Case: Re A Company (21 October 2024)
Court: High Court of Justice, Business and Property Courts of England and Wales, Insolvency and Companies List (CHD)
Judge: ICC Judge Burton
Facts:
This case was an application for an injunction to restrain presentation of a petition.
The debtor applicant (the “Debtor”) acquired land for development, primarily into residential apartment blocks, and a construction company (the “Creditor”) that was once the Debtor’s parent company was purportedly its creditor. The Creditor was itself in liquidation.
The Debtor stated that the Creditor conducted all the work on several of its projects, including some that could be subject to cladding claims. In view of this, the Debtor claimed to have a genuine and substantial cross-claim against the Creditor for at least £44 million, exceeding the debt the Creditor claimed was due from the Debtor (the “Debt”).
Decision:
Only in very rare cases will the evidence in support of an application to restrain presentation of a winding-up petition be the subject of cross-examination. The basic principle is that, until there has been such cross-examination, it is ordinarily not possible for the court to disbelieve the word of the witness in his affidavit and it will not do so.
Therefore, notwithstanding:
i) “the absence of detail or supporting documentary evidence that ideally I would have liked to have seen; and
ii) the Applicant’s delay in raising and then detailing its alleged cross-claim”
the court was satisfied that the Debtor had met the minimum evidential threshold to determine that the Debt was subject to a genuine and serious cross-claim against the Creditor. Therefore, the court granted an injunction restraining the Creditor from presenting a winding-up petition in respect of the Debt. In particular , the Judge held: “In my judgment, the [Creditor’s] reliance upon the absence of sufficient detail before this court to enable the [Debtor] formally to plead its asserted cross-claim puts an unnecessary and hitherto unrequired gloss on the relevant test. Clearly, to be serious, a cross-claim must be capable, at some stage, of being pleaded. But I consider that there is scope for this court to determine an asserted cross-claim to be genuine and serious even in circumstances where all of the information one would usually require for it to be properly pleaded, is not before this court.”
The court’s decision highlights the importance of considering cross-claims when determining whether to present a winding-up petition and the level of evidence that is sometimes sufficient to make out that cross-claim.