Hills R Ravinder Bhardwaj v The Official Receiver and Others
| Jurisdiction | England & Wales |
| Judge | HH Judge Simon Barker QC |
| Judgment Date | 17 May 2011 |
| Neutral Citation | [2011] EWHC 1275 (Ch) |
| Date | 17 May 2011 |
| Court | Chancery Division |
| Docket Number | Case No: 6185 of 2010 |
[2011] EWHC 1275 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
BIRMINGHAM DISTRICT REGISTRY
The Priory Courts
33 Bull Street
B4 6DS Birmingham
His Honour Judge Simon Barker, QC
(Sitting as a judge of the High Court)
Case No: 6185 of 2010
In the Matter of the Insolvency Act 1986 and in the Matter of Hillsgate Properties Ltd (in Liquidation)
Mr. Hansen of counsel instructed by Mr M Faquir Solicitors appeared for the Applicant.
Mr. Taylor the Official Receiver in person.
Mr. Murtagh of Cranfield Business Recovery Ltd attended court on behalf of the liquidator of Hillsgate Properties Ltd (in liquidation).
Mr. Bagshaw of counsel instructed by Brindley Twist Taft & James appeared for the Respondent.
Hillsgate Properties Ltd (HPL) was wound up by order of District Judge Maughan on 20 th May 2010 at the first hearing of a petition which had been presented to the High Court, Birmingham District Registry, on 1 st March 2010 by Mr. Peter Windatt, who is the Trustee in Bankruptcy of Mr. Resham Khela. At the hearing on 20 th May, Mr. Windatt was represented by counsel and HPL was not represented.
The application before me is for an order that "the winding up petition [strictly the order] be rescinded". This application was issued on 25 th October 2010 by Mr. Ravinder Bhardwaj who is the former sole director of and sole shareholder in HPL. Mr. Bhardwaj is also a solicitor. In his evidence, Mr. Bhardwaj also refers to himself as an old friend of Mr. Khela. According to the application notice, Mr. Bhardwaj makes this application as a director of HPL and by reference to a director's loan account which is reflected in HPL's accounts, as a liability of that company. Indeed, according to HPL's accounts Mr. Bhardwaj is the only creditor of any substance.
By 25 th October 2010, the date of this application, more than five months had passed since the date on which HPL was wound up.
The Insolvency Rules 1986, Rule 7.47 provides:
"(1) that every court having insolvency jurisdiction in respect of companies may rescind, review or vary any order made in the exercise of that jurisdiction", and "(4) any application for rescission of a winding up order shall be made within five business days after the date on which the order was made".
Unless otherwise stated, in this judgment all references to "Rule" are to a rule in the Insolvency Rules 1986, and all references to a "Section" are to a section of the Insolvency Act 1986.
In the context of companies winding up, Rule 4.3 provides that:
"Where, by any provision in the Rules about winding up, the time for doing anything is limited, the court may extend time either before or after it has expired on such terms, if any, as the court thinks fit".
By the Practice Direction "Insolvency Proceedings", which is noted at [2007] BCC 842, the obligation to make an application for rescission of a winding up order within seven days – that is, five business days plus a weekend – is emphasised. The direction also provides that: (1) notice is required to be given to the Official Receiver; (2) applications must be made by a creditor, or a contributory, or the company and, if the company, jointly with a creditor or contributory, and any application must be supported by written evidence of the company's assets and liabilities; (3) if unsuccessful, the applicant will normally be ordered to pay costs, including those of the Official Receiver, because it would be unfair to make them payable by the company and thus fall on the general body of creditors; (4) where a winding up order was not opposed and the application is made promptly, a statement by the Applicant's legal representatives may suffice; otherwise formal written evidence will normally be required.
This application by Mr. Bhardwaj I take to be by the company supported by Mr. Bhardwaj as a creditor.
By Rule 7.51A, the provisions of the CPR, subject to certain modifications not relevant in this case, are applied to the Rules with any necessary modifications, except as inconsistent with the Rules. Thus, where an application is made for an extension of time after the expiration of the seven day period, the provisions of CPR 3.9, which relate to relief from sanctions, and CPR 39.3(5), which relate to applications to restore proceedings or set aside a judgment made following the non-attendance at trial, are, potentially at least, relevant. It is to be noted that the equivalent power to rescind a bankruptcy order in personal insolvency proceedings under Section 375 and the general power to revoke an order made under the CPR (see, for example, CPR 3.1(7)), whilst also being exceptional discretionary remedies and powers, are not expressly subject to any, let alone such a strict, time limit as that applicable to the rescission of the winding up of a company.
The proper course for an application for rescission is for it to be exercised in the first instance by the same judge or by a judge at the same level as the judge who made the order. Applications to a judge at a higher level should be appeals which are provided for under Rule at 7.47(2) (see, for example, the judgment of Blackburne J in Re Dollar Land (Feltham) [1995] BCC 740 at page 746 F to G).
The route by which this application for rescission comes before me is that it was initially before a district judge but in February of this year was directed to be adjourned to one of the Chancery CJs. In order to avoid any possible uncertainty, I, therefore, state for the record that this is not an appeal under Rule 7.47(2).
In Re Virgo Systems Ltd. [1989] BCC 833 Peter Gibson J, as he then was, considered an application in the following circumstances. An unopposed winding up order was made on 24 th May 1989. The statutory demand, petition and order did not come to the company's attention because the company's accountants had overlooked the director's instruction to change the registered office address from that of the formation agents to that of one of the company's officers. On 31 st May the Official Receiver contacted the company's accountants about the order and within seven days of the company being notified by its accountants an application was made. On the basis that there was a proper explanation for the directing minds not being aware of what had occurred and given that they had acted within seven days of becoming so aware, Peter Gibson J exercised the discretion to extend time, considering that to be the first question for the court to consider. Turning to the merits, on the facts it was clear that the creditors would be paid in full and promptly, that all the contributories agreed to the rescission of the winding up order, and that the liquidator's costs would also be paid in full. His lordship, therefore, concluded:
"It is hard to see that anyone will suffer if the court exercises the jurisdiction."
Virgo may be characterised as a straightforward or classic case for rescission. Peter Gibson J's judgment identifies the two discretions and the elements requiring consideration on any rescission application, namely:
(1) should time be extended? Here the court must consider (a) whether there is a proper explanation for the failure to apply in time and (b) whether there is a proper explanation for the delay which has occurred, and,
(2) should the winding up order be rescinded? The court must consider (a) whether there are proper grounds for rescission and, if so, (b) what effect a rescission order would have on any and all persons interested in the company and affected by the winding up.
Both questions must be addressed properly by the Applicant if the court is to be satisfied that it should rescind a winding up order and thereby revive a company and return it to the control of its directors.
In Leicester v Stevenson [2002] EWHC 2831 (Ch) Lightman J refused to rescind a winding up order on an application made more than three years later. Lightman J held that the basis of the application was misconceived and, after concluding that there was no conceivable justification or proper excuse for such a delay, further observed that any application for an extension of time must be strictly justified if the extension is to cover any substantial period and that the jurisdiction (that is, the jurisdiction to rescind a winding up order) is to be exercised very cautiously.
The reason for the imposition of such a strict time limit to applications for the rescission of a winding up order was stated in Re Oakwood Storage Services Ltd. [2003] EWHC 2807 (Ch) to be that the winding up order necessarily affects persons apart from the petitioning creditor and the company itself. In that case, Hart J held on an appeal that, even though there was a substantial prospect that had the application to rescind been made in time it would have succeeded, the Registrar was entitled to refuse to make an order for rescission because the directors had not acted timeously once they were aware of the order and had not put forward sufficient reasons of the exceptional character required to justify the very considerable extension of time being requested. The extension of time in that case was less than three months, the relevant dates being: order made on 9 th April, directors becoming aware on 2 nd May, and application being made in June of 2003. As is apparent, the extension of time there sought was considerably shorter than that sought on the application before me.
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