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The applicants that cried wolf: how relying on COVID-19 was 'entirely opportunistic and not credible'

View profile for Tom Serafin
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Yesterday morning, the High Court of Justice in Shorts Gardens LLB v London Borough of Camden Council [2020] EWHC 1001 (Ch) dismissed two applications seeking to restrain winding up petitions, with one of the grounds of the applications relating to COVID-19.

Key takeaway point

Bald statements about the effects of COVID-19 or anticipated legislative reforms affecting the insolvency regime are not, of themselves, sufficient enough reasons to restrain properly issued winding up petitions.

Summary of relevant facts

The respondent councils brought separate winding up petitions against the applicants for unpaid liability orders and unpaid costs orders arising from past litigation.

The applicants sought to restrain these winding up petitions from proceeding to hearing on a number of grounds. Of particular relevance, the applicants argued that:

  1. They are suffering, or would suffer, cash flow problems due to the effects of the coronavirus pandemic; and

  2. The court should have regard to anticipated legislative changes which, according to the applicants, would prevent winding up petitions being presented, or orders for winding up being made, against companies where their inability to pay arises from the coronavirus pandemic.

Justice Snowden was unimpressed with this argument, calling it ‘entirely opportunistic and not credible’, particularly given that in the applicants’ original evidence there was nothing to suggest any financial difficulty.

In fact, His Honour noted that the applicants had, in an earlier hearing, expressly stated that they did not face ‘liquidity or operational challenges as a result of the circumstances related to COVID-19.’

His Honour also observed there was no attempt by the applicants to provide any explanation for the change in position, or to furnish the court with any financial information in support of this new position.

Outcome

The court dismissed the applications as an abuse of process, declared them as without merit, and ordered an indemnity costs order against the applicants.

If you or your business need advice on filing, or defending, a winding up petition as a result of unpaid debts, please do get in touch.