Wed 20 May 2020

"More than merely shadowy" - Inner House affirms low bar for restoration of a company to the Register

Defended petitions to restore a company to the Register are a rare beast.  However, the Inner House of the Court of Session has recently issued a judgment in a defended company restoration petition: MCR Oil Tools LLC v SPEX Offshore (UK) Ltd and others [2020] CSIH 23.  The court's decision is a reminder that the bar for achieving restoration is low.  In this case the defenders failed in their attempt to resist restoration.

The case has emerged from a litigation in Texas, USA concerning licence agreements for oilfield tools.  The Texan litigation was brought by MCR against SPEX and various other parties and concerns ownership of intellectual property.  One of the other parties was an individual called Jamie Oag who was a director of most of the companies in the SPEX group.  MCR seeks various orders including injunctions and damages.  SPEX sought to dismiss the Texan litigation on the basis that the companies sued had been dissolved and were no longer in existence.  MCR sought to retain SPEX in the Texan litigation arguing that it was important to retain them as MCR expected to be successful in arguments about piercing the veil in relation to SPEX.  The Texan litigation was stayed pending MCR's petition to the Court of Session to restore the SPEX to the Register of Companies.  The Texan court also ruled that any question of piercing the veil fell to be determined by Scots law. 

SPEX opposed MCR's petition on the basis that it would not be just to restore it to the Register.  The question of whether it would be "just" included questions of law as well as facts.  It was clear that, in Scots law, the attempt to pierce the veil would fail.  MCR argued that it would succeed in piercing the veil but more importantly, it was premature for that legal issue to be explored when determining if it was just to restore SPEC to the Register.  Furthermore, aside from the piercing the veil argument, the restoration of SPEX would improve prospects of establishing liability against other defendants in the Texan litigation.  MCR relied on affidavits from Texan attorneys in support of this.

The court agreed that it was not appropriate to undertake a detailed analysis of the law on piercing the veil.  The court determined that there was nothing in SPEX's argument that would make MCR's application exceptional.  The court therefore considered it just to restore SPEX to the Register.

The court affirmed the approach to the question of whether it was just to restore a company as set out in Re Blenheim Leisure (Restaurants) Ltd (No 2) [2000] BCC 821.  The process for restoration is administrative and should be quick.  Unless there are special circumstances, the company should be restored.  That includes situations where the prospects of the claim against the company are dubious or slender as long as prospects are "more than merely shadowy".  In this case, the court observed that the pleadings suggested a complex interplay between the remedies sought in the Texas litigation.  The court was not prepared to look beyond the affidavits of the Texan attorneys who said the inclusion of SPEX in the Texan litigation would be helpful.  Consequently, MCR's case against SPEX was more than merely shadowy. 

This decision again demonstrates that the standard of whether it is just to restore a company to the Register is a low one and it is very difficult for a party to succeed in resisting a petition to restore. 

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