Seaton Management Limited v Stephen Henry Evans-Jones

Relief from sanctions requires a structured assessment of the seriousness and significance of the breach, the reason for default, and all the circumstances. The merits may be relevant at the final stage where the applicant’s case is plainly bound to succeed or fail.

Disclosure and inspection in an application to restrain presentation of a winding-up petition are exceptional. Third-party disclosure and intrusive device inspection must be necessary, relevant and proportionate, and the applicant should first examine its own sources.

A winding-up petition should be restrained where the alleged debt is disputed on substantial grounds and the petition would be an abuse of process. The Companies Court’s summary procedure is unsuitable for resolving substantial disputes of fact requiring cross-examination.

Seaton Management Limited sought to restrain Stephen Henry Evans-Jones from presenting a winding-up petition founded on invoices and a statutory demand relating to an alleged fee-sharing agreement. The alleged agreement was oral, and the parties disputed both its terms and the identity of the contracting parties.

The respondent filed evidence late, applied for relief from sanction, and sought disclosure and forensic inspection of a non-party’s mobile phone and cloud storage to locate alleged WhatsApp messages. The court had to determine whether relief should be granted, whether disclosure and inspection were justified, and whether final injunctive relief should restrain presentation of the petition.

1. Relief from sanctions. The court applied the three-stage approach in Denton v TH White Ltd [2014] EWCA Civ 90. The breach was serious and significant because evidence was filed more than five weeks late, jeopardising the efficient disposal of a summary application. No good reason was established. The respondent had consciously delayed compliance, and his status as a litigant in person did not provide a sufficient explanation, applying Elliott v Stobart Group Ltd [2015] EWCA Civ 449.
2. The merits were relevant at the third stage because the respondent’s defence was bound to fail on the evidence, within the exception identified in R (Hysaj) v Secretary of State for the Home Department [2014] EWCA Civ 1633. Relief was refused.
3. Disclosure and inspection. Although disclosure jurisdiction exists in winding-up proceedings, it is exercised sparingly. In the context of an application to restrain presentation, only very exceptional circumstances would justify disclosure. Forensic inspection of a mobile device is an intrusive order under CPR r.25.1(c)(ii), requiring necessity and proportionality. The respondent had not reasonably examined his own sources and had not shown that the requested orders were necessary to dispose fairly of the injunction application. The application was dismissed.
4. Injunction. The court accepted the guidance summarised in Coilcolour v Camtrex [2015] EWHC 3202. The alleged debt was subject to a bona fide dispute on substantial grounds, involving factual issues requiring cross-examination. Presentation of a winding-up petition to exert pressure for payment of that disputed debt would be an abuse of process. A final injunction restraining presentation of the petition was granted.

Not stated in the judgment.