Bhanderi v Customs and Excise

The power to rescind a winding-up order is discretionary. It is normally exercised only where circumstances have changed since the order, or where fresh evidence, unavailable for use on appeal, has emerged. Exceptional circumstances may justify rescission where justice requires it.

A pending appeal against the underlying assessments does not itself justify rescission. The court may consider whether the company remains insolvent independently of the petition debt and whether the alleged new evidence materially alters the basis on which the order was made. A change of mind after an informed decision not to oppose the petition is insufficient.

Turnstem Ltd was compulsorily wound up on 13 January 2004 on a petition based on assessments for VAT and excise duty arising from alleged diversion of duty-suspended alcohol. Harish Bhanderi, Turnstem’s sole director and shareholder, applied to rescind the order.

He relied on a pending appeal to the VAT and Duties Tribunal, the earlier decision in Jack Baars Wholesale v Commissioners of Customs & Excise, and Customs’ later disclosure of tachograph evidence suggesting that some consignments might have crossed the Channel. Customs contended that there had been no relevant change of circumstances or fresh evidence and that Turnstem was insolvent apart from the petition debt. The central issue was whether the discretionary jurisdiction to rescind was engaged.

1. Application dismissed. The court had jurisdiction under rule 7.47(1) of the Insolvency Rules 1986 to review, rescind or vary the winding-up order. The discretion was normally exercised only for a relevant change of circumstances or genuinely fresh evidence, although exceptional circumstances might justify rescission where justice required it.
2. There had been no relevant change of circumstances. The argument based on Jack Baars Wholesale v Commissioners of Customs & Excise had lost its force because the Court of Appeal had subsequently upheld the validity of DSMEG regulation 7(2) in Re The Arena Corporation Ltd [2004] EWCA Civ 371.
3. The pending Tribunal appeal did not alter the basis of the winding-up order. The assessed debt was due notwithstanding an outstanding appeal, applying the approach in Re Anglo-German Breweries Ltd [2002] EWHC 2458 (Ch). The question whether the company should be wound up was distinct from the merits of the misfeasance proceedings.
4. There was no qualifying fresh evidence. The tachograph material merely suggested that some lorries might have travelled to continental Europe. It did not establish that the assessed consignments reached their intended destinations or materially undermine the basis of the order. Evidence concerning five other consignments was not taken into account.
5. Turnstem was hopelessly insolvent even without the petition debt. Its principal asset was its interest in Dimestore Ltd, which was itself insolvent. The evidence relied on to show Dimestore’s solvency was unconvincing and, in any event, irrelevant.
6. No exceptional circumstances required rescission. The evidence concerning the Rose Water consignments gave Customs a strong case, although the court did not determine the underlying fraud allegations or pre-judge the misfeasance application. The application was therefore dismissed.

First-instance decision. No earlier appellate decision concerning this application is stated in the judgment.