How To Steer Clear Of Fraudulent Trading

Overview Of Keeping Clear Of Fraudulent trading And Dishonest Assistance

Someone seeking to discover how you might steer clear of allegations of fraudulent trading and dishonest assistance might fancy (and then again of course they might not), having a trawl through this massive judgment, running to 579 paragraphs that Mr Justice Snowdon served up for us in Bilta (UK) Ltd & Ors v Natwest Markets Plc & Anor [2020] EWHC 546 (Ch) that has finally landed, almost 20 months after the relevant hearings.

Mr Justice Snowdon notably acknowledged the delay when he paid tribute to those preparing the case and apologised:

I should, in conclusion, pay tribute to the highly efficient manner in which this case was prepared and presented. In contrast, I must sincerely apologise for my subsequent delay in production of this judgment.

In view of the length of the judgment such a delay appears understandable. But was it worth the wait for the applicants? Well, they appear to have been in part successful.

It was notable that oral evidence was extensive and the judge appears to have asked a few questions as well in view of the transcripts reproduced in the judgment.

Let’s get right down to the bare bones of some of the key points that sprouted about fraudulent trading and dishonest assistance allegations.

Dishonest Assistance Concept

For dishonest assistance, it was said that you need dishonesty, assistance and breach trust or fiduciary duty.

Fraudulent Trading

For fraudulent trading it was said you need to show subjective intent to defraud or reckless indifference.

Fraudulent trading can extend to outsiders ie. not merely the management of the company whose trading was undertaken to defraud.

Vicarious Liability

Anyone with a keen appetite for the points on vicarious liability at large go to paragraph 193 for around 10 paragraphs on it.

Dishonesty

For dishonesty it was said that ” Honesty is a basic moral quality which is expected of all members of society. It involves being truthful about important matters and respecting the property rights of others … Acting dishonestly means simply not acting as an honest person would in the circumstances”

The test of dishonesty was said to be objective and that the “assister” might not know all the relevant facts.

The burden of proof was held to be with the claimant at a civil standard ie. balance of probability.

Thirdly, there is no rule of law that if the allegation is more serious (e.g. of dishonesty) more cogent evidence is required to prove it. Fourth, the court can take into account, as a matter of common sense, any relevant “inherent improbabilities” as to the defendant’s behaviour.  

Truthfulness is a characteristic of honesty, and untruthfulness is often a powerful indicator of dishonesty. However, truthfulness does not equate to honesty: a dishonest person may be truthful about his dishonest opinions: Ivey at [75]. In that regard, I also remind myself of the principles encapsulated in the direction given to juries in criminal cases derived from the decision in R v Lucas [1981] QB 720. Juries are routinely directed that the fact that a defendant tells lies in the witness box does not necessarily mean that he is guilty. They are told that people tell lies for all sorts of reasons: to bolster a weak defence, to conceal discreditable conduct, or out of panic, distress or confusion. They are also told to have in mind that the fact that a witness tells lies about some things does not mean that he or she is telling lies about everything.

Relief:

For the reasons that I have explained, I find both RBS and RBS SEEL liable for dishonest assistance and knowingly being a party to fraudulent trading by the Claimant companies by reason of RBS’s trading with CarbonDesk from 26 June 2009 to 6 July 2009 (inclusive). I dismiss the remainder of the claims.

Disclaimer: The comments in this post are not legal advice and ought not be relied upon as such. No liability is accepted by the author for any reliance placed upon the same. You should seek independent legal advice to consider the discrete facts of your scenario.

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Disclaimer

This page is not legal advice and should not be relied upon as such. This article is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.

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