Shorts Gardens LLB v London Borough of Camden Council

An injunction restraining presentation or advertisement of a winding-up petition is ordinarily available to the company whose legal right is threatened, not merely to its directors or shareholders. A civil restraint order cannot be evaded by a director or shareholder making the application in the company’s place.

A court will generally not go behind liability orders supporting a winding-up petition unless fraud, want of jurisdiction, miscarriage of justice or another truly compelling circumstance is shown. A cross-claim must be genuine, substantial, not yet capable of litigation, and exceed the petition debt. Prospective COVID-19 legislation did not justify relief where the debts pre-dated the pandemic and no credible causal connection was shown.

Two applications sought to restrain winding-up proceedings concerning unpaid National Non-Domestic Rates liability orders and costs orders. Christine Harper applied in relation to Saint Benedict’s Land Trust Limited, while Shorts Gardens LLP applied in relation to its own proposed petition.

The applications relied on alleged disputes concerning the underlying liability orders, cross-claims, and the COVID-19 pandemic. The court considered standing, the effect of a general civil restraint order, whether the debts were genuinely disputed, whether the court should go behind liability orders, the alleged cross-claim, and the prospective insolvency measures announced by the Government.

1. Disposition. Both applications were refused and dismissed as abuses of process. They were declared totally without merit. Indemnity costs were summarily assessed at £4,600 against Ms Harper and £4,150 against Shorts Gardens. The SBLT petition was directed to be endorsed as properly presented on 25 March 2020.
2. Standing and restraint order. Rule 7.24(1) of the Insolvency (England and Wales) Rules 2016 contemplated an application by the company. The right protected by an injunction against an improperly presented petition was the company’s right, not a director’s or shareholder’s personal right. Neither office-holding nor share ownership supplied a sufficient personal interest. Mann v Goldstein was a derivative claim brought to overcome a deadlocked board and did not establish a personal right.
3. A general civil restraint order prevented SBLT from making an application to restrain presentation or advertisement without permission. Defensive participation in proceedings did not require permission, but a pre-emptive application did. Using a director or shareholder to make the application instead was an abuse and could, depending on the circumstances, constitute contempt.
4. Liability orders. Under rule 18(2) of the Non-Domestic Rating (Collection and Enforcement) (Local Lists) Regulations 1989, liability orders were deemed debts for winding-up purposes. Following Yang v Official Receiver [2018] Ch 178 and Bolsover District Council v Dennis Rye Ltd [2009] 4 All ER 1140, the court would seldom go behind them absent fraud, want of jurisdiction, miscarriage of justice or another compelling circumstance. No such circumstance existed.
5. Cross-claim. Under Re Bayoil [1999] 1 WLR 147, a cross-claim relied on to restrain a petition had to be genuine, substantial, not yet capable of litigation and greater than the petition debt. The alleged claim failed each requirement.
6. The COVID-19 announcement did not justify discretionary relief. The proposed legislation had not been enacted, its scope was unclear, and the applicants supplied no credible evidence that they could not pay because of COVID-19. Their debts largely pre-dated the pandemic and arose from costs orders and longstanding NNDR liabilities.