A Company (Application To Restrain Advertisement)

In deciding whether to restrain advertisement of a winding-up petition, the court may take account of insolvency legislation which has been introduced but is not yet in force, where the parties agree that it is relevant to the discretionary exercise.

Under the proposed Schedule 10 restrictions, the creditor must show reasonable grounds for believing that the relevant statutory ground would apply even without any financial effect of coronavirus. A low prima facie threshold applies when establishing that coronavirus had a financial effect on the company, but the creditor bears the burden of satisfying the court that the winding-up ground would apply notwithstanding that effect. Advertisement may be restrained where there is no real chance of a winding-up order and publicity would be oppressive and unfair.

The Company applied to restrain advertisement of a winding-up petition presented by the First Respondent and to restrain the Second and Third Respondents from presenting petitions based on statutory demands. Earlier grounds based on collateral purpose and substantial dispute of the debts had been dismissed.

The adjourned hearing concerned the prospective effect of Schedule 10 to the Corporate Insolvency and Governance Bill, including whether the petition could proceed, whether the Bill should inform the court’s discretion before enactment, and whether advertisement would be oppressive and unfair in the circumstances.

1. Prospective legislation. The parties agreed that the court should factor the provisions of Schedule 10 to the Corporate Insolvency and Governance Bill into its discretion, reflecting Re a Company (Injunction to Restrain Presentation of a Petition) [2020] EWHC 1406.
2. Paragraph 1. Although paragraph 1 would prevent a petition based solely on a statutory demand served during the specified period, the petition could in principle rely instead on section 123(1)(e) of the Insolvency Act 1986. At this early stage the court would readily permit amendment to plead that ground. Paragraph 1 was therefore not fatal to the petition.
3. Paragraph 2. For section 123(1)(e), the relevant condition was paragraph 2(4). The creditor had to have reasonable grounds, at the date of presentation, for believing either that coronavirus had not had a financial effect on the company or that the relevant ground would apply even without that effect. The Petitioner satisfied paragraph 2(4)(b), principally because the debt had long been due, interest payments had ceased, and demands made before the pandemic had been ignored.
4. Paragraph 5. The Company bore the evidential burden of showing that coronavirus had a financial effect before presentation. The phrase “a financial effect” imposed a low threshold, requiring a prima facie case rather than proof on the balance of probabilities. The halted funding drive met that threshold. At the petition hearing, however, the Petitioner would bear the burden under paragraph 5(3) of satisfying the court that section 123(1)(e) would apply even without the coronavirus effect.
5. For an application to restrain advertisement, the court had to consider whether there was a real chance of a winding-up order on the material available. There was no such real chance on the evidence then before the court. Advertisement would also be oppressive and unfair because of the adverse publicity during the Company’s proposed scheme of arrangement under Part 26 of the Companies Act 2006.
6. An injunction restraining advertisement was granted until further order, with the usual cross-undertaking in damages and liberty to apply. Similar injunctions restrained the Second and Third Respondents from presenting petitions until further order. Costs were reserved for determination on handing down.

This was a first-instance application. The judgment records an earlier hearing before Deputy ICC Judge Agnello QC, at which two grounds of opposition were dismissed; the present hearing determined the remaining ground.