Summary

It was in the public interest to make orders winding up companies where the business affairs of the companies had been conducted with a lack of commercial probity.

Facts

The petitioner secretary of state petitioned for the respondent companies to be wound-up on the grounds of public interest. The companies had been founded by two individuals (X and Y) who acted as the companies' controllers and directors. The first respondent company (C), having received a consumer credit licence, acted as a broker in the sale of financial products to the public, in particular those with a poor credit history; recruited sales agents throughout the country to help C find more customers; and sold members of the public franchises of C's business concept. Due to a number of county court judgments that were made against C it became impossible for it to trade, so X and Y founded the third respondent company (F) to essentially take over C's business. X and Y obtained a consumer credit licence for that company but the Office of Fair Trading revoked F's licence. That decision was overturned by the Consumer Credit Appeals Tribunal on the grounds that the Office of Fair Trading had made a procedural error. Consequent to that decision the secretary of state brought the instant petition which was only opposed in respect of F. The secretary of state contended that it was appropriate to grant the petition as the whole business model offered by F was misleading to the public and flawed, and that far from being a successful business model, the business operated by F of selling finance on behalf of third parties and franchising the same, was the successor business to the business of C which had ceased to trade because of the county court judgments registered against it. The secretary of state further submitted that X and Y's conduct, in particular their use of different personal names in their conduct of C and F; their knowingly or recklessly concealing that they had used different names and that C had been the subject of county court judgments in applying for a consumer credit licence, and their publication of misleading testimonies in respect warranted the making of the orders.

Held

It was clear that the Insolvency Act 1986 s.124A provided a court with a complete discretion as to whether to make a winding-up order in light of the fact, including past conduct, that existed at the time the petition came to be heard, Secretary of State for Business, Enterprise and Regulatory Reform v Amway (UK) Ltd (2009) EWCA Civ 32, Times, March 18, 2009 followed. In the instant case the evidence demonstrated that X and Y had conducted the affairs of F with a serious lack of commercial probity. The evidence indicated a business and a set of directors and controllers who were quite prepared to act beyond the boundaries of the law and regulation until they are forced to either stop or significantly alter their business practices. There was little or no evidence to show that X or Y had voluntarily changed their business practices on their own initiative. Accordingly, in all the circumstances, it was appropriate to grant the winding-up orders sought by the secretary of state.

Petition granted