£2 MILLION JUDGMENT AGAINST DISGRACED INSOLVENCY PRACTIONER
Christopher Brockman instructed by James Latham and Christopher Burt of City firm Wedlake Bell acting on behalf of Steve Illes and Mick Sanders of MHA, the joint liquidators of Lime and Black BPS Ltd, successfully obtained £2 million judgment against Kiran Mistry.
Kiran Mistry is a former Insolvency Practitioner who in 2012 was disqualified from acting as a company director for 12 years. In 2015 he was sentenced to a three year and six months prison term in 2016 for conspiracy to defraud. In 2015 Mr Mistry was sentenced to 3 ½ years in prison for conspiracy to defraud.
Lime & Black was incorporated in 2020 and provided third party payment processing and payroll services for its clients. In July 2021, HMRC obtained a freezing order against the Company on the basis that it believed that the Company had not declared the correct amount of VAT, meaning it received output VAT from its customers but was failing to account for it net of inputs to HMRC. It later concluded that the Company was used to defraud HMRC of sums in excess of £3m.
The Company subsequently entered Creditors’ Voluntary Liquidation on 18 March 2022. Proceedings were issued by the Liquidators against various parties including Mr Mistry. The claim was settled against all the Defendants except Mr Mistry. The trial took place in February 2024.
A central allegation was that Mr Mistry had acted as a de facto director of the Company. For example, he was involved in the conception of the Company, administered the Company’s workplace pension scheme, set up some bank accounts for the Company, and processed and authorised payments from two of the Company’s accounts. David Mohyuddin KC (sitting as a Judge of the Chancery Division) found that Mr Mistry had acted as a de facto director as he carried out functions which were directorial in nature, looking at the role played by Mr Mistry in the round and in the context of a company with informal corporate governance, the court held that Mr Mistry acted as director and owed duties to the company.
The Judge also considered that the payments to Mr Mistry and other recipients were made in breach of the Mr Mistry’s fiduciary duties he owed to the Company as de facto director.
As such, judgment was given in favour of the Company and the Judge held that the total loss suffered by the Company was the monies which were (i) paid to him and (ii) paid to the other defendants from certain bank accounts where Mr Mistry had authorised the payments.
Mr Mistry was ordered to pay over £1.7 million plus compound interest at 4% and ordered to pay costs with an interim payment of £540,000. His application for permission to appeal was refused by the trial judge.
A copy of the judgment is available here.
