Wolf Rock (Cornwall) Ltd v Langhelle

A winding-up petition may be presented by a person with a debt claim, including claims for loans, expense reimbursement, salary or quantum meruit. A claim for unliquidated damages may also qualify as a contingent or prospective creditor’s claim. The exact amount need not be ascertainable when the petition is presented, provided an undisputed minimum exceeding £750 is established.

Where a court has directed evidence to be filed by a particular date, permission for materially late evidence may be assessed by applying the Denton/Mitchell approach, even where no express sanction is specified. An appellate court should not interfere with case-management decisions or factual and evaluative findings merely because it might have struck a different balance.

The appellant company appealed from a winding-up order made by District Judge Stone in the County Court at Truro. The order was made under section 122(1)(f) of the Insolvency Act 1986 on the petition of the respondent, who claimed unpaid salary, expenses and loans.

The appeal concerned the exclusion of late witness statements, the application of relief-from-sanctions principles, the respondent’s standing as a creditor, the uncertainty of the amount claimed, the alleged substantial dispute over the petition debt, and a substantial cross-claim based on company payments to the respondent’s partner.

Appeal dismissed. The winding-up order was upheld.

1. Late evidence. Rule 7.16 of the Insolvency (England and Wales) Rules 2016 is directed principally to preparation for the first hearing of a winding-up petition. The appellant’s initial witness statement satisfied that rule. The rule did not provide a continuing code governing later evidence.
2. Chapter 3 of Part 7 did not contain a complete code for the preparation of evidence. By rule 12.1(1) of the 2016 Rules, the Civil Procedure Rules 1998 applied with necessary modifications. CPR rule 32.1 empowered the court to control the evidence and to exclude evidence that would otherwise be admissible. The district judge’s directions created an evidence timetable, and the November statements were outside it.
3. No express sanction had been imposed. Nevertheless, for policy reasons, permission for evidence filed outside a court timetable was to be assessed by the same approach as relief from sanctions under CPR rule 3.9, applying the Denton/Mitchell principles. The order of 21 August 2019 did not replace the earlier timetable. The district judge was therefore entitled to exclude the late evidence.
4. The appeal court was reviewing, not rehearing, the decision. Under CPR rule 52.21, it should not interfere with the district judge’s case-management decision merely because it might have attached different weight to the competing considerations. There was no relevant omission, legal misdirection or perversity.
5. Under section 124(1) of the Insolvency Act 1986, standing was not confined to a person owed a debt in the strict sense. A person with an unliquidated damages claim could be a contingent or prospective creditor. The respondent’s claims were stronger: repayment of loans and expenses were debt claims, and the salary claim was a debt claim or, absent an agreed salary, a quantum meruit claim.
6. The precise amount did not need to be ascertained when the petition was presented. It was sufficient that a minimum exceeding £750 was established and was not bona fide disputed on substantial grounds. The approach in Angel Group v British Gas [2012] EWHC 2702 was applied.
7. The district judge had heard the witnesses and was entitled to prefer the respondent’s evidence. The appellate court could not substitute its own assessment without an identifiable flaw in the factual or evaluative reasoning. The only cross-claim properly before the district judge was worth at most £1,527.47, whereas the respondent’s claim exceeded £100,000. The larger cross-claim depended on the excluded evidence and could not affect the result.

County Court at Truro. District Judge Stone made a winding-up order against the appellant on 6 December 2019.

High Court (Chancery Division). On appeal, HHJ Paul Matthews, sitting as a Judge of the High Court, dismissed the appeal and upheld the order: [2020] EWHC 2500 (Ch).