PME Cake Ltd v June Penny Craig (a Protected Party by her Litigation Friend Barry Woods)
| Jurisdiction | England & Wales |
| Judge | Kyriakides |
| Judgment Date | 20 July 2022 |
| Neutral Citation | [2022] EWHC 1783 (Ch) |
| Docket Number | Case No: CR-2022-002142 |
| Court | Chancery Division |
[2022] EWHC 1783 (Ch)
Deputy Insolvency and Company Court Judge Kyriakides
Case No: CR-2022-002142
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
In the matter of PME Cake Limited
And in the matter of the Insolvency Act 1986
Philip Judd (instructed by Perrin Myddelton) for the Applicant
Simon Lane (instructed by Stephen Rimmer LLP) for the Respondents
Hearing dates: 16 June 2022
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.
Deputy Insolvency and Company Court Judge
This is an application by PME Cake Limited (“ the Company”) to restrain the Respondents, June Peggy Craig, Loraine Julie Craig and Stephanie Alice Woods, from presenting a petition to wind up the Company based on the debt alleged in a statutory demand served by the Respondents on the Company on 8 April 2022 (“ the Statutory Demand”).
Background
The Company is a manufacturer of cakes and baking products and was previously known as Knightsbridge Bakeware Centre (UK) Ltd.
The Respondents are the freehold owners of the property known as 3 Brember Road, South Harrow, Middlesex HA2 8UN (“the Property”). Prior to 2006 the freehold owner was the First Respondent. In 2006 the Second and Third Respondents acquired an interest in the freehold reversion of the Property, although the First Respondent also retained an interest.
By a lease dated 31 October 2001 the First Respondent demised the Property to Precision Machining Engineers (Harrow) Limited (“ PME Harrow”) for a term of ten years (“ the Lease”). The Lease was guaranteed by the Company.
Although the 10 year Lease expired on 30 October 2011, it continued pursuant to section 26 of the Landlord and Tenant Act 1954 until no later than 18 June 2019 when PME Harrow yielded up possession to the Respondents who, by that time, were the freehold owners of the Property. It is not in dispute between the parties that after 30 October 2011 the Company continued to occupy the Property on the terms of the Lease.
For the purposes of the Company's application, the relevant provision of the Lease is paragraph 2 of schedule 3, which provides as follows:
“ The Guarantor COVENANTS AND GUARANTEES with and to the Landlord that at all times during the Liability Period while the Tenant is bound by the tenant covenants of this Lease the Tenant shall punctually pay the rents and perform and observe the covenants and other terms of this Lease and if at any such time the Tenant shall make any default in payment of said rents or in performing or observing any of the covenants or other terms of this Lease the Guarantor will pay the rents and perform or observe the covenants or terms in respect of which the Tenant shall be in default and make good to the Landlord on demand and indemnify the Landlord against all losses, damages, costs and expenses arising or incurred by the Landlord as a result of such non-payment, non-performance or non-observance …” (“ the Guarantee”)
The “Liability Period” is defined by paragraph 1.1 of schedule 3 (insofar as is relevant) as:
“ In the case of Knightsbridge Bakeware Centre (UK) Limited the period during which Precision Machining Engineers (Harrow) Limited is bound by the tenant covenants of this Lease ….”.
Pursuant to paragraph 33 of schedule 3 of the Lease the Company covenanted at the end or sooner determination of the Lease to yield up the Property with vacant possession and in such good and substantial repair as accorded with the terms of the Lease. The Respondents allege that PME Harrow breached this covenant.
Proceedings were subsequently brought by the Respondents against PME Harrow based on the alleged breach of covenant, the Respondents claiming that they had suffered loss and damage in the region of £558,000 and were entitled to reimbursement of costs in the sum of £4,500 plus VAT incurred in preparing a schedule of dilapidations (“ the Proceedings”). PME Harrow defended the Proceedings primarily on three bases: first, liability was denied; secondly, it was claimed that the Property was damaged by squatters who occupied the Property after 18 June 2019; and finally, quantum and causation of the losses claimed were disputed.
About two months prior to the date fixed for the trial of the Proceedings, a mediation took place between the parties which resulted in their reaching a settlement. The settlement was incorporated into a Tomlin Order dated 7 December 2021 (“ the Tomlin Order”) and the Schedule to that order.
The Tomlin Order was in the usual form and provided for the Proceedings to be stayed upon the terms of the Schedule except for the purposes of carrying out those terms into effect for which purpose the parties had permission to apply. The order also provided for the trial to be vacated and for PME Harrow to pay the Respondents costs in the agreed sum of £55,000 (inclusive of VAT).
There was only one paragraph in the Schedule. This provided as follows:
“ On or before 4pm on 5 January 2022, the Defendant shall pay the Claimants the sum of £245,000 (inclusive of VAT) in full and final settlement of all claims against the Defendant in respect of its lease dated 31 October 2001 of 3 Brember Road, South Harrow HAZ BAX”.
PME did not pay either the costs agreed or make the agreement payment of £245,000. Pursuant to an application made by the Respondents on 21 January 2022, on 28 January 2022 Mr Justice Waksman ordered the stay imposed by the Tomlin Order to be lifted for the purposes of enforcing the Schedule and for PME Harrow to pay forthwith the sum total of £300,000 to the Respondents and an additional amount of £2,208.60 by way of summarily assessed costs (“ the Enforcement Order”). PME Harrow did not comply with that order.
On 17 February 2022, the Respondents served the Company with a demand claiming that the sum of £302,208.60 was owed by the Company to the Respondents pursuant to the Guarantee. When payment was not made by the Company, the Respondents served on it the Statutory Demand.
The Law
The principles for restraining the presentation of a petition are well-known and are usefully summarised by ICC Judge Burton in the recent decision of Sell Your Car with us Limited v Anil Sareen [2019] EWHC 2332 (Ch) at [11] and [12] as follows:
“ [11.] The court will restrain the presentation of a winding-up petition where it is satisfied that the company would succeed in establishing that the proceedings constitute an abuse of process. A petition founded on a debt that is disputed on genuine and substantial grounds would constitute an abuse of process. The Companies Court practice was clearly set out by Hildyard J in Coilcolor v Camtrex [2015] EWHC 3202 (Ch):
[32.] The Court will restrain a company from presenting a winding-up petition if the company disputes, on substantial grounds, the existence of the debt on which the petition is based. In such circumstances, the would-be petitioner's claim to be, and standing as, a creditor is in issue. The Companies Court has repeatedly made clear that where the standing of the petitioner, and thus its right to invoke what is a class remedy on behalf of all creditors, is in doubt, it is the Court's settled practice to dismiss the petition. That practice is the consequence of both the fact that there is in such circumstances a threshold issue as to standing, and the nature of the Companies Court's procedure on such petitions, which involves no pleadings or disclosure, where no oral evidence is ordinarily permitted, and which is ill-equipped to deal with the resolution of disputes of fact.
[33] The Court will also restrain a company from presenting a winding-up petition in circumstances where there is a genuine and substantial cross-claim such that the petition is bound to fail and is an abuse of process: see e.g. Re Pan Interiors [2005] EWHC 3241 (Ch) at [34] – [37]. If the cross-claim amounts to a set-off, the same issue as to the standing of the would-be petitioner arises as in the case where liability is entirely denied”.
[12.] The learned judge continued at paragraphs 34 and 35:
[34] Further, it is an abuse of process to present a winding-up petition against a company as a means of putting pressure on it to pay a debt where there is a bona fide dispute as to whether that money is owed: Re a Company (No 0012209 of 1991) [1992] BCLC 865.
[35] However, the practice that the Companies Court will not usually permit a petition to proceed if it relates to a disputed debt does not mean that the mere assertion in good faith of a dispute or cross-claim in excess of any undisputed amount will suffice to...
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