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Liability for costs where winding up petition withdrawn See CLM: ¶7650, ¶7723 |
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Re Realstar [2007] All ER (D) 171 (Aug) |
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RECENT CASES |
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A recent case has highlighted the importance of conducting winding up petitions properly from a costs point of view.
A dispute arose between A Ltd and B Ltd in relation to the payment of a service charge allegedly due in respect of a freehold unit. A Ltd threatened to wind B Ltd up if it did not receive payment by a certain date. B Ltd did not respond, so A Ltd served a winding up petition on B Ltd a month later. On the same day, B Ltd set out its position in relation to the dispute in more detail. After receiving the petition, B Ltd again set out its side of the dispute and objected to the petition being presented. It later requested A Ltd to undertake not to advertise the petition without first giving 7 days’ notice. A Ltd gave this undertaking, and subsequently gave notice to B Ltd of its intention to advertise the petition. This prompted B Ltd to apply to restrain the advertisement, which it did without notice to A Ltd. The petition was subsequently withdrawn, but A Ltd would not accept that each party should bear their own costs.
The court agreed with B Ltd that the use of a petition in these circumstances had been inappropriate from the start because it was clear that the debt was disputed and there had never been any doubt as to B Ltd’s ability to pay the debt if it was found to be liable for it. Therefore, A Ltd should pay B Ltd’s costs. However, the court rejected B Ltd’s argument that its costs should be paid on the indemnity basis (which would have reimbursed it pound-for-pound) because it had not conducted itself entirely properly. It should not have applied to restrain advertisement without notice to A Ltd, given A Ltd’s co-operation in giving notice of its intention to advertise. Therefore, A Ltd was ordered to pay B Ltd’s costs on the standard basis (meaning that it would receive what the court considered to be a fair amount for the work carried out, based on regional rates rather than its solicitors’ actual rates). |
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Administration application based on a disputed debt See CLM: ¶8728 |
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Hammonds (a firm) v Pro-fit USA Ltd [2007] EWHC 1998 (Ch) |
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Although normally a creditor must base his application for a company’s administration on an undisputed debt, a creditor with a disputed debt can still do so as long as he has an arguable case that a sufficient debt is owing to him. It is then up to the court to decide whether or not the application should be granted on the facts of his case. In this case, a firm of solicitors presented an administration application against its client in respect of monies owing for unpaid invoices and unbilled work in progress. After the firm threatened to take action against its client, the client alleged that the firm had been negligent and that it had a cross-claim which would result in a set-off or damages in excess of the debt. Despite this dispute regarding the debt, the court held that the firm was entitled to apply for an administration order: it was a creditor for the purposes of making an application because it had an arguable case that the debt was owed to it. There is a great deal of case law on whether a winding up order can be made on the basis of a disputed debt, which is often referred to in administration applications by analogy. However, the court in this case made it clear that the two procedures are separate, and while it can be guided by similar cases in the context of winding up, it is not bound to follow them. |