Broomfield Developments Ltd & Anor v Secretary of State for Business, Innovation & Skills

Advertisement of a winding-up petition is the default position. It serves to notify those entitled to be heard and those who may trade with the company before the petition is determined. The company seeking restraint must show that advertisement might cause serious damage to its reputation and financial stability. The court must balance that risk against the interests of creditors, contributories and persons dealing or proposing to deal with the company. Customers need not be contingent creditors: their position as persons dealing with the company may give their interest material weight where potential claims are not fanciful. On an application for permission to appeal, the issue is whether the first-instance evaluation was properly open to the judge, not whether the appellate court would necessarily have reached the same result.

Broomfield Developments Ltd and Lakeview sought permission to appeal after Tim Car QC, sitting as a deputy judge of the Chancery Division, refused to restrain the Secretary of State from advertising petitions to wind them up on public-interest grounds. The companies argued that their customers were neither actual nor contingent creditors and that advertisement posed a real risk of serious commercial harm. The Secretary of State relied on customers’ interest in learning of the petitions and responding to alleged misleading sales representations. The Court of Appeal also considered an application to adduce further evidence. The central issues were the proper balancing approach and whether the deputy judge’s evaluation disclosed a real prospect of being reversed.

Applications dismissed. Kitchin LJ held as follows:

1. The governing principles were those explained in Re a Company (No. 007923 of 1994) [1995] 1 W.L.R. 953. Advertisement is ordinarily required to notify creditors and contributories, and those dealing or proposing to deal with the company. Restraint requires consideration of whether advertisement might cause serious damage to the company’s reputation and financial stability.
2. The deputy judge had not decided that the customers were contingent creditors. He was entitled to treat them as persons dealing or proposing to deal with the companies in the ordinary course of business. Their possible claims were not fanciful, so their interest in knowing of the petitions properly weighed in favour of advertisement.
3. The deputy judge applied the correct standard and evaluated the evidence properly. The customers’ reactions might be varied. The evidence did not establish a real prospect of a concerted refusal to pay, substantial adverse publicity, or serious damage of the required kind. A validation order was likely to protect the companies against the freezing of their bank accounts.
4. On permission to appeal, the question was whether the conclusion was properly open to the deputy judge. The appellate court need not agree with the evaluation for itself, and there was no real prospect of reversing it.
5. The further-evidence application failed the Ladd v Marshall test. The evidence could have been obtained with reasonable diligence and had no real prospect of affecting the outcome. The applications were therefore dismissed.

Order: Application dismissed.

• Court of Appeal (Civil Division): On 10 November 2015, Kitchin LJ dismissed the applications for permission to appeal and to adduce further evidence: [2015] EWCA Civ 1526.
• Court of Appeal on the papers: Lewison LJ refused permission to appeal by order dated 27 November 2014.
• High Court of Justice, Chancery Division: On 13 November 2014, Tim Car QC, sitting as a deputy judge, refused to restrain advertising of the winding-up petitions.