Bilta v Tradition: Third parties now within reach of section 213 of the Insolvency Act

The Supreme Court’s decision In Bilta (UK) Ltd v Tradition Financial Services Ltd [2025] UKSC 18 marks a significant development in insolvency law, confirming that Section 213 of the Insolvency Act 1986 provides liquidators with the right to seek contributions to a company’s assets from those found to have knowingly been a party to carrying on business with intent to defraud creditors.

In Bilta (UK) Ltd v Tradition Financial Services Ltd [2025] UKSC 18, the Supreme Court has clarified the breadth of this provision, confirming that liability is not confined to directors or shadow directors but can extend to third parties who transact with a company knowing it is operating fraudulently.

Litigation and insolvency lawyer, Helen Rainford explores this case further…

What is section 213 of the Insolvency Act?

In the course of winding up or administration of a company, if it appears that business has been carried on with the intent to defraud creditors, or for any other fraudulent purpose, the court, on application by the Liquidator/Administrator may declare that any persons knowingly a party to the fraudulent trading are liable to make contributions to the company’s assets. Until now, it was unclear how far this liability extended.

Background to the case – Bilta v Tradition

The claim arose in the context of a complex VAT fraud (specifically, missing trader intra-community fraud) involving five companies: Bilta (UK) Ltd, Weston Trading UK Ltd, Nathanael Eurl Ltd, Vehement Solutions Ltd, and Inline Trading Ltd (together, the “Companies”). Each entered liquidation with substantial unpaid VAT liabilities following the operation of a fraudulent trading scheme.

Tradition Financial Services Ltd, (“Tradition”) brokered trades which had constituted the fraud while knowing and/or suspecting the trades were fraudulent.

The Liquidators of the respective Companies initiated proceedings against Tradition alleging:

1. That Tradition had knowingly participated in the fraudulent trading, and should therefore be required to contribute to the liquidation under s213 and
2. That Tradition haddishonestly assisted the directors in breaching their respective fiduciary duties by engaging in this fraud.

While both the High Court and Court of Appeal accepted that Tradition could fall within the scope of s213, they concluded that the dishonest assistance claim was statute-barred. The case proceeded to the Supreme Court to consider both issues.

Supreme Court’s decision on scope of s213 Insolvency Act 1986

The Supreme Court affirmed the decisions of the lower courts.

It adopted a purposive approach to statutory interpretation, holding that the language of s213 – specifically “any persons who were knowingly parties to the carrying on of the business” – was sufficiently broad to include third parties who, while not directing the company’s affairs, knowingly facilitated its fraudulent business operations through ongoing commercial dealings. The Supreme Court highlighted that there was nothing specifically contained within the wording of s213 which sought to restrict it to directors or managers of a company.

In their judgment, the Supreme Court endorsed the comments of Templeman J that “a man who warms himself with the fire of fraud cannot complain if he is singed.”

This ruling expands the pool of possible defendants and potentially gives Liquidators a stronger hand in pursuing recoveries.

Decision of the Supreme Court; was the dishonest assistance claim time barred?

The second issue was whether the dishonest assistance claim had been brought within the relevant limitation period.

The claims against Tradition were issued in 2017, however the claims became statute barred in 2015. The Companies sought to argue that the claims did not fall foul of any limitation by virtue of section32 of the Limitation Act. Two of the relevant companies had been dissolved and subsequently restored; Nathanael in 2012 (struck off in 2011), and Inline in 2015 (struck off in 2011) and as such, sought to rely on section 32 of the Limitation Act, which postpones the commencement of the limitation period where fraud has been concealed and was not, or could not reasonably have been, discovered earlier.

The Supreme Court held that a company restored to the register is treated as having continued in existence during its period of dissolution. While the Companies were deemed to have continued to have existed, this does not mean that they did so without any directors or liquidators during the period in which they Companies were respectively struck off.

Whether it should be assumed to have had competent directors or Liquidators during that time, and what could reasonably have been discovered, is a question of fact to be determined on the balance of probabilities, based on the evidence presented and the appropriate burdens of proof. In this matter, the Companies failed to adduce any evidence which proved that with reasonable diligence, the fraud could not have been discovered.

The Supreme Court, in reaching their conclusion, observed that if all restored companies bringing fraud claims were automatically treated as having lacked competent officers during their period of dissolution, and therefore presumed incapable of discovering the fraud, they would effectively be granting carte blanche for companies to circumvent the statutory limitation period and would undermine the purpose of section 32.

Conclusion

The Supreme Court’s decision in Bilta (UK) Ltd v Tradition Financial Services Ltd provides important clarification on the scope of section 213 of the Insolvency Act 1986. By confirming that liability under this provision extends beyond those who manage or control a company to include third parties who knowingly participate in fraudulent trading, the judgment significantly broadens the reach of fraudulent trading claims. The judgment therefore extends the potential pool of defendants in such claims and provides liquidators with a broader basis for recovery.

The Court’s treatment of limitation issues in the context of restored companies also provides welcome clarification on the operation of s32 Limitation Act in fraud claims.