Lendinvest BTL Limited v Property Services LDN Limited

A winding-up petition should not be used to determine a genuine and serious dispute about the petition debt or a substantial cross-claim. The company must provide evidence showing a rationally arguable claim of substance; bare assertions, an unparticularised case and unexplained delay may demonstrate that the claim is not genuine and serious. An extant, unchallenged costs order cannot be treated as invalid in winding-up proceedings. For inducing breach of contract, prevention of contractual performance is insufficient: the claimant must show persuasion, encouragement or assistance which causally operates on the contracting party’s will.

The petitioner sought the winding up of the respondent company for failure to pay a £20,000 costs order made in related Part 8 proceedings. The company contended that the order was invalid because the petitioner had not been joined to those proceedings. It also alleged that it had a cross-claim exceeding the petition debt, based on the petitioner’s alleged inducement of Laverstock Management Corporation Ltd to breach contracts for the sale of several properties.

The court considered whether the costs order was enforceable and whether the alleged tort claim was genuine and serious, substantial, properly articulated and supported by evidence.

1. The petition succeeded. The company’s challenge to the costs order failed. The order made by Spencer J remained extant and unchallenged, and this court would not treat it as invalid. The petitioner was necessarily a party to the company’s own application seeking to set aside or discharge an order obtained by the interested parties. It was therefore a successful respondent entitled to the costs order; no further joinder was required.
2. A winding-up order will not be made on the basis of a debt genuinely disputed on substantial grounds. A cross-claim relied on to defeat a petition must be genuine and serious, or one of substance, and must be supported by evidence. Delay is relevant to that assessment, although it is not necessarily fatal.
3. The ingredients of inducing breach of contract include breach, inducement, knowledge, intention and absence of lawful justification. Inducement requires conduct amounting to persuasion, encouragement or assistance, with a sufficient causal connection operating on the contracting party’s will. Preventing performance as a consequence of other conduct is not, by itself, inducement.
4. The proposed cross-claim was not properly articulated, particularised or evidenced. Assertions that the parties were acting together, had prevented completion and used connected solicitors did not identify conduct by the petitioner operating on the will of Laverstock, the receivers or the administrators. The receivers and administrators independently investigated the matter and reached their own conclusions.
5. The alleged cross-claim therefore failed to meet the required threshold, and the petition succeeded on the unpaid costs debt.

Not stated in the judgment.