Re A COMPANY

Under paragraph 5(3) of Schedule 10 to the Corporate Insolvency and Governance Act 2020, the counterfactual question is whether the statutory ground for winding up would have applied in the absence of coronavirus, assessed by reference to the actual winding-up proceedings. The court must consider the financial effect of coronavirus up to the time relevant to those proceedings, ordinarily including the period up to presentation of the petition. It need not assume that the creditor presented proceedings earlier. A historical failure to pay a debt is not conclusive of inability to pay debts under section 123(1)(e) of the Insolvency Act 1986. Whether a demand was needed, and what inference could be drawn from non-payment without one, depended on the particular circumstances.

The Petitioner appealed the dismissal of its winding-up petition against a connected property-development company. The petition relied on the Company’s failure to repay a secured loan and alleged inability to pay debts under section 123(1)(e) of the Insolvency Act 1986.

The petition was issued during the temporary coronavirus regime in Schedule 10 to the Corporate Insolvency and Governance Act 2020. The central issue was whether paragraph 5(3) required the counterfactual assessment to be made at the contractual repayment date, or at a later date by reference to the actual petition and demand.

1. Permission refused. The proposed appeal had no real prospect of success.
2. Paragraph 5(3) of Schedule 10 had to be read with paragraph 5(1). The relevant counterfactual was whether the ground in section 123(1)(e) or section 123(2) of the Insolvency Act 1986 would have applied without the financial effect of coronavirus referred to in paragraph 5(1). The court was to assess that question when considering the application of Schedule 10, including the coronavirus effects up to that time, or at least up to presentation of the petition.
3. The court was not required to assume that the Petitioner had commenced winding-up proceedings when the debt fell due. It had to consider the actual petition. On the judge’s findings, without the pandemic the Company would have refinanced the project and paid the debt by May or June 2020. Accordingly, the statutory ground would not have been established in the actual November 2020 proceedings.
4. Section 123(1)(e) is expressed in the present tense. Non-payment of a historical debt may be evidence of inability to pay debts at the hearing, but does not require the court to examine only the date when that debt accrued and its immediate aftermath.
5. Separately, and obiter, the judge was entitled to conclude that a demand was required before an inference of insolvency could be drawn from non-payment in the particular circumstances. The debt was between associated companies, the repayment date had passed without action, the debt was fully secured, and the agreement provided for additional interest. Whether those features justified that inference was evaluative. They also justified treating the demand and post-demand non-payment as part of the case advanced in the petition.
6. Costs were summarily assessed at £14,000.

• High Court (Chancery Division): ICC Judge Barber dismissed the winding-up petition on 20 July 2021 and refused permission to appeal, giving reasons in a reserved judgment dated 11 November 2021.
• High Court (Chancery Division): the Petitioner’s rolled-up application for permission to appeal and appeal was heard by Mr Justice Miles. Permission to appeal was refused.