The Secretary of State for Business, Energy and Industrial Strategy v Christopher Huw Douglas Mallet & Anor [2021] EWHC 3558 (Ch)

[2021] EWHC 3558 (Ch)IN THE HIGH COURT OF JUSTICEBUSINESS AND PROPERTY COURTS OF ENGLAND AND WALESCHANCERY DIVISIONCase No CH-2020-000074Courtroom No. 21Venue 7 Rolls Buildings, Fetter LaneLondonEC4A 1NLDate Thursday, 22 nd July 2021
Before
THE HONOURABLE MRS JUSTICE JOANNA SMITHB E T W E E N:THE SECRETARY OF STATE FOR BUSINESS, ENERGY AND INDUSTRIAL STRATEGYCHRISTOPHER HUW DOUGLAS MALLET (1)MARINA YOLANDA ORR (2)MISS WILSON-BARNES (instructed by HOWES PERCIVAL LLP) appeared on behalf of the ClaimantThe FIRST DEFENDANT appeared In PersonThe SECOND DEFENDANT appeared In PersonJUDGMENT(Approved)This Transcript is Crown Copyright. It may not be reproduced in whole or in part, other than in accordance with relevant licence or with the express consent of the Authority. All rights are reserved.WARNING: reporting restrictions may apply to the contents transcribed in this document, particularly if the case concerned a sexual offence or involved a child. Reporting restrictions prohibit the publication of the applicable information to the public or any section of the public, in writing, in a broadcast or by means of the internet, including social media. Anyone who receives a copy of this transcript is responsible in law for making sure that applicable restrictions are not breached. A person who breaches a reporting restriction is liable to a fine and/or imprisonment. For guidance on whether reporting restrictions apply, and to what information, ask at the court office or take legal advice.
Between
The Secretary of State for Business, Energy and Industrial StrategyClaimantChristopher Huw Douglas Mallet & AnorDefendant
[1]This is the hearing of a substantive appeal brought by Mr Mallet and Miss Orr against the order of ICC Judge Prentiss, (“the Judge”), made on 13 February 2020. In his judgment of that date, the Judge made disqualification orders against each Appellant on the grounds that they each caused Biomimetics Health Industries (UK) Limited (“the Company”) to make under-declarations of VAT chargeable sales income in its VAT returns for the periods ending September 2011, September 2012, and June 2013. The Appellants do not seek to challenge the disqualification orders. Instead, they appeal the periods of disqualification ordered by the judge of 10 years for Mr Mallet and 9 years for Miss Orr. These periods are at the top end of the middle bracket of 6-10 years, identified in the case of In Re Sevenoaks Stationers Retail Limited [1991] Chancery 164 by Dillon LJ.[2]Permission to appeal was granted by Zacaroli J on 19 June 2020.[3]Mr Mallet and Miss Orr are unrepresented and appear before me as litigants in person. They have both made submissions to me during the course of the appeal, to which I have listened carefully. I have also had regard to skeleton arguments in support of the appeal, prepared by counsel, Mr Richard Clegg of Selborne Chambers, together with the authorities referred to in those skeleton arguments.

The Right Approach to this Appeal

[4]In Secretary of State for Business Innovation and Skills v Rahman [2018] BCC 567, Stephen Jourdan QC sitting as a Deputy High Court

Judge said this at paragraph 35:

“Fixing a period of disqualification involves the exercise of discretion. Accordingly, an appeal court may only intervene and interfere with the judge’s exercise of this discretion, in accordance with the usual well-established principles concerning the circumstances in which this Court will intervene in a judge’s exercise of a discretion vested in him. Re Swift 736 Ltd [1993] BCC 312 at 313. Those principles are that an appeal court can only interfere with the exercise of discretion if it can be shown that irrelevant material was taken into account, relevant material was ignored, unless the appellate court was quite satisfied that the error made no difference to the decision, there had been a failure to apply the right principles, or if the decision was one which no reasonable tribunal could have reached, per Lord Neuberger in BPP Holdings Limited and Revenue & Customs Commissioners [2017] UKSC 55 at 21”
. I bear these principles firmly in mind in approaching this appeal.[5]In this case, for reasons to which I shall return, the Appellants say that the Judge wrongly made findings of dishonesty in circumstances where the allegation of unfitness was not an allegation of dishonesty, and the grounds did not identify it as such. They also say that, in any event, his evaluation of the evidence did not support his findings. In other words, they say that the Judge took into account matters which he was not entitled to take into account (i.e. dishonesty on the part of the Appellants) and that this led him into error, in that he ordered excessively long periods of disqualification.[6]During the course of oral submissions before me today, Mr Mallet initially sought to focus on the background to the issue of the invoices, the conduct of directors of the company, and its history, none of which, as I explained to him, is relevant to this appeal. I granted him some leeway in doing so, and I well understand the difficulties that he and Miss Orr face as litigants in person, but as they frankly acknowledge, this appeal does not relate to the Judge’s decision to disqualify them and nor, as I shall come to, am I in a position where I can properly consider afresh any of the facts on which findings have been made by the Judge.[7]As the Judge describes in his judgment, the trial took an unusual course. It was listed for a three-day trial further to an order made on 6 November 2018, which required the Appellants to attend for cross-examination, failing which their evidence should not be read without the permission of the Court.[8]On the first day of the trial, the Appellants applied, unsuccessfully, for an adjournment, and then, having been given time by the Judge to consider their options, they chose to leave the trial. The Judge warned them that the trial would proceed in their absence, but their view appears to have been that they were intending to appeal whatever, and therefore they were going to leave. In the circumstances, the Appellants chose not to give oral evidence at the trial or to be cross-examined on that evidence. They made a deliberate and, I am very sorry to say, extremely ill-advised decision not to go through the court process. This meant that the Judge was left without the benefit of their oral evidence, and without any submissions from them as to the terms of his order, or as to the appropriate period of disqualification.[9]The trial was then restricted to the submissions of Miss Wilson-Barnes, who appears before me today on behalf of the Respondent, together with evidence from Mr Peter Rout, the Deputy Head of Insolvent Investigations North, who had provided two affidavits in support of the application for disqualification. The Judge recorded in his judgment that he had read a statement from Mr Mallet dated 8 January 2019, a statement of the same date from both Mr Mallet and Miss Orr, a joint statement from them both dated 7 February 2020, together with statements from two other witnesses. The Judge expressly recorded that he would bear in mind that he had heard no cross-examination on those statements.[10]Pausing there, I agree with the Respondent to this hearing that, in the circumstances, I am not in a position to assess the weight to be given to the Appellants’ evidence, or to carry out a substitute evaluation of that evidence, as I am invited to do in paragraph 5 of the Appellants’ supplemental skeleton argument. It would not, in my judgment, be appropriate for me to make any findings about the inferences drawn by the Judge, or the extent to which he chose to rely on evidence in the bundle in preference to the Appellants’ witness evidence. As the Respondent rightly says, the Judge was not even bound to give the content of the Appellants’ evidence any weight at all, in light of the order of 6 November 2018, save perhaps where that evidence was wholly supported by contemporaneous documents. I accept the Respondent’s submission that it is not now open to the Appellants to seek to advance arguments that could and should have been made at the trial. That is not the purpose of this appeal. The Appellants had every opportunity to give evidence before the Judge, and they should have done so.[11]Returning to the judgment, it is detailed and comprehensive, setting out the background to the application in paragraphs 6 to 19, and then turning to deal with the grounds of disqualification as set out in Mr Rout’s evidence from paragraph 20 onwards. The Judge made it clear that he accepted that evidence in its totality, which, given the Appellants’ decision not to take part in the trial is, in my judgment, entirely unsurprising.[12]The Judge treated each of the three incidents of causing the Company to make under-declarations of VAT-chargeable sales income in its VAT returns as separate allegations, dealing with them in turn in considerable detail. I shall now summarise the findings that he made.

The First Allegation

[13]The first allegation concerns an invoice, number 62, raised by the Company on 14 July 2011 to Martindale Pharma, the trading name of McCarthy’s Laboratories Limited. Payment was made on 14 June of £600,000. On 2 November 2011, the Company filed its VAT return for the quarter ending September 2011, declaring that the Company owed £2,650-odd in VAT. The return listed invoices, including invoice 62, which was recorded in the net amount of zero, and with a VAT amount of zero. In fact, the VAT should have been £100,000. The Judge recorded that the Appellants had not suggested that the zero figures were inserted awaiting the entry of true figures. The Judge then went on to say this at paragraphs 26 and 27: “26. The only inference to be drawn in my judgment is that this was a dishonestly compiled return, deliberately writing down the invoice 62 to nothing. That dishonesty, as we will see, is both manifested and repeated within the other two grounds”. “27. The dishonesty is also manifested by the use that the company made of this money. I have already described that before the money came in, in June 2011, it had about £2,200-odd in its bank account. From then, apart from small trading credits from Sunlight Service, which looked to be royalty payments based upon turnover, the company traded on this money until 16 April 2012, so for 10 months, on which date the company’s bank accounts having descended to £9,400, a Paul Styles injected £60,000”.[14]The Judge went on to consider, in detail, the explanations provided by the Appellants in their evidence in paragraphs 28 to 31 of his judgment; in summary, that there was uncertainty as to whether the VAT element of this invoice should be dealt with by the Maltese Holding company, that the Appellants’ accountant (David Mansell of Mercer & Hole) gave initial advice to that effect, but said he would double-check the position, and yet never reverted to the Appellants with final advice, leaving them in a position where it was their case that, as the Judge put it, they “never obtained a straight answer to the VAT issue”. However, the Judge then went on to say this at paragraph 32: “This explanation, such as it is, gets the defendants nowhere. The fact is, as we have seen, this money was paid under the company’s invoice into its bank account and gradually dissipated to meet its ongoing liabilities. Nothing was, for example, put aside in case the VAT position should change were there re-invoicing by the Maltese company”.[15]The Judge then looked at some subsequent correspondence involving Mercer & Hole, in particular a letter to HMRC, dated 14 March 2014, in which they informed HMRC that they had brought the failure to include the £100,000 in the September 2011 VAT return to the attention of Miss Orr on 25 June 2012, and further that when they had asked the Company whether or not VAT had been included in a later return, they had received an email from Mr Mallet dated 18 July 2012 saying, “Yes, VAT paid in later quarter”. The Judge considered Mr Mallet’s evidence to the effect that this response had been vague, because he had been away in Italy (a point Mr Mallet also made before me today), but did not accept it.[16]At paragraphs 39 to 40 the Judge said this: “39. Well, that cannot be accepted. Mr Mallet was copied into these accounting communications as CEO of the company. Moreover, his response is anything but vague. It is direct. The VAT has been accounted for. He gives no explanation for that, nor for the use of the monies. What he does say, apparently relating to the same time is this, again in his latest February statement: ‘By this time, money was becoming tight despite the deal being done with Martindale. Cash flow was extremely tight as historical debts had to be settled and the burn rate going forward was higher than anticipated with significant monies going to professional advisors, as well as high ongoing patents and trademark protection costs’. 40. Therefore, one can observe that the company was getting through its cash flow, and that just in order to survive as a trading entity”.[17]The Judge then recorded that a draft set of accounts was sent to Mr Mallet on 1 August 2012, which expressly noted that the £100,000 of output VAT had been included in the accounts, but excluded from the September 2011 VAT return. The Judge commented at paragraph 42 that there was no reason to think that Mr Mallet did not read this document.

The Second Allegation

[18]The Judge went on to consider the second allegation against the background of the correspondence and draft accounts to which he had just referred. This allegation concerns an invoice raised by the Company on 2 July 2012, invoice number MP1000120, again to Martindale Pharma. The invoice was paid on the same day in the total amount of £250,000 plus £50,000 VAT. The VAT return to the quarter ending 30 September 2012 was submitted on 7 November. Again, reference was made to this invoice in the return but it was put in at zero net amount and zero VAT. At paragraphs 45 and 46 the Judge said this:
“45. Nobody could have believed that the net sales were 1% of what they actually were. Nobody can either have thought that the Martindale invoice was indeed for zero and zero. This was another very substantial sum of money coming into this company, which once again, save for occasional sums from Sunlight Services, permitted the company to trade on, this time until January 2013, so a period of about six months. That was until on 25 January, the bank balance reached £8,200-odd and there was then an injection of about £75,000. 46. As to this, the defendants aver that in July 2012, Mercer & Hole advised that the VAT monies were most likely owed by the company; yes, indeed”
.

Third Allegation

[19]The third invoice was raised on 25 June 2013, invoice Number 191 raised to Chicago Bottling Industries Limited in the sum of £250,000 plus VAT of £50,000. The Judge noted that the story for this invoice was the same. It was again identified in the VAT return, but entered as zero. Again, the Company traded off this money thereafter. At paragraphs 49 and 50 of his judgment, the Judge addressed the Appellants’ explanation for this saying: “49. As to this invoice, the defendants say that there was an agreement with Studex, who at the last minute switched to their UK company being Chicago Bottling. The company said that would be fine so long as for its part, the deal was done with the related Maltese company. In the subsequent confusion, that is the phrase used by the defendants, the company remained on the contract and therefore the VAT and this phrase is used as well, became due. That is right”. “50. They go on to say, despite the licenced funds helping cash flow, the company was still trying to play catch up to address it debts and fund its development programme”.[20]I pause there to note that the allegation against Miss Orr concerned only this third invoice as she was not appointed a director of the Company until around February 2013.[21]The Judge then goes on to record that on 29 November 2013, Miss Orr wrote to VAT Central Unit informing them that a voluntary disclosure was due on a future VAT return and that the Company’s accountants had recently changed. The Judge notes that this letter appears to have been recommended by Mercer & Hole in August 2012, the previous year, and is, “far from being the whole truth”.[22]As the Judge explains, disclosure of the three non-declarations took place at a meeting on 3 March 2014.[23]In paragraphs 59 to 63,

the judge went on to say this:

“59. …on 2 September 2014, Mr Mallet and Miss Orr signed materially identical declarations under HMRC’s code of practice 9. These were outline disclosure forms under the contractual disclosure facility. They were signed because on 2 July 2014, HMRC had written to each of them saying this: ‘HMRC suspects that you have committed tax fraud. This means that we think you have acted dishonestly in order to pay less tax. If you accept our offer, the contractual disclosure facility, you must admit that your deliberate conduct brought about a loss of the tax. The term “deliberate” means that you knew that an entry or entries included in a tax return were wrong, but you submitted them anyway, or that you knew you had a liability to tax but chose not to tell HMRC at the right time’. 60. The declaration is signed by each under the terms of the CDF, “I confirm that my deliberate conduct has brought about a loss of tax. This is my outline disclosure made under the terms of the CDF”
. Mr Mallet’s document is dated in parts 1 September and 2 September, Miss Orr’s throughout on 2 September but, as I have said, there is no material difference between them. 61. On 2 July 2014, HMRC also assessed the company for £200,000 in VAT. On 17 July 2014, it notified the interest due and subsequently perhaps as late as May 2015, penalties were raised for £85,000. ‘HMRC suspects that you have committed tax fraud. This means that we think you have acted dishonestly in order to pay less tax. If you accept our offer, the contractual disclosure facility, you must admit that your deliberate conduct brought about a loss of the tax. The term “deliberate” means that you knew that an entry or entries included in a tax return were wrong, but you submitted them anyway, or that you knew you had a liability to tax but chose not to tell HMRC at the right time’. 62. The disclosure forms said this in part four:
‘Your outline disclosure should cover all losses of tax and duty brought about by your deliberate conduct. If you have appointed an advisor to help you with your disclosure, it is important to remember that you are responsible for completing this document and for the details that are entered. Although they will help you with your disclosure, you must sign this form yourself as you are personally responsible for your tax affairs. You should make sure that you give your advisor all the facts. Part 4A, Description of your deliberate conduct. This section must include, but not be limited to, details of what you did, when you did it, how you did it, involvement of other people and entities how you benefited’
. The three non-declarations are identified. “These invoices and the attendant VAT were omitted from the relevant returns within which the tax points fell, the action of omission was deliberate on each occasion, and was purely to address funding issues. The intention was never to permanently deprive the Revenue with subsequent declaration and restitution in mind… initial notification of intended voluntary disclosure action was made in our letter dated 27 November 2013”, to which I have already referred. “The VAT returns were prepared and submitted by M Mallet”, meaning Miss Orr. Part 4F, other information you think is relevant. “The omissions, whilst deliberate in action, were only ever undertaken to resolve cashflow difficulties. We understand that the behaviour and actions in using HMRC as a bank have been wholly inappropriate”. There is then a continuation to part 4F in handwriting: “As regards payment of the VAT under-declared, we are in a position to make an immediate payment of potentially up to £10,000, we are anticipating receiving significant funding in October in the region of £1 million, at which time we will be able to settle in full any outstanding amounts”. 63. The offer of potentially up to £10,000 demonstrates the dire financial position of the company. Otherwise, these declarations and all their formality, in my judgment, speak for themselves”.[24]Pausing there, I note that, during the course of this hearing, Mr Mallet and Miss Orr submitted that they had been “between a rock and a hard place” in completing this form, and that they had been told by their advisors that they had to put their hands up to the deliberate conduct, even if they did not agree with it. They said that this form had been written for them, and that Mr Mallet had felt at the time that completing the form was, in his words, “a travesty”. This was entirely consistent with the evidence that was before the Judge at the trial, to the effect that they had been led like “lambs to the slaughter” in completing this form. The Judge not only addressed this evidence in detail, but he also explained why it did not affect his conclusions. Given that the focus of this appeal is on dishonesty, I should set out the paragraphs in which he addressed this in full. They are paragraphs 67 to 78, where he said this:
“67. It is convenient to consider at this point the scope of the case, because Miss Wilson-Barnes has very fairly pointed out the grounds set out in the affirmations of Mr Rout do not expressly refer to dishonesty. There is, though, in my view, no doubt that that is how the case is to be understood and has been understood by the defendants. If I just read the first lines of the allegation against Mr Mallet. “Mr Mallet caused the company to make under-declarations of VAT”
. The allegation is not that he allowed it, but that he caused it to do so. Without more, that seems to me to indicate a claim which is brought on the basis of positive action and therefore dishonesty, and that particularly so, when one looks at the figures which then ensue. 68. Moreover, when we turn to the details within Mr Rout’s evidence, they not only identify the disclosure statements, 2 September 2014, but they quote from them at length. Miss Wilson-Barnes in her skeleton put the case on the basis of dishonesty, and that is how the defendants have understood it. Thus the first statement from Mr Mallet of 8 January 2019, as early as its fourth paragraph, says “A full disclosure was made to HMRC as advised by the VAT specialist, Princecroft Willis”. 69. The joint statement of the two of them of the same date, 8 January 2019, shows their understanding of the claim in dishonesty. So, for example, paragraph four, “There was no wilful/intentional non-disclosure as witnessed by the fact that the board submitted an initial notification by way of the letter to HMRC dated 29 November 2013”. 70. “Professional advice”, paragraph five says, “was sought from Princecroft Willis. On reviewing the matter Princecroft Willis advised the situation of the company happened frequently and was part of daily commercial life for a lot of businesses”. They then proceeded to supply the exact wording. 71. The latest statement as well says “The outstanding VAT monies were never hidden as they appeared on the company’s balance sheet and in July 2012, Mercer & Hole reported that VAT monies were most likely owed by UK Limited”. Then a long section which I shall read: “Mr Simon Anslow of Princecroft Willis liaised with Silbury Accountants and emphasised that the matter was serious, and that it was important that Miss Orr and myself wrote to HMRC and explained the VAT error. The wording for the disclosure was provided by Mr Simon Anslow by our accountants, Silbury, as we had, at that point, not engaged them professionally. On 2 June 2014, we engaged with Princecroft Willis. Neither Miss Orr, nor myself are accountants or even vaguely conversant with the workings of HMRC, let alone VAT discrepancies that were overdue. The advice of Princecroft Willis was collectively to admit everything and fall on our swords as otherwise HMRC would move to a criminal investigation. We were led like lambs to the slaughter for the mistakes of our original financial advisors, namely Mercer & Hole, followed swiftly by Princecroft Willis. As stated, Mr Anslow had already provided the wording the directors were strongly advised to adopt for the declaration to HMRC. The opinion of the directors having sought further professional advice, the advice by Mr Anslow was flawed from the outset. A COP9 investigation is a serious matter but the directors should never have agreed to contractual disclosure despite the draconian alternatives suggested by HMRC guidelines, and Mr Anslow’s firm”. 72. I read that at length because, when one looks at the defendants’ evidence, nowhere do they say that those disclosures are wrong. They indeed constitute their only evidence as to how these non-disclosures came to be made.[25]Paragraphs 73 and onwards then go on to deal with evidence that Miss Orr had given to the Judge about duress during the course of the first day of the trial. Having considered this by reference to some further documents, the Judge then says this at paragraph 77: “There is no indication from her that she was under some duress when she made that statement. Moreover, she goes on to adopt and set out what she said on 2 September 2014, including that it was she who had prepared and submitted the VAT returns”.[26]At 78, the Judge concludes that, “I will therefore treat this as a case of dishonesty”.[27]Importantly, in those paragraphs that I have read out in full, as Miss Wilson-Barnes pointed out to me today, the Judge remarked that nowhere in their evidence did the Appellants say that the disclosures in the Code of Practice form 9 were wrong.

Dishonesty

[28]As I have already said, at the heart of this appeal is the extent to which the Judge was entitled to take into account the dishonesty of the Appellants. The Appellants say in their original and supplemental skeletons and in oral submissions: 1) that there is no allegation of dishonesty in the first affidavit of Mr Peter Rout in support of the application for disqualification orders, and that no allegation of dishonesty has ever been made against them. 2) That counsel for the Respondent acknowledged this fact during the hearing before the Judge, as is recorded in the judgment. 3) That there was only one charge against each Appellant of under-declaration of VAT chargeable sales income tax in the Company’s VAT returns. In the case of Mr Mallet, the charge concerns three invoices, a total VAT of £200,000, and in the case of Miss Orr, the charge concerns one invoice, with a total VAT of £50,000. 4) There was no allegation of dishonest motive or deliberate conduct against either Appellant. 5) Their case was that they intended to discharge all that was due to HMRC, as expressly noted in the Code of Practice 9 form (a point they have repeated before me today, saying that HMRC will get its money back if they see that as a sensible course of action) and their case is that, consistent with that intention, the Company accounts were prepared for 2011 to reflect the 2011 invoice. They also say that a voluntary indication of an intended VAT correction was ultimately made to HMRC by Mr Mallet and Miss Orr, both of whom were directors without incident since, respectively, 1979 and 1996. 6) They say the periods arrived at for the disqualification overestimated the seriousness of the charge, even assuming that it was right to take account of dishonesty. They were not periods that could have been arrived at by a reasonable tribunal applying a reasonable approach. The Appellants rely on various comparators identified in the case of Secretary of State v Rahman to make this submission good, and Mr Mallet referred to other comparators in court before me today. 7) Finally, the Appellants say that the appeal court is in as good a position to reach a conclusion as to the seriousness of the relevant conduct as the first instance Judge.[29]Having given careful consideration to the Appellants’ arguments, both written and oral, and having had regard also to the submissions made by Miss Wilson-Barnes, I do not consider that I should overturn the decision of the Judge.[30]My reasons are as follows.[31]I accept that the summary allegation of unfitness in paragraphs 9 and 10 of the first affidavit of Mr Rout does not expressly allege dishonesty but I reject the suggestion that, simply because the wording of the allegation does not assert dishonesty, the trial Judge cannot assess the credibility of the defence, or is unable to make a finding of dishonesty.[32]Rule 3.3 of the Disqualification Rules requires the affidavit served in support of the application to contain, “A statement of the matters by reference to which the defendant is alleged to be unfit to be concerned in the management of the company”. I accept the Respondent’s submissions that the matters are not to be picked apart so that paragraphs 9 and 10 are viewed in isolation and the rest ignored, and in that regard, I note in particular Secretary of State v Goldberg No. 2 [2003] EWHC 2848, at paragraphs 51 to 54, which make it clear that it is the whole affidavit and not the headline charge which is the key matter.[33]The affidavit must set out the substance of the case that the defendant is required to meet and the paramount requirement is that the director facing disqualification must know the charges he has to meet. I note in particular, Official Receiver v Atkinson [2020] EWHC 2839 (Ch), per Falk J at paragraphs 4-5 and 7. Paragraph 7 provides that having proper notice of the case to be met includes, in particular, an opportunity to produce evidence in the light of that knowledge.[34]It is clear from the authorities that if dishonesty is to be alleged against a director, the allegation must be fairly and squarely made in the affidavit and must be fairly and squarely put in cross-examination; see paragraph 53 of Secretary of State and Goldberg No. 2 citing Paragon Finance PLC v BB Thakerar [1999] 1 All ER 400. Therefore, the question for me is whether the allegation of dishonest conduct was squarely made against the Appellants, and understood by them, and whether they had an opportunity to respond to it in their evidence.[35]Paragraphs 9 and 10 of Mr Rout’s first affidavit read as follows: “9. Mr…Mallet caused [the Company] to make under-declarations of VAT chargeable sales income in its VAT returns for the periods ending 9September 2011, September 2012, and June 2013.9.1 An invoice dated 14/7/11 for £500,000 plus VAT of £100,000 was not disclosed in the corresponding VAT return for the period to September 2011, which was submitted to HMRC on 2 November 2011.9.2 An invoice dated 2/7/12 for £250,000 plus VAT of £50,000 was not disclosed in the corresponding VAT return for the period to September 2012 which was submitted to HMRC on 7 November 2012.9.3 An invoice dated 25/6/13 for £250,000 plus VAT of £50,000 was not disclosed in the corresponding VAT return for the period to June 2013, which was submitted to HMRC on 7 August 2013.9.4 The VAT under-declarations resulted in HMRC raising VAT assessments for the periods ending 9/11, 9/12 and 6/13 of £200,000, with additional penalties of £85,000 and interest of £8,745.51. At the date of administration, [the Company] had a liability to HMRC in regards to outstanding VAT of £211,765.46.9.5 Since the first under-declaration of VAT which took place on 2/11/11 when the VAT return for the period ending 9/11 was submitted to HMRC, [the Company] has paid Mr Mallet £287,615, and other directors have been paid £234,167.28, whilst HMRC has only received £174,561.18. 10. Ms…Orr…caused [the Company] to make under-declarations of VAT chargeable sales income in its VAT return for the period ending 6/13”. 36. Paragraph10.1 refers to under-declarations in relation to the invoice of 25 June 2013 and then at10.2 and 10.3: “10.2 The VAT under-declaration on 7 August 2013 resulted in HMRC raising the VAT assessment for the period ending June 2013 of £50,000 and additional penalties of £17,500. HMRC also charged interest totalling £8,745.51 due to VAT under-declarations (including periods prior to Miss Orr’s formal appointment as a director of [the Company]). At the date of administration [the Company] had a liability to HMRC in regards to outstanding VAT of £211,765.10.3 Since the under-declaration of VAT on 7 August 2013 when the VAT return for the period ending June 2013 was submitted to HMRC, [the Company] has paid Miss Orr £45,576.74, and other directors have been paid £175,234.13, whilst HMRC has only received £103,278.61”.[37]Paragraph 26 of Mr Rout’s first affidavit stated this: “On 1 September 2014, Mr Mallet signed a declaration with HM Revenue & Customs in which he admitted to deliberately under-declaring the sales invoices in [the Company’s] VAT returns for the periods ending September 2011, September 2012, and June 2013 (which is the basis of the allegation in this report, and is covered in detail between paragraph 68 and 113)”.38. I agree with the Respondent that the assertion and reliance on deliberate conduct (i.e. dishonest under-declaration) in that paragraph could not be clearer. That paragraph is broadly repeated in paragraph 31 of Mr Rout’s affidavit in respect of Miss Orr.39. Paragraphs 68 to 113 of Mr Rout’s affidavit then went on to set out in detail the matters relied upon, including a number of matters to which my attention has been drawn specifically by the Respondent in paragraph 10(3) of the skeleton argument for this hearing. Those are as follows: 1) An email sent on 18 July 2012, the subject of the Judge’s analysis and evaluation in the judgment at paragraphs 34 to 38. 2) The HMRC suspicion of tax fraud and the sending of the form which enabled the person accused to accept that the under-declaration had been either deliberate or non-deliberate. 3) The letter dated 2 July 2014, which included a factsheet about publishing details of deliberate defaulters. 3) The admissions of deliberate omission made in writing and signed by each of the Appellants on the forms that I have already referred to, specifically used for a taxpayer to declare non-payment, and those forms, the Respondent says, left no doubt as to what “deliberate” meant, and I have already referred to the section of the judgment where the Judge read out the relevant part of the form. 4) That the Appellants had each completed those forms with similar wording, including saying that the action of omission was “deliberate” on each occasion.40. The Respondent also points out that the headline allegation itself expressly refers to, and relies on, the penalties for the under-declarations. Those penalties followed completion by each of the Appellants of HMRC’s Code of Practice 9 disclosure facility for deliberate under-declaration.41. I agree with the Respondent that reliance on elements of deliberate and dishonest conduct is the only way in which the Respondent’s case before the Judge could have been understood by the Appellants. There is, in my judgment, no possible interpretation of Mr Rout’s affidavit (which is based and focused on deliberate under-declaration of VAT) other than that it is making an allegation of dishonesty.[42]Mr Mallet contended before me today that he did not understand the allegation as advanced against him to be one of dishonesty, but, as I have said, I consider that that is the only way in which the average reader of the material (see Finelist Limited [2004] BCC 877 per Laddie J), would have read and understood Mr Rout’s affidavit.[43]Further, and in any event, despite what Mr Mallet and Miss Orr have said before me today, I consider that they appreciated very well that the case was being advanced against them on the basis of deliberate and dishonest conduct. They had, after all, signed declarations which expressly accepted their deliberate conduct in making the under-declarations, and I note all of the points that the Judge made in relation to the contents of those forms.[44]During the course of this hearing, Miss Wilson-Barnes pointed out, as she had before the Judge, that there was evidence before him that both Appellants had actively considered the wording in the COP 9 form, and had consciously altered words drafted for them by their advisor in part 4A of that form. There was also evidence that sometime later, in email correspondence in July 2017, Miss Orr had responded to a query from HMRC about the under-declaration of VAT by simply referring to her declaration. She had made no suggestion that the declaration and COP 9 form were inaccurate or had been made under duress.[45]I note also that the Appellants’ witness statements prepared and provided to the court for the purposes of the trial expressly sought to address the issue of deliberate conduct when they denied that there have been any “wilful/intentional non-disclosure”, denied that the outstanding VAT monies had ever been “hidden” and noted the seriousness of a COP9 investigation.[46]As I have said, on the evidence before the Judge, the Appellants never sought to deny that the under-declarations had been made, or that they resulted in substantial penalties being issued by HMRC to the Company, which it was unable to pay, and which led to the Company going into administration.[47]In all the circumstances, I do not consider that the absence of the word “dishonesty” affected the way in which the allegations were understood, and there is no substance in the omission of the word itself. I accept the Respondent’s submission that the fact that the word “dishonest” is not used, does not necessarily mean that an allegation does not rely on dishonesty. I also accept the Respondent’s submission that there is, in reality, no distinction to be made between the words “deliberate” and “dishonest” on the facts of this particular case.[48]Miss Wilson-Barnes drew my attention to an extract from Mithani on Director’s Disqualification at paragraphs [32]-[40] which reads as follows: “In Secretary of State for Transport, Trade and Industry v Goldberg, Lewison J stated that if dishonesty was to be alleged against a director, the allegation had to be fairly and squarely made in the evidence in support of the application, and had to be fairly and squarely put in cross-examination. However, in the earlier case of Re Dayglen Limited, Secretary of State for Trade and Industry v Cachra, in addressing a submission that it was essential if a case of dishonesty was to be made, that it should be distinctly and clearly pleaded, Ferris J observed, “It has to be borne in mind, however, that what the Court is concerned with is not dishonesty as such, but whether a person is or is not unfit to be concerned in the management of a company. In other words, what the court has to look at is the question of unfitness which may or may not involve dishonesty. It seems to me that it is not essential for formal allegations of dishonesty to be made in the affidavits in every case, where unfitness is demonstrated by conduct which involves dishonesty. Whether it is necessary or not, to my mind, must depend upon the nature and context in which the allegation is made, and whether it would be procedurally unfair to the respondent for suggestions of dishonesty to be made in cross-examination, when the formal documents have not used expressions indicative unequivocally of dishonesty”. “It has to be borne in mind, however, that what the Court is concerned with is not dishonesty as such, but whether a person is or is not unfit to be concerned in the management of a company. In other words, what the court has to look at is the question of unfitness which may or may not involve dishonesty. It seems to me that it is not essential for formal allegations of dishonesty to be made in the affidavits in every case, where unfitness is demonstrated by conduct which involves dishonesty. Whether it is necessary or not, to my mind, must depend upon the nature and context in which the allegation is made, and whether it would be procedurally unfair to the respondent for suggestions of dishonesty to be made in cross-examination, when the formal documents have not used expressions indicative unequivocally of dishonesty”.[49]The footnote in Mithani as to this decision says this: “…On the facts of that particular case, Ferris J did not think that there was any procedural unfairness to the defendant in the fact that the word dishonesty was not used in the evidence in support of the application. It was inevitable that her motives would be explored at the hearing, as they were, and if as a result of that exploration, it appeared that there was an element of dishonesty in the relevant transaction, which the defendant herself was constrained to admit, that would be something which would be relied upon in the process of deciding whether the conduct complained of was such as to indicate unfitness, see transcript at p 12” .[50]In a similar vein, I cannot see that there was any procedural unfairness to the Appellants in the fact that the word “dishonesty” itself was not used in the evidence in support of the application. It was obvious in this case that their motives in making the under-declaration would be explored at the hearing, albeit that they chose not to take part, and there would have been nothing unfair in cross-examination on that topic. Indeed, it was plain that given the first affidavit of Mr Rout, and the assertions made by the Appellants in response to it, cross-examination on the issue of dishonesty would have been expected and indeed, necessary. In the absence of the Appellants, I cannot see that the Judge can be criticised for having drawn inferences on the basis of the evidence he had before him, in particular, the COP9 declarations.[51]Against that background, I must consider whether the periods of disqualification ordered by the Judge were nevertheless excessive given the facts as found. As I have said, the Appellants invite me to consider and compare the periods of disqualification ordered in other cases. However, I accept the Respondent’s submission that this is not the correct approach.[52]I note in particular, Secretary of State v Rahman, to which I have already referred, at paragraph 36, restating the approach set out in Re Westmid Packing Limited [1998] 2 All ER 124, to the effect that citing other cases in order to assist a trial judge on the appropriate period of disqualification is of little use and the wrong approach: “36. …the extent to which I should have regard to decisions other than Sevenoaks and Westmid in determining these grounds of appeal. This arises because of what Lord Woolf said in Westmid, delivering the unanimous decision of the Court of Appeal at 838. The appropriate period of disqualification is something which, like the passing of sentence in a criminal case, ought to be dealt with comparatively briefly and without elaborate reasoning. It is obviously undesirable for the judge to be taken through the facts of previous cases in order to guide him as to the course he should take in a particular case before him. The principles applicable to the Court’s jurisdiction under the Act are now reasonably clear. The application of those principles to the facts of the particular case is a matter for the trial judge. The citation of cases as to the period of disqualification will, in the great majority of cases, be unnecessary and inappropriate.37. Miss Doran correctly points out that Lord Woolf did not impose a blanket ban on citation of previous authority, he said that citation of cases as to period would “in the great majority of cases” be unnecessary, not in all cases.38. In my view, a first instance decision of a particular judge in a particular case on the appropriate period of disqualification in that case, representing no more than that judge’s reaction to the facts, is very unlikely to be of any assistance in most cases, unless it contains a decision on some point of principle. However, an appeal decision, which gives guidance on which bracket is appropriate is of a different character, especially if the appeal court overrules the first instance judgment as having been wrong in principle. Such guidance as an appeal decision of that kind gives ought to be followed by an inferior court”.[53]I accept that I can gain little or no assistance from the digest of cases in Rahman in circumstances where the point raised in that case on appeal was to show that the conduct alleged could not fall within the lowest Re Sevenoaks category. In this case, however, the Appellants argue that it was not open to the Judge to find that the conduct fell within the middle bracket, with or without findings of dishonesty.[54]Equally, I am not assisted by the various examples that Mr Mallet read out to me during his submissions. I was not taken to the authorities themselves, and I do not know the detail of the facts involved or the extent of any mitigating factors.[55]In circumstances where I have found that the Judge was right to base his findings on sanction on a finding of dishonesty, I do not consider that he was wrong to decide that the correct bracket was the middle bracket identified in Re Sevenoaks. This was not a case of inadvertent failure to pay. It was a case of deliberate under-declaration of VAT in a large sum of £200,000, which was not subsequently paid, and was only declared following an allegation of tax fraud by HMRC.

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[56]Accordingly, I also do not consider that the Judge was wrong to disqualify for 9 and 10 years respectively. Whilst another Judge may have made a different determination, and whilst I accept that the section 16 letters sought lower periods of 7 and 8 years respectively, I do not consider that I can, or should interfere with the exercise of the Judge’s discretion. He did not take account of irrelevant material, he was not wrong in treating the case as a case of dishonesty, and he did not arrive at a decision that no reasonable tribunal could have reached.[57]The Appellants have not identified before me any factors which they say the Judge failed to take into account, or put too much weight on in arriving at his decision. In particular, there appear to be no mitigating factors. Although Mr Mallet and Miss Orr asserted that they had entered into an agreement with HMRC for time to pay, Miss Wilson-Barnes referred me to paragraph 14 of her trial skeleton, which stated this:
“Following the assessment in 2014, for the under-declared VAT by early 2015, the Company made time to pay proposals with HMRC. Later in 2015, HMRC were pursuing proposals to pay and on 9 February 2016, wrote referring to the debt of £209,525 and warning of winding up proceedings on the basis that: “The Company has a history of making proposals for payment, which have not been honoured”
. Further, the money received by the Company in the form of VAT was used by the Company to keep it afloat, and both Mr Mallet and Miss Orr received payments from the Company during the relevant period, thereby benefiting from the under-declaration of the VAT, a point made by Mr Rout in paragraph 9 and 10 of his first affidavit”.[58]I entirely understand the Appellants’ focus on the fact that the Judge opted for longer periods of disqualification than had been identified in the section 16 letters, but the Judge was not bound by the recommendations made in those letters, and nor was he bound by any suggestions made to him by counsel. He was entitled to exercise his discretion on the basis of the evidence he had before him, the seriousness of the conduct and the lack of any mitigation. That is what he did, and in my judgment, there is no basis on which I can overturn his decision.[59]The Appellants have also sought to appeal on the question of costs, but dealing with that very shortly, I can see no basis on which to overturn the Judge’s decision on costs. He made a summary assessment which appears to me to have been both just and proportionate in all the circumstances. The making of a summary assessment was within the exercise of his discretion, and appears to have been done, in part, to save the costs of a detailed assessment, which costs would in any event have fallen on the Appellants.[60]In all of those circumstances and for the reasons I have given, I dismiss the Appellants’ appeal. End of Judgment Transcript from a recording by Ubiqus 291-299 Borough High Street, London SE1 1JG Tel: 020 7269 0370 legal@ubiqus.com 56. Ubiqus hereby certify that the above is an accurate and complete record of the proceedings or part thereof This transcript has been approved by the judge.