Company - Compulsory winding up - Petition by creditor

Sykes & Son Ltd v Teamforce Labour Ltd: Chancery Division (Richard Snowden QC sitting as a deputy judge of the High Court): 3 April 2012

The claimant company was a building contractor engaged in extension and refurbishment works at a property in Surrey (the property) in 2011. The defendant petitioner was a sub-contractor for some of those works. The petitioner brought a petition for the winding up of the company on the grounds: (i) that it was indebted to it in the sum of £341,885.34 under the petitioner's final account and for subsequent labour hire charges; and (ii) that the company had failed to pay the petitioner despite numerous requests for payment.

There was no formal written contract for the works and there was a conflict on the evidence of the parties as to the basis upon which it was agreed that the petitioner was to be paid for its work. The petitioner's case depended to a large extent on the inference from the failure of H, a surveyor employed by the company, to dispute or raise objection to the petitioner's final account. The company applied for an injunction restraining the petitioner from advertising or otherwise proceeding with the winding-up petition and to strike out that petition.

The company contended that there was a genuine dispute on substantial grounds as to whether any monies were due to the petitioner in respect of any final account for the work done by the petitioner at the property. It submitted that the petitioner had been paid all monies due to it and that a winding-up petition was not an appropriate procedure for resolution of the dispute. The company further submitted that it was solvent and adduced evidence of solvency, namely its last audited accounts showing net assets in excess of £4.5m.

The court ruled: It was settled law that the general rule of practice was that the Companies Court would restrain the presentation or prosecution, and would strike out or dismiss a winding up petition which was based upon a debt which was disputed by the company in good faith and on substantial grounds. The court would not act upon the bare assertion by the company that it disputed the petition debt, but would examine the evidence to determine whether there was in fact a genuine dispute on substantial grounds (see [6], [7] of the judgment).

In the instant case, there was no formal written contract and there was a conflict on the evidence of the parties. The petitioner's case depended to a large extent on the inference from the failure of H to dispute or raise objection to the final account. On the evidence, and consistent with the general practice of the Companies Court not to attempt to resolve factual disputes which would involve the rejection of credible evidence without cross-examination it had to be concluded that, in so far as the petition was founded upon the sums claimed in respect of the sub-contract works, it should not be permitted to continue and had to be dismissed.

On the evidence, the court was satisfied that the company was solvent and that it would not be appropriate to allow the petition to proceed and to be advertised to ascertain the views of other creditors (see [57], [69], [87] of the judgment). The petition would be dismissed (see [88] of the judgment).

Mann v Goldstein [1968] 2 All ER 769 applied; Company, a, (No 006685 of 1996), Re [1997] BCC 830 applied; UOC Corpn, Re, Alipour v Ary [1997] 1 BCLC 557 considered.

Jennifer Meech (instructed by DAC Beechcroft LLP) for the petitioner; Tiran Nersessian (instructed by QualitySolicitors Redferns) for the company.