Expert Witness Journal Issue 63 October 2025 - Flipbook - Page 101
Trading Blows: Supreme
Court draws the line on fraud
and third-party liability
by Natalie Kearney - www.st-philips.com
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The Supreme Court’s judgment in Bilta (UK) Ltd (in
liquidation) v Tradition Financial Services Ltd is important
for insolvency practitioners, lawyers, and those involved in fraud litigation. It clarifies the extent to
which third parties can be held liable for fraudulent
trading under section 213 of the Insolvency Act 1986.
Specifically, it has confirmed that:
Supreme Court Judgment
Section 213
The Court concluded that the language of section 213
was not ambiguous and there was nothing therein to
restrict its scope to directors or others involved in the
management or control of the company. The wording
is broad enough to include third parties if they were
knowingly parties to the fraudulent business being
carried on. It considered that where Parliament intended to limit the scope of provisions of the Insolvency Act 1986 to directors or other officers, it did so
expressly, as is contained in sections 212 (which refers
to a person who “is or has been concerned, or has taken
part, in the promotion, formation or management of the company”) or 214 (which refers to “a person who is or has been
a director of the company”).
l a defendant does not need to have participated
in the management or control of the fraudulently
trading company to attract liability; and
l any knowing involvement of anyone who
dishonestly assists or contributes to the carrying on by
the company of any business intended to defraud
creditors will be sufficient.
Bilta (UK) Ltd (in liquidation) and others v Tradition
Financial Services Ltd [2025] UKSC 18
The fraudulent scheme
Bilta was amongst several companies which were
vehicles in an “MTIC fraud”. The scheme involved
spot trading in carbon credits under the EU Emissions
Trading Scheme. The five companies entered into liquidation owing significant VAT liabilities to HMRC.
The Supreme Court endorsed, at [36], a helpful
example given in the Court of Appeal ([2023] EWCA
Civ 112) by Lewison LJ at paragraph 93:
“Suppose that a manufacturer regularly supplies counterfeit
designer clothes to a retailing company, knowing that the retailer will pass them off as genuine. It is, in my judgment, no
misuse of language to describe the manufacturer as ‘party to
the carrying on’ of a fraudulent business, even though he exercises no managerial or controlling role within the retailing
company; and the manufacturer may have other business activities that are not fraudulent. The manufacturer knows
about the retailer’s fraudulent business and is actively participating in it in the sense of furthering and facilitating it.”
Legal issues
The liquidators of the companies, together with the
companies, brought claims under section 213 against
Tradition Financial Services Ltd [‘Tradition’]. Section
213 imposes liability on “any persons who were knowingly
parties to the carrying on of the business” with intent to defraud creditors of the company or creditors of any
other person, or for any fraudulent purpose. The
claimants also alleged Tradition had dishonestly assisted the directors of the companies in their breaches
of fiduciary duties in relation to acts between May and
July 2009.
Limitation
As to the question of whether the dishonest assistance
claims were statute-barred; the acts complained of
took place between May and July 2009 and the claim
was issued in November 2017. The claimants sought
to rely on section 32 of the Limitation Act 1980, postponing the start of the limitation period until such
time as the claimants had discovered the fraud, or
could with reasonable diligence have discovered it.
A partial settlement was reached, leaving two legal
issues to be determined:
1. whether Tradition was within the scope of section
213; and
The Supreme Court confirmed that the latter is perhaps best framed as the claimant being required to
show it could not with reasonable diligence have discovered the fraud.
2. whether the claims in dishonest assistance were
statute-barred.
In relation to section 213, Tradition submitted that the
phrase “any persons who were knowingly parties to the carrying on of the business” was restricted to persons exercising management or control over the company in
question.
EXPERT WITNESS JOURNAL
As such, the key date was 8 November 2011; however,
the relevant parties (Nathanael Eurl Ltd (in liquidation) and Inline Trading ltd (in liquidation)) did not
exist at that date, as they had been struck off the
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