Media & Sport Management Ltd v Schettini

Serving a statutory demand and threatening winding-up proceedings is an abuse of process where the alleged debt is disputed on bona fide and substantial grounds, so that the intended petitioner cannot yet establish that it is a creditor. The company may obtain its costs of an application brought to restrain that conduct without awaiting trial of the underlying debt or fraud allegations. Where the demand is withdrawn only after proceedings are issued, the court may award costs incurred in securing the withdrawal and undertaking, including costs of subsequent hearings. Such costs may be assessed on the indemnity basis where the conduct justifies that order.

Media & Sport Management Ltd applied to restrain Dario Ovidio Schettini from presenting a winding-up petition founded on a statutory demand for approximately £1 million. The alleged commission debt was substantially disputed, including disputes about the effect and authenticity of contractual documents. After the application was issued, the statutory demand was withdrawn and an undertaking not to present a petition was given. The remaining issue was the applicant’s entitlement to, and the amount and basis of, its costs.

1. Entitlement to costs. The service of a statutory demand, coupled with a threat to pursue winding-up proceedings, was an abuse of process because the claimed debt was disputed on bona fide and substantial grounds. The respondent could not yet say that he was a creditor of the company. The court relied on Re a Company (No. 0012209 of 1991) [1992] 1 WLR 351.
2. It was unnecessary to await trial of the underlying contractual and fraud disputes before deciding the applicant’s entitlement to the costs of the injunction application. The entitlement arose from the abuse of the court process, not from a determination of the underlying debt.
3. Period of costs. Costs were payable from and including 23 April 2020, after the applicant’s detailed response and request for withdrawal. They included costs incurred up to and including the hearing because the respondent had not promptly provided the requested undertaking or agreed consent order.
4. Basis and quantum. The costs were awarded on the indemnity basis. The court accepted that rates above guideline rates were justified by the urgency and nature of the work, but reduced the proposed hourly rates to £550 for the Grade A fee earner and £300 for the Grade C fee earner. The remaining phase 2 and phase 3 costs and disbursements were allowed subject to that recalculation.