Jetivia SA & Ors v Bilta (UK) Limited (in liquidation) & Ors

31st July 2013


Jetivia SA & Ors v Bilta (UK) Limited (in liquidation) & Ors

Court of Appeal (31/07/2013)

Insolvency - VAT fraud

[2013] EWCA Civ 968


Rebecca Page acts for successful parties in important Court of Appeal decision limiting the scope of the Stone & Rolls ex turpi causa defence and confirming the extra-territorial reach of the fraudulent trading provisions of the Insolvency Act 1986.


Rebecca Page appeared for the claimant insolvent company (Bilta) who brought claims against various defendants for conspiracy to defraud and for dishonestly assisting its directors in breaching their fiduciary duties to the company.  The breaches of fiduciary duty relied on were the incurring of substantial VAT liabilities in the course of Bilta's trading and depriving Bilta of its funds with which to discharge its liabilities.  Bilta's liquidators also brought fraudulent trading claims pursuant to s.213 Insolvency Act 1986 ("IA 1986").


The defendants applied to strike out the claims on the ground that following the House of Lords decision in Stone & Rolls, they had an ex turpi causa defence.  They argued that the fraud was in fact one on HMRC and that the knowledge of Bilta's directors of the fraud was attributable to Bilta such that it was unable to bring a claim against other parties to the fraud.  The Court of Appeal rejected this argument and upheld the decision of the Chancellor (Sir Andrew Morritt) refusing to strike out the claim.  It was held that on the pleadings Bilta was the victim of the fraud and that the knowledge of its directors would not be attributed to Bilta where its directors were perpetrating a fraud against it.  Furthermore Stone & Rolls did not apply to this situation which was between company and director, as Stone & Rolls was a claim against a third party to the fraud who owed no fiduciary duties to the company.


As to the fraudulent trading claim, the defendants (domiciled in Switzerland and France) argued that s.213 IA 1986 was not intended by Parliament to apply extra-territorially.  The Court of Appeal rejected this argument and held that s.213 IA1986 does apply extra-territorially.  The Court followed the decision in Re Paramount Airways concerning s.238 IA 1986 (transactions at an undervalue) and said there were no grounds for distinguishing between s.213 and s.238 in terms of extra-territorial effect.


Rebecca Page was led by Christopher R Parker QC and instructed by Gateley LLP. 

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