A Company, Re

The court will restrain presentation of a winding-up petition where an undisputed debt is met by a genuine and serious cross-claim which is likely to equal or exceed the petition debt. The applicant need not plead the cross-claim fully or conclusively answer every possible defence at the injunction stage. The court must assess whether the claim has real substance, while avoiding a detailed trial of complex factual or construction issues.

A contractor which has taken on work connected with providing dwellings may owe the statutory duty under Defective Premises Act 1972, subject to the statutory defence concerning compliance with another’s instructions. A contribution claim may be established where the parties could each be liable for the same damage. Such issues should ordinarily be determined in ordinary Part 7 proceedings.

The Applicant sought an injunction restraining the Respondent, its former parent company and now sister company in liquidation, from presenting a winding-up petition for an undisputed debt of approximately £7 million.

The Applicant asserted cross-claims exceeding that debt. It relied on alleged defective cladding at several residential developments and claimed liability under the Defective Premises Act 1972 and the Civil Liability (Contribution) Act 1978. The Respondent argued that the claims were vague, speculative, insufficiently evidenced and, in any event, unlikely to exceed the debt. The central issue was whether the asserted claims met the threshold of being genuine and serious and were likely to equal or exceed the petition debt.

1. Application granted. The Respondent was restrained from presenting a winding-up petition in respect of the debt, in the absence of a satisfactory undertaking.
2. The governing test was whether the Applicant had a genuine and serious cross-claim, or one of substance, which was likely to exceed the petition debt. The court was not required to conduct a detailed analysis or determine the ultimate merits of the cross-claim. A claim need not already be pleaded, although it must be capable of being pleaded at a later stage.
3. The evidence had to be assessed against all admissible evidence and material. Untested witness evidence could be rejected where it was manifestly incredible or contradicted by reliable documents, but the evidential threshold at this stage remained low. Delay and the absence of documents were relevant, but were not automatically fatal.
4. The Applicant had established a genuine and serious claim under section 1(1) of the Defective Premises Act 1972. The Respondent was not disputed to have taken on work connected with the provision of dwellings, and there was unchallenged evidence that the dwellings were not fit for habitation because of the cladding. The claim remained subject to possible defences, including section 1(2), but the Applicant did not have to anticipate and conclusively defeat those defences at this stage.
5. The alternative contribution claim also passed the threshold. Applying the three-part approach in URS Corporation Limited v BDW Trading Limited, the Applicant could be liable to the relevant claimants, the Respondent could also be liable as contractor, and the alleged liabilities concerned the same cladding damage.
6. The court was not the appropriate forum to quantify the construction liabilities. The funding evidence, including substantial grants, supported the conclusion that the cross-claim was likely to equal or exceed the debt. The specialist issues should be addressed in Part 7 proceedings.