Carman v The Cronos Group SA & Ors

On restoration of a dissolved company to the register, it is treated as having continued in existence as if it had not been struck off. Dealings during the dissolution may therefore form part of fraudulent trading under section 213 of the Insolvency Act 1986. However, payments made from an assisting company’s own bank account do not constitute fraudulent trading by the insolvent company merely because they are recorded as reducing a debt owed to it. The transaction must be assessed when made, and the fraud must involve the insolvent company’s assets or business. A payer who knowingly makes a payment which will immediately be stolen by the recipient’s officer may remain liable for the full contractual amount. A new fraudulent-trading claim may be added under CPR 17.4(2) where it arises from substantially the same facts as an existing claim.

The Liquidator of two companies sought declarations and compensation under section 213 of the Insolvency Act 1986 against companies in the Cronos group. The claims concerned alleged transfers of shares and containers, payments to third parties, withdrawals from the companies’ accounts, and an alleged scheme to conceal the removal of assets.

The Respondents applied to set aside permission for service abroad, strike out the claims, or obtain summary judgment. The court had previously struck out an allegation that the business had been diverted from the English company to the Isle of Man company. The issues included the effect of restoration after dissolution, whether particular payments constituted assistance in fraudulent trading, and whether a further pleaded claim could be added under CPR 17.4(2).

1. Restoration and fraudulent trading. The Liquidator had a good arguable case that the English company’s business was carried on with intent to defraud its creditors. Applying Tymans v Craven [1952] 2QB 100, restoration under section 653(2) of the Companies Act 1985 deemed the company to have continued in existence as if its name had not been struck off. Dealings during the dissolution could therefore continue to constitute fraudulent trading under section 213 of the Insolvency Act 1986.
2. Share and container transactions. The pleaded case that the consideration for the TOL share purchase and Reefer Container transactions was never intended to be fully provided was sufficient to resist strike-out and summary judgment. The contracts were arguably unenforceable for fraud or shams. Permission to amend would also be available under CPR 17.4(2) if necessary.
3. Third-party payments. Claims concerning payments made from Cronos NV’s bank accounts were bound to fail as claims for assistance in T1’s fraudulent trading. The payments were made from Cronos NV’s assets and constituted, on the assumed facts, a fraud on Cronos NV rather than on T1. The accounting entries could not discharge Cronos NV’s debt to T1. Limitation did not alter that conclusion, and section 32 of the Limitation Act 1980 might in any event answer a limitation defence.
4. Withdrawals. Cronos NV’s contractual accounting to T1 did not, without more, constitute assistance in fraudulent trading. If a company pays money in ostensible discharge of a contractual obligation while knowing that it will immediately be stolen by the payee’s officer, the payment does not discharge the obligation pro tanto. The payer remains liable for the full contractual amount. The section 213 claims for the third-party payments and withdrawals were dismissed.
5. Winding-up period. After presentation of the winding-up petition, T1 could not be treated as carrying on business where transactions involving its property were void under section 127 of the Insolvency Act 1986. A withdrawal after the winding-up order, and three withdrawals after presentation of the petition, could not constitute assistance in fraudulent trading.
6. Further concealment claim. The pleaded allegation that the Respondents assisted in concealing the removal of T1’s assets raised a good arguable case. It arose from substantially the same facts as the existing claims, so permission was granted under CPR 17.4(2) to amend the claim to include it.

The judgment concerns an interlocutory application in the High Court. The judgment does not state an appellate history.