Sarjanda Ltd (In Liquidation) v Aluminium Eco Solutions Ltd & Anor

An application to rescind a winding-up order must be made within the strict period prescribed by Insolvency (England and Wales) Rules 2016, and any extension is subject to the Denton criteria. The jurisdiction is exceptional and is intended for cases where the winding-up order can be shown quickly to have been inappropriate. It does not permit a prolonged period for investigating debts and paying them piecemeal from funds later supplied by shareholders. Third-party funding may support rescission where it promptly establishes solvency and permits continued trading, but it does not ordinarily justify rescission where the company was not trading, lacks its own funds and merely seeks to realise an asset. The court may consider the merits and all the circumstances when deciding whether to extend time, but must refuse an extension where there is no good reason for delay and rescission would not serve the jurisdiction’s purpose.

Sarjanda Ltd, acting together with a contributory, applied under rule 12.59 of the Insolvency (England and Wales) Rules 2016 to rescind a compulsory winding-up order made on 29 August 2018. The application was filed on 25 October 2020, more than two years after the order and after an earlier, also out-of-time, application had been dismissed.

The applicant relied on the subsequent payment of established debts and liquidation costs, and on proposed claims against professional advisers. The liquidator did not oppose the application. The issues were whether time should be extended and, if so, whether the circumstances justified rescission.

1. Application refused and dismissed. The application was made more than two years after the five-business-day limit in rule 12.59(3) of the Insolvency (England and Wales) Rules 2016. The court had power to extend time through CPR 3.1, incorporated by rule 12.1, but the application had to be considered under CPR 3.9 and the three-stage Denton criteria.
2. The breach was serious and significant. There was no good reason for the delay. The delay resulted from attempting to investigate and agree creditors’ claims and then paying them piecemeal, which was outside the purpose of the rescission jurisdiction. Extending time for that purpose would effectively create a winding-up equivalent of bankruptcy annulment, although the legislature had not provided one.
3. Rescission is an exceptional jurisdiction exercised with caution. It is generally necessary to show that the petitioning debt and liquidation costs have been or will be paid, that the company is solvent at least on a cash-flow basis, that the application is candid and complete, and that no investigation into the company’s affairs is required.
4. The present case differed materially from Re Diamond Hangar Ltd [2019] EWHC 224 (Ch). The company was not trading, did not propose to resume trading, had no funds of its own, and sought only to realise a cause of action. Funds voluntarily supplied by a shareholder did not establish the company’s solvency. The shareholders could pursue the cause of action through assignment or distribution after liquidation.
5. The fact that this was a second application, and that the shareholders had failed to establish payment of all debts at the first hearing, further weakened the case. Considering all the circumstances, there was no justification for extending time. The extension was refused and the application was dismissed as out of time.