Sarjanda Ltd ((in Liquidation)) v Aluminium Eco solutions Ltd
| Jurisdiction | England & Wales |
| Judge | David Cooke |
| Judgment Date | 05 February 2021 |
| Neutral Citation | [2021] EWHC 210 (Ch) |
| Docket Number | Case No: 6237 of 2018 |
| Date | 05 February 2021 |
| Court | Chancery Division |
[2021] EWHC 210 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN BIRMINGHAM
Insolvency and Companies List (ChD)
In the matter of Sarjanda Ltd
And in the matter of the Insolvency Act 1986
Birmingham Civil Justice Centre
Bull Street, Birmingham B4 6DS
HHJ David Cooke
Case No: 6237 of 2018
Edward Ross (directly instructed) for the Applicant
No other party appeared or was represented
Hearing date: 19 January 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
On 19 January 2021 I heard an application to rescind the order for the compulsory winding up of Sarjanda Ltd made by DJ Rouine on 29 August 2018. The applicant was represented by Mr Ross but no other party appeared. At the end of the hearing I stated that the application would be refused, for reasons to follow in writing. These are my reasons.
The application is brought in the name of the company itself, but is in substance pursued by Mr Stuart Woodley, who is a director of and shareholder in the company and has filed evidence in support of it. I treat it as being brought jointly by the company and a contributory, for the purposes of para 9.10 (3) of the Practice Direction-Insolvency Proceedings. The first named respondent is the petitioning creditor and the second is the liquidator. The liquidator made a witness statement which is relied on, but neither he nor the petitioning creditor appeared at the hearing.
The application is made pursuant to Rule 12.59 of the Insolvency (England and Wales) Rules 2016, which gives the court in insolvency proceedings a general power to “review, rescind or vary any order made by it in the exercise of that jurisdiction”. It is not controversial that that power in principle extends to permit the rescission of a winding up order, but by sub para (3) of that Rule:
“Any application for the rescission of a winding up order must be made within five business days after the date on which the order was made.”
This application is long outside that time limit, having been filed at court on 25 October 2020, over two years after the date of the winding up order. It is also the second such application, the first (also made by Mr Woodley) being dated 5 September 2018. That would have been the last permissible date, but it appears from the file that the application was not received at court until two days later, so it was also out of time. It was nevertheless listed for hearing on 3 January 2019, adjourned on that date for further evidence to be filed but eventually dismissed by order of DJ Musgrave at the adjourned hearing on 22 January 2019.
There is in principle power to extend the five day time limit; the court's general power in that respect pursuant to CPR 3.1 being incorporated into the Insolvency Rules by R 12.1 except as might be inconsistent with any other provision of those Rules. In Preston v Green [2016] EWHC 224 (Ch) Registrar Briggs (as he then was) held that there was no inconsistency preventing that power from applying to an application such as this (he was considering the equivalent provisions of the 1986 Rules, but the position would be the same under the 2016 Rules) but that given the context of an application to extend time in relation to rescission of a winding up order it fell to be treated as an application for relief from sanctions pursuant to CPR 3.9 and determined in accordance with the well known Denton criteria. In so holding the Registrar followed the judgment of Mr Philip Marshall QC, sitting as a judge of the High Court, in Metrocab v Siddiqui [2010] EWHC 1317 (Ch), though giving different reasons.
Mr Woodley in his application and Mr Ross in his submissions have approached the matter in that way. They accept that the breach, ie the delay of over two years, is “serious and significant”, but submit that there is a good reason for the breach and that on consideration of all the circumstances the application should be allowed.
The facts
The factual background is as follows. The company was formed to acquire and develop property. Its shareholders and directors were Mr Woodley and Mr Brian Wilson. Between 2009 and 2014 it purchased and developed various residential sites, and in 2014 it bought a commercial building with a view to redevelopment into flats. That project was completed, but there were delays and remedial costs incurred as a result, according to Mr Woodley, of defective fireproofing and electrical installation. He and Mr Wilson wish to cause the company to bring claims against professional advisers which, they say, may be worth up to £600,000. The company has no further current development projects but, they say, depending on the outcome of the claims they may pursue other projects through the company in the future.
The petitioning creditor was a contractor working on the commercial project, for which it claimed to be owed some £17,800. The first application stated that this debt was disputed, apparently on the basis that the creditor was a subcontractor whose debt was owed by the main contractor, but that point has not been pursued. According to Mr Woodley, there were similar disputes with a number of others.
The witness statements of Mr Woodley and Mr Wilson in support of the first application asserted that the company was solvent, having received substantial proceeds from its various developments, though it appears that these monies, or what remained of them, had been paid out from the company's own bank account either to Mr Wilson or to another company he controlled. Mr Wilson said this was in satisfaction of debts owed to him on director's loan account. They both said that Mr Wilson could transfer monies back as and when required to pay any outstanding debts of the company.
By the time of the adjourned hearing of the first application, the Official Receiver had filed two reports:
i) He noted the petition debt and that Mr Woodley had disclosed two other potential creditors claiming some £22,500 between them, though he said they were disputed.
ii) Three other creditors had submitted proofs totalling about £9,000.
iii) By the date of that hearing the petitioning creditor had been paid in full, but other creditors and the costs of the liquidation had not, and Mr Woodley was disputing the amount of those costs.
iv) He noted the substantial sums (some £1.4m) paid to Mr Wilson from the development proceeds, and that a sum of £343,000, said to be available to pay creditors, was not held by the company in liquidation but by another company.
With that evidence, DJ Musgrave dismissed the first application. His order does not state any reasons, but Mr Woodley accepts that by the date of that hearing certain of the debts were still outstanding, as were the costs, because he and Mr Wilson had not by then agreed those claims and discharged them.
Since then, Mr Woodley explains the extended delay as being due to the process of contacting and negotiating with creditors, many of whom were slow to provide details of their claims or insisted upon dealing through the liquidator or both. There were additional delays in dealing with matters caused by Mr Woodley's medical problems and by the coronavirus restrictions.
On 18 September 2019 Mr Stares was appointed liquidator in succession to the Official Receiver, and after discussion with him an advertisement was made in the Gazette for creditors to prove by 7 September 2020. By October 2020 Mr Woodley had...
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