Holmes v Mainstream Ventures Ltd (t/a Town Base)

Where a winding-up petition is dismissed after payment of the petition debt or provision of satisfactory security, the court may order the company to pay the petitioner’s costs because that conduct ordinarily demonstrates that the petition was a proper means of seeking payment. The costs discretion must be exercised fairly and on the material facts. A rejected offer to provide security is relevant, but the court must assess whether its rejection caused additional costs. The court may re-exercise the discretion on appeal where the first decision was made on incomplete or mistaken facts and the relevant evidence is before it.

The Company appealed against a Registrar’s order requiring it to pay the petitioner’s costs of a winding-up petition. The petition debt arose from costs orders and was paid into escrow shortly before the petition was dismissed by agreement. The Registrar was unaware that the Company had earlier offered to pay the debt into escrow and apparently proceeded on the basis that the debt had simply been paid.

The appeal concerned whether the costs discretion should be re-exercised, whether presentation of the petition had been appropriate while the underlying litigation continued, and what effect should be given to the rejected escrow offer and the subsequent conduct of the parties.

1. Appeal allowed in part. The court re-exercised the costs discretion because the Registrar had decided the matter on incomplete facts. Since the relevant facts were before the court, a rehearing by the Registrar was unnecessary.
2. The presentation of the petition was appropriate. The judgments underlying the petition debt had not been stayed, and permission to appeal had been refused before the petition was presented or before the Registrar’s hearing.
3. Where a petition is dismissed after payment of the petition debt or provision of satisfactory security, the court may order the company to pay the petitioner’s costs. Payment or security ordinarily demonstrates that the petition was a proper means of seeking recovery: Amalgamated Properties of Rhodesia (1913) Ltd [1917] 2 Ch 115, 123–124; Re Lanaghan Bros Ltd [1977] 1 All ER 265.
4. The Company’s offer to pay the debt into escrow was a material consideration and justified a significant reduction in costs. However, the court had to determine whether rejecting the offer actually caused further costs. The subsequent hearings were substantially attributable to the Company’s failure to make the escrow payment promptly, rather than to the petitioner’s rejection of the offer.
5. The Company was ordered to pay 85 per cent of the petitioner’s petition costs. The Registrar’s order was varied by disallowing 15 per cent of those costs, but otherwise remained in force.

1. High Court (Chancery Division): on appeal from the order of Mrs Registrar Derrett dated 13 May 2009, the appeal was allowed to the limited extent that 15 per cent of the petitioner’s petition costs was disallowed.