Secretary of State for Business, Innovation and Skills v PGMRS Ltd and another
| Jurisdiction | England & Wales |
| Judge | Judge Behrens |
| Judgment Date | 12 November 2010 |
| Neutral Citation | [2010] EWHC 2864 (Ch) |
| Court | Chancery Division |
| Date | 12 November 2010 |
| Docket Number | Case No: 18844 and 18843 of 2009 |
[2010] EWHC 2864 (CH)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
IN THE MATTERS OF PGMRS LIMITED AND LAKEWEST ASSOCIATES LIMITED
Before: His Honour Judge Behrens sitting as a Judge of the High Court
Case No: 18844 and 18843 of 2009
AND IN THE MATER OF THE INSOLVENCY ACT 1986
Mark Mullen (instructed by The Treasury Solicitor of One Kemble Street, London WC2B 4TS) for the Petitioner
Martin Shekiluwa the Director of the Respondent Companies for the Respondents
Hearing dates: 1, 2 and 3 November 2010
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.
BEFORE HIS HONOUR JUDGE BEHRENS SITTING AS A JUDGE OF THE HIGH COURT
Judge Behrens :
Introduction
There are before the Court petitions by the Secretary of State for Business, Innovation and Skills (“the Secretary of State”) for the compulsory winding up of two companies —PGMRS Limited (“PGMRS”) and Lakewest Associates Limited (“Lakewest”). The petitions are brought under section 124A of the Insolvency Act 1986 that is to say that it is expedient in the public interest and it is just and equitable for the two companies to be wound up.
The companies are two of a series of five companies incorporated to carry on a recruitment business placing both temporary and permanent staff primarily in manual labour positions.
In December 2008 a Chartered Accountant, Mr Stevenson, was appointed by the Secretary of State under the powers contained in Part XIV of the Companies Act 1985 to investigate the two companies. Following his investigation these petitions were presented in September 2009.
There are four principal grounds upon which the Secretary of State seeks to wind up Lakewest:
Lack of Commercial Probity – Lakewest is the latest of in a series of five companies through which a recruitment business has been operated by or involving Mrs Shekiluwa. The Secretary of State alleges that a pattern has emerged whereby each company is operated until its debts, primarily Crown debts due in respect of VAT and unpaid PAYE contributions, are such that the Company is insolvent. At the time of the investigation substantial sums were due from Lakewest in respect of Crown debts. Those sums have significantly increased. Furthermore Mrs Shekiluwa has continued to be concerned in the management of Lakewest in spite of a disqualification undertaking that she gave in February 2008.
Failure to maintain or preserve accounting records – This is a feature in all of the Companies in respect of which Mrs Shekiluwa has been involved. Mr Stevenson exposed some striking examples of the inaccuracies. There is no real dispute that the records were inaccurate but it is said that the position has now been put right. The Secretary of State does not accept that it has been put right.
Insolvency – it is the Secretary of State's case that Lakewest is trading whilst insolvent and following the same pattern as the other companies within the PM Group.
Failure to co-operate with the Investigator – This is very much a lesser allegation and the Secretary of State does not contend that this allegation would, of itself, be sufficient to justify disqualification. Mr Stevenson does not allege a total failure to co-operate but he does contend that there was a partial failure and that that made his investigation more difficult.
As noted above both of the Respondent Companies were represented by their Director —Mr Shekiluwa. Up until comparatively recently the Companies had the benefit of legal assistance. However Mr Shekiluwa failed to place the Companies' lawyers in funds. As a result the Companies were unrepresented at the trial. On the first day of the hearing Mr Shekiluwa applied for the trial to be adjourned so that he could instruct fresh lawyers. For reasons I gave at the time I refused to adjourn the trial. In summary Mr Shekiluwa had had sufficient notice of the hearing which had been fixed at the end of April 2010; I was not satisfied that he would be in a position to instruct fresh lawyers – he had promised funds in the past that had not materialised; no documents were produced that gave me any confidence that funds could now be produced; the petition was stale having been presented over a year ago; there was little or no prospect of the Secretary of State being able to recover the wasted costs thrown away by an adjournment.
Mr Shekiluwa seeks to resist the making of the winding up order. He makes the point that he has only been involved as a Director of Lakewest since November 2008, that the companies were not set up to defraud or to pile up debts and move away. He did not accept that Mrs Shekiluwa had been involved in the management of any company since she gave the undertaking in February 2008. He has also made the point that Lakewest is now only involved in obtaining contracts for permanent staff and is no longer reliant on factoring.
PGMRS is a company that is dormant and has never traded. The Secretary of State seeks a winding up order to prevent a repetition of the conduct and to mark the Court's displeasure at it.
Witnesses
The only witnesses to give live evidence before me were Mr Stevenson on behalf of the Secretary of State, and Mr and Mrs Shekiluwa on behalf of the Respondents. The bundle contained witness statements from Ms Butterfield, a partner in Account-Ad Services LLP, who were employed by Lakewest to carry out a review of the financial position and by Ms Sloman an employee of Account-Ad Services.
Mr Shekiluwa objected to the inclusion in bundle of a number of witness statements and exhibits. These were the affidavits of Mr Shekiluwa, Mrs Shekiluwa dated 7 th December 2009, the witness statement of Ms Butterfield dated 30 th November 2009 and the Defence of Mr Shekiluwa dated 7 th December 2009.
These documents were sent to the Treasury Solicitor under cover of a letter from Account-Ad Services dated 7 th December 2009. The letter made it clear that Lakewest wished to defend the proceedings. I ruled that the documents were properly included in the bundle. Furthermore throughout the hearing Mr Shekiluwa indicated that he wished to call Ms Butterfield to give evidence and it was anticipated she would be available on the third day of the hearing. When she did not attend I indicated that I was willing to hear her evidence by telephone. In the event that too proved impossible and she did not give evidence.
The facts
In the light of the allegations by the Secretary of State it is necessary to consider in a little detail each of the Companies within what may be called the PMR Group.
PGM Staffing Solutions Limited (“PGMSS”)
PGMSS was incorporated on 7 th October 2002. Mrs Shekiluwa was the sole shareholder and the sole director. PGMSS entered into administration on 17 th August 2005. The Administrator's proposals indicated that the unaudited and management accounts for the period up to October 2004 showed that the Company had made a profit but that the level of profits was not substantiated by the amount of crown debts and trade creditors. The report indicated that PGMSS's records were not sufficiently organised to establish the level of the director's remuneration. At that stage there was an estimated deficiency of £315,000 with Crown debts of £243,762.
In the Statement of Affairs signed by Mrs Shekiluwa on 12 th April 2006 the deficiency was shown as £248,345 with Crown debts unchanged. There was no dividend for unsecured creditors.
In the subsequent disqualification proceedings Mrs Shekiluwa faced two allegations with regard to PGMSS. First that the accounting records were inadequate and second that she caused PGMSS to trade to the detriment of HMRC and to deal with its taxation affairs. It is not necessary to set out the allegations in detail save to note that the Administrators were unable to establish the true Crown debt position, the level of remuneration drawn by Mrs Shekiluwa or the beneficiaries of cheque payments totalling over £260,000.
In the Defence Mr Shekiluwa says that the administration came about as a result of advice from the Insolvency Practitioner. There was £40,000 due in respect of VAT. BDO (“the Insolvency Accountants”) advised that the way forward was to enter administration and for a new company to purchase the assets from the administrator.
In a document submitted to the Treasury Solicitor shortly before the hearing Mrs Shekiluwa puts more flesh onto the appointment of the Administrator. She also challenges the amount of the Crown debts. She makes the point that the figures were based on an assessment by HMRC which went unchallenged. At the time it went unchallenged the Administrator was in charge. She maintains the figure was too high. She repeated that assertion when she gave evidence at the trial. Although she had signed the Statement of Affairs which included the Crown debts she repeated that the figures were based on an assessment which was not challenged. She admitted that a substantial sum was due to the Crown. She estimated it to be between £70,000 and £100,000.
PGM Recruitment Specialists Ltd – (“PGM Specialists”)
PGM Specialists was incorporated on 21 st July 2005. Mr Shekiluwa was initially appointed a Director but he was replaced by Mrs Shekiluwa on 28 th July 2005. The 1,000 shares were jointly held by Mrs Shekiluwa and Mr Shekiluwa. Trading began in August 2005.
PGM Specialists purchased the assets of PGMSS from the Administrators for £20,000. Payment was to be made by instalments. As at the date of...
To continue reading
Request your trial
-
Secretary of State for Business Innovation and Skills (Petitioner) v PAG Management Services Ltd
...generally (for example by casting burdens on the general body of tax payers). An illustration of this may be found in SoS for Business Innovation and Skills v PGMRS Limited [2010] EWHC 2864 (Ch) in which four companies traded at theexpense of HMRC (by not paying either VAT or PAYE) until su......
-
The Secretary of State for Business, Energy and Industrial Strategy v PAG Asset Preservation Ltd
...on the general body of tax payers). An illustration of this may be found in SoS for Business Innovation and Skills v PGMRS Limited [2010] EWHC 2864 (Ch) in which four companies traded at the expense of HMRC (by not paying either VAT or PAYE) until such time as they were insolvent, conduct ......