Realstar Ltd, Re

The presentation or advertisement of a winding-up petition is generally inappropriate where the alleged debt is genuinely and substantially disputed, particularly where the petitioner knows that the company is financially sound and able to pay. The court may award the company its costs when the petitioner’s conduct has caused the injunction proceedings. Even where costs are justified, the court retains discretion as to the basis of assessment. A failure by the applicant to give advance notice of an injunction application may justify awarding costs on the standard basis rather than the indemnity basis.

The respondent presented a winding-up petition against the applicant for alleged arrears of service charges. The applicant disputed the debt on substantive grounds and maintained that the relevant certificates and further information had not been provided. The applicant was financially sound and able to pay the alleged arrears.

After the respondent gave notice of its intention to advertise the petition, the applicant obtained an injunction restraining advertisement. The respondent then agreed that the petition should be dismissed. The remaining issue was whether the applicant should receive its costs, and if so, whether they should be assessed on the indemnity or standard basis.

1. The petition was dismissed by agreement. The applicant was entitled to its costs of the injunction application.
2. The alleged debt was genuinely and substantially disputed. The respondent knew, at the latest from 9 May 2007, that the applicant disputed the debt on substantive grounds.
3. The presentation of the winding-up petition was an inappropriate course. The applicant was on a sound financial footing and able to pay, and the respondent had used the petition to secure a response concerning the alleged arrears. It was also inappropriate to proceed towards advertisement after receipt of the applicant’s detailed letter of 13 June 2007.
4. The respondent’s later provision of further information did not alter the position. Its decision to withdraw the petition without receiving further information about the applicant’s position undermined the contention that the debt had become undisputed.
5. The applicant should have warned the respondent before applying for the injunction. That failure could properly affect the basis of assessment, notwithstanding that the respondent had effectively brought the proceedings upon itself.
6. Costs were therefore awarded to the applicant on the standard basis, not the indemnity basis.