Umbrella Care Ltd ((in Liquidation)) v (1) Khair Un Nisa
| Jurisdiction | England & Wales |
| Judge | Mr Justice Edwin Johnson |
| Judgment Date | 08 December 2022 |
| Neutral Citation | [2022] EWHC 3139 (Ch) |
| Court | Chancery Division |
| Docket Number | Claim Number: BL-2020-001098 |
[2022] EWHC 3139 (Ch)
Mr Justice Edwin Johnson
Claim Number: BL-2020-001098
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES COURT
IN THE MATTER OF UMBRELLA CARE LIMITED (IN LIQUIDATION)
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Rolls Building
7 Rolls Buildings
Fetter Lane
London, EC4A 1NL
Christopher Brockman and Anna Lintner (instructed by Wedlake Bell LLP) for the Claimant
Usman Khalid Raja (Second Defendant) in person
Hearing dates: 2 nd and 3 rd November 2022
Remote hand-down: This judgment was handed down remotely at 10.30am on Thursday 8 th December 2022 by circulation to the parties and their representatives by email and release to The National Archives.
Introduction
This is my judgment on the issues, principally relating to quantum, which remain outstanding in this action. In terms of liability, the bulk of the issues in the action have been dealt with in a judgment which I delivered on an application for summary judgment made by the Claimant.
I will refer to this earlier judgment, which was handed down on 21 st January 2022, as “the First Judgment”. I will refer to specific paragraphs in the First Judgment as [J1], for paragraph 1, and so on. I will refer to the order which I made, consequential upon the First Judgment, as “the First Order”. I will refer to the application for summary judgment, which was heard on 24 th and 25 th November 2021 and on which the First Judgment was handed down, as “the Application”.
At this hearing Christopher Brockman and Anna Lintner appeared for the Claimant. Of the eight remaining Defendants in this action, only the Second Defendant, Mr Raja, appeared at this hearing. Mr Raja appeared in person. I permitted Mr Raja to address me on behalf of all the remaining Defendants, so far as he had authority to do so, with the exception (as I understood the position) of the Third and Eighth Defendants, whom Mr Raja did not seek to represent. I also had the benefit of written skeleton arguments from the Claimant's counsel, and from Mr Raja. Mr Raja's skeleton argument was expressed to be submitted on behalf of himself and the First, Second, Fourth, Fifth, Sixth and Seventh Defendants.
The Claimant is a company in liquidation. As in the First Judgment, it is convenient to refer to the Claimant as “the Company”. The joint liquidators of the Company are Louise Brittain and Stephen Grant.
Relevant background
The background to this action is set out in detail in the First Judgment. The following summary of the background is sufficient to set the scene for what I have to decide 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 was sought, acted dishonestly and in concert to defraud HMRC ( “the Revenue”) of PAYE tax ( “PAYE”) and national insurance contributions ( “NIC”), and VAT. The Company's case is that the PAYE and NIC 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, which had been filed by the time of the hearing of the Application ( “the First Hearing”), the Revenue claimed 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 claimed by way of unpaid VAT (including surcharges and interest) had increased to £14,492,661.85.
The Revenue has now filed an updated proof of debt in the liquidation. The sum now claimed is £35,170,471.98, comprising what is said to be a PAYE debt of £21,812,923.35 and a VAT debt of £13,357,548.63.
According to evidence from the Revenue, as at 15th 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 27th 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.
The Company's case was that the missing funds had been wrongfully and dishonestly abstracted from the Company by its directors, and that at least some of those funds could be traced into the hands of the Defendants to the action, who were liable to account for the same.
There were originally fifteen Defendants to the action, but the claims against the Ninth to Fifteenth Defendants were settled by way of consent orders, prior to the First Hearing.
The parties
The Company was incorporated on 9th March 2017. The director of the Company, from the date of its incorporation until 10th September 2019 was the First Defendant, Mrs Khair Un Nisa ( “Mrs Nisa”). Mrs Nisa and Mr. Raja are wife and husband. Mrs Nisa was replaced as sole director of the Company on 10th September 2019 by the Third Defendant, Emil Cervenak (“Mr. Cervenak”). Mr. Cervenak resigned as a director on 15th February 2020. On 15th February 2020 Mrs Nisa was re-appointed as director and, on 24th February 2020 Mr. Raja was appointed as a director. Mr. Raja subsequently filed a notice of termination on 27th January 2021, which stated that his directorship had terminated on the same day as his appointment; that is to say 24th 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 27th 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 15th 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 29th July 2020, on the application of the Revenue. The Company went into liquidation on 4 th November 2020. The Company's sole shareholder, from incorporation until 10th September 2019, was Mrs Nisa. Her shareholding in the Company was transferred to Mr. Cervenak on 10th September 2019. The Company's case was 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 only pursued its case that Mr. Raja was a de facto director of the Company.
In the First Judgment I decided that Mr Raja was a de facto director of the Company for the entirety of the Relevant Period. The Relevant Period was defined in the First Judgment to mean the period running from February 2017 to the provisional liquidation of the Company in July 2020. I will use the same expression, to mean the same period, in this judgment. The effect of my decision is that Mr Raja was a director of the Company, either on a de jure or a de facto basis, from the date of its incorporation to the date of its provisional liquidation.
The Fourth Defendant, Dynamic Int Limited ( “Dynamic”), was incorporated on 12th September 2016. Mrs Nisa was a director of Dynamic from 12th September 2016 to 10th September 2019, and was then re-appointed as a director from 15th February 2020. On 25th February 2021 a notice was filed at Companies House stating that her appointment as director had terminated on 1st April 2017. Mr. Cervenak was a director of Dynamic from 10th September 2019 to 15th February 2020.
As matters stood, at the hearing of the Application, Dynamic had no de jure directors. The Company's case was that Mr. Raja was the de facto director of Dynamic at all times from its incorporation, and remained the de facto director of Dynamic. In the First Judgment I decided that Mr Raja was the de facto director of Dynamic for the entirety of the Relevant Period.
The Fifth Defendant, Universal Real Estate (PVT) Limited ( “Universal Real”) was incorporated on 9th July 2018. Mrs Nisa was appointed as a director of Universal Real from 9th July 2018, but resigned the same day. Mrs Nisa was re-appointed as a director on 15th February 2020. Mr. Raja was appointed as a director on 9th July 2018 and resigned on 15th February 2020. The Company's case was that Mr. Raja was a de facto director of Universal Real at those times when he was not a de jure director. In the First Judgment I decided that Mr Raja was the de facto director of Universal Real at those times when he was not a de jure director.
The Sixth Defendant, Universal Total Care Limited ( “Universal Total”), was incorporated on 14th December 2018. Mrs Nisa was appointed a director of Universal Total from 14th December 2018, and has remained a director since then. Mr. Raja was a director of...
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