The Welsh Ministers v Haydn Price and The Registrar of Companies (Pablo Star)

The Court considered the circumstances in which a third party may be joined to proceedings for restoration of a dissolved company to the register under Companies Act 2006 s.1029 and CPR 19.2. The court held that CPR 19.2 should be given a broad interpretation but that joinder requires both that the proposed party can assist the court in resolving matters in issue and that it is desirable to add that party.

The Welsh Ministers sought joinder to challenge the Restoration Order and a later Variation Order on grounds of non-disclosure, misrepresentation and breach of undertakings by the company's director. The Court of Appeal concluded the Welsh Ministers were not "directly affected" in the relevant sense because restoration did not create a new asset or a new liability for them but only altered the identity of the person able to enforce pre-existing rights. The court also held that the Welsh Ministers had no real prospect of persuading the court to revoke the restoration or variation orders and that allowing joinder risked opportunistic and disproportionate litigation. CPR 19.2(2) was therefore not satisfied as to desirability and the appeal was dismissed.

This appeal arises from an application for joinder made by the Welsh Ministers to proceedings brought to restore Pablo Star Limited to the register under Companies Act 2006 s.1029. Pablo Star had been struck off in February 2014 and restored by Registrar Derrett in June 2014 on undertakings given by its director and sole shareholder, Mr Price. A later Variation Order modified those undertakings. The restoration and variation were sought so that litigation for alleged copyright infringement (concerning a photograph) could be pursued. Following restoration, an assignment of copyright to a related company (Pablo Star Media Limited) and various proceedings in multiple jurisdictions gave rise to complaints by the Welsh Ministers that the Restoration Order and Variation Order were tainted by non-disclosure, misrepresentation and breaches of undertakings.

Nature of the application: The Welsh Ministers applied to be joined under CPR 19.2 in order to argue that the Restoration Order and Variation Order should be revoked or declared invalid and that the assignment of copyright to Media was ineffective, leaving the copyright vested in the Crown.

Issues framed: (i) Whether the court has power and it is appropriate to join a third party after restoration proceedings have been determined; (ii) whether CPR 19.2(2)(a) or (b) is satisfied so as to justify joinder, particularly whether the Welsh Ministers were "directly affected" by the restoration and whether joinder was desirable; (iii) whether alleged misrepresentation, non-disclosure or breaches of undertakings provided a proper basis for joinder or for revocation of the restoration/variation orders.

Reasoning and outcome: The court accepted that CPR 19.2(2) is to be read widely and that joinder may be appropriate in restoration cases where a third party's rights would be directly affected. However, the court held the Welsh Ministers were not directly affected because restoration did not create a new cause of action or new liability for them but only changed who could enforce existing rights. The court also held that the Welsh Ministers had no real prospect of showing the restoration or variation would have been refused if the alleged matters had been disclosed, nor that revocation would be an appropriate sanction for breaches of undertakings (contempt proceedings or penalties being the usual remedy). Given the risk of opportunistic and disproportionate litigation and the lack of real prospect of success, joinder was not desirable and the appeal was dismissed.

Appeal dismissed. The Court of Appeal held that while CPR 19.2(2) should be interpreted broadly and the court has power in an appropriate case to join a third party to restoration proceedings, joinder was not desirable here. The Welsh Ministers were not "directly affected" because restoration did not create a new asset or liability for them but only changed the identity of the potential claimant; moreover, they had no realistic prospect of persuading the court to revoke the Restoration Order or Variation Order and allowing joinder risked disproportionate opportunistic litigation.

Order of Registrar Barber joining the Welsh Ministers (2 March 2016); appeal to the High Court (Behrens J) [2016] EWHC 2640 (Ch) — Behrens J allowed the appeal and set aside the Registrar's joinder order; appeal to the Court of Appeal [2017] EWCA Civ 1768 (this judgment) — appeal dismissed.