Summary

The winding up of a Bahamanian company which had failed to respond to a statutory demand was valid where the company had failed to establish that the petition represented an abuse of the process of the court.

The appellant company (E) appealed against an order for its winding-up on the petition of the respondent (H).

Facts

E was a company incorporated in the Bahamas. Its share holder (M) was adjudicated bankrupt in the United Kingdom and H was appointed as trustee in bankruptcy of his estate. M had been the registered owner of a property, of substantial value, in London, which was transferred to two others (X) immediately prior to the adjudication. H considered that the change in the registered ownership of the property was cosmetic, that M remained its owner on the date of adjudication and accordingly the property had then vested in him. H registered a caution against the property and commenced proceedings in the UK for a declaration that, if X existed, they held the title on a bare trust for H. H subsequently became aware of an allegation that X had sold the property to E, and that E had made the purchase with the help of a bank loan. H formed the view that E was under the effective control of M, and that the alleged sale of the property to it was a further attempt on his part to hide his continuing ownership of it. H subsequently purchased the assignment of the bank's debt and its purported mortgage over the property. H served a statutory demand on E at its registered office. The demanded payment was not made, but E did not dispute its liability to make it. H petitioned for E to be wound up for failure to respond to the demand. E based its opposition to the petition on the proposition that H's purpose in bringing it was improper and an abuse of the court process.

E submitted that H's intention was to replace the direction of its defence of the English action by its directors with that of a liquidator who might prove to be a weaker opponent, and thereby secure for himself an unfair advantage in the litigation.

Held

The Board had no view about where the merits of the English action between H and E lay. There was no doubt that H's purposes in presenting the winding-up petition were intimately related to the English action. It was probably the case that H regarded a winding-up order as likely to be of advantage to him in his capacity as claimant in the English action as well as in his capacity as the petitioning creditor. E's continuing defence in the English action was leading H to incur substantial costs and was thus generating a potential increase in its total liability to him and a corresponding increase in the risk that it could not be met. A winding-up order was also likely to be of substantial advantage to H in his capacity as the petitioning creditor, and the securing of such an advantage was one of his purposes. It was not necessary that it should have been his principal purpose, Millennium Advanced Technology Ltd, Re [2004] EWHC 711 (Ch), [2004] 1 W.L.R. 2177 applied. H, as trustee, was a large creditor of E; his debt was contingently unsecured and he was not in receipt of interest. It was in the interests of E, as the insolvent company, and in particular of H in that capacity, that, before it proceeded, from some source or other, to incur further indebtedness with which to fund the maintenance of its defence at a trial estimated to last for seven or eight days, a professional decision had to be taken on its behalf about the further conduct of its defence and about the terms of any compromise which it would have been commercially sensible for it to have proposed. In its defence of the winding-up petition, E had therefore failed to establish that H's petition represented an abuse of the process of the court and failed to displace his entitlement to an order (see para.33 of judgment).

Appeal dismissed