The advent of the current pandemic has prompted the introduction of temporary measures to prevent landlords from using “aggressive” debt recovery methods against their tenants. One such measure is included in the Corporate Insolvency and Governance Bill (the CIG Bill), which seeks to prevent landlords from using statutory demands and winding-up petitions against tenants impacted by coronavirus.
Re a Company (Injunction to Restrain Presentation of Petition) [2020] EWHC 1406 (Ch) concerned a tenant of a retail unit, which had been closed in accordance with the government’s instructions. The landlord was unable to forfeit the lease for non-payment of the rent and service charge, thanks to section 82 of the Coronavirus Act 2020. So it had served a statutory demand on the company, and had filed a winding-up petition, but had not yet paid the court fee, when the company applied for an injunction to restrain the presentation of the petition.
The landlord was not represented at the hearing, although its solicitor listened in on Skype and the judge was shown correspondence in which the landlord argued that there was nothing to stop a creditor presenting a petition and continuing with it until a hearing, before the CIG Bill was enacted. It was only at the hearing that the parties would know whether the CIG Bill had been enacted and what provisions it contained.
However, the court accepted that the CIG Bill was likely to be enacted “in more or less its current form” and to receive Royal Assent by the end of June 2020. Therefore, if the petition were presented now or in the near future, it was most unlikely that it would be heard before the CIG Bill reached the statute book. Consequently, the court would have to apply the provisions set out in schedule 10, which require creditors presenting winding-up petitions to have reasonable grounds for believing that coronavirus had not had a financial effect on the company, or that the company would have been unable to pay its debts regardless of coronavirus.
The evidence provided by the company to the court built what the judge described as “a strong case” that coronavirus had had a financial effect on the company before the presentation of the petition and “further, that the facts on which the petition would be based would not have arisen if coronavirus had not had a financial effect on the company”. Consequently, it appeared that the petition would not result in the court making a winding-up order, and would cause serious damage to the company in the interim.
Hill v C A Parsons [1972] Ch 305, Sparks v Holland [1997] 1 WLR 143 – and Travelodge Ltd v Prime Aesthetics Ltd [2020] EWHC 1217 (Ch) – confirm that, when the court is deciding whether to grant relief and, in particular, relief which involves controlling or managing its own processes, it can take into account its assessment of the likelihood of a change in the law that would be relevant to its decision.
The most pertinent of these cases was Travelodge, which was decided before the publication of the CIG Bill and was based on what was said in ministerial statements. The position was even clearer now that the CIG Bill had been published and was being actively and speedily considered by Parliament. Consequently, the judge granted the company the injunction that it sought, subject to the company providing the usual cross-undertaking in damages.
Allyson Colby is a property law consultant