Secretary of State for Business, Innovation and Skills v Top Choice Wholesale Ltd

Where a creditor’s winding-up petition is pending, that does not prevent the Secretary of State from presenting a separate public-interest winding-up petition. The restriction in section 124A(2) of the Insolvency Act 1986 applies where the company is already being wound up by the court, not merely because another petition has been presented.

Pending the hearing of a public-interest petition, the court may appoint a provisional liquidator without notice where there is a good prima facie case of serious commercial impropriety, a risk of continuing harm to the public or dissipation of assets, and no adequate alternative remedy.

The Secretary of State applied without notice for permission to present a public-interest winding-up petition against Top Choice Wholesale Limited and for the appointment of a provisional liquidator.

The proposed petition relied on alleged failure to co-operate with an investigation, false accounts and trade references, obtaining goods on credit without payment, inadequate accounting records and continued trading. A creditor’s winding-up petition was already pending in the Birmingham District Registry, and this had prevented issue of the Secretary of State’s petition.

The central issues were whether the pending creditor’s petition engaged section 124A(2) of the Insolvency Act 1986, and whether provisional relief should be granted without notice.

1. Permission to present the petition. Section 124A(2) prevents a company being wound up on public-interest grounds where it is already being wound up by the court. Section 129(2) provides that the winding-up is deemed to commence on presentation of the petition. A pending creditor’s petition did not, however, make it inappropriate or impermissible for the Secretary of State to present a public-interest petition. The two petitions protect different interests: the creditor’s petition protects creditors, whereas the public-interest petition protects the public.
2. The court followed its earlier unreported decision concerning CTN Security Services Limited and CTN Retail Security Services Limited. A creditor’s petition might be withdrawn, dismissed, or otherwise fail to result in a winding-up order. The Secretary of State should therefore be permitted to present the public-interest petition, notwithstanding the pending creditor’s petition.
3. Provisional liquidation. The evidence established a good prima facie case that the company would ultimately be wound up on public-interest grounds. There was also a prima facie case that it had obtained credit using false accounts and false references, failed to pay suppliers, failed to co-operate with investigators, and failed to maintain or produce proper accounting records.
4. Taking management from the sole director and appointing the Official Receiver as provisional liquidator was necessary to protect the public, secure the company’s assets and records, investigate its affairs, identify creditors, and prevent further dissipation or acquisition of goods on credit.
5. The application could properly be made without notice. The company and its director had failed to co-operate, meaningful contact appeared impracticable, and giving notice created a risk of further trading, dissipation of assets or removal of goods. Permission was granted to present the petition and the Official Receiver was appointed provisional liquidator until the petition hearing, with the power to sell property limited to perishable property in the ordinary course of business.