Court refuses to make winding-up order of its own initiative

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2 min read

A Trustee in Bankruptcy (TiB) invited the court, by way of application notice, to place Panelform Limited (Panelform), the respondent company, into compulsory liquidation.

The TiB had successfully secured declarations that Panelform had entered into a number of transactions with the Bankrupt for the purpose of putting assets beyond the reach of creditors (Section 423 order).  The TiB subsequently secured a freezing order in support of the execution of the Section 423 order.  Believing that Panelform would not be able to satisfy the Section 423 order, the TiB asked the court to exercise its own initiative and place Panelform into compulsory liquidation.

Considering the court’s jurisdiction to place a company into liquidation, notwithstanding that no petition had been presented, HHJ David Cooke considered that:

  1. This is an exceptional jurisdiction to be exercised cautiously, and not as a tactic in litigation.
  2. It was incongruous for the court to make an order of its own initiative when invited to by a party to litigation.  In circumstances where the TiB made the application to the court, an order could not be said to be incidental, but was rather the TiB trying to bypass the statutory mechanism for placing a company into liquidation.
  3. The TiB and Panelform were in hostile litigation; in these circumstances, it would be inappropriate to make the order sought.
  4. Panelform was not necessarily defunct.
  5. There was no agreement between all parties that Panelform would inevitably enter liquidation.
  6. Panelform’s directors opposed the outcome of the application, and to make the order would deprive them of the opportunity to appear on the hearing of a petition.

The TiB’s application was dismissed.

Richard Paul Rendle (Trustee in Bankruptcy of Peter Thomas Cartwright) v Panelform Ltd, [2020] EWHC 2810 (Ch)

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