The UK Supreme Court has found that outsiders who participate in, facilitate or assist fraudulent transactions by a company, when they know that the company's business is being carried on for any fraudulent purpose, are liable to make contributions under s.213 of the Insolvency Act 1986.
In Tradition Financial Services Ltd v Bilta (UK) Ltd (in liquidation) and others [2025] UKSC 18, Enyo Law represented the Respondent Companies before the UK Supreme Court. They successfully resisted an appeal which would have narrowed the scope of persons who would be liable to make contributions to a company's assets in winding up, where the persons were a knowingly party to a company's fraudulent trading.
This decision follows the Court of Appeal's judgment on the same issue, which was discussed in our previous article. Traditional Financial Services ("TFS") subsequently sought and obtained permission to appeal to the UK Supreme Court.
TFS's essential argument has been that the scope of "any persons who were knowingly parties to the carrying on of the business" (per s.213(2) of the Insolvency Act 1986) is restricted to persons exercising management or control over the company in question. In contrast, the Respondent Companies have argued that the provision extends wider and captures those who assisted or contributed to breaches of duty by the company and those controlling the company.
In dismissing TFS's appeal, the Court considered the language and context of s.213, the purpose of the statutory provision as a whole, and conducted a careful review of the legislative history of s.213, as well as relevant civil and criminal precedent.
Lord Hodge and Lord Briggs, who gave the joint unanimous judgment, noted that "there is nothing in the language of section 213(2) which restricts the scope of the provision to directors and other "insiders" who were directing or managing the business of the company", going on to explain that that the natural meaning of the statute was wide enough to cover persons dealing with the company if they were knowingly parties to the fraudulent business of the company.
They explained that whilst discouraging fraud is not a reason to adopt a 'maximalist interpretation' of the relevant words of the statute, it did not prevent the statute from being interpreted to include a counterparty to a fraudulent transaction "where the counterparty has the requisite knowledge of, including wilful blindness to, the fraudulent activity in the conduct of the company's business".
The Court also took the opportunity to reaffirm Templeman J's maxim from Gerald Cooper Chemicals, that "a man who warms himself with the fire of fraud cannot complain if he is singed." There have been no previous cases determining the scope of s.213, and so Tradition Financial Services becomes the leading authority, providing welcome confirmation that an outside party who is knowingly involved in the fraudulent trading of a company (or wilfully blind to it), can be liable to contribute to the assets of the company in winding up.
The Enyo team for the appeal comprised: Louise Bell, Jamie Leader, Bruno Bainsfair, Olivia Gare, Alex Jenkins and Jack Barnes.