Tallington Lakes Ltd v Ancasta International Boat Sales Ltd

The Court of Appeal upheld the strike-out of a winding-up petition because the alleged debt on which the petition was founded was genuinely disputed on substantial grounds. The court applied the established practice that where a company demonstrates a genuine and substantial dispute as to liability the Companies Court will strike out a petition rather than try the substantive debt claim.

Key legal points:

• The petitioning creditor must establish standing under section 124 of the Insolvency Act 1986; a dispute as to liability challenges that standing.
• The question whether the purchaser dealt as a consumer for the purposes of section 12(1) of the Unfair Contract Terms Act 1977 was a triable issue because of the significant claim for lost charter hire.
• The correspondence relied on as admissions or concluded agreements was at least arguable and could not be resolved on a petition strike-out application (notably an email where the presence or absence of the words "without prejudice and subject to contract" was disputed).
• The company’s standard terms (including warranty provisions and condition 8.4.5 concerning unauthorised repairs) raised substantial grounds for disputing liability; whether reliance on those terms would be fair and reasonable under section 55(4) UCTA could not be decided at this stage.

This was an appeal against an order striking out a winding-up petition presented by Tallington Lakes Limited and Neil Morgan claiming sums totalling just over £103,000 from Ancasta International Boat Sales Limited for alleged defects in a yacht and consequential losses. The petition had been presented on 17 September 2010; the company applied to strike out on 8 October 2010 and HHJ Pelling QC struck out the petition on 25 March 2011. Permission to appeal was sought and the appeal was heard by the Court of Appeal, which dismissed the appeal on 20 December 2012.

Background and parties: Tallington (a trading company) purchased a Beneteau sailing yacht in April 2007 under a sale agreement incorporating Ancasta’s standard terms and conditions. Tallington alleged numerous defects (bow thruster, air conditioning, electrical instrumentation, rigging and battery-charger related loss) and claimed costs of repairs, loss of charter hire, time spent by Mr Morgan, legal costs and interest.

Nature of the application and issues:

• The primary relief sought was continuation of the winding-up petition; the company sought strike-out on the ground that the debt was genuinely disputed on substantial grounds.
• The principal issues framed were: whether Tallington dealt as a consumer for UCTA purposes under section 12(1); whether there had been admissions or concluded agreements in the correspondence; whether the company’s standard terms excluded or limited liability (including condition 8 and its sub-clauses) and whether reliance on those terms would be fair and reasonable under section 55(4) UCTA; and whether the Companies Court should determine disputed debt claims.

Court’s reasoning: The Court of Appeal confirmed the established practice that the Companies Court will not attempt to try disputed debt claims on a winding-up petition but will strike out petitions founded on debts that are genuinely disputed on substantial grounds. The court found that Tallington’s substantial claim for lost charter hire made it arguable that the yacht had been bought in the course of a business rather than as a consumer and thus raised a triable issue under section 12(1) UCTA. The alleged admissions in emails were either not clearly admissions or their status was disputed (including a factual dispute over whether words "without prejudice and subject to contract" had been included), and thus could not be resolved on strike-out. The standard terms contained warranty limits and conditions (notably condition 8.4.5 regarding unauthorised repairs and condition 8.1 requiring enforcement of any manufacturer warranty) that, if applicable, gave the company substantial grounds to dispute liability. On that basis the petition was properly struck out to prevent misuse of the winding-up procedure.

The court observed that the Companies Court is not the appropriate forum to determine detailed factual and contractual disputes of this kind and that the petition should never have been used in circumstances where county court or Part 7 proceedings were the proper route.

Appeal dismissed. The Court of Appeal held the judge below was correct to strike out the winding-up petition because the debt was genuinely disputed on substantial grounds: triable issues existed as to whether Tallington dealt as a consumer under section 12(1) UCTA, whether purported admissions or agreements in correspondence were effective, and whether the company’s standard terms (including condition 8 and related clauses) excluded or limited liability; these matters could not properly be resolved in winding-up proceedings.

Appeal from the High Court of Justice, Chancery Division, Companies Court (HHJ Pelling QC) which struck out the winding-up petition on 25 March 2011. Petition originally presented 17 September 2010; strike-out application made 8 October 2010. Permission to appeal was granted and the Court of Appeal heard the appeal on 29 November 2012, giving judgment 20 December 2012 ([2012] EWCA Civ 1712).