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

The Court of Appeal dismissed the applicants' renewed application for permission to appeal against the deputy judge's refusal to restrain advertisement of winding up petitions. The court reaffirmed the settled principle that the primary purpose of advertising a winding up petition is to notify those entitled to be heard (creditors and contributories) and that a secondary purpose is to notify those who may trade with the company in the interim. The default position is that petitions should be advertised and it is for the company seeking to avoid advertisement to demonstrate that advertisement would cause serious damage to its reputation and financial stability.

The court held that the deputy judge had applied the correct legal tests (including the approach in Re a Company (No. 007923 of 1994) [1995] 1 W.L.R. 953) and had carried out a proper balancing exercise between the interests of the purchasers and the company. He was entitled to conclude that purchasers fell within the wider class of persons to whom notice may be given and that the evidence of likely serious damage to the companies was thin. The application to adduce further evidence was refused under the Ladd v Marshall principles.

This was an application by two companies engaged in land banking for permission to appeal the deputy judge's decision refusing orders to restrain the Secretary of State from advertising petitions for the winding up of the companies. The petitions had been presented in January 2014 following an investigation under section 447(3) of the Companies Act 1985; the Secretary of State alleged misleading sales representations and other improprieties and relied on section 124(a) of the Insolvency Act 1986 as representing the public interest.

The applicants, owned and controlled by a single individual, submitted that advertisement would cause real risk of reputational and financial damage, provoke a run on payments by purchasers and could threaten solvency. They sought injunctions to prevent advertisement. The Secretary of State argued that advertisement was necessary to enable purchasers to bring misrepresentation claims, to decide whether to continue payments, and to enable the State to gather reply evidence.

The key issues framed by the court were (i) whether the purchasers were actual or contingent creditors or otherwise persons with a legitimate interest in knowing of the petitions, and (ii) the correct standard and the evidence required to show that advertisement would cause serious damage to reputation and financial stability.

The deputy judge applied the principles explained in Re a Company (No. 007923 of 1994) and concluded that purchasers fell within the wider class of persons who deal or propose to deal with the company and thus had a real interest in notice; he was not required to decide categorically whether they were contingent creditors. On the second issue, the deputy judge properly required evidence that advertisement could cause serious damage and, after evaluating the evidence, concluded that the risk of a concerted run or irremediable harm was not established. The Court of Appeal held that the deputy judge had directed himself correctly, had made a permissible evaluative judgment on the evidence, and that there was no real prospect of reversal. An application to adduce further evidence was refused on the Ladd v Marshall test.

Relief sought: injunction restraining the Secretary of State from advertising winding up petitions. Procedural posture: appeal from the Chancery Division (deputy judge's order of 13 November 2014), permission refused on the papers by Lewison LJ on 27 November 2014, oral renewal before Kitchin LJ on 10 November 2015 dismissed.

The application for permission to appeal was dismissed. The court held that the deputy judge applied the correct legal principles, including the approach in Re a Company (No. 007923 of 1994), properly balanced the competing public policy concerns and purchasers' interests against the risk of serious damage to the companies, and was entitled to find that the evidence of likely serious reputational or financial harm was insufficient. The application to adduce further evidence failed the Ladd v Marshall test and would not have affected the outcome.

Appeal from the Chancery Division (deputy judge Tim Car QC) decision dated 13 November 2014 refusing injunctive relief restraining advertisement of winding up petitions. Permission to appeal was refused on the papers by Lewison LJ by order dated 27 November 2014. Oral renewal of the application for permission was heard by Kitchin LJ on 10 November 2015 and dismissed (this judgment, [2015] EWCA Civ 1526).