Jetivia S.A. and Another (Appellants/6th and 7th Defendants) v Bilta (UK) Ltd ((in Liquidation)) and Others (Respondents/Claimants)
| Jurisdiction | England & Wales |
| Judge | Lord Justice Patten,Lord Justice Rimer,The Master of the Rolls |
| Judgment Date | 31 July 2013 |
| Neutral Citation | [2013] EWCA Civ 968 |
| Docket Number | Case No: A3/2012/2318 |
| Court | Court of Appeal (Civil Division) |
| Date | 31 July 2013 |
[2013] EWCA Civ 968
The Master of the Rolls
Lord Justice Rimer
and
Lord Justice Patten
Case No: A3/2012/2318
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Sir Andrew Morritt
HC09CO3502
Royal Courts of Justice
Strand, London, WC2A 2LL
Alan Maclean QC and Colin West (instructed by Macfarlanes LLP) for the Appellants
Christopher Parker QC and Rebecca Page (instructed by Gateley LLP) for the Respondents
Introduction
This is an appeal by the sixth and seventh defendants, Jetivia S.A. ("Jetivia") and Mr Urs Brunschweiler ("Mr Brunschweiler"), against an order of the Chancellor of the High Court dismissing their applications for the summary dismissal or striking out of the claims against them in this action. The appeal is brought with the leave of the Chancellor.
The claimants are Bilta (UK) Ltd ("Bilta") which is now in liquidation together with Mr Hellard and Mr Ingram who are the joint liquidators of the company. Bilta seeks damages and equitable compensation from the appellants and the other defendants for conspiracy and dishonest assistance. The liquidators have separate claims for fraudulent trading under s.213 of the Insolvency Act 1986 (" IA 1986"). The appellants' applications relate to both types of claim but are based on different grounds. The appellants contend that Bilta's own claim should be dismissed or struck out on the grounds of public policy based on the ex turpi causa non oritur actio principle. The s.213 claim is challenged on the basis that the court has no jurisdiction over the appellants in respect of the claim. Jetivia is a Swiss company and Mr Brunschweiler, who is resident in France, is its sole director. This is ultimately a question of statutory construction in relation to s.213.
Much of the factual background is not in dispute but, in relation to the conspiracy and dishonest assistance claims, there is an issue between the parties as to whether the pleaded conspiracy represents an accurate statement of what the various defendants were engaged upon. Bilta's pleaded case is that the object of the alleged conspiracy was to defraud and injure the company by depriving it of the money necessary to meet its VAT liabilities incurred from its trading in carbon credits. The appellants contend that this is only a partial account of the allegedly fraudulent scheme and that, looked at overall, it is obvious that the intended victim of the fraud which the appellants are said to have participated in must have been HM Revenue and Customs who were deprived of the VAT which was due to them.
The difference between these two versions of the conspiracy is relevant on one view to the application of the ex turpi causa principle. The Chancellor decided the case on the basis of the fraudulent scheme as set out in the amended particulars of claim which he accepted went no further than the position contended for by the claimants. But, for reasons which I will come to later in this judgment, I am not convinced that the difference in the identity of the alleged victim of the conspiracy (Bilta or HMRC) can or should materially affect the outcome of the appellants' applications.
The facts
I can start with what is common ground. Bilta is a company incorporated in England which is registered for the purposes of VAT. The first and second defendants, Mr Nazir and Mr Chopra, were its only directors and Mr Chopra owned all the issued shares. Between 22 nd April and 21 st July 2009 Bilta traded in European Emissions Trading Scheme Allowances ("EUAs") which are more commonly known as carbon credits. Until 31 st July 2009 EUAs were treated as taxable supplies under the VAT Act 1994 and were standard-rated. Since that date they have been zero rated.
EUAs are traded on the Danish Emissions Trading Registry. According to its own records, Bilta bought and sold more than 5.7m EUAs in the three month period between April and July for some €294m. Because the sales to Bilta were from traders like Jetivia carrying on business outside the UK, these supplies were zero rated. The EUAs were then sold on back-to-back to UK-based traders such as the third defendant, Pan 1 Limited, who were registered for VAT. These were taxable supplies at the standard rate and Bilta thereby incurred liabilities to VAT in excess of €44m.
The price payable to Bilta by Pan 1 Limited and the other purchasers was in each case less before VAT than the amount paid by Bilta to Jetivia and the other non-UK suppliers and, on the instructions of Bilta's directors, was paid to Jetivia or some other third party located outside the UK. In some cases there were further sales on of the EUAs to other UK traders with, again, similar instructions for the price to be paid to an external third party. As a consequence, Bilta made no profit on the transactions and was unable to pay the VAT which it owed because it never received or retained the proceeds of sale. Its liability for VAT on the transactions amounts to £38,733,444.
On 29 th September 2009 Mr Hellard and Mr Ingram were appointed provisional liquidators of Bilta and commenced the company's claim against the appellants and the other defendants. Bilta was wound up compulsorily on 25 th November 2009 and on 13 th October 2011 the proceedings were amended to include the claims by the liquidators under s.213.
The pleaded claim
The allegation of conspiracy is pleaded in paragraph 14 of the amended particulars of claim ("APC") as follows:
"14. (a) During at least the period 22 April 2009 to 21 July 2009 a conspiracy existed to defraud and injure a company (and thereby to engage in fraudulent trading with an intention to defraud and injure that company) by trading in carbon credits and dealing with the proceeds therefrom in such a way as to deprive that company of its ability to meet its VAT obligations on such trades namely to pass the money (which would otherwise have been available to that company to meet such liability) to accounts off-shore, including accounts of Jetivia and THG ("the Conspiracy").
(b) As the conspirators knew, the fraudulent scheme involved breaches of fiduciary duty by a director or directors of such company.
(c) Bilta was the defrauded company. This claim concerns Bilta's purchase and sale of EUAs between 22 April 2009 and 21 July 2009.
(d) The parties to the conspiracy included Mr Brunschweiler and Jetivia, and Mr Shafiq and THG.
(e) It is not known on what date or dates the conspiracy was formed."
Particulars of the fraudulent scheme are then set out in paragraphs 15–19:
"15. (1)(a) Mr Brunschweiler and Jetivia agreed to supply Bilta with EUAs, and to enter into documentation which showed Jetivia as having supplied Bilta even though in a number of cases the EUAs had been transferred direct to a First Line Buffer (see paragraph 22(8) below), for onward sale, knowing that Bilta would not be paying the VAT due on its onward sales.
[(b)-(e)]
(2) Bilta would then sell the EUAs on (or, where Bilta had not itself received the EUAs, produce paperwork showing the EUAs to have been sold on) at a price inclusive of VAT. In at least 46 cases Bilta sold the EUAs at a price which was less (net of VAT) than it had paid. Bilta sold to companies that had no legitimate use for the EUAs and whose role was to sell on the EUAs for a small profit ("the First Line Buffers"), which they were only able to do because Bilta had sold for a price net of VAT less than it had paid, (save that on at least 25 occasions Pan 1 immediately sold on at a loss — see Schedule 1). The First Line Buffers were not engaged in legitimate trading but were dishonestly participating in the fraudulent scheme.
(3) The First Line Buffers would themselves often sell on to companies that had no legitimate use for the EUAs and whose role was to sell on the EUAs for a small profit ("the Second Line Buffers") (which they were only able to do because Bilta had sold for a price net of VAT less than it had paid). (Sometimes the First Line Buffers would sell onto the Second Line Buffers at a loss). The Second Line Buffers were not engaged in legitimate trading but were dishonestly participating in the fraudulent scheme.
(4) The money payable to Bilta by its purchasers (inclusive of the VAT element) would almost all be paid by the purchasers either (a) to Bilta and then paid by Bilta to Jetivia or (b) directly to Jetivia or to THG, or (c) to offshore accounts the account-holders of which have yet to be identified.
(5) Jetivia and THG's participation in the fraudulent scheme was not limited to transactions in which Bilta actually acquired EUAs from Jetivia and THG:
(a) In a good number of transactions Jetivia and THG entered into paperwork with Bilta which showed that Bilta had acquired and sold on EUAs from Jetivia and THG which EUAs the Registry showed as being transferred from THG and Jetivia directly to Bilta's purchaser or through a different intermediary company before transfer to Bilta's purchaser (see paragraph 22(8) below).
(b) Jetivia and THG would receive payments directly from the First Line Buffers depriving Bilta of the means of meeting its VAT liabilities.
(6) The First Line Buffers included Pan 1…. The aforementioned First Line Buffers' participation in the fraudulent scheme was not limited to transactions in which EUAs were actually transferred at...
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