Enfield Highway Development Limited v Park Estate Holidings Limited

A winding-up petition should not be used to determine a debt which is disputed in good faith on substantial grounds. The threshold is not particularly high, but the company must show a defence with a rational prospect of success. The court may examine the evidence in detail to distinguish a genuine dispute from a cloud of unsubstantiated objections.

A cross-claim can also restrain presentation of a petition where it is advanced in good faith on substantial grounds and exceeds the debt. A contractual pre-condition to payment of commission requires evidence of a substantial breach causing significant loss. Generalised assertions, unsupported allegations of delay and speculative loss are insufficient.

Enfield Highway Development Limited applied to restrain Park Estate Holdings Limited from presenting a winding-up petition based on an alleged commission debt of £54,180 arising from the introduction of a purchaser for a property.

Enfield contended that the debt was disputed because the introduction occurred outside the contractual agency period, the contractual strike price had not been agreed, and Park Estate had breached its obligations, giving rise to a cross-claim exceeding the debt. Park Estate disputed each contention.

The central issues were whether Enfield had raised a genuine and substantial dispute or an equivalent cross-claim capable of preventing presentation of the petition.

1. Application dismissed. The evidence did not disclose a defence or cross-claim with a realistic prospect of success, apart from a substantial dispute about whether the balance was £54,180 or £39,180.
2. The court applied the principles summarised in Angel Group v British Gas Trading Ltd [2012] EWHC 2702 (Ch), [2013] BCC 265. A company may challenge the petitioner’s standing by disputing the whole debt, or enough of it to bring the undisputed part below £750. A dispute is not substantial if it has no rational prospect of success. The court may examine the evidence in detail, while remaining alert to a debtor creating a cloud of objections to avoid the consequences of a petition.
3. The threshold is not particularly high, as recognised in Tallington Lakes Ltd v South Kesteven District Council [2012] EWCA Civ 430. Nevertheless, the Agency Period argument was not credible. The correspondence proceeded on the basis that the contractual agreement and strike-price mechanism applied, and clause 6.4, read with clause 6.2, concerned an introduction made during the agency period which was later completed.
4. The contention that the strike price had not been agreed was also rejected. Enfield had signed the agreement containing Schedule 2, the contemporaneous documents supported the contractual mechanism, and the entire agreement clause made the alleged collateral arrangement implausible.
5. The existence of a cross-claim exceeding the debt may justify restraining a petition: Re Bayoil SA [1999] 1 WLR 147. However, Enfield provided only general assertions of breach and delay, no cogent contemporaneous evidence, and insufficient evidence of causation or loss. The buyer’s change of solicitors was a significant alternative cause of delay.
6. Although clause 6.1 made commission conditional on Park Estate performing its obligations, that pre-condition required Enfield to establish a substantial breach causing significant loss. The evidence fell well short. The total-failure-of-consideration argument likewise failed because Park Estate had performed valuable marketing and introductory work, consistent with Stream Healthcare (London) Ltd v Pitman Education and Training Ltd [2010] EWHC 216 (Ch).