Secretary Of State For Trade & Industry v North West Holdings Plc & Anor

Rule 4.11 of the Insolvency Rules 1986 regulates the advertisement required by the rule, ordinarily in the Gazette. The seven-business-day period after service protects the company’s opportunity to seek relief before that advertisement. It does not prohibit additional publicity before the period expires. Accordingly, premature press notices do not constitute a breach of rule 4.11, and the dismissal power in rule 4.11(5) addresses defective, not excessive, advertisement. A separate inherent jurisdiction remains available to control abusive proceedings. Where a provisional liquidator has been appointed on a public-interest petition under section 124A of the Insolvency Act 1986, immediate publicity will usually be justified by the need to inform those dealing with the company and to protect the public.

The Secretary of State presented winding-up petitions against two companies under section 124A of the Insolvency Act 1986 and obtained the appointment of provisional liquidators. The petitions were advertised in the Gazette within the period required by rule 4.11 of the Insolvency Rules 1986. The Department also issued press notices on the day of service, summarising the allegations in the petitions.

Before Hart J in the Chancery Division (Companies Court), the companies sought dismissal for breach of rule 4.11 or abuse of process. The applications were dismissed. The central issue on appeal was whether the additional press notices meant that the petitions had not been duly advertised.

Lord Justice Chadwick gave the leading judgment, and Lord Justice Morritt agreed. The appeals were dismissed.

1. Purpose of rule 4.11. Rule 4.11 of the Insolvency Rules 1986 has two objectives. It ensures timely advertisement in the Gazette, in the prescribed form and with the required information, so that persons entitled to appear and be heard have a proper opportunity to do so. It also prevents the advertising requirements from operating oppressively. Failure to satisfy the prescribed requirements may justify an adjournment or, where proceeding or adjournment would be improper, dismissal under rule 4.11(5).
2. Scope of the advertising restriction. Rule 4.11(2)(b) concerns only the advertisement required by rule 4.11(1). The reference to “the advertisement” cannot be expanded to mean any publication. Additional press notices, whether issued before or after the prescribed period, do not breach rule 4.11. Rule 4.11(5) addresses failure to advertise in accordance with the rule and does not provide a remedy for excessive advertisement.
3. Separate abuse jurisdiction. The court retains an inherent jurisdiction to strike out an abusive winding-up petition independently of rule 4.11(5). That jurisdiction was not the basis of the appeal, although premature publicity may in an appropriate case be objectionable on that ground.
4. Provisional liquidators and publicity. Where a provisional liquidator has been appointed on a petition under section 124A of the Insolvency Act 1986, immediate publicity will usually be justified. The appointment commonly requires communication with employees, bankers and other persons dealing with the company, and is intended to protect the public. The court will already have considered the effect of the appointment on the company’s business and goodwill.
5. Where there is uncertainty, directions may be sought from the court. The court may temporarily restrain publicity to allow the company to make representations. In the present case, the press notices were not objectionable. The appeal was dismissed with costs, subject to any application that the costs be paid personally by Mr Backhouse.

• Court of Appeal (Civil Division): appeals from the dismissal of the companies’ applications were dismissed. [1998] EWCA Civ 1548.
• Chancery Division (Companies Court): Hart J dismissed applications to dismiss the winding-up petitions for breach of rule 4.11 or abuse of process.