Secretary of State for Business, Innovation and Skills v Hawkhurst Capital Plc

On an application to appoint a provisional liquidator pending a public-interest winding-up petition, the court must consider whether another remedy would provide an adequate answer to the concerns relied upon. Appointment is appropriate where injunctive relief would be difficult to formulate, ineffective to police or unlikely to be obeyed, particularly where the company’s structure and activities lack transparency and there is a risk of continuing public harm. The court must also weigh the seriousness of the appointment, the urgency of the circumstances, the adequacy of notice and any potential prejudice to the company. The absence of a cross-undertaking in damages is a relevant consideration but does not prevent appointment where the evidence demonstrates a sufficiently strong need for urgent protection.

The Secretary of State petitioned for the winding-up of the respondent company on public-interest grounds and applied for the appointment of a provisional liquidator pending the petition hearing. The evidence suggested that the company’s shares formed part of a pension-release scheme involving overseas companies, long-term share lock-ins and loans to members of the public. Concerns included lack of transparency, inaccurate accounts, misleading conduct, lack of commercial probity and the failure of the company’s director to co-operate with investigators.

The respondent had been given short notice but was not represented. The central issue was whether immediate appointment of a provisional liquidator was necessary and whether injunctive or other relief would adequately protect the public pending determination of the petition.

1. Prima facie case. The evidence established a prima facie case for winding up the company in the public interest. The company appeared to be a vehicle for a pension-release scheme potentially causing substantial prejudice to pension holders, with features suggesting serious and deliberate misrepresentation.
2. Need for provisional protection. The management and assets of the company should be taken out of the directors’ hands as soon as possible. The apparent continuation of share sales created an urgent risk that further members of the public would participate in the scheme and suffer loss.
3. Alternative relief. Applying the guidance in Re City Vintners Ltd (unreported, 10 December 2001), the court considered whether another remedy would provide an adequate answer. Injunctive relief would be insufficient or ineffective because the company’s precise role and the structure of the scheme were unclear, the order would be difficult to formulate and police, the principal individuals and related companies were overseas, and the director’s conduct gave no confidence that an injunction would be obeyed.
4. Balancing prejudice. The court took account of the absence of a cross-undertaking in damages and the potential injustice to the company if the appointment later proved unjustified. Those considerations did not outweigh the need to protect the public and preserve the company’s assets and records.
5. Order. The Official Receiver was appointed provisional liquidator pending the hearing of the winding-up petition or further order. Time for service was abridged, and the company’s officers were given liberty to apply on 48 hours’ written notice to set aside or vary the order.