Supreme Court dismisses appeal from the Court of Appeal in Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others

Supreme Court dismisses appeal from the Court of Appeal in Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others

Frances Coulson, partner at Moon Beever, gives her reaction to the Supreme Court's decision in Jetivia SA and another v Bilta (UK) Ltd (in liquidation) and others [2015] UKSC 23.

Months of waiting are over as today the Supreme Court handed down its decision in the Bilta case. Seven Justices (including Lord Mance a minority Judge in the Stone & Rolls case) considered this vitally important case in the fraud arena, albeit of wider application. The Supreme Court has not however decided to deal fully with the question of illegality, saying that this case was not going to be determinative of the questions and thus those questions would wait for another day.

Per Lord Neuberger:

“In common with all members of the court, I consider that this appeal should be dismissed because the Court of Appeal were right to hold that (i) illegality cannot be raised by Jetivia or Mr Brunschweiler as a defence against Bilta’s claim because the wrongful activity of Bilta’s directors and shareholder cannot be attributed to Bilta in these proceedings, and (ii) section 213 of the Insolvency Act 1986 has extra-territorial effect.”

Lord Neuberger confirmed that “a claim against directors under section 172(3) cannot be defeated by the directors invoking the defence of ex turpi causa.”

The principle of ex turpi causa was originally defined by Lord Mansfield CJ in Holman v Johnson (1775):

“no Court will lend its aid to a man who founds his cause of action upon an immoral or illegal act”.

The Case

Bilta (UK) Limited (“Bilta”) went into liquidation on 29 September 2009 on an HMRC petition. It had only ever had two directors - Messrs. Nazir and Chopra, though Mr Chopra was the sole shareholder. For a period of 3-4 months to July 2009, the company was engaged in a substantial VAT fraud, based on the purchase and resale of European Emissions Trading Scheme Allowances

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.