Bilta (UK) Ltd & Ors v Tradition Financial Services Ltd

Factual and Procedural Background

Five insolvent companies—referred to here as Company A, Company B, Company C, Company D and Company E—were used in 2009 to perpetrate a “missing trader intra-community” (MTIC) fraud involving the trading of EU carbon credits. The fraud generated substantial Value Added Tax liabilities now owed to the United Kingdom revenue authority (“Agency A”). All five companies are in liquidation and their liquidators, acting on their behalf, issued proceedings against a brokerage firm (Company F).

The claim form (filed 8 November 2017) contained two heads of claim: (1) that Company F dishonestly assisted the directors of the claimant companies in breaches of fiduciary duty; and (2) that Company F was liable under section 213 of the Insolvency Act 1986 (IA 1986) for knowingly participating in fraudulent trading. In February 2022 the parties reached a partial settlement, leaving two discrete questions for determination on agreed (and hotly contested) assumed facts. Those questions were tried at first instance, appealed to the Court of Appeal and finally determined by the United Kingdom Supreme Court.

Legal Issues Presented

1. Whether section 213(2) IA 1986 is confined to persons who exercised management or control of the company’s business (“narrow interpretation”) or extends to any outsider who knowingly participates in the carrying-on of the fraudulent business (“wide interpretation”).
2. Whether the dishonest-assistance claims brought by Company C and Company E are time-barred, given that each company was dissolved and later restored to the register; specifically, how section 32(1) of the Limitation Act 1980 operates during the period of dissolution and in light of section 1032 Companies Act 2006.

Arguments of the Parties

Claimant Companies and Liquidators

• Section 213 should be given its ordinary, purposive meaning: any person who knowingly participates in a fraudulent business—whether insider or outsider—may be ordered to contribute to company assets.
• Legislative history, statutory context and prior case law (e.g., In re BCCI) all support a broad reach.
• For limitation, section 1032(1) deems the dissolved companies to have “continued in existence” without officers, so they could not with reasonable diligence have discovered the fraud before restoration; section 32 therefore postpones time.

Company F (Defendant)

• Section 213 liability should be limited to those exercising management or control; extending it to outsiders would unfairly expand civil (and parallel criminal) exposure.
• Any ambiguity must be resolved narrowly because similar wording in section 993 Companies Act 2006 creates a criminal offence.
• The dishonest-assistance claims are statute-barred: the claimant companies bear the burden under section 32, and they adduced no evidence that fraud could not with reasonable diligence have been discovered earlier.

Table of Precedents Cited

Court's Reasoning and Analysis

Issue 1 – Scope of section 213: The Court, applying orthodox purposive interpretation, focused on the statutory language “any persons who were knowingly parties.” It identified three built-in limitations—(i) liability attaches only if the company’s business (not merely a single transaction) was fraudulent; (ii) passive failure to act is insufficient; and (iii) the putative defendant must have actively participated. Nothing in the wording confines liability to directors or managers. Comparison with neighbouring IA 1986 provisions (sections 212, 214, 216) revealed that where Parliament intended to target only insiders it said so expressly; the broader wording of section 213 therefore carries deliberate significance. Legislative history (from the Cohen Report through Companies Acts 1948, 1985 and IA 1986) showed a trajectory of widening, not narrowing, liability. Criminal parallels in section 993 Companies Act 2006 did not justify a narrow civil reading; any penal ambiguity argument failed because the wording is clear and dishonest outsiders are already exposed to aiding-and-abetting liability. Prior authorities, both civil and criminal, were either consistent with the wide view or not determinative. Accordingly, outsiders such as Company F fall within section 213 when they knowingly facilitate the fraudulent business.

Issue 2 – Limitation of dishonest-assistance claims: Section 32 postpones time only if the claimant could not with reasonable diligence have discovered the fraud. Section 1032(1) deems a restored company to have continued in existence, but—applying principles governing statutory fictions—it does not automatically deem the company to have lacked officers during dissolution. Whether competent officers should be assumed is a factual question on which the claimant bears the burden. Companies C and E adduced no evidence to show that, had they existed continuously, they could not with reasonable diligence have uncovered the MTIC fraud (particularly since Agency A was already investigating). They therefore failed to satisfy section 32, and their dishonest-assistance claims remain time-barred.

Holding and Implications

HELD: The appeal of Company F is dismissed; section 213 IA 1986 applies to outsiders who knowingly participate in fraudulent trading. The cross-appeals of Companies C and E on limitation are also dismissed; their dishonest-assistance claims are statute-barred.

Implications: The judgment confirms that civil liability for fraudulent trading extends beyond company insiders to any party—domestic or foreign—who knowingly furthers a fraudulent business. Liquidators may therefore pursue contribution orders against brokers, suppliers and other counterparties involved in fraud. The decision also clarifies the interplay between section 32 Limitation Act 1980 and section 1032 Companies Act 2006: restoration to the register does not, without evidence, suspend limitation by presuming an absence of competent officers during dissolution.