Deferral of the Dissolution of a Company
In the recent case of Kumar v Secretary of State for Business, Energy and Industrial Strategy & Anor [2021] EWHC 2965 (Ch) the Court of Appeal allowed an appeal seeking deferral of the dissolution of a company to 13 May 2025.
The appeal was brought by Mr Joseph Kumar, the sole director and shareholder of Border Control Solutions Ltd, under section 205(4) Insolvency Act 1986, against the decision of the Secretary of State to defer the dissolution of the company to 13 May 2025, following its liquidation. But for the deferral, dissolution would have occurred on 2 February 2021. The deferral had been sought to assist the official receiver’s investigations, but by 5 August 2021, those must have been completed as they had confirmed that they would not oppose the appeal.
Insolvency and Companies Court Judge Barber outlined that before the 1986 Act an Order of the Court was required to dissolve a company which was in liquidation. The 1986 Act introduced a new regime in the form of Section 205 which allowed the Secretary of State, on the application or any other person who appears to the Secretary of State to be interested, to give a direction deferring the date at which the dissolution of the company was to take effect for a period that the Secretary of State deemed fit. The same provision provided the appeal mechanism which the Court had to consider.
Insolvency and Companies Court Judge Barber dealt with a number of issues to which the appeal gave rise, those being:
Section 205(4) did not expressly address who has standing to bring an appeal. The judge found guidance in the decision of the Privy Council in Deloitte & Touche AG v Johnson. In that case a key question was whether the Defendant, who was a stranger to the liquidation, had locus to apply to remove the liquidators. Lord Millett reasoned as follows:
“In their Lordships’ opinion two different kinds of cases must be distinguished when considering the question of a party’s standing to make an application to the Court. The first occurs when the Court is asked to exercise a power conferred on it by statute. In such a case the Court must examine the statute to see whether it identifies the category of person who may make the application. This goes to the jurisdiction of the Court, for the Court has no jurisdiction to exercise a statutory power except on the application of a person qualified by the statute to make it. The second is more general. Where the Court is asked to exercise a statutory power or its inherent jurisdiction, it will act only on the application of a party with a sufficient interest to make it. This is not a matter of jurisdiction. It is a matter of judicial restraint….”
Lord Millett went on to say that the standing of an applicant had to be considered alongside the nature of the relief for which the application was made. The question was whether that person had a legitimate interest in the relief being sought.
On the evidence before her, Insolvency and Companies Court Judge Barber concluded that Mr Kumar had standing by reason of his status in relation to the company and the fact that continued deferral could impede business projects he was undertaking or about to undertake.
The Judge then went on to consider whether permission to appeal was required, holding it was not. She extended time as the appeal had been made late.
Insolvency and Companies Court Judge Barber then moved on to consider the nature of the appeal, saying, “In my judgment CPR Part 52 applies to appeals brought under section 205(4) IA 2016. Rule 12.58 IR 2016, provides that CPR Part 52 applies to appeals brought under Chapter 10 of Part 12 of IR 2016 as varied by any applicable Practice Direction. Rule 12.62, which falls within Chapter 10 of Part 12, imposes time limits on appeals from decisions of the Secretary of State and the Official Receiver. The clear implication is that an appeal from a decision of the Secretary of State is subject to CPR Part 52.”
Judge Barber also outlined that the decisions of the Court of Appeal in Dupont de Nemours (EI) & Co v ST Dupont [2003] EWCA Civ 1368 and Zissis v Lukomski [2006] EWCA Civ 341 made clear that CPR Part 52 applied to appeals from decisions of non-judicial bodies. Having regard to those, Judge Barber took the view that any appeal was in the nature of a rehearing and that fresh evidence could be adduced. On the evidence before the Judge, she was satisfied that the deferral ought to be brought to an end and the company dissolved as soon as reasonably practicable: deferral served no useful purpose now that the official receiver’s investigations had been completed. There was no indication that any other person objected to the appeal or would be prejudiced by the relief sought, as against that there was evidence that the continued existence of the company until 2025 would cause prejudice to the appellant for no good reason. In light of this, the appeal was allowed.
Lee Doore, Senior Costs Consultant
13.04.2023