Key Facts
- •HMRC petitioned for the winding-up of Payroll & Pension Services (PPS) Ltd due to a £7.39 million debt in unpaid National Insurance Contributions (NICs).
- •HMRC applied for the appointment of provisional liquidators without notice.
- •The High Court Judge ordered HMRC to provide an unlimited cross-undertaking in damages as a condition for appointing provisional liquidators.
- •HMRC appealed this order.
- •A subsequent High Court hearing dismissed HMRC's winding-up petition due to a bona fide dispute over the employment status of PPS's workers.
- •The question of PPS's NIC liability is subject to a First-tier Tribunal (Tax Chamber) appeal.
Legal Principles
A petitioner seeking the appointment of a provisional liquidator is generally required to give a cross-undertaking in damages.
General rule of practice
The default position is that an applicant for an interim injunction is required to give an unlimited cross-undertaking in damages, except when the applicant is a law enforcement agency enforcing the law in the public interest.
JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 139
Public authorities do not have a protected status in litigation, and the question of a cross-undertaking requires careful consideration, balancing the public interest with the potential for injustice to the respondent.
Competition and Markets Authority v Flynn Pharma Ltd [2022] UKSC 14, Re Southbourne Sheet Metal Co Ltd [1993] 1 WLR 244, Jain v Trent Strategic Health Authority [2009] UKHL 4
In ‘law enforcement actions’ brought by public authorities, the court weighs whether requiring a cross-undertaking would unduly deter or burden the authority in the public interest. The court also assesses the fairness in the particular circumstances.
F. Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295, Financial Services Authority v Sinaloa Gold plc [2013] UKSC 11
HMRC's role in collecting taxes, while a public function, doesn't automatically exempt them from providing cross-undertakings in damages when acting as a creditor in ordinary debt recovery, particularly when alternatives are available.
Abbey Forwarding Ltd v Revenue and Customs Commissioners [2015] EWHC 225 (Ch)
Outcomes
The appeal was dismissed.
The court found that HMRC, while acting in the public interest, was not engaged in a ‘law enforcement action’ as defined in relevant case law. Their winding-up petition and application for provisional liquidators were brought in their capacity as creditors seeking to recover a debt, not as a law enforcement agency. Alternative remedies were available. Therefore, the lower court was correct to require the cross-undertaking.