Bilta (UK) Limited (in liquidation) & Ors v SVS Securities plc

Section 32 of the Limitation Act 1980 postpones limitation in fraud cases until actual discovery or until the fraud could have been discovered with reasonable diligence. The test is objective but informed by the position of the actual claimant. In fraud cases, discovery occurs when the claimant can plead a viable cause of action with the necessary facts and particularity. Full evidence, or confidence that the claim will succeed, is unnecessary. A liquidator may need to use statutory information-gathering powers when investigating. Restoration under section 1032 of the Companies Act 2006 deems a company to have continued in existence, so limitation is not suspended during dissolution. Section 213 of the Insolvency Act 1986 may extend to outsiders who knowingly participate in fraudulent company business, not only those who manage or control it.

The liquidators of five companies brought claims concerning missing trader intra-community fraud involving spot trading in European Union Allowances. The claims against Tradition Financial Services Limited alleged dishonest assistance in breaches of fiduciary duty and liability under section 213 of the Insolvency Act 1986.

Following settlement, the remaining issues were whether the claims were time-barred under section 32 of the Limitation Act 1980 and whether section 213 was legally confined to persons managing or controlling the companies’ businesses. Costs were also reserved.

The court determined the two remaining legal issues as follows.

1. Limitation. The dishonest assistance claims accrued when the alleged wrongdoing occurred and were outside the ordinary six-year period. Section 32 of the Limitation Act 1980 was therefore the only possible saving provision. The claimant bore the burden of proving that the fraud was not discovered, and could not with reasonable diligence have been discovered, earlier.
2. The statutory question was single, although it was analytically helpful to ask first whether there was a trigger requiring investigation and then what a reasonably diligent investigation would have revealed. The standard was objective but informed by the actual claimant’s position: FII Group Test Claimants v HMRC, [2020] UKSC 47; OT Computers v Infineon Technologies AG, [2021] EWCA Civ 501.
3. In fraud cases, the relevant point of discovery was when the claimant could plead a viable statement of case, not when it possessed every item of evidence or had assessed the likely prospects of success. The liquidators had knowledge by 29 September 2009 of the relevant MTIC fraud, the EUA market and broker involvement. That knowledge triggered the need to investigate. With reasonable diligence, they could have pleaded a dishonest assistance claim against TFS in 2009 or 2010. The Karra/Bullen transcript was not necessary to make the claim viable.
4. The same conclusion applied to Nathanael and Inline. Under section 1032 of the Companies Act 2006, restoration deemed each company to have continued in existence as if it had not been dissolved. For limitation purposes, the court had to deem ordinarily competent directors to have been in place during the period of non-existence. No case was pleaded that such a director could not have discovered the alleged fraud before 8 November 2011.
5. Section 213. The court followed the wide construction reflected in Banque Arabe Internationale d’Investissement v Morris, [2002] BCC 407, Bank of India v Morris, [2005] EWCA Civ 693, and Bilta UK Ltd v NatWest Markets plc, [2020] EWHC 546 (Ch). Liability under section 213 was not confined to persons exercising management or control. It could potentially extend to outsiders who knowingly participated in the fraudulent carrying-on of the company’s business, subject to the need not to stultify normal commercial transactions.
6. The Limitation Defence succeeded. The section 213 claims did not fail as a matter of law. Consequential matters, including costs and any permission to appeal, were left for a further hearing.

This was a first-instance determination. The original proceedings were issued in 2015. The separate claim against TFS was issued on 8 November 2017 and later consolidated with the original proceedings. Claims against other defendants were stayed, dismissed or compromised before this judgment. Following settlement, this judgment determined the limitation defence and the legal scope of section 213.