Fenton Whelan Ltd v Swan Campden Hill Ltd
| Jurisdiction | England & Wales |
| Judge | Burton |
| Judgment Date | 09 September 2021 |
| Neutral Citation | [2021] EWHC 2470 (Ch) |
| Docket Number | Case No: CR-2020-003888 |
| Court | Chancery Division |
[2021] EWHC 2470 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSIENSS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (CHD)
IN THE MATTER OF SWAN CAMPDEN HILL LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Royal Courts of Justice
Rolls Building
London EC4A 1 NL
INSOLVENCY AND COMPANIES COURT JUDGE Burton
Case No: CR-2020-003888
Rowena Page (instructed by Stevens & Bolton LLP) for the Petitioner
John Briggs (instructed by Forsters LLP) for the Respondent
Hearing date: 30 June 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
INSOLVENCY AND COMPANIES COURT JUDGE Burton
This is the hearing of a winding-up petition presented at court by Fenton Whelan Ltd against Swan Campden Hill Ltd (the “Company”) on 8 October 2020.
The petition states at paragraph (j) that a winding-up order is sought on the grounds set out in section 124(1) and section 122(1)(f) of the Insolvency Act 1986 (the “Act”). Section 124 sets out who is entitled to apply for a winding-up order and provides that such application shall be by petition which may be presented by various parties, including a creditor. Section 122(1) sets out the circumstances in which a company may be wound up by the court, including, at sub-paragraph (f) that the company is unable to pay its debts.
The petition refers at paragraph (l) to a statutory demand served on the Company on 18 August 2020 in respect of the Company's failure to pay invoices from 1 October 2018 to 1 February 2019.
The Corporate Insolvency and Governance Act 2020 received Royal assent on 25 June 2020. When first introduced, it precluded a creditor from presenting a winding-up petition between 27 April 2020 to 30 September 2021 unless the creditor had reasonable grounds to believe that the Covid 19 coronavirus had not had a financial effect on the debtor company, or that the company was unable to pay its debts regardless of the financial effect of the virus. Its terms also prevent statutory demands served between 1 March 2020 and 30 September 2021 from being relied upon for the purposes of a winding-up petition presented on or after 27 April 2020. It was not therefore open to the Petitioner to rely upon the statutory demand served on 18 August 2020 as it falls within the period of statutory restriction. Nevertheless, in December 2020, the parties submitted a consent order to the court which recited that the parties had agreed, pursuant to paragraph 8.1(a) of the Temporary Insolvency Practice Direction, that the coronavirus test set out in the Practice Direction had been met and that consequently, on the evidence, it is likely that the court will be able to make an order under section 122(1)(f) of the Act. The court order vacated the Preliminary Hearing, gave directions for the filing of further evidence in relation to the grounds on which the Company opposed the petition and for a hearing to be listed before an ICC judge. This is that hearing.
Whilst the amount of the debt claimed by the Petitioner is not set out in the petition, following service of the statutory demand and the reference in the petition to outstanding invoices, it appears to be accepted that the debt in question relates to 5 invoices totalling £50,000 plus VAT dated between 1 October 2018 and 1 February 2019. For convenience I shall refer to this as the “Petition Debt”.
Ms Page confirmed that in light of the CIGA provisions to which I have already referred, the Petitioner seeks a winding-up order on the basis that the Company is unable to pay its debts as evidenced by its failure to pay the Petition Debt. Mr Briggs submits that the Petition Debt is genuinely disputed on substantial grounds and/or is subject to a genuine and serious cross claim.
Relevant legal principles
The legal principles are well known and have been summarised in the skeleton arguments. Whilst each emphasised what they considered to be pertinent issues by reference to separate authorities, the key principles do not appear to be in dispute. The rule of practice, long rehearsed in this court, is that the court will dismiss a petition when it is satisfied that the debt on which the petition is based is bone fide disputed on substantial grounds.
Even in cases where the petition debt is not disputed, as established by the Court of Appeal in Re Bayoil SA [1999] 1 WLR 147, the court has a discretion and may decline to order winding up where there is a genuine and serious cross-claim that the respondent has been unable to litigate that equals or exceeds the amount of the petition debt.
Ms Page highlights that although a failure to litigate a cross-claim is not necessarily fatal, in deciding whether a cross-claim is genuine and serious, the court is entitled to take into account all the relevant circumstances, including the fact that a company has not attempted to litigate it. In Dennis Rye Ltd v Bolsover District Council [2010] BCC 248, Mummery LJ stated:
“A company is not prevented from raising a cross-claim in winding-up proceedings simply because it could have raised or litigated the claim before the presentation of the petition or it has delayed in bringing proceedings on the cross-claim. The failure to litigate the cross-claim is not necessarily fatal to a genuine and serious cross-claim defeating a winding-up petition. However, in deciding whether it is satisfied that the cross-claim is genuine and serious, the court is entitled to take into account all the relevant circumstances, such as the fact that a company has not even attempted to litigate the cross-claim, or that there are reasons why it has not done so.”
Mr Briggs referred me to LDX International Group LLP v Misra Ventures Ltd [2018] EWHC 275 Ch in which David Stone, sitting as a Deputy High Court Judge brought together the key uncontroversial propositions that can be drawn from the leading authorities concerning a company's opposition to the making of a winding-up order. Mr Briggs relied upon the summary as authority for two principal propositions. First, when considering whether to make a winding-up order in the face of opposition, it is not practical or appropriate for the court to conduct a long and elaborate hearing, examining in minute detail, the case made on each side. In Re Bayoil, cited in LDX International Group LLP, Ward LJ said:
“a winding-up order is a draconian order. If wrongly made, the company has little commercial prospect of reviving itself and recovering its former position. If there is any doubt about the claim or the cross-claim, that seems to me to require that the court should proceed cautiously”.
Secondly, Mr Briggs submitted that the court must take a realistic view of whether the Company is likely to establish a genuine and substantial dispute and/or cross claim. I accept his submission, noting also the third proposition set out in LDX, that:
“It is incumbent on the recipient of the statutory demand to demonstrate, with evidence, that the cross-claim is genuine and serious: Orion Media, at paragraph 31. Bare assertions will not suffice: there is a minimum evidential threshold: Re a Company, at paragraph 33.”
Ms Page relies upon the Court of Appeal's judgment in Ashworth v Newnote Ltd [2007] BPIR 1012 as authority for the proposition that when considering a party's opposition to a winding-up petition, it is open to the court to reject evidence because of its inherent implausibility or because it is contradicted by or not supported by the documents. In reaching its conclusion, the Court relied upon paragraph 12 of Patten J's judgment in Portsmouth v Alldays Franchising Ltd and others [2005] EWHC 1006 (Ch):
“[12] So far as the evidence is concerned the mere fact that a party in proceedings not involving oral evidence or cross-examination asserts that certain things did or did not occur, is not sufficient in itself to raise a triable issue. That evidence inevitably has to be considered against the background of all the other admissible evidence and material in order to judge whether it is an allegation of any substance. Once the court considers that the evidence is reliable in that sense, and not some attempt to obfuscate the real issues by raising a series of hopeless allegations then it does, of course, become necessary to consider what the legal consequences of it are.”
In her skeleton argument and oral submissions, Ms Page referred to the Company's decision, as time advanced, to raise points in opposition to the petition which were initially not mooted in any of the correspondence which preceded service of the statutory demand, nor in the first witness statement of the Company's solicitor, Andrew James Head dated 23 October 2020,
in opposition of the petition. She submitted that this gave rise to “the archetypal case in which a company seeks to raise a cloud of objections to stave off a winding-up petition”. I take this to be a reference to the observations of Oliver LJ in Re Claybridge Shipping Company SA, regarding an unwilling debtor raising in his affidavit, a cloud of objections in order to claim that a dispute of fact exists which cannot be determined without cross-examination so that the petition cannot be allowed to proceed. As noted by Chadwick J in Re a Company No. 006685 of 1996 [1997] B.C.C. 830, referring in turn to Staughton LJ in Re Taylor's Industrial Flooring Ltd “anything that the law could do to discourage such behaviour should be done”.
Background
The Petition Debt arises from a development manager appointment contract dated 31 August 2017 between the Petitioner and the Company (the “DMA”). Pursuant to the...
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Insolvency Insight - Issue 5 | September 2021
...proposed by a small / medium sized enterprise. A reasoned judgment will follow. Fenton Whelan Limited v Swan Campden Hill Limited [2021] EWHC 2470 (Ch): Decision of ICC Judge containing a useful review of the authorities and their application to the question of when a Court will find a peti......
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Insolvency Insight - Issue 5 | September 2021
...proposed by a small / medium sized enterprise. A reasoned judgment will follow. Fenton Whelan Limited v Swan Campden Hill Limited [2021] EWHC 2470 (Ch): Decision of ICC Judge containing a useful review of the authorities and their application to the question of when a Court will find a peti......