[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback]
	England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> The Secretary of State for Business, Energy And Industrial Strategy v Rigil Kent Acquisitions Ltd & Ors [2017] EWHC 3636 (Ch) (19 December 2017) URL: http://www.bailii.org/ew/cases/EWHC/Ch/2017/3636.html Cite as: [2017] EWHC 3636 (Ch)

[New search] [Printable RTF version] [Help]

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS
OF ENGLAND AND WALES
COMPANIES COURT (ChD)

		Rolls Building Fetter Lane EC4A 1NL
		19th December 2017

MR JUSTICE MARCUS SMITH:

1. I have before me various applications for the appointment of a provisional liquidator pending the hearing of various petitions for the winding up of a group of companies, whom I shall refer to general as the "Respondents", on the public interest ground under s.135 of the Insolvency Act 1986.
2. Appearing for the Secretary of State is Ms Lucy Wilson Barnes and appearing for some, but not all, of the Respondents is Mr Lawrence Power. I should be clear about the parties for whom Mr Power acts. On the commencement of this hearing, Mr Power was instructed only by Rigil Kent Group Limited. During the course of the hearing, he has been instructed by various other related companies. I shall return to the question of the relationship between the companies in due course. For now, I simply list the additional parties for whom Mr Power now acts:

(1) RK Acquisitions Limited;

(2) RK Corporate Rescue Limited;

(3) RK Client Account Limited;

(4) French Fox Limited.

These companies are all, I am told, dormant companies.

3. As I have said, I shall refer to the Respondents generally as the "Respondents". Where I need to differentiate between the Respondents generally, and those Respondents who have instructed Mr Power, I shall refer to them as the "Represented Respondents", represented, as they are, by Mr Power.
4. The circumstances in which a winding up petition may be granted in the public interest are relatively wide. The court must be satisfied that it is just and equitable to wind up a company in the public interest. That jurisdiction is to be exercised with a view to protecting the public and, in doing so, the court needs to balance all of the relevant interests, each against the other, in order to ascertain a just and equitable result. The approach of any balancing exercise must take into account the totality of the material before the court. Taking into account all that material, the court then must reach a view as to whether a compulsory winding up is expedient in the public interest.
5. It is fair to say that what is expedient in the public interest bears a wide meaning. In Re Senator Hanseatische [1997] 1 WLR 515 at 526 it was stated:

"The expression "expedient in the public interest" is of the widest import. It means what it says. The Secretary of State has a right, and some would say a duty, to apply to the court to protect members of the public who deal with the company from suffering inevitable loss, whether this derives from illegal activity or not."

6. I have taken care to describe the jurisdiction to wind up in the public interest because that is a factor that I must bear in mind on this application for the appointment of a provisional liquidator. Essentially, to summarise the test in HMRC v. Rochdale Drinks Distributors [2013] BCC, 419 at [76] – [77], the court must take a two-stage process when seeking to consider whether a provisional liquidator should be appointed under s.135.
7. First, the court must be satisfied that, on the hearing of the winding up petition, an order for winding up is likely to be made. Then, secondly, assuming the first stage is satisfied, the court must be satisfied that it is right, in all the circumstances, that a provisional liquidator is appointed.
8. Those principles are expanded upon in a decision of Norris J in HMRC v. Winnington Networks Ltd [2014] EWHC 1259 (Ch). That case stands as authority for the following propositions, namely that in deciding whether to appoint a provisional liquidator, a court must have regard to a number of principles:

(1) The appointment of a provisional liquidator is a most serious step and should be the subject of anxious consideration.

(2) An application without notice needs to be justified by exceptional circumstances.

(3) The application is not a trial of the petition itself and proceeds on a provisional and interim basis.

(4) It is for the petitioner to show that he is likely to obtain a winding up order on the hearing of the petition by demonstrating that he is entitled to present the petition and the material part of the petition debt was not capable of serious dispute.

(5) The assessment referred to at (4), when made on a without notice application for a provisional liquidator, obviously falls to be made without the company having had the chance to demonstrate that it has a good arguable case in support of a dispute as to the debt, and so the court must be assured it has a fair picture of the circumstances and that the petitioner has given full and frank disclosure.

(6) The court must be satisfied that the appointment of a provisional liquidator is the right course to take in all of the circumstances.

(7) Material to a consideration of those circumstances is the need to protect assets, which should be given a fairly broad interpretation in cases where there is a real question as to the integrity of the company management and the quality of the accounting and record-keeping functions.

(8) The relief being sought by a public body discharging the public function for the public good is such that a cross-undertaking in damages is not generally to be required.

Norris J was, of course, framing these principles by reference to the facts of the case before him. The facts of this case – as we shall see – are quite unusual, and some of the principles framed by Norris J (notably (4), with its reference to a "debt"; and (5), which is consequential upon (4)) are less pertinent here.

9. Subject to the qualification that this is a case for winding up sought on a public interest ground not related to the indebtedness, or arguable indebtedness, of the Respondents, I naturally accept those statements as statements that should guide me in this case.
10. This is not a case where an ex parte application is being made. However, it is a case where these applications have been made on short-notice to the Respondents and where the Secretary of State has applied to abridge time. I have granted the application to abridge time, but I have done so on the basis that I treat this application, for the purposes of the obligation on counsel for the Secretary of State to make full and frank disclosure, as if it were an ex parte application.
11. I appreciate that the Represented Respondents have had the able assistance of Mr Power. But Mr Power has only been able to read, in addition to the various petitions, the two statements in support of the Secretary of State's applications (the statements of Mr Hill and Mr George).
12. Mr Power has not seen the fifteen lever-arch files of exhibits which were before me on today's applications. Even if he had received them shortly before this hearing, I have little doubt that, with all due credit to his fast reading abilities, he would have been able to assimilate that volume of material. Accordingly, I have proceeded – and I am very grateful to Ms Wilson Barnes for doing so – on the basis that this is, for the purpose of Ms Wilson Barnes' submissions only, an ex parte application.
13. As I noted a moment ago, the evidence in support of this application for the appointment of a provisional liquidator is supported by two statements, first, the statement of Mr David Hill, dated 11 December 2017. This is a relatively short and high-level statement explaining why it is necessary for a provisional liquidator to be appointed. The second statement, that of Mr Mark George, is an altogether more substantial document. It runs to 94 pages and 624 paragraphs and sets out in massive detail the investigation that has been conducted on behalf of the Secretary of State.
14. The investigations of the Secretary of State have been ordered under s.447 of the Companies Act 1985. The authority was given on 3 April 2017 in respect of three of the Respondents, and on 26 April 2017 in respect of a fourth. Naturally, during the course of the investigations, information regarding the other companies that are Respondents has been obtained, but it is important to note that the authorities relate only to four such companies.
15. The evidence of Mr Hill and Mr George makes clear that the Respondents are, to a greater or lesser extent, related in the nature of the services that they offer. That relationship is, to the extent it is understood by the Secretary of State, fully set out in the evidence that I have read.
16. The existence of this relationship was not a point that was seriously contested by Mr Power in his submissions. Indeed, the fact that Mr Power now finds himself instructed by five of the Respondents rather underlines the existence of the relationship. I accept, based upon the evidence that I have seen, that there is a substantial relationship not merely between the Represented Respondents, but the Respondents generally.
17. What is more important and more significant is the nature of the nature of the service that is offered by the Respondents. It is to that which I now turn.
18. I have been shown various email communications between one or other of the Respondents and either clients or proposed clients of the Respondents. I begin with an "Acquisition Proposal", as it is headed, set out in an email dated 18 November 2016, timed at 9.06 in the morning. This comes from a mailbox, [email protected], and it sets out a proposal for the acquisition of the company, which is referred to as "Oldco". The terms of the acquisition – which I describe further below – are outlined below in a draft service agreement set out in the email. The email refers to various benefits provided by the Respondents (to whom I shall refer generally).
19. The email says:

"You have no more legal or financial responsibility for the debts of Oldco. You can walk away and carry on with the rest of your life. We take full legal and financial responsibility for the debts of Oldco from the point of purchase. You avoid having to go through court and formal insolvency proceedings, with all the dangers and pitfalls that exist. As our client, we only have legal responsibility to protect you and ensure you receive a clean exit, unlike insolvency practitioners who have a legal responsibility to creditors and to report or prosecute alleged misconduct, despite the fact that you pay them. You avoid having a bust business to your name and a black mark. You can tell the world you sold the business, which of course you have. And, finally, this process allows you to have a clean, fresh start, if that's what you want, and sleep peacefully at night, knowing you have dealt with everything."

20. These points are all made under the heading "Benefits to You". Next, under the heading "Strategy Detail", the following is said:

"In essence, as we discussed, we offer a realistic alternative to formal insolvency proceedings. We will acquire Oldco for a nominal consideration, normally £1. On acquisition, we will change the registered office, the existing directors will resign, appropriately dated, we will acquire the shares and you will hand all company records to us, for which we provide a receipt, of course. In most cases we change company name on acquisition if thought necessary by you as our client. We will then conduct a full review of these records in order to establish the financial position. We will speak to creditors and inform them that we have purchased the business and that we are conducting a full financial review and will revert to them at its conclusion, normally within three to six months of acquisition. In the meantime, we will pacify all interested parties and explain to them the situation, which, surprisingly, calms then down for the most part.

At the conclusion of a financial review, we will re-contact stakeholders and inform them of the position, that there is little or no prospect of them receiving any distribution. In most cases, that ends the matter and we are able to proceed to having the company dissolved or struck off the register. In the unlikely event we have to take the company through formal insolvency proceedings, we will complete all necessary filings and statements and attend all meetings as owners and directors.

For this service, we charge a fee of £5,000 plus VAT or 10 per cent of the liabilities remaining in Oldco on acquisition, whichever is the greater. These fees are normally payable as to 50 per cent on instruction and 50 per cent on signing the purchase and sale agreement. In your case, we assume that the total company debt would not exceed £45,000 and that there will be no realisable assets. We would therefore expect to receive a fee of £5,000 plus VAT as our acquisition handling fee.

We will require a personal warranty and indemnity from you, or a former director of the company, that the information provided represents a true and fair view of the company's affairs at the date of acquisition and that to the best of their/your knowledge and belief there's been no misfeasance, breach of fiduciary duty or other conduct in the affairs of the company during their stewardship."

21. I was referred to two other emails which are in similar form. I do not need to refer to these second and third email communications. They are, in all material respects, the same as the first, from which I have extensively quoted.
22. A number of points are made about this proposal by the Secretary of State. The first is that the suggestion that is made in the email that a director can, simply by selling his insolvent or near insolvent company to an acquirer, constitutes a clean break for that director is wrong. To say that you can walk away and carry on with the rest of your life, as the email does say, and to refer to a "clean, fresh start", as the email also says, does not state with complete accuracy the true position. True it is that a director may resign his position and a shareholder may sell his or her interest in a company, but that does not absolve a former director of liability in respect of, for example, transactions at an undervalue or preferences; neither does it prevent that former director being asked questions by the Official Receiver. So, the suggestion of a clean break is one that is not entirely correct and one that might very well lead to a purchaser of this service being misled as to exactly what he or she was obtaining by way of service from the Respondents.
23. However, the objective of the service being sold by the Respondents is pretty clear. What it seeks to do is to insert a firebreak between the old director, selling the company, and the Respondents, one of whom is buying it. In effect, there is a clean skin interposed so that, if and when insolvency proceedings occur, the first in the line of fire will be the new directors rather than the old. What is more, it is quite clear from the strategy proposed in these emails that the aim is to avoid a formal insolvency process. There are, it seems to me, three paragraphs in the email that I have quoted which are really quite important:

(1) I refer to the paragraph referencing a full review of the company records in order to establish the financial position. That paragraph then goes on to say:

"We will speak to creditors and inform them that we have purchased the business and that we are conducting a full financial review and will revert to them at its conclusion, normally within three to six months of acquisition."

Pausing there, this is clearly intended to give the sense that the "Oldco's" financial affairs are being looked at by a responsible entity in a responsible way.

(2) The intention, quoting from the last sentence in this paragraph, appears to be simply to put off interested parties:

"In the meantime, we will pacify all interested parties and explain to them the situation, which, surprisingly, calms them down for the most part."

(3) The next paragraph describes what happens after the review:

"At the conclusion of the financial review, we re-contact stakeholders and inform them of the position, that there's little or no prospect of them receiving any distribution. In most cases, that ends the matter and we are able to proceed to having the company dissolved or struck off the register."

24. So, the "firewall", as I have referred to it, actually involves giving stakeholders (specifically, creditors) comfort, and then, after a period of investigation, letting them down gently so that the company can be wound up or dissolved or struck off without a formal insolvency investigation. It is only in the unlikely event that that takes place, that the Respondents will complete all necessary filings and statements and attend all meetings as owners and directors of the company.
25. Now, it is clear, and it was certainly accepted by Ms Wilson Barnes, that there is nothing illegal in any of this. I accept that and proceed on that basis. Nevertheless, it must be accepted and understood that there is, through the interposition of a firewall or a cut-out, a risk to the integrity of the insolvency process. The point about an insolvency process is that it enables the relevant officers, namely the Official Receiver, to look into the affairs of a company. That implies access to the company's papers and access to the directors who were involved in that company during its trading period, rather than during the period immediately prior to any insolvency.
26. The point of the service offered by the Respondents is that it undermines the insolvency process by putting in place clean skins, who have actually nothing to do with the company and no particular interest in doing anything other than putting off the investigation of the company's insolvency, if that investigation takes place at all.
27. It seems to me that the prejudice caused by this service offered by the Respondents can be tested by looking at what occurred in individual cases which are set out in the evidence relied upon by the Secretary of State. A number of points are relied upon by the Secretary of State to indicate that the service offered by the Respondents is an undesirable one.
28. First, reference was made to the backdating of documents. It was suggested that the delay in the filing of directors' appointments was indicative of backdating, but there are other instances of backdating or irregularity in the evidence of the Secretary of State. Dates, it was suggested, sometimes did not add up and statements were made by a party purporting to be a director of an Oldco after that director had resigned.
29. I place no weight on these backdating points. It seems to me that backdating or giving a statement in the wrong capacity might very easily be innocently explained. It is also the case that I am very conscious that the Respondents have been unable to file any evidence in response to the Secretary of State's applications and it seems to me that if there is the possibility of an innocent explanation then I ought to factor that in. In this instance, the best way to be fair to the Respondents is simply to discount this evidence. It seems to me that this is a point of secondary importance to the Secretary of State's contentions, but one where evidence in response from the Respondents might very well make a material difference to my views.
30. The second point made by the Secretary of State related to certain instances when enquiries were made of directors of Oldco. I was referred, in particular, to enquiries that were made of a director or former director of Tiptoes Day Nursery Limited. What occurred in that case was that a request for information was made of a former director, i.e. someone who had sold an Oldco to the Respondents. The response that was received was as follows:

"Dear Sirs,

I am in receipt of your letter of the 12^th instant. I write to advise that, some months ago, the business was sold, but not formally completed due to licensing requirements, to Rigil Kent Acquisitions Limited ("RK") and I resigned as a director. The books and records were handed to RK and are no longer in my possession. Whilst I am aware of my statutory duty to cooperate with your investigations, I am not able to provide any records or answer any detailed questions. In order to meet my statutory obligations, I am willing to answer any questions put to me in writing. For more detailed information, please communicate with RK. In these circumstances, I will not be attending the meeting I have been requested to attend."

31. I do not criticise the desire of a director or former director to seek to answer questions in writing. What, however, I do consider this email demonstrates is how investigations into an insolvent company can be stymied by the fact that it becomes very difficult to trace where the books and records have gone. Moreover, the director or former director of Oldco is given an excuse to pass the buck to one or more of the Respondents from whom Oldco has been, or in this case, may have been acquired.
32. Related to this moving target as to whom to approach when seeking information about the affairs of Oldco, the chain of communications regarding the attempt to locate the records of the Tiptoes Day Nursery are instructive. Following on from the letter I have set out at paragraph 30 above, the insolvency examiner at the Insolvency Service communicated with [email protected]:

"I have been informed you are holding the records of the company. In the circumstances, I would be grateful if you could arrange for the records to be delivered to the address below."

33. A response was received stating:

"The records are currently in transit to our archive and retrieval centre in Thailand, where they will be processed and scanned and returned within eight weeks. We will deliver the records upon their return."

34. Now, pausing there, I am entirely happy to proceed on the basis that the Respondents do in fact have an archive and retrieval centre in Thailand. What this shows, however, is that there is – on the face of it – significant delay, eight weeks in this case, before the material can be provided to the Insolvency Service. As it happens, no such material was ever provided in this case.
35. Just to conclude this particular story, the Insolvency Service proceeded by thanking the communicator for this information, stating that they looked forward to receiving the documentation and then stating:

"In the interim, I would be grateful to receive a copy of the receipt issued when the records were obtained by you, and also a schedule from the documentation sent to Thailand."

36. On the same day, there was a response from the Respondents, with a laconic "Enclosed". What was enclosed was a document which lists, in very generic detail, a series of documents apparently held on behalf of Tiptoes Day Nursery. It is, however, to be inferred from the evidence of Mr George (see his statement at paragraph 254) that this was a generic, rather than a individual list. Mr George says this because, under the heading "Accounting Records", it lists VAT returns, and Tiptoes Day Nursery was in fact VAT exempt. Certainly, it does not seem that the schedule of documents provided by the Respondents was very helpful – or, for that matter, very accurate – at all.
37. I cite this incident in some detail simply because it demonstrates the sort of difficulties that arise because of the service being offered by the Respondents. And, of course, it needs to be borne in mind that this service was being offered on a large scale.
38. One sees a further instance of the difficulties caused by the Respondents' service when the affairs of an Oldco do come to court. I was referred to another example, arising out of an attendance note of proceedings in the District Court in respect of the winding up of a company whose directors or former directors had signed up to the service offered by the Respondents. Shall simply refer to the company involved as "Oldco", although that was not its name. I was shown an attendance note of Mr Simon Newman of counsel, dated 3 July 2017. This attendance note describes is the exchanges that took place before a hearing before the District Judge and then the hearing by the District Judge himself.
39. Paragraph 3 of the attendance note describes what Mr Newman was told by someone (I shall refer to that person as X) who attended on behalf of OldCo, and who claimed to be a solicitor's clerk for French Fox Law, which was either one of the Respondents or else related to the Respondents:

"I was informed [Oldco] had been purchased by another company and a thirty-day adjournment was sought by the company to assess the financial position and make payment in full. I made further enquiries of [the sol, but he made clear that he did not know anything beyond that he has told me."

40. Pausing there, this notion of assessing the company's (Oldco's) financial position and offering to make payment in full is entirely inconsistent with the nature of the service being offered in the emails that I described earlier on in the judgment.
41. In paragraph 4 of the attendance note, Mr Newman records the suspicion that he had that Oldco was stalling. In paragraph 5 of the attendance note, Mr Newman records what X told the District Judge:

"…that he was instructed to seek a thirty-day adjournment. The District Judge enquired about the capacity in which he acted, and he stated he appears as agent for his firm and was instructed this morning to attend court. He stated that French Fox Law were solicitors instructed by Rigil Kent Limited, a corporate acquisition and turnaround firm who had acquired [Oldco]. He stated that if a thirty-day adjournment was granted, this would be used to review the financial situation and pay creditors."

42. So, once again, one has a clear indication that, if time is granted, Oldco will have at least an opportunity of paying its creditors. This is, of course, entirely at variance with the nature of the companies the Respondents' clients were seeking to sell to the Respondents.
43. Looking at paragraph 7 of the attendance note, X is recorded as confirming that Oldco had been aware of its debts, including that of supporting creditor, and the company's position was that if an adjournment was granted, the company would pay the creditors in full. So we see an even firmer assertion of future payment being made.
44. I put it no higher than this, but I do not consider it needs to be put any higher than this: there is clearly material from which an inference can be drawn that the District Judge was not being told the complete truth about the circumstances of the company that X was representing.
45. Equally seriously, X represented himself as being a solicitor's clerk for French Fox Law, and he was asked specifically by the District Judge to produce the SRA number of the firm he was purporting to act for. He produced an SRA number, which is stated at paragraph 11 of the attendance note as "297633". That number has been checked under the law firm search provided by the SRA, and that number does not reference French Fox Law. Instead, an altogether different firm is identified by the SRA number provided by X
46. This material underlines, to my mind, one of the mischiefs of the service being sold by the Respondents, namely that there is a clear incentive to misstate or mislead the court as to the true position of the insolvent Oldco.
47. In my judgment, the service sold by the Respondents undermines the insolvency process in at least two respects.
48. First, it does not clearly state, and certainly does not completely accurately state, the implications of the service being offered to clients, as I say, the directors of Oldco, who purchase that service. A clean break is promised, where no clean break can be achieved.
49. Secondly, the establishment of the firewall that I have described results in prejudice to the insolvency process in these respects:

(1) First, it hampers the investigation of the Official Receiver and the Insolvency Service in establishing the true facts relating to the background of an insolvent company.

(2) Secondly, when matters do come to court, there is at least the potential for the court to be misled as to the affairs of the Oldco. The example I have given is a particularly serious one, which I do not assume to be typical. But I consider that there is a clear risk of the court being misled in less serious, but nonetheless material, ways.

50. The next point that is made on behalf of the Secretary of State regarding the importance of both these applications and the petitions is that the investigation of the Respondents pursuant to the investigation process under s.427 has been fraught and difficult. This is described in considerable detail in the statement of Mr George, and I will not, given the length and detail of that statement, seek to quote or even to summarise the detail that it contains. Suffice it to say that it is plain from the evidence of Mr George that those Respondents under investigation, and I stress that it was only four of the Respondents in respect of whom an authority was given, gave the investigators the run-around. It has not been possible to establish with any great success exactly who controls or operates the Respondents, how they operate, or all the parties involved.
51. The lack of transparency that has been demonstrated simply bears out the risks of prejudice to the insolvency process that I have already described. It is, in reality, an extrapolation of those difficulties.
52. I turn to the various points that were made in response to these applications by Mr Power. Before I do so, I should say that the question of abandonment, which is really a matter to be argued in relation to the petitions to wind up, when they are moved, was not addressed by Ms Wilson Barnes today, and I say nothing about that now.
53. Various points were taken by Mr Power on behalf of the Represented Respondents.
54. First, he suggested that there was no risk of dissipation of assets. To a very large extent, that point was accepted on the facts by the Secretary of State. The reason it was accepted was because the risk of dissipation of assets was not the point of the petition and not the point of these applications. The fact is, a petition seeking the winding up of a company in the public interest can, as I have indicated, be very widely based. Dissipation is not the only ground for winding up. I have described the prejudice that I have found to the insolvency process and it is that prejudice that drives forward these applications. So, I find the point made by Mr Power well-grounds on the facts, but irrelevant.
55. Secondly, and, in a sense, related to this question of dissipation, it is said that there is no sufficient statement of the assets under risk. Now, granted, such a statement is required by the Insolvency Rules and Mr Power accepted that such a statement had been made in paragraph 29 of Mr Hill's statement. What Mr Power suggested was that the statement made by Mr Hill, which was to the effect that he did not know what assets were under risk, was insufficient. I do not accept that submission. It seems to me that the evidence of Mr Hill was entirely appropriate given the lack of cooperation from the Respondents that is described in the evidence of Mr George. It seems to me that if one does not have the material to describe the assets under risk, then all that one can say is "I don't know". That, as it seems to me, is what Mr Hill says in his statement.
56. Mr Power's third point was that no cross-undertaking was offered by the Secretary of State. I should be quite clear that Ms Wilson Barnes, both in her written and in her oral submissions, made clear that no such cross-undertaking was being offered. The reason no cross-undertaking was being offered was because the Secretary of State was, according to Ms Wilson Barnes' submission, acting in the public interest in making these applications and, next year, in bringing the petitions. She referred me to the decision of Etherton J, as he then was, in the matter of City Vintners Limited, which is a decision dated 10 December 2001. I will not quote extensively from the judgment of Etherton J. I will simply state that the judgment considers in some detail the law regarding cross-undertakings from the Crown, or the Secretary of State in this case. The decision makes clear that, where the Crown is acting to enforce some proprietary right, in other words, where the Crown is, in effect, acting in a private capacity, the ordinary rule applies so that no interlocutory injunction will be given, unless, as the price for the injunction, an undertaking in damages is given. Where, however, the Crown is taking proceedings in order to enforce the law, no such undertaking should be required, unless the person against whom the injunction was sought shows special circumstances justifying the requirement.
57. Mr Power sought to persuade me that City Vintners Limited was not a correct statement of the law, and I was referred to the decision, much more recent, in Abbey Forwarding Limited (in Liquidation) v Revenue and Customs Commissioners [2015] EWHC 225 (Ch), a decision of David Richards J, as he then was. This, however, was not a case where the public interest was engaged. Instead, the Revenue had in fact given a cross-undertaking in damages and was seeking to persuade the court that the cross-undertaking which had been given should not be enforced in full. The court (at [147]) indicated that whilst it had not been the practice to require HMRC to provide an undertaking in damages where a provisional liquidator was sought in support of a winding up petition, once an undertaking had been given, it should be enforced, and that, to my mind, is all that the decision says. To my mind, it says nothing about the need or desirability of cross-undertakings in a case such as this.
58. I accept the general rule as set out by Etherton J, that where the Secretary of State is seeking to enforce a public interest, it would have a deterrent or cooling effect were there to be, as the automatic price of an interim remedy, the imposition or requirement of an undertaking in damages. I take into account in my decision that no cross-undertaking is offered, and I should say now that if, in the facts of this case, I thought that such an undertaking was appropriate, then I would require one from the Secretary of State before making any order in this matter. But I do not consider, in this case, that it is appropriate to require a cross-undertaking as the price of the relief sought by the Secretary of State.
59. I turn then to the question of urgency (or lack of it), which was Mr Power's fourth point. Mr Power suggested that there was no urgency in this case, and he made his point in two ways. First, he suggested that there had been an unreasonable delay between the commencement of the authorisation of the investigations and the making of these applications. Now, as I have said, the statements on which the Secretary of State relies are dated 11 December 2017, and here we are, only a few days later, on 19 December 2017, hearing applications based upon those statements. I do not consider that there can be any criticism of the time between the conclusion of the statements on which the Secretary of State relies and the making of these applications.
60. Mr Power, however, was seeking to make a more subtle point. What he suggested was that there was no discovery by the Secretary of State sufficient to trigger the making of an urgent applications. There was, in short, no factual discovery, made shortly before these applications were made, to justify them.
61. So far as it goes, that is factually right. But it seems to me that the point is a rather poor one that overlooks the reality of the Secretary of State's position. The fact is that the Secretary of State cannot, in all propriety, proceed with applications such as these without having the evidential basis upon which to do so. That evidence cannot be presented as half-baked; it has to be properly presented, particularly when, as here, I am proceeding on the basis that this is as if an ex parte application. Unless it could be shown that, in some way, the Secretary of State had delayed unreasonably in producing the evidence on which the applications are founded, there is nothing in the point.
62. I can see no basis for suggesting that the Secretary of State has delayed in the production of the evidence relied upon. I find that the Secretary of State has proceeded with these applications as quickly as the Secretary of State could, given the time gap between 11 December 2017 and 19 December 2017. So, I reject this argument. I find that there has been no delay, and certainly no undue delay, in the making of this application.
63. There is, however, the question of whether these applications for the appointment of a provisional liquidator are sufficiently urgent in all the circumstances. These applications do need to be justified in terms of explaining why it is that they are being made in anticipation of and in support of the petitions to wind up the Respondents that are due to be heard next year, in February 2018.
64. The urgency arises out of the fact that the Secretary of State does not want the practices that I have described to continue any longer. I do not need to repeat what I have said about the desirability of these practices. I consider that the Secretary of State is entirely right to want to have, for the rest of this year and for the early part of next year, the assurance that the practices that I have described will not take place any longer. I will return, in a few moments, to the question of the whether the undertakings that are now being offered by the Representative Respondents affects the extent to which urgency can be said to justify these applications. Apart from that point, I am satisfied that there is sufficient urgency to justify these applications.
65. As a collateral benefit of the appointment of a provisional liquidator pending a petition, it is also the fact that the affairs of the Respondents can be investigated by the Official Receiver, through the provisional liquidator. I place relatively little weight on this simply because it is not a point that is made with any great force in the evidence relied upon by the Secretary of State. But I do observe that the evidence relied upon by the Secretary of State sets out in some terms and some clarity the lack of cooperation and response from the Respondents the subject of the investigations. There is, consequently, a lack of clarity in the Secretary of State's understanding of the affairs of the Respondents, so I attach some, but not undue, weight to this fact.
66. I turn then to the application of the test that I began this ruling in describing. I must ask myself, first, whether it is likely that the court, on a hearing of the winding up petitions, will make an order winding up the Respondents. I consider that it is likely that such a winding up order will be made and that the petitions, when they are heard, will be successful. I base that, essentially, on the analysis that I have made of the service provided by the Respondents. That service is, as it seems to me, not in the public interest and one that, in the specific circumstances of this case, ought to be stopped.
67. The question then is whether, being satisfied that a winding up order is likely to be made, I am satisfied, in all the circumstances, that a provisional liquidator should be appointed. In considering this factor, I of course accept that the appointment of a provisional liquidator is an exceptional remedy. Indeed, it is an extreme remedy and it is one that should only be imposed in a clear case. To my mind, there is real benefit in ensuring that these practices, which I consider to be pernicious, are stopped.
68. Of course, I have well in mind the undertakings that are offered by the Represented Respondents. Ordinarily, an undertaking in the terms of an order sought will be accepted by the court in lieu of making the order. In this case, however, the undertakings have been made or given extremely late. I make no criticism of that, but it is a fact. What is more, they emanate from four entities that are dormant, and one entity that is active. So, to the extent that the undertakings are of any value, it seems to me that it is only the undertaking from the active entity that has real value. So far as the dormant companies are concerned, the undertaking has little value, but, equally, the imposition of a provisional liquidator has minimal prejudice to the dormant companies. As it seems to me, there is some advantage, that is to say the advantage of being able to investigate the affairs of the Respondents by appointing a provisional liquidator, and that, and that, at the end of the day, is one matter that suggests to me that the applications today should be granted.
69. The other much more potent factor is simply this. Given the complexity of the interrelationship between the various Respondents and their lack of transparency, it is appropriate that a blanket provisional liquidator regime be put in place in respect of all the Respondents so that the business that appears to have been operated interchangeably through the various Respondents can properly be brought to a close.
70. In those circumstances and given that I have found no indication and no evidence of delay on the part of the Secretary of State, and I consider that these matters and practices should be prevented for the future, until the petitions can be heard, I grant the applications that are made today.
71. I should say, however, that, whilst I grant the applications, I am conscious that I have seen and received no evidence from the Respondents, and it is appropriate to treat this application as an interim application. If the Respondents, or the Represented Respondents, wish to move the court in advance of the hearing of the petitions next February, then I give them liberty to do so. Obviously, that must be done on the basis of evidence, to which the Secretary of State will wish to reply. I say nothing about whether it is desirable or not to have such an application heard before the hearing of the petitions or at the same time as the petitions, but it seems to me that it is a consequence of the fact that, whilst I am satisfied, on the evidence, that the orders sought are appropriate, equally, I should give the opportunity to the Respondents, if they wish it, to move the court on a future date to have these orders set aside, and I will want that incorporated in any order that I am invited to make.
__________

Transcribed by Opus 2 International Ltd. (Incorporating Beverley F. Nunnery & Co.) Official Court Reporters and Audio Transcribers 5 New Street Square, London EC4A 3BF Tel: 020 7831 5627 Fax: 020 7831 7737 [email protected] This transcript has been approved by the Judge