A liquidator's fraudulent trading claim against the defendant directors under s.213 Insolvency Act 1986 failed because it had not been shown on the facts that the business of the company had been carried on with intent to defraud a single creditor, namely the company's landlord.Appeal and cross-appeal from a judgment of Anthony Elleray QC holding that the defendant directors were liable for fraudulent trading under s.213 Insolvency Act 1986 but that their liability to contribute to the company's assets had been extinguished by a payment into court made by solicitors. The company ('TMC') ran a haulage business and was the tenant of warehouse and depot premises under four leases. TMC's business was unprofitable in 1991 and 1992 and the directors ('M' and 'B') identified the principal problem as the onerous rental obligations under the leases. They took advice as to whether and how they could free TMC from the liabilities under the leases. On advice they implemented a scheme under which TMC ceased trading at the end of 1992 and the business was thereafter carried on by a new company ('Newco') from new premises using the initials TMC. In 1994 TMC's landlord served a statutory demand for rent and presented a winding-up petition. TMC was compulsorily wound up and the liquidator took proceedings against B and M under s.213 of the Act alleging that they and the company's solicitors had been knowingly party to the carrying on of the business of TMC with intent to defraud creditors, namely the landlord. The liquidator's case was that the defendants deliberately and deceptively forestalled presentation of a winding-up petition during 1993 to prevent the transactions involved in the scheme being vulnerable to challenge under the Act. The solicitors made a payment into court and the s.213 claim proceeded to trial against the directors only. The deputy judge held that there had been fraudulent trading by the directors but that their liability to make contribution to the company's assets, including a punitive element, had been satisfied by the solicitors' payment into court. The liquidator appealed and the directors cross-appealed.HELD: (1) A business could have been carried on with intent to defraud creditors notwithstanding that only one creditor had been defrauded and by a single transaction but s.213 was not engaged in every case where an individual creditor had been defrauded but only where the business of the company had been carried on with intent to defraud. (2) 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 or in particular the landlord. The business was carried on throughout 1993 with the intent to protect M and B from the penalties to which they would otherwise be exposed under s.216 of the Act as directors of Newco for re-using the TMC name. (3) 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. (4) There was no material on which the judge could have reached the conclusion that it was correct to order the contribution that he did, or any other sum. (5) There was no power to include a punitive element in the amount of any contribution ordered under s.213. (6) The judge was right to treat the directors' liability as satisfied by the solicitors' payment into court and to make no order against them for costs after the date on which the liquidator accepted that payment.Directors' cross-appeal allowed. Liquidator's appeal dismissed.

[2002] EWCA Civ 289