Cases & Deals

First Curaçao International Bank successfully defends £220+ million claims in significant fraudulent trading judgment

Client(s) First Curacao International Bank N.V.

In an extensive 400+ page judgment handed down by the English High Court after a seven-week trial, Mr Justice Leech dismissed the entirety of the claims advanced by Transworld Payment Solutions UK Limited ("TWPS") and its Liquidator, Stephen Hunt, against Jones Day client, First Curaçao International Bank ("FCIB"), and its former President Mr John Deuss. TWPS and FCIB were part of the Transworld Oil group owned by Mr Deuss. The Claimants alleged that FCIB and Mr Deuss dishonestly assisted 19 UK companies (the MTIC Companies) engage in a form of VAT fraud, commonly known as MTIC fraud, between 2003 and 2006 by providing those fraudulent companies with banking services. The claims included Fraudulent Trading claims brought under s. 213 of the UK Insolvency Act 1986 in the name of the liquidator and claims of dishonest assistance brought by TWPS. The pursuit of claims followed after Mr Hunt had taken a series of steps to restore TWPS to the UK Companies' register following its dissolution in order to bring claims and had taken assignment of other claims from the MTIC Companies' liquidators. Mr Hunt sought sums exceeding £220 million (initially £280 million) in respect of the supposed liabilities of TWPS to the MTIC Companies and of the MTIC Companies, in turn, to the UK tax authority, HMRC.

In rejecting the claims, Mr Justice Leech dismissed all of the Claimants' allegations of dishonesty, including blind eye dishonesty. The judgment constitutes important guidance for liquidators on the Fraudulent Trading regime and the requirements when advancing serious allegations of dishonesty.

In addition to an extensive review of the test for dishonesty, Mr Justice Leech's judgment covers a number of other important areas including: (i) the Limitation Act 1980 (finding that a large number of the Claimants' claims would have in any event been time-barred); (ii) the de facto / shadow director test; and (iii) issue estoppel. Finally, the judgment is likely to be of significance to the litigation funding market given the Liquidators' claims were funded and the judge commented on the significant commercial value of the claims to the funders, Mr Hunt and Mr Hunt's firm.

Jones Day has advised on this matter since 2016, when claims were first threatened by TWPS.