The Secretary of State for Business, Innovation and Skills v New Horizon Energy Ltd & Anor

This is an application to appoint a provisional liquidator of an English company and of a dissolved Illinois LLC. But it is necessary to start some way away from the companies at the heart of this application.

Global Alternative Investments Limited ("Global"), was a company which marketed investment opportunities to the public, in particular the opportunity to participate in oil wells and gas wells drilled in the United States. From the material before the court, it appears that Global used fairly high pressure sales techniques to induce investors to part with their money and created a client list of persons who had so invested and would be invited to make further investments. Its directors and employees included a Mr Harrison and a Trencham. Global entered into a CVL on 9 May 2014.

Emerald Knight Limited ("Emerald"), was incorporated in November 2009 and it, too, traded in the same line of business. The evidence suggests that it used the Global client list for the purpose of promoting its investments which were wider in scope than oil and gas investments, and included Australian and Ukrainian farmland, Brazilian timber and Brazilian social housing and various biofuel enterprises. Emerald entered into a CVL on 6 June 2015.

I now come to the companies at the heart of this application. New Horizon Energy Limited ("Horizon") was incorporated on 27 July 2012. It was in the ownership and under the management and control of Mr Ladds until September 2013 and thereafter it was in the ownership and control of Mr Skeet. It, too, traded in the same line of business as Global and Emerald, and appears to have used the same client list.

New Horizon Energy LLC ("Horizon LLC") is an Illinois corporation that was created in November 2012. From incorporation until October 2013, it was in the control of Mr Ladds. Thereafter, its sole officer was Mr Skeet. Horizon LLC was involuntarily dissolved by the Secretary of State for Business Service in the State of Illinois on 8 May 2015 for failure to file any accounts.

At the same time as Mr Skeet took over ownership and/or control of Horizon and Horizon LLC, Mr Skeet created another company called NGI Management Limited ("NGI"). NGI was compulsorily struck off on 26 May 2015.

As I have indicated, Horizon sold oil and gas investment opportunities to members of the public, members of the public who were meant to be sophisticated investors or accredited investors. The business model is extraordinarily obscure, but it seems that these investors were invited to participate in some way in the oil and gas produced from two drilling sites known as Slarts No.1 and Slarts No.2, in the belief that these were productive wells and that they would earn substantial returns. Horizon's role in this is not transparent. It appears, in effect, to have operated as an introducer to Horizon LLC for commission, and Horizon LLC appears to have contracted with the investors in relation to the investor's rights to participate in the oil production.

According to Mr Skeet, Horizon ceased trading in October 2013. But material discovered in the course of investigations suggests that it may have continued trading until January 2014; since then, there appears to have been no activity.

Horizon LLC appears, from the material so far discovered, to have continued to trade in the sense of soliciting or obtaining investments until about July 2014, but the evidence suggests that, since then, it has not obtained any new investments, although there is a possibility that it is continuing to administer in some way contracts already in existence.

Although hundreds of thousands of pounds appear to have been invested by members of the public, the only known return so far is about £625 received by a couple of investors. For the most part, investors have been unable to find out what has become of their money, although they have received assurances from Mr Skeet that information will be forthcoming, and that the wells are productive.

One concerned investor has told investigators that he has endeavoured to contact Mr Skeet but that Mr Skeet has failed to return telephone messages, that the mobile number is not responded to, although on one occasion Mr Skeet indicated that Horizon would be issuing an annual statement for each investor to show what had happened to their funds, but that he was waiting for approval from the FCA before issuing any such statement. It appears that in fact the FCA is concerned that the activities of Horizon, and possibly also of Horizon LLC, amount to the conduct of an unauthorised collective investment scheme. So no material has been forthcoming to investors.

It was against this background that the Secretary of State appointed investigators to examine the conduct of the affairs of Horizon and, in relation to its English and Welsh operations, Horizon LLC.

As regards Horizon, in August 2014 Mr Skeet provided the investigations with some short financial statements for the period July 2012 to July 2013, some copy contracts in the name of NGI (not Horizon) and a bundle of miscellaneous papers and bank statements. Although these assisted the investigations to identify bank statements they were not a record of Horizon’s dealings, and in particular provided the transparency as to dealings with investors.

As regards Horizon LLC in September 2014, the investigators wrote to Mr Skeet at the addresses that were known for him asking for a detailed list of documents and for attendance at a meeting to consider the content of those documents. Although a solicitor for Mr Skeet acknowledged receipt of the request and indicated that the documents would be produced by 30 September, they were not so produced and the meeting with Mr Skeet was cancelled. Eventually, on 28 October 2014, some material was received in digital form, but this material consisted of brochures, client information, some contracts and some background updating material. Significantly, it did not contain any accounting material, although this had been a key part of the investigator's request. No accounting records for Horizon LLC have been provided.

The contracts indicated that money paid by investors would be collected via a firm of solicitors called Lawcom, who would provide escrow services. The investors made enquiry of those solicitors. They indicated that they had received for the account of Horizon some £419,750 and for the account of Horizon LLC, some £2.78 million paid by members of the public. It is from Lawcom that the information that the collection of monies continued into 2014 is derived. Lawcom indicated that all of the monies collected had been paid out on the directions of Mr Skeet to one of three bank accounts, which Lawcom understood to be in the name of Horizon or Horizon LLC.

The first account was an account at the Barclays Bank. When this was traced, it was found that this account was not in the name of Horizon but in the name of NGI Management, Mr Skeet's vehicle. It appears that some £633,000 had been paid out of that account, including very substantial sums to Mr Skeet personally, to Emerald and to Mr Harrison and Mr Trencham, the former directors or employees of Global.

The second account was at Lloyds Bank. This was also not an account in the name of Horizon. It was an account belonging to a company called Cuthbert & Kingsley Limited, who were debt collectors. Cuthbert & Kinsley have given an account of what became of the monies which they collected. These amounted to some £1.1 million. They dealt with the collections at the direction of Mr Skeet. The payments out of the account include very substantial payments to Mr Skeet, to an associated company of Emerald, to a former director of Emerald, to Mr Harrison and Mr Trencham of Global, and to a number of miscellaneous accounts in the Seychelles, Malta and Dubai and elsewhere.

Between them, Horizon and Horizon LLC appear to have collected some £3.2 million from investors, but from an analysis of the disbursements from the Lawcom monies, none of that has been spent on acquiring investment opportunities in Illinois oil and gas rights. What has become of other monies is simply unknown.

In these circumstances, the Secretary of State has formed the view that it would be expedient in the public interest for Horizon and Horizon LLC to be wound up on the just and equitable ground. He has presented petitions and now seeks, without notice to Horizon or Horizon LLC, the appointment of provisional liquidators.

The court plainly has jurisdiction over Horizon as an English and Welsh company. The court will have jurisdiction over Horizon LLC if the Secretary of State can establish that there is a sufficient connection between the English and Welsh jurisdiction and the Illinois corporation. The petition advances a number of grounds to establish that sufficient connection. For present purposes, I accept that a sufficient connection is established by the fact that Horizon LLC has entered into dealings with English customers and clients using the medium of an English escrow account and has acted upon the directions of its sole manager, Mr Skeet, who is domiciled in England. There are also, it seems to me, assets within the jurisdiction of this court in all likelihood, namely books, documents and records, and conceivably the unexpended balanced of collected funds.

Horizon LLC is a dissolved foreign corporation. I am satisfied that the court has jurisdiction under section 225 of the Insolvency Act 1986 which provides that:

I consider it likely that the Secretary of State will establish that Horizon LLC has a sufficient connection with this country, that it did conduct business here, that it has ceased to conduct business here (most certainly it has ceased to collect new money here since July 2014) and accordingly, may be wound up as a dissolved foreign corporation.

The jurisdiction to appoint provisional liquidators arises under section 135 of the 1986 Act. As stated by the Court of Appeal in HMRC v Rochdale Drinks [2011] EWCA Civ 1116, it is a jurisdiction to be exercised if a petition has been presented and it is likely that, on the hearing of the petition, a winding up order may be made. Here, petitions have been presented. The question is whether at the hearing of the petition it is likely that a winding up order will be made.

In HMRC v Winnington [2014] EWHC 1259, I gave some consideration to what the question of “likelihood” required. I expressed the view that it involved demonstrating that the petitioner was entitled to present the petition and, in the context of a creditor's petition, that a material part of a petition was not capable of serious dispute. I pointed out that that assessment fell to be made without the company having had the chance to demonstrate that it did have an arguable ground to dispute the petition (because the application is made without notice) and that, accordingly, the court would need to be assured that it had a fair picture of the circumstances in which the petition was presented and, in that regard, that the petitioner had given full and frank disclosure. But I expressed the view that in making the assessment the court would be entitled to take into account the company's response to any initial investigatory steps since, if it had a serious case to advance against the petition, it might be expected to have advanced that case in the course of the engagement and not to keep it up its sleeve.

With some slight modification, I consider those principles are equally applicable where the petition is presented on the just and equitable ground.

Counsel for the Secretary of State has suggested that the burden on him is to demonstrate that the Secretary of State is entitled to present the petition (a requirement that is plainly satisfied because of the view which the Secretary of State has formed about the public interest) and that at least one ground for winding up has been demonstrated which is sufficient for the grant of the relief sought and is not capable of serious dispute.

In assessing whether a ground advanced in the petition is capable of serious dispute, counsel submits that the court can take into account the information obtained from the investigation which is necessarily undertaken prior to presentation of a public interest petition and that, if the company had information which met the concerns implicit in the investigation itself, then it will have advanced that explanation during the course of the engagement with the investigators and would not have concealed it. I accept that submission.

In the instant case, the petitions against Horizon and Horizon LLC essentially complain that the operation of the company's business is not conducted in a way that is transparent and accords with commercial probity, that misrepresentations had been made to induce investors to part with their money, that that money has been passed along a chain for which there is no legitimate commercial purpose, and that it is in the public interest that all dealings should be investigated as fast as possible.

For present purposes, I focus on the dealings with the investor's money. In my judgment, this is a ground on which, on the material available, the Secretary of State is likely to succeed at the hearing of the petition. The results of the investigation appear to demonstrate that, in very substantial measure, monies collected for investment purposes from members of the public, have been applied in making payments to Global, to Emerald and to NGI Management, and thence to the principals who were involved in those businesses.

Although a request has been made to and an opportunity afforded for Mr Skeet to provide accounting documents demonstrating the right dealing with the money, and although he has promised at least one investor that such an explanation would be forthcoming, no explanation has been provided as to how these dealings could conceivably be proper. In the circumstances, I am satisfied that it is likely that, at the hearing of the petition, an order for the winding up of Horizon and of Horizon LLC will be made on the just and equitable ground. I am satisfied that the Secretary of State has given full and frank disclosure of the material that is at present available. The same cannot be said for Mr Skeet.

Being satisfied that the jurisdiction exists because the petition has been presented which is likely to succeed, I must consider whether it is nonetheless right to appoint a provisional liquidator, which is a most serious step to take. I am satisfied that the step is justified. First, Horizon is not trading (according to Mr Skeet). Horizon LLC does not appear to be trading (according to the conduct of the escrow account, which appears to be an essential part of the collection of funds from investors).

Secondly, I am satisfied that, in the circumstances in which these businesses have been carried on, it is essential to put in place someone who will have access to and control over all of the assets of both of these companies. In that connection, I place particular weight on the observation of Rimer LJ in Rochdale at paragraph 100 to this effect:

To the same effect was the observation of Lewison LJ at paragraph 113 that:

Third, I am satisfied that it is of great importance that the provisional liquidator should be able to obtain control of the client list to ensure both that those who may have been damaged by the conduct of the company's business are identified and also to ensure that they are not drawn into any further investments, either by Horizon or Horizon LLC, or by any new company which takes over the pushing of these investments as Horizon and LLC took over from Global and Emerald.

Fourthly, I consider it essential that, at the earliest opportunity, there is a focal point for the collection of information and its dissemination to concerned investors.

In the circumstances, I propose to appoint provisional liquidators. They may be able to provide to investors answers which Mr Skeet has so singularly failed to provided, either at the request of investigators or at the request of the investors themselves.

The draft order includes a provision for alternative service on Horizon LLC and on Horizon itself. That is because Horizon appears to have no active registered office and Horizon LLC is dissolved. I am satisfied that the arrangements for alternative service are likely to be effective, are proportionate and enable each company to know of the existence of the proceedings and of this order and to have a fair opportunity to apply for its immediate discharge in case there is some clear and obvious explanation, so far withheld, as to what has become of the investors' money.

In the circumstances, I will make the order sought.