Bilta (UK) Ltd (in liquidation) and others v Tradition Financial Services Ltd

A person may be liable for fraudulent trading under section 213(2) of the Insolvency Act 1986 without managing or controlling the company. An outsider falls within the provision by knowingly and dishonestly participating in, facilitating or assisting transactions through which the company carries on business for a fraudulent purpose. Active participation is required; mere failure to advise is insufficient.

When a dissolved company is restored, section 1032(1) of the Companies Act 2006 deems only its continued existence. It does not deem the presence or absence of officers during dissolution. Whether the company could with reasonable diligence have discovered fraud under section 32(1) of the Limitation Act 1980 is a counterfactual question of fact, determined on evidence and the balance of probabilities. The claimant bears the burden of proving that earlier discovery was not reasonably possible.

Five insolvent companies had been used in missing trader intra-community fraud involving carbon-credit trading and unpaid VAT. They and their liquidators claimed that Tradition Financial Services Ltd had dishonestly assisted breaches of fiduciary duty and had knowingly participated in fraudulent trading under section 213 of the Insolvency Act 1986. A partial settlement left two issues to be decided on assumed facts.

Marcus Smith J rejected Tradition’s contention that section 213 applied only to persons managing or controlling the fraudulent company: [2022] EWHC 723 (Ch). The Court of Appeal upheld that conclusion but dismissed limitation appeals by Nathanael Eurl Ltd and Inline Trading Ltd: [2023] EWCA Civ 112; [2023] Ch 343.

The Supreme Court considered whether section 213 extends to an outsider who knowingly assists the fraudulent business, and whether companies dissolved and later restored had proved that their dishonest-assistance claims benefited from the postponement in section 32(1) of the Limitation Act 1980.

1. All appeals dismissed. Lord Hodge and Lord Briggs gave a joint judgment with which Lord Hamblen, Lord Burrows and Lord Richards agreed.

2. Section 213(2) of the Insolvency Act 1986 is not confined to directors or other persons managing or controlling a company. Its natural language reaches outsiders who knowingly participate in, facilitate or assist fraudulent transactions through which the company carries on business for a fraudulent purpose. The contrasting, narrower descriptions of insiders in nearby provisions supported that construction. The legislative history did not displace the statutory language and indicated an intention to expand the class of potentially liable persons.

3. Liability nevertheless has limits. The defendant must be a party to the carrying on of a fraudulent business, rather than merely to an isolated fraud unless that transaction evidences such a business. The defendant must participate actively; a mere failure to advise is insufficient. The knowledge requirement includes wilful blindness and makes liability dependent upon dishonest participation. The established English authorities formed a strong persuasive line consistent with that construction, although the Court of Appeal decision in Bank of India v Morris was not binding on the point because it proceeded on a concession.

4. The assumed dispute had been conducted as a binary choice between the narrow construction advanced by Tradition and the wider construction. Tradition could not redefine that agreed battleground before the Supreme Court. Its appeal on section 213 was therefore dismissed.

5. Section 1032(1) of the Companies Act 2006 deems a restored company to have continued in existence during its dissolution, but does not deem that it had—or lacked—directors or liquidators. Neither condition inevitably follows from continued existence. Whether officers would have been in place, and whether the company could with reasonable diligence have discovered fraud for section 32(1) of the Limitation Act 1980, are counterfactual factual questions to be determined from evidence on the balance of probabilities.

6. The restored companies bore the burden of showing that they could not with reasonable diligence have discovered the fraud before the relevant date. Treating every restored company as necessarily officerless would give such companies an automatic postponement inconsistent with section 32’s purpose. Nathanael and Inline adduced no sufficient evidence on the counterfactual question and therefore failed to discharge their burden. Their appeals were dismissed.

1. United Kingdom Supreme Court: Tradition’s appeal on section 213 of the Insolvency Act 1986, and Nathanael and Inline’s limitation appeals, were dismissed unanimously: [2025] UKSC 18.

2. Court of Appeal: The court rejected Tradition’s narrow construction of section 213 and dismissed Nathanael and Inline’s limitation appeals: [2023] EWCA Civ 112; [2023] Ch 343.

3. High Court, Chancery Division: Marcus Smith J rejected Tradition’s narrow construction and held the dishonest-assistance claims time-barred: [2022] EWHC 723 (Ch); [2022] BCC 833.