Bilta (UK) Ltd v Nazir (No 2)
A company's directors cannot rely on their own fraud against the company, attributed to the company, to defeat a claim by the company against them.
Facts
Bilta, a company, was used by its directors in a carousel fraud on the VAT system, which caused it to incur a large liability to the tax authorities, and it went into liquidation. The liquidators sued the directors and others who had taken part in the fraud, for breach of fiduciary duty and conspiracy. The defendants argued that the directors' fraud should be attributed to the company, so that its claim was barred by the illegality defence.
Legal principle
The Supreme Court held that the directors' fraud was not to be attributed to the company in a claim by the company against the directors. Lord Neuberger said that, where a company has been the victim of wrongdoing by its directors, the wrongdoing of the directors cannot be attributed to the company as a defence to a claim brought against the directors by the company's liquidator. Whether the act or state of mind of an agent is attributed to the company depends on the context and the purpose for which attribution is relevant. The court also held that the statutory claim for fraudulent trading could be brought against a person outside the jurisdiction.
Related cases on corporate contracts, agency and attribution
- Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
- Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
- Kelner v Baxter (1866) LR 2 CP 174
- Lennard's Carrying Co Ltd v Asiatic Petroleum Co Ltd [1915] AC 705
- Meridian Global Funds Management Asia Ltd v Securities Commission [1995] 2 AC 500
- Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45
- Phonogram Ltd v Lane [1982] QB 938
- Rama Corp Ltd v Proved Tin and General Investments Ltd [1952] 2 QB 147
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This summary is for study and revision and is not legal advice. Although our case summaries are checked for accuracy, we do not guarantee that they are free from errors or omissions. Always read the full judgment for the court's reasoning.
