Contribution from Participators in Fraud

Morris v Banque Arabe et Internationale D’lnvestissment SA (No 2) (TLR 18 October Ch D)

Section 213(2) of the Insolvency Act 1986 provides: ‘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 [mentioned in subsection 1] are to be liable to make such contribution (if any) to the company’s assets as the court thinks proper’. The liquidators of BCCI claimed that Banque Arabe participated in three separate frauds committed by BCCI. They sought a contribution pursuant to s213. Banque Arabe applied for the determination of the preliminary issue: ‘Was a person within the ambit of s213(2) if he had participated in fraudulent acts of the company in liquidation or was it necessary that such a person carried on or assisted in the carrying on of the company’s business?’ Banque Arabe contended that the latter interpretation was correct. They were wrong. To come within the ambit of s213(2) it was sufficient to show that a person had participated in the fraudulent acts of the company in liquidation, it was necessary to show that such a person had carried on or assisted in the carrying on of the company’s business.