Disgraced insolvency practitioner found guilty again

The High Court has ruled that disgraced Leicester-based insolvency practitioner Kiran Mistry was found to have been acting as a de facto director of Lime & Black BPS while disqualified.

The case was brought by the joint liquidators of the company Steve Illes and Mick Sanders of MHA.

Mistry is a former insolvency practitioner who had previously been sentenced to a three year and six months prison term in 2016 for conspiracy to defraud.

Lime & Black was incorporated on 24 March 2020 and provided services to third parties related to payment processing, payroll and labour supply. 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 was later concluded that the company was used to perpetrate a fraud on HMRC for sums in excess of £3m.

The company subsequently entered Creditors’ Voluntary Liquidation on 18 March 2022 with HMRC appointing liquidators Steve Illes and Mick Sanders of MHA. Proceedings were issued by the company in liquidation against Dharminder Singh Gill, Kiran Kumar Mistry and Kiran Mistry t/a Fairplay Accounting and Tax, Oberon 11 Limited, Lime & Black Corp Limited and Squared Circle Limited and freezing orders were made against them. The amount frozen was £4,291,134.02 of which £822,928.01 was frozen on a proprietary basis. On 27 January 2023 judgment in default was entered against the First, Third, Fourth and Fifth Defendants and the claim continued solely against Mistry.

David Mohyuddin KC sitting as a Deputy Judge of the Chancery Division held that Mistry was a de facto director on the basis that he carried out acts which were directorial in nature. He was involved in the conception of the company, administered the company’s workplace pension scheme, set up an IFX payments account for the company, and processed and authorised payments from the company’s IFX and Payfect accounts.

The Judge also considered that the payments to Mistry and other recipients were made in breach of the his 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 paid to him and paid to the other defendants from bank accounts where Mistry had authorised the payments.

Mistry was ordered to pay 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.

Steve Illes, restructuring & recovery partner at MHA said: “I am delighted with this result following a thorough investigation and protracted litigation against Mr Mistry, as it will allow for the repayment of some of the losses suffered by HMRC.”

Wedlake Bell partner James Latham and legal director Christopher Burt (represented by Christopher Brockman of Enterprise Chambers), acted on behalf of Lime and Black BPS by its joint liquidators Steve Illes and Mick Sanders of MHA.