Portfolios of Distinction Ltd, Re

On a petition under section 124A of the Insolvency Act 1986, the court must itself decide whether winding up is just and equitable in the public interest. It balances all the circumstances and identifies the public interest that the order would promote. The petitioner bears the burden of proving the case on the balance of probabilities and must establish weighty and substantial reasons for this serious remedy. Alleged mis-selling must be deliberate and significant. A company is not necessarily wound up because it was connected with another company carrying on an inherently objectionable business, particularly where the offending business has ceased and other remedies remain available. Genuine, substantial reforms may be taken into account where wrongdoing has ceased and public protection has improved.

The Secretary of State presented petitions under section 124A of the Insolvency Act 1986 for the compulsory winding up of Portfolios of Distinction Ltd and Turning Point Seminars Ltd. The petitions alleged deliberate mis-selling, the promotion of a fraudulent debt-purchase scheme operated by CM2 Services Ltd, intermingling of the companies’ operations and finances, and irregular payments by TPS.

Provisional liquidators had been appointed before the petitions were heard. The central issues were whether the evidence established deliberate and significant mis-selling, whether the companies were sufficiently tainted by their connection with CM2, and whether the public interest required their winding up despite the cessation of CM2’s business and reforms made by POD.

The petitions were rejected and no compulsory winding-up order was made against either company.

1. Statutory approach. Section 124A of the Insolvency Act 1986 permits a petition where the Secretary of State considers winding up expedient in the public interest, but the court must reach its own decision. It must balance all the circumstances, weigh the factors for and against winding up, and identify the aspect of public interest which the order would promote.
2. Burden and seriousness. The Secretary of State had to prove on the balance of probabilities that winding up was just and equitable. Weighty and substantial reasons were required because compulsory winding up is a serious step.
3. Mis-selling. Mis-selling had to be deliberate and of some significance. The POD documents, read together, imposed an obligation to offer properties and appraisals, not to guarantee that a client would acquire a £1 million portfolio. The evidence did not establish deliberate misrepresentation or deception.
4. CM2 connection. Although Churchill and Dowling were closely involved in CM2 and should not have encouraged investment in it, CM2’s business had ceased and was separately subject to winding-up and other possible enforcement remedies. Its taint was insufficient to justify winding up POD or TPS.
5. TPS and reforms. The TPS petition depended substantially on the grounds advanced against POD and therefore failed. The court also treated POD’s costly and substantial administrative, contractual and risk-management reforms as genuine improvements consistent with protecting the public. The circumstances were materially different from Re Alpha Club (UK) Limited, where reforms were not accepted as a sufficient answer.

First-instance decision. No prior or subsequent appellate decision is stated in the judgment.