Victory House General Partner Ltd v RGB P&C Ltd

A judgment debt may be enforceable and no longer disputed, yet a winding-up petition may still be inappropriate where the company has a bona fide cross-claim on substantial grounds exceeding the petition debt. The rule concerning disputed debts extends to such cross-claims. The existence of execution remedies does not itself constitute a special circumstance justifying winding up. The court should apply the general rule consistently and depart from it only in exceptional circumstances.

RGB P&C Ltd presented a winding-up petition against Victory House General Partner Ltd for non-payment of a judgment debt arising from an adjudication under a building contract. The judgment had been entered following enforcement of the first adjudicator’s decision and was immediately enforceable.

The company relied principally on a nascent restitutionary cross-claim arising from a later adjudication, which valued the relevant interim works at less than the sum previously determined and paid. A second alleged cross-claim for defects and consequential losses was not determined. The central issue was whether the existence of the enforceable judgment debt prevented the company from relying on the cross-claim to resist the petition.

1. The petition was dismissed. The judgment debt was binding, immediately enforceable and no longer a disputed debt. The company could not rely on set-off as a defence to that judgment debt.
2. The court applied the principle in Re Bayoil SA [1999] 1 WLR 147: where a company has a bona fide cross-claim on substantial grounds exceeding the petition debt, the normal approach is to dismiss or restrain the winding-up petition. That principle applies even where the petition debt is a judgment debt capable of execution.
3. The ability of the petitioning creditor to levy execution does not itself justify winding up. A judgment creditor’s ordinary enforcement remedies do not amount to the required special circumstance.
4. The later adjudication provided substantial grounds for a restitutionary cross-claim. It had valued the work for interim-payment purposes, including the work covered by the earlier application, at a figure below sums already paid. The court considered that the claim would probably succeed, although it was unnecessary to reach a final conclusion on that point.
5. Re Douglas Griggs Engineering Ltd [1963] 1 Ch 19, insofar as it treated a judgment creditor as prima facie entitled to a winding-up order despite a disputed cross-claim, could no longer stand following Re Bayoil SA. The earlier authorities concerning an appeal against a judgment, including Re Amalgamated Properties of Rhodesia (1913) Ltd [1917] 2 Ch 115 and James v The Silver Fund Investment.Com Ltd, concerned a different situation.
6. No special circumstances displaced the general rule. The petition was therefore dismissed, without detracting from the binding nature of the judgment or the petitioner’s ordinary enforcement rights.

The judgment itself was a first-instance decision. It recorded that a Technology and Construction Court deputy High Court judge had enforced the first adjudication decision and entered judgment for the petitioner on 26 January 2018. No appeal or stay had been obtained.