Mulalley and Company Ltd v Regent Building Services Ltd & Anor

On an application to restrain presentation of a winding-up petition, the court should not determine the ultimate validity of the debt. It must decide whether the alleged debt is disputed in good faith and on grounds of sufficient substance for determination in ordinary civil proceedings. The threshold is low.

An adjournment sought on medical grounds remains a case-management decision. The court must scrutinise the evidence, consider reasonable accommodations, the nature of the hearing and the party’s ability to participate or obtain representation. Abuse of the winding-up procedure may justify indemnity costs.

Mulalley sought injunctions restraining Regent Building Services Ltd and Christopher White from presenting a winding-up petition based on a statutory demand for approximately £30,915.29. Mulalley disputed the debt on grounds including a contractual restriction on assignment, payment or maturity of component sums, and doubts about the authenticity and legal effect of documents relied on as an assignment.

Mr White and Regent sought an adjournment based on inadequate notice and Mr White’s ill health. The court also considered whether Mr White should be personally liable for costs and whether costs should be assessed on the indemnity basis.

1. Adjournment. The court refused the adjournment and proceeded in Mr White’s absence. The evidence showed that he had notice of the hearing, had conducted extensive correspondence and had been active in pursuing the statutory demands. The medical evidence was general and out of date, gave no reasoned prognosis, and did not address possible accommodations such as attendance by videolink. The nature of the hearing and the apparent strength of Mulalley’s case also favoured proceeding.
2. Injunction jurisdiction. The power to restrain presentation of a winding-up petition arises from the court’s jurisdiction to prevent abuse of process. The court should stop short of deciding whether the debt dispute is ultimately valid. It must examine the material sufficiently to decide whether the dispute is made in good faith and has sufficient substance to warrant determination in ordinary civil proceedings. The threshold is low, even where a defence might be regarded as shadowy on a summary-judgment application.
3. Each of Mulalley’s three grounds independently met that threshold: the contractual restriction on assignment, disputes about payment and maturity of component sums, and substantial concerns about the authenticity and legal effect of three purported asset-purchase agreements. The three grounds together were compelling.
4. Costs. Mr White was a proper party and was personally liable with Regent because he had driven the conduct, signed the statutory demand and produced the disputed agreements. The use of the winding-up procedure despite clear knowledge of substantial, good-faith disputes justified indemnity costs. Mulalley’s costs were summarily assessed at £16,128.28.