Payless Cash & Carry Ltd v Patel & Ors [2011] EWHC 2112 (Ch) (29 July 2011)

Payless Cash & Carry Ltd v Patel & Ors [2011] EWHC 2112 (Ch) (29 July 2011)

The court found that the trades with the 'missing traders' were not genuine, the documentation and accounting records were unreliable and inconsistent, and Mr Patel was not a credible witness. The liquidator established, to the requisite standard, that Mr Patel fraudulently caused Payless to claim input VAT to which it was not entitled, resulting in liability to HMRC. Mr Patel is liable to the company for the assessed VAT liability as misfeasance.

Citation
[2011] EWHC 2112 (Ch)
Parties
Claimant: Payless Cash & Carry Limited (In Liquidation); First Defendant: Madhusudan Maganbhai Patel; Second Defendant: Gardford Limited; Third Defendant: Multirush Limited; Fourth Defendant: MBT Cash & Carry Limited; Fifth Defendant: MDD Trading Limited
Jurisdiction
England and Wales
Judgment Date
29 July 2011
Procedural Posture
Chancery Division Civil Claim / Post Trial Judgment
Outcome
Claim allowed against Mr Patel; liability established for the VAT assessment amount.
Legal Topics
Director's Misfeasance, Fraudulent Trading, VAT Fraud, Liquidation Liability, Input Tax Claims
Insolvency Company Law Tax Law Fraud Director's Misfeasance Fraudulent Trading VAT Fraud Liquidation Liability +1 more

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Parties

Payless Cash & Carry Limited (In Liquidation)

Claimant

Madhusudan Maganbhai Patel

First Defendant

Gardford Limited

Second Defendant

Multirush Limited

Third Defendant

MBT Cash & Carry Limited

Fourth Defendant

MDD Trading Limited

Fifth Defendant

Procedural Posture

Chancery Division Civil Claim / Post Trial Judgment

Legal Issues

  1. 1 Whether Mr Patel, as director, wrongfully and fraudulently caused Payless to incur a liability to HMRC for wrongfully claimed input tax on liquor purchases
  2. 2 Whether the trades with the so-called 'missing traders' were genuine
  3. 3 Whether the accounting records and documentation supported the claimed input tax deductions

Ratio Decidendi

The court found that the trades with the 'missing traders' were not genuine, the documentation and accounting records were unreliable and inconsistent, and Mr Patel was not a credible witness. The liquidator established, to the requisite standard, that Mr Patel fraudulently caused Payless to claim input VAT to which it was not entitled, resulting in liability to HMRC. Mr Patel is liable to the company for the assessed VAT liability as misfeasance.

Court Disposition

Claim allowed against Mr Patel; liability established for the VAT assessment amount.

Orders

  • Mr Patel is liable to Payless Cash & Carry Limited (In Liquidation) for the sum assessed by HMRC as wrongfully claimed input VAT.
  • Other defendants remain subject to freezing orders; no substantive relief determined against them at this stage.