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

The court considered a claim under section 6 of the Company Directors Disqualification Act 1986 (CDDA) seeking an order disqualifying Mr Low from acting as a company director. The Secretary of State alleged Mr Low caused or allowed Bartletts Hi‑Fi to participate in transactions connected with missing trader intra‑community (MTIC) VAT fraud and to make wrongful input tax claims totalling £2,646,905 for eight consecutive quarters. The judge applied the statutory test under s.6 CDDA and the Schedule 1 factors and concluded that Mr Low either knew of, or wilfully turned a blind eye to, the features of MTIC fraud in the company’s wholesale trading. The judge found failures of adequate due diligence, participation in contrived back‑to‑back transactions, use of high‑risk goods and alternative banking platforms, and acceptance of high value trades with inadequate contractual protection. On those grounds the court made a disqualification order for 10 years under the CDDA.

This was a first instance hearing of the Secretary of State’s claim for a director disqualification order under section 6 CDDA against Mr James Bernard Low, a director of Bartletts Hi‑Fi. The Secretary of State relied on HMRC and Insolvency Service evidence that the company engaged in wholesale trading in electronic goods that displayed hallmark features of MTIC fraud, and that HMRC had denied the company’s input tax claims for eight quarters amounting to £2,646,905. The claim also relied on HMRC engagement with the company and Mr Low in 2015 warning of MTIC risks and advising checks.

The key issues for the court were:

• whether the company had become insolvent and Mr Low was a director at the relevant times (satisfied);
• whether the company participated in transactions connected with fraudulent evasion of VAT (found to be the case); and
• whether Mr Low’s conduct made him unfit to be concerned in the management of a company, applying s.6 CDDA, Schedule 1 and relevant authorities.

The court reviewed HMRC attendance notes, tracing of supply chains, and the absence of adequate KYC and contractual protections. The judge found that HMRC had repeatedly warned the company and Mr Low about MTIC risk, that the company’s trading exhibited contrived features (same‑day back‑to‑back deals, matched stock, pre‑dated invoices, loss‑making mark‑ups, trading in euros, use of alternative banking platforms), and that HMRC had ultimately denied the company’s input tax claims and issued assessments. Mr Low’s account that he was only a PAYE employee managing an Amazon account was rejected as inconsistent with contemporaneous HMRC meeting notes in which he described running the wholesale business and the limits he would commit to, the KYC he said he carried out and his role in negotiating prices.

The court found that Mr Low either knew or ought to have known that the trades bore the hallmarks of MTIC fraud, that he wilfully closed his eyes to the true nature of the trading and that he failed to take steps to verify trading partners or to ensure adequate due diligence. The judge also accepted, on the balance of probabilities, that Mr Low acted as a 'front' for a third party and deliberately concealed that third party’s role. The court held that these failures amounted to serious misconduct making Mr Low unfit and, applying the guidance in Re Sevenoaks Stationers and Warry about appropriate disqualification ranges in MTIC cases, imposed a 10 year disqualification order (top end of the middle bracket).

The judgment records the statutory requirement to make an order once unfitness under s.6 is established and explains the reasoning for the ten year period (seriousness, wilful blindness, deliberate concealment, and the substantial loss to the public purse).

First instance: The court made a disqualification order against Mr Low for 10 years under section 6 of the Company Directors Disqualification Act 1986. The judge found that Bartletts Hi‑Fi participated in transactions connected with MTIC VAT fraud and that Mr Low caused or allowed the company to take part in those transactions and to make wrongful input tax claims. The disqualification was imposed because he knew or ought to have known about the hallmarks of MTIC fraud, wilfully turned a blind eye to those features and failed to carry out adequate due diligence, such conduct rendering him unfit to be concerned in the management of a company.