Turning a blind-eye fails to protect director from fraudulent trading claim (Re Pantiles Investments Ltd (in liquidation))

Turning a blind-eye fails to protect director from fraudulent trading claim (Re Pantiles Investments Ltd (in liquidation))

Paul Wright, barrister at 9 Stone Buildings, says Re Pantiles Investments Ltd serves as a useful reminder of the potential dangers facing persons acting as a director of a company established to shield assets from a third party’s creditors.

Re Pantiles Investments Ltd (in liquidation) Pantiles Investments Ltd (in liquidation) and another v Winckler [2019] EWHC 1298 (Ch)  

What are the practical implications of this case?

Re Pantiles Investments Ltd (in liquidation) Pantiles Investments Ltd (in liquidation) and another v Winckler serves as a useful reminder, if one were needed, of the potential dangers facing persons acting as a director of a company established to shield assets from a third party’s creditors. Such a director will be unable to evade a claim for fraudulent trading by simply turning a blind-eye to the third party’s conduct. The criminal test of dishonesty set out by the Supreme Court in Ivey v Genting Casinos (UK) Ltd [2017] UKSC 67 applies to applications brought under section 213 of the Insolvency Act 1986 (IA 1986).

What was the background? 

In 2009, Sabine Winckler incorporated Pantiles Investments Limited (the company). The company was inactive until, in February 2011, it purchased a residential property for £550,000 from her long-time friend and sometimes employer, Peter Goldbart. The purchase was funded by a combination of loans—both secured and unsecured—including an apparent loan from a company connected with Mr Goldbart’s wife and son.

In October 2011, Mr Goldbart was made bankrupt. He and his wife remained in the property both after the sale and during his bankruptcy until, in June 2012, the company sold the property to a third party for £899,000. The proceeds of sale were transferred to: 

  • the company’s sale agents 
  • its secured lenders 
  • its unsecured lenders, and 
  • Mr Goldbart’s trustee in bankruptcy who claimed the original sale in 2011 was at an undervalue

These transfers rendered the company insolvent with insufficient funds to pay the tax liability which arose on the sale of the property. The company was wound up on HMRC’s petition in 2015.

The company’s liquidator brought a claim against Mrs Winckler

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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.