LM1 Limited v Seacroft Film Investments Limited

Success in an application to restrain presentation of a winding-up petition does not dictate the costs order. Under Civil Procedure Rules 1998, CPR 44.2, the court considers all circumstances, including conduct, the reasonableness of the parties’ positions, the handling of a detailed assessment, and settlement offers. A party seeking costs of a counterclaim may recover only costs specifically referable to that counterclaim. Where its bill wrongly claims the costs of the whole action, and the party gives no meaningful information or urgency about a replacement bill, the respondent may reasonably seek repayment of an interim contribution and issue a statutory demand while the position remains unclear. Even if the application succeeds, these circumstances can justify no order as to costs.

LM1 Limited applied under the Insolvency Rules 2016 to restrain Seacroft Film Investments Limited from presenting a winding-up petition based on a statutory demand seeking repayment of a £20,000 costs contribution under a settlement agreement.

The original bill of costs had been struck out at detailed assessment, with permission to draw a replacement bill. The application was adjourned with an undertaking by Seacroft. After LM1 served further evidence, Seacroft accepted that the debt was substantially disputed, leaving only the question of costs. The central issue was whether the circumstances justified departing from the usual order that the unsuccessful party pays the successful party’s costs.

Disposition. LM1 was successful in obtaining protection from presentation of a winding-up petition based on the statutory demand, but the court ordered no order as to costs.

1. Insolvency principles. Under the Insolvency Rules 2016, a statutory demand may be set aside and presentation of a petition restrained where there is a genuine dispute on substantial grounds giving rise to a triable issue. Insolvency proceedings must not be used to decide such a dispute or to exert pressure to pay. A bare assertion of dispute is insufficient. These principles were stated in Re Company (No. 006685 of 1996) [1997] BCC 830, Crossley-Cooke v Europanel (UK) Ltd [2010] EWHC 124 (Ch) and Angel Group Ltd v British Gas Trading Ltd [2012] EWHC 2702 (Ch). The merits were not finally adjudicated because Seacroft accepted that a substantial dispute existed.
2. Costs discretion. CPR 44.2 gives the court a broad discretion. The usual rule that the unsuccessful party pays may be displaced after considering all the circumstances, including conduct, the extent of success, the reasonableness and manner of pursuing the dispute, and settlement offers. The guidance in Frank Saul (Fashion) Limited v Her Majesty’s Revenue & Customs [2012] EWHC 2702 (Ch) supported making no order where the circumstances required departure from the usual rule.
3. Application of the discretion. LM1’s counterclaim was substantially a mirror of Seacroft’s claim. Under Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] AC 88, only costs specifically referable to the counterclaim were recoverable. LM1’s original bill wrongly claimed the costs of the whole action. Although a replacement bill was permitted, LM1 provided no meaningful information about its likely amount or timing and served it only at the final moment permitted by a later court direction. Seacroft was therefore entitled reasonably to regard the counterclaim costs as minimal and to seek repayment of the contribution.
4. Technical compliance with the later direction did not cure the earlier lack of urgency and transparency. Seacroft’s conduct was not an abuse of process, and no order as to costs was appropriate.

This was a first-instance decision. The application was first listed on 20 February 2026, adjourned with an undertaking by Seacroft, and heard on 12 May 2026. No appellate decision is stated in the judgment.