Bilta v Tradition Financial Services [2025] UKSC 18 concerned tax liabilities arising from a form of VAT fraud involving EU carbon credit trading known as ‘missing trader intra-community fraud’.
Insolvent companies brought proceedings against Tradition, arguing it had knowingly participated in the scheme, and was liable for having dishonestly assisted the directors of the fraudulent companies in breaching their duties as directors.
The dispute centred on whether Tradition fell within the scope of s 213, Insolvency Act 1986, and whether the dishonest assistance claim was time-barred. The High Court and Court of Appeal held Tradition was within scope and was also time-barred.
Both sides appealed. Handing down judgment this week, the Supreme Court unanimously dismissed both appeals and upheld the decision of the Court of Appeal.
Section 213 gives the court powers to make parties contribute to the assets of an insolvent company if, in the course of the winding up of the company, it emerges they were ‘knowingly’ parties to business carried out with a fraudulent purpose.
Sophia Purkis, partner, Fladgate, said: ‘The Supreme Court has upheld the landmark decision in Bilta which shall help liquidators and the victims of fraud to recover losses using s 213 Insolvency Act 1986.
‘The provision was held to extend beyond a strict reading of “any persons who were knowingly parties to the carrying on of the business” as referring solely to the company’s management and control by holding that “it could very well apply to someone routinely transacting with the company in the knowledge that the company was carrying on a fraudulent business”. Again, the court has demonstrated that it shall interpret legislation using strict principles which may assist victims to find recourse.’
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