17 June 2020
Lending Focus - June 2020 – 6 of 6 Insights
Snowden J heard two applications for injunctions to restrain the presentation of two winding-up petitions, against Saint Benedict's Land Trust Limited (SBLT) and Shorts Gardens LLP (SG), respectively. The respondent creditors were Camden and Preston councils in relation to unpaid liability orders in respect of NNDR (National Non Domestic Rates) and other unpaid costs orders.
SBLT had been involved in lengthy litigation with Camden and Preston, claiming it was not liable for NNDR because it was occupying the properties for charitable purposes. This was despite the fact that it was not registered under the Charities Act 2011. It was also subject to a general civil restraint order (GCRO), although the injunction application was brought in the name of a director of SBLT. A petition had already been presented against SBLT, but was (wrongly) rejected by the registry on the apparent basis that an application had been filed to restrain its presentation.
At the time of the hearing, the petition against SG had not yet been presented. However, SG contended that the property subject to the liability order had in fact been occupied by SBLT under licence.
SBLT and SG both sought injunctive relief, claiming that the debts were genuinely disputed on substantial grounds.
Both contended that it was inappropriate for a winding-up petition to be 'proceeded with', "until 14 days after COVID-19 had been controlled through vaccination and/or the government had announced that it was safe for the UK to come out of lockdown".
An injunction will be granted to restrain the presentation of a petition where the debt is genuinely disputed on substantial grounds. Snowden J set out the reasons for this, as follows:
Snowden J dismissed both applications, concluding that:
He also made short shrift of the attempted COVID-19 argument:
Since the date of the judgment, the Corporate Insolvency and Governance Bill (the Bill) has been laid before Parliament. The Bill contemplates a temporary ban (until 30 days after the Bill is enacted) on statutory demands presented from 1 March 2020 as a ground for presenting a winding-up petition, and on winding-up petitions presented from 27 April 2020 unless the petitioning creditor has reasonable grounds for believing that COVID-19 has not had a financial effect on the debtor company, or that it would have been insolvent even if COVID-19 had not had a financial effect on it.
Given the court's observation on the position of both the SBLT and SG, it therefore seems unlikely that the Bill, even if enacted in its current form, would have changed the outcome of the application. A 'blanket' approach to the current pandemic as an excuse for non-payment is not likely to be well-received by the courts.
Please refer to our article for more information on the Bill.
by Andrei Babiy
by Cheng Bray