[2025] EWHC 2480 (Ch)

Dishonest Assistance

I have dismissed eight Direct Claims on the basis that the MTIC Companies were not liable for the VAT Claim to HMRC or that FCIB did not assist them to incur those liabilities because the receipts or payments relating to the trades which gave rise to the VAT Claim did not pass through the MTIC Company’s FCIB account. I consider below whether the Court is bound by Mr Hunt’s decision to admit the Indirect Claims against TWPS to proof. But subject to this point, I dismiss the eight Indirect Claims of the MTIC Companies against TWPS for the same reasons. If the MTIC Companies are not liable to HMRC or the relevant receipts and payments did not pass through their FCIB accounts, TWPS cannot be liable to the MTIC Companies for dishonest assistance. I, therefore, limit my consideration in this section to the remaining eleven Indirect Claims.

The Claimants’ Case

The Claimants pleaded case was that Mr Deuss was at all material times both a de facto director and a shadow director of TWPS and that he exercised strategic and tactical control over its activities. They pleaded the following particulars of this allegation in paragraph 3(2):

“(a)

He set management objectives and marketing priorities.

(b)

He gave direct instructions to TWPS marketers about site visits.

(c)

He received TWPS marketing reports. If reports were not forthcoming when the marketer at fault would be chastised by using Mr Deuss' name.

(d)

He received TWPS performance data.

(e)

He reviewed individual business plan objectives for the marketers.

(f)

He held scheduled meetings with the marketers.

(g)

He set and controlled the bonus plan.

(h)

He set TWPS' marketing priorities.

(i)

He attended TWPS quarterly meetings world-wide.

(j)

Daniel Maurice-Vallerey (“Mr Vallerey”), TWPS' President, reported to Mr Deuss and not to the de jure directors of TWPS (who were Martina Deuss, Mr Deuss' sister ("Ms Deuss") (who was also referred to as "Tineke Deuss"), and Charles Geerts).

(k)

Unlike Mr Deuss, neither of TWPS’ de jure directors were included on emails about TWPS' operational and marketing decisions.”

It was also the Claimants’ case that Mr Deuss was the directing mind of TWPS and that the knowledge of both Mr Deuss and Mr Vallerey should be attributed to TWPS when considering the liability of TWPS to the MTIC Companies: see paragraphs 3(3) and (4)(b). Mr Deuss served a Request for Further Information in relation to paragraph 3(2) (above) but the Claimants did not provide any additional particulars of either allegation. Mr Deuss denied both allegations in his Defence:

“21.

The first sentence of paragraph 3(2) is denied:

21.1.

Mr Deuss was not a de facto director of TWPS. Any participation by, or concern of, Mr Deuss in the affairs of TWPS was in his capacity at FCIB (to which TWPS was a service provider) set out at paragraphs 19.3 and 19.4 above and/or as the UBO of TWPS, as to which paragraph 19.6 above is repeated.

21.2.

Mr Deuss was not a shadow director of TWPS:

21.2.1

Mr Deuss did not give directions or instructions to the directors of TWPS on which they were accustomed to act within the meaning of the applicable legislation at the relevant time.

21.2.2

Alternatively, any directions or instructions given to directors of TWPS by Mr Deuss were given by him in his capacity at FCIB (to which TWPS was a service provider) set out at paragraphs 19.3 and 19.4 above and/or as the UBO of TWPS, as to which paragraph 19.6 above is repeated.”

The Claimants’ case in relation to the dishonest assistance claim against TWPS was principally set out in the Particulars of Claim, paragraphs 32B, 35 and 38. I have set out paragraph 35 (above) and, although the Particulars of Claim are not entirely clear, I understood the allegation of dishonesty in that paragraph to be made in relation to both the Direct and Indirect Claims of dishonest assistance. In paragraphs 32B and 38(3) the Claimants advanced the following case under the heading “Dishonest Assistance”:

“32B. The claim relies on the assistance of FCIB in providing bank accounts that facilitated the MTIC trading of the MTIC Companies (and TWPS pre-screening/on-boarding and failure to monitor) as pleaded in paragraph 6 above and/or in the following ways: -

(1)

Transactions giving rise to the VAT liabilities were processed through the FCIB account of the MTIC Company, including where the evidence is that the transactions of the MTIC Company were predominantly through its FCIB account so that it should be inferred that the transactions giving rise to the VAT liabilities were processed through the FCIB account of the MTIC Company;

(2)

Money in respect of the transaction giving rise to the VAT liability was paid into the MTIC Company's FCIB account;

(3)

The MTIC Company gave third party payment instructions for money to be paid to other MTIC fraud companies (who had been pre-screened/ onboarded by TWPS and whose accounts were not monitored) and the money was paid into their FCIB accounts;

(4)

The unpaid VAT liability arose as a result of the failure of the MTIC Company to be able to claim for input VAT paid on purchases prior to export sales as part of the MTC fraud, which purchases and sales were processed through its FCIB account.”

“38.

(3) TWPS is liable to the MTIC Companies in the amount of their undischarged VAT liabilities as a result of its dishonest assistance by promoting FCIB’s services and onboarding them as customers of FCIB and/or failing to monitor their trading activity (alternatively under s213 or the Civil Liability (Contribution) Act 1978).”

Finally, the Claimants alleged in paragraph 6(1) that Mr Deuss used TWPS to create, facilitate the creation of, and/or to enable FCIB to profit from the existence of networks engaged in MTIC fraud including the MTIC Companies and in paragraph 6(2) that the MTIC Companies were onboarded or, alternatively, pre-screened as customers of FCIB by TWPS. Paragraph 6 continues as follows:

“(3)

Furthermore, (a) TWPS failed to alert FCIB to the indicia of illegitimate trading of the MTIC Companies that would have been apparent to TWPS and/or FCIB had either monitored the trading activity of FCIB’s customers in the T & C sector as evidenced by their FCIB accounts (particularly when compared with the onboarding information provided) in circumstances where Mr Deuss formally charged TWPS with doing so (knowing that it would and/or could properly not do so);

(b)

Had TWPS notified FCIB in writing of such “red flags”, given that TWPS was, in that respect, acting as FCIB’s compliance department, FCIB would have had no choice but to suspend the operation of the accounts of the MTIC Companies;

(4)

(a) In breach of his fiduciary duty as a director of TWPS, Mr Deuss caused TWPS thereby to participate and assist the directors of the MTIC Companies in their MTIC fraud as a result of which TWPS has suffered loss and damage, namely its liability to the MTIC Companies;

(b)

Mr Deuss is liable to TWPS for breach of fiduciary duty in the amount of such VAT liabilities;

(5)

TWPS, FCIB and Mr Deuss (whether or not a director of TWPS) thereby dishonestly assisted the breaches of duty by the directors of the MTIC Companies. TWPS and FCIB and are all liable for such dishonest assistance to the MTIC Companies in the amount of their unpaid VAT liabilities (the MTIC Companies’ claims in dishonest assistance against Mr Deuss being time barred);…”

The Law

I have set out the relevant law in relation to dishonest assistance in deciding the Direct Claims and it is not necessary for me to refer to any further authority here. I deal with two issues of limitation which arise in relation to the Indirect Claims separately in section L below. This leaves the issue whether Mr Deuss was a de facto or shadow director which I address here. The present case is what I will call a “multiple hats” case in which the issue was whether Mr Deuss acted not only in his capacity as the ultimate beneficial owner and sole shareholder of TWPS but also as a de facto or shadow director.

The Claimants and Mr Deuss both relied on the decision of the Court of Appeal in Smithton Ltd v Naggar [2014] EWCA Civ 939, [2015] 1 WLR 189. In that case the issue was whether the director of a parent company who introduced investors to a subsidiary was either a de facto or shadow director. The judge at first instance decided that he was neither for reasons to which I return. The Court of Appeal upheld her decision and Arden LJ (as she then was), with whom both Elias and Tomlinson LJJ agreed, gave the leading judgment. She analysed the leading “multiple hats” case (Revenue and Customs Comrs v Holland [2010] 1 WLR 2793) before identifying the critical issue at [28] to [32] and setting out the principles which applied to determine it at [32] to [45]:

“28.

But another issue that may arise is whether the acts relied on are actually the acts of a director at all. Holland’s case did not address the question what actions make a person a director, save in so far as the majority clearly make it clear that the court should ask whether the defendant formed part of the corporate governance structure of the company. However, that is merely to restate the question. The real issue in some contexts will be whether the acts demonstrate the assumption of acts as a director. That question was not explored in this case. There was simply no argument as to whether the acts on which Hobart relied lacked the quality of directorial acts.

29.

In Holland’s and Jones’s cases, the acts in question were plainly directorial in nature. In Holland’s case, the corporate director was the sole director: there was no evidence of any other person taking management decisions on its behalf or on behalf of the composite companies.

30.

In this case, Hobart challenges the judge’s failure to make findings about its corporate governance structure. This case raises the fundamental point of why the court needs to undertake that exercise and (in consequence) what makes a person a director.

31.

The Companies Act definition does not elucidate that matter. Provisionally it seems to me that that term is to be tested against the usual split of powers between shareholders and directors under Table A, i.e. on the basis that the powers of management of the company’s business are delegated to the directors and the shareholders cannot intervene except by special resolution. On that basis it means a person who either alone or with others has ultimate control of the management of any part of the company’s business. In the usual case, in my judgment, it would not include a purely negative role of giving or receiving permission for some business activity.

32.

The role of a de facto or shadow director need not extend over the whole range of a company’s activities: see In re Mea Corpn Ltd [2007] 1 BCLC 618; Secretary of State for Trade and Industry v Deverell [2001] Ch 340. A person may be both a shadow director and a de facto director at the same time: In re Mea Corpn.

Practical points: what makes a person a de facto director?

33.

Lord Collins JSC sensibly held that there was no one definitive test for a de facto director. The question is whether he was part of the corporate governance system of the company and whether he assumed the status and function of a director so as to make himself responsible as if he were a director. However, a number of points arise out of Holland’s case and the previous cases which are of general practical importance in determining who is a de facto director. I note these points in the following paragraphs.

34.

The concepts of shadow director and de facto are different but there is some overlap.

35.

A person may be de facto director even if there was no invalid appointment. The question is whether he has assumed responsibility to act as a director.

36.

To answer that question, the court may have to determine in what capacity the director was acting (as in Holland’s case).

37.

The court will in general also have to determine the corporate governance structure of the company so as to decide in relation to the company’s business whether the defendant’s acts were directorial in nature.

38.

The court is required to look at what the director actually did and not any job title actually given to him.

39.

A defendant does not avoid liability if he shows that he in good faith thought he was not acting as a director. The question whether or not he acted as a director is to be determined objectively and irrespective of the defendant’s motivation or belief.

40.

The court must look at the cumulative effect of the activities relied on. The court should look at all the circumstances “in the round” (per Jonathan Parker J in Secretary of State for Trade and Industry v Jones [1999] BCC 336).

41.

It is also important to look at the acts in their context. A single act might lead to liability in an exceptional case.

42.

Relevant factors include: (i) whether the company considered him to be a director and held him out as such; (ii) whether third parties considered that he was a director.

43.

The fact that a person is consulted about directorial decisions or his approval does not in general make him a director because he is not making the decision.

44.

Acts outside the period when he is said to have been a de facto director may throw light on whether he was a de facto director in the relevant period.

45.

In my judgment, the question whether a director is a de facto or shadow director is a question of fact and degree. The principles of appellate review are well established. I need only summarise those applicable here. Where the decision depends on the judge’s assessment of weight to be attached to various facts, the test to be satisfied on appeal is that in most cases the judge was plainly wrong. Where the appellant contends that the judge misdirected herself as to the law, the court must determine what the law is and whether the judge applied it.”

The judge at first instance had approached the issue as one of “hat” identification and on the basis that she had to decide what the Defendant had done and which hat he was wearing at any given time. She also accepted that it was important to examine the way in which the company was governed. The first ground on which the Claimant appealed was that she had failed to do so. Arden LJ addressed this at [59] to [62]:

“59.

Mr Marshall’s first submission is that the judge failed to make findings about the corporate governance structure of Hobart and to take it into account. She was right to say that the Hobart board did not make the important decisions. As in the Mumtaz case [2012] 2 BCLC 109, Hobart’s business had been run informally and major corporate decisions had been taken by Mr Naggar and Mr Townsley, who had operated like partners in Hobart’s business. There was only one board minute. There was not even a board meeting to deal with the interim dividend. There were meetings of a board committee called Exco. That was set up before Hobart was incorporated and while it was still a division of DD Brokers. But, submits Mr Marshall, that committee did not deal with any important matters.

60.

Mr Marshall submits that the de jure directors of Hobart did not make any significant decision, whether as to IT, investment, staffing, premises or otherwise, without Mr Naggar’s agreement. Mr Naggar received regular information and gave regular instruction concerning the day-to-day operation of Hobart’s business. Mr Naggar for instance exercised considerable control over the hiring and firing of staff.

61.

In my judgment, Mr Marshall is correct to say that the judge focused on “hat identification” rather than on ascertaining the corporate governance system of Hobart. He is also correct in his submission that determining whether Mr Naggar was part of the corporate governance system was an important step in deciding whether he had assumed the responsibility of a director. The corporate governance system will vary from company to company. Therefore in the normal course, it is vital that the trial judge makes findings about the role which the defendant played in running the company in question.

62.

However, in this case, Mr Naggar did not at trial dispute that he performed directorial acts. He sought to run his defence on the basis of “hat identification” i.e. that he had multiple roles and that he had acted in a different capacity at all times from that of a Hobart director. In those circumstances, there is no material error of law on the judge’s part in not seeking to meet a defence which was not run.”

The Claimant’s second ground of appeal was that the judge had approached the question of “hat identification” in the wrong way and instead of asking herself whether the Defendant’s conduct could be explained by his hats as a director of the holding company or as a major client, she should have asked herself in what capacity he was acting. Arden LJ also rejected that ground for the following reasons:

“64.

The judge’s conclusion was not in terms that at the material times Mr Naggar acted as chairman of DDI or as an investor but rather that nothing which the judge had seen “goes beyond the involvement one would expect to see from a person who combined the roles of major client and chairman of the majority shareholder”: judgment, para 125.

65.

Mr Marshall interprets this as a holding that all the acts were ones to be expected of a client and chairman of the major shareholder and that they were to be attributed to that capacity without considering whether they were actually done in that capacity. While I accept that those words read on their own can be interpreted in this way, in my judgment they have to be read in the context of the judgment as a whole. In particular the judge took the view that in the light of the JVA and the need for directors of Hobart to be authorised by the FSA it was unlikely that Hobart would have permitted Mr Naggar to act as a de facto director: judgment, para 73. In other words, the passage on which Mr Marshall relies is to be read as saying that she had considered Mr Naggar’s involvement objectively against the conduct to be expected of a major client and chairman of the majority shareholder, that his involvement was consistent with that conduct and that he had in fact acted in that capacity. So read, her conclusion is in my judgment unassailable.

66.

The assessment of the capacity in which a person acts is one of fact and degree and all the circumstances must be taken into account. Mr Marshall relies on this appeal on passages in his closing submissions in respect of a considerable number of specific categories of acts or specific episodes as showing that the judge came to the wrong conclusion. He does not contend that the judge was not entitled to come to the conclusion to which she came, and so it is clear that the challenge is in reality a disagreement with the judge’s findings. As such, it does not amount to a good ground of appeal.”

In Re UKLI Ltd [2013] EWHC 680 (Ch), [2015] BCC 755 Hildyard J also gave a useful summary of the characteristics of a de facto director. It is in quite similar terms to the summary set out in Arden LJ’s judgment above. However, one additional feature to which he drew attention was that the de facto director’s role may relate to part of the affairs of the company only, so long as it is the part of which complaint is made. Mr Parker and his team also relied on the decision of Linden J in Bishopsgate Contracting Solutions Ltd v O’Sullivan [2021] EWHC 2103 (QB) as authority for the proposition that there is no requirement that a de facto director be held out as a director: see [152]. In that passage the judge referred to Re UKLI Ltd (above) where Hildyard J stated that it is relevant to ask whether the individual was held out as a director by the company to third parties or internally or was claimed by himself or others to be one. Bishopsgate is a strong decision because Linden J held that the Defendant was not a de facto director even though he held himself out to be its managing director.

Before the Companies Act 2006 came into force on 1 October 2007 the term “shadow director” had a statutory definition (as it does now). Section 741 of the Companies Act 1985 provided as follows:

“(1)

“In this Act, ‘director’ includes any person occupying the position of director, by whatever name called”. (2) In relation to a company, “shadow director” means a person in accordance with whose directions or instructions the directors of the company are accustomed to act. However, a person is not deemed a shadow director by reason only that the directors act on advice given by him in a professional capacity.”

In Secretary of State for Trade and Industry v Deverell [2001] Ch 340 Morritt LJ (as he then was) set out the following propositions at [35] to assist the Court to determine whether an individual is a shadow director in any given case:

“35 I propose to express my conclusions on these and other issues in a number of propositions, (1) The definition of a shadow director is to be construed in the normal way to give effect to the parliamentary intention ascertainable from the mischief to be dealt with and the words used. In particular, as the purpose of the Act is the protection of the public and as the definition is used in other legislative contexts, it should not be strictly construed because it also has quasi-penal consequences in the context of the Company Directors Disqualification Act 1986. I agree with the statement to that effect of Sir Nicolas Browne-Wilkinson V-C in In re Lo-Line Electric Motors Ltd [1988] Ch 477, 489. (2) The purpose of the legislation is to identify those, other than professional advisers, with real influence in the corporate affairs of the company. But it is not necessary that such influence should be exercised over the whole field of its corporate activities. I agree with the statements to that effect of Finn J in Australian Securities Commission v AS Nominees Ltd 133 ALR 1, 52-53 and Robert Walker LJ in In re Kaytech International plc [1999] BCC 390, 402. (3) Whether any particular communication from the alleged shadow director, whether by words or conduct, is to be classified as a direction or instruction must be objectively ascertained by the court in the light of all the evidence. In that connection I do not accept that it is necessary to prove the understanding or expectation of either giver or receiver. In many, if not most, cases it will suffice to prove the communication and its consequence. Evidence of such understanding or expectation may be relevant but it cannot be conclusive. Certainly the label attached by either or both parties then or thereafter cannot be more than a factor in considering whether the communication came within the statutory description of direction or instruction. (4) Non-professional advice may come within that statutory description. The proviso excepting advice given in a professional capacity appears to assume that advice generally is or may be included. Moreover the concepts of "direction" and "instruction" do not exclude the concept of "advice" for all three share the common feature of "guidance". (5) It will, no doubt, be sufficient to show that in the face of "directions or instructions" from the alleged shadow director the properly appointed directors or some of them cast themselves in a subservient role or surrendered their respective discretions. But I do not consider that it is necessary to do so in all cases. Such a requirement would be to put a gloss on the statutory requirement that the board are "accustomed to act" "in accordance with" such directions or instructions. It appears to me that Judge Cooke, in looking for the additional ingredient of a subservient role or the surrender of discretion by the board, imposed a qualification beyond that justified by the statutory language.”

In Re Hydrodam (Corby) Ltd [1993] BCC 161 the liquidator of a company in liquidation pleaded a wrongful trading case against two individuals who had not been de jure directors of it in the following way: “The individual respondents also personally acted as de facto or shadow directors of the company as hereinafter pleaded in relation to them respectively.” Millett J (as he then was) held that this pleading was embarrassing and struck it out. He stated as follows at 163B-C:

“I would interpose at this point by observing that in my judgment an allegation that a defendant acted as de facto or shadow director, without distinguishing between the two, is embarrassing. It suggests - and counsel's submissions to me support the inference - that the liquidator takes the view that de facto or shadow directors are very similar, that their roles overlap, and that it may not be possible to determine in any given case whether a particular person was a de facto or a shadow director. I do not accept that at all. The terms do not overlap. They are alternatives, and in most and perhaps all cases are mutually exclusive.”

The judge then went on to state what a claimant had to plead in order to make good either the allegation that a person was a de facto director or a shadow director in the following terms at 163D-F:

“A de facto director is a person who assumes to act as a director. He is held out as a director by the company, and claims and purports to be a director, although never actually or validly appointed as such. To establish that a person was a de facto director of a company it is necessary to plead and prove that he undertook functions in relation to the company which could properly be discharged only by a director. It is not sufficient to show that he was concerned in the management of the company's affairs or undertook

tasks in relation to its business which can properly be performed by a manager below board level. A de facto director, I repeat, is one who claims to act and purports to act as a director, although not validly appointed as such.

A shadow director, by contrast, does not claim or purport to act as a director. On the contrary, he claims not to be a director. He lurks in the shadows, sheltering behind others who, he claims, are the only directors of the company to the exclusion of himself. He is not held out as a director by the company. To establish that a defendant is a shadow director of a company it is necessary to allege and prove: (1) who are the directors of the company, whether de facto or de jure; (2) that the defendant directed those directors how to act in relation to the company or that he was one of the persons who did so; (3) that those directors acted in accordance with such directions; and (4) that they were accustomed so to act. What is needed is, first, a board of directors claiming and purporting to act as such; and, secondly, a pattern of behaviour in which the board did not exercise any discretion or judgment of its own, but acted in accordance with the directions of others.”

Although Morritt LJ held that someone could be a shadow director without “lurking in the shadows” in Secretary of State for Trade and Industry v Deverell (above) at [36], this does not in my judgment affect the authority of Re Hydrodam for the facts which a claimant must plead and prove. In particular, to establish that a defendant is a shadow director it is necessary to give particulars of the directions which they gave to the de jure directors of the company and the particulars of the statements of overt acts upon which the claimant relies in support of the allegation that those directors were accustomed so to act.

Assistance

Before considering the facts of each individual claim, I must resolve a number of general issues which were argued before me. I begin with the question whether TWPS marketers onboarded clients as opposed to screening or pre-screening them. I have found that Mr Deuss did not charge TWPS with monitoring customer activity for unusual transactions: see [454] and [455]. For the same reasons I dismiss the pleaded allegations that from 2004 it was the role of TWPS marketers to onboard FCIB’s customers in the sense that they were either instructed to perform FCIB’s KYC and AML procedures or did perform those procedures or checks for and on behalf of FCIB.

In reaching this conclusion I place significant weight upon Mr Ulrich’s Marketing Guidelines circulated in July 2005. They provide contemporaneous documentary evidence that TWPS marketers were expressly told not to carry out that role. The Claimants did not pursue their pleaded case that this was a dishonest document and I find that it reflected the actual practice of the TWPS marketers. I make that finding on the basis of my examination of the individual account opening documents for the remaining eleven MTIC Companies below.

I accept that from January 2006 TWPS marketers were instructed to complete the new form of site visit reports, to grade FCIB’s customers green, amber or red, to make an EWL recommendation and to set out their conclusions. I also accept that this went further than “screening” or “pre-screening” of customers and formed part of FCIB’s due diligence. To that extent, therefore, I find that the Claimants’ have made out their case that TWPS onboarded customers (although all of the site visit reports to which I was taken involved visits to existing customers rather than new customers).

However, I reject the Claimant’s case that it was the role of TWPS to carry out AML or KYC checks exclusively on behalf of FCIB. I have accepted the evidence of both Mr Sharma and Mr Ganesh that the RMC performed transaction monitoring and that it did so after January 2006. Based on this evidence and the account opening documents to which I was taken and to which I have referred in this judgment I find that it was not the role of TWPS marketers to decide whether to open, suspend or close an account and the ultimate decision remained throughout with the FCIB compliance department and the RMC. I also find that the site visit reports were intended to supplement or provide additional information to the RMC and FCIB’s compliance department not to replace their functions. Finally, I find that the RMC and FCIB’s compliance department used this information not only to decide whether to open, suspend or close accounts but to decide what further due diligence to carry out (e.g. EDD or transaction monitoring) and the order in which those investigations should be prioritised.

I have looked carefully at the examples of the new form site visit report for the MTIC Companies to which I refer in this judgment. Each one was completed by a different TWPS marketer and involved answering a number of detailed questions and the collection of a number of documents. It may well be that it was unwise to ask TWPS marketers to complete these reports and to rely on them. But I am not satisfied that they were doing no more than going through the motions or saw them as a “tick box exercise”. But in any event, I have placed much greater weight on these site visit reports in assessing the Indirect Claims than I have on any other documents. I placed significant weight on the report for Eliyon submitted on or after 20 January 2006 and the report dated 18 April 2006 for JDG.

Even though I have found that it was not the role of TWPS to onboard customers as opposed to screening them, I am not persuaded that this is sufficient by itself to dismiss the claims for dishonest assistance against TWPS. In my judgment, TWPS marketers provided material assistance to the MTIC Directors by introducing them to FCIB and its eBanking service and providing guidance through the account opening process. Furthermore, it was the Claimants’ pleaded case that TWPS assisted the MTIC Directors whether or not the TWPS marketers were screening or onboarding customers and I must address that case.

Where I draw the line, however, is at the certification of documents. In one case, the TWPS marketer did no more than certify copies of documents and, in my judgment, this was no more than minimal. There is no allegation that any of the documents which TWPS marketers certified were forgeries or that they involved identity theft and the MTIC Directors could have taken the originals to a solicitor who could have certified them for a small fee. In the event, none of the individual claims turned on this distinction.

Further, I place little weight on internal correspondence between the TWPS marketers and FCIB unless the information which they supplied was significant. For the most part, TWPS marketers were chasing up queries either from the customer or from FCIB’s compliance department and Mr Thanki and team referred to a spreadsheet which showed that in April 2006 TWPS was involved in assisting FCIB to calculate risk scores under the Risk Scoring Model. In one case, Kingswood, I was not satisfied that the internal correspondence was of more than minimal assistance to the MTIC Director.

Finally, Mr Lemer argued that none of actions taken by TWPS marketers gave rise to actionable claims by the MTIC Companies because there is no allegation that the marketers were acting dishonestly, e.g., by certifying copies of documents or completing visit reports. I reject that submission. It confuses the mental element of the cause of action with the actionable conduct. There is no reason why innocent acts by an agent or employee cannot give rise to an actionable claim provided that the principal or employer dishonestly instructs the agent or employee to perform them or even stands by and watches them being performed. The critical issue in relation to both the Direct and Indirect Claims was whether Mr Deuss had that state of mind.

Assistance: the individual claims

There is no evidence that TWPS assisted Mr Duddy to open an FCIB account. The Claimants’ case was that Mr Elliott-Square of First Dimension certified copies of all of the relevant documents: see S5, p.51. By email dated 16 November 2004 Ms Angeline Cheng of TWPS chased Ms Neuman in relation to Kingswood’s application and by emails dated 14 and 15 March 2006 Mr Reeve of TWPS supplied EDD documentation supplied by Mr Duddy to FCIB’s compliance department. TWPS was also involved in computing a risk score for Kingswood. By email dated 11 May 2006 Mr Carl Crisostomo wrote to Mr Duddy trying to arrange a site visit. But the Claimants accept that no such visit took place.

I have found that Mr Duddy committed the relevant breaches of fiduciary duty between 18 November 2005 and 23 November 2005. I find on a balance of probabilities that TWPS did not assist him to commit those breaches. On the evidence before me, TWPS had no involvement in screening Mr Duddy and I am satisfied that Ms Cheng’s email dated 16 November 2004 was de minimis. The only other involvement which TWPS had with Kingswood occurred later between March and May 2006. I, therefore, dismiss Kingswood’s claim against TWPS for dishonest assistance.

On 24 May 2005 Mr Bailey visited MTL. He also certified copies of MTL’s account opening documents including its Memorandum and Articles of Association, the passport of Mr Abrahamovitch and a bank statement. Finally, he supplied his EPR number in lieu of a bank reference or letter of good standing. By email dated 2 November 2005 Mr Jones wrote to Mr Abrahamovitch inquiring why he had not so far used the account. In April 2006 TWPS was involved in discussions with FCIB in computing a risk score and by email dated 26 May 2006 Ms Cheng wrote to Mr Abrahamovitch to arrange a site visit which took place on 1 June 2006. By email dated 2 June 2006 Ms Catalina Pinilos of TWPS tried to persuade Mr Sharma to re-activate MTL’s account which had been suspended for making third party payments.

I have found that Mr Abrahamovitch committed the relevant breaches of fiduciary duty on or shortly before 27 April 2006 because that was the date on which all of the relevant payments were all made. I find on a balance of probabilities that TWPS assisted Mr Abrahamovitch to make those payments by introducing him to FCIB and certifying the account opening documents. In my judgment, TWPS gave Mr Abrahamovitch more than minimal assistance by its actions even though there was an eleven month time lag between the date on which the account was opened and the date on which the relevant payments were made.

On 27 October 2005 and 28 November 2005 Mr Nixson visited MML. He also certified MML’s account opening documentation including the driving licences of both directors, Mr Hussain and Mr Junaid, and a bank statement. On 27 October 2005 he also provided a letter of good standing. On 7 February 2006 Mr Hussain contacted Mr Nixson about changing the signatories on MML’s accounts and he raised this with FCIB. In April 2006 TWPS was involved in discussions with FCIB in computing a risk score and by email dated 27 April 2006 Mr Jones wrote to FCIB’s compliance department asking for further time for MML to supply documents.

I have found that Mr Junaid and Mr Hussain committed the relevant breaches of duty between 12 December 2005 and 9 November 2006. I find on a balance of probabilities that TWPS assisted both directors to make payments through its FCIB account or accounts throughout that period by introducing him to FCIB and certifying the account opening documents.

On 19 August 2004 Mr Bailey visited 385 North and certified copies of the passports of both Ms Tindall and Mr Coglan. He also provided his EPR number in lieu of a letter of good standing and assisted them in answering certain queries raised by Ms Neuman before the account was opened on 24 August 2004. Between January 2005 and October 2005 TWPS chased 385 North for KYC and EDD documentation and Mr Bailey raised a query about the lack of activity on the account.

I have found that 385 North traded through its FCIB account or accounts for the longest period, namely, 18 February 2005 to 7 April 2006 during which it incurred liability to HMRC of £40,513,355.34. I have also found that Ms Tindall, the sole director, committed breaches of fiduciary duty by exposing 385 North to that liability. I find on a balance of probabilities that TWPS assisted her to make payments through the company’s FCIB account throughout that period by introducing her to FCIB, certifying the account opening documents and helping her to answer FCIB’s queries.

On 18 February 2005 Mr Bailey visited Eliyon and on or before 28 February 2005 Mr Van Laarhoven certified copies of the passports of Mr Kamlesh Gathani and his wife, a bank statement and the Memorandum and Articles of Association of the company and faxed them to FCIB. On 20 January 2006 (or possibly later) Mr Grandin carried out a second site visit and completed the new site visit report marking Eliyon as green under the new traffic light system. In April 2006 TWPS was involved in discussions with FCIB in computing a risk score.

I have found that Mr Gathani committed breaches of fiduciary duty by causing Eliyon to incur liability of £455,360.09 to HMRC in relation to transactions taking place between February 2006 and June 2006 and that the relevant receipts and payments passed through its FCIB account. I find on a balance of probabilities that TWPS assisted him to make those payments during that period by introducing him to FCIB, certifying account opening documents and conducting a second site visit. I place particular reliance upon the second site visit report and Mr Grandin’s evaluation.

On 13 March 2005 Mr Nixson visited Gold Digit and certified a copy of the passport of Mr Jones, who was then the sole director of the company, and his wife, Ms Samantha Jones (or Ridge). He also certified copies of a bank statement and their signed corporate secretarial certification (after FCIB had requested this). On 7 April 2005 Mr Nixson followed up a request from Mr Jones to chase for his ID and password. In April 2006 TWPS was involved in discussions with FCIB for calculating a risk score. TWPS did not provide a letter of good standing and the account opening checklist records that a banker’s reference was provided.

I have found that Mr Jones committed breaches of fiduciary duty by causing Gold Digit to incur a liability of £1,231,524.20 in relation to an assessment and two returns relating to periods 01 to 03 of 2006 and that he did so by using an FCIB account. I find on a balance of probabilities that TWPS assisted him to make payments through the company’s FCIB account during that period by introducing him to FCIB, certifying account opening documents and chasing FCIB for his ID and password.

On 14 September 2005 Mr Nixson visited Northdata and certified copies of Mr Walker’s passport and a utility bill. He also provided a letter of good standing for the company. I have found that Mr Walker committed breaches of fiduciary duty by causing Northdata to incur liability of £7,913,255.00 in relation to transactions taking place between 1 September 2005 and 30 November 2006 and that the relevant receipts and payments passed through his FCIB account (or other FCIB accounts). I find on a balance of probabilities that TWPS assisted him to make those payments during that period by introducing him to FCIB and certifying account opening documents.

There is no record of a visit to ETP taking place. However, on 30 June 2005 Mr Barrs certified copies of Mr Field’s passport, a bank statement and the Memorandum and Articles of Association of the company. In early July 2006 Mr Atkins tried to contact ETP to carry out a site visit but his assistant (who had tried to call a number of times) recorded in an email “constant answer phone”. The account opening checklist records the EPR number E76413 against “Reference Letter” and the account opening documents contain no bank reference or letter of good standing. The corporate eBanking account application also records that ETP was referred by E76413.

I have found that Mr Field committed breaches of fiduciary duty by causing ETP to incur liability of £7,913,255.00 in relation to transactions taking place between 1 September 2005 and 30 November 2006. But I have also found that his commission payments only passed through its FCIB account. I held that this was sufficient to satisfy the legal test for assistance in relation to FCIB and, after some hesitation, I am also satisfied that TWPS provided more than minimal assistance to Mr Field. Mr Barrs’ certification of the documents recorded that his EPR number was E76413 and I find that he introduced Northdata to FCIB and provided his EPR number in lieu of a letter of good standing. I also find that he met Mr Field in person because he certified that a copy of Mr Field’s passport was a true copy of the original.

On or before 1 September 2005 Mr Nixson visited Wood Works and certified copies of the passport of Mr Cutts and the Memorandum and Articles of Association of the company. He also provided a letter of good standing. In August and September 2005 Mr Nixson and Mr Reeve responded to queries from Ms Salas in relation to the address of the company. In December 2005 Mr Vallerey identified Wood Works as a customer who should provide EDD documentation and in April 2006 TWPS was involved in the process of calculating a risk score for the company. In early July 2006 Mr Atkins’ assistant tried to contact ETP to carry out a site visit but she recorded that “both telephones switched off”.

I have found that between October 2005 and July 2006 Mr Cutts committed breaches of fiduciary duty which caused Wood Works to incur a VAT liability of £9,004,904.84. I find on a balance of probabilities that TWPS assisted him to make those payments during that period by introducing him to FCIB, certifying account opening documents and answering queries from FCIB.

On 5 August 2005 Mr Bailey visited JDG, he certified copies of the passport of Mr Deepak Bhatia, Ms Suman Bhatia and Ms Joti Bhatia, a bank statement, utility bill and tax return and also the Memorandum and Articles of Association of the company. He also provided a letter of good standing. On 18 April 2006 Mr Murat Cakir also visited JDG and completed a site visit report in the new form grading JDG as green under the new traffic light system.

I have found that between 1 March 2006 and 31 May 2006 and in breach of his fiduciary duties Mr Bhatia caused JDG to incur a VAT liability of £1,246,736.17 and that the relevant receipts and payments passed through its FCIB account. I find on a balance of probabilities that TWPS assisted him to make those payments during that period by introducing him to FCIB, certifying account opening documents and in conducting a second site visit. I place particular reliance upon the second site visit report and Mr Cakir’s evaluation of JDG in that report.

@tomic was referred to FCIB by Mr Elliot-Square of First Dimension. The account opening documents contain a certified copy of Mr Harpal Bahia’s passport and, although it was not possible for me to identify the individual who certified it, the parties were agreed that Mr Nixson did so. On 14 April 2006 TWPS sent a standard form letter to the company requesting EDD documentation and during the same month TWPS was involved in calculating its risk score. On 19 May 2006 Mr Atkins visited @tomic and completed a site visit report in the new form marking it as green. He also stated that he was able to recommend it as a suitable prospect for evaluation by FCIB.

I have found that between 10 May 2006 and 17 May 2006 and in breach of fiduciary duty Mr Bahia engaged in a series of transactions which exposed @tomic to a VAT liability of £2,083,422.86. I found that FCIB assisted Mr Bahia to commit this breach or these breaches of fiduciary duty because the relevant receipts and payments passed through its FCIB account. Indeed, I relied on Mr Atkins’ site visit report in support of this finding of fact. However, I am not satisfied that TWPS provided more than minimal assistance to Mr Bahia. TWPS did not introduce or refer him to FCIB. Nor did it provide a letter of good standing and Mr Nixson’s only involvement in the account opening process was to certify his passport.

I have considered whether I should find that Mr Atkins provided material assistance to Mr Bahia by completing a “clean” site visit report which classified @tomic as green and recommending it as suitable prospect. However, Mr Atkins visited Mr Bahia and completed the report two days after the last relevant transaction and there was no evidence that @tomic suffered any further loss because the clean site visit report enabled the company to continue to trade after 19 May 2006. Even if Mr Atkins had marked @tomic as red and FCIB had suspended or closed its account immediately, all of the relevant funds had already passed through its account. It is possible that HMRC would have denied @tomic’s claim for input tax of £7,300,683.47 much earlier than they did. But there is no reason to conclude that Mr Bahia would not have appealed or that any funds would have been available to meet the VAT Claim when the company was wound up and put into liquidation. I, therefore, dismiss @tomic’s claim against TWPS.

Dishonesty

I found the Claimants’ case on dishonesty obscure. As I understood it, the Claimants’ case was that the TWPS failed to alert FCIB to the “red flags” of MTIC fraud in the T&C sector in circumstances where they had responsibility for onboarding those customers and transaction monitoring and that Mr Deuss was dishonest because he knew that they had been given this responsibility but also that they were not carrying it out: see paragraphs 6(3) and 32B where the Claimants allege “TWPS pre-screening/onboarding and failure to monitor”. In my judgment, this case was highly artificial and was also an attempt to elevate an allegation of negligence into dishonesty. But in any event, I am satisfied that the Claimants’ case fails on the facts for the following reasons:

Finally, I dismiss the allegation that Mr Deuss used FCIB and TWPS to create, facilitate the creation of and/or to enable FCIB to profit from the existence of networks of companies engaged in MTIC fraud (including the MTIC Companies): see paragraph 6(1). This was not simply an allegation of blind eye dishonesty but an allegation that Mr Deuss deliberately used FCIB and TWPS as instruments to facilitate fraud. Based on my earlier findings in relation to his conduct, I am satisfied that there was no basis for this allegation. The Claimants pleaded only two documents in support of their case that Mr Deuss intended TWPS to have this role, namely, Mr Vallerey’s email dated 19 February 2004 and Mr Sanchez’s memo dated 9 December 2004: see [239]. Neither document contained any material upon which the Court could properly draw the inference that Mr Deuss intended to use TWPS as an instrument to facilitate fraud.

Was Mr Deuss a de facto or shadow director?

Mr Thanki and his team complained in their closing submissions that the Claimants had still not made it clear whether their case was that Mr Deuss was a de facto director or a shadow director. But they did not invite the Court to strike out paragraph 3(2) on the basis that it was embarrassing and, after some reflection, I consider that they were right not to do so. In my judgment, the particulars under paragraph 3(2) plead sufficient facts to enable the Court to make a finding of fact that Mr Deuss was a de facto director. They do not, however, plead the necessary facts to enable the Court to make a finding that he was a shadow director. It may be that the Claimants intended the particulars in paragraphs 3(2)(j) and (k) to support such a finding. But if they did, this was wrong as a matter of law. Mr Vallerey’s job description was the “President” of TWPS but he was not a director of the company.

The Claimants’ case was based on extracts from 54 electronic documents or files including “Batch 54” which consisted of 250 pages and from which the Claimants relied on a number of isolated pages which consisted of an agenda for one of the TWPS quarterly meetings and a few emails. None of the documents upon which the Claimants relied consisted of formal company documents or resolutions or minutes of meetings of either the board of directors or general meetings.

Mr Deuss’s evidence was that he left the management of TWPS to Ms Deuss, Mr Vallerey and Mr Partridge and that his involvement in the company’s affairs was as the ultimate shareholder of the TWPS group and because TWPS was providing services to FCIB:

“55.

TWPS UK was a small company within the larger Transworld group, and one of a few Transworld Payment Solutions or ‘TWPS’ companies. I mostly dealt with it at a high level. Although I was the ultimate owner of TWPS UK, I was not a director of the company, nor was I involved in its management or day-to-day affairs.

56.

During the relevant period (i.e. 2003 to 2006), the directors of TWPS UK were my sister, Tineke, and my cousin, Charles Geerts. Daniel Maurice-Vallerey, who was the President of TWPS EMEAA, was in charge of TWPS UK’s day-to-day affairs, and he was helped by Brian Partridge, until Brian moved to head TWPS Malaysia. I left the management of TWPS UK’s affairs to Tineke, Daniel and Brian. I was involved with TWPS EMEAA because I was the ultimate shareholder of the companies, and they were providing marketing services to FCIB.

57.

I was sent several types of reports from those working at the various TWPS entities, including marketing reports, business plans and performance reports. As I have explained at paragraph 33 above, the reports were primarily a management tool, and whether or not I read a particular report, and how detailed my review of it would be, would depend on its importance or relevance. I was mainly copied to ensure that the company’s employees were doing their jobs properly; the reports were largely intended for the TWPS executives, such as Daniel-Maurice Vallerey in the case of TWPS UK and Mike Sanchez in the case of TWPS Miami. I understand that the Claimants allege that if these reports were not forthcoming from the marketers, those at fault would be chastised using my name. I do not remember there being such a practice, although whether others did it without my knowledge is not something I can speak to.

58.

As with most companies in the Transworld group, TWPS UK held quarterly meetings. My recollection is that sometimes these were held together with TWPS Malaysia, as TWPS EMEAA meetings. These meetings would usually have been held in London. I would generally attend these meetings. The agenda would have been circulated in advance of the meeting and action points afterwards. I would often not read either of these; if there was something which needed to be brought to my attention, I would be briefed at the meeting and I would participate accordingly. This included running through individual business plans with individual marketers and Daniel Maurice-Vallerey, although I would not usually follow up on these afterwards. It is possible that during these meetings I discussed the importance of site visits with the marketers and while doing so I may also have given them instructions about site visits, but I do not recall any specific instances of doing so. My recollection is that such direct instructions to TWPS UK marketers would have been given by Daniel Maurice-Vallerey. I understand that the Claimants have made allegations about a TWPS UK meeting held on 7 October 2005. I do not have any specific recollection of this meeting.

59.

I understand that the Claimants have alleged that I approved new recruits for TWPS UK. My recollection is that I would not usually get involved in the hiring of employees at the level of marketers. I may have been informed and have approved the positions which needed to be filled. This is something I would have done for all companies within my group. I do not recall having participated in the decision as to the individuals who were eventually hired (or not) to fill those positions.

60.

I understand that the Claimants have alleged that I “set and controlled” bonus plans of TWPS UK marketers. I do not recall setting and controlling bonus plans. My recollection is that the bonus plans would have been set by the relevant company’s executives (in the case of TWPS UK, Daniel Maurice-Vallerey), although they would have been escalated to me for my approval as the ultimate owner of the company.”

The Claimants pleaded two emails dated 28 April 2005, an email dated 26 June 2005 from Mr Vallerey to the TWPS marketers and an email dated 5 October 2005 from Mr Vallerey to Mr Deuss himself: see paragraph 26. I have set out the principal text of the first three emails at [255] and [269]. In the fourth email Mr Vallerey wrote to Mr Deuss as follows:

“Please find attached the O3 Quarterly meetings documents:

- YTD performance analysis (per client and per marketer)

- Q3 Actuals vs. targets transactions on a per marketer and per product line (eb and EP) basis

- B2B segments (% by segment and countries)

- Referrals made and received by marketers

- Trends analysis

In addition to the above, the YTD financial results (eb and EP) referred to in the Meeting Agenda are the documents sent by Susan on Monday.”

I accept Mr Deuss’s evidence that he did not consider himself to be a director of TWPS and that he was not involved in its management of day to day affairs. I have reached this conclusion for the following reasons:

I accept that the question whether Mr Deuss was a de facto director is an objective one and that it is open to the Court to find that was a de facto director even if he did not believe himself to be one. I, therefore, test Mr Deuss’s evidence by reference to some examples of the documents upon which the Claimants relied. Having reviewed those documents, I take the view that the strongest evidence in support of the Claimants’ case that Mr Deuss was a de facto director related to his involvement in fixing salaries and introducing the bonus scheme. In particular:

My difficulty with assessing whether these documents provide clear evidence of directorial activity is that the Claimants provided no context for them. They would provide strong evidence that he was acting as a director if the Claimants had also established that the employees of TWPS (or whichever Transworld company handled HR matters) simply implemented his instructions. But they would carry a very different complexion if there were minutes of a meeting of the board of directors showing that they considered Mr Deuss’s proposal for a bonus scheme and exercised their powers in good faith for the benefit of the company to implement it. This would show no more than that he as the ultimate shareholder of both TWPS and FCIB wanted TWPS to adopt the scheme and that the board of directors exercised their independent judgment to do so.

Moreover, I have no further evidence about Ms Lanigan’s bonus. It may be that Mr Vallerey was doing no more than sheltering behind Mr Deuss’s name to avoid paying her a bonus and that her remuneration was considered by the Transworld HR team and then approved by the board of directors. Either way, there was no evidence whether she received the disputed bonus or not. In my judgment, this lack of context explains why it was so important for the Court to make findings about the corporate governance structure of TWPS.

In Smithton Ltd v Naggar (above) the Court of Appeal held that determining whether the individual was part of the corporate governance system was an important step in deciding whether he had assumed the responsibility of a director and that in the normal course it is vital that the trial judge make findings about the role which the defendant played in the running of the company in question: see [61]. In the present case, it is impossible for me to conclude that Mr Deuss’s email dated 8 December 2003 and his memo dated 1 July 2004 were directorial acts because there was no evidence about the corporate governance of TWPS at all. I was not even taken to the Memorandum and Articles of Association.

In summary, the Claimants’ case was based on a series of documents which showed that Mr Deuss had a significant influence on the activities of TWPS but principally at a very general level. But they did not undertake the additional analysis necessary to demonstrate that Mr Deuss could not have been acting in his capacity as the ultimate shareholder or a director of FCIB and was acting in his capacity as a director. This would have required a detailed comparison between his actions and statements and those of the de jure directors. The email dated 1 June 2004 (above) strongly suggests that TWPS had normal corporate governance and that the directors and Mr Vallerey directed its detailed operations. I therefore dismiss the allegation that Mr Deuss was a de facto director of TWPS.

But even if I am wrong and Mr Deuss was a de facto director of TWPS, I am satisfied that he did not give directions to any of the marketers who marketed TWPS’s services to the eleven MTIC Companies who had surviving claims against TWPS. I find, therefore, that he did not have a role in relation to that part of the affairs of TWPS about which the Claimants complain: see Re UKLI Ltd at [41](7). In my judgment, he cannot be held liable as a de facto director for TWPS introducing or referring individual customers to FCIB if he had no oversight or control over the individual conduct of the TWPS marketers who did so.

As I have stated, the Claimants did not plead or seek to prove that Mr Deuss gave instructions to the two statutory directors of TWPS or that they were accustomed to act at his directions. In their closing submissions, Mr Parker and his team complained that Mr Deuss did not adduce evidence from his sister, Ms Deuss, and relied on Mr Vallerey’s relationship as evidence that Mr Deuss was a shadow director. Even then they did not properly distinguish between the two concepts:

“Overall, the Claimants submit that a shadow director is someone whose wishes the directors as a board are accustomed to act upon, whereas where a person is giving instructions to the directors otherwise than as a board such that he acts as the boss, the appropriate concept is that of de facto director. Mr Vallerey was in no doubt that Mr Deuss was in charge of TWPS: see (1) 17 June 2005 email from Mr Vallerey which states that in relation to TWPS London and Miami “the two groups are now run in parallel by Mr Deuss” (Document List #37), and (2) a note of a Mr Deuss/ Mr Vallerey meeting on 16 October 2005 which records, under ‘12. Organisation’, “TWPS Miami and TWPS London are two separate entities, each reporting directly to [Mr Deuss]” (Document List #45).”

I dismiss the allegation that Mr Deuss was a shadow director of TWPS because the Claimants advanced no case that he gave directions to Mr Geerts and Ms Deuss or that they were accustomed to act on those directions and adduced no evidence from which I could properly draw that inference. Moreover, they made no attempt to distinguish between those documents which were intended to prove that he was a de facto director and those which were intended to prove that he was a shadow director. Finally, I attribute no weight to the decision not to call Ms Deuss given that she was not the subject matter of the pleaded case.

S.213

The Claimants’ Case

The Claimants advanced three S.213 claims: first, against TWPS for knowingly participating in the business of the individual MTIC Companies; secondly, against FCIB for knowingly participating in the business of TWPS; and, thirdly, against Mr Deuss also for knowingly participating in the business of TWPS. In the first claim the Claimants alleged that the MTIC Companies were carrying on business with intent to defraud creditors or for a fraudulent purpose and in the second and third claims they alleged that TWPS was carrying on business with intent to defraud creditors or for a fraudulent purpose.

By Application Notice dated 21 September 2020 Mr Hunt applied for relief under S.213 against FCIB and Mr Deuss but no such application was issued against TWPS. In any event, Mr Hunt had no authority to issue such an application because Freedman J held that the claims of the MTIC Companies could not be assigned. It follows, therefore, that the only place in which the Claimants have articulated the S.213 claim against TWPS is in the Particulars of Claim. There, they plead as follows in paragraph 7:

“(1)

The business of each of the MTIC Companies has been carried on with intent to defraud the creditors of, inter alia, those companies and/or other companies and for a fraudulent purpose and TWPS, FCIB and Mr Deuss were knowingly parties to its carrying on business in that manner.

(2)

Mr Hunt has accepted that TWPS is liable to make a contribution to the assets of each of the MTIC Companies but has not adjudicated on the proofs of debt of the MTIC Companies submitted in TWPS’ liquidation.”

No further particulars of these allegations are set out either in the body of the Particulars of Claim or in any of the individual Schedules for the individual MTIC Companies. As I understand their case, therefore, the Claimants relied on the same factual allegations and the same evidence in support of their case against TWPS under S.213. Mr Parker and his team certainly presented the case that way.

The Law

Chapter X of the IA 1986 contains a number of provisions relating to “Malpractice before and during liquidations”, “penalisation of companies and company officers” and “investigations and prosecutions”. S.213 is headed “Fraudulent Trading” and it provides as follows:

“(1)

If in the course of the winding up of a company it appears that any business of the company has been carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, the following has effect. (2) The court, on the application of the liquidator may declare that any persons who were knowingly parties to the carrying on of the business in the manner above-

mentioned are to be liable to make such contributions (if any) to the company’s assets as the court thinks proper.”

In Morris v State Bank of India [2003] BCC 735 Patten J identified three elements of the claim which had to be established in a passage which is widely quoted at [11]:

“There are therefore three elements to be established: (1) that the business of the company in liquidation has been carried on with intent to defraud the creditors of the company or for any other fraudulent purpose; (2) that the defendant sought to be made liable (in this case SBI) participated in the carrying on of the business of the company in that manner; and (3) that it did so knowingly: i.e. with knowledge that the transactions it was participating in were intended to defraud the creditors of the company or were in some other way fraudulent.”

S.213 is aimed at the carrying on of a business and not at individual transactions: see Re Gerald Cooper Chemicals Ltd [1978] Ch 262 at 267. It follows that not every creditor who is defrauded in the course of carrying on a business has a remedy under S.213: see Morphitis v Bernasconi [2003] EWCA Civ 289, [2003] Ch 552 at [46] (Chadwick LJ). In Harrington & Charles Trading Co Ltd v Mehta [2022] EWHC 2960 (Ch) Edwin Johnson J cited that passage before continuing as follows:

“358.

What I take from this extract is that Section 213 can be engaged in a situation where a creditor or creditors are shown to have been defrauded by a single transaction. This however has to occur in a situation where the business of the relevant company is being carried on with an intention to defraud creditors. It is not sufficient for a fraud to occur in the course of the business of a company. The pre-condition to the exercise of the power

under Section 213 is that the business of the company has been carried on with intent to defraud creditors of the company.

359.

All this however begs the question of what was the business of the Claimant Companies in the present case. Were the Claimant Companies engaged in legitimate business activities, in the course of which they happened to be used as vehicles for the Alleged Fraud? Can it be said that the business of the Claimant Companies was to engage in the Alleged Fraud? These are related questions which are also fact sensitive questions, for trial. As matters stand it seems quite clear to me that the Claimants (specifically the Liquidators) have a good arguable case that they are entitled to claim contributions from each of the Respondents pursuant to Section 213 of the 1986 Act.”

In London Capital Finance plc v Thomson [2024] EWHC 2894 (Ch) Miles J cited a number of the relevant authorities and stated that the case law does not seek to define or delimit the concept of fraud. He also stated that liability requires that a person has acted dishonestly and that the words “for any other fraudulent purpose” are broad in reach: see [1537] to [1545].

There is no requirement that the defendant must exercise a managerial function or control over the company or be an “insider”. In Bilta (HK) Ltd v Tradition Financial Services Ltd [2023] EWCA Civ 112, [2023] Ch 343 the Court of Appeal held that the words “any persons who were knowingly parties to the carrying on of the business” were not limited to those persons exercising management of control over a company. Lewison LJ (with whom Stuart-Smith and Falk LJJ agreed) held that outsiders or third parties could carry on the business of the company and he gave the following example at [93]:

“What must be established is that the company’s business (or a discrete part of that business), taken as a whole, had been carried on fraudulently. Whether that is established in any particular case is a question of fact. Mr Scorey submitted that if the defendant was carrying on his own business, he could not be said to be party to the carrying on of a different business. I do not agree. The extent to which a counterparty must be involved in the carrying on of the fraudulent business may depend upon the facts. Suppose that a manufacturer regularly supplies counterfeit designer clothes to a retailing company, knowing that the retailer will pass them off as genuine. It is, in my judgment, no misuse of language to describe the manufacturer as “party to the carrying on” of a fraudulent business, even though he exercises no managerial or controlling role within the retailing company; and the manufacturer may have other business activities that are not fraudulent. The manufacturer knows about the retailer’s fraudulent business and is actively participating in it in the sense of furthering and facilitating it. In my judgment, the allegedly odd results are more apparent than real.”

Lewison LJ also accepted that it was a precondition of liability that business had been carried on with fraudulent intent and that incidental frauds committed in the course of a business were not enough: see [112]. The Supreme Court dismissed an appeal against the decision: see [2025] UKSC 18, [2025] 2 WLR 1015. Lord Briggs JSC stated as follows at [25] and [26]:

“25.

We note certain features of the language which limit the circumstances in which liability may be incurred under section 213. First, the person to incur liability must be a party to the carrying on by the company of a fraudulent business and not merely involved in a one-off fraudulent transaction, unless the fraud is sufficient evidence on its own of the carrying on of a fraudulent business: In re Murray-Watson Ltd (unreported) 6 April 1977, Oliver J; Morphitis v Bernasconi [2003] EWCA Civ 289; [2003] Ch 552, Chadwick LJ para 46. Secondly, being party to the carrying on by the company of a fraudulent business does not extend to a mere failure to advise: see In re Maidstone Buildings Provisions Ltd [1971] 1 WLR 1085, in which Pennycuick V-C held that the failure of a company secretary to give advice to the company's directors did not bring him within the ambit of section 332 of the Companies Act 1948, a predecessor of section 213 the IA 1986: p1092. Thirdly, the person liable must have had an active involvement in the carrying on of the fraudulent business by the company: In re Maidstone (above); R v Miles [1992] Crim LR 657.

26.

Subject to those limitations, there is nothing in the language of section 213(2) which restricts the scope of the provision to directors and other "insiders" who were directing or managing the business of the company. The natural meaning of the statutory words – "any persons who were knowingly parties to the carrying on of the business" of the company for any fraudulent purpose – is wide enough to cover not only such "insiders" but also persons who were dealing with the company if they knowingly were parties to the fraudulent business activities in which the company was engaged. Such persons could include those who transacted with the company in the knowledge that by those transactions the company was carrying on its business for a fraudulent purpose.

Nevertheless, some positive acts of assistance are required for participation although a person may participate by involvement in a transaction which is not itself fraudulent: see London Capital Finance plc v Thomson at [1548]. For example, in Bilta (UK) Ltd v NatWest Markets plc (above) Snowden J (as he then was) held that traders were liable for turning a blind eye to MTIC fraud whilst causing RBS to enter into lawful carbon credit trades with them: see [192].

It is not necessary for the liquidator to prove that the participant knew that a fraud was being carried out or the details of that fraud and knowledge in this context includes blind-eye knowledge. It is also enough for the liquidator to prove that the participant knew that their conduct was connected with a fraud (such as assisting the company to cover it up). Finally, it is necessary for the liquidator to establish that the participant had either the subjective intend to defraud or reckless indifference whether the creditors have been defrauded: see London Capital Finance plc v Thomson at [1550] to [1559] citing Re JDG Group plc [2023] EWHC 775 (Ch).

In Re Overnight Ltd [2009] EWHC 601 (Ch), [2009] Bus LR 1141 the issue for the Court was whether time for bringing a claim under S.213 ran for the purposes of limitation from the date of presentation of the winding up petition or from the appointment of a liquidator or from some later date. By coincidence, the liquidator in that case was Mr Goldfarb and Sir Andrew Morritt C accepted his argument that time ran from the date of the winding up order for the following reasons at [22] to [24]:

“22.

Section 213 creates a statutory cause of action. As I have indicated, it is conceded that section 9 of the Limitation Act 1980 applies to that cause of action. It follows that if the application issued on 30 November was more than six years after the statutory cause of action accrued, then it was out of time. The ingredients of the statutory cause of action must be ascertained from the statute. It appears to me that section 213 imports two essential conditions quite apart from the need to prove that the business of the company had been carried on with intent to defraud creditors. Those two essential conditions are: (1) that the company is in the course of being wound up and (2) that the application is made by the liquidator.

23.

The need to satisfy the first condition is clear from the opening words of subsection (1) and the decision of the House of Lords in R v Schildkamp [1971] AC 1, a decision on the comparable provisions of section 332 of the Companies Act 1948. The need to satisfy the second, namely, the application is being made by the liquidator, is apparent from the express term of section 213(2). Counsel for Mr Andreous contends that the terms of 129(2) show that the first condition was satisfied as from the time the petition on which the order was made was presented, that the date of presentation is the date of the winding up is deemed to have commenced.

24.

I do not accept that submission. The need to deem the commencement of the winding up to be the date when the petition is presented arises from the terms of, for example, sections 127 and 128 of the 1986 Act. Without some such provision, the presentation of a petition would invite a race by creditors to grab such assets of the company as they could find which is the exact opposite of the purpose of a winding up. But the very fact that it is necessary, for some purposes, to deem the winding up to commence at a time before the winding up order is made shows clearly that as of that date for other purposes the company is not “in the course of being wound up” for the purposes of section 213.”

The judge also rejected the argument that “liquidator” included a provisional liquidator: see [25] to [34]. In Bilta (UK) Ltd v Transition Lord Briggs confirmed that his analysis was correct and that the limitation period for a claim under S.213 is six years from the date of the winding up petition. He stated as follows at [17]:

“Because the application under section 213 can be made only by a liquidator in the course of the winding up of the company, the six-year limitation period under section 9 of the Limitation Act 1980 runs from the date of the winding up order or when the company goes into voluntary liquidation. As the winding up orders of Bilta, Weston and Vehement were made more than six years before the claim form was issued on 8 November 2017 the claims by their liquidators under section 213 are statute-barred, while the claims of the liquidators of Nathanael and Inline are not, because their winding up orders were made on 19 March 2012 and 8 June 2015.”

Mr Scott submitted that whatever the merits of the S.213 claims by the MTIC Companies, TWPS is not liable to them because none of them have issued an application under S.213(2) and that is one of the two conditions of liability. He argued that the cause of action was not complete until or unless the liquidators had issued an Application Notice in accordance with S.213(2) and that since time began to run when each of the MTIC Companies was ordered to be wound up or went into voluntary liquidation (and the last to do so was in 2015) all of the claims were hopelessly time-barred and the MTIC Companies could not cure this defect by issuing an Application Notice now. This gave rise to the Application Issue (as I have termed it above).

Mr Parker contested these submissions on the basis that they involved a logical inconsistency. How could time begin to run for limitation purposes, he asked rhetorically, if the cause of action was not complete until the issue of an Application Notice? He relied on Zedra Trust Co (Jersey) Ltd v THG plc [2024] EWCA Civ 158, [2024] Ch 318 and Re Farmizer (Products) Ltd [1997] 1 BCLC 589 (Blackburne J) as authority for the proposition that the cause of action under S.213 was complete and the MTIC Companies were entitled to relief once the facts upon which they relied had taken place and their cause of action did not depend either on the issue of an Application Notice or the Court making a declaration under S.213(2).

On the Application Issue I accept Mr Scott’s submissions and I reject those of Mr Parker. Whether one characterises the issue of the Application Notice as an element of the cause of action or a condition which must be satisfied before a liquidator may bring a claim for a contribution under S.213 probably does not matter much. Either way, it is a statutory condition which must be satisfied before the Court may make a declaration under S.213(2). Overnight (above) is clear authority for that proposition and I follow it.

Moreover, there was no inconsistency in Mr Scott’s argument. The issue of the Application Notice and the satisfaction of the condition in S.213(2) is the event which stops time running and entitles a liquidator (as opposed to the company itself) to claim relief. It is the statutory equivalent of the issue of a Claim Form under CPR Part 7 and the Insolvency Rules 2016 provide for the issue and service of an Application Notice. Indeed, rule 12.1 provides that the Civil Procedure Rules shall apply with any necessary modification. But it is still a condition which must be satisfied before a claim can be made.

In Overnight, Mr Goldfarb had issued an Application Notice just before the sixth anniversary of the winding up order: see [3]. The reason why Sir Andrew Morritt C considered the condition in S.213(2) to be relevant to the issue which he had to decide was because it showed that only liquidators can bring a claim under S.213 and then only when they have issued an Application Notice. It followed, therefore, that as a matter of purposive construction time could not begin to run until the company had been wound up and put into liquidation.

Furthermore, I gain no assistance from either Zedra Trust or Re Farmizer. In Zedra Trust the Court of Appeal held that the limitation period in section 9 of the LA 1980 applied to an unfair prejudice petition under section 994 of the Companies Act 2006 and, as such, it could be said to be entirely consistent with Overnight where it was conceded that section 9 applied to S.213: see [22] (above). But in any event, Overnight was not cited to the Court or referred to Lewison LJ (with whom Arnold LJ agreed) or by Snowden LJ who gave a concurring judgment. Furthermore, in Overnight itself Sir Andrew Morritt distinguished Re Farmitzer but held that it supported his conclusion: see [29] to [31]. I do not, therefore, consider it further. Accordingly, I find in favour of the Defendants on the Application Issue.

Mr Scott also submitted that the claims by the liquidators of the MTIC Companies were not debts provable in the liquidation of TWPS because none of them had issued Application Notices or complied with the condition in S.213. He and his team developed a complex argument in their opening submissions: see D1, O121 to O128. They took this point in anticipation of an argument which Mr Parker and his team might take the point that the General Rolling Stock principle stopped time running for the purpose of S.213 claims. But Mr Parker and his team did not take that point and it is unnecessary for me to decide it.

Findings

I find that all of the MTIC Companies were carrying on business with the intent to defraud their principal creditor, HMRC, with the exception of JDG. I make this finding based on the individual findings of breach of fiduciary duty which I have made in section G (above). In the case of JDG I have found that Mr Bhatia turned a blind eye to MTIC fraud and based on this finding I also find that JDG was carrying on business with intent to defraud its principal creditor, HMRC. I note that in Re JDG Group Ltd [2023] EWHC 775, [2023] BCC 748 Sir Anthony Mann upheld the decision of ICC Judge Agnello KC that Mr Bhatia had actual knowledge of the MTIC fraud. I take some comfort from this decision. But my decision was based on the evidence presented to me alone.

However, I dismiss the allegation that TWPS was a party to the carrying on of the MTIC Companies business. I do so based on the individual findings of assistance which I made in section J(3) and J(4) (above). This issue must be examined on an individual basis in relation to each MTIC Company and I am not satisfied that TWPS participated in the business of each MTIC Company by introducing it to FCIB, certifying documents, providing letters of good standing or their EPR numbers in lieu of such a letter (if, indeed, they did so) or making visits to their premises and completing site visit reports.

There was no contractual relationship between the individual MTIC Companies and TWPS and there was no evidence that the TWPS marketers were involved in any of the individual trades which gave rise to the VAT Claims. I have also dismissed the allegation that TWPS marketers were involved in any ongoing monitoring of the MTIC Companies (other than chasing for EDD documents). I am prepared to accept that it would be possible for an introducer to be held liable under S.213 and that it could be held liable even if the only active steps which it took were entirely innocent ones. But the issue is one of fact and degree to be decided on the individual facts and in the present case I am not satisfied that the TWPS marketers had sufficient involvement in the activities of any of MTIC Companies to be held liable under S.213.

But even if I am wrong, I find that Mr Deuss did not know that the MTIC Companies were carrying on business with the intent to defraud HMRC or turn a blind eye to them doing so. Again, I base this conclusion on the individual findings which I have made in relation to Mr Deuss’s state of mind in section H (above). In particular, I have dismissed the allegations that Mr Deuss dishonestly incorporated FCIB to pretend that it was an offshore bank and that he used FCIB and TWPS to create or facilitate the creation of the existence of networks of companies engaged in MTIC fraud: see [497], [498] and [561]. These were allegations of a fraudulent design and deliberate dishonesty and, in my judgment, there was no evidence to support them. As Mr Scott submitted in closing, the Claimants had to put their case this high to get their S.213 claims off the ground and they signally failed to prove these allegations.

In any event, I have held that Mr Deuss was not a de facto or shadow director of TWPS and even if I had found that he turned a blind eye to the fraud of the MTIC Companies, I would not have held that his state of mind should be attributed to TWPS. Since no allegations of dishonesty were made against the TWPS marketers and the allegation against Mr Vallerey was not pursued, I dismiss the Indirect Claims of the liquidators of the MTIC Companies under S.213 because I find that TWPS did not knowingly participate in the business which they carried on with intent to defraud HMRC.

Finally, I have accepted Mr Scott’s argument on the Application Issue and I hold that no valid claims were made against TWPS by the liquidators of the MTIC Companies under S.213 because they failed to issue Application Notices seeking a declaration under S.213(2) on behalf of the individual MTIC Companies at any time during the six years after each company went into liquidation and have still not issued such Application Notices. Because no Application Notices have ever been issued, it is unnecessary for me to decide whether the General Rolling Stock principle applies to S.213 claims brought by the liquidator of one company in liquidation against another company in liquidation and the liquidation of TWPS stopped time running for those claims because, in my judgment, no valid claims have ever been made.

Limitation

The Claimants’ Case

Both Defendants took a limitation defence in their Defences and in the Reply dated 20 April 2023 the Claimants relied on S.32 in respect of all of their claims. As Mr Scott pointed out to Mr Hunt in cross-examination, the Claimants had relied on their case to obtain an order for service out and Mr Hunt had made a witness statement verifying it. However, by amendments dated 13 September 2024 the Claimants amended the Particulars of Claim to advance the case set out below and by amendment dated 4 December 2024 they amended to strike out their original case from the Reply. By trial their case was set out in the Particulars of Claim at paragraphs 42 and 43:

“42.

(1) No limitation defence has been or is being taken by TWPS or its liquidator in respect of the claims against it by the MTIC Companies, and it is not open to the Defendants themselves to raise a limitation defence to the claims of the MTIC Companies and their liquidators on TWPS; and (2) In the circumstances set out below, none of the MTIC Companies discovered or could with reasonable diligence have discovered TWPS’ fraud prior to 22 September 2008, 6 years prior to the date of TWPS’ liquidation.

43.

(1) The MTIC Companies went into liquidation on dates between 22 July 2005 and 15 June 2015. At the time of their liquidation, none of the MTIC Companies had the requisite knowledge to bring any claims against TWPS.

(2)

The knowledge of the dishonest directors of each of the MTIC Companies is not to be attributed to that company.

(3)

It follows that in respect of those companies which went into liquidation after 22 September 2008, they could not have discovered TWPS’ fraud before 22 September 2008;

(4)

As regards those MTIC Companies which went into liquidation prior to 22 September 2008, those liquidators could not with reasonable diligence have discovered TWPS’ fraud prior to 22 September 2008:

(a)

Save for the limited instances adverted to in the Schedule for each of the MTIC Companies, a review of the company’s books and records would not have revealed TWPS’ involvement or revealed only that TWPS had a role in the opening of the MTIC Company’s FCIB account;

(b)

The liquidator of the MTIC Company could not have known and could not with reasonable diligence have discovered: (i) that TWPS knew that MTIC fraud was prevalent in the T & C sector nor that TWPS was targeting companies in that sector despite in that sector despite such knowledge; (ii) that TWPS knew that once onboarded such clients’ activities were not being monitored properly or at all, as set out above;

(iii)

that Mr Deuss had any connection to TWPS (let alone as set out above that he was a de facto director of TWPS, still less the degree of control he exercised over TWPS (as set out above));

(5)

Such facts were only discovered following the receipt by Mr Hunt of CD-Roms from HMRC, described below. Mr Hunt was appointed as liquidator on 17 November 2014;

(6)

On 25 September 2015, Mr Hunt received three CD-Roms of documents belonging to TWPS from HMRC. Based on the information contained on those CD-Roms, Mr Hunt prepared an annual progress report to the creditors of TWPS on or around 16 November 2016 regarding the status of his investigations and the potential claims against TWPS, FCIB and Mr Deuss;

(7)

(a) Until at the earliest the receipt of the three CD-Roms from HMRC, TWPS and the Griffins MTIC Companies did not have, and could not with reasonable diligence have obtained, the requisite knowledge to bring any claims;

(b)

Until Timothy Bramston’s appointment as liquidator of Notebook Express Limited (“Notebook") on 6 October 2015, Notebook did not have, and could not with reasonable diligence have obtained, the requisite knowledge to bring any claims;

(c)

Until receipt of the annual progress report dated 16 November 2016, the non-Griffins MTIC Companies other than Notebook did not have, and could not with reasonable diligence have obtained, the requisite knowledge to bring any claims;

(8)

Accordingly time did not start to run for the claims of the MTIC Companies against TWPS until at the earliest on 25 September 2015, less than 6 years prior to the issue of these claims.”

I understood the Defendants to accept paragraphs 43(1) and 43(2). I also understood them to accept paragraph 43(3) subject to one qualification, namely, that three of the remaining companies (Eliyon, Gold Digit and JDG) had Uninvolved Directors who were not involved in the MTIC frauds committed by the MTIC Directors themselves. Those directors were as follows:

The Claimants’ answer to this allegation is set out Schedules A7, A9 and A10. In summary, the Claimants pleaded that Ms Breitenfeld knew about or was complicit in the relevant MTIC fraud and that Ms Jones and Ms Joti Bhatia were not active directors. No case is pleaded in relation to Ms Suman Bhatia. In their closing submissions Mr Parker and his team made the blanket submission that: “The ‘Uninvolved Directors’ were not “innocent” and that any director of an MTIC Company was either “(a) involved in perpetrating the fraud or (b) entirely abrogated their duties as a director”.

The Law

The famous decision of the House of Lords in Government of India v Taylor [1955] AC 491 is generally cited as authority for the proposition that claims by a foreign state to recover taxes due under its own laws are unenforceable in an English Court. However, as Mr Scott and his team pointed out in their opening submissions, the issue arose because the liquidator of an English company had refused to admit the relevant claims to proof. Viscount Simmonds (with whom Lords Reid and Morton agreed) stated as follows at 509:

“I conceive that it is the duty of the liquidator to discharge out of the assets in his hands those claims which are legally enforceable, and to hand over any surplus to the contributories. I find no words which vest in him a discretion to meet claims which are not legally enforceable. It will be remembered that, so far as is relevant for this purpose, the law is the same whether the winding up is voluntary or by the court, whether the company is solvent or insolvent, and that an additional purpose of a winding up is to secure that creditors who have enforceable claims shall be treated equally, subject only to the priorities for which the statute provides. It would be a strange result if it were found that the statute introduced a new category of creditors to compete with those who alone, apart from it, could enforce their claims.”

“I am, on the other hand, satisfied that the case of a statute barred debt presents a very close analogy and that in concluding that the present claim cannot be admitted your Lordships are assisted by such cases as In re Lorillard and In re Art Reproduction Ltd which were in my opinion rightly decided.”

Lords Keith and Somervell delivered concurring judgments. In Re Art Productions Ltd [1952] Ch 89 (which Viscount Simmonds cited above) a liquidator in a solvent voluntary liquidation rejected two claims on the basis that they were statute-barred. On appeal to the High Court it was argued that different rules should apply to compulsory and voluntary liquidations. Wynn-Parry J rejected that argument and upheld the liquidator’s decision. In doing so he cited and relied on Re General Rolling Stock. He stated as follows at 94:

“In In re General Rolling Stock Co, James L.J. quoted section 98 of the Act of 1862 and proceeded: "A duty and a trust are thus imposed upon the court, to take care that the assets of the company shall be applied in discharge of its liabilities. What liabilities? All the liabilities of the company existing at the time when the winding-up order was made which gives the right. It appears to me that it would be most unjust if any other construction were put upon the section." Mellish L.J. said: "It appears to me to be the clear meaning of that section, that the assets should be applied in satisfaction of all the liabilities which existed at the time of the winding-up order."

In Buckley on the Companies Acts (12th ed.), at p. 634, in the notes to section 316, it is said: "But, of course, a debt barred at the date of the order cannot be proved"; and for that proposition there is cited Mitchell's Claim, which, in my judgment, bears out that proposition; for in that case it appears that the proposition to the contrary was not even argued. The note continues: "and, semble, cannot even in a solvent voluntary liquidation properly be paid against the wishes of the contributories." Mr. Sykes, for the liquidator, contended that that statement in its present form was, if anything, too cautious, and ought to read: "and, semble, cannot even in a solvent voluntary liquidation properly be paid unless the contributories consent." In my judgment, that would be a correct statement of the law.”

In my judgment, therefore, Mr Hunt had no power to admit to proof claims barred by limitation and it is not an answer to say that none of the creditors of TWPS objected to his decision or took legal proceedings to challenge it. Moreover, the issue is not whether Mr Hunt acted reasonably by admitting the claims to proof. It might well be difficult for a liquidator to decide whether a claim is statute-barred and quite reasonable to admit the proof and value it at £1 for voting purposes. But that does not turn an unenforceable claim into an enforceable one, if the matter ultimately has to be determined by the Court on the facts. The Court cannot be bound by a decision which Mr Hunt had no power to make.

In Re RJH Stanhope Ltd [2020] EWHC 2808 (Ch) His Honour Judge Saffman (sitting as a Judge of the High Court) reached the same conclusion. In that case the liquidators of a company adjudicated on a claim against two directors and assessed the claim at £87,231. They obtained judgment in default against one director and there was no challenge to the adjudication itself. They then brought misfeasance proceedings against the second director under section 212 of the IA 1986. The judge rejected the argument that he was bound by the adjudication on the basis of the rule in Hollington v Hewthorn and also because the function of the Court was different. After reciting the liquidators’ arguments he set out his reasoning at [90] to [92]:

“90.

All these are powerful arguments for concluding that the adjudication is indeed determinative and binds the court. However, it appears to me that it if I were to conclude that it was, that would be contrary to the case law. Indeed, in this case it is not a question of the court not being bound by the decision of a previous judge who has heard evidence. This is a case where the adjudication has been made essentially as an administrative step without necessarily the benefit of any representations by a person directly affected, namely John. If the position is as stipulated in Rogers I asked myself rhetorically how much more so it must be the position where the decision in issue is not one by judge after a trial but merely an administrative step taken by a liquidator?

91.

Furthermore, I do not think that concluding, as I do, that the adjudication is not determinative undermines the importance of Rule 14.8 and the need for people to comply with it. The position in this case is that I am presented with a specific claim under section 212. That requires a consideration of what it is just to order to be repaid, if anything. In my view, that means looking at the matter on a clean slate basis. The jurisprudence does not point in favour of treating the adjudication of £87,000 odd as the starting point and simply considering what it is just to deduct from it, if anything. That it seems to me would be to undermine the integrity of the principle which requires me to apply a judicial independent assessment as to what loss has been sustained by the Company by virtue of John’s breaches.

92.

Further, the purpose of the liquidators’ adjudication and the courts obligation are different. The adjudication represents what the liquidators (and perhaps Ms Birkhead) accept is the extent of the Company’s debt to Ms Birkhead. The court’s obligation is to assess the loss to the Company. In short, the adjudication may be binding on the Company and Ms Birkhead but the question of whether it is binding on the court is a different one.”

Mr Parker was forced to submit that Stanhope was wrongly decided. But it is consistent with the general principle set out in Government of India v Taylor. It is also consistent with the decision of the Supreme Court of South Australia in The Duke Group Ltd v Arthur Young (No 2) (1991) 9 ACLC 380 (affirmed at (1991) 9 ACLC 599). In that case the defendants in an accountants negligence case brought by a company in liquidation applied for permission to amend to allege that certain debts upon which the liquidators relied as evidence of their loss were not liabilities of the company. Perry J held that the defendants were entitled to challenge the claims (even though the partnership was a creditor in the liquidation for a small sum). He held that the way in which the liquidator discharged his responsibilities was res inter alios acta at [53] to [55]:

“53.

The manner of discharge by the liquidator of his responsibilities with respect to admission or rejection of proofs of debt is, for the purposes of these proceedings, res inter alios acta.

54.

Observations such as that made by Kitto J in Motor Terms Co. Pty. Ltd. v. Liberty Insurance Ltd. (in liquidation) (supra) that "a creditor's right to recover his debt by ordinary legal proceedings is taken from him at sequestration ..." (116 CLR p 180) must be regarded correctly to identify the exchange of a right of action at the suit of a creditor against the debtor for a right to prove in the debtor's liquidation. But that exchange of rights does not speak to the question whether or not the debt continues to exist at Common Law.

55.

It seems to me that the fact that the Court may, pursuant to s.137(1) of

the Code, give leave to a creditor to proceed by way of ordinary action in the Courts against a company in liquidation, points very strongly to the fact that the existence of a debt at Common Law survives an order for liquidation.”

The judge also went on to consider the argument that the ability to quantify their own damages would place liquidators in a position of conflict and although he did not determine this issue it is helpful to look at the way in which he framed the argument at [56] and [57]:

“56.

Mr Lander submitted that to yield to the plaintiff's argument would result in a situation where the liquidator of the plaintiff could, by his own decision, determine the quantification of this part of the damages, and that this would place him in a position of conflict of interest. 57. There is much to be said for that contention, and it is not answered by reference to the fact that the liquidator is obliged to act judicially. On the contrary, it is highly desirable that, given that he is obliged to act judicially, the appearance of impartiality is not affected by the creation of a situation in which he is faced with an apparent conflict of interest. However, I do not determine this aspect of the matter by reference to that consideration.”

In my judgment, Stanhope was correctly decided for both of the reasons which the judge gave. It is trite law that a decision by another tribunal between different parties is not binding on a third party. A liquidator’s decision is not binding on this Court or parties who are not creditors either as a matter of precedent or by any form of issue estoppel. It follows, therefore, that it will only bind this Court and the Defendants as matter of insolvency law or if the rules for assessing equitable compensation or a contribution under S.213 require the Court to assess damages by reference to a liquidator’s decision to admit a claim to proof.

The Claimants cited no authority for the first proposition and, in my judgment, it is inconsistent with the general principle in Government of India v Taylor. I agree with both His Honour Judge Saffman in Stanhope and Perry J in Duke Group Ltd v Arthur Young that the Court is not required to accept the correctness of a liquidator’s adjudication as a matter of law even in an action brought by or against a creditor. In particular, I agree that since the third party defendants in a claim for damages or equitable compensation or for a contribution under S.213 are not seeking to challenge the liquidator’s decision it should be regarded as res inter alios acta or legally irrelevant and the Court should start with a clean slate. Perry J placed particular reliance on the fact that the relevant insolvency legislation preserved the right of a creditor to bring proceedings at common law with the leave of the Court and so do I: see S.130(3).

Finally, the Claimants cited no authority for a rule or principle for the assessment of damages, equitable compensation or a contribution that the Court must accept a claimant’s own assessment of his damage even if it is made by a liquidator in deciding whether to admit a claim to proof or adjudicating upon that claim. I am prepared to accept that the Court could accept such an assessment if satisfied that it is reasonable in the same way that the Court may accept that a sum paid by a claimant to a settle a third party claim is the measure of their loss, if it is reasonable. Biggin & Co Ltd v Permanite Ltd [1951] 2 KB 314 is still the leading authority for the proposition that where a claimant in subsequent proceedings has made a payment to settle a claim “they can recover this amount as damages from the now defendant provided that the settlement represented a reasonable figure”: see McGregor on Damages 22^nd ed (2024) at 22—058.

It follows from this analysis that I reject the Claimants’ case that it is not open to the Defendants to raise a limitation defence or, more accurately, to challenge Mr Hunt’s own decision not to take a limitation defence and to ask the Court to determine whether TWPS had a limitation defence to any of the Indirect Claims. However, I also accept that it is open to the Court to accept Mr Hunt’s decision not to take a limitation defence as a short cut to determining that is provided that he is able to satisfy the Court that this decision was a reasonable one. When I come to decide the facts below, I consider that issue first before going on, if necessary, to decide the S.32 Issue.

S.32 is headed: “Postponement of limitation period in case of fraud, concealment or mistake.” For the purposes of this action, the only relevant part of the section is S.32(1) and it provides as follows:

“(1)

Subject to subsections (3) , (4A) and (4B) below, where in the case of any action for which a period of limitation is prescribed by this Act, either— (a) the action is based upon the fraud of the defendant; or (b) any fact relevant to the plaintiff's right of action has been deliberately concealed from him by the defendant; or (c) the action is for relief from the consequences of a mistake; the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it. References in this subsection to the defendant include references to the defendant's agent and to any person through whom the defendant claims and his agent.”

In Upham v HSBC plc [2024] EWHC 849 (Comm) Bright J described the law as both simple and well-established. Subject to one qualification, I accept that this is correct and I gratefully adopt his summary of the law at [586]:

“(1)

The burden of proof in establishing their case under section 32 was on the Claimants: Paragon Finance plc v D B Thakerar & Co [1998] EWCA Civ 1249; [1999] 1 All ER 400, per Millett LJ at p. 418b-d. This is a passage cited as “authoritative” by the majority in the Supreme Court in Test Claimants in FII Group Litigation v HMRC [2020] UKSC 47, at [203] per Lord Reed PSC and Lord Hodge DPSC; see also [209(2)], [213(16)].

(2)

Discovery of the fraud, for the purposes of section 32(1), means knowing that there is a worthwhile claim, i.e., having sufficient confidence in the facts it is necessary to allege to justify embarking on the preliminaries to issuing proceedings: Gemalto Holdings BV v Infineon Technologies AG [2022] EWCA Civ 782, per Sir Geoffrey Vos MR, in particular at [45] and [53], applying in the context of fraud the reasoning in Test Claimants in FII Group Litigation v HMRC (above) at [192]-[193], [196] and [213(14)].

(3)

The requirement of “reasonable diligence” for the purposes of section 32(1) means that the Claimants (the burden being on them) must show that they could not have discovered the fraud (in the sense just explained) without “exceptional measures which they could not reasonably have been expected to take”: see again the “authoritative” passage from the judgment of Millett LJ in Paragon Finance plc v D B Thakerar & Co.

(4)

Although not necessary, it can be useful to consider whether, and if so when, something happened to put the Claimants on notice of a need to investigate: OT Computers v Infineon Technologies [2021] EWCA Civ 501, per Males LJ at [47]. This is sometimes referred to as the “trigger” for investigations, and in many cases can be identified when it is objectively apparent that something has gone wrong, which ought to prompt the Claimants to ask "why?" and investigate accordingly: Granville Technology Group Ltd v Infineon Technologies AG [2020] EWHC 415 (Comm), per Foxton J at [48].”

The one qualification which I would make to this summary concerns proposition (2). There are conflicting decisions whether the test for fraud is the “statement of claim test” rather than the “worthwhile claim test” above. In Loreley Financing (Jersey) No 30 Ltd v Credit Suisse Securities (Europe) Ltd [2023] EWHC 2759 (Comm) Cockerill J described the debate at [150] to [152] (original emphasis):

“150.

Discovery can in some cases create a debate. Two different "tests" or points in time have been discussed in the authorities, namely the point at which the claimant had (or would acting with reasonable diligence have had): (a) sufficient knowledge to plead its claim ("the Statement of Claim Test"); and (b) sufficient knowledge " to justify embarking on the preliminaries to the issue of a writ " or " in the sense of recognising that a worthwhile claim arises " ("the Worthwhile Claim Test").

151.

The cases in which there is a difference between the two will be rare: In Gemalto Holdings BV v Infineon Technologies [2022] EWCA Civ 782 Sir Geoffrey Vos MR observed at [45]: " there is unlikely in most cases, as in this case, to be a real difference between the application of the statement of claim test and the [worthwhile claim] test. Indeed, the statement of claim test is, perhaps, little more than a gloss on the [worthwhile claim] test ".

152.

The Statement of Claim Test which the parties have agreed that I should apply in this case requires that the claimant is in a position (i.e. has sufficient actual or constructive knowledge) to plead a complete cause of action, which in fraud cases entails the critical allegations that a representation has been made, that it was false and that the representor knew it to be false: see Barnstaple Boat Co. v Jones [2007] EWCA Civ 727 at [34] ; Bilta (UK) Ltd v SVS Securities plc [2022] BCC 833 at [31(7)(h)].”

Cockerill J also addressed the question of which version of the case must be known in order to trigger the running of time and, after considering the decision of the Court of Appeal in Seedo v Gamal and Salfiti [2023] EWCA Civ 330, she concluded that the issue was not cut and dried: see [153] to [155]. In Super Fast Trading Ltd v The Governor and Company of the Bank of Ireland [2025] EWHC 871 Dame Clare Moulder DBE noted that Sir Geoffrey Vos MR had left open the question whether the statement of claim test applied in fraud cases, Seedo had not been cited to Bright J and that she was bound by authority to apply that test rather than the worthwhile claim test. She stated as follows at [98] and [99] (original emphasis):

“98.

However it appears that the judge in Upham was not referred to Seedo v El Gamal [2023] EWCA Civ 330 and referred only to Gemalto. Further I note that in Gemalto it was said that "if the putative claim would be struck out as not disclosing a cause of action, it would be right to say that the claimant had not discovered that it had a worthwhile claim". Accordingly when Bright J referred to a " worthwhile claim " as being "having sufficient confidence in the facts it is necessary to allege" that would mean having sufficient confidence to allege that a representation has been made, that it was false and that the representor knew it to be false. It is for that reason that there may not be a difference in most cases. However on the authorities which are binding on this Court I proceed on the basis that the appropriate test is the Statement of Claim test.

99.

I further note that in order to plead fraud: "… The claimant does not have to plead primary facts which are only consistent with dishonesty. The correct test is whether or not, on the basis of the primary facts pleaded, an inference of dishonesty is more likely than one of innocence or negligence. As Lord Millett put it, there must be some fact 'which tilts the balance and justifies an inference of dishonesty'. At the interlocutory stage, when the court is considering whether the plea of fraud is a proper one or whether to strike it out, the court is not concerned with whether the evidence at trial will or will not establish fraud but only with whether facts are pleaded which would justify the plea of fraud. If the plea is justified, then the case must go forward to trial and assessment of whether the evidence justifies the inference is a matter for the trial judge…". (Flaux J in JSC Bank of Moscow v Kekhman [2015] EWHC 3073 (Comm) at [20] referred to in the White Book at 16.4.4) [emphasis added].”

In almost all of the authorities (including Gemalto and Super Fast Trading) the Court has observed that in most cases it makes no difference which test applies. However, until the issue is resolved by the Court of Appeal, I prefer to follow Super Fast Trading on this issue and to apply the statement of claim test. I also apply the test for pleading fraud which the judge adopted at [99]. Finally, this is not a case analogous to Loreley, where the claimant has brought some good and some bad claims. This is a case in which I have dismissed the entire claim but have nevertheless gone on to decide the limitation issue. In my judgment, the appropriate course is to assume that the Claimants had succeeded on the facts on both the dishonest assistance and S.213 claims and I adopt this course.

Further, one question which Bright J was not required to address in his summary but which arises in the present case is what assumptions (if any) the Court should make about the directors or officers of companies which go into administration or liquidation. In OT Computers Ltd v Infineon Technologies AG [2021] EWCA Civ 501, [2021] QB 1183 the Court of Appeal held that S.32 did not require the Court to treat the company as if it had been continuing to trade when it had gone into liquidation. After citing Adams v Bracknell Forest BC [2004] UKHL 29, [2005] 1 AC 76 Males LJ stated the following principles at [59] to [61]:

“59.

In my judgment a similar approach applies to section 32. The section requires an objective standard (what the claimant could have discovered with the exercise of reasonable diligence) but what assumptions are appropriate in the case of a claimant from whom wrongdoing has been deliberately concealed and the degree to which they reflect the actual situation of that claimant will depend upon why the law imports an objective standard. Here, the purpose of the section is to ensure that the claimant—the actual claimant and not a hypothetical claimant—is not disadvantaged by the concealment. In achieving that purpose it is appropriate to set an objective standard because it is not the purpose of the law to put a claimant which does not exercise reasonable diligence in a more favourable position than other claimants in a similar position who can reasonably be expected to look out for their own interests. Rather, claimants in a similar position should be treated consistently. However, a claimant in administration or liquidation which is no longer carrying on business is not in a similar position to claimants which do continue actively in business and it is unrealistic to suggest otherwise.

60.

Mr Jowell protested that it is necessary to treat a claimant in administration or liquidation as if it were still carrying on business in order to achieve certainty, and thereby avoid injustice, for defendants who might otherwise be exposed to claims by companies in administration or liquidation many years after the event. However, as I have explained, an element of uncertainty is inherent in section 32. It is, moreover, unnecessary to be too sympathetic to defendants who have committed fraud (section 32(1)(a)) or who have deliberately concealed wrongdoing (section 32(1)(b)) and who, if they wish to ensure that the limitation period begins to run, can always make a clean breast of their wrongdoing by contacting their victims. This latter consideration does not apply in the case of section 32(1)(c) (relief from the consequences of a mistake) where the running of limitation may be postponed without wrongdoing by the defendant. However, as the facts of FII demonstrate, it may be many years before a mistake comes to light and, even then, there may be considerable uncertainty as to precisely when time begins to run.

61.

For these reasons I conclude that there is nothing in the language of section 32 which requires the claimant to be treated as if it were still carrying on business at the time when facts concerning the wrongdoing begin to emerge and that achieving the purpose of the section does not require any such assumption to be made. As Lord Hoffmann NPJ put it in Peconic [2009] 5 HKC 135, it does not follow that because an objective standard is applied, the claimant must be assumed to have been someone else.”

In Bilta (HK) Ltd v Tradition Financial Services Ltd the issue was what assumptions to make about a company which had been restored to the register. Lord Briggs JSC approved this decision and observed that the Court must take the company as it finds it. He stated at [69]:

“The question whether a claimant could not with reasonable diligence have discovered the fraud (or concealment or mistake) is plainly an objective one, at least so far as the identification of reasonable diligence is concerned. But, generally speaking, the court will take the facts about the fraud (including how deeply it may have been concealed) as read. It will in an ordinary case where the claimant is a company which has not during the relevant period been dissolved also take the company as it finds it, rather than construct some equivalent company the affairs of which are presumed to be in the hands of reasonably competent, honest and properly resourced officers, if that is not the case: see OT Computers Ltd v Infineon Technologies AG [2021] EWCA Civ 501; [2021] QB 1183.”

This passage provides support for the approach which I propose to adopt, namely, that the Court should take the fraud as read for the purpose of considering section 32. It also confirms that the Court should take each MTIC Company as it finds it for the purposes of assessing whether it could with reasonable diligence have discovered the fraud or dishonesty of TWPS. This means that I must consider what information was available to those in control of the company before the Cut Off Date whether they were the Official Receiver, a liquidator or the Uninvolved Directors and also consider whether something happened or whether there was a reason for them to commence an investigation (to which I will refer as a “trigger”). Finally, I have to consider what reasonable diligence required of the individual concerned bearing in mind their personal characteristics and circumstances (as in Adams).

The Witnesses

Remuneration. Mr Hunt gave evidence in Hunt 6 that his remuneration was agreed at 50% of the realisations and he confirmed in answer to a question from Mr Scott that this was agreed at a creditors’ remuneration meeting which took place on 30 September 2015. He accepted that it took place at Griffins offices and that the only persons present apart from himself were Mr Andrew Fatherly and Mr Raymond Khan of Griffins and Mr James Latham of Moon Beever. He suggested that Mr Latham was attending as a representative of HMRC although the minutes of the meeting clearly show that he was attending as the representative of TC Catering. The following exchange then took place:

“We see that you, as Chairman, had the vote as to 6.61% of the creditors by value; is that right? A. They were -- yes, so they are -- as the "type" says "special", so it's a special proxy, giving me no discretion. So I voted in the way as directed. Q. And those were the Kingston Smith claims, weren't they? A. I assume so. I think they are, yes. Q. And Mr Latham, he had the vote as to the remaining 98.39%, based on the TC Catering assigned debt that Griffins had paid for? A. Yes. Q. And we see that the resolution passed unanimously? A. Yes. Q. Mr Hunt, if we can just stand back on this meeting. It's a meeting chaired by you, about your remuneration, at which the vast majority of the votes are held by a company under the control of one of your partners, based on a judgment debt that your firm paid for, and the proxies are held either by you or Mr Bramston's appointee at a law firm with whom you have a well-established relationship. With respect, how is that a process driven by compliance? A. Well, it's order and compliance for sort of the same reasons, but this is probably articulated in a different way. The remuneration had to be fixed and so a meeting had to be called. Then, having considered that, we turned our mind to the special circumstances of the case, where we would have a conflict agreeing our own remuneration? And so what we did was we made sure that others would decide our remuneration instead of ourselves. Q. Those others were effectively Mr Latham of Moon Beever? A. Representing HMRC's interests in all the estates -- essentially all the estates -- TC Catering, but essentially all the MTIC cases. Q. Isn't the reality, Mr Hunt, that the process we see here did nothing whatsoever to address your conflicted position? It was a process that was designed to achieve your preferred outcome, being remunerated at 50%? That's the reality, isn't it? A. Absolutely not. Everyone was available to vote any which way they wished. It follows exactly the standard procedure in every other insolvency, taking into account the conflicts in this particular case.”

In the Reply, the Claimants denied that allegation that Mr Hunt stood to receive 50% of all realisations in TWPS’s liquidation. However, in a letter dated 21 February 2025 Gowling wrote to Jones Day stating that it was not unusual for a liquidator’s remuneration to be set by reference to recoveries. They then continued:

“Without prejudice to that position, it will be appreciated that there is a difference between remuneration being set at an amount which is calculated by reference to a percentage of the realisations, and there being sufficient realisations remaining to pay that amount after all prior claims on those realisations have been discharged. While it is correct that the resolution for Mr Hunt's remuneration provides for his remuneration to be calculated at a rate equal to 50% of realisations, you will also be aware (for

example from issues around security for costs) that there are numerous other calls and claims which the realisations will have to meet, including funder costs and the costs of insurance. There is (without waiving confidentiality as to its content) a hierarchy of claims before any part of the realisations can be paid to Mr Hunt. The Defendants do not require, and are not entitled to, any further information or detail in that respect.”

Mr Hunt agreed in answer to a question from Mr Scott that his remuneration was set gross of the costs of the insolvency. He also agreed that the “numerous other calls and claims” to which Gowling were referring in their letter were the expenses of the liquidation which he himself had authorised. Mr Scott then put an example to him which he was originally reluctant to answer but which I told him I would like him to answer. In amongst a great deal of prevarication, I understood his answer to this question to be as follows:

“Q. And if we can go back to a question I asked a moment ago. Let me pose it again. And I think the answer is "yes". Have I correctly understood that if one takes the total value of the calls and the claims they will be more than 50% of the realisations in TWPS' insolvency? A. What was the word you used there, something and claims? Q. The calls and the claims. A. The calls and the claims? Q. I mean, I'm using the language from your letter. A. From my letter? Q. The letter that we have on screen in front, from your solicitors. A. Oh, I'm sorry. Yes. I see so they've used "calls and claims", I would use "expenses". Sorry. What was the question again? Q. The question is: have I correctly understood that the total value of these calls and claims was more than 50% of the realisations in TWPS' insolvency? Whatever those realisations may be. A. You have to have a number for that question to make sense, don't you? If the realisations are one figure, it's a different percentage to another. So greater than 50% of a number. MR JUSTICE LEECH: Well, let's say that your claim is entirely successful. 220 million. A. Yes. MR JUSTICE LEECH: What proportion of that will be calls and claims? A. Approximately half. Maybe just under. MR JUSTICE LEECH: So if there is any recovery at all -- A. Yes. MR JUSTICE LEECH: Let's say you absolutely recover in full in these proceedings. A. Yes. MR JUSTICE LEECH: Will any money go to HMRC? A. Yes, but for slightly different reasons; but, yes. MR SCOTT: Well, how much will go to HMRC? A. The general position is that whilst I may have an entitlement to remuneration, what tends to happen is there are subsequent discussion about making sure creditors benefit from the claims that you bring. So it's slightly more voluntary but you have a discussion about paying a dividend and in effect waiving some of your fee. Again, that depends on the outcome. So if I recovered 100 million it would be quite difficult to retain that in the face of creditor claims from other IPs and things like that. So we would negotiate; and that's what tends to happen. Q. Can we go back to his Lordship's question and let's put to one side, for one moment, the possibility of this voluntary discussion. The position, is it not, that once the numerous calls and claims have been paid and you get your 50%, there's nothing left for HMRC, is there, unless you choose to give it to them? A. Well, no, the claim includes interest, for example. So the claim is not 225 million; it's substantially more. But that's just the number that we've just been discussing. So there are any tens of millions possibly in excess of 100 million, depending on the judgment on interest, depending when it runs from, what rates etc, etc; recoveries of costs, all of that is part of the calculation.”

Although it was not entirely clear from his evidence, my understanding is that if the Claimants recovered in full in these proceedings, most of the proceeds of any judgment would be used to pay the expenses of the liquidation (of which the largest figure would be the cost of funding it) and Mr Hunt’s remuneration and that HMRC would recover almost nothing unless Mr Hunt volunteered to pay some of his remuneration to them. Having heard this evidence, I took (and take) the view that the Claimants were bringing these claims primarily for the benefit of Mr Hunt personally, his partners and the funders of the litigation and that I should approach his evidence with the greatest of caution in relation to three factual enquiries to which his evidence was relevant, namely, the Standing Issue, the S.32 Issue and the IPSA negotiations. He had a very powerful reason to give favourable evidence on these issues.

Credibility. Leaving aside his financial interest in the outcome, Mr Scott and his team also submitted that Mr Hunt’s evidence was dishonest, false, evasive, and argumentative in material respects. They advanced this submission primarily on the basis of Mr Hunt’s evidence about the IPSA negotiations and I set out my findings in relation to his evidence below. The principal evidential issue which I had to consider was whether Mr Hunt was a candid witness who openly accepted in evidence that he had made things up in an email to persuade a colleague or whether his account in evidence in Court was false. Mr Scott and his team submitted that it was the latter and I agree. This was an example of a witness making up a story to explain away a difficult or inconvenient document.

More generally, I found Mr Hunt to be an unreliable witness and attached very limited weight to his evidence. He was vague and evasive when both Mr Scott and Mr Thanki cross-examined him and he attempted to keep to the increasingly indefensible position that the trigger for the Indirect Claims against TWPS was the receipt of three CD-Roms from HMRC (as the Claimants had pleaded) and not his own suspicions about TWPS and Mr Fatherly’s internal investigations. However, I do not accept that he set out to mislead the Court either in relation to that issue or to any of the relevant issues.

Standing. By email dated 28 September 2015 Mr Raymond Khan of Griffins wrote to Ms Hall attaching a copy of a progress report and referring to a meeting of creditors which was due to take place shortly. Mr Khan copied in both Mr Hunt and Mr Fatherly and stated as follows:

“I refer to your conversation with Steve and attach a copy of our recent progress report which incorporates the documentation for a meeting of creditors due to be held this Wednesday at 11.15 a.m. at which we are seeking to fix the basis of the Liquidator's remuneration. Can you please confirm which of your appointments are creditors in the liquidation of Transworld? As suggested, this could be all MTIC companies with VAT losses who traded through FCIB and whose date of liquidation is after 22 September 2014. The proxy and proof of debt forms are at appendices E and F respectively, should you wish to complete these.”

Mr Hunt accepted that the proof of debt which Ms Hall submitted arose from a conversation with himself. But he would not accept that Ms Hall submitted the proof at his suggestion. Nor would he accept that it was contrary to the fiduciary duty of loyalty which he owed to TWPS to suggest that claims be brought against it. Nor would he acknowledge that he had accepted the claims of the MTIC Companies (even though this was expressly pleaded in the Particulars of Claim):

“Q. Now, as liquidator of TWPS, you decided to accept all of the proofs that I've mentioned: your own for the ten Griffins companies, Mr Bramston for his three MTIC companies and Ms Hall for her six companies. You accepted all of them; correct? A. No. Q. What do you mean "no"? A. My recollection is that we -- we -- having received the proofs, I had no evidence to adjudicate on whether or not they were proper claims or not. So the -- the creditor could make the claim, but that wasn't, on behalf of Transworld, something we could accept. So the position, I think, is under the Act, at the time, that you could accept the contingency or the possibility; and so, effectively, accept them for £1 but make no admission as to the validity of the claim. Q. Mr Hunt, as you know, the question wasn't about adjudication; it was about your acceptance of the claim. Can we get up {B/3/6}, please. This is your particulars of claim? A. Yes. Q. Which carries a signature of truth from you. A. Yes. Q. Can I just ask you to, please, read sub-paragraph (2) of paragraph 7. A. Yes. Q. And that's correct, isn't it? You have accepted that TWPS is liable to contribute to the assets of each of the MTIC companies? A. That's a completely separate exercise, in a different context in a different period. There's no equivalence between the two in any way, shape or form. Q. When do you say you did this acceptance? A. The acceptance was the end of last year, I think, just limited to the 19 companies. Q. Mr Hunt, with respect, that cannot be right, because these particulars of claim date back to when you issued the proceedings in September 2020. As at that point in time, you had accepted these claims? A. Sorry, I'm misreading it. What are we talking about here: "Mr Hunt has accepted that TWPS is liable to make a contribution ... but has not adjudicated on the proofs of debt ..." Q. I'm just asking, at the moment, about your acceptance that TWPS is liable to make the contribution? A. So I misunderstand the word "acceptance". Q. It's in your particulars of claim, Mr Hunt. If you didn't understand the word, why did you sign the statement of truth upon it? A. The word "acceptance" doesn't -- sorry, "has accepted that TWPS is liable to make a contribution", yes. But that is not the same as acceptance of the proof of debt. I'm confused. We may be at cross purposes.”

Mr Hunt accepted that there was an actual conflict between the interests of the MTIC Companies of which he was a liquidator and the interests of TWPS. He also accepted that he could have appointed another liquidator. When he was asked why he did not do so, his evidence was that he managed the conflict another way. Mr Scott then asked him how he managed it and his evidence was as follows:

“Q. How did you manage the conflict, Mr Hunt? A. By instructing another firm of solicitors to go through the process (indecipherable) the proofs of debt. It's quite a long series of steps up to 2020, but there's quite a lot of different examinations of the process and the conflict. Q. Can we go, please, to your trial witness statement at {C1/6/37}. A. Yes. Q. And you tell us there, in the final sentence of 127: "Later on, when the Respondents raised questions about the claims, I decided that the Proofs of Debt should be reviewed by independent legal advisers, and so Enyo Law was engaged by the MTIC Companies to carry out this review." Do you see that? A. That's correct, yes. Q. Now, I think the respondents that you intend to refer to here, that's the defendants, FCIB and Mr Deuss; correct? A. Yes. Q. Because it is only when the defendants in the action raised concerns about these proofs that you took this step that you describe in the witness statement? A. I was alive to the point, but, yes, the -- the order of events was that -- that I think the defendants had raised issues about it pre-issuing the proceedings. And so we were -- we were alive to it anyway, but we were looking at it further. Q. And it's similar, is it not, to the situation with your progress reports for TWPS, where it was only when my solicitors chased you to comply with your duty that you filed those progress reports at Companies House towards the end of last year? A. That's not correct. Q. I see. A. That was a -- it's another unfortunate document here. Companies House had all the documents on the right dates, at the right time, but Companies House refused to file them because there was a redaction in the public version; and Companies House took the view that they could police the wording of the report. So we spent, effectively, three or four years arguing with then. And, as it happens, in the week that you wrote a letter saying: where are these documents, companies House had, coincidentally, released them. So I sent an e-mail to my lawyers saying: you're about to get some grief from the other side because they think -- they're going to think that one caused the other, but it didn't. It's entirely coincidental. Q. I see. Very well. Now, Enyo Law, to whom you refer here, they were not independent legal advisers, were they, Mr Hunt? They were legal advisers engaged by the MTIC companies? A. Yes. Q. And it would have been the duty of Enyo Law to act in the interests of their clients, the MTIC companies, not in the interests of TWPS, for which they did not act? A. That's correct, yes. Q. Now, given that the MTIC companies are in liquidation, presumably, they were unable to pay Enyo Law for their services in reviewing the proofs? A. I think that's right, yes. Q. Did Griffins pay Enyo Law for their services? A. No. Q. Do you know who did pay Enyo Law? A. I think it was paid for by the litigation funders -- I think. Q. You don't suggest, Mr Hunt, in your witness statement that TWPS ever instructed independent legal advisers to review the proofs. Is that because TWPS has not done so? A. No, I think -- I think my lawyers have reviewed the proofs as part of the claim. Q. And that's your lawyers acting in this litigation? A. That's right, yes.”

Mr Hunt agreed with Mr Scott that he had originally accepted in his second witness statement dated 20 December 2020 that there was a legitimate debate about TWPS’s limitation defence to some of the Indirect Claims but that the position which he had now adopted was not to rely on them because they had no substantial merit. He would not accept that it was incumbent upon him to take any arguable limitation defence or that his conflict of interest disabled him from making a neutral decision. But he finally accepted that if the Court concluded that TWPS had a limitation defence, he would take it and follow the Court’s guidance:

“Q. Let me suggest this, again in lay terms: surely if TWPS UK had an arguably -- arguably legitimate limitation defence to claims against it then you should, as the liquidator of TWPS UK, want to take that defence rather than simply trying to remove it from the court's consideration? A. No, because ultimately that question comes down to my knowledge and the knowledge that was available to me. So if -- if I did defend it then essentially it would be me versus myself in those -- in those sort of conceptual proceedings. But, in the alternative, I agree with myself. I agree that the knowledge of myself, but also with the other liquidators in the other cases is substantially the same. Q. So I think you recognised a moment ago your potential conflict in this context; yes? A. In the context of agreeing it as a proof of debt, which is my sort of statutory -- the procedure I'm familiar with. I'm less familiar with this procedure, which is a form of acceptance which sits slightly outside my sort of statutory remit. I'm not normally required to accept a claim except within the governing structure of a proof of debt. Q. So recognising the potential conflict, can I suggest to you that the reason you've chosen to try to prevent the limitation defence being considered is because you simply wouldn't want it to succeed, would you? A. Well, that's the danger in the conflict: is that I would have an incentive for it not to be heard. Q. Hmm. A. But I've -- I'm effectively not conflicted with regard to, say, Ms Hall's claim. So I am effectively being neutral on the point. Q. I mean, you wouldn't want a limitation defence to succeed, would you? Because if it did TWPS' claim would be reduced and so would your consequential fees; correct? A. That's correct; but also the recoveries to the creditors, so our position, wearing that particular hat, is we are in accord with each other. Q. You have a number of hats, don't you? A. Yes, I do. Q. Let me ask you this: if the court were to conclude that TWPS has a limitation defence for some of the claims by the MTIC companies, would you still not take that defence? A. No, I would take the defence. Q. You would follow the court's guidance on that matter? A. Absolutely, yes.”

MTIC Fraud. Mr Hunt’s evidence was that in 2001 he first became aware of MTIC fraud when he worked on a case with Mr Goldfarb and that in 2003 he was first appointed as the liquidator of a company which had been put into liquidation as a result of MTIC fraud. His evidence about this and later appointments was as follows:

“14.

My first MTIC fraud appointment came in October 2003, when I was appointed as liquidator over a company called Amitel Ltd. The particular fraud in that case involved trading in mobile phones and computer processing units where Amitel Ltd acted as the 'broker', receiving large amounts of VAT refunds. The liquidation involved aspects of European law and the evolving understanding of how MTIC fraud might be tackled. My firm invested heavily in modelling the fraud to prove the lack of commerciality of the transactions. The company was one of a number of cases given to a group of IPs on the same point of law and my recollection is that my firm was the only one to succeed in making a recovery (which was against the defendant directors).

15.

Another significant case that assisted in the development of my understanding of MTIC fraud was a case called Fresh-n-Clean (Wales) Limited, which was brought against the company’s sole director, Mr Miah, for breach of his duties to the company, and against others for dishonestly assisting Mr Miah in that breach. It involved a newsagent business in Birmingham that was trading millions in a carousel fraud. Having reviewed Griffins' case management system, I am reminded that I was appointed as the provisional liquidator in that case in January 2005, and appointed as the liquidator in March 2005.

16.

By 2005, the IPs who had been appointed by HMRC on MTIC fraud work formed an informal group to liaise with HMRC about it (the "IP Group"). The IP Group was made up of Kevin Hellard at RSM Robson Rhodes (later merged with Grant Thornton), who I had first met in around 2002, along with David Ingram at Chantrey Vellacott (now merged with Moore Stephens and then based in the same building as Griffins), Tim Bramston who was then at Kingston Smith, Louise Brittain at Baker Tilly, and lawyers Frances Coulson at Moon Beever (now merged with Wedlake Bell), Chris Branson at Boyes Turner, and Nick Oliver and Chris Potts at Blake Lapthorn (now Blake Morgan) ("Chris Potts"). We were all involved in discussions with HMRC, which I recall would have been facilitated by Frances Coulson, who had very good connections with HMRC having acted for them for some years. The earliest meeting that I recall was at Somerset House sometime in 2005, where a senior figure from HMRC (I believe it was Bob D'Cruz but cannot specifically recall) had asked us to attend to 'pick our brains' on how HMRC could best utilise and work with the private sector (being IPs).

17.

Shortly after the IP Group was formed, in 2005-06, there were meetings between some of the IPs of account holders and representatives from FCIB including Tim Ulrich and Mr Deuss. Others in the IP Group were involved and would share any results with the IP Group. I do not recall specific events from any of these meetings but I would have listened to the information coming out of them, for example who in the IP Group was getting the most work from HMRC and how the other IPs were approaching their cases.

18.

By this stage, I had some experience of MTIC fraud mainly through the Amitel case but was not particularly into the mechanics of the fraud to the same extent that some of the other IPs were. That said, I would have understood the basic principles of the chains of transactions that were a necessary part of the fraud and would have understood terms such as 'misser', 'broker' and 'buffer'. I cannot now recall I cannot now recall how much I knew about the Telecoms & Computing (“T&C”) sector as a whole, or when I became aware that UK banks were closing accounts of customers in that sector: the role of the banks had not been a significant factor in my cases. In 2005, others in the IP Group such as Frances Coulson and Richard Healey (of Gateley LLP (now PLC)) would have had greater knowledge and experience in their direct dealings with HMRC.”

TWPS. Mr Hunt stated in Hunt 6 at paragraph 103 that: “When I was first appointed, I did not have any idea what TWPS’s role had been.” In cross-examination he accepted that this evidence was incorrect:

“Q. I've already addressed with you most of the points you make in paragraph 103, but there is just one of them I need to explore further. If I can ask you to look at the third sentence in paragraph 103. It begins on the sixth line. You say: "When I was first appointed [ first appointed to TWPS] I did not have any idea what TWPS's role had been ..." A. Yes. Q. That's not true, is it, Mr Hunt? And you must have known that it was not true when you gave this witness statement. A. In what sense? Q. It was false to state that you did not have any idea upon appointment what TWPS' role had been. You did have an idea about that, didn't you? A. Yes, to be fair, I knew what was in the criminal judgment. So I knew that it was involved in the marketing. Q. If I ask my question again, this part of your statement, where you say you did not have any idea what TWPS' role had been, it is untrue, and you must have known it was untrue when you signed the statement? A. But I think it's sloppy language on my part. The −− what I mean is that I didn't know the role that came to learn that they took is what I'm intending.”

Mr Deuss. Mr Hunt accepted in Hunt 6 that he would have known about the meetings between Mr Deuss, Mr Ulrich and the IP Group and their solicitors. In cross-examination he accepted that that FCIB accounts of companies over which he was the liquidator had been frozen before it went into Emergency Measures (although he sought to play this down by saying that it was only one or two companies) and that he himself had brought proceedings against FCIB. He also accepted that by 2007 he knew that FCIB had been accused of involvement in MTIC fraud, that raids had been carried out in London offices associated with it and that Mr Deuss and other directors of FCIB had been accused of money laundering offences:

“Now, before FCIB went into emergency measures in 2006 −− in the autumn of 2006, it was often the case that FCIB accounts over companies, over which you were the liquidator, had already been frozen; yes? A. Yes. Could you take me to that statement, please. Q. Paragraph 23, page 8 of the same statement. A. I recall when I was reviewing my witness statement yesterday, paragraph 23 I had difficulty with the language. That's what I wanted to check. Because, again, I think it's generalised, it's not very specific. And I just wanted to re−read it. I think in terms of the accounts had often been frozen, we may be talking about one, possibly two. So I think it's −− it −− Q. Some companies. A. Some. It just didn't feel quite right. Thank you. Q. Before it went into emergency measures. A. I think I detail elsewhere, but I think I can recall one freezer but the other one may have been simultaneous with the emergency measures or very −− Q. Or shortly before. A. It's just literally one or two companies. Q. Okay. We'll look at that −− A. Yes. Q. −− with you and other witnesses. In late 2007, Mr Hunt, do you remember you brought proceedings against FCIB in Curaçao in your capacity as a liquidator for a company called V2 UK Limited? A. Yes, I do. Q. And that was to force the payment of account balances; yes? A. Yes. Q. So it's fair to say, isn't it, that you were well aware of FCIB and its involvement in companies being accused of MTIC fraud by at least 2007; yes? A. Yes. Q. And you were aware that raids were carried out in London offices associated with FCIB in 2006; yes? A. Yes. Q. And you were aware that the raid was at the behest of the Dutch authorities; yes? A. I assume that I knew at the same time, but I became aware of it some time in that period. Q. Some time in that period. Thank you. And in 2007 you were aware that Mr Deuss and other directors of FCIB had been accused of money laundering offences and were awaiting trial in the Netherlands; is that right? A. Yes. Yes.”

Finally, Mr Thanki took Mr Hunt to an article in the Guardian newspaper published on 21 September 2006. He accepted that anyone reading that article would have known of the raid on TWPS’s Knightsbridge office, that it vetted customers for FCIB and that Mr Deuss was connected with the company:

“Q. Thank you for that. If we go then, please, to {F/1739.1/1}. This, you will see on the page, Mr Hunt, is an article from The Guardian of 21 September 2006. Do you see that? A. Yes. Q. And if we go to the top of page {F/1739.1/2}, second line. Do you see it says: "The results could not have been more spectacular: this month the bank's offices on the first floor of an office block in Curaçao were raided by officials of the Dutch Ministry of Justice and local police ." Do you see that? A. Yes. Q. And then on the third page, {F/1739.1/3}. Do you see, halfway down, there's a heading, "Customers vetted"? A. Yes. Q. Yes. You see under that heading it says: "Simultaneous raids were carried out at the offices in Knightsbridge, London, of Transworld Payment Solutions UK"; yes? A. Yes. Q. −− "which vetted potential British customers of FCIB". And then "at a farmhouse in Monmouthshire, which Ms Deuss used as a holiday home. Dutch officials are now You see that? A. Yes. Q. And anyone reading this article would have known that it was understood or being reported that TWPS UK vetted FCIB's potential British customers? A. Yes. Q. Point (a); but their London offices were raided in relation to MTIC fraud, point (b); yes? A. Yes. Q. And that Mr Deuss and Ms Deuss were in some way connected; yes? A. Well, they're brother and sister. Q. No, no, no, with the underlying events, MTIC fraud. A. I don't see it from that paragraph. Are you saying from the overall article ? Q. I 'm saying that anyone reading this article would appreciate that raids had been carried out at the offices of Transworld Payment Solutions UK, that that company had vetted potential customers of FCIB, and that Ms Deuss and Mr Deuss were connected with the enquiries being made? A. Yes. Yes. Q. Right. And anyone reading this article would have known that it was at least being reported that TWPS −− TWPS UK vetted FCIB's potential British customers; yes? A. That's what it says, yes. Q. And you would agree with me that The Guardian is a major UK newspaper; yes? A. Yes. Q. And this is the type of article that your policy of keeping track on FCIB related articles would have or could have been identified; yes? A. If we'd seen it, yes, we would have. Q. Well, it's the type of thing your searches, for example in relation to FCIB or MTIC fraud, should have detected. Surely you agree with that, Mr Hunt? A. Yes; and we would have saved a copy of it.”

The Trigger. Mr Hunt’s detailed evidence about the trigger for the Indirect Claims was that the first time he took any notice of TWPS was when he received the translation of the Dutch Judgment in March 2014:

“74.

When TWPS was mentioned in the Dutch Judgment, the Griffins team looked into it further. I suspect (based on usual practices when first looking to obtain some information on a company) Andrew or his team would have done a company search and identified that Martina Deuss ("Ms Deuss") was one of the directors, and noted the connection to Mr Deuss. I was keen to obtain the data on the FCIB main server (and improve upon the failed attempt to information gather (described at paragraph 31(b) above)) and I thought that TWPS might be an avenue for this, as it was not one MTIC company applying for all the data about all the companies (cf. XYZ 8), but

an agent of FCIB. If TWPS had access to the entire server then I thought it might fall legitimately within the bounds of s.234 or s.236 of Insolvency Act 1986. I do not recall planning to make claims through TWPS at this point.

75.

I recall suggesting (to whom I cannot recall, but likely Andrew or Chris Potts) that we see whether we could restore TWPS and become appointed as liquidator. Chris Potts then located a County Court Judgment against TWPS from a company called Chubb Fire Alarms. This debt was assigned to TC Catering Limited Document 43 {GOW_00014034}, which was a company Tim Bramston was the appointed IP over, who then petitioned for TWPS to be restored to the register and wound up on 6 August 2014 Document 62 {GOW_00011492}.”

Mr Hunt claimed that he had very limited involvement in Mr Fatherly’s investigation or knowledge about TWPS until November 2015 when Mr Fatherly showed him documents from 3 CD-Roms which HMRC had supplied. As Mr Fatherly confirmed in evidence, those contained copies of scanned material which HMRC had taken in a raid on TWPS’s Knightsbridge office on 5 September 2006 at the request of the Dutch Ministry of Justice: see NC443. Mr Hunt’s evidence in Hunt 6 was as follows:

“81.

In around November 2015, Andrew's team were starting to go through the CD-ROM documents. During the course of that review (which spanned at least a few months) I recall quite clearly Andrew showing me several documents over a period of a few days. It was obvious he was getting quite excited about what he was finding, and I recall seeing 3 documents in particular. The documents that stand out in my memory are:

(a)

A document about using a currency other than GBP to effectively hide the fraudulent transactions from HMRC. I was able to recall the purpose and content (at an overview level) of this document nearly 10 years after having seen it, because the content was so striking – that a bank was identifying solutions to allow account holders to hide suspicious transactions from HMRC. Document 40 {GOW_00005731};

(b)

A document that summarised discussions at a TWPS meeting in London which showed that TWPS and FCIB recognised that T&C customers were unable to bank with other banks Document 41 {GOW_00012344}; and

(c)

A document evidencing a big TWPS meeting in Kuala Lumpur at which Mr Deuss was shown to be heavily involved in the running of TWPS Document 42 {GOW_00012334}.

82.

It was not until after receipt of the CD-ROM documents and some of their contents being shown to me during the course of late 2015/2016 that I became aware of the following points in relation to TWPS:

(a)

Mr Deuss was actively involved in the management decisions and running of TWPS. He attended and gave presentations at key meetings, and took responsibility for strategic decisions such as TWPS employee remuneration;

(b)

TWPS (and FCIB, given Mr Deuss' heavy involvement with TWPS) was not only aware of the risks posed by T&C traders but also the fact that UK banks were unwilling to deal with T&C account-holders;

(c)

TWPS was actively targeting T&C traders despite the recognition of the risks that they were engaged in MTIC fraud. FCIB was aware of and encouraged the targeting of this sector;

(d)

TWPS was responsible for monitoring customers’ activity but did not do so properly; and

(e)

TWPS had a clear understanding of how MTIC fraud worked – the description of Olympic Rings was as good an explanation as I had heard, and it was designing its policies (such as delaying transfers in GBP and requiring all traders to have their primary account in a foreign currency Document 40 {GOW_00005731}) to permit MTIC fraudsters to hide suspicious transactions from HMRC.

83.

I did not know about TWPS’ true role, and its fraud, until the CD-ROM documents were reviewed, which significantly post-dated 22 September 2008. It was when I instructed Andrew to send some of the key documents to Chris Potts (I cannot now recall exactly when this was), that I first considered that I had evidence (indeed good evidence) which would support claims against FCIB and/or Mr Deuss.”

However, Mr Hunt made a number of important concessions in cross-examination. He accepted that his evidence in support of the application to serve out of the jurisdiction that he did not have knowledge of facts which would have triggered an investigation into FCIB and Mr Deuss was wrong. Mr Thanki also suggested to him that this was a serious error:

“Q. What happens in your witness evidence in support of your application to serve out, you'd said you didn't even have any knowledge of facts that could have triggered an investigation into whether FCIB or Mr Deuss had been involved in fraud until 2015, following the receipt of the CD Roms. But you now accept that that wasn't correct, on a fuller review? A. Yes, I had a suspicion at that stage. Q. Well, we'll look, in a few minutes, at when you in fact found out about possible claims against FCIB or could have found out about such claims. But, to be clear, you must now accept that what you said in your second witness statement was wrong and you, in fact, knew about the possibility of claims against FCIB before you received the CD Roms. That's right, isn't it ? A. Yes. Q. And that's quite a significant error, isn’t it, in the evidence you gave to the court in support of your application to serve out? A. I don't −− I think the difficulty I had at the time −− sorry, (indecipherable) answer the question. I don't know −− Q. Yes, if you would just answer the question and then if you need to amplify −− A. I don't know the seriousness of the consequence of that. Any mistake is obviously −− Q. Well, in lay terms, would you accept that when you're giving evidence to the court it's quite a serious error? A. Any error is serious; and I've tried to (indecipherable) −− Q. Well, there are errors and there are errors; but this is quite significant, isn't it, when you're giving evidence to the court? A. I −− I −− yes, but I don't understand what I'm measuring against, but I accept it's an error. I don't know (indecipherable) seriousness, but ... Q. Presumably, you were advised about −− I think you accepted with Mr Scott −− the duty of full and frank disclosure on this type of application? A. Yes; and the document will be put together with the genuine intention to give disclosure of absolutely everything, based on every document that I've −− Q. So it's a general intention to give full and frank disclosure and −− A. Exactly; so that was the intention of the document, so not a deliberate error.”

By letter dated 24 March 2015 Blake Morgan had written to HMRC on behalf of Mr Hunt in his capacity as liquidator of TWPS requesting the records which HMRC had taken from its Knightsbridge office. Mr Thanki put it to Mr Hunt that this letter prompted the disclosure of the CD-Roms and that in it Blake Morgan were already intimating claims against TWPS:

“Q. If we go to {F/2575/1}, please. Moving on in time. 21 A. Yes. Q. This is a letter sent by Blake Morgan, your solicitors; yes? A. Yes. Q. Well, you can see it in the first paragraph. A. Yes. Yes. Q. And you will see it's a letter to HM −− HM Revenue and Customs. And Blake Morgan was writing to request TWPS UK's books and records from HMRC. Do you recall that? Let's look at the final paragraph of the letter on page 2. A. I don't recall that Blake Morgan were involved in that exercise, so ... Q. Let's look at the last paragraph on the second page, {F/2575/2}. A. Yes. Q. Yes. And then if we go to the −− back to the first page, {F/2575/1}. If we go to the bottom half of the page. Do you see the penultimate paragraph says: "Transworld was closely linked with FCIB. The directors of Transworld from 2005 onwards were Martina Deuss and Charles Geerts. Martina Deuss is the sister of John Deuss who owns FCIB." Do you see that? A. Yes. Q. And in the bottom half on that page you say it appears −− Mr Potts says −− well, Blake Morgan say: "It appears that the function of Transworld was to collate applications and undertake due diligence visits to companies applying for FCIB e−banking accounts." A. Yes. Q. "In some instances, Transworld certified the suitability of applicants (who were involved in MTIC fraud) to open bank accounts with FCIB." A. Yes. Q. And, as I understand it, this was the letter that requested documents that resulted in the CD Roms being provided to your clients by HMRC. Does that accord with your recollection ? A. No, my recollection is that Mr Fatherly did it directly with HMRC; so I didn't −− I don't recall this letter. Q. Well, we will take this up with Mr Fatherly, but I suggest that's wrong. It was this letter which prompted the CD Roms to be produced, but it doesn't matter, particularly, for present purposes. A. That's just my recollection. Yes. Q. And then if we go to −− back to page {F/2575/2}. You see at the top of the page Blake Morgan write that: "We are aware from media coverage (including the enclosed article from the Guardian dated 21 September 2006) that HMRC officers raided Transworld's offices in Knightsbridge, London in 2006. It appears that during the raid, Transworld's books and records were seized by HMRC. Copies of the books and records were then provided to the 25 Dutch authorities." A. Yes. Q. Do you see that? A. Yes. Q. The reference to the media coverage is to at least one of The Guardian articles that we looked at previously; yes? A. I think that's right, yes. Q. Yes. And in the penultimate paragraph on this page, do you see it says: "It may be that through investigating the affairs of Transworld, claims could be established that could be brought by the liquidator or Transworld itself for the benefit of creditors. Given Transworld's close affiliation with FCIB and its involvement with companies which committed MTIC fraud, it is possible that HMRC could benefit as a creditor from such claims if brought." Do you see that? A. Yes. Q. Now, for TWPS UK or its liquidator to have been able to bring claims, as this −− as this passage suggests, it would, presumably, have been necessary for there, first, to be claims against TWPS UK; yes? A. Sorry. Can you just repeat that? I was reading. Q. My fault. I probably asked the question too quickly. But for TWPS UK or its liquidator to have been able to bring claims, as this passage we just looked at suggests, it would presumably have been necessary for there, first, to be claims against TWPS UK? A. I think that's right. I can't think of (overspeaking) −− Q. (overspeaking) so here the suggestion being made is that TWPS UK was closely connected to FCIB and companies involved in MTIC fraud? A. That's what it says, yes. Q. And these points were being made before the CD Roms had been obtained; yes? A. That's correct.”

On 1 April 2025, and whilst Mr Hunt was giving evidence, Gowling disclosed an ethics checklist completed by Mr Hunt in November 2014 before he accepted the engagement as TWPS’s liquidator. Mr Thanki put this document to him on the following morning and he accepted that when he completed it he was anticipating the possibility of claims against TWPS by other Griffins liquidators. Mr Thanki also put a series of time entries to Mr Hunt and he accepted that before he saw either the English translation of the Dutch Judgment or the CD-Roms Griffins were aware from FCIB’s KYC material that TWPS was providing referees for MTIC traders. He also accepted that Griffins were investigating the role of TWPS in relation to those MTIC traders. Finally, Mr Thanki put some time entries to him which showed that Griffins was investigating individual TWPS marketers:

“Q. And if we go to row 2, we can see that the entry, this time, is for 7 March 2014. Do you see that? A. Yes. Q. And column E shows that this is an entry for Mr Benjamin; yes? A. Yes. Q. And column H shows that Mr Benjamin spent six and a half hours working on −− in respect of this work A. Yes. Q. −− that's described across the page at row −− column M. And you see that's refers to: “reviewing FCIB 'KYC' [documents] to obtain details of referees for each [account] [ Griffins cases and 3rd party claims]"; yes? A. Yes. Q. "Referees include agents of Transworld Payment

Solutions Ltd [[ Company Secretary] Martina Deuss]"; do you see that? A. Yes. Q. So this entry shows that a review which took six and a half hours was carried out over FCIB's KYC documents; and that led Griffins to consider that TWPS UK was providing referees for accounts. That's what it looks like; yes? A. Yes. Q. And the review was being conducted of FCIB's KYC material. And it must have been conducted on or before 7 March. That must follow; yes? A. It probably was on the date. It is effectively a day's work, by the looks of it. Q. Okay. And this was certainly before you saw a translated copy of the Dutch judgment; yes? A. Yes. Q. And before you saw the CD Roms; yes? A. Yes. Q. And so this understanding of TWPS UK's role must have been arrived at using documents that Griffins already had in its possession by this point; correct? A. Yes. Q. If we go down to row 5. You will see this relates to an entry for 11 March 2014. And if you look across at column E, you see it's a reference to Mr Fatherly; yes? A. Yes. Q. And column H shows that Mr Fatherly spent just under six hours working on this; yes? A. Yes. Q. And then, if we look across to the narrative, we see it says: "Internet/[Companies House]/deep web/searching on Transworld Global Payments/Bart .../James Mallerun/various companies to identify evidence that those giving references from Transworld link"; yes? A. Yes. Q. The reference to James Mallerun is presumably a reference to James Mallaburn; yes? A. I was going to ask who James Mallerun is; I don't recognise the name. Q. So he is −− from the dramatis personae, he was a marketer at TWPS. Do you remember anything about him? A. I 'm not familiar with the name, no. Q. Okay. It looks like if −− it looks like a typo for his name. Do you want to see the dramatis? A. No, I'm fine; it's just a list of names. Q. And I suggest that this shows that your investigators at Griffins must have been aware of and looking at specific TWPS marketers. That's what it looks like; yes? A. I don't know why those names are in his time sheets; so I don't know if they have more or less or what the reference is. Bart Van −− is Bart Van Laarhoven mentioned in the criminal judgment? No, that's why they're looking for it. I don't know James Mallerun or −− Q. I don't think James Mallaburn is though. A. I 'm sure there's effectively an audit trail to why −− what they're actually looking at, so ... Q. At this point in time that audit trail would be focused on documents already held by Griffins. I think we can agree on that? A. Yes and it −− depending which company he's actually looking at will tell you when we received a particular document in a particular way. And you will see, from column E, that this is work relating to Mr Benjamin. You see that, MDP? A. Yes. Q. And column H shows that he spent 2.7 hours working on this; yes? You see that? A. Yes. Q. And then if we look at the narrative at column M it refers to: "Prepare i2 charts, outlining links /interaction between entities −− including FCIB, Transworld ... and identified MTIC traders". Yes? A. Yes. Q. And you can't help me with what "i2 charts" means? A. No, i2 was a −− I think it may have changed its name now, but it was owned by IBM and it was the industry standard chart. You will be familiar with those charts with lines and pictures of heads of people and the accountant had glasses and things like that. That's an i2 chart. Q. Ah, okay. Thank you. So this entry suggests to you, presumably, that Mr Benjamin was looking at links interactions between FCIB and Transworld and identified MTIC 24 traders; yes? A. Yes. Q. And it suggests that Griffins investigators were investigating role of TWPS in relation to MTIC traders; yes? A. Probably I would say, yes.”

When Mr Scott cross-examined him in relation to the proof of debt submitted by Ms Hall, Mr Hunt accepted that her proof had been submitted on 28 September 2015 and that Ms Hall had divided up the claims of the companies of which she was liquidator into those which went into liquidation before the Cut Off Date and those which went into liquidation after it. He also accepted that this division had been made for limitation reasons and that where the date of liquidation was less than six years before 22 September 2008 the limitation position was stronger:

“Q. Can we turn to {F/2352/1}, please. A. Yes. Q. And you've seen -- Mr Scott has taken you to some of these documents. If we go to {F/2352/4} in this clip. You'll recall this is the proof of debt that was submitted by Ms Hall in relation to TWPS UK? A. Yes. Q. We saw that this proof of debt Mr Scott took you to, it's not dated. But if we look at the previous page, page {F/2352/3}, do you see this is a proxy form that Ms Hall signed to allow the Chairman of the meeting of TWPS' creditors to vote? A. Yes. Q. And do you see that document is dated 28 September 2015? A. Yes. Q. So it looks likely that the proof of debt is likely to have been lodged on or before 28 September 2015; correct? A. My expectation is that they would be filed at the same time. Q. Yes. Now, if we go back to the proof of debt at {F/2352/4}, you'll see that in relation to the name of the creditor, point number 1 says "various (per attached schedule)". You see that? A. Yes. Q. And then, in relation to the total claims, in box 3 it says "see attached"? A. Yes. Q. And in relation to details of documents by which the debt can be substantiated, at box 4, it says "Supporting HMRC VAT claims". Do you see that? A. Yes. Q. And if we look at the schedule, which is on page {F/2352/5}. We see that the -- the heading is "KINGSTON SMITH AND PARTNERS LLP". And that's Ms Hall's firm; yes? A. Yes. Q. And below it, it says "SUMMARY OF ALL OUTSTANDING FCIB CASES WITH A VAT DEBT AS AT 22 SEPTEMBER 2014"? A. Yes. Q. 22 September 2014 is the date that TWPS UK went into liquidation; correct? A. Yes. Q. And so what is being set out in the schedule is a list of companies that Ms Hall was a liquidator for and who had outstanding VAT liabilities as at the date of TWPS UK's liquidation? A. Yes. Q. And you can see, Mr Hunt, that the list is broken into two parts? A. Yes. Q. The first part is FCIB cases more than six years; yes? A. Yes. Q. The second part is FCIB cases less than six years? A. Yes. Q. And the relevant dates for the first group are all more than six years before 22 September 2008; is that right? A. Yes. Q. We can't see a full list of the second group, but for all the -- for all of the relevant dates that we can see, the date is less than six years before 22 September 2008? A. Yes. Q. And can you help me with this: in the column headed "RELEVANT DATE", is the date the date on which the VAT debt was assessed or the date on which the company went into liquidation? A. I'm sure it's the date the company went into liquidation. Q. Okay. Thank you. And, either way, the six year distinction is, presumably, being set out there for limitation reasons; yes? A. That would be a logical starting point for any question like this, yes. Q. Yes. And presumably it was thought that where the relevant date is less than six years before 22 September 2008, the limitation position, from your perspective, was stronger? A. Yes.”

Credibility. Mr Potts and his firm had a significant financial interest in the outcome of this action and he accepted that his firm stood to be paid “many hundreds of thousands” of pounds if the Claimants were successful. For this reason I also treated his evidence with caution and I tested it against the documents before accepting it. Although he had very limited recollection and could add little to the documents, I am satisfied that he was an honest witness trying to do his best to assist the Court. Mr Potts was also highly experienced in MTIC fraud cases and between 2005 and 2015 they made up the vast majority of his practice. Mr Scott cross-examined Mr Potts about his workload in the context of his ability to recall the IPSA negotiations and I consider his evidence again in that context. But in relation to the S.32 Issue I attribute significant weight to Mr Potts’s expertise as a lawyer who specialised in MTIC fraud and that he had been acting for Mr Hunt for a number of years before the Cut Off Date.

MTIC fraud. Mr Potts confirmed that Hunt 6, paragraph 16 (above) was accurate in cross-examination. Mr Thanki also took him to the Committee Report and he accepted that in July 2007 it was a matter of public record that the majority of fraudsters seeking to defraud the UK tax authorities used FCIB. He confirmed, therefore, that in 2005 the IP Group had been formed, that it had very good connections with HMRC and that in 2005 the IP Group had met a senior figure from HMRC.

TWPS. On 8 February 2006 Mr Deuss sent Mr Potts an email attaching two documents, a memo about tackling MTIC fraud and the new site visit report: see [295]. Mr Thanki cross-examined Mr Potts about this email and he accepted that it was apparent to him that he was aware that TWPS was involved in carrying out KYC for FCIB and that he would have communicated this information to Mr Hunt:

“Q. But don't worry about that reference to the meeting. If we go to page {F/1082/4}. You see at the bottom of the page there's a reference to FCIB's establishment in Bangalore. Do you see that? A. Yes. Q. And then, if we go to the next page, {F/1082/5}. Do you see there, at the top of the page, a reference to "TWPS's marketing presence around the world" -- A. Yes, I see that. Q. -- "facilitates one-on-one client interviews and the detailed site visits". A. Yes. Q. So, from this document that was sent to you, it would have been apparent that TWPS was involved in this part of the process, involving FCIB; yes? A. Yes. Q. And then if we go to {F/1083.1/1}. This is the blank site visit report that Mr Deuss attached. A. Hmm, hmm. Yes. Q. And the reference letter. And you can see in the top left-hand corner, we can just blow that up, the Transworld -- Transworld -- you can read it -- A. I can read it. Q. The Transworld Payment Solutions logo; yes? A. Yes, I can see that. Q. And then at the bottom left-hand corner of this document, if we can go down the page, we see a reference to "Transworld Payment Solutions"; yes? A. Yes. Q. You can take it from me that that appears at the bottom of every page of this document. And you will see the type of information, if we just glance through this document. If we go to the next page. I'm not asking you to concentrate on the detail. {F/1083.1/5}. But you'll see the type of information. And you'll see on the final page, page {F/1083.1/7}, "Remarks" and then a box for recommendations? A. Yes, I see that. Q. And if this document had been sent to you by Mr Deuss, it's something -- it's material which you would have looked at? A. Yes. Q. Yes. And it would have been apparent to you that a company called TWPS was involved in -- in relations with FCIB's customers? A. Yes. My recollection is that there were a large number of -- I probably only knew this later -- there were a large number of companies that were called TWPS something; so I wouldn't necessarily have known which one it was. Q. No, but you would have appreciated that a company TWPS was involved in the KYC, for example -- A. Yes. Q. -- process involving FCIB. Thank you. And the e-mail dated 8 February, from Mr Deuss, presumably was regarded as quite a significant e-mail from the owner and a director of FCIB? A. It's -- so, yes, but it's part -- there's been a continuing dialogue between me and -- starting between me and Mr Ulrich; and then I have meetings with Mr -- or meetings with Mr Ulrich that I'm at and Frances Coulson is at. Then there's meetings with Mr Deuss. And then this e-mail comes after that. So it's in that context. Q. It's a process? A. Yes. Q. But you would have attached a degree of significance to a communication from Mr Deuss personally to you? A. Yes. Q. And the aim of the e-mail we can see was to allow you to better understand FCIB's approach to tackling VAT fraud; yes? That's what it looks like, isn't it? A. That's what the e-mail says. Q. And if, as you say you did, you would have looked at the e-mail and the attachments, you would have shared whatever you gleaned from that documentation with -- with Mr Hunt? A. Yes, I would have. I would have forwarded the document to him.”

Mr Deuss. On 21 June 2007 Mr Potts made a witness statement in the Dutch criminal proceedings. He accepted in cross-examination that from before this date he was aware that both FCIB and Mr Deuss were being investigated by the Dutch authorities. Mr Thanki did not go so far as to ask Mr Potts whether he understood Mr Deuss to have a management role in TWPS. But as he stated above, Mr Potts accepted that he would have attributed a degree of significance to a communication from Mr Deuss.

The trigger. On 4 June 2014 Blake Morgan sent the Letter of Claim to Spigt, who were acting on behalf of FCIB. They sent the letter on behalf of Mr Hunt and Mr Bramston in their capacity as liquidators of a number of companies but not at that stage on behalf of TWPS (which had not yet been restored to the register). In the Letter of Claim Blake Morgan stated as follows:

“FCIB was aware in 2005 that it was being used by companies allegedly involved in the trade in mobile phone and CPU's to conduct MTIC fraud. For example, in June 2005 Mr Chris Potts, a partner at Blake Lapthorn who acts for our clients, spoke at length with Tim Ulrich, the General Counsel at FCIB, about MTIC fraud and the claims being brought against companies with accounts at FCIB.”

Blake Morgan also referred to another article from the Guardian newspaper dated 26 October 2006 and stated as follows: “The suspicions relating to the conduct of the bank were widely reported in the public press. They also referred to the Committee Report and then stated as follows:

“It was therefore a matter of public record in July 2007 that the majority of MTIC fraudsters seeking to defraud the UK tax authorities used FCIB. Further the part played by FCIB can be seen quite graphically from the estimates in the Report (at page EV15) of missing trade associated with MTIC fraud in the UK. In the period Jan - Mar 06 it was GBP11.6 billion, rising to GBP14.3 billion in the period April - June 2006. FCIB was forced to cease trading in August 2006. The estimate of trade related to MTIC fraud dropped to GBP2.2 billion in the period July - Sept 06 and to just GBP0.6 billion in the period Oct - Dec 06.”

Mr Potts accepted that he was responsible for the Letter of Claim. He also accepted that he believed that he had a solid basis in evidence for making the allegation that FCIB was an active participant in MTIC fraud:

“Q. And I'm sure you'll agree with me, but what is clear from this letter is that you were alleging on behalf of your clients that FCIB was an active participant in MTIC fraud? A. I say actively facilitating the fraud. Q. Yes, knowingly and actively. A. Knowingly and actively facilitating the fraud. Q. It's an allegation of fraud? A. Yes. Q. And it's not an allegation which any lawyer can put their name to lightly, is it? A. Correct. Q. And you must have believed that you had a solid basis in evidence for making such a serious allegation? A. Yes.”

Credibility. From 1990 to 2011 Mr Fatherly was employed by HMRC and from 2000 or 2001 until 2005 or 2006 he was a case officer investigating MTIC fraud. From 2011 until 2021 he was employed by Griffins managing its team of insolvency investigators. In early 2023 he agreed to provide consultancy services to TWPS in a self-employed capacity. He accepted that he had a financial interest in the outcome of the action and that he was owed £450,000 for the work which he had already carried out on a contingency basis. In general, I found Mr Fatherly to be an honest witness although I also treated his evidence with caution and on certain key issues I found him to be evasive. For these reasons, I attributed little weight to his evidence when making certain findings of fact (as I explain below).

MTIC fraud. Mr Fatherly gave evidence that it was standard practice for an investigator acting for a liquidator to obtain account opening information. He also accepted that in a matter of weeks or months he made the connection between Mr Deuss and TWPS and TWPS and the raid in London. Finally, he accepted that in theory at least his investigation could have been started at any time:

“Q. Now, Mr Fatherly, you began working at Griffins in 2011; yes? A. That's correct, yes. Q. So, as a result, you're not able to say what was known by people working at Griffins before that date? A. Generally, no. Q. Generally, no. Thank you. Now, in terms of your processes, Mr Fatherly, it's correct to say, isn't it, that if you discovered a company you were investigating had a bank account, it was standard practice to request statements, confirmation of any account balances and account opening information? A. That was the process that was used in Griffins, yes; and would be the same process when I was a financial investigator for HMRC. That would be the same process. Q. Yes, it was standard practice that that's really the first port of call, isn't it? A. Absolutely. Q. That type of material?

A. Yes. Q. And a failure to take that very basic step of requesting those bank documents, including account opening information, would -- would, I assume -- would mean the investigators weren't doing their job properly? A. Yes. Q. Thank you. And, having received that type of information, an investigator would obviously look at it? A. They would schedule it normally; put it into an Excel spreadsheet, my Lord. Q. And look at it carefully? A. Relatively carefully. It depends exactly what they're looking for. Q. Well, it's your starting point for further investigation, isn't it? A. It's one starting point, yes. Q. Well, okay. Thank you. You certainly thought it was a useful -- useful source of information. We can agree on that, I think? A. Yes, I mean, in terms of liquidations where you're looking for money and assets then looking at the bank account is always a good place to start. Q. Indeed.”

“So I would like to ask some questions about the process by which you came to look at the position in relation to TWPS UK. On 27 February 2014 you attended a meeting in Curaçao to discuss account balances; yes? A. That's correct. Q. And following that meeting you asked your team to look at the account opening and statement disclosure packs that you had on file for FCIB; is that right? A. That's correct, my Lord, yes. Q. And during that process you came across documents that referred to TWPS UK? A. Yes. Q. You can't remember what specific document that was? A. No. Q. No. A. I mean, I think there were probably a number of them that came later. Q. More than one? A. Yes. Q. So it's plainly a document that Griffins already had within its files; yes? A. That's correct. Q. Yes. You didn't need to go to any third party to obtain such documents? A. No, sir. Q. Having found reference -- a reference or references to TWPS UK, you or one of your companies did a Companies House search? A. Yes. Q. You then did a Google search that resulted in your connecting TWPS UK to Mr Deuss? A. That's correct, through ownership, yes. Q. And you also made the connection between TWPS UK and the raid in London, which you considered significant; correct? A. Yes, it was a fact, that struck me, yes. Q. So a significant fact in your mind? A. Yes. Q. The process that we've discussed of looking through account opening statements, identifying TWPS UK, making the connection between TWPS and Mr Deuss, is a process that you could have started at any time; yes? A. I think, in theory, it could have been started at any time. However, you merged two things there: the statements themselves were dealt with by the investigator. That's what they were interested in. The account opening documents, they were looking for other leads, perhaps to other bank accounts, if there was a reference to another bank account, it could be a home address, some other -- there could be a copy driving licence, a passport with a name and address on that they would be looking – looking for. So I don't think they -- when they were -- when the material was coming in, they were primarily interested in what does the bank statement, not what -- how much detail is in the other documents. Q. With respect, Mr Fatherly, we are talking about periods before 2011 you're not able to comment, are you? A. That's correct. Q. So you're speculating? A. I'm -- based on what happened post 2011, I think that's what my investigators did, yes. Q. And so far as TWPS is concerned, you may not have started that process until after your Curaçao meeting. But I think we can agree that was nothing to stop you having done it sooner; correct? A. If there was a reason to, yes.”

Mr Fatherly accepted that Griffins’ focus was on account balances and this explained why they did not investigate account opening material any sooner. He accepted that on 27 February 2014 he attended a meeting in Curaçao to discuss account balances (the “Curaçao Meeting”) and he started to look at account opening and statement disclosure packs and that he came across documents referring to TWPS. He gave the following evidence about that meeting in answer to a question from me:

“MR JUSTICE LEECH: Why schedule the -- you know, gather all the information about the individual referees? What was the target, if you like, of that exercise? A. For me, my Lord, it went back to the meeting in Curaçao. I thought was -- my view was very slightly different, I suspect, to Mr Hunt's and Mr Bramston’s and what have you. I thought it was very strange that the curator and his lawyer, appointed by the Central Bank, were saying: we're a victim. FCIB is a victim. You know, this is -- there's -- there's nothing there. We're a victim in all this. And I thought that seemed really quite odd that we knew there had been a Dutch judgment; and, in fact, just prior to the meeting, we had heard about the -- that there was a criminal judgment. And it -- it didn't tie up for me. So my thought process was: has FCIB been duped by someone else? Is there referees in the middle who have however profited and fooled FCIB? Or does FCIB have a major compliance issue? So that was my thought process, was to start looking at T -- go through the account papers that we had and start to see: well, is it possible that FCIB actually was duped? So a very -- a slightly different way of looking at it.”

TWPS. Mr Thanki then took Mr Fatherly in detail through a series of time entries which recorded the work which he and other Griffins investigators had carried out in relation to the investigation of TWPS. He confirmed in cross-examination that Griffins received a translation of the Dutch Judgment on 26 March 2014. He also confirmed that by 28 March 2014 the Griffins investigators knew that there was “a service level agreement between TWPS UK and FCIB” and that “Mr Deuss sat behind FCIB and also sat behind TWPS”. The key evidence which he gave, therefore, related to the period before 26 March 2014.

Mr Fatherly accepted that by 7 March 2014 Griffins investigators were working on a specific project to identify from the KYC documents which they held (and any public information) those TWPS marketers who had provided references for the companies of which Griffins were the liquidators. He also confirmed that before they had received the Dutch Judgment they were aware of Mr Nixson, Mr Bailey and Mr Mallaburn:

“Thank you. And if we go to row 2, you will see an entry for 7 March 2014. A. Yes. Q. And you'll see this relates to Mr Benjamin -- A. Yes. Q. -- it's six and a half hours; yes? A. Yes. Q. And you'll see the narrative there -- A. Yes. Q. -- for Mr Benjamin's work: "Reviewing FCIB 'KYC' documents to obtain details of referees for each [account] [Griffins cases and 3rd party claims] Referees include agents of Transworld Payment Solutions [[Company Secretary] Martina Deuss]". Yes? A. Yes. Q. So this shows, doesn't it, a review that took some six and a half hours, being carried out over FCIB's KYC documents; yes? A. Yes. Q. And that led Griffins to consider that TWPS was providing referees for accounts? A. Yes. Q. Yes. And we can see that the review was being conducted of FCIB's KYC material; yes? A. Yes. Q. And it had been conducted on or by 7 March; yes? A. It was on; it wouldn't be by. The date is when the work is actually completed. Q. So these are daily entries? A. Yes. Q. I see. Thank you. And I think we can agree this is before you saw the Dutch judgment in translation; yes? A. Yes. Q. And certainly long before the CD Roms were received from HMRC? A. Yes. Q. Yes. So, again, the understanding of TWPS' role recorded here would have been arrived at using documents that Griffins had in its possession already or, as you clarified to me a moment ago, publicly available information? A. Yes.”

“MR JUSTICE LEECH: Just before we go further down. I'm just looking at 7 March. A. Yes. MR JUSTICE LEECH: So ADF. That's you? A. That's correct. MR JUSTICE LEECH: "FCIB update to SJH" -- A. Yes. MR JUSTICE LEECH: -- "re lists and work being undertaken/tasking MB re Transworld Global Payments". So it looks as if the project was specifically related to Transworld Global Payments. Was that -- is that a fair interpretation of that entry, that you were asking them to do something specifically in relation to Transworld Global Payments, rather than in relation to FCIB? A. Yes. It was to look at the referees and see what information we could glean from the papers that we already held. MR JUSTICE LEECH: And that seems to be supported by the next one down which is: "Reviewing tribunal decisions, for further info re involvement of Transworld and its agents". And there you've just identified Mr Nixson and Mr Bailey, whose names we've encountered before? A. Yes. MR JUSTICE LEECH: So the first task you set yourself on 7 March or asked Mr Benjamin to carry out is to identified, from whatever sources you could find, the referees who had given references by TWPS to FCIB; is that right? A. Yes, from the liquidation estates that we held. MR JUSTICE LEECH: Yes. A. Yes. MR JUSTICE LEECH: Thank you. MR THANKI: Thank you, my Lord. And James Mallerun is, presumably, a reference to James Mallaburn; yes? A. That's me typing with thumbs again, I'm afraid; yes, Mallaburn. Q. And he was a marketer at TWPS? A. Yes. Q. And this suggests, doesn't it, that Griffins investigators, including you, were aware of specific TWPS marketers; yes? A. Once we started this exercise, yes.”

Mr Fatherly also gave evidence that by 11 March 2014 a colleague, Mr Benjamin, would have been preparing a report about TWPS and a chart which would have shown the connections between individuals and companies and also the MTIC chains:

“Q. 2014. And you'll see column M refers to: "Continue work on drafting Transworld report". Do you see that? A. Yes. Q. And can you help me with this: what was being drafted in relation to Transworld? A. I have no idea. Based on what my time entries say I would have thought I was probably pulling together Companies House information and any articles I could find on the internet. But I cannot remember the report itself or whether it was even finished. I have no idea now. Q. So it refers specifically to a Transworld report. It looks as if a report was being drafted on Transworld; Yes? A. It certainly looks as though that was my attention at the time, yes. MR JUSTICE LEECH: There's a reference to a chart, two entries immediately above. MR THANKI: Can you help my Lord with what Transworld chart refers to? A. That -- that would be -- I think Mr Hunt referred to i2 charts (overspeaking) -- MR JUSTICE LEECH: (overspeaking) refer to an i2 chart, yes. A. And it's a schematic chart. MR THANKI: And can you remember that? Or does that just sound like a likely explanation? A. No, that's what it will be, a chart, because the individual who is named there, MB, is Mark Benjamin; and Mark was one of the people who knew how to use iBase to produce those charts. MR JUSTICE LEECH: And when you say it was schematic, what the connections between the company? A. Yes. MR JUSTICE LEECH: Common directors, employees, that kind -- reporting lines; that would be the kind of thing? A. Yes, it uses symbols for people, companies, locations, so you could link a person. I mean, it was quite often -- sorry, my Lord, it was quite often used to map links between trading counterparties. So you'd have money, you know, A trading with B, trading with C -- MR JUSTICE LEECH: And presumably the chains; you could do that in chains -- A. That's correct. MR JUSTICE LEECH: -- in the same software? A. Yes.”

Mr Thanki took Mr Fatherly to another time entry made by Mr Benjamin and he accepted that by 12 March 2014 an investigator called Mr Potter had identified TWPS as a UK limited company. He also gave evidence that the Griffins investigators had come to the view that TWPS had a role in relation to specific MTIC traders and that there could not be any doubt that it involved potential fraud:

“Q. And the narrative refers to i2 charts. "... interaction between entities -- [including] FCIB, Transworld [Van Laarhoven] and identified MTIC traders"; yes? A. That's correct. Q. If we go to row 9, please. Sorry. My fault. In terms of the identified MTIC traders, it suggests, this entry, doesn't it, that Griffins had come to the view that TWPS UK had a role in relation to specific MTIC traders; is that right? A. Could -- could it just be moved slightly further to the right so I can see the full entry. Sorry. Sorry. Could you repeat the question. Q. Yes. It shows that there was a view within Griffins that TWPS UK had a role in relation to specific MTIC traders? A. Yes. Q. And once we've introduced the reference to MTIC here, there can't be any doubt that one is talking about potential fraud; yes? A. Yes.”

Mr Fatherly also accepted in answer to some questions from me that by 19 March 2014 he was investigating whether a TWPS marketer, who had given a reference for one company which had been found to have committed MTIC fraud, had also given references for other companies:

“Q. Thank you, Mr Fatherly, that's very helpful. If we go, please, to line 1383. You'll see an entry for 19 March 2014? A. Yes. Q. And if you look at the narrative it says: "Checking MB progress on chart for Fresh N Clean to identify where Transworld gave referee/adverse judgment/and same referee continues to produce FCIB account recommendations." A. Yes. Q. Mr Hunt was a little bit unclear in relation to this entry. And he referred to Fresh N Clean as being slightly a confusing part of this possibly. Can you help us with what this entry relates to? A. I'm afraid I can't. If -- it could be an error, but I -- I honestly don't know. I can't recall what Fresh N Clean was about. Q. Well, what we can see here is Transworld -- references to Transworld giving references; yes? A. Yes. Q. And in connection with FCIB account recommendations. We can see that much from this entry, can't we? A. Yes. MR JUSTICE LEECH: The way I understood this entry

and perhaps -- so I don't know whether Fresh N Clean was an MTIC company. So what you've got is identify where Transworld have given a reference. A. Yes. MR JUSTICE LEECH: There was an adverse judgment, presumably a published judgment, in relation to an MTIC case. And then the same referee who gave the judgment in that -- in relation to that particular company was then -- you were then checking to see whether that same referee also gave a further FCIB account recommendations. Does that sound a fair assumption -- a fair interpretation of that entry? A. That's correct, my Lord. MR JUSTICE LEECH: So you're chasing down -- where somebody has given a reference for -- someone from Transworld has given a reference for an MTIC company, that company is then found to have committed a -- a VAT fraud. And then you're checking to see what other account recommendations that individual has given. A. Cross-checking, yes, my Lord.”

Mr Thanki also put an email dated 27 June 2014 to Mr Fatherly in which he had described TWPS as a “creature” of Mr Deuss. Because of its importance I set out this email in full. It was addressed to Mr Goldfarb but copied to Mr Hunt (and Mr Scott also asked him some questions about it). It was headed: “Payment from office account” and in it Mr Fatherly asked Mr Goldfarb to sign off on a payment to fund the assignment to TC Catering of a judgment debt against TWPS:

“We have this morning received confirmation that the judgment debtor against Transworld has signed the deed of assignment to TC Catering (TCCAT01). The assignment will now allow us to apply for the restoration and winding up of Transworld. Transworld was, you may recall, the agent through which accounts were opened with FCIB. The company was a creature of Mr Deuss. The value of the judgment debt, assigned at face value, is £1,833.06. I am currently waiting for details of the account to which the assignor wants the funds transferred. Once I have those details I will ask CPT to raise a requisition. TCCATO1 is unfunded and therefore it will be necessary for Griffins to fund the payment.”

When Mr Thanki originally asked Mr Fatherly what he meant by describing TWPS as the creature of Mr Deuss, he said that he meant only that he was the ultimate owner and not that he controlled the company. However, he later accepted that he could not be certain what he had in mind:

“Q. Can you just focus, for a moment, on your use of the word "creature". A. Yes. Q. Have you seen that in the e-mail? A. Yes. Q. In your witness statement you say, when you wrote the e-mail, you only understood Mr Deuss as the ultimate shareholder? A. Yes. Q. Yes. But I suggest to you that when you describe a company as the creature of a person, that really means only one thing; it means that the person is in complete control of the company? A. It can mean two things. It can mean in control of or belonging to. And factually it belonged to, the extent to which it was controlled by, well, there was an SLA -- service level agreement -- between FCIB and TWPS, which is what it says in the document. So the extent to which Mr Deuss was involved day-to-day, I had no idea. Q. It's your e-mail. I'm just trying to understand your intentions. It's a rather pejorative term, isn't it "creature"? A. It's the one I've used before. Q. It means subservience to a person, doesn't it? Suggesting complete control over --A. I said before it can be belonging to or control of. Q. Okay. A. And Transworld Oil owned TWPS UK and Mr Deuss owned Transworld Oil. Q. Are you suggesting that Mr Deuss was more than just a shareholder? A. I didn't know. Q. You didn't know? A. No. Q. And you've not explained in your witness statement how you came to have that knowledge about Mr Deuss? A. It's from the Dutch judgment, my recollection would be, where it describes a similar situation for one of the other companies where his sister and someone else are directors but I think the Dutch judgment says he controlled it. Q. Let me -- A. It appeared to be similar circumstances, so ...Q. Can we just go back, briefly, to the spreadsheet we looked at, {F/2511.1/1}. And go up the page to row 9. We looked at this a moment ago. It was Mr Potter. And we're talking about the reference in the narrative column to individuals behind Transworld. A. Yes. Q. Can you help me with who was being referred to there. A. Could I see what date that entry is, please? Q. Yes. A. 12 March. We didn't have the Dutch judgment by then so I still think it's the referees, so people -- Q. You really -- that's your answer to what "individuals behind Transworld" meant? A. That's what I think it means, but it's Mr Potter's entry, so ... MR JUSTICE LEECH: Well, having looked at your e-mail, having looked at that entry, is it possible that you instructed Mr Potter to look into who the directors and shareholders of TWPS and its ultimate beneficial owner were? A. I think we knew that the day before, on 11 March, when we were looking at Companies House, at line 5. It is a possibility, my Lord, that that that's what I add asked Mr Potter to do, but I can't recall.”

The trigger. Finally, Mr Fatherly gave evidence in his witness statement that he had found numerous documents on the CD-Roms which established that TWPS had acted in a fraudulent manner. He also stated that on “being shown a privileged document” he had identified eight such documents. Mr Thanki took him to three of those documents which did not mention TWPS at all and a fourth which only referred to a “twps.com” address. Mr Thanki took him through the remaining documents and put it to Fatherly that none of the remaining documents pointed to fraud:

“Q. Thank you. So the documents we've just been looking at, referred to in paragraph 61 of your witness statement, to the extent that you believe that you had a fraud claim against TWPS UK, it can't have been because of any of these individual documents, can it? A. I'm afraid I can't answer to what the claim would or wouldn't be. All I could point out is what I perceived or saw from the documentation and the conclusion that I reached. In terms of framing a claim, I'm afraid that's something I would have handed over. MR THANKI: Very well. Thank you very much, Mr Fatherly. My Lord, I don't have any further questions. MR JUSTICE LEECH: Do you have any re-examination, Mr Parker? MR PARKER: No, my Lord. MR JUSTICE LEECH: Could I just ask you one question about paragraph 61, please, Mr Fatherly. A. Yes, my Lord. {C1/4/127}. MR JUSTICE LEECH: You identify eight documents there? A. Yes. MR JUSTICE LEECH: And your evidence is that you found numerous documents which established, among other things, that TWPS had behaved in a fraudulent manner? A. Yes. MR JUSTICE LEECH: But I think the answer that you gave to Mr Thanki was that you couldn't remember which documents produced that response? A. No, there were certainly more than eight. I – in proofing I was shown eight documents. There were a whole raft more documents -- MR JUSTICE LEECH: Well, that was my question. You didn't actually read through the entirety of the documents on the CD Rom to identify these eight documents; is that correct? You were given a selection of documents to look at? A. Yes. Yes, that were attached to -- MR JUSTICE LEECH: Don't tell me about what's in the -- A. No, no, no; they were attached to another document. MR JUSTICE LEECH: And who made that selection of documents for you to look at? A. That was produced by Gowling.”

On 4 April 2014 Ms Hall was appointed as the liquidator of Blue Fox, ETP and Wood Works and on 28 November 2014, 18 March 2015 and 9 May 2016 she was appointed the liquidator of JDG, Comveen and @tomic. I attached no weight to her evidence because it was clear that the proof of debt which she submitted for the claims of her MTIC companies against TWPS were prompted by discussions between Mr Neil Bacon, her manager, and Mr Fatherly. Furthermore, she was not even prepared to say that she believed those claims to be legitimate.

Between 2001 and 2014 Mr Ian Defty was either an employee or partner of MKS. In 2017 he moved to DDJ Insolvency which later merged with CVR Global and which was later acquired by the Begbies Traynor Group. He served as a partner of the Begbies Traynor Group from 2021 to 2023. On 26 August 2008 he was appointed as liquidator of ETP, on 13 January 2011 he was appointed as liquidator of Wood Works and on 16 November 2011 he was appointed as liquidator of Blue Fox. On 31 May 2014 he retired as a partner at MKS and transferred his appointments to Ms Hall.

Again, I attach little weight to the evidence of Mr Defty because he had very limited evidence to give about the period before the Cut Off Date. He accepted that he could not speak to what the Official Receiver knew before his appointment as liquidator of ETP. However, he did accept that he knew that HMRC had appointed him because they believed that ETP was engaged in MTIC fraud and that by October 2017 his firm had identified an FCIB account and was writing to FCIB. He also confirmed that the KYC material of Blue Fox contained a site visit report dated 10 April 2005 and prepared by Mr Nixson and that any of the three liquidators (including Mr Gordon Johnston appointed on 22 July 2005) could have obtained a copy of this report.

Credibility. Mr Mark Reynolds is a director of Valentine & Co (“Valentine”) and in 2005 he joined the firm. On 4 April 2006 he was appointed the joint liquidator of TCG with his principal, Mr Robert Valentine, following a creditors voluntary liquidation. On 5 August 2008 he was removed as the liquidator. He was a candid witness and I found his evidence useful because he was in office as a liquidator of an MTIC Company when FCIB went into Emergency Measures and he remained in office almost until the Cut Off Date.

MTIC fraud. Mr Reynolds gave evidence that he was pretty sure that he was appointed by Mr Callender himself. Mr Lemer, who cross-examined him, took Mr Reynolds through the detailed events following the liquidation of TCG until Mr Callender’s disqualification as a director in 2008. He accepted that by 17 January 2007 a reasonably diligent liquidator would have been able to work out that TCG was involved in MTIC fraud:

“Q. Can we turn to {F/2941.3/1} and can we go to page 8 {F/2941.3/4}. So this is a letter from the Insolvency Service dated 17 January 2007. And you will see the first paragraph says: "The Callender Group Limited was placed into liquidation on 4 April 2006, and Robert Valentine and Mark Reynolds of Valentine & Co were appointed joint liquidators". Do you see that? A. I do. Q. And can you read the second paragraph of the letter for me. A. "Under the provisions of Section ..." Q. You don't need to read it out loud; read it to yourself. A. Oh, sorry. Q. Let me know when you've finished with it. A. Finished. I've finished reading. Q. So that second paragraph makes clear that you sent a report to the Official Receiver? A. It would appear so, yes. Q. And that seems to be a reference to the report that was referred to in the Griffins' note that we saw earlier, the annual progress report. That seems to be a reference that we saw in the annual progress to the ...? A. If you would ping back to it, please. Q. So that's at {F/2941.4/1} -- sorry, {F/2941.5/4}. The reference is {F/2941.5/4}. So we saw this earlier: "The computerised records maintained by the former office holder indicates that a report has been submitted to the Insolvency Service ..." Do you see that? A. Yes. Q. So that seems to be a reference to that report that's referred to in the computer records that were passed on to Griffins? A. Yes, it does. Q. Okay. Sorry. Can we go back to the document we were just looking at, which is {F/2941.3/4}. We don't have a copy of that report. Do you recall sending it? A. No. Q. And do you recall what was in the report? A. No. Q. Now, the wording in bold in the middle of that letter, it says: "Please note that the Official Receiver has identified this as a possible Carousel enquiry." Do you see that? A. I do. Q. And then, if you look over the page, {F/2941.3/5}, it sets out the information that is being sought. Do you see that? A. Yes. Q. So it's clear that the Official Receiver considered that there may have been MTIC fraud. That's right, isn't it? A. It would appear that way, yes. Q. And if the Official Receiver was able to work that out then a reasonably diligent liquidator would also have been able to work that out, wouldn't they? A. Yes.”

Mr Reynolds also accepted that it was standard practice for a reasonably diligent liquidator to write to both the director and the bank of the company to ask for account opening information:

“Q. And can we turn to paragraph 20 of your witness statement, which is {C1/1/5}. What you say is: "As part of my investigations, I would write to

the director for the books and records of the company I was investigating and I would then write to the bank to seek copies of bank statements and a copy of the mandate." Do you see that? A. Yes. Q. So that's a standard part of what you would do as a liquidator, isn't it? A. Correct. Q. And any reasonable -- any reasonably diligent liquidator would have done that, wouldn't they? A. Yes.”

Mr Reynolds received various documents from Mr Callender which he supplied to the Official Receiver when he left office. These included invoices from TCG which would have included FCIB’s details and the payment instructions. He also accepted that he would have investigated these payments:

“Q. And we have some invoices from the TCG group. If we could turn to one at {F/2098/33}. This is an invoice from The Callender Group. You will see it's an invoice sent to MG Components Limited. Do you see that? A. I do. Q. And it's for the sum of -- the total at the bottom, 184,988.48. Do you see that? A. Yes. Q. And if we turn over to the next page, {F/2098/34}. These are payment instructions. And we can see that the customer is instructed to pay IQ Trading to an account FCURANCUXXX; do you see that? A. Yes. Q. And then also instructed to make a payment to Barclays; do you see that? A. Yes. Q. If we turn to just one more invoice at page {F/2098/37}. It's another invoice to MG Components. Do you see that? A. Yes. Q. And this time for £632,000-odd. Do you see that? A. Yes. Q. And if you turn over the page, {F/2098/38}, you will see payment instructions. And we see that the payee is being told to pay £606,000 to IQ Trading. And we've got that FCURANCU swift code again. Do you see that? A. I do. MR JUSTICE LEECH: Could you go back to the invoice again, the previous page, {F/2098/37}. It says "HOW TO PAY THIS INVOICE", do you see there? There's a reference to First Curaçao International Bank NV. And then it's got the same swift code. It just looks as if there's a typo on the actual payment instruction, but it does look as if that's the correct swift code. And if we go back to the -- go to the following page, {F/2098/38}. You see again -- Mr Lemer took you to this. So it does look as if that was a -- even though the First Curaçao number looks as if it is a typo, it does look as if it's the correct swift code. MR LEMER: Do you see that? A. I do. Q. There are other invoices, I won't take you to all of them, but these show very large sums of money that were owed to TCG being paid to other specific bank accounts. You've seen that, haven't you? A. I've seen that now, yes. Q. And surely, as the liquidator, you would have wanted to understand what had happened to TCG's assets; correct? A. Yes. Q. And so, surely, that would have led you to investigate these payments, wouldn't it? A. One would assume so, yes. Q. But you don't recall doing that, do you? A. I don't. Q. And you don't know if Mr Valentine did that, do you? A. I don't.”

Mr Reynolds accepted that by 22 March 2007 the Insolvency Service had discovered that TCG had an FCIB account and had asked for its records. He also accepted that a reasonably diligent liquidator could have found out about FCIB and its connection to TCG. Finally, he also accepted that on 2 April 2007 (i.e. within 10 days) FCIB had provided all of the KYC information for TCG. Mr Lemer put the two Guardian articles and an article from the BBC website to Mr Reynolds and he then gave the following evidence:

“Q. So if you had seen this article, you would have known that it was being reported that FCIB was suspected to be involved in MTIC fraud, wouldn't you? A. Yes. Q. And you would have known that it was understood that TWPS UK vetted potential British clients for FCIB, wouldn't you? A. Yes. Q. And you would have known that TWPS UK's offices had been raided, wouldn't you? A. That's what the article says, yes. Q. And, again, this is an article that anyone looking for information about VAT fraud and FCIB could have found, couldn't they? A. If it was online, for sure. Q. And you don't recall whether you saw this article, do you? A. I'm as certain as I think I can be that this is the first time I've seen it. Q. But you don't know what Mr Valentine has seen, do you? A. No, I don't.”

“Q. These are not obscure publications, are they, Mr Reynolds? A. Not at all. Q. So in September 2006, when you were liquidator of the company, any competent liquidator -- sorry. In September 2006 you were the liquidator of a company; and any competent liquidator would have known that they had an FCIB account and that it was being alleged that they were involved in MTIC fraud. That's correct, isn't it? A. That would appear to be the case, yes. Q. Yes. And any liquidator with that knowledge could have and should have conducted basic searches for relevant news articles, shouldn't they? A. I wouldn't say they could or should have. They certainly could have, yes. Q. And had they done so, they would have discovered these articles that we've looked at, wouldn't they? A. If they're online, for sure.”

The Standing Issue

The Claimants submitted in their closing submissions that because the Defendants had not challenged Mr Hunt’s decision not to take a limitation defence either by an application in the liquidation or by alleging that the Claimants failed to mitigate their loss, they had no standing to challenge that decision. Nevertheless Mr Parker and his team sought to defend that decision:

“197.

With respect, this analysis is wrong. It is a fact (not disputed by the Defendants) that Mr Hunt has not taken a limitation defence against the claims of the MTIC Companies. The issue is properly to be framed as follows: (1) Has Mr Hunt’s decision not to take a limitation defence been challenged and if so how? (Question 1) (2) If it has, what are the consequences? (Question 2)

198.

As to Question 1, the Defendants complain about Mr Hunt’s decision (see the conflict of interest section) but do not challenge it, either by an application in the liquidation of TWPS or by alleging a failure to mitigate TWPS’s loss. Question 2 does not therefore arise.

199.

It is easy to see why Mr Hunt did not raise a defence of time-bar and why the Defendants have not challenged his decision as an unreasonable one. The matter is addressed in detail at Section I.4.3. Mr Hunt was plainly correct not to force the MTIC Companies to incur the time and cost of defeating a limitation defence by reliance on s.32, unnecessarily adding to the costs of bringing these proceedings against dishonest defendants.

200.

As with any litigant, the Court should recognise and respect the decision of the liquidator of TWPS that, in view of the MTIC Companies’ ability to rely on s.32 of the Limitation Act (“s.32”), there were good reasons for not taking the six year limitation period as a defence. The Court does not second-guess a person’s decision not to take a limitation defence (subject to any argument on failure to mitigate) and the liability to those MTIC Companies which rely on s.32 is not therefore extinguished. The Court cannot raise of its own motion a limitation defence and nor can the Defendants. Had it been thought that Mr Hunt’s decision to accept that the limitation period was extended by s.32 was unreasonable, then his decision should have been challenged as a failure to mitigate TWPS’s loss.”

I reject this analysis. For the reasons which I have already set out, Mr Hunt’s decision is not binding on the Court. I have accepted that it would be open to him to persuade the Court that it is unnecessary to decide the S.32 Issue on the facts because his decision to admit the Indirect Claims to proof was reasonable. But Mr Hunt did not plead such a case or to argue it with any great conviction. But in any event, I find that his decision not to take a limitation defence in answer to the Indirect Claims was unreasonable for the following reasons:

I have found as a matter of law that the Court is not bound by Mr Hunt’s decision to admit the Indirect Claims to proof. I also find that his decision (whenever it was taken) was not a reasonable one and that it is not appropriate to treat the proofs of debt submitted by the liquidators of the MTIC Companies as a fair and reasonable assessment of the loss which they claim to have suffered or to use it as a basis for fixing a contribution under S.213. It is, therefore, necessary for me to go on and consider the S.32 Issue with a clean slate (as His Honour Judge Saffman put it in Stanhope).

Finally, as Mr Scott pointed out in his closing submissions, FCIB had pleaded in its Defence that Mr Hunt’s decision to admit the claims of the MTIC Companies to proof broke the chain of causation: see paragraph 116A.3. This met Mr Parker’s point that the Defendants had failed to challenge Mr Hunt’s decision in this action. In this context there was no real difference between an argument based on failure to mitigate and an argument based on a breach in the chain of causation. If it was necessary for the Defendants to challenge the reasonableness of Mr Hunt’s decision, then I am satisfied that they did so.

The S.32 Issue: general

I reject Mr Hunt’s evidence in Hunt 6 that he did not know about TWPS’ true role and its alleged fraud until the documents on the three CD-Roms were reviewed by Mr Fatherly. I also reject his evidence that it was only when he instructed Mr Fatherly to send key documents to Mr Potts that he first considered that he had evidence to support claims against FCIB and Mr Deuss. My reasons for rejecting this evidence are as follows:

Accordingly, I dismiss the Claimants’ case in paragraphs 43(5) to 43(8). Mr Scott and his team pointed out in their closing submissions that the Claimants had called no evidence from the Official Receiver or the liquidators at the time of nine of the ten MTIC Companies which went into liquidation before 22 September 2008 and that they had called no evidence from Mr Valentine who was the joint liquidator with Mr Reynolds of the tenth MTIC Company (TCG). They submitted that if I rejected Mr Hunt’s evidence in relation to the trigger, the Court should find that the Claimants had failed to discharge the burden of proof on the S.32 Issue given these gaps in the evidence.

Although I was tempted by this shortcut, I do not accept this submission. The Claimants called evidence to discharge the burden of proof on the S.32 Issue and they adduced sufficient evidence to enable me to decide the issue on the merits for each of the MTIC Companies which went into liquidation before the Cut Off Date. In each case, therefore, I must ask whether there was a trigger which would have led a reasonably diligent liquidator to carry out investigations before then deciding whether the statement of claim test was or would have been satisfied before the Cut Off Date.

I find that Mr Hunt fully understood the mechanics of MTIC fraud by the date on which FCIB went into Emergency Measures. He accepted that from 2003 he had been appointed liquidator of at least two companies engaged in MTIC fraud and that he had some experience of the issue. Furthermore, he had already been appointed the liquidator of some of the MTIC Companies. I reject his evidence that he “was not particularly into the mechanics of the fraud to the same extent that some of the other IPs were”: see Hunt 6, paragraph 18. In my judgment, this was another example of Mr Hunt trying to downplay his experience.

I also find that by 2007 Mr Hunt knew that FCIB had been accused of involvement in MTIC fraud, that raids had been carried out on Transworld’s London offices, that Mr Deuss and other directors of FCIB had been accused of money laundering offences and that TWPS had vetted potential customers of FCIB. He accepted that he was aware of all of these facts in cross-examination.

Finally, I find that Mr Potts forwarded on Mr Deuss’s email dated 8 February 2006 to Mr Hunt and that he was aware that TWPS was carrying out KYC for FCIB and he had seen an example of a site visit report. I draw the inference that Mr Hunt knew that Mr Deuss was involved in the management or control of TWPS from the contents of his email. But even if he did not know this, I find that a reasonably diligent liquidator would have reached this conclusion from a careful reading of the email and its attachments and discussing them with Mr Potts.

I find that in 2007 a reasonably diligent liquidator would have known that there was a solid basis in evidence for advancing a case that FCIB knowingly and actively facilitated MTIC fraud based on publicly available information alone. The Letter of Claim was principally based on publicly available information (the Committee Report and the Guardian article dated 26 October 2006) and Mr Potts accepted in cross-examination that he would not have advanced such an allegation consistently with his conduct obligations without a solid basis in evidence.

The Letter of Claim made reference to Mr Potts’ meeting with Mr Urich and the Dutch Judgment and I have considered whether they made a material difference to Mr Potts’ state of knowledge by the date of the Letter of Claim. In my judgment, he would still have been able to advance the case against FCIB without reliance on this additional information because he did not qualify his evidence in cross-examination and he was not re-examined on that basis either. But in any event, Mr Hunt would have had the benefit of Mr Potts’ advice about his meeting with Mr Urich.

I find that in 2006 to 2008 it was standard practice for a reasonably competent liquidator to obtain account opening information from the banks at which the company in liquidation had accounts. Mr Reynolds accepted this in terms in cross-examination and Mr Fatherly’s evidence also supported this conclusion even though he only joined Griffins in 2011. Further, I find that if the liquidator of any of the MTIC Companies had asked FCIB to provide the account opening documents for their FCIB accounts, FCIB would have provided this information promptly. Mr Reynolds’ evidence was that FCIB provided the KYC material for TCG within 10 days.

I find that between 7 March and 19 March 2014 Mr Fatherly and his team of Griffins investigators reviewed the KYC material for the companies over which Griffins partners had been appointed liquidators and were able to prepare a report and schematic chart into the activities of TWPS. I also find that the purpose of the report was to identify TWPS marketers who had provided references to FCIB for companies engaged in MTIC fraud and that they had identified Mr Nixson, Mr Bailey and Mr Mallaburn as providing references. Finally, I find that by 19 March 2014 the Griffins investigators were investigating whether the TWPS marketers whom they had identified had given references to other companies engaged in MTIC fraud by looking at FTT judgments.

I also find that by 11 March 2014 Mr Fatherly had identified Mr Deuss as the ultimate beneficial owner of TWPS and that Mr Geerts and Ms Deuss were its statutory directors and had formed the view that TWPS had a specific role in relation to traders who were involved in MTIC fraud. Finally, I find that by 12 March 2014 Mr Fatherly had formed the view that TWPS had a specific role in relation to traders involved in MTIC fraud and that it involved potential fraud on the part of TWPS. Mr Fatherly accepted all of these propositions in cross-examination.

In my judgment, in 2007 a reasonably diligent liquidator could have obtained the publicly available information and the MTIC Companies’ account opening documents within a couple of weeks and established the facts set out above within a month or six weeks depending on the contents of the KYC material for each MTIC Company (which I consider individually below). I, therefore, dismiss the Claimants’ case that a review of the books and records of the MTIC Companies would not have revealed TWPS’s involvement in MTIC fraud or revealed only that it had a role in the opening of the MTIC Companies’ accounts: see paragraph 43(4)(a).

The test. The Claimants pleaded that the liquidators of the MTIC Companies could not have known and, therefore, pleaded: (a) that TWPS knew that MTIC fraud was prevalent in the T&C sector and that TWPS knew that FCIB was targeting companies in the T&C sector, (b) that TWPS knew that once onboarded such clients’ activities were not being monitored properly or at all and (c) that Mr Deuss had any connection with TWPS. Mr Scott and his team did not accept that it was necessary for the liquidators of the MTIC Companies to plead these allegations to meet the statement of claim test and, in particular, the need to prove (c).

MTIC fraud. In my judgment, from May 2007 (at the latest) all of the liquidators of the MTIC Companies could have pleaded that MTIC fraud was prevalent in the T&C sector and that FCIB was targeting that sector by relying on the conduct of the individual MTIC Company, the Committee Report and the shared knowledge of the IP Group. However, I am not satisfied that the individual liquidators of the MTIC Companies would have been able to plead that TWPS was aware of this unless there were account opening documents from which this inference could be drawn. In particular, such an inference could be pleaded either from a completed site visit report or a letter of good standing and even from the TWPS marketer inserting their EPR number (as I find in relation to ETP below).

However, I am also satisfied that Mr Hunt himself could have pleaded that TWPS knew that FCIB was targeting the T&C sector on the basis of Mr Deuss’s email dated February 2006 and its attachments. In the first attachment Mr Deuss set out his intention to continue to service the T&C sector and he also stated: “TWPS's marketing presence around the world facilities one-on-one client interviews and the detailed site visits.” Moreover, the site visit report itself identified the inquiries which the TWPS marketers would be required to make. On the Claimants’ case, Mr Deuss was wholly disingenuous in this email and the accompanying memo in expressing the intention to combat MTIC fraud.

Monitoring. In my judgment, the individual liquidators could have pleaded a case that FCIB did not properly monitor the accounts of the MTIC Companies from the information which FCIB had provided or would have provided if requested to do so promptly. The Claimants produced a “red flag analysis” as Cs, S9 to their closing submissions in which they set out in tabular form all of the red flags which, on their case, the TWPS marketers, the FCIB compliance department and the RMC ought to have spotted. This analysis was exclusively based (or almost exclusively based) on account opening information and bank statements.

However, I am not satisfied that the liquidators of the MTIC Companies could properly have pleaded that FCIB knew that the MTIC Companies had not been properly monitored unless they could rely on documents which showed that TWPS marketers introduced the MTIC Company to FCIB. In my judgment, it was not necessary for the liquidators to plead that the TWPS marketers knew that the MTIC Companies were not being monitored after the account had been opened. It would have been sufficient to allege that the TWPS marketers knew that FCIB had not carried out any proper analysis of the companies’ trading patterns for the purpose of approving the application. The red flag analysis would have been sufficient to plead such a claim.

Mr Deuss. I accept the Defendants’ submission that it would not have been necessary to plead a case against Mr Deuss personally in order to satisfy the statement of claim test. Indeed, the obvious reason why the Claimants have advanced such a case against him is because they wish to obtain a judgment against him personally. But in any event, I am satisfied that there was sufficient publicly available information to plead that Mr Deuss had a connection with TWPS. Mr Fatherly established by a simple Companies House search that he was the ultimate beneficial owner of FCIB and it was obvious from its name that TWPS was one the companies in the Transworld group which he ultimately controlled. The liquidators of the MTIC Companies would also have known well before the Cut Off Date that Mr Deuss had been an active director of FCIB and was still a member of the Supervisory Board.

The S.32 Issue: individual claims

Mr Scott and his team identified ten MTIC Companies which went into liquidation before 22 September 2008. They were in order of timing: Blue Fox, TCG, Northdata, Kingswood, MTL, ACEL, ETP, Leeds Smith and 385 North. I deal with each one in turn. In considering whether the liquidators could with reasonable diligence have discovered TWPS’s fraud, I consider the individual documents which were available to them against the background of the general conclusions which I have reached about the statement of claim test and on the assumption that the liquidators of those MTIC Companies would not have been looking at the relevant documents in a vacuum but would have had the public information available to them and the pooled knowledge of the IP Group (including Mr Hunt himself).

The Claimants’ case was that the liquidator of Blue Fox could not have discovered TWPS’s fraud because its books and records did not contain any reference to TWPS. They pleaded in the Particulars of Claim at Schedule A4:

“Glover resolved to place Blue Fox into creditors’ voluntary liquidation on 22 July 2005 due to the fact that Blue Fox could not, by reason of its liabilities, continue to trade, less than 4 months after trading commenced. On 22 July 2005, Gordon Johnstone was appointed as liquidator. Mr Johnstone filed a return dated 23 October 2007 for the final meeting of creditors showing no realisations had been made. Blue Fox was dissolved on 27 January 2008. Mr Johnston could not with reasonable diligence have discovered TWPS’ fraud by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. The books and records of Blue Fox do not contain reference(s) to TWPS prior to Blue Fox’s dissolution on 27 January 2008. In addition, Mr Johnston’s files for Blue Fox do not contain any material obtained prior to 22 September 2008 which is relevant to the matters pleaded at paragraph 43(4)(b) above.”

I am not satisfied that this is correct. The Claimants referred to the site visit report of Mr Nixson dated 21 March 2005 in their red flag analysis in Cs, S.9. Moreover, Mr Defty, who ultimately became the liquidator, accepted that he could have obtained a copy of the site visit report at any time. The Claimants did not call Mr Johnston or seek to prove why he did not carry out any investigations given that the company only traded for four months, it had assets of £133 and its only creditor was HMRC to whom it owed £18,432,107. The inference which I draw is that Mr Glover put Blue Fox into creditors voluntary liquidation to avoid an investigation rather than to facilitate one. On the assumption that my findings of fact in relation to the dishonesty of Mr Deuss are wrong and in the absence of any evidence from Mr Johnston himself, I find that he could with reasonable diligence have discovered the fraud of TWPS before the Cut Off Date.

Mr Reynolds was one of the joint liquidators of TCG from 4 April 2006 until 5 August 2008. It was the Claimants’ case that the books and records of TCG did not contain any reference to TWPS in the period up to the Cut Off Date. They pleaded as follows in the Particulars of Claim at Schedule A5:

“TCG went into a CVL on 4 April 2006 and Mark Reynolds and Robert Valentine were appointed liquidators. They could not with reasonable diligence have discovered TWPS’ fraud by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. The books and records of TCG do not contain reference(s) to TWPS in the period up to 22 September 2008. In addition, the liquidators’ files for TCG do not contain any material obtained prior to 22 September 2008 which is relevant to the matters pleaded at paragraph 43(4)(b) above.”

Again, I am not satisfied that this is correct because the KYC material for TCG contained a site visit report dated 24 January 2006. Mr Reynolds accepted that by 2 April 2007 FCIB had provided TCG’s account opening information and he did not suggest that this document was not sent to him. Moreover, the Claimants themselves relied on it as KYC material in both Cs, S5 and Cs, S9. I am satisfied that Mr Valentine and Mr Reynolds had ample time to determine whether TCG had a claim against TWPS. Finally, Mr Reynolds accepted that by 17 January 2007 a reasonably diligent liquidator would have been able to work out that TCG might have been involved in MTIC fraud and, in my judgment, that ought to have been the trigger for an investigation. On the assumption that my findings in relation to the dishonesty of Mr Deuss are wrong, I find that Mr Reynolds and Mr Valentine could with reasonable diligence have discovered the fraud of TWPS before the Cut Off Date.

On 13 February 2006 Mr Bramston was appointed the provisional liquidator of Northdata on the application of HMRC and on 12 April 2006 he was appointed as the liquidator of the company. The Claimants’ case was that the company’s books and records and his files did not contain any material obtained before the Cut Off Date which was relevant to the S.32 Issue:

“Northdata was compulsorily wound up on 5 April 2006 and Mr Bramston was appointed as liquidator by the Secretary of State (having previously served as provisional liquidator from 13 February 2006). Mr Bramston could not with reasonable diligence have discovered the fraud of TWPS by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. The books and records of Northdata do not contain reference(s) to TWPS prior to 22 September 2008. In addition, Mr Bramston’s files for Northdata do not contain any material obtained prior to 22 September 2008 which is relevant to the matters pleaded at paragraph 43(4)(b) above (as opposed to material which is consistent with TWPS having a role in the opening of Northdata’s FCIB account).”

Again, I am not satisfied that this is correct. Mr Nixson provided a letter of good standing dated 14 September 2005 and this was included in the account opening pack. Moreover, Mr Bramston’s files contained the transcript of an interview by him of Mr Walker on 28 February 2006 pursuant to S.236. In the course of that interview Mr Bramston referred to Mr Rajkumar’s affidavit sworn on 13 February 2006 upon which I relied in finding that FCIB assisted Mr Walker to commit the relevant breaches of fiduciary duty. On page 89 of the transcript Mr Bramston asked Mr Walker about his introduction to FCIB and the transcript records as follows:

“How did you get introduced to Curacao? JASON WALKER: Just by talking to people. They said to me that you know, are you into First Curacao and I said, "What is that?" It's something that I'd never even heard of. TIMOTHY BRAMSTON: But which people? JASON WALKER: Just one of the companies perhaps. TIMOTHY BRAMSTON: Could it be the Lets Talk IT? WARREN HEYMAN: It could have been anybody. JASON WALKER: I can't remember. TIMOTHY BRAMSTON: And did it -- were you given an introduction, or did you approach them yourself? How did -- TIMOTHY BRAMSTON: And did it -- were you given an introduction, or did you approach them yourself? How did -- JASON WALKER: He gave me a number. Whoever I spoke to gave me a number of a guy called Roy, Roy Nixson, who I contacted. I thought, "Oh well, that's great anyway", because I couldn't get a bank account, I couldn't continue to use my personal bank account. TIMOTHY BRAMSTON: Okay, and why was the account put in your name as opposed to the company name? JASON WALKER: Because I hadn't got any paperwork. I needed a -- like a lot of paperwork, you know, to say I'd been trading for a while, which I hadn't got at the time. But I set the First Curacao Bank account up, so he said to me, what I'd have to do is same again, put it in your own personal name until you start building a business up and then when you've got records, paperwork and things, then we'll transfer it into a business account, which will be round about February time, which is something that I was originally doing. TIMOTHY BRAMSTON: Okay. Did you set up two accounts at the same time? JASON WALKER: No I didn't. TIMOTHY BRAMSTON: Right. So remind me the name of the other account? It was -- JASON WALKER: It was ExactPay. TIMOTHY BRAMSTON: Yes. When did that get set up? Months later? JASON WALKER: Yes, a few weeks later, yes. TIMOTHY BRAMSTON: Okay. JASON WALKER: I set this one up and then Roy explained to me about that one. TIMOTHY BRAMSTON: Right. The purpose of this account is what, as you saw it? JASON WALKER: Which account, sorry? The ExactPay? TIMOTHY BRAMSTON: No, not the ExactPay, the main account. JASON WALKER: This one? TIMOTHY BRAMSTON: Yes. JASON WALKER: To run it as a business account. TIMOTHY BRAMSTON: Right, so it is to carry on the business of the company? JASON WALKER: Yes.”

If my findings of dishonesty in relation to Mr Deuss are wrong, then in my judgment Mr Bramston had actual knowledge of TWPS’s fraud on 28 February 2006. He was provided with direct evidence of this conduct by Mr Walker, namely, that Mr Nixson was willing to introduce him to FCIB even though he could not get a bank account himself and that he was prepared to advise Mr Walker to trade on behalf of a limited company through a personal bank account. This was one of the signs of fraud upon which the Claimants placed significant reliance.

Mr Bramston did not give evidence before me and the Claimants did not disclose when FCIB provided the account information to him or to Griffins. But even if he did not have the letter of good standing available to him on 28 February 2006, I am satisfied that he could have obtained it within a matter of days from FCIB. In my judgment, the transcript of the interview with Mr Walker and the letter of good standing itself would have enabled Mr Bramston to satisfy the statement of claim test and to advance an allegation of fraud against TWPS whether or not he also chose to allege fraud against Mr Deuss. I find, therefore, that Mr Bramston could with reasonable diligence have discovered the fraud of TWPS before the Cut Off Date.

On 31 July 2006 Mr Hunt was appointed to be the liquidator of Kingswood. His evidence in Hunt 6 was that on 10 November 2006 Mr Sharma provided Griffins with the KYC material for Kingswood. He also exhibited the email which had been sent the day before. His pleaded case was that these documents and his own files did not contain any material which was obtained before the Cut Off Date and which was relevant to the S.32 Issue:

“(vii)

Kingswood entered administration on 12 May 2006 and Gagen Sharma was appointed as administrator. On 31 July 2006, Kingswood’s creditors approved a resolution to place the company in liquidation and to appoint Stephen Hunt as liquidator. The CVL commenced on 30 August 2006.

(viii)

Neither Mrs Sharma nor Mr Hunt could with reasonable diligence have discovered TWPS' fraud by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. The books and records of Kingswood do not contain reference(s) to TWPS in the period up to 22 September 2008. In addition, Mr Hunt’s files for Kingswood do not contain any material obtained prior to 22 September 2008, including any material received from Mrs Sharma, which is relevant to the matters pleaded at paragraph 43(4)(b) above (as opposed to material showing that TWPS appeared to help FCIB to apply its purported ‘enhanced due diligence requirements’ to Kingswood).”

I find in favour of the Claimants on this issue. I have found that TWPS did not assist Mr Duddy to commit the relevant breaches of duty because it did not introduce Kingswood to FCIB. Even if this finding and my findings on dishonesty in relation to Mr Deuss are wrong, I am not satisfied that Mr Hunt could have discovered TWPS’s fraud by the Cut Off Date even with reasonable diligence. I accept Mr Hunt’s evidence that the only TWPS document on the file was an email dated 11 May 2006 and that it would not have put him on notice of fraud or dishonesty.

On 17 April 2008 a meeting of creditors took place at which they resolved to put MTL into liquidation and on 18 April 2007 Mr Hunt was appointed to be the liquidator of the company. The report to the meeting stated that Mr Abrahamovitch attributed its failure to the refusal of HMRC to allow monthly instead of quarterly returns, the suspension of its bank account by FCIB and an assessment of approximately £570,000 by HMRC. Mr Hunt accepted in evidence that on 17 May 2007 FCIB provided him with MTL’s account opening information. But his pleaded case was that these documents and his own files did not contain any material which was obtained before the Cut Off Date and which was relevant to the S.32 Issue:

“MTL was placed into CVL on 18 April 2007. Stephen Hunt was appointed as liquidator on the same date. Mr Hunt could not with reasonable diligence have discovered the fraud of TWPS by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. The books and records of MTL and the liquidator files include material dated prior to 22 September 2008, and obtained by Mr Hunt before that date, which (1) concerns the suspension of MTL’s FCIB account because of third party payments on two transactions, and (2) shows that MTL’s KYC documents were certified by a TWPS employee (although the individual concerned is not identified as such). Taken together, that material is, on its face, consistent with TWPS assisting in the carrying out of a bona fide compliance function, and consistent with post-account-opening monitoring. None of the material obtained by Mr Hunt prior to 22 September 2008 is relevant to the matters pleaded at paragraph 43(4)(b)(i) and (iii) above.”

Again, I am not satisfied that this is correct. Mr Hunt accepted that the material which FCIB sent to him contained a letter dated 1 June 2006 from Mr Abrahamovitch to Ms Pinillos of TWPS complaining about the suspension of MTL’s account because of third party payments. In this letter he stated that he was introduced to a supplier, MediaWatch 360 Ltd by a trader in Dubai and at their suggestion MTL paid their suppliers directly. He then continued:

“I had absolutely no idea until the recent email from Compliance that third party payments contradicted your terms and conditions, and had I known I would, of course, found a different way of transacting the business. I now know that FCIB do not like these transactions, and that they are considered an indicator of a potential missing trader. I must point out that I did not know this at the time, but I do know that our supplier is not a missing trader and is, at the time of writing, still very much in business, and offering me stock daily. They have also told me that although they have no relationship with FCIB, they are happy for your representatives to visit them at their offices in Wembley London to discuss these transactions.

With reference to EB000000859784: This is a commission payment to Network Trading in Dubai, the company that introduced us. There has been some confusion on my part as to whether this transaction will attract VAT in the UK, and my accountants are currently investigating the situation. It's my belief that it will not attract VAT and therefore it is very likely that the commission invoice that you have will be credited by Mediawatch360 Ltd, and I will hold an invoice with no VAT liability from Network Trading FZE for the transaction.”

Mr Hunt did not refer to a site visit report which Ms Pinillos of TWPS completed on the same day and in which she stated: “Please note I was at the customer [sic] premises he did not know 3^rd party payments were not allowed by the bank. He gave me all the paperwork regarding all 3^rd party payments he has done – he is willing to stop straight away.” She also rated MTL amber on the basis that MTL had made third party payments but the client had agreed to stop them. Mr Hunt did not suggest that this site visit report was not included in the material which FCIB provided to him on 17 May 2007 and the Claimants relied on it in both G14 and Cs, S9.

But even if the site visit report was not included in the account opening material, Mr Abrahamovitch referred to her visit in the first line of his letter and, in my judgment, Mr Hunt could have obtained this site visit report by writing to FCIB for a copy. If he had done so, then he would have had sufficient material to satisfy the statement of claim test in relation to MTL. Indeed, he had the documents on which he relied at trial in support of the Indirect Claim against TWPS and a clear example of a TWPS marketer trying to persuade FCIB to keep open the account of a T&C customer, which was part of a network and making third party payments. In my judgment, he could have advanced an allegation of fraud against TWPS whether or not he also chose to allege fraud against Mr Deuss. I find, therefore, that Mr Hunt could with reasonable diligence have discovered the fraud of TWPS before the Cut Off Date.

On 25 July 2007 ACEL was wound upon the petition of HMRC and the Official Receiver was appointed as liquidator. The Claimants’ case was that FCIB’s account opening information would not have revealed TWPS’s fraud:

“ACEL was placed into liquidation on 25 July 2007 on the application of HMRC and the Official Receiver was appointed. The Official Receiver gave notice that the winding up was complete on 15 April 2008 at which date he would not have and could not with reasonable diligence have discovered TWPS’ fraud. For example, a review by the Official Receiver of the KYC material collected by FCIB, had it been available to him, would have revealed only that TWPS had a role in the opening of ACEL’s FCIB account.”

It appeared to be common ground that TWPS did not provide a letter of good standing or a site visit report and I would have been prepared to find in favour of the Claimants on this issue but for one factor. The Claimants pleaded that three documents contained in FCIB account’s opening information were an example of the allegation that Mr Deuss was aware that the TWPS marketers of TWPS “were not concerned with the contents of the documents that were needed in order to meet FCIB's onboarding requirements and that they did not subject them to any scrutiny to see if there was anything unusual that was revealed by such information”: see paragraph 15.

I found against the Claimants in relation to this allegation and, in my judgment, this allegation demonstrates how artificial the case against Mr Deuss was. But if I am wrong in relation to that allegation, then in my judgment the Official Receiver could with reasonable diligence have obtained and analysed those three documents before the Cut Off Date and discovered that Mr Deuss and TWPS were turning a blind eye to ACEL’s fraud. I am also satisfied that there was a trigger to request those documents and investigate that conduct. The Official Receiver was appointed by HMRC and on 4 December 2007 and 1 April 2009 interviewed Mr Shakil Ahmed under S.236. In his second interview he stated that he had given copies of all bank statements for ACEL’s FCIB account to the Official Receiver.

On 27 February 2008 MML was wound on the petition of HMRC and the Official Receiver was appointed as liquidator. The Claimants’ case was that FCIB’s account opening information would not have revealed TWPS’s fraud:

“MML was struck off for failing to file accounts on 29 May 2007 and dissolved on 5 June 2007. By an order dated 27 February 2008, on the petition of HMRC, MML was to be restored to the Register of Companies (which occurred on 26 July 2008) and compulsorily wound up. The Official Receiver was appointed as liquidator. He gave notice that the winding-up of MML was complete on 25 September 2008. The Official Receiver could not with reasonable diligence have discovered the fraud of TWPS by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. For example, a review by the Official Receiver of the KYC material collected by FCIB in October 2005, had it been available, would have revealed only that TWPS had a role in the opening of MML’s FCIB account. Otherwise, the books and records of MML do not contain reference(s) to TWPS prior to 22 September 2008.”

Again, I do not accept that this is accurate. On 27 October 2005 Mr Nixson certified the account opening documents provided by MML and provided a letter of good standing for MML and the Claimants recorded in Cs, S5 that he completed a site visit report. In my judgment, the Official Receiver could with reasonable diligence have obtained and analysed FCIB’s account opening documents before the Cut Off Date. I am also satisfied that there was a trigger to request those documents and investigate that conduct. The Official Receiver was appointed by HMRC and on 4 April 2008 and 17 June 2008 respectively Mr Hussain and Mr Junaid were interviewed under S.236. Both mentioned MML’s FCIB account. Indeed, Mr Junaid stated that all payments were made to suppliers by bank transfer from the FCIB account. I find, therefore, that the Official Receiver could with reasonable diligence have discovered the fraud of TWPS before the Cut Off Date.

On 16 April 2008 ETP was restored to the register and wound up on the petition of HMRC and the Official Receiver was appointed to be the liquidator. On 26 August 2008 Mr Defty was then appointed to be the liquidator of ETP. The Claimants case was as follows:

“(vi)

ETP was struck off under section 652(5) of the Companies Act 1985 on 2 October 2007 and dissolved on 9 October 2007. On 16 April 2008, on the application of HMRC, the court ordered that ETP be restored to the register (which occurred on 29 May 2008) and be compulsorily wound up. The Official Receiver was appointed as liquidator. The Official Receiver could not with reasonable diligence have discovered the fraud of TWPS by 22 September 2008, the date 6 years before TWPS went into liquidation on 22 September 2014. For example, a review by the Official Receiver of the KYC material collected by FCIB in June 2005, had it been available, would have revealed only that TWPS had a role in the opening of ETP’s FCIB account. Otherwise, the books and records of ETP do not contain reference(s) to TWPS prior to 22 September 2008.

(vii)

Ian Defty was appointed as liquidator by the Secretary of State on 26 August 2008. He could not with reasonable diligence have discovered TWPS’ fraud before 22 September 2008, the date 6 years before the liquidation of TWPS. Mr Defty’s files for ETP do not contain any material obtained prior to 22 September 2008, including any material received from the Official Receiver, which is relevant to the matters pleaded at paragraph 43(4)(b) above.”

On 21 July 2008 Mr Field was interviewed under S.236 and I have already set out the admissions which he made to the Official Receiver: see [204]. Mr Defty accepted that when he was appointed he knew that ETP was thought to be involved in MTIC fraud and within two months Blake Lapthorn were writing to FCIB to request KYC information and bank statements. In my judgment, Mr Field’s admissions were the trigger for the Claimants to obtain that material and the Official Receiver could with reasonable diligence have obtained and looked at that material before the Cut Off Date.

I have also held that TWPS assisted Mr Field to commit the relevant breaches of duty by introducing him to FCIB and in doing so I relied on the documents which showed that Mr Barrs certified copies of various documents giving his EPR number E76413 and that the checklist recorded that number against “Reference Letter”. The Official Receiver would have had these documents available if FCIB had been asked to provide them promptly after the interview on 21 July 2008. Moreover, the obvious inference to draw from the checklist was that Mr Barrs had provided a reference for ETP even if that letter was not on the file. I find, therefore, that the Official Receiver could with reasonable diligence have discovered the fraud of TWPS before the Cut Off Date.

I dismissed both the Direct and the Indirect Claims for Leeds Smith on the basis that there was no evidence to support allegation that the receipts or payments relating to the relevant transactions passed through its FCIB account and that the findings in the FTT decision were not admissible. Given that there was no evidence to support either claim, I am not satisfied that the administrator or the liquidators could with reasonable diligence have discovered TWPS’s fraud even assuming that my findings on dishonesty were wrong (and even though Mr Nixson provided a letter of good standing to support the application).

On 3 September 2008 385 North was wound up on the petition of HMRC and the Official Receiver appointed as liquidator. Given that there were less than three weeks between this date and the Cut Off Date, I am satisfied that the Official Receiver could not have discovered TWPS’s fraud or dishonesty before that date with reasonable diligence. If there had been a longer time between the appointment of the Official Receiver and the Cut Off Date I would have reached a similar conclusion to the one which I reached in relation to ETP (above) and for similar reasons.

The Uninvolved Directors

Between 30 March 2006 and 1 January 2007 Ms Janine Breitenfeld was the sole director of Eliyon and in his statement to the Official Receiver dated 15 February 2011 Mr Gathani stated that she was his partner and kept the paperwork. Further, in 2013 Mr Hunt and Mr Bramston brought a claim for breach of fiduciary duty against her in in their capacity as liquidators of Eliyon alleging that she was complicit in the MTIC fraud carried out by Mr Gathani. The inference which I draw is that Ms Breitenfeld was the stooge or puppet of Mr Gathani and was either complicit in the relevant MTIC fraud or turned a blind eye to it. In those circumstances, I find that Eliyon could not have discovered TWPS’s dishonesty with reasonable diligence during the seven months during which she was the sole director.

Ms Samantha Jones was the wife of Mr Jones and on 29 February 2008 she was appointed to be a director of Gold Digit although Mr Nixson certified a copy of her passport as part of the account opening process. She is also described as a co-director in a VAT audit report dated 17 August 2004 although it described her as “non-active”. There is no evidence to suggest that she had any involvement in the MTIC fraud of the company. But in my judgment, it is unrealistic to suggest that she should have discovered TWPS’s fraud between 1 March 2008 and the Cut Off Date far less taken legal advice or any other action to establish the existence of a worthwhile claim which satisfied the statement of claim test. I, therefore, find that Gold Digit could not with reasonable diligence have discovered TWPS’s fraud by the Cut Off Date.

Ms Joti Bhatia and Ms Suman Bhatia were the sister and mother of Mr Deepak Bhatia and directors of JDG at all material times until 30 June 2008 and 24 October 2008 respectively. In his statement to the Official Receiver dated 5 May 2015 Mr Bhatia admitted that Ms Joti Bhatia was an active director. By contrast, there are no documents which shed any light on the role of Ms Suman Bhatia. The Claimants specifically pleaded that Ms Breitenfeld and Ms Jones could not with reasonable diligence have discovered TWPS’s fraud. But for some reason they did not plead such a case in relation to the Bhatias. I could have held, therefore, that the Claimants failed to plead or prove their case on S.32 in relation to JDG.

On reflection, however, I find that JDG could not with reasonable diligence have discovered TWPS’s fraud by the Cut Off Date. Mr Deepak Bhatia committed the relevant breaches of duty between 1 March 2006 and 31 May 2006 and I must take the company as I find it. As with Gold Digit, it is unrealistic in my judgment to suggest that family members should have discovered TWPS’s fraud far less taken legal advice or any other action to establish the existence of a worthwhile claim which satisfied the statement of claim test. In reality none of the Uninvolved Directors were truly independent and none of them occupied an executive role.