The Secretary of State for Business and Trade v James Bernard Low

Under section 6 of the Company Directors Disqualification Act 1986, a director may be disqualified where the company became insolvent and the director’s conduct makes him unfit to participate in company management.

Participation in transactions connected with MTIC fraud, or allowing wrongful VAT claims, may establish unfitness where the director knew, or wilfully ignored, objectively obvious fraud indicators. A director cannot avoid responsibility by limiting his practical role, excluding himself from the company’s finances, or acting as a nominal director. Mere imprudence is insufficient, but serious failures of probity or competence justify disqualification. The appropriate period remains fact-sensitive and falls within the statutory bracket guidance.

The Secretary of State sought a disqualification order against James Bernard Low under section 6 of the Company Directors Disqualification Act 1986. The claim alleged that, while a director of Bartletts Hi-Fi, Mr Low caused or allowed the company to participate in transactions connected with MTIC fraud and permitted wrongful VAT claims totalling £2,646,905.

The company entered creditors’ voluntary liquidation after HMRC assessments remained unpaid. Mr Low denied responsibility, asserting that he was only an employee managing the Amazon account and that Warren Bartlett controlled the wholesale business. The central issues were whether the statutory conditions for disqualification were met, whether Mr Low’s conduct made him unfit, and the appropriate period of disqualification.

1. Statutory conditions. The company had become insolvent, Mr Low had been its director during relevant periods, and his conduct had to be assessed under section 6 of the Company Directors Disqualification Act 1986. The court also had regard to section 12C and Schedule 1.
2. Unfitness. The court applied the principles in Re Bath Glass Ltd, The Official Receiver v Elliott and Sharp (1988) 4 BCC 130 and Re Grayan Building Services Ltd [1995] Ch 241. Mere imprudence was insufficient. The relevant conduct had to amount to serious failure or failures in directors’ duties, assessed cumulatively and against the allegations pleaded by the Secretary of State.
3. MTIC fraud. Following Re Chapter 6 Ltd, Secretary of State for Business, Innovation and Skills v Warry [2014] EWHC 1381 (Ch) and Revenue & Customs Commissioners v Brayfal Limited [2011] UKUT 99 (TCC), the inquiry required consideration of the company’s participation in transactions connected with VAT fraud, the director’s personal knowledge or involvement, and the effect on fitness. Mr Low had received repeated warnings about MTIC fraud and the relevant indicators. The transactions displayed numerous such indicators, including high-risk electronic goods, back-to-back trading, unusual payment arrangements, alternative banking platforms, and inadequate due diligence.
4. Mr Low’s limited formal role and exclusion from financial affairs did not absolve him. By accepting office, he assumed responsibility for the company’s business, finances and statutory obligations. His deliberate concealment of Warren Bartlett’s involvement, together with his failure to investigate obvious warning signs, amounted to knowing or wilful blindness.
5. The court found that Mr Low caused or allowed the fraudulent transactions and allowed wrongful VAT claims. His conduct fell below the standards of probity and competence required of a fit director. A disqualification order was therefore mandatory. Applying Re Sevenoaks Stationers (Retail) Ltd [1991] Ch 164 and the guidance in Warry, the appropriate period was 10 years, at the top of the middle bracket.