In The Matter Of Metrocab & In The Matter Of Frazer Nash Technology v Revenue & Customs (2010)
The court refused to exercise its discretion to rescind winding-up orders made against two companies where the circumstances were not significantly different from those at the time the orders were made, and the court was not satisfied that it had been provided with all the material facts.
The applicant companies (M and F) applied to rescind winding-up orders which had been made against them. M and F were run by a sole director and majority shareholder (S). Both companies had been wound-up on petitions presented by Revenue and Customs for unpaid National Insurance and PAYE contributions. The combined debt was in the region of £250,000. M and F's applications had been made between three-and-a-half and four months late and were opposed by persons claiming to be creditors. Those persons included M's landlord and a group of companies involved in litigation with M and F concerning unpaid loans and promissory notes. In the course of that litigation, S had paid £5 million into court (see Kazeminy v Siddiqi (2009) EWHC 3207 (Comm) and Kazeminy v Siddiqi (2010) EWHC 201 (Comm)). Revenue and Customs indicated that if M and F paid their debts plus costs, it would not oppose the instant applications. M and F submitted that (1) they had delayed in making the application because it was necessary to obtain third party funding; (2) it was appropriate to rescind the winding-up orders as they had now concluded new contracts to build taxicabs, which would enable them to pay off all their debts and have a viable future.
(1) The analysis set out in Sayers v Clarke Walker (2002) EWCA Civ 645, (2002) 1 WLR 3095 concerning applications for permission to appeal out of time was equally applicable in the context of an application for an extension of time made under the Insolvency Rules. Therefore the checklist in CPR r.3.9 concerning relief from sanctions should be used, Sayers applied. The interests of the administration of justice required any application for rescission of a winding-up order to be made promptly or a considerable degree of uncertainty would arise for creditors, the official receiver and any liquidator appointed. Under the Insolvency Rules 1986 r.7.47, applications for rescission were to be made within seven days of the date of the winding-up order. M and F had delayed significantly in making their application. That delay was intentional and without any proper justification. The suggestion that third party funds were required was unconvincing, particularly as the findings in the Commercial Court proceedings strongly supported the conclusion that S had substantial funds available, much of it from his personal resources. The effect of the delay was an added period of uncertainty for creditors and the joint liquidators in respect of M and F's status. The balance therefore came down against the grant of an extension of time. (2) From the authorities, it appeared that the power to rescind a winding-up order was discretionary and only to be exercised with caution. The onus was on the applicant to satisfy the court that it was an appropriate case in which to exercise the discretion. It would only be an appropriate case where the circumstances were exceptional, and the circumstances relied on had to involve a material difference from those before the court which had made the original order. Further, in dismissing a winding-up petition so that the company would be free to resume trading, the court had to be satisfied that the debt of the petitioning creditor would be paid, that the court was in possession of all material facts, there was nothing that required further investigation, and there were no other cogent reasons for not making the order sought, Dollar Land (Feltham) Ltd, Re (1995) BCC 740 Ch D (Companies Ct), Piccadilly Property Management Ltd, Re (2000) BCC 44 Ch D (Companies Ct), Wilson v Specter Partnership (2007) EWHC 133 (Ch), (2007) 5 Costs LR 802, Papanicola v Humphreys (2005) EWHC 335 (Ch), (2005) 2 All ER 418 and Bhanderi v Customs and Excise Commissioners (2004) EWHC 1765 (Ch), (2005) 1 BCLC 388 applied. Applying those principles, the court was not satisfied that it would be appropriate to accede to M and F's applications. First, the registrar had been aware of M and F's impending new contracts at the time of the winding-up order. The instant court had not seen the terms of the contracts, even in redacted form. The situation was therefore not significantly different from that before the registrar. Second, although adequate provision appeared to have been made to meet the petition debt and other undisputed debts, the court was not satisfied that sufficient protection was offered in connection with the costs of the liquidators, or that M and F would be able to meet their debts as they fell due if the winding-up orders were rescinded. Although it was possible that S might make further funding available, S's failure to provide such funding in the past so as to avoid the making of the winding-up orders did not inspire confidence. Third, the evidence served in support of the applications had been presented in a misleading way, and the court had not been provided with all the material facts. For example, S's witness statements were wholly inadequate in providing sufficient information regarding the financial position of M and F, and he had given different information to the liquidators from the information he presented to the court. The court was not satisfied that S had fully cooperated with the liquidators, and the liquidators had properly concluded that there were a number of matters warranting further investigation.
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11 Jun 2010
Philip Marshall QC
LTL 14/6/2010 :  EWHC 1317 (Ch)