Getting it right: how to make a successful application for the appointment of provisional liquidators
Arguably, the main job of a judge is to determine and uphold rights of property ownership, so applications to appoint provisional liquidators — which, if successful, deprive a debtor company of its assets before a detailed judicial examination of the creditor’s claims has taken place — tend to go against the judicial grain. This is particularly so where the debtor company is not present when the application is heard. Applications made by HMRC can be particularly sensitive because they are usually based upon assessments, which debtors often view (wrongly) as more of an opening point for discussions about the eventual level of debt than a crystallised liability. Judicial attitudes to these applications have probably also been influenced by a recent high-profile case where HMRC was successful in its application for the appointment of a provisional liquidator, but failed spectacularly at the eventual trial, which relied on the same allegations — all 300 of the alleged criminal acts were shown to have been completely legitimate, which led to stinging criticism of HMRC by the judge and subsequently in Parliament. In a typically clear judgment given recently in The Commissioners for Her Majesty’s Revenue & Customs v (1) Winnington Networks Ltd and another  EWHC 1259 (Ch), Mr Justice Norris went back to first principles to explain what has to be shown if an application is to succeed.
Winnington Networks had two strands to its business: firstly, the purchase and sale of domestic electrical goods and electronic goods such as hard drives; and secondly, the trade in voiceover internet protocol (VoIP) units, the digital capacity that discount phone call providers use to keep prices down. The domestic and electrical goods business purchased stock from Samsung and LG as a zero-rate VAT supply, using an associated Irish company, Osmosis, for this purpose. The Irish company sold the same goods to a Czech company called Winnington Prague, which in turn ‘under-invoiced’ them to Winnington at cost or at below cost. Winnington then sold the same goods to a UK company named Impact UK, making a VATable supply, and Impact UK sold the goods to the public at less than their cost price. No profit was made anywhere in the sales chain and the goods were always under the control of Osmosis, which delivered them to Impact UK, which in turn delivered them to the end user: neither Winnington nor Winnington Prague ever had control or possession of the goods…
Click on the link below to read the rest of the Mourant Ozannes briefing.
Sign in or Register to continue reading this article
It's quick, easy and free!
It takes just 5 minutes to register. Answer a few simple questions and once completed you’ll have instant access.Register now
Why register to The Lawyer
In-depth, expert analysis into the stories behind the headlines from our leading team of journalists.
Identify the major players and business opportunities within a particular region through our series of free, special reports.
Receive your pick of The Lawyer's daily and weekly email newsletters, tailored by practice area, region and job function.
More relevant to you
To continue providing the best analysis, insight and news across the legal market we are collecting some information about who you are, what you do and where you work to improve The Lawyer and make it more relevant to you.
News from Mourant Ozannes
News from The Lawyer
Briefings from Mourant Ozannes
Guernsey was the first jurisdiction to introduce the concept of a protected cell company but the Companies Law has effectively modernised it.
Top tips for dealing with a JFSC on-site examination; guidance on investment business on-site examinations and an important decision of the Royal Court concerning the information a party subject to regulatory action should be provided with.