Revenue and Customs v Rochdale Drinks Distributors Ltd: CA 13 Oct 2011

The revenue appealed against refusal of its petition for the winding up of the company for non-payment of a VAT assessment. The company said that the assessment was disputed. The revenue said that the company had been run for the purpose of submitting false VAT Input tax claims, and suppressing Output tax invoices.
Held: The appeal succeeded. ‘A well-settled rule of practice . . is that a debt that is wholly disputed on substantial grounds cannot ordinarily found the basis for the making of a winding up order. A petition based on a debt shown to be the subject of such a substantial dispute will ordinarily be dismissed . . It is not sufficient for the company merely to raise a cloud of objections. It has, in the old-fashioned phrase, to condescend to particulars by properly explaining the basis of the claimed dispute and showing that it is a substantial one. If, despite the company’s protestations, the alleged dispute can be seen on the papers to be no dispute at all, or to be no dispute as to part of the debt, the petition will ordinarily be allowed to proceed. If, however, the dispute is shown to be one whose resolution will require the sort of investigation that is normally within the province of a conventional trial, the settled practice is for the petition to be struck out or dismissed so that the parties can contest their differences before whichever other forum may be appropriate.’
‘ the real question before the judge on the ‘missing traders’ issue was whether RDD had shown by its evidence that, upon the hearing of the petition, it was likely to be able to show that in relation to all the alleged trades it claimed to have carried out it had a good arguable case that they were genuine. The judge did not, however, as I read his judgment, approach the case from that angle. In my view he should have done. Had he so approached it, I consider that he could only have concluded that RDD had not discharged that burden. ‘
Lewison LJ agreed but also considered the propriety of the actions of the Revenue in seeking the appointment of a provisional liquidator without notice of the application being first given to the company’s directors, saying: ‘the mere fact that a winding up order is likely to be made on a creditor’s petition is not enough on its own to justify the appointment of a provisional liquidator. Something more is needed. Although the phrase ‘dissipation of assets’ has crept into this branch of the law it is important not to fall into the trap of equating the criteria for the appointment of a provisional liquidator with the criteria for the grant of a freezing order. For one thing, a freezing order will not (at least in theory) prevent transactions that take place in the ordinary course of business, whereas if a provisional liquidator is appointed the business will usually grind to an instant halt. For another, the need to preserve books and records may be an important factor in deciding whether or not to appoint a provisional liquidator. This may be so where there is clear evidence of fraud; or even (as in this case) where there is almost irrefutable evidence of chaos.’
Rimer, Pill, Lewison LJJ
[2011] STI 2776, [2011] EWCA Civ 1116, [2011] BPIR 1604, [2012] STC 186
Bailii
Insolvency Act 1986 122 124
England and Wales
Citing:
CitedAmerican Cyanamid Co v Ethicon Ltd HL 5-Feb-1975
Interim Injunctions in Patents Cases
The plaintiffs brought proceedings for infringement of their patent. The proceedings were defended. The plaintiffs obtained an interim injunction to prevent the defendants infringing their patent, but they now appealed its discharge by the Court of . .
CitedRe Union Accident Insurance Co Ltd ChD 1972
A provisional liquidator cannot be appointed on a baseless petition. There are two conditions to be met. The first was that the petition must disclose a prima facie case, the second was that there were circumstances that require that a provisional . .
CitedIn re Highfield Commodities Ltd ChD 1985
The court’s discretion in appointing provisional liquidators is unfettered provided it is exercised in a ‘proper judicial manner’. Sir Robert Megarry V-C said: ‘I would respectfully express my complete agreement with the view taken by [the judge]. I . .
CitedRe a company (No 003102 of 1991), ex parte Nyckeln Finance Co Ltd ChD 1991
. .
CitedIn re Bayoil SA and In the Matter of Insolvency Act 1986 Seawind Tankers Corporation v Bayoil SA CA 12-Oct-1998
Although a company admitted a debt, it was nevertheless right to set aside a petition for winding up under that debt, where the company had an unquantified but greater counterclaim within the same proceedings, even if that claim could not presently . .
CitedStocznia Gdanska Sa v Latreefers Inc ComC 21-Dec-1998
In some cases the appointment of a provisional liquidator of an insolvent company may be justified because of his ability to investigate possible claims against directors for fraudulent or wrongful trading. . .
CitedNational Commercial Bank Jamaica Ltd v Olint Corp Ltd (Jamaica) PC 28-Apr-2009
Jamaica – The customer appealed against refusal of an order requiring its bank not to close the customer accounts after the customer had been accused of fraud. There was no evidence that the account was being used unlawfully.
Held: In the . .

Cited by:
CitedRevenue and Customs v SED Essex Ltd ChD 14-Jun-2013
Liquidator confirmed despite VAT challege
The Revenue sought the winding up of the company for non-payment of substantial arrears of VAT. The revenue had declined to allow VAT input claims. The company said that the petition was wrong since the debt was genuinely disputed.
Held: The . .

These lists may be incomplete.
Updated: 16 March 2021; Ref: scu.445450