Harper v Camden London Borough Council and another; Shorts Gardens LLP v Camden London Borough Council – Insolvency – Winding-up petition – Liability order – Claimants seeking orders restraining presentation of winding-up petitions relating to unpaid non-domestic rates – Whether director entitled to apply on behalf of company – Whether Covid-19 being good reason to restrain presentation – Applications dismissed
The claimants applied to restrain presentation of two separate winding-up petitions against SBLT and SG by the defendant local authorities. The petitions related to unpaid liability orders in respect of national non-domestic rates (NNDR) and certain unpaid costs orders arising out of earlier litigation.
The application to restrain the SBLT petition was made by the claimant as a director/trustee of SBLT. The court had made a general civil restraint order (GCRO) against SBLT following a series of applications made in its attempts to avoid the payment of NNDR. The order restrained SBLT from issuing any claim or making any application in the High Court or County Court without first obtaining the court’s permission.
The application to restrain the SG petition was made by the company itself. The link between the two applications was that SG contended that the property subject to the liability order was occupied at the relevant time by SBLT under licence.
Each application sought injunctive relief on the basis that the debts in question were genuinely disputed on substantial grounds or were subject to cross-claims. They also contended that it was inappropriate for a winding up petition to proceed, until 14 days after Covid-19 had been controlled through vaccination and/or the government made an announcement that it was safe for the UK to come out of the lockdown.
There was a preliminary issue whether an application could be made by the claimant in the first application at all, or in any event when there was the GCRO against the company.
Held: The applications were dismissed.
(1) The mere holding of office as a director or the holding of shares in a company did not give an individual a sufficient personal interest to apply for an injunction to prevent winding up proceedings being commenced against the company. A director was an office-holder with powers and duties owed to the company under the company’s constitution and the general law, who might be given authority to act as agent on the company’s behalf. But directors were not personally entitled to any remuneration or other benefit simply by virtue of holding office.
(2) The GCRO restrained SBLT from making any application to the High Court without first obtaining the permission of the nominated judge. It plainly prevented SBLT from making a pre-emptive application to restrain presentation or applying in the winding up proceedings to restrain the advertisement of a petition without first obtaining the court’s permission. SBLT would clearly be barred by the GCRO from making an application unless it had first followed the procedure under the GCRO for giving notice to the defendants and then obtained the permission of the nominated judge. The claimant made the application because she considered that the company was itself barred from doing so and it was a clear abuse of process. Consequently, the application for an injunction in the SBLT application would be dismissed on the grounds of the claimant’s lack of standing, and as an abuse of process.
(3) In both cases, there was nothing to suggest that the manner in which the liability orders were made and the challenges to them dealt with by the magistrates’ court involved fraud, a miscarriage of justice or some other compelling circumstance to justify the court going behind the orders. Accordingly, there was no genuine or substantial dispute about any of the debts relied on in the petitions: Yang v Official Receiver [2018] Ch 178 and Bolsover District Council v Dennis Rye Ltd [2009] EWCA Civ 372; [2009] PLSCS 149 applied.
In any event, in contrast to a case in which the petition debt was itself subject to a genuine and substantial dispute, where the company simply alleged in answer to an undisputed debt that it had a cross-claim, the court had a discretion to allow the petition to proceed. On the facts, the court would exercise its discretion to allow a petition to be presented and proceeded with so that the views and interests of the unpaid creditors could be heard and considered.
(4) The “New Measures to protect UK high street from aggressive rent collection and closure” announced by the government, under which measures which were to be implemented to restrict or prohibit petitions to be presented, or winding-up orders made, where the company’s inability to pay had been the result of Covid-19, did not prevent the making of winding-up orders in respect of the claimants. Under those measures, any winding-up petition that claimed that the company was unable to pay its debts first had to be reviewed by the court to determine why. The law would not permit petitions to be presented, or winding-up orders made, where the company’s inability to pay was the result of Covid-19. No draft legislation had been published and the scope of the intended restriction and how it would be implemented was unclear. Therefore, the court had to make its decision on the basis of the law as it stood.
It was anticipated that the prohibitions were not intended to extend to entities such as SBLT and SG, neither of which was a tenant in the retail or hospitality industry, or to petitions which were not based upon arrears of rent, but were based upon outstanding court orders and longstanding arrears of NNDR. Further, it seemed from the government’s announcement that some threshold test was envisaged under which the restrictions on use of statutory demands and presentation of petitions would only apply where the reason that the company was unable to pay its debts was due to the coronavirus.
The reason why the claimants had not paid the debts they owed had nothing to do with the coronavirus, and they were not the sorts of entity owing the type of liabilities which the proposed legislation seemed to be intended to protect. Therefore, there was no reason to exercise any discretion in favour of the claimants based upon the prospect that legislative measures were to be introduced to assist more deserving companies experiencing genuine financial hardship caused by the effects of the Covid-19 pandemic.
Andrew Clark (instructed by Harrison Carter) appeared for the claimants; Tom Gosling (instructed by Greenhalgh Kerr Solicitors Ltd, of Wigan) appeared for the defendants.
Eileen O’Grady, barrister
