ICS Incorporation Ltd v Michael Wilson & Partners Ltd

Presentation of a winding-up petition should normally be restrained where the company establishes a substantial dispute about the whole of the alleged debt. The court need not finally determine the debt or resolve disputed witness credibility at the interlocutory stage. The same approach applies even where insolvency is otherwise shown. A dispute may be substantial where there are serious issues about whether the company was the client, whether an engagement letter was authorised or binding, and whether particular work was undertaken for another joint-venture party. If any part of the debt is admitted or otherwise due, an injunction should normally be refused.

Two UK companies applied to restrain Michael Wilson & Partners Ltd from presenting winding-up petitions based on statutory demands for approximately US$1.13 million in legal fees arising from a Kazakhstan joint venture. The respondent relied on an engagement letter, powers of attorney, the parties’ joint-venture arrangements and subsequent dealings. The applicants disputed the engagement letter’s validity and contended that the respondent had acted for the Kazakhstan joint-venture partner or related companies.

The central issue was whether the alleged liability was subject to a substantial or bona fide dispute, including disputes about the identity of the respondent’s client and responsibility for fees relating to the joint venture and service contract.

1. The applications were granted. Presentation of winding-up petitions against both applicants was restrained because there was a substantial dispute as to the whole of the claimed debt.

2. The governing principle was that, where the whole debt is substantially disputed, the court will not normally make a winding-up order and should normally restrain presentation of a petition. This remains so even if the company is otherwise shown to be insolvent. The court need not resolve the underlying dispute or determine the exact amount due. A defence which might appear shadowy on a summary judgment application may nevertheless justify relief.

3. There were substantial disputes about whether the UK companies were MWP’s clients or were otherwise bound to pay its fees. The evidence strongly suggested that MWP had acted for Mr Batalov or companies associated with him in relation to the joint venture. The engagement letter was disputed on authority, execution, scope and consistency with the surrounding documents. The evidence also raised serious issues concerning the conduct and credibility of Mr Wilson and whether the document had been authorised by the applicants.

4. The correspondence concerning the Service Contract did not plainly establish an implied retainer by the UK companies. It was arguable that responsibility for procuring the Service Contract lay with the local joint-venture partner under the memorandum of understanding, while the applicants’ lawyers dealt with that aspect and the applicants’ representatives merely contributed commercial or technical comments.

5. The respondent’s reliance on clause 19 of the memorandum of understanding through the Contracts (Rights of Third Parties) Act 1999 was not persuasive. It was difficult to regard the term as intended to be enforceable by a third party or as identifying a third party within section 1(2) or section 1(3).

6. An application to transfer the proceedings to another judge because the judge had formerly been a partner in the applicants’ solicitors’ firm was refused, applying the approach in Chellaram v Chellaram (No 2) [2002] 3 All ER 17.

First-instance decision. Appellate history was not stated in the judgment.