Umbrella Care Ltd ((in Liquidation)) v Khair Un Nisa
| Jurisdiction | England & Wales |
| Judge | Mr Justice Edwin Johnson |
| Judgment Date | 21 January 2022 |
| Neutral Citation | [2022] EWHC 86 (Ch) |
| Docket Number | Case No: BL-2020-001098 |
| Court | Chancery Division |
[2022] EWHC 86 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Mr Justice Edwin Johnson
Case No: BL-2020-001098
Christopher Brockman and Anna Lintner (instructed by Wedlake Bell LLP) for the Claimant
Timothy Becker (acting on a direct access basis) for the First, Second, and Fourth to Seventh Defendants
Hearing dates: 24 th and 25 th November 2021
Approved Judgment
I direct that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic
THE HONOURABLE Mr Justice Edwin Johnson
Introduction
This is the hearing of an application (“the Application”) for summary judgment and interim payments made by the Claimant in this action, Umbrella Care Limited, a company in liquidation. I will refer to the Claimant as “the Company”. The joint liquidators of the Company are Louise Brittain and Stephen Grant.
The Company, as its name suggests, operated as an umbrella company, principally or exclusively in the healthcare field. It employed or retained workers and supplied those workers to recruitment agencies providing medical staff. Essentially therefore, the Company acted as employer or retainer of the relevant staff, and was responsible for the payroll functions for those staff, including the payment of their wages, and the accounting to HMRC (“the Revenue”) for the PAYE tax and National Insurance contributions which fell to be deducted from these wages. The Company also charged VAT to its customers, and was thus liable to account for VAT on payments received from its customers. The evidence is that the Company operated on a substantial scale, with a large number of clients and a substantial turnover.
My reference to employment or retainment takes account of the fact that one matter which is said to be in dispute in this case is the status of some of the medical staff provided by the Company. It has been suggested that some of the staff were in fact self-employed, as opposed to being employed by the Company. I will return to this particular point later in this judgment.
The Company's case is that it has been involved in what it refers to as a large scale labour supply fraud. It is alleged that the Defendants, against whom summary judgment is sought, acted dishonestly and in concert to defraud the Revenue of tax (“PAYE”) and national insurance (“NIC”) contributions, and VAT. The Company's case is that the PAYE and NIC contributions were deducted from employees' wages, and that payments of VAT were received from customers, but that no, or only minimal accounting was then made to the Revenue for any of these funds. Instead, so it is alleged, the relevant funds were removed from the Company and then either ended up in the hands of other parties or were used to buy properties in the names of certain of the Defendants.
The figures involved are substantial. In its final proof of debt in the liquidation, the Revenue claims to be owed £36,418,026.45 in unpaid PAYE, NIC, and VAT. The previous figure assessed by the Revenue for unpaid PAYE, NIC, and VAT, was £26,797,492.74. The debt on which the petition for the provisional liquidation of the Company was based was the figure then claimed by the Revenue as unpaid VAT, together with interest thereon and a small amount of PAYE which had been declared but not paid by the Company, in the total sum of £5,200,810. In the final proof of debt the sum now claimed by way of unpaid VAT (including surcharges and interest) has increased to £14,492,661.85.
According to evidence from the Revenue, as at 15 th July 2020 the Revenue had received, in the period since May 2017, PAYE returns from the Company totalling £344,182.86 and payments in this respect of £165,648.33. In terms of VAT, and according to the same evidence, the Company was registered for VAT on 27 th March 2017. In the period from April 2017 to April 2020, according to the Company's evidence, the VAT returns submitted by the Company showed sales of £186,136 and VAT payable of £24,691.
To state the obvious, the discrepancies between what is said to be due to the Revenue, and what is said to have been paid to the Revenue are very substantial. The Company's case is that the missing funds have been wrongfully and, the Company also alleges, dishonestly abstracted from the Company.
There were fifteen Defendants to the action, but the claims against the Ninth to Fifteenth Defendants have been settled by way of consent orders. Of the remaining eight Defendants, summary judgment is now sought against the First and Second Defendants, who are wife and husband, and the Fourth to Sixth Defendants.
The case against those of the remaining Defendants against whom summary judgment is sought (“the Application Defendants”) is that they are each liable to the Company in respect of the funds removed from the Company or some of them, on the basis of various legal duties and obligations said to have been owed and to be owed to the Company. It is also said that various of the Application Defendants hold either part of those funds or properties purchased with those funds on trust for the Company.
At the hearing of the Application the Company was represented by Mr. Christopher Brockman and Ms. Anna Lintner, both counsel. The Application Defendants were represented, on a direct access basis, by Mr. Timothy Becker, also counsel.
At the outset of the hearing a question was raised by Mr. Brockman as to the ability of Mr. Becker to act on behalf of the Fourth Defendant, Dynamic Int Limited (“Dynamic”), which has no directors. Mr. Becker confirmed that his instructions to act on behalf of Dynamic came from the Second Defendant (Mr. Usman Khalid Raja), as was the case with his representation of the Fifth and Sixth Defendants; namely Universal Real Estate (PVT) Limited (“Universal Real”) and Universal Total Care Limited (“Universal Total”). On the same basis Mr. Becker also stated that he represented the Seventh Defendant, First International Holdings Limited, although this latter company is not a respondent to the Application.
I am most grateful to all counsel for their assistance on the hearing of the Application. I should however pay a particular tribute to Mr. Becker who, as I understand the situation, had only been instructed for the hearing at a relatively late stage, and was therefore required to master the documents in the Application, which are extensive, in a short space of time, and to present what was, in certain respects, a difficult case on behalf of the Application Defendants. Notwithstanding these circumstances Mr. Becker made an effective presentation of his clients' case.
The Company
The Company was incorporated on 9 th March 2017. The director of the Company, from the date of its incorporation until 10 th September 2019 was the First Defendant, Mrs Khair Un Nisa (“Mrs Nisa”). As I have said, Mrs Nisa and Mr. Raja are wife and husband. Mrs Nisa was replaced as sole director of the Company on 10 th September 2019 by the Third Defendant, Emil Cervenak (“Mr. Cervenak”). Mr. Cervenak resigned as a director on 15 th February 2020. On 15 th February 2020 Mrs Nisa was re-appointed as director and, on 24 th February 2020 Mr. Raja was appointed as a director. Mr. Raja subsequently filed a notice of termination on 27 th January 2021, which stated that his directorship had terminated on the same day as his appointment; that is to say 24 th February 2020. On the basis of this notice of termination therefore, Mr. Raja was a director of the Company only for a single day. Also on 27 th January 2021 a notice of termination was filed which stated that Mrs Nisa's directorship had terminated on the same day as her re-appointment; namely 15 th February 2020. On the basis of this notice of termination therefore, Mrs Nisa's second period as a director of the Company lasted only a single day.
The Company went into provisional liquidation on 29 th July 2020, on the application of the Revenue. The Company went into liquidation on 4 thNovember 2020. The Company's sole shareholder, from incorporation until 10 th September 2019, was Mrs Nisa. Her shareholding in the Company was transferred to Mr. Cervenak on 10 th September 2019. The Company's case is that Mr. Raja and Mrs Nisa were de facto directors of the Company, even at those times when they were not de jure directors of the Company. For the purposes of the Application however, the Company has only pursued its case that Mr. Raja was a de facto director of the Company.
Dynamic (Dynamic Int Limited)
Dynamic was incorporated on 12 th September 2016. Mrs Nisa was a director of Dynamic from 12 th September 2016 to 10 th September 2019, and was then re-appointed as a director from 15 th February 2020. On 25 th February 2021 a notice was filed at Companies House stating that her appointment as director had terminated on 1 st April 2017. Mr. Cervenak was a director of Dynamic from 10 th September 2019 to 15 th February 2020.
As matters stand Dynamic has no de jure directors. The Company's case is that Mr. Raja was the de facto director of...
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