Allso v Secretary Of State For Trade & Industry

A contributory with a genuine financial interest in a company may appear on and oppose a public-interest winding-up petition under Insolvency Act 1986, even where the company itself does not oppose it. The contributory must, however, be able to demonstrate that the company is solvent, so that the winding-up could produce a surplus available to the contributory. A person who is neither a contributory nor a creditor has no locus standi. The court must itself evaluate the public-interest case and conduct the statutory balancing exercise; the Secretary of State’s submissions do not receive automatic weight.

The Secretary of State presented petitions under section 124A of the Insolvency Act 1986 seeking the winding up of three companies in the public interest. The petitions alleged that the companies had been used as vehicles for extracting assets from financially distressed companies. The companies did not oppose the petitions. Simon Allso, who controlled one company and claimed beneficial ownership of the others, sought to oppose the petitions and adduce evidence. The registrar held that he lacked locus standi and made winding-up orders. The appeals concerned whether a shareholder could oppose a Secretary of State’s petition, and whether he had to show that his shares had value.

1. Appeals concerning Birch Developments and H-M Birch. Mr Allso was not a contributory or creditor of either company. His control of Rodencroft did not give him standing to oppose their petitions or appeal against the winding-up orders. Those appeals were dismissed.
2. Standing of a contributory. A contributory with an interest to oppose a petition under section 124A may appear and file evidence in opposition, even where the company itself does not oppose the petition. The court must remain alert to the reasons for the company’s inaction, since genuine board disagreement might explain it. The position was consistent with Re Camburn Petroleum Products Ltd and the winding-up rules.
3. Requirement to show solvency. The rule in Re Rica Gold Washing Co applies to a contributory seeking to oppose a Secretary of State’s petition, as well as to a contributory opposing a creditor’s petition. The contributory must demonstrate that the company is solvent and that a surplus could therefore become available. A petitioner should not be required to incur the costs of a contested petition where the only opposition comes from a contributory unable to establish solvency.
4. Public-interest petitions. The court’s task is to evaluate the evidence and submissions and conduct the statutory balancing exercise. The Secretary of State’s expertise and governmental status do not make his submissions conclusive or automatically weightier.
5. Rodencroft. Mr Allso had a prima facie right to appear and file evidence because he was a contributory, subject to showing solvency. The registrar acted wrongly in making the winding-up order without allowing evidence on that issue. The appeal was allowed, but the petition was not dismissed. It was directed to proceed to a hearing, with liberty for the Secretary of State to consider amending it to allege insolvency as an alternative ground.

• High Court (Chancery Division): appeals from winding-up orders made by Mrs Registrar Derrett on 17 December 2003. The appeals concerning Birch Developments and H-M Birch were dismissed. The appeal concerning Rodencroft was allowed and the petition was directed to proceed to a hearing.