Adrian Charles Hyde & Anor v Sukhwinder Todd
[2024] EWHC 1423 (Ch)
Tradition Financial Services Ltd v Bilta (UK) Ltd & Ors
10 February 2023
[2023] EWCA Civ 112
Court of Appeal
A company's liquidators sued another company for helping with a fraud. The court decided that even if you weren't in charge of the company, you can still be sued if you knowingly helped with the fraud. The court also said the judge was right about who should pay the legal fees, even though it might have decided differently itself.
Key Facts
- •Tradition Financial Services Ltd (TFS) was involved in spot trading of carbon credits, brokering deals between companies involved in missing trader intra-community fraud (MTIC Fraud).
- •Five claimant companies became insolvent due to MTIC fraud, with HMRC as the primary creditor.
- •Liquidators brought claims against TFS under section 213 of the Insolvency Act 1986 for fraudulent trading and dishonest assistance.
- •Claims against TFS for dishonest assistance were statute-barred.
- •A partial settlement agreement was reached, leaving two issues: statute-barred claims and the scope of section 213.
- •TFS argued that section 213 liability is restricted to persons with management or control over the company.
- •The judge held that TFS was within the scope of section 213 but that the claims of three claimants were statute-barred.
Legal Principles
Section 213 of the Insolvency Act 1986 allows the court to declare persons knowingly party to a company's fraudulent business liable for contributions to its assets.
Insolvency Act 1986, section 213
A claim under section 213 arises when a winding-up order is made, with a six-year limitation period.
Limitation Act 1980, section 9; Re Overnight Ltd [2009] EWHC 601 (Ch)
Section 1032 of the Companies Act 2006 deems a restored company to have continued in existence, but the extent of this fiction is subject to interpretation.
Companies Act 2006, section 1032; Fowler v HMRC [2020] UKSC 22
The modern approach to statutory construction considers the provision's purpose to best give effect to it.
Barclays Mercantile Business Finance Ltd v Mawson [2004] UKHL 51
Costs follow the event unless there is a justifiable reason to depart from this rule.
Civil Procedure Rules
Outcomes
Appeal regarding the scope of section 213 dismissed.
The court found that section 213 is not limited to those with management or control; those knowingly participating in the fraudulent business can be liable.
Appeal regarding statute-barred claims dismissed.
The court upheld the judge's finding that the claims for dishonest assistance were statute-barred, even considering the deeming provisions of section 1032 of the Companies Act 2006.
Costs appeal dismissed.
The judge's costs order, though not what the appellate court might have made, was within his wide discretion, particularly given the partial success of the claimants in the settlement.
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