The Facts

A liquidator applied for permission to amend his claim for fraudulent trading. The claim against the respondents related to purported defrauding of HMRC for non-payment of VAT.

Two of the three respondents (being a supplier to the company and the supplier’s director) applied to strike out the proceedings on the basis that they must fail as a matter of law as, firstly, the liquidator had not pleaded that there had been a loss to creditors, only the company, and, secondly, there was no loss recoverable against them as a penalty levied against the company could not be characterised as a loss to the company’s creditors and costs awarded by the Tax Tribunal related to proceedings where only the company was a respondent.

The Decision

At the hearing of the strike out application, the Judge found the pleadings to be defective as no loss against the creditors had been pleaded, and gave the liquidator an opportunity to apply for permission to amend, which he did.

On the application to amend, the Judge held that it was reasonably arguable that the HMRC penalty constituted a loss against creditors finding that, whilst there was a lack of authority on the point, the penalty could give rise to a loss suffered by HMRC as a creditor.

However, the Judge agreed with the Second and Third Respondents that, whilst the costs order constituted loss to HMRC as a creditor, no valid claim in respect of those costs was pleaded against those respondents and therefore there was no reasonably arguable case on the point and permission to amend on the costs point was refused.

Goldfarb v Alibhai and others [2017]