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 for fraudulent trading with intent to defraud the creditors of Mr Goldbart (IA 1986, s 213) and for breach of her duties as a director:

  • to promote the success of the company (section 172 of the Companies Act 2006 (CA 2006)) 
  • to exercise independent judgment (CA 2006, s 173)

  • to exercise reasonable care, skill and diligence (CA 2006, s 174)

What did the court decide? 

Fraudulent trading

The requirement for knowledge under IA 1986, s 213 includes Nelsonian blindness—wilfully shutting one’s eyes to the obvious—and requires an element of dishonesty. The criminal test of dishonesty, as considered by the Supreme Court in Ivey v Genting Casinos (UK) Ltd also applies in this civil context.

Ms Winckler was a knowing party to Mr Goldbart’s attempt to conceal the property from his creditors for the purposes of IA 1986, s 213. There was no other rational explanation for her causing the company to enter into a ruinous loan agreement that it had no real hope of servicing or repaying. The fact that Mr Goldbart and his wife remained in the property was consistent with the purchase simply being a device to enable Mr Goldbart to remain in possession of the property.

Breach of directors’ duties

The interests of creditors intrude for the purposes of the duty to promote the success of the company when the directors know or should know that the company is or is likely to become insolvent.

Ms Winckler acted in breach of this duty by causing the company to enter into a loan agreement for the benefit of Mr Goldbart’s wife, and by transferring the proceeds of sale to certain unsecured creditors leaving the company with insufficient assets to pay its other unsecured creditors.

Ms Winckler was required to exercise her own independent judgment as a director of the company. There was no evidence that she ever declined to follow Mr Goldbart’s advice, nor could she now remember what that advice was. The court found that Ms Winckler simply abrogated her decision-making to Mr Goldbart, thereby failing to exercise independent judgment in breach of her duties as a director.


No limitation period ran against Ms Winckler because a director of a company is regarded for all purposes connected with section 21 of the Limitation Act 1980 (LA 1980) as a ‘trustee’ in respect of any fraud to which she was party.

Alternatively, the entry into the loan for no benefit to the company was a deliberate act that was unlikely to be discovered until someone else took charge of its affairs. Pursuant to LA 1980, s 32, time would not have started to run until the company entered into liquidation in 2015.

CA 2006, s 1157

CA 2006, s 1157 provides the court with the power to relieve a director from liability for breach of duty, provided it appears to the court that the person acted honestly and reasonably. The question of whether a director acted honestly must be answered subjectively and the question of reasonableness must be answered objectively.

The judge considered that, if wrong on the question of whether Ms Winckler acted dishonestly in breaching her duties as a director, she had unreasonably failed to act on advice from the company’s conveyancing solicitors and failed to seek proper advice regarding the propriety of the transfer of proceeds of sale.


The question of the appropriate form of relief is now to be considered by the judge at a further hearing.

Paul Wright is regularly instructed to appear for various stakeholders in personal and corporate insolvency matters in the County Court and High Court. Wright has appeared in directors’ misfeasance applications, applications for injunctions to restrain the presentation of winding-up petitions, and disqualification proceedings. Wright frequently acts for creditors and debtors in both bankruptcy and winding-up petitions. Wright advises on all aspects of company law including directors’ duties, reductions and reorganisations of capital, structuring of corporate transactions and company meetings.

Interviewed by Kate Beaumont.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Relevant Articles
Area of Interest