Consideration of temporary winding up restriction provisions

This case concerned a winding up petition presented during the period when the Corporate Insolvency and Governance Act 2020 (CIGA) had introduced restrictions on winding up petitions.

The facts were exceptional:

  • The petitioners had appointed the company as its agent for collection of rent in 2014 which were paid into an account at Barclays Bank. The company alleged that it had done so upon the instruction of the petitioners. The petitioners contended that the account at Barclays Bank was unknown to them.
  • The petitioners first queried the missing payments in March 2020, ie, after the pandemic had commenced.

The Court of Appeal held that:

  • At the preliminary hearing the court is not directed solely to the effect of the pandemic upon the company but can consider the insolvency ground more generally, including whether the debt is the subject of a genuine, serious dispute. Nor is there any reason why the court should take the petitioner's case at its highest.
  • The exercise which the court undertakes at the preliminary hearing is similar to that on an application to restrain advertisement of the petition and for this purpose the court was entitled to consider all the relevant facts.
  • In any event the petitioners were required to satisfy the court that the company was unable to pay its debts as they fell due even if coronavirus had not had a financial effect upon it. They chose to rely solely upon the alleged non-payment of rent in the period from 2014 to 2019/20 to prove an inability to pay debts in spite of the pandemic, notwithstanding that no "formal complaint" was made until June 2020. In the absence of a substantial dispute in relation to the alleged debt, the petitioners would have needed to demonstrate that if they had notified the company of its alleged indebtedness and made a demand for payment, prior to the pandemic, the company would have been unable to pay prior to the pandemic but this was not made out in the circumstances.
  • Even if the court was wrong about the proper construction of the statutory provisions and the ability to consider the merits of the petition under them, there was no reason why, at a preliminary hearing, in accordance with overriding objective, a district judge would not have been entitled also to consider whether a petition ought to be struck out on its merits.

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