Jetivia SA v Bilta (UK) Limited [2015]
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Jetivia SA v Bilta (UK) Limited [2015] UKSC 23 is a significant UK company and insolvency law case heard by the Supreme Court of the United Kingdom. The case addresses two key issues: (i) the attribution of unlawful acts of a director to the company when the company is the victim of the unlawful act, and (ii) the extraterritorial effect of liability for fraudulent trading under section 213 of the Insolvency Act 1986.
The defence of ex turpi causa (illegality defence) could not prevent a claim brought by the liquidators on behalf of a company against its former directors. This was based on the principle that, when the company is essentially the victim of fraud by the directors, the conduct of the directors would not be attributed to the company, treating the company as a party to the illegality. Liability for fraudulent trading under the Insolvency Act 1986 was determined to have extraterritorial effect.
Bilta (UK) Ltd (Bilta), an UK company, sought damages through its liquidators against its former directors and other parties for alleged fraud and breach of fiduciary duty. The directors were accused of conducting carousel fraud, specifically in the trading of European Emissions Trading Scheme Allowances (carbon credits). Bilta claimed damages for conspiracy or equitable compensation for breach of fiduciary duty against its directors. Jetivia, a Swiss company, and Mr Brunschweiler, its sole director residing in France, were also implicated in the claim. The liquidators additionally pursued a claim for fraudulent trading under section 213 of the Insolvency Act 1986.
The Supreme Court unanimously held that the court's power to impose liability for fraudulent trading had extraterritorial effect. On the issue of attribution, all seven judges agreed that the wrongdoing or knowledge of the directors could not be attributed to the company as a defence against a claim brought by the liquidator for losses suffered by the company.
The decision clarified that liability for fraudulent trading under the Insolvency Act 1986 extends beyond the territorial borders of the UK. The case established a principle that when a company is the victim of wrongdoing by its directors, the directors' conduct or knowledge cannot be attributed to the company as a defence against a claim brought by the liquidator. While the case did not directly address the illegality defence, it emphasised that the defence could not operate to prevent a claim brought by the liquidators when the company is the victim of fraudulent conduct. The test laid down in Jetivia has been subsequently applied by the courts in cases related to attribution, providing guidance in resolving similar issues.
The decision was seen as a missed opportunity to issue an authoritative statement on the issue of illegality in English law. However, it represented a departure from the controversial decision in Stone & Rolls Ltd v Moore Stephens [2009], and its principles have been applied in subsequent cases.
The defence of ex turpi causa (illegality defence) could not prevent a claim brought by the liquidators on behalf of a company against its former directors. This was based on the principle that, when the company is essentially the victim of fraud by the directors, the conduct of the directors would not be attributed to the company, treating the company as a party to the illegality. Liability for fraudulent trading under the Insolvency Act 1986 was determined to have extraterritorial effect.
Bilta (UK) Ltd (Bilta), an UK company, sought damages through its liquidators against its former directors and other parties for alleged fraud and breach of fiduciary duty. The directors were accused of conducting carousel fraud, specifically in the trading of European Emissions Trading Scheme Allowances (carbon credits). Bilta claimed damages for conspiracy or equitable compensation for breach of fiduciary duty against its directors. Jetivia, a Swiss company, and Mr Brunschweiler, its sole director residing in France, were also implicated in the claim. The liquidators additionally pursued a claim for fraudulent trading under section 213 of the Insolvency Act 1986.
The Supreme Court unanimously held that the court's power to impose liability for fraudulent trading had extraterritorial effect. On the issue of attribution, all seven judges agreed that the wrongdoing or knowledge of the directors could not be attributed to the company as a defence against a claim brought by the liquidator for losses suffered by the company.
The decision clarified that liability for fraudulent trading under the Insolvency Act 1986 extends beyond the territorial borders of the UK. The case established a principle that when a company is the victim of wrongdoing by its directors, the directors' conduct or knowledge cannot be attributed to the company as a defence against a claim brought by the liquidator. While the case did not directly address the illegality defence, it emphasised that the defence could not operate to prevent a claim brought by the liquidators when the company is the victim of fraudulent conduct. The test laid down in Jetivia has been subsequently applied by the courts in cases related to attribution, providing guidance in resolving similar issues.
The decision was seen as a missed opportunity to issue an authoritative statement on the issue of illegality in English law. However, it represented a departure from the controversial decision in Stone & Rolls Ltd v Moore Stephens [2009], and its principles have been applied in subsequent cases.
