Bridger & Co Limited v Specialist Lending Limited (t/a Duologi)

A winding-up petition should not be advertised where the company raises a good-faith, substantial dispute about the whole petition debt, or enough of it to reduce the undisputed debt below the statutory threshold. The court may examine the evidence in detail, while ordinarily taking the company’s evidence at its highest unless it is incredible or contradicted by contemporaneous documents.

Contractual repayment obligations are not displaced by hopeful expectations of recoveries, implied terms, frustration, or alleged commercial arrangements which contradict express terms. A secured creditor is nevertheless entitled to present and pursue a winding-up petition. The existence and value of security, and the weight to be given to different creditors, are matters for the hearing of the petition.

Specialist Lending Limited presented a winding-up petition against Bridger & Co Limited for approximately £2.2 million under a disbursement funding agreement used to fund cavity wall insulation claims. The company applied under r.7.24 of the Insolvency (England and Wales) Rules 2016 to restrain advertisement of the petition.

The company argued that the debt was disputed on grounds including misrepresentation, implied terms, frustration, agency, repudiation, force majeure and abuse of process. It also contended that the petitioner’s security over the claims and related insurance restricted its recourse or deprived it of standing. The central questions were whether any argument disclosed a substantial dispute and whether a secured creditor could petition.

1. Application refused. The company’s application to restrain advertisement was dismissed because none of the grounds raised a substantial dispute about the petition debt.
2. The applicable approach was that stated in Angel Group Ltd v British Gas Trading Ltd [2012] EWHC 2702 (Ch); [2013] BCC 265. A creditor must have standing, and the company must raise in good faith a substantial dispute about the whole debt, or enough of it to reduce the undisputed amount below £750. The dispute must have a rational prospect of success. The court may examine the evidence in detail, but ordinarily takes the company’s evidence at its highest unless it is incredible or contradicted by contemporaneous documents.
3. The DFA required repayment of funded disbursements and accrued interest on a rolling basis when the earliest specified event occurred, including expiry of 24 months after the first drawdown for an individual claim. The company’s alleged representations were, at most, expectations that recoveries would normally be sufficient within 24 months. They were not false statements of existing fact and did not displace the express repayment provisions.
4. No implied term could be inserted requiring the petitioner to rely only on recoveries from the claims or associated insurance. The proposed term was neither necessary for business efficacy nor so obvious that it went without saying. It was also inconsistent with the express repayment obligation and would convert the facility into a non-recourse arrangement.
5. The alleged COVID disruption, expert-evidence difficulties and related events did not frustrate the DFA. COVID was already an established commercial reality when the company drew down funds. Problems with experts and litigation-market conditions were inherent and foreseeable risks of the funded litigation. The repayment obligation remained capable of performance; lack of available cash was not frustration.
6. The agency and repudiation arguments disclosed no substantial dispute. There was no evidence of refusal to fund before the company’s default. The force majeure argument was unnecessary to decide because the alleged events would not have frustrated the contract without the clause.
7. The petition was not an abuse of process. The petitioner genuinely sought a winding-up order, and knowledge that the company disputed the debt or could not pay did not itself establish an improper collateral purpose.
8. A secured creditor has standing to present a winding-up petition. The court relied on Re Lafayette Electronics Europe Ltd [2006] EWHC 1006; [2007] BCC 890 and Re Sushinho Ltd [2011] All ER (D) 32 (Mar), and noted the absence of any equivalent statutory restriction applicable to winding-up petitions. The value of the security and the relative weight of secured and unsecured creditors were reserved for the petition hearing.