Hex Technologies Limited & Ors v DCBX Limited

The court considered a creditor's winding up petition presented pursuant to section 122(1)(f) of the Insolvency Act 1986, based on a statutory demand for unpaid invoices arising under several written agreements between the parties. The judge applied established authorities on disputed winding up petitions (including the principles in Angel Group v British Gas and Re Taylor's Industrial Flooring Ltd) and concluded that unpaid sums above the statutory threshold which are not bona fide disputed on substantial grounds suffice to demonstrate inability to pay under section 123. The judge rejected the respondent's successive grounds of opposition: that the Corporate Insolvency and Governance Act 2020 restrictions (CIGA) precluded the petition, that the court was the wrong venue, that exclusive jurisdiction clauses prevented consideration of disputed debts (distinguishing BST Properties from Salford Estates and declining to follow ICC Judge Prentis' approach in Al Saad), and that frustration, implied termination or other asserted defences established a substantial dispute. The judge found that at least USD 22,500 (software licence fees), USD 4,000 (minimum custody fees) and approximately USD 101,447.36 (custody fees under client custodian agreements) were indisputably due and therefore made a winding up order.

This was a first instance contested creditor's petition brought on 17 December 2021 by Hex Technologies Ltd, Hex Trust Ltd and Hex Technologies Pte Ltd (together "HEX") for the winding up of DCBX Limited under section 122(1)(f) of the Insolvency Act 1986. HEX relied upon a statutory demand of 10 November 2021 and invoices dated between October 2019 and July 2020 for sums said to be due under four types of written agreements: an Engagement Letter, a Software License Agreement, a Company Custodian Agreement and 19 Client Custodian Agreements. The Petition alleged unpaid sums totalling, after credits, USD 131,759.36 (converted to sterling in the pleadings) plus interest.

The respondent company filed multiple witness statements and raised seven successive grounds of opposition, namely: (i) limits imposed by CIGA 2020; (ii) that insolvency proceedings were the wrong venue because the company was solvent; (iii) that the English court was the wrong forum because of an exclusive jurisdiction clause (the "one overall agreement" argument); (iv) that the debt was bona fide disputed on substantial grounds; (v) asserted solvency; (vi) abuse of process; and (vii) that the petition was pursued with an improper motive.

The court first identified and analysed the contractual basis of the invoices and excluded, for present purposes, certain invoice items where the contractual basis was not clear. The judge accepted the parties' pragmatic approach to foreign law and proceeded on the basis that Singapore and Hong Kong law were materially similar to English law on the issues in dispute. He then considered the statutory test for inability to pay (section 123) and the revised threshold and notice requirements introduced by Schedule 10 to the Corporate Insolvency and Governance Act 2020 as in force for the relevant period.

On the CIGA point the judge held there was no retrospective bar to presenting a petition in November 2021 in respect of earlier debts: Parliament had not enacted the retrospective protection the company sought. On the forum and jurisdiction points, the court rejected the submission that the separate written agreements constituted one overarching contract governed exclusively by the Singapore courts. The court construed the client custodian agreements' jurisdiction clause as not imposing exclusive jurisdiction on Hong Kong courts and, applying BST Properties Ltd, concluded that an exclusive jurisdiction clause does not automatically preclude the companies court from determining whether a debt is bona fide disputed on substantial grounds.

Substantively, the respondent's defences failed. The judge rejected frustration and implied termination arguments, held that the termination and repudiation points amounted to complaints of an adverse commercial bargain rather than substantial legal defences, and found the company had not demonstrated solvency by evidence of assets and liabilities. Consequently the unpaid sums above the applicable threshold evidenced inability to pay. The petition was therefore well founded and a winding up order was made, subject to administrative matters (amendment of a typographical error in the petition and evidence of service on the FCA) which were addressed before handing down.

First instance: The court made a winding up order. The judge held that certain sums due under the Software Licence Agreement, the Company Custodian Agreement and the Client Custodian Agreements were indisputably payable, that the respondent had not raised bona fide disputes on substantial grounds nor proved solvency, and that neither CIGA nor the existence of jurisdiction clauses barred the court from determining the petition under binding authority (BST Properties). Frustration and termination defences failed as a matter of construction and evidence.