in authorising Mr Selby, who was not formally appointed as a director, to deal with the financial affairs of [the Company];
• Mr Bamford signed the financial statements for the period ended 28 February 2014 despite them carrying a warning from the auditors. It is not clear what action, if any, he took in relation to the auditors concerns;
• Mr Bamford only met with HMRC once during the period from 24 October 2013 to liquidation; he did not respond to numerous HMRC enquiry letters despite them being addressed to him and hampered HMRC's investigation into the fraudulent transactions by not engaging with it.”
The first two points are not happily worded: they ought to have set out the ways in which Mr Bamford was said to have abrogated his responsibilities in those respects. Mr Bamford, though, who was represented until shortly before trial, has not said that he was confused, or would have put in further evidence on the points.
I will address Mr Awan's understanding of the scope of the allegations below.
The claim: procedure
Notices under s.16 Company Directors Disqualification Act 1986 (“ CDDA”) were sent out on 27 April 2018. The claim was issued in the Manchester District Registry on 24 January 2019, being transferred to this court by order of District Judge Bever of 9 December 2019. That same order dismissed the application for a stay which had been made by Mr Selby, Mr Sayed and Mr Bamford but was no longer pursued.
This trial was listed by order of ICCJ Jones of 22 September 2020. Among his orders were that, absent agreement, all deponents to affidavits were to attend for cross-examination failing which their evidence would not be read or used without permission of the court. He also gave directions for further exchanges of evidence.
A pre-trial review was held before DICCJ Addy QC on 20 May 2021 at which each of the defendants was separately represented, albeit that Mr Selby, Mr Sayed and Mr Bamford were then represented by the same solicitors. As now, Ms Newstead Taylor appeared for the Secretary of State, and Mr Cole for Mr Awan.
Over the course of trial, and for reasons then given, I rejected the application of Mr Sayed to rely upon further evidence, and permitted reference to be made to his and Mr Selby's convictions. I also confirmed that trial would proceed in the absence of Mr Selby. He did not seek to explain his non-attendance until day 6, when he sent a medical report from Dr SA Mohiddin, a consultant cardiologist at the London Independent Hospital in Beaumont Square. The report was dated 16 July, the day after Dr Mohiddin had examined him. Mr Selby had told his consultant “that there is an option for him to provide evidence in the form of written statements”, which the consultant considered “preferable” to appearing in person. The report outlined other possible mitigations, including “shorter sitting days, regular breaks, ensuring he maintains good hydration, and that he is able to halt proceedings if he develops symptoms”. Had a request been made, those options could easily have been incorporated into this hybrid trial, in which there were regular breaks anyway for the transcriber. Despite Mr Bamford confirming that he had been in contact with Mr Selby a few times over the trial, no application of any sort was made by Mr Selby. I permitted the parties to make reference, though, to his proposed evidence, a 21-paragraph affidavit; and he had also filed a CPR part 18 response.
Law: disqualification of directors
By s.6(1) CDDA:
“The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied (1) that he is or has been a director of a company which has at any time become insolvent (whether while he was a director or subsequently), and (b) that his conduct as a director of that company… makes him unfit to be concerned in the management of a company”.
By s.6(2)(a) insolvency includes a company which “goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up”.
By s.6(3C) director includes a shadow director. s.22(5) gives a definition: “a person in accordance with whose directions or instructions the directors of the company are accustomed to act”, but not encompassing “advice given by that person in a professional capacity”: (5)(a). As indicated by the definition, the necessary directions or instructions need not be as to the entirety of the company's business.
Also within s.6 is a director who while not formally appointed as such in fact fulfils the functions of a director: by s.22(4) “‘Director’ includes any person occupying the position of director, by whatever name called”. A comprehensive account of the law in this regard has recently been provided by Falk J in Re Keeping Kids Company [2021] EWHC 175, [153–167]. Her summary of conclusions at [167] includes at (b)
“There is no single test, but an important starting point is the company's corporate governance structure. The court is seeking to identify functions that were the sole responsibility of a director or board of directors… Those who assume and exercise powers and functions that can only properly be exercised or discharged at that highest level of management will, consistent with the purpose of the disqualification legislation, be within its scope as de facto directors. Those who are subordinate and accountable to that highest level of management will not be. (c) The test has been described as whether the individual was participating, or had the ability to participate, in decision-making as part of the corporate governing...
To continue reading
Request your trial
-
The Secretary of State for Business, Energy and Industrial Strategy v Shafique Uddin (aka Sofiq Uddin)
... [2006] EWHC 3694 (Ch) and Re X E Solutions Ltd: The Secretary of State for Business, Energy and Industrial Strategy v Selby & Ors [2021] EWHC 3261 (Ch). 43. In Kappler, a central issue on appeal was the scope of the word ‘caused’ in the first allegation of unfitness. At [88]–[90], Judge R......