Public interest winding up petition – company subsequently falling insolvent – whether court could put company into compulsory liquidation on grounds not set out in the petition

The Secretary of State presented a petition to wind up the company on the public interest ground. He applied in vain for the appointment of a provisional liquidator. The petition, which was contested, had been on foot for over 2½ years and was not expected to reach its 10 day trial for some months yet.

The company, which had made cold-calls seeking to persuade the public, ironically, to sign up to services said to block unwanted telephone sales calls, had continued trading for some time but the directors lately concluded that it was unable to continue and was insolvent. The directors applied for an order winding the company up on the ground that it was unable to pay its debts. The extant petition did not seek to rely on that ground, and the Secretary of State was unwilling to amend so to plead.

The Secretary of State resisted the winding up of the company which it considered was a ruse designed to ensure that the directors’ actions would not come under scrutiny at a contested trial. The company said it would be unable to afford to go to trial as well armed as the Secretary of State.

Reviewing the authorities, the Judge held that the Court did have jurisdiction to wind up a company in “thoroughly exceptional circumstances” even if no petition were before it. There was some earlier first instance authority to different effect, but the Judge preferred to follow the line of cases culminating in Harlow v Creative Staging [2014] EWHC 2787 (Ch) in which HHJ Purle QC had considered the conflicting first instance decisions.

The Judge found that, as a petition was before the Court, it could wind up the company and need not find thoroughly exceptional circumstances. That was even if the petition was of a different species. But, if he was wrong about that, such circumstances did in fact exist in this case: the company had fallen insolvent in the currency of the petition, its business had ended and there was no prospect of it ever resuming trade. Winding up was inevitable and it would be a denial of justice and a waste of time to refuse to make the order now. The Secretary of State need not be concerned about the fact that no trial would take place – the public would be aware, as a result of this judgment, that the Secretary of State had considered that the company ought to be wound up and that he had taken steps to pursue his public interest petition. The liquidator could investigate matters after the winding up.

When public interest petitions take years to get to trial, there must be a risk of intervening insolvency. Despite the Secretary of State wanting his day in court, the company could be wound up in advance of a contested trial if the business of the company dried up before trial.