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Court's discretion to grant time re established debt

Court's discretion to grant time re established debt

- Limited to considering whether the debt can be paid within a reasonable time

 

"[5]...The starting point, therefore, is that there is a debt due and owing of £57,563.83.

[6] That being so, I have been informed by Mr Brown that the company would be unable to pay that sum, or indeed any sum over £10,000, in less than a year. The position for this court, once a debt is established, is that its jurisdiction, if a petitioner asks for a winding-up order, is, in general terms, limited to considering whether the debt can be paid within a reasonable time. It is the normal approach that a time period of about a year for sums of the amounts we are talking about is never considered reasonable." (HMRC v. Nationwide Finance Ltd [2013] Lexis Citation 112, Registrar Jones)

- Limited to considering whether the debt can be paid within a reasonable time

Winding up whilst appeal is pending

 

Winding up petition for debt disputed in good faith on substantial grounds will be dismissed

"[36] The existing law is unsurprisingly not much in dispute between the parties. Both sides refer to a series of cases that endorse the long-established principle that there is a well-settled rule of practice that a winding-up petition based on a debt that is wholly disputed in good faith on substantial grounds will ordinarily be dismissed (see Mann v. Goldstein [1986] 1 WLR 1091 per Ungoed-Thomas J at pages 1098-9, Arena supra at paragraph 53, HMRC v. Rochdale Drinks Distributors Limited [2011] EWCA Civ 1116 at paragraphs 79-80 per Rimer LJ, and Re SED Essex Limited [2013] EWHC 1583 (Ch) at paragraph 4 per John Randall QC). The question of whether a winding-up order should be made or the petition should, in a particular case, be dismissed, is a matter for the discretion of the Companies court (see section 125(1) of the Insolvency Act 1986 and, for example, Lord Brightman in the Privy Council in Brinds Limited v. Offshore Oil N.L. [1986] 2 BCC 98,916 at page 98,921, and Lord Hoffmann in the Privy Council in Parmalat Capital Finance Limited v. Food Holdings Limited [2009] 1 BCLC 274 at paragraphs 9-11) ." (Changtel Solutions UK Ltd (formerly Enta Technologies Ltd) v HMRC [2015] EWCA Civ 29, Vos LJ - FTT had held that appeal was not “hopeless” in admitting a late appeal))

Companies court does not have to defer to FTT

"[71] For the reasons I have tried shortly to express, I think the judge was wrong to say that the Companies court must defer to the tax tribunal in a case of this kind. That does not mean that the tax tribunal will not normally be the appropriate forum to determine whether an appeal against a VAT assessment has a real prospect of success. Moreover, when the tax tribunal has reached a conclusion on such an issue, that decision is normally likely to be a compelling factor in the Companies court's exercise of discretion. That discretion is not, however, completely abrogated by the jurisdiction of the tax tribunal. It need not defer to the tax tribunal in every case, though it may often choose to do so.
[72] Here, the facts are quite exceptional, and in my judgment, the judge ought, after a full consideration, to have concluded that they showed that the debts represented by the dispatch assessments were not disputed by the company in good faith and on substantial grounds." (Changtel Solutions UK Ltd (formerly Enta Technologies Ltd) v HMRC [2015] EWCA Civ 29, Vos LJ)

Discrepancies in evidence making company's position unsustainable

"[57] To put the matter shortly, the discrepancies that HMRC has highlighted in relation to the supposed export transactions are simply too numerous and too clear to admit of any conclusion other than that the export did not take place as the company contends. There is, moreover, no real issue as to whether the company is implicated in the fraud, because it is the company that has put forward the evidence that, in my judgment, must be regarded as false. The company cannot say it does not know that the goods were not exported in the manner that it claims they were, because it has promulgated documents and evidence that can be shown to be simply unsustainable. In that situation, the principles enunciated in Teleos supra upon which the judge relied cannot avail the company.

...

[69] The judge described HMRC’s case as ‘prima facie formidable’. I agree. In my judgment, that should have led him to conclude that the dispatch assessments were not disputed in good faith on substantial grounds. Accordingly, he ought to have exercised his discretion to wind up the company" (Changtel Solutions UK Ltd (formerly Enta Technologies Ltd) v HMRC [2015] EWCA Civ 29, Vos LJ)

Winding up is not indirect way of winning appeal

"[40] It is true, as the judge said, that the adjudication on the correctness of a tax assessment has been entrusted by Parliament to a specialist tax tribunal. But that does not mean that the question that the Companies court has to decide is the same, or even substantially the same, as the one that faces the tax tribunal. The presentation of a petition to wind up a trader, which has appealed against a tax assessment, is not an indirect way of winning the appeal. The appeal will remain extant even if the trader is wound up. It is simply that there will be a process of collective execution in place that will allow the liquidator rather than the company's directors to decide whether to pursue the tax appeal. For that reason, the House of Lords' decision in Autologic is not applicable here." (Changtel Solutions UK Ltd (formerly Enta Technologies Ltd) v HMRC [2015] EWCA Civ 29, Vos LJ)

Winding up whilst appeal is pending
Winding up is not indirect way of winning appeal

Public interest winding up and tax avoidance

Companies set up to promote tax avoidance that abuses insolvency legislation

“PAG Management is an active and solvent business. That business involves the promotion of an NNDR mitigation scheme. Of itself the promotion of tax mitigation schemes is not an inherently objectionable activity. In the course of so doing it incidentally uses artificial leases having no commercial reality and containing some terms which are mere pretences; and on occasion having procured that its creature companies enter liquidation, it has delayed appointing new officeholders. These historic events would not of themselves be of sufficient weight to warrant a winding up. But PAG Management's business model involves a misuse of the insolvency legislation in the way I have described and the SoS has satisfied me that it is just and equitable to wind up the company that I ought to exercise the discretion conferred by 124A of the 1986 Act in that way: and I will so order.” (Secretary of State for BIS v. PAG management Services Ltd [2015] EWHC 2404 (Ch), §69 – the scheme relied on an exemption from business rates for companies in liquidation)

Corporate reconstructions involving liquidating companies

“Mr Chivers QC, who has great experience and high standing in this field, gave evidence from the Bar that many corporate reconstruction schemes involve the interposition of a company to receive assets and then to be wound up (perhaps for tax reasons or as a mechanism of distribution) and that it had never been suggested that this was improper; and that many schemes of very many sorts require directors to take steps which are wholly predetermined (in relation to which it was never contemplated that they would exercise independent judgment). Of such schemes I say nothing, save that if the liquidation is not genuinely a collection and distribution of assets then its propriety might need to be reconsidered. For me it is the use of the company in liquidation as an asset shelter and the inherent bias towards prolongation of the liquidation that is subversive of the true purpose and proper functioning of insolvency law. So I cannot accept Mr Chivers QCs submission that the operation of the scheme through the medium of insolvency is not commercially improper.” (Secretary of State for BIS v. PAG management Services Ltd [2015] EWHC 2404 (Ch), §67)
 

Public interest winding up and tax avoidance

Impeding a court appointed provisional liquidator (committal for contempt) 

“In the usual way the order appointing the provisional liquidator spelt out that Mr. Wilson had been appointed by the court as an officer of the court and that it was a contempt of court for any person to prevent or impede him in carrying out his duties. The order warned that if they did so they may be held to be in contempt of court and liable to be imprisoned, fined or have their assets seized. The order also contained a warning that anyone who did anything which helped or permitted a breach of the terms of the order would likewise be liable to be held in contempt of court.” (HMRC v. Munir [2015] EWHC 1366 (Ch), §2).

Placing money out of reach 

“In these proceedings HMRC contend that the first payment, the second payment and the third payment [from the company account to an overseas company’s account] were each payments made in contempt of court.” (HMRC v. Munir [2015] EWHC 1366 (Ch), §7 – the defendants admitted that they had knowingly breached the court order).

Sentence 

 

Six months imprisonment each in HMRC v. Munir [2015] EWHC 1366 (Ch).

Impeding a court appointed provisional liquidator (committal for contempt) 
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