Yuzu Hair & Beauty Ltd v Selvathiraviam

A dissolved company, having ceased to exist, cannot itself apply for or continue a freezing order before restoration to the register. However, the court may grant a freezing order in proceedings brought by its director and shareholder to restore it, where the order preserves the company’s assets and makes the restoration application effective. The jurisdiction under section 37 of the Senior Courts Act 1981 is sufficiently broad to protect assets against a person who may owe obligations to the company, even though the applicant has no personal cause of action. Ancillary passport and departure restraints may be granted where necessary to secure compliance with disclosure obligations, but must last no longer than necessary.

Yuzu Hair & Beauty Limited had been dissolved after its accountant allegedly defrauded it of more than £300,000 and failed to prevent its removal from the register. Falk J had granted a without-notice freezing order. The company’s director and shareholder had applied to restore it under section 1029 of the Companies Act 2006.

The application sought continuation of the freezing order, or a fresh order, together with ancillary orders requiring information about a bank account, permitting execution of a document by a Master, and restricting the respondent’s departure from the jurisdiction. The central issues were whether relief could be granted before restoration, and whether the requested ancillary orders were justified.

1. Freezing order before restoration. The court declined to continue or make an order on the application of the dissolved company itself. Although restoration would retrospectively validate prior acts, restoration was not certain and the company did not presently exist as a legal person.
2. Alternative jurisdiction. A freezing order could instead be made in the restoration proceedings on the application of the director and shareholder. Section 37 of the Senior Courts Act 1981 was wide enough to preserve assets belonging to, or potentially recoverable for, the company so that the restoration proceedings were not rendered futile. The reasoning in HMRC v Eglinton [2007] BCC, 78 supported that conclusion. The jurisdiction was exceptional, but no alternative procedure, such as provisional liquidation, was available.
3. Execution by a Master. Because the respondent had failed to comply with the disclosure obligations in the freezing order, an order under section 39 of the Senior Courts Act 1981 could permit a Master to execute the required document if the respondent failed to do so within the specified time.
4. Passport and departure restraint. Applying the approach in Bayer AG v Winter [1986] 1 WLR 497, the court considered the respondent’s non-compliance, apparent concealment and dissipation of assets, the strength of the fraud evidence, the risk that departure would frustrate cross-examination and disclosure, and the evidence that he remained within the jurisdiction. The restraint was justified under section 37(1), but only for the period necessary to secure compliance with disclosure orders. The respondent could apply to discharge it.
5. The respondent was added as an applicant for the restoration proceedings, without deciding whether Falk J’s earlier order had been wrongly made. Costs were summarily assessed at £44,000 on the standard basis; indemnity costs were refused at that stage.