Winding-up in the public interest (Secretary of State for Business, Innovation and Skills v PLT Anti-Marketing Ltd)

David Mohyuddin QC, barrister at Exchange Chambers, examines Secretary of State for Business, Innovation and Skills v PLT Anti-Marketing Ltd and explains the legal issues raised, and the practical implications and lessons that can be learned from the judgment.

Original news

Secretary of State for Business, Innovation and Skills v PLT Anti-Marketing Ltd [2015] EWHC 3981 (Ch), [2015] All ER (D) 260 (Dec)

The Chancery Division held that it had jurisdiction to grant a compulsory winding-up order in respect of a company on the company’s own application, and where there was an extant winding-up petition, which had previously been presented by the Secretary of State for Business, Innovation and Skills (SoS). The company was no longer trading and, notwithstanding that the SoS’s petition had been presented on public interest grounds, it had sought the winding-up of the company on the just and equitable ground, which was sufficient to found jurisdiction in the court to make a winding-up order on the company’s application. There was no requirement that the case be ‘thoroughly exceptional’ where, as in the present case, there was an extant winding-up petition.

What was the background to the public interest winding-up petition?

PLT carried on business selling the purported service of preventing unwanted telephone sales calls and junk mail. It mainly recruited its customers by cold calling, during which customers were required to make an immediate decision whether to purchase PLT’s service.

By the petition as amended, the SoS sought the compulsory winding-up of PLT because:

  • PLT had engaged in misleading sales practices in order to induce the public to enter into contracts for services and subsequently failed to provide the services in accordance with the representations made
  • PLT represented to potential customers that it was in some way backed or endorsed by the government, which it was not, and such conduct amounted to an unfair commercial practice—prohibited by the Consumer Protection from Unfair Trading Regulations 2008, SI 2008/1277 and/or Unfair Commercial Practices Directive 2005/29/EC (requiring an immediate transactional decision also made PLT guilty of misleading actions contrary to the Regulations and/or Directive)
  • PLT traded in breach of the Consumer Protection (Distance Selling) Regulations 2000, SI 2000/2334 and in breach of undertakings given to a trading standards authority
  • PLT traded in a manner which frustrated its customers’ rights to exercise their contractual and legislative rights to cancel their contracts
  • PLT retained its customers’ financial details when there was no ongoing business requirement
  • PLT’s trading was a continuation of objectionable sales practices carried out by a company of which those involved with PLT had been directors and which had itself been wound-up in the public interest

Notably, the SoS did not rely on PLT’s insolvency as a ground for making a compulsory winding-up order.

PLT avoided the appointment of the official receiver as provisional liquidator by giving undertakings as to its trading, so as to require it, in advance of making sales, specifically to advise customers that it would register their details with the telephone and mail preference services, and that such services were free services otherwise available to customers individually.

PLT applied to vary those undertakings on the basis of a proposed manner of trading. This application was dismissed. PLT appealed. Its appeal was allowed in part because the Court of Appeal considered that the question over the way in which PLT proposed to trade (upon which its application to vary the undertakings was premised) should have been considered after trial, but that the judge was correct not to have varied the undertakings.

There was then substantial procedural delay, not least because criminal proceedings were brought against PLT’s directors.

PLT then applied for an order that it be wound-up on the basis that it was irretrievably insolvent and for the SoS’s petition (which did not include insolvency as a ground for winding-up) to be amended if need be. The SoS had made no application of his own for such amendment.

What were the legal issues the judge had to decide in this petition?

The judge had to decide whether:

  • the court had jurisdiction to entertain PLT’s application that it be compulsorily wound-up on the grounds of insolvency when the extant petition was that presented by the SoS alleging grounds other than insolvency and asserting that, in the public interest, it was just and equitable for PLT to be wound-up
  • if there was such a jurisdiction, it required the presence of exceptional circumstances before it could be exercised
  • if exceptional circumstances were required, they were present

What were the main legal arguments put forward?

On behalf of PLT it was argued that:

  • the court plainly had jurisdiction to make a winding-up order even where there was no petition on foot such that in the present case, where there was on foot a petition, there was no reason not to make an inevitable winding-up order
  • the court’s powers included making a winding-up order on grounds not stated in the petition
  • there was no reason to delay and require a trial to take place
  • insofar as exceptional circumstances had to be shown, they were present because PLT was plainly insolvent and wished to be wound-up and because a petition had already been presented and advertised
  • the only prejudice to the SoS would be not being able to make out their case for winding-up on public interest grounds and would not be able to publicise the basis of the winding-up order as being the public interest

On behalf of the SoS it was argued that:

  • there was no jurisdictional basis to make the order sought by PLT, the petition did not allege insolvency and the SoS did not wish to amend his own petition to do so and could not be ordered to do so
  • if there was jurisdiction, there required to be present exceptional circumstances before it could be exercised and there were none
  • if PLT genuinely wanted a compulsory order to be made, it should simply have conceded the petition, thus demonstrating that the true reason for the application was that PLT’s directors wished to protect themselves against a finding that PLT had been operated contrary to the public interest
  • if the court acceded to PLT’s application, a message would be sent to the directors of miscreant companies that they could avoid a winding-up order on public interest grounds because of the company’s intervening insolvency
  • PLT should either proceed to a trial or withdraw its opposition to the petition

What did the judge decide and why?

The judge decided that:

  • the court did have jurisdiction to entertain PLT’s application
  • because the SoS’s petition was on foot, there was no need to demonstrate exceptional circumstances
  • if he was wrong about that, however, on the facts of the case such exceptional circumstances as were required were present by reason of the time for which the petition had already been on foot and the time that it would likely take before any trial would be heard (PLT having ceased trading)

The judge considered that publication of the judgment would be sufficient vindication of the SoS’s eagerness to enforce the public interest, which he could no longer do by reason of circumstances outside his control.

Accordingly, the judge made a compulsory winding-up order against PLT and ordered it to pay the SoS’s costs of the petition. The judge ordered that those costs were to include the cost of obtaining a transcript of his judgment so that the SoS could demonstrate the assiduity with which he had pursued what he considered to be the public interest.

To what extent is the judgment helpful in clarifying the law in this area?

It is doubtful that this judgment has clarified the law in this area. The facts of this case are entirely unusual and what appears to have played heavily on the judge’s mind was the delay that had already been incurred and the likely delay before any trial of the SoS’s petition could be heard in circumstances where PLT had ceased trading.

What practical lessons can those advising take away from this case?

The competing parties in public interest winding-up petitions are, generally, the SoS as petitioner and the company as respondent. The SoS has specialist advisers who are well-versed in this area of law. As for those advising respondent companies, it would be wrong to think this decision gives companies—and those behind them—a get out of jail card where the company can demonstrate its own insolvency. Rather, what appears to have driven the judge’s conclusion to exercise the jurisdiction he said the court enjoyed was the time already taken to reach this stage and the time that would elapse before any trial.

Interviewed by Susan Ghaiwal.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Further Reading

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When a winding-up petition can be issued and a company wound up by the court

The appointment of a provisional liquidator

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First published on LexisPSL Restructuring and Insolvency

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