Company Restoration and Joinder of Interveners

Where an application is made to the Court under section 1029 of the Companies Act 2006 for an order restoring a dissolved company to the Register of Companies, the applicant will be a party along with the Registrar of Companies as respondent. Sometimes there may be third parties who seek to be joined as a party to the application to restore, in order that they may file evidence and make submissions on the application (typically against restoration). This article will consider the parties to a section 1029 application to restore and when the Court will accede to an application by a third party to be joined as a party to a section 1029 application to restore.

What is and what is not a proper basis for joinder? Or to put it another way, what are the circumstances in which it is permissible and, where permissible, appropriate to join a third party to proceedings for restoration of a dissolved company to the Register of Companies. This issue of joinder has recently been considered by the Court of Appeal in Re Pablo Star Ltd  [2018] 1 W.L.R. 738 (‘Re Pablo Star’; also known as Welsh Ministers v Price), with Etherton MR giving the reasoned judgment.

Nomenclature

When such a third party is granted party status, they may be labelled an ‘intervener’. For the purposes of this article, a third party seeking such status will be labelled a ‘would-be intervener’[1] (or ‘applicant for joinder’). Given that there is a main application for restoration of the company, alongside the ancillary application for joinder, use of the label ‘applicant’ can cause confusion as to whether the person being referred to is the main application applicant or ancillary application applicant. Consequently, this article will attempt to avoid using the label 'applicant' where confusion might arise.

Application for Restoration of Company to Register of Companies

Before considering joinder, it might be helpful to briefly consider the nature of applications to restore under section 1029 of the Companies Act 2006.

There are two mechanisms for a company to be restored to the Register of Companies following its dissolution. They are: (i) Administrative Restoration under section 1024 of the Companies Act 2006; and (ii) Court Restoration under section 1029 of the Companies Act 2006. This article relates only to Court Restoration. Such section 1029 applications to restore companies to the Register of Companies are not uncommon.

Section 1029 (2)[2] limits those who may issue an application for a company restoration. Further, an applicant for restoration must have a sufficient interest in having the company revived. That interest however, does not have to be firmly established or highly likely to prevail. It is sufficient that it is not ‘merely shadowy’. Megarry J in Re Wood and Martin (Bricklaying Contractors) Ltd [1971] 1 WLR 293[3], at 297, said:

‘…it would be somewhat unreal to say that this applicant has no interest of a proprietary or pecuniary nature in resuscitating the company. The situation is unusual, but the possibility of a claim being made by the applicant and the possibility of a claim being made against him, when added together, seem to me to remove him from the category of person who cannot fairly be regarded as having any proprietary or pecuniary interest of this kind. It does not, I think, have to be shown that the interest is one which is firmly established or highly likely to prevail: provided it is not merely shadowy, I think it suffices for the purpose of section 352.’

This was affirmed in Stanhope Pension Trust v Registrar of Companies [1994] BCC 84 (‘Stanhope’), at 90.

The question on an application to restore is whether the Court considers it ‘just’ to restore the company. Section 1031 of the Companies Act 2006 is entitled ‘Decision on application for restoration by the court’ and reads:

‘(1) On an application under section 1029 the court may order the restoration of the company to the register–

(a) if the company was struck off the register under section 1000 or 1001 (power of registrar to strike off defunct companies) and the company was, at the time of the striking off, carrying on business or in operation;

(b) if the company was struck off the register under section 1003 (voluntary striking off) and any of the requirements of sections 1004 to 1009 was not complied with;

(c) if in any other case the court considers it just to do so.’

As Norris J in Barclays Bank v Registrar of Companies [2016] BCC 64 (‘Barclays Bank’) said, at paragraph 27:

‘The only question in each case is whether “the court considers it just” to restore the company; and central to that consideration are the concerns of those with an economic interest in restoration.’

Norris J went on, at paragraph 36, to adopt Robert Walker J’s words in Re Oakleague Ltd [1995] BCC 921, at 924H in relation to earlier legislation concerning these matters:

‘As often occurs in cases of this sort the restoration of the company to the register may do it some good or it may not. The attitude of the Companies Court is that provided the application for restoration falls within the general legislative purpose … the company will be restored, and whether the restoration does anyone any good or not is a matter to be decided by another tribunal in the future.’

In Re Blenheim Leisure (Restaurants) Ltd (No.1) [2000] BCC 554 (‘Blenheim’), Aldous LJ said, at 571[4]:

‘What is just must depend upon all the circumstances of the case. Such circumstances must include the nature of the application to remove Blenheim's name from the register, the reasons for the application to restore and I believe all the subsequent events that have happened, including intervening substantive rights that have arisen after dissolution. The weight to be given to any fact or matter will be decided by the judge having regard to all the circumstances of the case.’

Restoration might be sought for a myriad of reasons. Hoffman LJ in Stanhope said, in respect to the previous, now superseded, section 651 of the Companies Act 1985, at 87:

‘…ordinarily the purposes of s. 651 are either to enable the liquidator to distribute an overlooked asset or a creditor to make a claim which he has not previously made.’

Another reason might be the investigation of the dissolved company’s affairs, as founded the application to restore in Barclays Bank (see Barclays Bank paragraphs 12 and 15).

An insolvent company ought only to be restored if some mechanism is also established for eventual dissolution, after the purpose of restoration has been achieved (see Barclays Bank Plc, paragraph 39). Usually, the Court acceding to the application to restore an insolvent company will also have before it a petition to wind up the company on ‘just an equitable’ grounds under section 122(1)(g) of the Insolvency Act 1986 (possibly under section 122(1)(f) ‘…company unable to pay its debts’ also); leading to the ‘usual double-barrelled order’ if the application to restore and petition for a winding up order are both successful.

Registrar of Companies as Respondent to Application

On the application for restoration being issued, the Registrar of Companies is normally the sole respondent[5].

This has been the case for sometime. In Re Portrafram Ltd (1986) 2 B.C.C. 99160, Harman J considered a joinder application in 1986. As to the main action to restore the company to the Register of Companies, Harman J remarked, at 99161:

‘Such applications are usually determined in chambers and are usually conducted by the applicants on the one side and the Treasury Solicitor on behalf of the Registrar of Companies on the other side… The applications are regularly and frequently made and are habitually decided without the intervention of any extra person.’

Later, he said, at 99163-4:

‘…the matters which the court has to consider as to jurisdiction are matters which are regularly, habitually and capably dealt with by the Treasury Solicitor on behalf of the Registrar of Companies and which the court itself is keen to investigate…’

Ten years later, Hoffman LJ referred to these remarks without demur. He said in Stanhope, at 90:

‘As Harman J remarked in In re Portrafram Ltd (1986) 2 BCC 99, 160 such applications are usually to all intents and purposes ex parte. The registrar of companies, who appears by counsel instructed by the Treasury Solicitor, will assist the court on whether the requirements of the section have been satisfied but has no interest except in securing the registrar's costs.’

In Re Pablo Star, Judge Behrens said, at paragraph 49:

‘It is quite clear from the authorities that the right to be joined into restoration proceedings is an exception to the ordinary practice of the Companies Court.

Former Officer Holders to the Company

Where the company to be restored had been in liquidation immediately prior to dissolution, Practice Note (Companies Ct: Claims for an Order Restoring the Name of a Company to the Register) [2012] BCC 880 (Companies Court Practice Note 1 of 2012) ('Practice Note 2012') contains a requirement to give notice to the former liquidators of an application to restore.

Hoffman LJ said, in Stanhope, at 86 that ‘The registrar of companies and the former liquidator are normally the only respondents to an application under s.651.’ But, seemingly, former office holders of the company are not usually respondents to the application to restore at the outset, though they might later become parties should the facts warrant it[6]. It is noted that the former administrator in Barclays Bank was not informed[7] of the section 1029 application. (see UPDATE, at the end of this article)

Where the Registrar of Companies does not Oppose Restoration

The Registrar of Companies has a limited role within section 1029 applications. Where the Registrar of Companies does not oppose restoration application, the Treasury Solicitor on behalf of the Registrar of Companies, will write to the applicant for restoration outlining the terms on which the Registrar of Companies will not oppose the restoration application. Such terms can include the applicant giving the Court undertakings as to the company’s post restoration use[8]. Practice Note (Ch D: Companies Ct: Claims for an Order Restoring the Name of a Company to the Register) [2012] BCC 880 sets down some practice matters for section 1029 applications in respect to timetabling and filing a consent order for approval by the Court, with ancillary documents[9], following agreement with the Registrar of Companies[10].

It is necessary to return to this limited role the Registrar of Companies occupies, later in this article, as the lack of any extended role for the Registrar of Companies has led the Court to recognise a wider basis for joinder by third parties.

Joinder Application by Would-be Intervener

Third parties seeking to be joined as a party to the section 1029 application for restoration proceedings must apply by application notice[11]. Such application for joinder by the would-be intervener is made pursuant to CPR 19.2 and 19.4(2)(b)[12]. CPR r.19.2 (2) reads as follows:

‘(2) The court may order a person to be added as a new party if—

(a) it is desirable to add the new party so that the court can resolve all the matters in dispute in the proceedings; or

(b) there is an issue involving the new party and an existing party which is connected to the matters in dispute in the proceedings, and it is desirable to add the new party so that the court can resolve that issue.’

As Etherton MR said in Re Pablo Star, paragraphs 47 and 48:

‘CPR 19.2 confers a discretion on the court to join a party if the conditions in 19.2(2)(a) or (b) are satisfied.

The conditions in CPR 19.2(2)(a) are that (1) the new party can assist the court to resolve all the matters in dispute in the proceedings, and (2) it is desirable to add the new party to achieve that end.’

Wide interpretation of Requirement for Proceedings to contain ‘matters in dispute’

CPR r.19.2(2)(a) refers to that ‘…matters in dispute…’, a phrase that required interpretation. Contrary to what, on first glance, this phrase might be thought to mean, even if there is no dispute between the existing parties to the application to restore, this is no impediment to a would-be intervener being joined to the application to restore. This was the situation in Re Pablo Star; there was no live dispute between the existing parties (Registrar of Companies had consented to restoration; indeed the joinder application was made after the company has been restored); the would-be intervener Welsh Ministers sought to be joined notwithstanding. Etherton MR said in Re Pablo Star, paragraphs 50 and 51:

‘On its literal wording CPR 19.2(2)(a) is directed to a situation where, prior to the joinder of the new party, there already exists a dispute which is the subject of the proceedings. In the present case, aside from the issues which the Welsh Ministers wish to raise if they are joined, there is not and has never been, strictly speaking, any dispute. The proceedings were for the restoration of Pablo Star to the register of companies and the Registrar of Companies consented to the restoration. There is no suggestion that, even if the Welsh Ministers are not joined, the only other party to the proceedings, namely the Registrar of Companies, would wish to argue that some sanction should apply to Mr Price because the court was misled on the making of the Restoration Order or on the making of the Variation Order or because Mr Price was in breach of undertakings to the court.

The provisions of CPR 19.2(2) ought, however, to be given a wide interpretation. The words "in dispute" ought to be read as "in issue". That is consistent with authority that the court's powers to add a party under CPR 19.2 can exist after judgment even though, on a literal approach, there is no longer a matter in dispute: Dunwoody Sports Marketing v Prescott [2007] EWCA Civ 461 at [23]; [2007] 1 WLR 2343. It is also consistent with cases such as Stanhope and Blenheim, in which the court permitted third parties to be joined to an application for restoration of a company to the register of companies and, for all practical purposes, it was only the intervention of the third parties which put in dispute whether or not the company should be restored.’

The support that Etherton MR drew from Blenheim, included the proposition from Tuckey LJ, at 574G, that the provisions of what are now CPR r.19.2(2) ‘are drawn in wide general terms to ensure that parties whose rights may be affected by a particular decision have a right to be heard.’

Judicial Reticence and Caution in Granting Joinder

The Courts exhibit reticence and caution when considering acceding to applications for joinder to restoration proceedings. Etherton MR in Re Pablo Star summarized the basis for this, at paragraph 78:

‘…the jurisdiction to add third parties to company restoration proceedings is capable of providing an opportunity for all manner of opportunistic applications by persons who consider that they would be or might be adversely affected if the company was restored, including third parties against whom the company would have a cause of action. Such applications are capable of giving rise to huge costs, delay and the considerable deployment of court and judicial resources.’

Proper Basis for Joinder

In light of the Court’s reticence and caution, the Court will be astute to identify the alleged basis upon which the would-be intervener ought to be joined.[13].

Central to the analysis are two guiding objectives:

1 - the policy objective of enabling parties to be heard if their rights may be affected by a decision in the case; and

2 - the Overriding Objective in CPR Part 1.

Etherton MR referred to these as ‘lodestars’ in Re Pablo Star, at paragraph 60:

‘In considering whether or not it is desirable to add a new party pursuant to CPR 19.2(2) two lodestars are the policy objective of enabling parties to be heard if their rights may be affected by a decision in the case and the Overriding Objective in CPR Part 1.’

The would-be intervener must have an identifiable right that may be affected by the decision on restoration. This is central to the analysis. A distinction is drawn between: (i) a would-be intervener with a right that may be indirectly affected, and (ii) a would-be intervener with a right that may be directly affected. Etherton MR in Re Pablo Star said, at paragraph 60 to 62:

There are important practical considerations for strictly limiting the circumstances in which third parties are joined to applications to restore a company to the register, and they apply equally to applications to set aside an order for restoration. There may be many third parties who perceive that their interests may be indirectly affected by restoration and who may wish to advance all manner of reasons for seeking to prevent or reverse an order for restoration rather than wait to face and, where appropriate, resist actions of the company against them or others which the company perceives to be in its best interests. That is particularly true, in a case like the present, when it is sought to restore a company to the register of companies in order to resurrect an asset in the form of a cause of action against third parties.

In such a case, it is well established that the court will not allow the intervention in proceedings for restoration by a third party who merely wishes to argue that the proceedings which the revived company proposes to bring against the third party have no prospect of success: Stanhope [1994] BCC 84 at 90D.

By contrast, the court will allow intervention by a third party whose interests will be directly affected by the restoration and who would otherwise have no opportunity to be heard on the issue of whether, in the light of that direct effect, restoration is just: Blenheim at 574B.’ [Author’s bold]

It is the would-be intervener that must hold a right affected (‘…their right…’). A would-be intervener merely wanting to point out that the applicant’s alleged claim against the company to be restored, is in fact, meritless, does not involve the would-be intervener’s own right being directly affected. The making of the restoration order does not determine whether (as the case may be) the applicant has a meritorious claim against the company or the company has a meritorious claim against a third party.

Etherton MR’s comments on joinder echo those of Hoffman LJ in the earlier case of Stanhope. On joinder, Hoffman LJ said, at 90:

‘…a third party who merely wants to say that the applicant has no claim against the company or that the proceedings which the revived company proposes to bring against him have no prospect of success should not be entitled to intervene in the application.

There are however some cases in which an order will directly affect the rights of a third party, irrespective of whether the applicant has any claim against the company or the company has any claim against the third party.’

The majority in Blenheim quoted this with approval, at 572[14] In Re Jayham Ltd [1996] BCC 224, Judge Maddocks sitting as a High Court Judge, referred to this as the ‘two categories of case’.

Aldous LJ in Blenheim said, at 573-574, after referring to the ‘just’ provision:

‘That gives to the court a wide discretion and enables the court to take into account the rights of third parties that may be directly affected. In my view it is desirable that the appellants be added so that the court can be fully informed of their rights and take into account before deciding whether it is just for restoration to be ordered….it is desirable, if justice is to be done and seen to be done… To conclude to the contrary would mean that rights directly affecting the appellants would be decided without their being able to be heard upon the issue of whether restoration was just. That in my judgment is not desirable. I do not envisage…that such a conclusion will result in a large number of proceedings for restoration being turned into major litigation….intervention has taken place in the past and I envisage it will in the future in limited circumstances where the decision would or might directly affect rights or obligations.’

Identifying whether a would-be intervener has a right that may be directly affected, or merely a right that may be indirectly affected, involves considering what the right is, and how that right will be affected by the outcomes possible on determination of the restoration application. Will the would-be intervener be in a worse position after restoration, than he was before the dissolution. For instance, on the one hand, will restoration, as Etherton MR said in Re Pablo Star, paragraph 63:

‘…bring into existence a new asset or a new liability …’

Or, on the other hand, will restoration have:

‘…merely changed the identity of the person who could enforce [the right]’

In the former (‘…bring into existence a new asset or a new liability …’), a direct right is affected, and so joinder likely to be granted. In the latter (‘…merely changed the identity of the person who could enforce [the right]’), no right is affected per se - the right itself remains the same - merely the identify of the holder of the right against the would-be intervener changes – the right is not directly affected, and so joinder unlikely to be granted.

In Blenheim, Tuckey LJ, in the majority, said (at 575A):

‘[The court] could I think quite properly only allow intervention in cases where the order for restoration itself would or might directly affect the rights of the intervener. This is such a case. In most cases restoration does not affect rights or obligations. For example a debtor whose creditor is struck off is not directly affected by any decision to restore since the debt exists both before and after restoration. All that changes is the identity of the creditor.’

Building on the illustration here of what ‘all that changes is the identity of the creditor’ means in practice and keeping with the debtor/creditor relationship example, the moment before the company (creditor) is dissolved, it is the holder of the right to be paid (it holds the benefit of the ‘thing in action’). At the moment of dissolution, that right to be paid transfers up to the Crown (it transfers to the Crown by the process of bona vacantia), where it will remain vested in the Crown. Given the nature of the Crown, it is very unlikely to be used, but that is beside the point, it will continue to exist and be vested in the Crown. If the company is restored, that right to be paid re-transfers (re-vests) back into the company, who will again be a creditor, able to use that right to be paid in the normal way. The thing in action, the right to be paid, has remained constant. What changed at the moment of dissolution, and again at the moment an order for restoration was made, was not the right itself, but who held that right. The thing in action remains unaffected by the transfer (vesting) and re-transfer (re-vesting) processes. The debtor’s rights are unaffected throughout the transfer and re-transfer; changes in the likelihood that the debtor will be sued on the right, because of the identity and nature of the holder of the right to be paid, is not something the law considers as directly affecting the debtor’s end of the right (obligor end).

Re Pablo Star

The facts of Re Pablo Star were complicated, but essentially a respondent owned two companies (Pablo Star Limited (‘Pablo Star’) and Pablo Star Media Limited (‘Media’)). The respondent claimed that Pablo Star owned copyright in a photograph. After Pablo Star was struck off the Register of Companies, the photograph was published by others, including on a website for which Welsh Ministers were responsible. Pablo Star was restored to the register in order to pursue breach of copyright claims against would-be defendants, including Welsh Ministers. A secondary issue existed over an assignment from Pablo Star to Media, subject to reservation by Pablo Star of a right to sue (so covering claiming against the Welsh Ministers for its alleged infringement). On those facts, Welsh Ministers did not have interests directly affected by restoration. Etherton MR said, at paragraph 63:

‘On the assumption that Pablo Star owned the copyright in the Photograph before it was dissolved and was entitled to sue for any infringement of that copyright, third-party infringers, such as the Welsh Ministers are alleged to be, are in no worse position after restoration than before. The fact that the Restoration Order retrospectively validated the assignment to Media (under CA 2006 s. 1032) does not affect this analysis. It merely had the consequence that, instead of being exposed to proceedings by Pablo Star, the Welsh Ministers might (always subject to the reservation to Pablo of its rights in the assignment) be exposed to proceedings by Media. It did not bring into existence a new asset or a new liability but merely changed the identity of the person who could enforce the copyright.’

By contrast, Etherton MR said, at paragraph 63, the third party would-be intervener’s interests were directly affected in Re Servers of the Blind League [1960] 1 WLR 564 (‘Servers of Blind League’), Stanhope and Blenheim[15].

Servers of the Blind League

Though Servers of the Blind League did not involve an application for joinder (the other residual beneficiaries did not apply to be joined), the case is illustrative of when a third party’s interest would be directly affected by the decision on restoration. Servers of the Blind League involved a charitable company that had gone into voluntary liquidation. Post dissolution of the company, a lady died, bequeathing to the company a quarter of her residuary estate. A consequence of the company having ceased to exist was that the gift to the company lapsed, what would have gone to the company accrued to the other residuary beneficiaries under the will – consequentially, the quantum, in absolute terms, for each of the other residuary beneficiaries increased because the total residual was shared amongst fewer natural/legal persons. The liquidator applied for an order declaring the dissolution void under the now superseded Companies Act 1948 section 352[16] (as was then the equivalent to an application to restore the company) in order retrospectively to validate the legacy. In its brief judgment, the High Court said, at 565:

‘The effect of this order, if made, would be that the dissolution would be void ab initio, with the consequence that the company must be regarded as having been in existence at the date of the death of the testatrix; and, accordingly, the gift to it of a residuary share would have been effective. Equally, the order would now divest the interest which the next-of-kin took on the date of death, and with which they were in a position to deal from that date.’

The High Court refused the order on the ground (stated at 565) that the order would ‘dispossess other persons who obtained a vested interest in the asset under a title not derived from the company.’ Had the affected residuary beneficiaries applied to be joined, to resist the application for a declaration that the dissolution was void, they would have satisfied this aspect of the joinder test. They stood to loose a slice of their legacy if the application to declare dissolution of the company was successful – the determination of the application (equivalent to restoration) would have a direct affect on their property rights.

Stanhope

In Stanhope, an application was made for a declaration that the dissolution of a company Forte’s (Manufacturing) Ltd (‘Forte’) was void (under section 651[17] of the Companies Act 1985). The dissolved company Forte had, prior to dissolution, been granted a demise of premises. That premises had been assigned first to a company called Post Inns Ltd (‘Post’) and then assigned on to Forte Properties Ltd (‘Properties’) before being assigned to BCCI. BCCI then went insolvent. It was the landlord of the premises, who applied for a declaration that its original tenant’s dissolution was void. Pausing there. Typically there would be little point in reviving a company to enable a new claim against it, since all its assets will have been distributed pre-dissolution[18]. However, the landlord identified Post as a solvent company and claimed that:

‘…in this case its claim for rent will bring into existence a new asset, namely, Forte's right of indemnity against Post under the covenant implied in the 1964 assignment by s. 24(1)(b) of the Land Registration Act 1925.’ (at 86)

The landlord applicant argued that Forte’s liquidator would be able to recover under the indemnity against Post. Forte’s indemnity from Post would be for the full amount of rent claimed by the landlord (even though the sum actually received by the landlord might be only a small dividend - see Re Perkins [1898] 2 Ch 182). Though, on the facts, it was said that the landlord creditor was likely to get substantially the whole payment[19].

Post and Properties[20], the subsequent assignees to Forte, applied to be joined to the application for a declaration that the dissolution was void, in order to oppose the restoration order being made.

On the application for restoration in Stanhope, the Court of Appeal allowed the appeal against the judge’s decision that he ought not, as a matter of principle, make an order under section 651 (see Stanhope, at 89), exercised the discretion and made the restoration order, as the landlord applicant’s sufficient interest in having the company revived was more than ‘merely shadowy’. This left the ‘now academic question of whether the judge should have allowed Post and Properties to be joined in the proceedings.’[21] (at 90)

In essence, Post and Properties’ argument was that the determination did directly affect their rights - that upon dissolution of Forte, their liability under the right of indemnity was irrevocably discharged. Although Hoffman LJ doubted the merits of Post and Properties argument, ‘…Post and Properties were entitled to be joined in order to argue it.’ (at 90).

Blenheim

In Blenheim, the Court of Appeal allowed an appeal brought by would-be interveners, against the 1^st instance judge’s refusal to join them as a party to the restoration application. The would-be interveners were mesne landlords to Blenheim as subtenant. Blenheim had contended that by reason of s. 24 of the Landlord and Tenant Act 1954 its tenancy continued notwithstanding the original term expiring by effluxion of time. Blenheim accepted that for such a tenancy to persist the tenant must be and continue to be in business occupation of the premises. The would-be interveners then discovered that Blenheim had been struck off and dissolved, and realised that an effect of the dissolution of Blenheim was that the assets of Blenheim had passed to the Crown as bona vacantia. With that in mind, the would-be interveners served notices under s. 24(3) of the 1954 Act on the Treasury Solicitor as representative of the Crown. As the Crown was not in occupation of the premises, the effect of such notices was to terminate any tenancy that existed on expiry of the notice period.

In contrast, it was assumed that if Blenheim was restored to the register, and deemed to have continued to have existed throughout, the tenancy would be deemed never to have been vested in the Crown, and so consequentially, the s. 24(3) notices would have no effect. On such facts, the would-be interveners mesne landlords argued that they had a ‘proper interest’ (569) in being joined as an parties to the application to restore Blenheim to the Register of Companies, because ‘…the decision whether or not to restore Blenheim's name to the register would be determinative of whether or not there was a continuing tenancy. Thus they would be directly affected by the decision of the court on the application.’ (569)

The applicant did not dispute that the would-be interveners’ substantive rights would be directly affected by the restoration of Blenheim (at 571). Aldous LJ said, at 571:

‘That being so, it would seem to be desirable that the party affected should have an opportunity to be heard before a decision was taken. [Counsel for the Applicant] did not dispute that such was as a general proposition correct…’

The Court of Appeal held that joinder should be granted[22].

Jayham and H Clarkson

Though not referred to by Etherton MR, two further cases are:

(1) Re Jayham Ltd [1996] BCC 224, wherein, a would-be intervener’s application for joinder was successful as, the outcome of the application for restoration would, if successful, have the effect of depriving the would-be intervener of his main defence to a separate but linked claim against him.

(2) Re H Clarkson (Overseas) Ltd (1987) 3 BCC 606, wherein, a creditor applied to restore a company to the register, and a (former) member of the dissolved company - the would-be intervener, applied for joinder to the restoration application. The member's application was refused, after Hoffmann J stated, at 607:

‘The difficulty which faces [counsel for the would-be intervener] in this case is that it is in my view impossible to suggest any way in which the rights of a fully paid shareholder could be affected by the restoration to the register of a company in which he used to be a member…’ and 'He does not appear to me to have any locus standi to make a contribution to the debate before the registrar as to whether it would be just to restore the company or not.'

No significance attaches to when Would-be Intervener’s directly affected right arose

It matters not when the directly affected right relied upon by the would-be intervener arose, whether before or after the company was dissolved. Aldous LJ in Blenheim, dismissed an argument based on the timing of the right, at 573[24]:

‘I can see no reason why it should matter that the right directly affected arose post-striking off.’

Additional Basis for Joinder

Establishing a directly affected right is not the only basis for joinder. In appropriate cases, the Court can properly grant party status to a would-be intervener in order to enable that would-be intervener to bring before the court a complaint that the court was misled when making the restoration order or that there has been a breach of undertakings given to the court when the order was made. Etherton MR said, that in such circumstances, at paragraph 77:

I consider that the court does have power under CPR 19.2(2) to join a third party to restoration proceedings for such a purpose in an appropriate case.’

On this point, the Court of Appeal in Re Pablo Star disagreed with Judge Behrens, sitting as a High Court Judge, who heard the first appeal from the 1^st instance decision of Registrar Barber. Judge Behrens had rejected Registrar Barber’s other ground for joining Welsh Ministers – so that the Court could be assisted as to whether the Court had been seriously misled by the applicant for restoration.

In Re Pablo Star [2017] 1 WLR 299, Judge Behrens said of Registrar Barber’s reasoning, at paragraph 47 to 49 (‘WM’ is short for ‘Welsh Ministers’):

She justified the joinder on two grounds which are contained in paras 17–20 of her judgment:

“17. Firstly, they have brought to the attention of the court what appears be material which shows, at the very least, that the court may have been seriously misled, not only in the course of granting the original order for restoration but also in the course of allowing the discharge of the original undertakings and their replacement with further undertakings.

18. Those matters, it seems to me, do require fuller investigation and the court will be greatly assisted by the evidence, analysis and submissions provided by or on behalf of [WM] in these respects.”

           …

In my view neither of those grounds justify the decision of Registrar Barber. They do not directly affect WM's rights in the sense explained by the authorities.

I accept that joinder of WM may assist the court in determining whether the court was misled. I do not, however accept that a desire by a third party to assist the court in this way is a proper basis for joinder. It could give rise to a multitude of claims from anyone with a grudge against or who wanted to complain about the company.’

Etherton MR summarized this, at paragraph 71[25]:

‘First, he said it could give rise to a multitude of claims from anyone with a grudge against or who might want to complain about the company. Secondly, he said that Parliament has entrusted the policing of restoration applications to the Registrar of Companies, and so it is for the Registrar, and no one else, to raise with the court issues of breach of an undertaking or misleading witness statements.’

Etherton MR disagreed with Judge Behrens. Etherton MR’s disagreement with Judge Behrens sprang from Etherton MR’s disagreement with Judge Behrens’s characterization of the role and involvement of the Registrar of Companies.

It is noteworthy that, on this point, the Registrar of Companies, represented by counsel in the Court of Appeal, argued that Judge Behrens has mischaracterized the Registrar of Companies’ role and involvement, and was wrong to express the view that it is for the Registrar alone to raise such issues with the court. Etherton MR said he agreed with the Registrar of Companies' submissions. Etherton MR said, at paragraphs 73 to 77:

‘No statutory provision has been identified to support the Judge's proposition. Part 35 of CA 2006 sets out the functions of the Registrar of Companies. Other than the requirement to keep the register of companies, no role in respect of restoration applications, including their policing, is assigned by that Part to the Registrar. Part 31 of CA 2006 addresses dissolution and restoration of a company to the register. It does not confer any role on the Registrar in respect of applications to the court under section 1029 for restoration, other than administrative roles such as the requirement under section 1031(3) to publish notice of the restoration.

As a matter of practice the Registrar of Companies is always made a respondent to restoration applications: see Practice Note (Companies Court: Claims for an Order Restoring the Name of a Company to the Register)  [2012] BCC 880. The Registrar assists the court as to whether all relevant papers have been served and the requirements of CA 2006 s.1029 are satisfied. The Registrar will suggest to potential applicants for restoration suitable undertakings to be given to the court. The Registrar is assisted by an administrative team. In the vast majority of cases, applications for restoration are dealt with by the court on the papers.

Once jurisdiction for an order for restoration is established, the Registrar does not under current practice go on to consider, let alone address the court on, the issue of the suitability of restoration in any particular case. Nor does the Registrar monitor compliance with undertakings or refer any breach of undertakings to the court. [Counsel for the Registrar of Companies] has emphasised that the Registrar does not have the in-house legal and other expertise and resources to investigate and, if appropriate, to pursue complaints such as those in the present case.

The Registrar of Companies, therefore, while adopting a neutral position as to the outcome of this appeal, would in principle be in favour, in an appropriate case, of joinder to enable a third party to bring before the court a complaint that the court was misled when making the restoration order or that there has been a breach of undertakings given to the court when the order was made.

I consider that the court does have power under CPR 19.2(2) to join a third party to restoration proceedings for such a purpose in an appropriate case.’

And at paragraph 91 of Re Pablo Star, Etherton MR said:

‘As I have made clear, in an appropriate case, where it is desirable for the purposes of CPR 19.2(2) and consistent with the Overriding Objective, there is jurisdiction to permit a third party to be joined to bring such matters before the court.’

General Duty of Full and Frank Disclosure on Applicants

A greater appreciation of the Registrar of Companies’ more limited role and involvement in Court proceedings, results in more reliance being placed on the applicant fulfilling his duty of full and frank disclosure to the Court of all material facts. Etherton MR made this clear when he said, in Re Pablo Star, at paragraph 91:

‘…nothing in this judgment should detract from the importance of full and frank disclosure to the court of all material facts on applications for restoration of a company to the register and any subsequent variations to the restoration order where, as here, they are effectively ex parte applications in view of the limited involvement of the Registrar of Companies…’

Appealing a Decision on Joinder

The decision whether to accede or refuse the would-be intervener’s application to be joined as a party to the application to restore the company to the Register, is a case management decision. An Appeal Court will not usually interfere with a lower court’s case management decision, unless the wrong principles have been applied. In Re Pablo Star [2017] 1 WLR 299, Judge Behrens said, at paragraph 43[26]:

‘I accept, of course, that an appellate court will not usually interfere with a case management decision of a lower court. I also accept that the decision to permit the joinder of [Welsh Ministers] was a case management decision of Registrar Barber. However, where, as here, there are principles established by the Court of Appeal as to when to allow joinder in restoration proceedings, an appellate court is bound to interfere if the decision of the lower court is not in accordance with those principles.’

Where Restoration Order made

The effect of the order is that the company is deemed to have continued in existence as if it had not been dissolved: s.1032(1) of the Companies Act 2006.

Subsequently, restoration order can be the subject of an application to set it aside, or vary it, by a non-party. CPR r.40.9, entitled 'Who may apply to set aside or vary a judgment or order', sets out that a non-party who wishes to apply for an order, setting aside or varying the restoration order, must show that they were 'directly affected' by order (i.e. the restoration order). Rule 40.9 reads:

'A person who is not a party but who is directly affected by a judgment or order may apply to have the judgment or order set aside or varied.'

Conclusion

Where the Court has before it an application for an order to restore a dissolved company to the Register of Companies, and an application by a would-be intervener for an order granting the would-be intervener party status (joinder) in the restoration proceedings, the Court has a discretion under CPR 19.2 to join a party if the conditions in 19.2(2)(a) or (b) are satisfied. The conditions in CPR 19.2(2)(a) are that (1) the new party can assist the court so that the court can resolve all the matters in dispute in the proceedings; and (2) it is desirable to add the new party to achieve that end. The Court will be guided, in determining the joinder application, by two lodestars: (a) the policy objective of enabling parties to be heard if their rights may be affected by a decision in the case; and (b) the Overriding Objective in CPR Part 1.

Presently, two areas have been identified where joinder is likely to be granted: (1) where the would-be intervener holds a right which will be directly (not merely indirectly) affected by the determination of the restoration application; and (2) where the would-be intervener would ‘…bring before the court a complaint that the court was misled when making the restoration order or that there has been a breach of undertakings given to the court when the order was made.’

UPDATE: See now the case of Fakhry v Pagden [2020] EWCA Civ 1207; [2021] BCC 46 ('Fakhry'), Court of Appeal (Floyd LJ; David Richards LJ; Newey LJ), wherein David Richards LJ gave the only reasoned judgment (to which Floyd LJ and Newey LJ simply agreed), where the Court had before it an application for an order, setting aside or varying an existing restoration order. While many of the points made in Fakhry relate to this scenario, David Richards LJ does give some more points:

(1) Where a restoration order has been made, for a non-party (the would-be intervener) to have standing (sufficient interest) to make an application to court, for an order, setting aside or varying that restoration order, the would-be intervener must satisfy the test laid down in CPR r.40.9, entitled 'Who may apply to set aside or vary a judgment or order', namely, the would-be intervener must be 'directly affected' by the restoration order.

(2) a member of a dissolved/now restored company, was/is 'directly affected' by the restoration order that restored the company. That member/would-be internener has standing to bring a r.40.9 application, for an order, setting aside or varying the restoration order.

(3) Indeed, David Richards LJ went further, holding that a member of a company, has standing in relation to any stage of restoration process. That is, the member has standing to make an application: (a) for a restoration order; (b) for joinder to an existing application for a restoration order (and be joined); and (c) under CPR r.40.9, for an order, setting aside/varying a restoration order.

For (a) above, see section 1029(2(h)) of the Insolvency Act 1986 and Fakhry; for (b) and (c) above, David Richards LJ in Fakhry said, at paragraph 46:

'If a restoration order is made, it will directly affect all the members. The company of which they were members will be revived and, if they were members at the date of dissolution, their status as such will also be revived. They will become again the owners of an asset, their shares in the company. Although there is no requirement for former members to be given notice of a restoration application, it is frankly impossible to see why members should not have standing to be heard on it. They may indeed have many legitimate reasons to support or to oppose restoration. For the same reasons, it is clear that they are “directly affected” by a restoration order for the purposes of CPR r.40.9 and so have standing to apply to the court to vary or set aside a restoration order.'

In point of fact, the restoration applicants in Fakhry were willing to concede some of the point. David Richards LJ said, at paragraph 47:

'On reflection, [counsel for the restoration applicants] accepted that members have standing to appear on a restoration application and to apply under CPR r.40.9 to vary or set aside a restoration order, provided that their grounds for doing so are linked to their positions as members.' (see also, paragraph 56 of Fakhry).[27]

(4) Where the company to be restored, was: (a) in members voluntary liquidation ('MVL'[28]) immediately prior to dissolution; and (b) the restoration application 'should' (Practice Note, paragraph 6) (unless the Third Parties (Rights Against Insurers) Act 1930 is relied on for the purposes of the proposed claim) be accompanied by a s.108 of the Insolvency Act 1986 application (s.108 application). In relation to such a s.108 application, the member also has standing in relation to all s.108 stages: (i) making the s.108 application; (ii) joinder/opposing a s.108 application, and (iii) making a CPR r.40.9 application for an order, setting aside/varying a s.108 application order. David Richards LJ said, at paragraph 48:

'As regards an application to appoint a liquidator, s.108 of the Act does not even specify who may make the application. It is left to the court to determine whether the applicant has a sufficient interest to do so. In a members’ voluntary liquidation, members clearly have sufficient interest by virtue of their membership. Equally, they also have sufficient interest to oppose an appointment or to set aside an order making an appointment under CPR r.40.9. A member might, on any view, have legitimate reasons for opposing the appointment of a particular liquidator.'

(5) Speaking of would-be interveners more generally, in Fakhry, David Richards LJ, at paragraph 20, referred to the Judge below basing his decision upon:

'...the well-established principle, as explained by Sir Terence Etherton MR in Welsh Ministers v Price at [61], that the court will not permit interventions in a restoration application by a third party who merely wishes to argue that the proceedings to be brought by the company, if restored, against the third party have no prospect of success.'

(6) Returning to the scenario where the company to be restored was, immediately prior to dissolution, in liquidation:

(a) the restoration application should be accompanied by a s.108 application (unless the Third Parties (Rights Against Insurers) Act 1930 is relied on for the purposes of the proposed claim), with the former liquidator as a respondent; the s.108 application seeking an order from the Court, appointing a liquidator to the helm (so to speak) of the restored company, accompanied by a letter from the proposed liquidator, consenting to his/her appointment as liquidator (and, if the proposed liquidator is not the former liquidator, an explaination/evidence as to why this is). Paragraph 6 of the Practice Note reads:

‘Where the company was in liquidation at the date of dissolution and the liquidator has vacated office, unless the Third Parties (Rights Against Insurers) Act 1930 is relied on for the purposes of the proposed claim, the claim for restoration should include an application for the appointment of a liquidator pursuant to s.108 of the Insolvency Act 1986  and a letter from the proposed liquidator consenting to act. If the liquidator proposed is different from the liquidator who vacated office, evidence is required to explain why. The consent of the registrar of companies to the proposed appointment should not be sought.’

(b) as will be apparent, the former liquidator is not automatically (somehow) re-appointed as the liquidator to the restored company upon restoration. Assuming the liquidation ran its course, the former liquidator will have automatically ceased to be the liquidator under s.171(6) of the Insolvency Act 1986 (likely 3 months before dissolution). The appointment of a different liquidator (i.e. not the former liquidator) upon the company being restored, does not, strictly speaking, involve the removal of the former liquidator (but see paragraph 61 of Fakhry). As David Richards LJ said, in Fakhry, at paragraph 50, after noting s.171(6)'s effect (and seemingly agreeing with counsel for the restoration order's submissions, at least to this extent):

'Accordingly, they did not become liquidators again on restoration of the companies and the application to appoint the present liquidators did not involve the removal of the former liquidators from office.'

(c) typically though, the expectation is that the former liquidator will be re-appointed as liquidator to the restored company. David Richards LJ in Fakhry said, paragraph 61:

'In the usual course of events, the expectation would be that the former liquidator would be re-appointed on restoration of the company. This is demonstrated by para.(6) of the Practice Note which requires evidence to explain the reasons if a different liquidator is proposed.'

(d) as mentioned above, the former liquidator should be a respondent to the restoration application. David Richards LJ said, in Fakhry, at paragraphs 50 to 53:

...'the Practice Note requires that, in the case of a company which was dissolved whilst in or following its liquidation, evidence of service of the application on the former liquidator must be filed with the court: para.3.5 of the Practice Note. This pre-supposes, without expressly providing, that the application must be served on the former liquidators. Service of proceedings, rather than just giving notice of them, is a formal step not only informing the recipient of the proceedings but also asserting the court’s jurisdiction over that person.

Neither the Companies Act nor the CPR make provision for respondents or other parties to restoration applications. Paragraph (6) of the Practice Note refers to “the parties” without specifying them. The identity of parties to a restoration application has been developed over the years by the court’s practice. In Welsh Ministers v Price at [74], Sir Terence Etherton MR said that “as a matter of practice the registrar of companies is always made a respondent to restoration applications” and referred to the Practice Note (although it contains no express provision to that effect). Referring to s.651 of the Companies Act 1985, which contained the previous procedure for declaring the dissolution of a company void, Hoffmann LJ said in Stanhope Pension Trust Ltd v Registrar of Companies [1994] B.C.C. 84 at 86E that “the registrar of companies and the former liquidator are normally the only respondents to an application under s.651”. The same had applied under the equivalent provisions of earlier Companies Acts.

In my judgment, the terms of the Practice Note reflect the practice of joining the former liquidator to an application to restore a company which had been dissolved following the completion of its liquidation. For this reason, evidence of service of the application on the former liquidator is required to be filed. There is no indication in the Practice Note, or anywhere else so far as I am aware, of any intention to change the court’s longstanding practice.

Even if the prior practice of joining former liquidators as respondents no longer applies, the requirement for service on them necessarily means that they are considered to be persons interested in the application. A self-evident purpose of service on former liquidators is to enable them to bring to the attention of the court any matters relevant to the proposed restoration and, as an application will also be required for the appointment of liquidators under s.108 (see para.6 of the Practice Note), any matters relevant to that application as well. In my judgment, the judge was in error to say ... that the former liquidators were not entitled to participate in the restoration applications.'

Later, at paragraph 61, David Richards LJ said:

'If the application is served on the former liquidator, he or she is entitled to appear on the application and to assist the court with evidence and submissions relevant to the application. In my view, those matters include the reasons put forward for not re-appointing the former liquidator, including whether there are grounds for investigating his or her conduct. This was the view taken, correctly in my judgment, by Norris J in Barclays Bank Plc v Registrar of Companies [2015] EWHC 2806 (Ch); [2016] B.C.C. 64 at [19]–[20]. Although the present type of application is technically not an application to remove the former liquidator, it has that practical effect in a case where the former liquidator is willing to act. If it were an application for removal, the liquidator would be entitled to be heard as to whether there were grounds for an independent investigation (see Clydesdale Financial Services Ltd v Smailes on which the judge relied) and I see no reason why the same should not apply on this type of application.' (Clydesdale Financial Services Ltd v Smailes has the neutral citation [2009] EWHC 1745 (Ch); (2009) BCC 810])

Applying this by analogy to a CPR r.40.9 set aside/variation of a restoration order application, David Richards LJ said, paragraph 61:

'It follows that these are matters that the former liquidator could also raise on an application to set aside or vary the order.'

Where on any CPR r.40.9 set aside/variation of a restoration order application, there are new liquidators of the restored company, their role is '...confined to providing information to the court. On applications of this sort, liquidators are expected to adopt a neutral position: see, for example, in the context of a petition to wind up a company already in voluntary liquidation, Re Roselmar Properties Ltd (1986) 2 B.C.C. 99157.' (paragraph 40), however, 'If the application to remove the present liquidators had been made on grounds that reflected on them personally, for example their competence or integrity or that their conduct required investigation, they could be heard in opposition to that relief...' (paragraph 40)

(e) where there is a dispute between different members about whether the company should be restored, see Fakhry, paragraphs 64 onwards.

SIMON HILL © 2018 (UPDATED 2024)

BARRISTER

33 BEDFORD ROW 

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.