Background
The background to this case started as a trademark infringement and passing off claim between easyGroup Ltd (easyGroup) and ER Travel Services Ltd (ER Travel). easyGroup claimed that ER Travel's use of the signs "EASIRENT" and "EASIRENTVANS" infringed easyGroup's family of trademarks.
ER Travel subsequently entered administration in February 2020; however, weeks before its administration, ER Travel's intellectual property (the "EASIRENT") was transferred to another entity controlled by the owners of ER Travel via a pre-pack sale. ER Travel was eventually dissolved and struck off the register in June 2022, removing ER Travel's legal entity status and meaning that easyGroup would not have been able to bring a claim against the company.
easyGroup applied to the High Court for a "double-barrelled" order:
- Restoration: to bring the dissolved company back onto the register under Section 1029 of the Companies Act 2006; and
- Winding Up: to immediately place ER Travel into compulsory liquidation following its restoration.
easyGroup's standing to bring the application under Section 1029 of the Companies Act was founded on easyGroup's status as creditor by virtue of an assignment of a debt of £175,286 from a prior creditor of ER Travel to easyGroup in July 2024.
In applying to the High Court for the double-barrelled order, easyGroup was specifically looking for a liquidator to be appointed to investigate ER Travel's transfer of the intellectual property. easyGroup alleged that the "EASIRENT" marks were transferred at an undervalue, and they wanted a liquidator to claw black those assets to satisfy any potential intellectual property damages owed to them.
The Defendants raised three grounds of opposition, arguing that (1) easyGroup lacked standing to bring the application; (2) the application did not fall within the legislative purpose of section 1029 CA06; and/or (3) that the application was an abuse process.
The Ruling
The Judge rejected the Defendants' grounds of opposition and made the double-barrelled order on the following basis:
- Per section 1032(1) of the Companies Act, once a company is restored, it is deemed to have continued in existence as if it had not been dissolved or struck off the register. In the circumstances, the Judge held that there did not seem to be any law preventing the debt, and all rights associated with it (including the right to petition for winding-up) from being assigned to easyGroup during the period of dissolution, the debt then existing as a contingent debt. Therefore, even if the debt was technically extinguished when the company was dissolved, the judge said the petition was still possible because the debt was capable of being assigned and easyGroup was a "contingent creditor" at the time of presentation as a result of the assignment.
- Whilst easyGroup could not apply for restoration as a creditor under section 1029 (2)(i) of the Companies Act 2006 (as easyGroup would have been required to be a creditor at the time of ER Travel's dissolution), it had standing by reason of being another person with an interest in the matter under section 1029 (2).
- On the abuse of process ground, the Judge held that, even if easyGroup did have an ulterior motive (i.e. to gain leverage in their long-running intellectual property dispute), there were still legitimate investigations to be carried out upon ER Travel's restoration and winding-up, which would benefit the creditors as a class. The Judge therefore dismissed the idea that easyGroup's application was an abuse of process.
Key takeaways
- A party can apply to restore a dissolved company even if they acquired the debt after the company was dissolved. Pursuant to Section 1032 of the CA 2006, once a company is restored, it is deemed to have continued in existence as if it had never been dissolved. This "retrospective validity" means an assignment of an "extinguished" debt is sufficient to give the assignee standing as a creditor to petition for restoration and a winding-up order.
- Courts are willing to grant "double-barrelled orders". This means that a creditor can force a company back into existence specifically to appoint a liquidator to investigate past conduct, even several years after the initial dissolution.
- Multiple purposes of restoration. Even if the applicant has an "ulterior motive", the application will not be an abuse of process so long as there is a legitimate objective for the creditors as a class; investigating potential transactions at an undervalue or preference is a valid reason for restoration.
This decision is a timely reminder that dissolution of a company does not provide permanent immunity for directors or office holders. If a creditor can show that a previous office holder failed to fully investigate specific asset transfers, the court is likely to find there is a legitimate purpose to restore the company and order the appointment of a new liquidator to investigate.
