Liquidated
S Ltd imported goods from suppliers in the EU and sold them on to different UK purchasers. S Ltd's sole director, the first defendant, instructed the company to divert most of the moneys due from the English companies to overseas companies. In respect of two transactions, S Ltd told purchasers to pay a Spanish company, with which S Ltd had never dealt and which was not a supplier of goods to S Ltd. This instruction rendered S Ltd insolvent and unable to pay its VAT. It was subsequently wound up.
Liquidated
S Ltd imported goods from suppliers in the EU and sold them on to different UK purchasers. S Ltd's sole director, the first defendant, instructed the company to divert most of the moneys due from the English companies to overseas companies. In respect of two transactions, S Ltd told purchasers to pay a Spanish company, with which S Ltd had never dealt and which was not a supplier of goods to S Ltd. This instruction rendered S Ltd insolvent and unable to pay its VAT. It was subsequently wound up.
The second claimant was appointed as provisional liquidator to the company. S Ltd began proceedings against the first and second defendants, alleging that the first had breached his fiduciary duty and the second was liable to the company for knowingly receiving property and moneys in breach of trust.
The original claim particulars were amended pursuant to an order of the master. The claimants then wished to re-amend particulars, but this was stood over to a judge.
The claimants wished to infer that the second defendant was a knowing party to VAT fraud perpetuated by the first defendant and that the second defendant's system of trading was not bona fide commercial trading. The second defendant objected.
In the High Court it was ruled that the amendments had set out matters of fraud; that they might be oppressive but were not disproportionate. The second defendant argued that the action was 'private claim', but this ignored the fact that the action was for indirect recovery of VAT. Furthermore UK legislation allowed HMRC to use the Civil Procedure Rules.
The claimants should be allowed to re-amend the claim.
Silversafe Ltd (in liquidation) and another v Hood and others, Chancery Division, 25 July 2006
