Time GB Group Limited v Yarwell Mill Country Park Limited

The Companies Court will restrain presentation of a winding-up petition where the petition is abusive, bound to fail, or founded on a debt disputed on genuine and substantial grounds. A genuine and substantial cross-claim may also justify restraint where it equals or exceeds the petition debt. Mere assertions, unparticularised allegations, or a cloud of objections do not suffice. The filing of an application to restrain presentation does not itself prevent presentation of the petition. A promissory note is an unconditional negotiable instrument, and a unilateral payment obligation will not ordinarily support an implied duty of good faith. Any proposed cross-claim must be supported by evidence and a properly arguable basis for liability and quantum.

Time GB Group Limited issued a promissory note promising to pay Yarwell Mill Country Park Limited £2.37 million. The debt was not paid, and Yarwell served a statutory demand before presenting a winding-up petition.

Time applied first to restrain presentation and then to strike out the petition or restrain its advertisement. It alleged that the debt was disputed, that Yarwell had breached an implied duty of good faith through conduct attributed to a former director, and that it had a cross-claim equal to or exceeding the debt. The central issues were whether those matters established a genuine dispute on substantial grounds or a genuine arguable cross-claim, and whether the petition’s presentation or advertisement constituted an abuse of process.

1. The application was dismissed. The filing of an application to restrain presentation did not prevent Yarwell from presenting the petition. The timing argument was rejected as hopeless.
2. The governing principles were those summarised in Coilcolour v Camtrex: restraint may be ordered where presentation would be abusive or the petition bound to fail, where the debt is disputed on substantial grounds, or where there is a genuine and substantial cross-claim equal to or exceeding the petition debt. A mere assertion of a dispute or a cloud of objections is insufficient.
3. The promissory note fell within sections 83, 88 and 89 of the Bills of Exchange Act 1882. It was an unconditional promise to pay and a negotiable instrument akin to cash. Its unilateral payment obligation was inconsistent with the suggested implied duty of good faith.
4. Applying Candey Ltd v Bosheh, the Applicant had shown neither that a term of good faith was necessary or obvious nor that the promissory note was a relational contract. The allegations concerning contact with brokers, disclosure of information and a visit to a former director’s home were unparticularised, unsupported, and in any event insufficient to establish breach.
5. The letter of 3 May 2023 did not rescind the promissory note or accept a repudiatory breach. The Applicant therefore failed to establish genuine and substantial grounds for disputing the debt.
6. The proposed cross-claim also failed. The alleged loss was based on a self-serving estimate unsupported by documents. Applying Ashworth v Newnote, the evidence could be rejected as inherently implausible and unsupported, and did not approach the minimum evidential threshold.
7. Advertisement was not restrained. The jurisdiction exists to prevent threatened abuse of process, while advertisement also serves the statutory purposes identified in In Re a Company (No 007923 of 1994), including notice to persons entitled to be heard and protection of potential traders affected by section 127 of the Insolvency Act 1986.
8. The Applicant appeared, on the evidence, to be hopelessly insolvent. Costs were to be addressed separately.