Here's a summary of the facts of the question:
We act for S who are former auditors of E Ltd. E Ltd is in liquidation and it's liquidator has brought an action for fraudulent trading against a director of E Ltd. The proceedings are regarding the director's dishonesty in running the company. The liquidator now claims that S were involved in the fraudulent trading. The liquidator wants to draw S into the action by way of contribution proceedings.
Am I right to search for fraudulent trading under s.213 Insolvency Act?
Also, do you know which search terms I could look for to answer the following:
- Can the liquidator add S in the claim of fraudulent trading against the director?
- What the liquidator needs to prove
- Could S defend on the basis that any dishonesty was on the part of the director alone?
Any ideas would be a great help. Thank you!
I don't know if contribution proceedings means something different on the LPC than it does to me. A claim for contribution is brought by a defendant, not a claimant. The liquidator should just apply to join the auditors as parties under CPR 19.2(2)(a) if the claim form has been served.
Hiya, I've just come across your question and I'm doing the LPC this year and have the same scenario to do for PLR! Do you have any guidance? I've found the Morris case but not sure I'm going in the right direction
Great, in that case you will understand what a third party will need to do in terms of a defence - it’s a question of identifying the evidence that points *away* from, or otherwise undermines, what the liquidator would need to establish in order to join the third party.
hi I found the relevant information about fraudulent trading on practical law but what I need is another secondary source to confirm what ive found but I can't seem to find anything on halsbury? also in the information given, we're actually not told of the evidence that the auditor has about their involvement? also is Section 215 of the IA 1986 relevant towards this for a remedy? I don't quite understand what the section is talking about? I can't seem to find anything on what an auditor can do to defend the claim as the companies act isn't relevant to it?
Section 215 of the Insolvency Act sets out some of the rules relating to the liquidator's application to the court that I just described above. I'm not sure what you mean about it being "relevant towards this for a remedy"?
To the last part of your question, it's not a question of there being a specific defence available in the same way as, for example, lawful self-defence is a defence to a charge of murder. If the liquidator applies to the court under s. 213, it will be on the basis that they think your client (the auditor) was knowingly involved in fraudulent trading. Your job would be to establish as a matter of fact (1) whether there was any fraudulent trading, and if so, (2) whether your clients knew about it, in their capacity as the auditors of the company. If the evidence on either of those two points doesn't stack up, then that is how you defend the proceedings.
Finally, I would point out the same thing that I said to the previous poster. Your key source here is the statute, not the commentary on the statute. You need to read it carefully, understand it, include references to it in your memorandum, and set it out in a way that a non-lawyer client can understand. Please don't include references to Halsburys in your memo unless that is something you have been specifically instructed to do by your tutors.