Breyer Group Plc v Rbk Engineering Ltd
| Jurisdiction | England & Wales |
| Judge | Daniel Alexander |
| Judgment Date | 19 May 2017 |
| Neutral Citation | [2017] EWHC 1206 (Ch) |
| Docket Number | Petition No: CR-017003348 |
| Court | Chancery Division |
| Date | 19 May 2017 |
[2017] EWHC 1206 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Daniel Alexander QC
Sitting as a Deputy Judge of the Chancery Division
Petition No: CR-017003348
Ms W Parker (instructed by Birketts) for the Applicant
Mr R Bowles (instructed by Keystone Law) for the Respondent
Hearing date: 17 May 2017
Judgment Approved
Daniel Alexander QC
This is an application, made by notice dated 2 May 2017, for an order that the Respondent (RBK Engineering Ltd. – "RBK") be restrained from proceeding further with a creditor's petition to wind up the Applicant (Breyer Group PLC – "Breyer") whether by advertising the same or otherwise and that the petition is removed from the file or struck out.
Summary of conclusions
In view of the fact that those who do business with Breyer have expressed interest in the outcome, I will summarise my conclusions at the outset.
a. Breyer is not unable to pay its debts. To the contrary, Breyer appears, on the evidence provided to the court, to be solvent with cash in hand and a substantial unused credit facility.
b. The reason Breyer has not paid the substantial sums claimed by RBK under a sub-contract for work carried out by it is that it claims to have arguable defences to RBK's claims as well as substantial cross-claims of its own. These defences and cross-claims are various and relate to
i. the terms on which the work was undertaken;
ii. the quality of work undertaken,
iii. the validity of certain certificates issued by RBK in respect of electrical work and the testing of certain apparatus.
These claims, some of which operate as defences and some of which are cross-claims, are fairly arguable, cannot be resolved by the court on this application and it is inappropriate to do so in insolvency proceedings. Some of the issues raised by Breyer are already the subject of investigation by third parties.
c. The proper place for the dispute between the parties is either Adjudication under the scheme established under the Scheme for Construction Contracts or ordinary proceedings. The dispute could be readily resolved in either forum.
d. For RBK to continue these insolvency proceedings would be oppressive and would constitute an abuse of process.
e. The petition to wind Breyer up will therefore be struck out.
Evidence
The application is supported by fairly extensive witness statement evidence mainly from senior executives of Breyer and certain ex-employees of RBK (for Breyer) and from Mr Louis O'Mahoney (director of RBK, for RBK) of which I will summarise the most salient parts under the relevant headings.
Striking out – principles
The principles upon which the court will act in striking out a winding up petition are well known and were not in dispute. In Angel Group v. British Gas [2012] EWHC 2702, they were summarized as follows by Mr Justice Norris at [22]:
"The principles to be applied in the exercise of this jurisdiction are familiar and may be summarised as follows:-
a) A creditor's petition can only be presented by a creditor, and until a prospective petitioner is established as a creditor he is not entitled to present the petition and has no standing in the Companies Court: Mann v Goldstein [1968] 1 WLR 1091.
b) The company may challenge the petitioner's standing as a creditor by advancing in good faith a substantial dispute as to the entirety of the petition debt (or at least so much as will bring the indisputable part below £750):
c) A dispute will not be "substantial" if it has really no rational prospect of success: in Re A Company No.0012209 [1992] 1 WLR 351 at 354B.
d) A dispute will not be put forward in good faith if the company is merely seeking to take for itself credit which it is not allowed under the contract: ibid. at 354F.
e) There is thus no rule of practice that the petition will be struck out merely because the company alleges that the debt is disputed. The true rule is that it is not the practice of the Companies Court to allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds, because the effect of presenting a winding up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary action: in Re A Company No.006685 [1997] BCC 830 at 832F.
f) But the court will not allow this rule of practice itself to work injustice and will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute exists which cannot be determined without cross-examination ( ibid. at 841C).
g) The court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment: ( ibid at 837B)."
Breyer
Breyer is an unlisted, company incorporated on 2 December 1963 with registered offices in Romford, Essex. According to the unchallenged evidence of its finance director, Mr Neil Fisher, Breyer had a ledger balance of £622,288.28 on 15 May 2017. Breyer currently has over 400 employees and is active in the construction industry. Its turnover in 2016 was approximately £92.4 million with profit before tax of c. £316,000. That was not an unusual level of turnover and profit over the last five years, with profits regularly in the several hundreds of thousands of pounds. A letter from Lloyds bank dated 18 November 2016 confirms that Breyer has access to an overdraft facility in the sum of £4,000,000.00 which has apparently not been used.
It is, in my judgment, clear that Breyer has at all material times had the financial means to pay the sum claimed in the petition. The whole of the disputed sum was transferred to its solicitors when it became apparent that the petition would not be voluntarily withdrawn. On the basis of the evidence before me, Breyer is plainly not insolvent in the sense of being unable to pay the alleged debt.
It is said on behalf of RBK that some of the payments due under the contract were late and it is true that some of them were by varying numbers of days and in some cases, more than a fortnight. However, as Mr John Walsh, the construction director of Breyer, points out, on one occasion they paid early at RBK's request. None of that provides evidence that Breyer is or was unable to pay its debts as they fell due. I reject Mr Louis O'Mahoney's statement in his evidence that Breyer was "wholly unable to pay its debts as they fell due" in the relevant period. There is nothing in the broader picture of evidence to justify that.
As Mr Fisher says, this is not a question of Breyer being unable to pay the sum claimed by RBK in the petition but a question of Breyer refusing to pay the sum claimed. It is in short, not a case of can't pay, but won't pay. It is against that background that the question of whether this petition which seeks to wind up Breyer for non-payment of this debt is an abuse of process falls to be assessed.
The context in which the application arises
The dispute arises out of the non-payment by Breyer of a sum allegedly due in respect of work undertaken by RBK as a sub-contractor for Breyer in respect of a building project pursuant to a contract with Affinity Sutton Group.
The 2015/2016 Contract
RBK made a sub-contract with Breyer on 28 May 2015 ("the 2015/2016 Contract") whereby RBK agreed to undertake to supply labour, plant and materials to carry out Kitchen, Bathroom, W/C and OT Shower Room refurbishments in accordance with the contractual terms.
The 2015/2016 Contract contained a number of standard terms and conditions of which the following are important.
Payment
Clause 8 provided for quite a complex structure of payments and interim payments with conditions to be satisfied before payments should be made. In summary, the contract required that RBK would submit to Breyer no later than 3 working days before the Payment Due Date, a written statement of its gross valuation of the works done by the Payment Due Date in such form and with such details that Breyer may reasonably require in order to enable it to check and verify the amount in the payment application (clause 8(a)). Not later than 5 days after the Payment Due Date, Breyer was to submit to RBK a Payment Notice specifying the sum that Breyer considers to have been due at the Payment Due Date and the basis on which that sum is calculated (clause 8(c)). Subject to any PayLess notice (a notice served indicating an intention to pay less than the sum stated as due in the Payment Notice) Breyer was to make an interim payment in the sum stated as due in the Payment Notice (see clause 8(g)). There were specific terms relating to payment of the Final Sub-Contract Sum Payment (clause 8(j)). There were also specific provisions for payment of a retention equivalent to 5% of the cumulative gross value which was to be released after the certificate of making good defects. Clause 8(i) provided a specific right to Breyer to deduct sums claimed to be owed or a payment otherwise due to RBK.
The Appendix to the contract indicates that the First Payment Due Date pursuant to clause 8(b) of the agreement is set out in an "attached summary of valuation dates" and that clause provides that the Payment Due Dates thereafter until the Works are completed are the same date in each month as the date stated in the Appendix for the first Payment Due Date (unless otherwise stated in the Appendix).
The Appendix is a somewhat puzzling document since it contains not only what appears to be (but is not expressly described as) a Payment Due Date but also a number of other...
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