Aerovias del Continente Americano SA Avianca & Ors v Versilia Solutions Ltd

Following the service of a statutory demand on Versilia Solutions Ltd for invoice debts amounting to some $1.5m which was only satisfied in part, Aerovias del Continente Americano SA presented a winding up petition. A number of matters led to delay in the prosecution of the petition. In December 2025 the petitioners applied for the appointment of provisional liquidators on the basis, among other things, of the company’s deteriorating financial position and admitted insolvency. At a hearing on 10 December 2025 the directors and the company expressly acknowledged the petition debt, and HHJ Klein, sitting as a Judge of the High Court, made an order which: (a) (by consent) dismissed an outstanding administration application; (b) (by consent) discharged an ex parte injunction against the company; (c) (by consent) directed advertisement of the petition; (d) (without objection from the company) appointed provisional liquidators until final determination of the petition or further order, giving the joint provisional liquidators various standard powers; (e) adjourned the hearing of the petition; and (f) made various orders as to costs. As a result of order (e) the petition came before Lance Ashworth KC, sitting as a Deputy High Court Judge, whose judgment deals with the petition itself and also an application by the joint provisional liquidators for an order ratifying their sale of the company so as to make clear that it could not be challenged as having been outside the scope of the powers granted to them on their appointment.

The power to appoint a provisional liquidator is to be found in s 135 Insolvency Act 1986. The section provides that where a liquidator is provisionally appointed by the court, his/her powers may be limited by the order making the appointment (s 135(5)). The court has a discretion as to the form of the order it makes: see McPherson & Keay’s Law of Company Liquidation (5th edn para 6-018).

Etherton J noted the distinction between provisional and other liquidators in Ashborder BV v Green Gas Power Ltd [2005] EWHC 1031 (Ch):

“Provisional liquidators are, as the name indicates appointed provisionally, pending the hearing of the winding up petition. They are not liquidators following a winding up order, seeking to realise the assets of the company for the best value they can reasonably obtain.”

In that case, in spite of the fact that the powers granted to the provisional liquidators included a power to sell or dispose of company property, Etherton J had restrained the sale of causes of action to the petitioning creditor on the basis that they could have been relied on to defeat the winding up petition.

In Aerovias del Continente Americano SA the joint provisional liquidators had instructed agents to sell the company’s assets and formed the view that a particular offer represented the best means of preserving/obtaining value for them, and on 19 December 2025 had proceeded with the sale but without making an application to the court for confirmation that their powers under the 10 December 2025 order covered their doing so.

Before Lance Ashworth KC, sitting as a Deputy High Court Judge, counsel for the joint provisional liquidators accepted that “on a strict reading” of the 10 December order the sale was not within the liquidators’ powers, hence the need for an order  ratifying the sale, although she also submitted that, notwithstanding the terms of the joint provisional liquidators’ ratification application, the sale did fall within the terms of the 10 December order because it was done with a view to protecting the company’s assets.

The relevant wording in the 10 December order was said to be in standard form and similar to that used in earlier cases such as Re Union Accident Insurance Co Ltd. [1972] 1 All ER 1105. In that case Plowman J held that, in spite of the power in the order being limited to “taking possession of, collecting and protecting the assets…[which] are not to be distributed or parted with until further order,” “a reduction of the company’s liabilities is the correlative right of the protection of its assets.” The deputy judge in this case also accepted a submission to the effect that the sale, which had necessarily resulted in the disposal of assets rather than their preservation in physical form, had been the best and only means of preserving any value in them for the benefit of creditors:

“The physical assets have been replaced by their cash alternative, thereby preserving the value. In effect…these were assets which could be considered perishable in light of the advice from Gordon Brothers [the agents]. Therefore, their sale and transformation into cash fell within the wording ‘protect, secure, take possession of, collect and get in all property or assets (of whatever nature)’.”

The deputy judge went on to hold that a restriction in the order on distributing or parting with the assets and property of the company was expressly qualified by the words “except pursuant to the functions hereby conferred:”

“The ‘functions hereby conferred,’” he said, “include the functions and powers in sub-paragraphs (f) [of the order] ‘to do all such things as may be necessary or expedient for the protection of the Company’s property or assets’ and (h) ‘to do all things necessary or incidental to the foregoing functions, duties and powers.’ Accordingly, if I am wrong and the JPLs could be said to have distributed or parted with the assets and property of the Company by virtue of the Sale, they will have done so pursuant to the function in sub-paragraph (f) in that they acted in a way which was necessary or expedient for the protection of the Company’s property or assets and/or pursuant to the function in sub-paragraph (h) in that such a Sale was necessary or incidental to their functions, duties and powers. Preserving the best value for the assets in the situation before them was expedient for their protection, including the protection of their value which they were advised was going to reduce. Therefore, in my judgment, the Sale did not contravene the restriction in sub-paragraph 6(a).”

It followed, the deputy judge held, that the joint provisional liquidators did not need an order ratifying the sale. However, as the question of the court’s power to ratify such a sale after the event raised issues of importance, and in case he was wrong as to the proper interpretation of the terms of the 10 December order, he went on to address the arguments relied on in support of the submission that the court should ratify the sale.

He started from the proposition that the joint provisional liquidators had the ability to come to court at any stage to seek directions (either on the basis of liberty to apply contained in the order or on the basis of s 168(3) Insolvency Act), so could have come back to court for clarification and/or  express permission to enter into the sale before it was completed. He noted that “[i]f a provisional liquidator considers it is in the best interests of a company to be given particular powers, he should apply for them (Re Highfield Commodities Ltd [1985] 1 WLR 149 at 163H). Therefore, not only could they have done so, but in my judgment they should have come back to the Court for directions. I have no doubt that the Court would have been able to accommodate an urgent application of this nature in very short order. There is, in my view, no proper explanation…as to why this step was not taken. Should a similar situation arise in a future case, I would anticipate that a provisional liquidator would come back for directions in advance of causing the company to sell its business and assets (or part of them).”

The deputy judge identified the next question as whether the power to seek directions was available retrospectively.

Counsel for the provisional liquidators addressed that question by reference to a number of cases on the need for permission to commence proceedings against a company in an insolvency process in which permission had been sought after the event (Bank of Ireland v Colliers International UK Plc (In Administration), Gaardsoe v Optimal Wealth Management Ltd (In Liquidation) and Registrar of Companies v Swarbrick), and the jurisdiction retrospectively to appoint administrators and/or make an administration order when something had gone wrong with the initial appointment (e.g. Re Biomethane (Castle Eaton) Ltd).

The deputy judge found that the permission cases provided the closest analogy, holding that, if, contrary to his finding, the 10 December order did prevent the joint provisional liquidators from making the sale, the prohibition was only “until further order,” i.e. until the court gave permission to sell by extending their functions and powers under s 135(4) and (5) Insolvency Act:

“This is closely analogous with the permission required in those other contexts, which also require an order of the Court. In my judgment, just as in those cases, there is no reason why, given the terms of paragraph 6(a) which does not provide that a further order can only be sought before a step is taken, the JPLs should not be able to seek retrospective permission from the Court for the Sale.”

Finally the deputy judge considered, again on the assumption that the 10 December order prohibited the sale, whether the joint provisional liquidators’ actions should be ratified. He decided they could and should:

“The evidence is that the likely impact on the value of the assets and business of the Company if the Sale did not take place was that they would decrease. The Company had effectively ceased to trade. The Sale had the benefits identified in the Gordon Brothers’ advice. It was, in my judgment, without doubt the correct course of action in order to seek to preserve value for the ultimate benefit of creditors. […] There is no evidence of any prejudice caused by the Sale. The Petitioners did not object to the Sale or the Ratification Application. No other creditor has come forward to make any representations either way on the propriety of the Sale.”

Given that a provisional liquidator does not usually sell part or all of the business of a company over which he is appointed, there is little English and Welsh authority on the point. The deputy judge did, however, find support in Australian jurisprudence which was drawn to his attention.

In the circumstances, the deputy judge granted declaratory relief to the joint provisional liquidators before going on to wind up the company.

The case emphasises the importance of carefully considering the powers that any provisional liquidators to be appointed are likely to need to fulfil their role. It also emphasises the desirability of returning to court if the scope of their powers is uncertain. The pragmatic approach of the judge in this (and other) cases was as helpful as it was justified; but each case will turn on its facts, meaning that it may not always be possible to rely on ratification as the provisional liquidators were able to in this case.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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