Annette Doran and James Donald Doran v County Rentals Ltd t/a Hunters
| Jurisdiction | England & Wales |
| Judge | Cadwallader |
| Judgment Date | 20 December 2021 |
| Neutral Citation | [2021] EWHC 3478 (Ch) |
| Docket Number | CLAIM NO. CR-2020-MAN-000850 |
| Court | Chancery Division |
[2021] EWHC 3478 (Ch)
His Honour Judge Cadwallader sitting as a Judge of the High Court
CLAIM NO. CR-2020-MAN-000850
APPEAL COURT REF. NO. M21C412
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
INSOLVENCY AND COMPANIES LIST (ChD)
Winding up — ‘Coronavirus test’ — relationship between CIGA Practice Direction and statute — attended preliminary hearing — strike out
PGH Investments Ltd v Ewing [2021] EWHC 533 (Ch)
Re a Company [2021] EWHC 2289
Taylors Industrial Flooring Limited v M and H Plant Hire (Manchester) Limited [1990] BCLC 216.
Re Easy Letting & Leasing [2008] EWHC 3175 (Ch)
Re A Company (No. 006798 of 1995) [1996] 1 WLR 491
Re a Company (Application to Restrain Advertisement) [2020] EWHC 1551 (Ch)
Introduction
This is my reserved judgment on the hearing of appeal on the part of the petitioning creditors against the decision of District Judge Richmond at a preliminary hearing on 9 February 2021 to dismiss the winding up petition presented against the company on 5 October 2020 on the ground that the Court found that it was not likely that it would be able to make an order under section 122(1)(f) of the Insolvency Act 1986 having regard to the ‘coronavirus test’.
The learned District Judge was sitting in the High Court, and I am able to determine this appeal because, by the order of Snowden J. dated 18 June 2021 granting permission to appeal, he directed that the appeal would be heard before a High Court Judge or Deputy High Court Judge.
The petitioning creditors were represented by counsel, Mr Arnold Ayoo, and the company was represented by counsel, Mr Simon Passfield. I had the benefit of their skeleton arguments, including a supplemental skeleton argument on behalf of the petitioning creditors.
I also had an appeal bundle, including in particular the appellant's notice, the grounds of appeal and the witness statements referred to below.
I do not propose to rehearse all of the arguments raised, or all of the evidence referred to during the course of the hearing, but I record that I read and considered those arguments, as well as all the various documents referred to within the appeal bundle, and the joint bundle of authorities, as well as the supplemental skeleton argument, before coming to a decision.
Background
The respondent company (“the Company”) operates a franchise of Hunters estate agents. The petitioners own four properties in Wallasey, Merseyside, at 10 and 10a Rowson Street and at 116 and 116a Mill Lane (“the Properties”), which they let to tenants. In or about 2009 the company and the petitioners agreed that the company should collect the rents for the properties and pay them (after deductions) to the petitioners. From about 2013 the Company started paying most, but not all, of the rent which it collected in respect of the properties into a Barclays bank account. On 13 March 2020, 7 years later, the First Petitioner told the Company that this account was wholly unknown to her, and complained on 26 June 2020 that the petitioners had not received rental payments for the period 2014 to 2019 in the total sum of over £60,000. On 27 th of August 2020 solicitors instructed on behalf of the petitioners wrote to the Company asserting that at least £65,442.55 was owed for unpaid rent and that if an immediate payment of £50,000 were not made within 7 days a winding up petition would be presented. The Company denied liability, and the petition was presented. In summary, the Company says the petitioners must have instructed the company to start making payments to the Barclays account otherwise it would not have done it; and on that footing, the debt is disputed.
The petition
The petition stated as follows:
“Pursuant to Schedule 10 to the Corporate Insolvency and Governance Act 2020 the company is insolvent and unable to pay its debts and the petitioner has reasonable grounds for believing that coronavirus has either, not had a financial effect on the company; or had a financial effect on the company but the company would still have been insolvent and unable to pay its debts in any event.
“The grounds relied upon by the petitioning creditor for the purposes of the coronavirus test are as follows:
“The Petitioners are the freehold owners of 10 and 10a Rowson Street, Wallasey CH45 5AT ((registered at HM Land Registry with title no. MS181985) and, they were freeholder owners of 116 and 116a Mill Lane, Wallasey CH44 3BL between October 2002 and February 2020 (both registered at HM Land Registry with title no. MS277433) (“the Properties”). In early 2014 the Petitioners appointed the Company as the managing agents of the Properties who dealt with, among other things, the collection of rents. The Petitioners only recently found that the Company has failed to amount to them for the rents needed.
“A demand for payment was sent to the Company on 27th August 2020, the demand required the Company to pay the sum of £65,442.55 being the amount the Petitioners believe has not been amounted [sic] for in respect as rents needed by the Company. The Company failed to pay the said sum or to secure or compound to the Petitioner's satisfaction for the same or any part thereof.
“The company is accordingly unable to pay its debts as they fall due.”
Procedural history
The court listed the petition for a non-attended review on 9 November 2020. One Mark Valentine filed and served a witness statement dated 29 October 2020 on behalf of the company, of which he was a director. He asserted that the petition debt was genuinely disputed, and that the coronavirus test was not satisfied. The petitioners responded with a witness statement of Mr Doran dated 6 November 2020 asserting that it was not disputed that the coronavirus might have had a financial effect on the company, but it would still have been unable to pay the amount owed because payments had been missed since 2014 and the entire indebtedness arose before coronavirus came into being. He disputed that the debt was genuinely disputed.
The matter first came before District Judge Obodai on 9 November 2020 who dismissed the petition on the ground that it purported to rely on a statutory demand, which as a result could not found a petition as the result of paragraph 1 of Schedule 10 to the Corporate Governance and Insolvency Act 2020 (“CIGA”), and appeared to be defective in any event because not in the prescribed form.
By application notice dated 23 November 2020, however, the petitioners applied to set aside that order on the basis of a witness statement of their solicitor, Paul Whelan, of the same date. That was on the basis that paragraph 1 of Schedule 10 to CIGA had no application, since the petition was not founded on a statutory demand at all; whereas paragraph 2 of that Schedule did apply and was satisfied: that is, the creditor had reasonable grounds for believing that coronavirus had not had a financial effect on the company, or the relevant ground would apply even if coronavirus had not had a financial effect on the company.
Satisfied that the demand referred to in the petition was not the basis for seeking the winding up order, on 27 November 2020 the learned District Judge set aside her previous order and reinstated the petition, directing it to be considered at an attended preliminary hearing listed for 2 hours at which the Court would determine whether it was likely that it would be able to make an order under section 122(1)(f) Insolvency Act 1986 having regard to the coronavirus test, and giving directions for further evidence.
That was the hearing which took place on 9 February 2021 before District Judge Richmond at which he dismissed the petition. At that hearing he had the benefit of a second witness statement of Mr Valentine on behalf of the company dated 14 December 2020 and a witness statement by Annette Doran dated 15 December 2020 on behalf of the petitioners.
The decision of the District Judge
Both counsel who appeared before me also appeared at the hearing before District Judge Richmond. It appears that in the event the hearing took 1 1/2 hours. Unfortunately, no transcript of the judgment could be obtained because the recording of the hearing was incomplete. Counsel helpfully agreed a note of the substance of the judgment, but it was not put before the learned District Judge for approval or amendment.
The note of judgment is short, and I set out in full.
“There is a strangeness to this Petition. The Petitioner has not queried any missing payments for 6 years. Had you asked Company in, for example, 2019, whether they had been discharging their obligations, they would have said ‘of course’.
“For today's argument, the Respondent suggests that I should grasp the nettle and strike out the Petition because it is a debt which is disputed on substantial grounds.
“Parameters of the hearing
“I take note of what Mr Passfield says. Unless this was a no-hope Petition, I think it would not be appropriate to use this forum for me to dispose of this Petition on the merits. The evidence has not been directed as fully towards that question as it might have been. Of course, questions would have to be answered if we are at a final hearing of a winding up petition: where did the Barclays authority come from, why did the Petitioners not pursue the question earlier? Whilst I can see the questions, I'm not satisfied I have the answers. I am not minded to accede to his request on that front. It would have to be much clearer.
“Coronavirus test
“This is an unusual factual situation. It is not a usual trading situation where a debt for goods/services has been incurred and invoices have been rendered. A fundamental and important differing factor, is that the Company was paying these debts as they went...
To continue reading
Request your trial
-
Annette Doran and James Donald Doran v County Rentals Ltd T/A Hunters
...PROPERTY COURTS IN MANCHESTER Insolvency and Companies List (ChD) His Honour Judge Cadwallader (sitting as a Judge of the High Court) [2021] EWHC 3478 (Ch) Royal Courts of Justice Strand, London, WC2A 2LL Arnold Ayoo (instructed by Athena Solicitors LLP) for the Simon Passfield (instructed ......
-
Insolvency Insight - Issue 8 | February 2022
...can now be side-stepped by issuing parallel proceedings in the country of incorporation. Doran v County Rentals Ltd (t/a Hunters) [2021] EWHC 3478 (Ch) The Court considered the interpretation of paragraph 5(3) of the (former) Schedule 10 to the Corporate Insolvency and Governance Act 2020 (......
-
Insolvency Insight - Issue 8 | February 2022
...can now be side-stepped by issuing parallel proceedings in the country of incorporation. Doran v County Rentals Ltd (t/a Hunters) [2021] EWHC 3478 (Ch) The Court considered the interpretation of paragraph 5(3) of the (former) Schedule 10 to the Corporate Insolvency and Governance Act 2020 (......