James Dolman & Company Ltd. v Pedley

A winding-up petition may be restrained where its presentation or advertisement would constitute an abuse of process, including where the petition debt is subject to a bona fide and substantial dispute. A judge who finds that no such dispute exists should not postpone the petition merely to await separate proceedings concerning earlier liabilities. An unquantified or unparticularised cross-claim does not establish the necessary dispute. A limited dispute concerning part of the debt did not, on the facts, justify restraining the whole petition. Presenting a petition to forestall other proceedings is not, by itself, an improper purpose.

The appellant, the company's landlord, presented a winding-up petition based on unpaid rent of £25,000 for August 2002 to July 2003. The company relied on alleged set-offs and cross-claims, including rent attributable to the landlord's occupation, rent payments to the landlord's daughter, and asbestos-related losses.

Separate proceedings in the Dudley County Court concerned earlier rent and a claim relating to rent received from a sub-lessee. His Honour Judge Norris QC found no substantial and bona fide defence to the petition debt, but restrained advertisement of the petition until after the Dudley trial. The central issue was whether that order was permissible despite the absence of a substantial dispute concerning the petition debt.

Lady Justice Arden gave the judgment. Lord Justices Rix and Schiemann agreed.

1. Disposition. The appeal was allowed and the injunction restraining advertisement of the winding-up petition was discharged. The petitioner received £3,000 for costs below and £4,500 for the appeal, both sums inclusive of VAT.
2. Abuse of process. Rule 4.11 required the petition to be advertised; without advertisement, no winding-up order could be made on it. The jurisdiction to restrain advertisement is an aspect of the inherent jurisdiction to prevent abuse of process. As explained in Mann v Goldstein [1968] 1 WLR 1091, it applies where the petition is presented or prosecuted outside the legitimate purpose of winding-up proceedings.
3. Dispute as to the petition debt. The relevant abuse arises where the petition is being used to exert insolvency pressure in order to determine a substantial dispute raised on bona fide grounds, reflecting the principle discussed in Re A Company No 006685 of 1996 [1997] ECC 830. Having found no bona fide and substantial dispute as to the petition debt, the judge acted inconsistently and erroneously in principle by restraining advertisement pending the Dudley proceedings. The occupation issue concerned only a limited part of the rent. The asbestos cross-claim was unquantified and unparticularised and therefore did not establish the necessary dispute.
4. Separate proceedings and motive. The Dudley proceedings concerned earlier liabilities and, on the pleadings, could not affect the later rent forming the petition debt unless the company established a set-off exceeding the landlord's claim. Presenting the petition to forestall those proceedings was not an improper motive. The company remained free to pursue any properly substantiated asbestos claim later.

• Court of Appeal (Civil Division) — On 25 September 2003, the appeal was allowed and the injunction was discharged: [2003] EWCA Civ 1686.
• High Court of Justice, Chancery Division, Birmingham District Registry — On 12 September 2003, His Honour Judge Norris QC restrained advertisement of the winding-up petition and postponed it until after the Dudley proceedings.