Restraining Advertising Of A Winding Up Petition

Overview Of Restraining Advertising Of A Winding Up Petition

The case of Time GB Group Ltd v Yarwell Mill Country Park Ltd [2023] EWHC 1887 (Ch) saw the applicant’s application seeking a court order for restraining advertising of a winding up petition fail.

This appeared to be a case of not how to stop a winding up petition.

The applicant via a promissory note promised to pay the respondent £2.37m (“the Debt”) by 27 April 2023 and the applicant’s Director, Robert Bull, guaranteed the obligation.

The 27 April 2023 came and went without the Debt being paid. As a result, the respondent served a Statutory Demand claiming £2.37m from the applicant.

The applicant did not appear to have the Court onside with its arguments.

How To Restrain Advertising A Winding Up Petition

In order to restrain advertising of a winding up petition the Court referred to the following key principles:

… as set out at [31-35] of Coilcolour v Camtrex [2015] EWHC 3202, in which Hildyard J confirmed:

(1) The court will prevent presentation of a winding up petition where it considers that the petition would be an abuse of process and/or that the petition is bound to fail (to the extent that they are different).

(2) The Court will restrain a company from presenting a winding up petition where the company disputes, on substantial grounds, the existence of the debt on which the petition is based.

(3) The Court will restrain a company from presenting a winding up petition where there is a genuine and substantial cross-claim which equals or exceeds the petition debt.

(4) 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 on substantial grounds as to whether that money is owed.

(5) 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 amounts will suffice. As put by Hildyard J at [35]:

‘The court must be persuaded that there is substance in the dispute and in the Company’s refusal to pay: a “cloud of objections” contrived to justify factual enquiry and suggest that in all fairness cross examination is necessary will not do’.

Timing Of Presentation of the Winding Up Petition

It was submitted by the applicant that the petition should not have been treated as presented as the company filed an application to restrain presentation before the date of presentation.

The Court was not impressed with this argument:

This was an utterly hopeless argument which I have no hesitation in rejecting. The mere filing of an application to restrain presentation of a petition does not of itself preclude presentation.

Genuine Dispute On Substantial Grounds

A series of arguments were put forward to suggest the Debt was disputed. Yet again the Court was not impressed:

In this regard Mr Poole contended that the promissory note was subject to an implied term that the parties would act in good faith towards each other, and that the Respondent had acted in breach of the implied duty of good faith, with the result that the Applicant was ‘not liable for the alleged debt under the promissory note’: skeleton argument, para 27 and 28.1.

This too was a hopeless argument.

…

… notwithstanding Mr Poole’s valiant attempts to make bricks without straw, the Applicant has failed to make out on the law and the evidence any properly arguable grounds supporting the implication of a term of good faith in this case.

…

On the issue of breach, Mr Poole again relied on the letter of 3 May. (I should say that his skeleton argument suggested that there might be more relevant documents on this issue in the exhibits to the statements relied upon by the Applicant in support of this application, but I was taken to no further documents said to be of relevance on this issue, save for the letter of 9 May, which for reasons already expressed at paragraph 31 above, takes matters nowhere).

The letter of 3 May simply sets out a series of unparticularised and unsubstantiated allegations regarding an individual who is not even an officer or employee of the Respondent. As rightly observed by Mr Boardman, the letter itself is not evidence of what actually occurred.

Cross-Claim Equalling Or Exceeding The Debt

The Court quickly disposed of the cross-claim line of argument as well:

Moreover, even if one were to put to one side all other difficulties with the proposed cross-claim, the Applicant’s case on quantum was based on little more than a self-serving ‘guestimate’ by Mr Williams, which made no sense at all in context, and was entirely unsupported by documentary evidence.

In this regard I remind myself of the guidance given in Ashworth v Newnote [2007] EWCA Civ 793 at [29-34] in which Lawrence Collins LJ (among other things) confirmed that 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.

The Applicant’s case on quantum, as set out in Mr Williams’ statement, was based on little more than bare self-serving assertion. It is inherently implausible and is not supported by any underlying documentation. I have no hesitation in rejecting it. Had I not rejected it, I would in any event have concluded that it did not come anywhere near clearing the minimum evidential threshold.

The Court suggested on the evidence before it the applicant was “hopelessly insolvent” and dismissed the application.