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A liquidator's
fraudulent trading claim against the defendant directors under s.213
Insolvency Act 1986 failed because the business had not been carried
on with a general intent to defraud.
The company,
TMC Transport (UK) Ltd ran a haulage business and was the tenant of
warehouse and depot premises under four leases.Its business became unprofitable
and the directors identified the principal problem as the onerous rental
obligations under the leases. They took advice as to whether and how
they could free the company from the liabilities under the leases. On
advice they implemented a scheme under which the company ceased trading
at the end of 1992 and the business was thereafter carried on by a new
company from new premises using the initials TMC. the company landlord
then presented a winding-up petition and the company was compulsorily
wound up. The liquidator took proceedings against two of the company
directors under s.213 of the Insolvency Act alleging that they and the
company's solicitors had been knowingly party to the carrying on of
the business of the company with intent to defraud creditors, namely
the landlord.
It was
held that s.213 was engaged where the business of the company had been
carried on with intent to defraud but not in every case was this where
an individual creditor was defrauded.. It was impossible to reach the
conclusion, on the facts found by the judge in the present case, that
the business of the company was carried on with intent to defraud creditors
and in particular the landlord. The business was carried on throughout
1993 with the intent to protect the directors from the penalties to
which they would otherwise be exposed under s.216 of the Act as directors
of the new company for re-using the TMC name. The amount of contribution
ordered under s.213 should reflect the loss that had been caused to
a company's creditors by the carrying on of the business in the manner
that gave rise to the exercise of the power to order the contribution.
There was no power to include a punitive element in the amount of any
contribution ordered.
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