Helios Energia Ltd v IBM United Kingdom Financial Services Ltd

An injunction restraining presentation or advertisement of a winding-up petition may be granted where the alleged debt is subject to a substantial dispute advanced in good faith and having a rational prospect of success, or where the company has a genuine and serious cross-claim likely to exceed the petition debt. The Companies Court may examine the evidence in detail, but will not ordinarily determine a substantial dispute by means of winding-up proceedings.

Where a financing agreement separates the finance and supply relationships, and expressly excludes liability for product-related matters, the finance company is not liable for defects or misrepresentations by the supplier absent evidence establishing an agency relationship or contractual assumption of that liability.

Helios Energia Ltd applied for an interim injunction restraining IBM United Kingdom Financial Services Ltd from presenting or advertising a winding-up petition based on a statutory demand for £52,819.10.

The debt arose under a master financing agreement under which the defendant financed software and services and leased hardware supplied by Recarta IT Ltd. Helios disputed liability and advanced a cross-claim alleging negligent and fraudulent misrepresentation and breach of contract. It also alleged that Recarta acted as the defendant’s agent.

The central issues were whether the debt was subject to a substantial dispute in good faith with a rational prospect of success, whether the cross-claim was genuine and serious, and whether the contractual exclusions and allocation of responsibility prevented the proposed claims.

1. Application dismissed. The defendant had established that it was a creditor for more than £750 and therefore had standing to present a winding-up petition. The injunction application accordingly failed.
2. Under Insolvency Act 1986, sections 122(1)(f) and 123(1)(a), a statutory demand for at least £750 which remains unpaid for three weeks provides a basis for presenting a petition and deems the company unable to pay its debts. Corporate insolvency legislation contains no equivalent to the procedure for setting aside an individual’s statutory demand, so the appropriate remedy is an injunction restraining presentation or advertisement of the petition.
3. The governing principles were those summarised in Angel Group Ltd v British Gas Trading [2012] EWHC 2702 (Ch). The court will not allow a petition to be used to exert pressure in relation to a substantial dispute raised in good faith. A dispute must have a rational prospect of success. The same approach applies where there is a genuine and serious cross-claim likely to exceed the petition debt.
4. The agreement distinguished the supply contract between Helios and Recarta from the financing and leasing contract with the defendant. The defendant financed the purchase of software and services and bought and leased the hardware. It did not assume responsibility for product performance or product-related matters.
5. The Sale of Goods Act 1979 did not apply because the transaction was a lease, not a sale. The Supply of Goods and Services Act 1982 could apply to a lease of goods, but its implied terms could be excluded under section 11, as the agreement purported to do. Section 3 of the Unfair Contract Terms Act 1977 did not assist Helios on the facts. The defendant had performed the financing and leasing obligations it had undertaken, rather than providing a substantially different performance or no performance.
6. The promissory-estoppel case lacked evidence identifying the promises, when they were made, and their effect. Recarta’s substitution of equipment or assistance did not establish any variation by the defendant.
7. The cross-claim had no rational prospect of success. The documents did not establish that Recarta was the defendant’s agent, and the supply agreement had not been produced. Any remedy arising from the products was therefore against Recarta, not the defendant.
8. Permission to appeal was refused because there was no real prospect of success and no other compelling reason. The defendant was awarded its costs.

This was a first-instance application in the High Court. Permission to appeal was refused, with liberty to renew the application directly to the Court of Appeal.