Bhardwaj (Hillsgate Properties Ltd) v Barton, The Official Receiver & Ors

An application to rescind a company winding-up order engages two separate discretionary questions. The court must first decide whether to extend the strict time limit and then whether there are proper grounds for rescission. The applicant must provide a convincing explanation for delay and establish exceptional circumstances. The court must also consider the effect of rescission on the company, creditors, office-holders and other affected persons.

The criteria in CPR 3.9 and, by analogy, CPR 39.3(5) provide useful guidance. Unjustified and substantial delay may itself defeat the application. A payment made to a bankrupt after the bankrupt’s estate has vested in the trustee does not discharge the debt. Registration of a proprietor under Land Registration Act 2002 does not create an unassailable title.

Hillsgate Properties Ltd was wound up on 20 May 2010 on the petition of Peter Windatt, trustee in bankruptcy of Resham Khela. Ravinder Bhardwaj, the former sole director and shareholder, applied on 25 October 2010 for the winding-up order to be rescinded.

The application was made more than five months after the order and was treated as an application by the company supported by Bhardwaj as a creditor. The central issues were whether time should be extended under the Insolvency Rules 1986 and, if so, whether the order should be rescinded. The merits included alleged payment of the debt, the effect of Khela’s bankruptcy, the enforceability of the land transaction and the effect of registration.

1. Time and merits. The application was dismissed. Rescission required the court to exercise two discretions: first, whether to extend the five-business-day period under Rule 7.47(4); and secondly, whether there were proper grounds for rescission and whether rescission would prejudice persons affected by the winding up. Failure to satisfy either discretion was fatal.
2. The court preferred that sequence over determining the merits first. The applicant bore the burden of providing a proper explanation for delay and demonstrating exceptional circumstances. The criteria in CPR 3.9 were relevant, and the requirements in CPR 39.3(5) could be applied by analogy through Rule 7.51A. Promptness, intentionality, compliance with court orders, the effect on creditors and office-holders, and the consequences of granting relief were material considerations.
3. There was no adequate or candid explanation for the five-month delay. The evidence showed awareness of the petition and winding-up order, failure to comply with a later deadline, and delay after the alleged evidence of payment became available. The court therefore refused to extend time.
4. The merits would also have failed. Payment into Khela’s bank account after his estate had vested in the trustee under section 306 did not discharge the debt. Section 307 was not engaged because the trustee had given no written notice claiming after-acquired property.
5. Section 58 of the Land Registration Act 2002 did not make the registered title unassailable. The register could be altered under section 56 and Schedule 4 to correct a mistake, including one caused or substantially contributed to by the proprietor. The circumstances of the garage transfers required investigation by the liquidator, making continuation of the liquidation appropriate.

First-instance application before the High Court. No prior appellate decision was stated in the judgment.