Ronald Martin v McLaren Construction Limited

For a statutory demand or winding-up petition, a debtor must show a genuine and substantial dispute or a genuine and serious cross-claim. The threshold requires more than a bare or merely arguable assertion, but the court should avoid conducting a full trial.

A contractual term will not be implied where it contradicts detailed express provisions or is unnecessary to give the contract commercial or practical coherence. A conspiracy claim based on uncertain planning and sale prospects may amount only to loss of a chance. It cannot establish a cross-claim equal to the petition debt without evidence showing a genuine and serious claim in that amount.

McLaren Construction Limited claimed approximately £7.9 million under a loan agreement with Martin Dawn plc. It also claimed against Ronald Martin under a personal guarantee. The loan agreement provided for repayment from sale proceeds, on a long-stop date, or following specified events.

Mr Martin and the Company applied to set aside statutory demands and opposed McLaren’s winding-up petition. They alleged that terms should be implied into the loan agreement suspending repayment while a related promotion agreement was not being performed. They also alleged that McLaren and its associated promoter had conspired to prevent the development and sale of land, causing a cross-claim sufficient to defeat the debt.

The central issues were whether the alleged implied terms were arguable and whether the alleged conspiracy constituted a genuine and serious cross-claim.

1. Outcome. The applications to set aside the statutory demands were dismissed and a winding-up order was made against Martin Dawn plc.
2. Disputed debt and cross-claim. Under rule 10.5(5) of the Insolvency (England and Wales) Rules 2016, the court considers whether the dispute has a realistic, substantial and genuine prospect of success, or whether the cross-claim is genuine and serious. Bare assertions and a cloud of objections do not satisfy the evidential threshold. The court may examine evidence and determine short points of law or construction, while avoiding a full trial.
3. Implied terms. The proposed terms were hopeless. The loan agreement expressly required repayment on the long-stop date irrespective of the success of the promotion and also dealt expressly with termination. The suggested terms would contradict those provisions, impose uncertain obligations on the lender concerning a separate contract, and potentially make the borrowers indefinitely immune from repayment. The contracts had commercial and practical coherence without the implied terms.
4. Unlawful means conspiracy. The alleged conspiracy lacked evidential support. The parties had not identified the alleged conspirators, the relevant agreement or combination, or any act by McLaren Construction Limited in furtherance of it. The surrounding commercial circumstances also made the allegation inherently unlikely.
5. Loss. Any alleged loss was a loss of a chance that planning permission would be obtained and the land sold for sufficient proceeds to repay the loans. The relevant chance was substantially below 100%. Even assuming arguable breach and causation, the evidence could not establish a genuine and serious cross-claim equal to the debt.