Lomo Telecommunications Ltd v Revenue And Customs

A winding-up order may be made under section 123(1)(e) of the Insolvency Act 1986 where the court is satisfied that the company cannot pay its debts as they fall due. A statutory demand is not required where that ground is relied upon. Debts arising from returns filed by the company, and statutory debts assessed as due by HMRC, cannot generally be disputed in winding-up proceedings. Challenges to assessed tax liabilities belong in the First-tier Tribunal (Tax). An appeal based only on broad assertions that the company lacked an opportunity to present its case will fail unless a specific and material error is identified. Decisions whether to adjourn insolvency proceedings fall within the lower court’s discretion and will be reviewed only in wholly exceptional circumstances.

HMRC petitioned for the winding-up of Lomo Telecommunications Ltd. On 18 December 2017, Chief Registrar Briggs ordered Lomo’s winding-up under the Insolvency Act 1986, with the petition costs payable from the company’s assets.

Lomo appealed with permission granted by Nugee J. It advanced three grounds: that no statutory demand had been served; that it had not been given a proper opportunity to present its case; and that HMRC’s debt was disputed. Lomo did not appear at the appeal hearing. The court nevertheless considered the grounds on their merits.

1. Appeal dismissed. The absence of a statutory demand did not invalidate the winding-up proceedings. Section 123(1)(a) of the Insolvency Act 1986 is only one of the disjunctive grounds on which inability to pay debts may be established. HMRC relied on section 123(1)(e), under which the court may proceed where it is satisfied that the company cannot pay its debts as they fall due. The court applied the principle identified in Cornhill Insurance plc v Improvement Services Limited [1986] 1 WLR 114.
2. The first ground therefore failed. Although the debt had reduced through later regularisation, a substantial balance remained unpaid and the company remained unable to pay its debts as they fell due.
3. The second ground also failed. The matter had been heard on two occasions, and the Chief Registrar had discretion whether to grant a further adjournment. The decision fell well within that discretion. An appellate court would not revisit an adjournment decision save in wholly exceptional circumstances. A general assertion that a party had not presented its case fully was insufficient without identifying a specific and material error.
4. The alleged dispute of debt did not provide a valid ground of appeal. Amounts derived from Lomo’s own filed returns could not be disputed in the insolvency proceedings. Other statutory debts, assessed as due by HMRC, were susceptible to challenge in the First-tier Tribunal (Tax), rather than before the insolvency court. The court applied HMRC v Chamberlin [2011] EWCA Civ 271.
5. The outstanding sum remained well above £750 and justified the winding-up order. The appeal was dismissed.

• High Court (Chancery Division): On 23 July 2018, the appeal from the Chief Registrar’s winding-up order was dismissed.
• Chief Registrar: On 18 December 2017, Chief Registrar Briggs ordered Lomo Telecommunications Ltd to be wound up and directed that the petition costs be paid from its assets.