Winding Up Petitions and Arbitration Agreements - The Impermissible Investigation

Author: Simon Hill
In: Article Published: Monday 05 November 2018

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Contracting parties are generally free to agree that disputes that may arise between them in regard to, or under a contract, shall be resolved by arbitration rather than through the Courts[1]. Where the parties choose to incorporate an arbitration agreement[2]into their contract, and a dispute[3]about the contract arises, a question can arise where the alleged wrongdoer is a company, can the alleged debt/liability which the company does not admit, found a winding up petition presented by the alleged wronged party? To answer this question, this article will look at 2 relatively recent cases, Salford Estates (No.2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; [2015] B.C.C. 306 (‘Salford Estates’) and Eco Measure Market Exchange Ltd [2015] BCC 877 (‘Eco Measure’).

Salford Estates and Winding-Up Petitions 

In Salford Estates, the Court of Appeal considered whether a winding-up petition, founded upon a debt arising out of a contract which contained an arbitration agreement, was a proceeding or claim, that ought to be stayed under s.9 of the Arbitration Act 1996 or, if that section did not apply, whether the Court ought to stay or dismiss the petition pursuant to its jurisdiction not to make a winding-up order unless it was just and equitable to do so. 

To consider this issue, Salford Estates noted the relevant provisions of Arbitration Act 1996. Those relevant provisions included section 1, entitled ‘General principles’, which reads:

‘The provisions of this Part are founded on the following principles, and shall be construed accordingly— (a) the object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense; (b) the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest; (c) in matters governed by this Part the court should not intervene except as provided by this Part.’

And also section 9 of the Arbitration Act 1996, which is entitled ‘Stay of legal proceedings’; subsections (1) and (4) read:

“A party to an arbitration agreement against whom legal proceedings are brought (whether by way of claim or counterclaim) in respect of a matter which under the agreement is to be referred to arbitration may (upon notice to the other parties to the proceedings) apply to the court in which the proceedings have been brought to stay the proceedings so far as they concern that matter.” [my bold]

“On an application under this section the court shall grant a stay unless satisfied that the arbitration agreement is null and void, inoperative, or incapable of being performed.’

And section 82 of the Arbitration Act 1996, entitled ‘Minor definitions’ containing:

‘In this Part— … ‘dispute’ includes any difference … ‘legal proceedings’ means civil proceedings in the High Court or a county court …’

As to the Salford Estates parties, the respondent company (Altomart) was an underlessee, and petitioning putative creditor (Salford Estates (No.2) Ltd) was the underlessor; the underlease being over commercial premises (the ‘Premises’). For brevity, they will respectively here be referred to as ‘Lessee’, ‘Lessor’ and ‘Lease’.

Covenants in the Lease provided for the Lessee to pay to the Lessor annual service charge, the sum being a due proportion … of the expenses … reasonably and properly incurred by the lessor’ (paragraph 6) in the preceding year in connection with the works and services prescribed in the Lease. The Lessor covenanted to insure the Premises with, amongst other things, an insurer approved by the Lessee. The Lessee covenanted to pay to the Lessor an amount equal to the insurance premium by way of rent, without deduction. 

Crucially, the Lease also contained a ‘wide and comprehensive’ (paragraph 10) arbitration agreement, which read:

Any dispute or difference arising between the lessor and the lessee as to their respective rights duties or obligations or as to any other matter arising out of or in connection with this [Lease] shall be referred to a single arbitrator...’

The Lessor and Lessee fell into dispute about Lessee’s obligation to pay service charge and insurance rent in respect to 3 years (from 1 April 2010 to 31 March 2013), and these disputes were referred to arbitration. During the arbitration procedure, the arbitrator made a decision to refuse a late application[4]by the Lessee …to bring within the arbitration the issue of the reasonableness of Salford Estates' expenditure on management fees and marketing fees and the correctness of the due proportion based on rateable values.’ (paragraph 11). The arbitrator issued his final arbitral award (the ‘Award’) resolving that the Lessee was obliged to pay about £64,500 for services charges and for insurance rent, to the Lessor. 

The Lessee did not immediately pay the Award, and the Lessor threatened to present a winding-up petition based on the Award, and importantly, on ‘some further sums claimed’ (paragraph 13) in respect to the year ending 31 March 2014 (so the year after the 3 years subject to the arbitration and Award), unless such were paid by a certain date. The Lessor said that:

Those further sums were ... necessarily to follow from the Award or the reasoning contained in it.’ (paragraph 13)

However, 

‘[The Lessee] did not accept that it was liable for those further sums.’ (paragraph 13)

After the Lessor’s deadline passed, the Lessor presented a winding-up petition against the Lessee (the ‘Petition’), founded upon alleged indebtedness comprising: (a) the Award; and (b) the ‘further sums’ for the year ending 31 March 2014 of about £27,600. The Lessee resisted the winding-up petition on the ground that, apart from the Award sum, the ‘further sums’ were disputed and that dispute had to be referred to arbitration pursuant to the arbitration agreement. A cheque for the Award amount having been sent to the Lessor, the Lessee applied to strike out and/or stay the Petition on, amongst other things, the ground that the Petition was liable to be stayed pursuant to section 9 of the Arbitration Act 1996.

The Lessee argued that the ‘further sums’ were disputed as:

(a) the service charge part of the ‘further sums’ contained items of expenditure not reasonably and properly incurred. He argued that this related to a later service charge year (a year not having been subject to the previous arbitration and Award) and so, it seems, not subject to the arbitrator’s decision to refuse to allow this issue to be included and argued. The Lessee was in the process of obtaining expert evidence on the reasonableness of the Lessor's expenditure; and 

(b) the insurance rent part of the ‘further sums’, was in respect insurance obtained by the Lessor but not in conformity with the Lessor’s obligations to the Lessee. Though the arbitrator had ruled against the Lessee on whether or not the Lessor was still entitled to recover from the Lessee for insurance premiums paid, notwithstanding Lessor non-compliance, the Lessee contended that the Lessee was still entitled to argue that, for the year to 31 March 2014, a cheaper premium could have been obtained (and so it had been overcharged and had suffered loss).

And that such disputes must be determined exclusively by arbitration[5]

The Lessor responded, alleging amongst other things, that the evidence did not disclose any real or bona fide dispute or that there was a dispute or difference which was capable of being referred to arbitration.

At first instance, a deputy High Court Judge imposed a stay on the winding-up petition. The Lessor appealed to the Court of Appeal (Sir Terence Etherton, Chancellor, Longmore LJ and Kitchin LJ), which addressed two main issues:

(a) whether a winding-up petition is subject to section 9 (1) of the Arbitration Act 1996, and so subject to its mandatory stay provision; and 

(b) whether, when exercising its section 122(1) of the Insolvency Act 1986 discretionary power to order a company to be wound up, the Court should exercise that discretion consistently with the legislative policy embodied in the Arbitration Act 1996, unless ‘wholly exceptional circumstances’ exist.

Etherton C gave the only reasoned judgment of the Court.

(a) Winding-up Petitions not subject to section 9(1). 

The Court held that while winding up petition proceedings are ‘legal proceedings’ within section 82 of the Arbitration Act 1996, section 9 (1) does not apply to a winding up petition founded upon allegedly due but unpaid debt, as evidence that the respondent is unable to pay its debts as they fall due for the purposes of section 123(1)(e) of the Insolvency Act 1986, because the winding up petition is not a ‘claim’ for payment of the debt[6]. Issue (a) was answered in the negative. 

Distinguishing a winding up petition from a ‘claim’ within the meaning of section 9(1), Etherton C held, at paragraphs 31 to 33, that:

‘…the Petition is not a claim for payment of the debt.

The making of a winding up order might or might not result in the right to payment of an amount equal to the debt specified in the Petition in the present case. It would depend on the value of the assets available for distribution in the liquidation to [the Lessee’s] body of creditors and the respective priority ranking of the creditors, including [the Lessor], under the statutory framework.

Further, by contrast with a “claim” for a debt, it is an abuse to present a winding up petition in order to put pressure on the company to pay a genuinely disputed debt…It was common ground between the parties before us that the court will dismiss a petition based on an alleged debt where the debt is bona fide disputed on substantial grounds…

Finding support for his decision that section 9 (1) of the Arbitration Act 1996 does not apply to unpaid debt winding up petitions, Etherton C noted, at paragraphs 34 and 35, that:

If several alleged debts are specified in the winding up petition as evidence of the company's inability to pay its debts within section 122(1)(f) of the 1986 Act and only some arise out of a transaction containing an arbitration agreement, the concept of a non-discretionary “stay” of the winding up petition pursuant to section 9(1) and 9(4) of the 1996 Act makes no sense. Plainly, there is no basis for staying the Petition itself; and, if the Petition proceeds, there can be no reference to arbitration of any of the debts because the making of a winding up order brings into effect the statutory scheme for proof of debts which supersedes any arbitration agreement.

Furthermore, it seems highly improbable that Parliament, without any express provision to that effect, intended section 9 of the 1996 Act to confer on a debtor the right to a non-discretionary order striking at the heart of the jurisdiction and discretionary power of the court to wind up companies in the public interest where companies are not able to pay their debts.’

Etherton C concluded, at paragraph 38 that:

…at least in respect of an alleged due but unpaid debt, I do not agree … that an issue on a winding up petition which is essential to the foundation of the petition becomes a claim and falls within section 9. That section has no application to the Petition in the present case.’ 

(b) Legislative Intent Behind Arbitration Act 1996

Where the Arbitration Act 1996 comes in is when the Court is exercising its discretion whether or not to make a winding up order against a company under section 122 (1) of the Insolvency Act 1986. When the Court is exercising that discretion, the Court is required to exercise that discretion consistently with the legislative intent behind the Arbitration Act 1996. Any ‘dispute’ as to the existence or quantum of the sum allegedly due and relied upon by the winding up petition, ought to be determined by arbitration not by the courts; such exclusion of the Court applies to a Court undertaking an analysis of the petition debt to determine whether the debt is bona fide disputed on substantial grounds. 

Etherton C explained, at paragraphs 39 and 40:

‘Insolvency Act 1986 s.122(1) confers on the court a discretionary power to wind up a company. It is entirely appropriate that the court should, save in wholly exceptional circumstances which I presently find difficult to envisage, exercise its discretion consistently with the legislative policy embodied in the 1996 Act….

Henry and Swinton Thomas LJJ considered in Halki Shipping Corpn v Sopex Oils Ltd [1998] 1 WLR 726 that the intention of the legislature in enacting the 1996 Act was to exclude the court’s jurisdiction to give summary judgment, which had not previously been excluded under the Arbitration Act 1975. It would be anomalous, in the circumstances, for the Companies Court to conduct a summary judgment type analysis of liability for an unadmitted debt, on which a winding-up petition is grounded, when the creditor has agreed to refer any dispute relating to the debt to arbitration. Exercise of the discretion otherwise than consistently with the policy underlying the 1996 Act would inevitably encourage parties to an arbitration agreement––as a standard tactic––to by-pass the arbitration agreement and the 1996 Act by presenting a winding up petition. The way would be left open to one party, through the draconian threat of liquidation, to apply pressure on the alleged debtor to pay up immediately or face the burden, often at short notice on an application to restrain presentation or advertisement of a winding up-petition, of satisfying the Companies Court that the debt is bona fide disputed on substantial grounds. That would be entirely contrary to the parties’ agreement as to the proper forum for the resolution of such an issue and to the legislative policy of the 1996 Act.’

Consequentially, Issue (b) was answered in the affirmative.

Applying this to the facts in Salford Estates, Etherton C, at paragraph 41, said that:

‘There is no doubt that the debt mentioned in the [Petition] falls within the very wide terms of the arbitration clause in the [Lease]. The debt is not admitted….that is sufficient to constitute a dispute within the 1996 Act, irrespective of the substantive merits of any defence, and, were there proceedings on foot to recover the debt, to trigger the automatic stay provision in s.9(1) of the 1996 Act. For the reasons I have given, I consider that, as a matter of the exercise of the court’s discretion under Insolvency Act 1986 s.122(1)(f), it was right for the court either to dismiss or to stay the petition so as to compel the parties to resolve their dispute over the debt by their chosen method of dispute resolution rather than require the court to investigate whether or not the debt is bona fide disputed on substantial grounds.’

Dismiss or Stay Petition 

Where this Salford Estates situation arises, the petition should be dismissed, rather than stayed, unless there is evidence that a would-be substitute petitioner proposes to take over carriage of the petition as creditor[7]

Eco Measure 

This guidance from Salford Estates was applied in Eco Measure, a decision of Mr Alan Steinfield QC sitting as a Deputy High Court Judge. In that case, the Court heard an application by a company (Eco Measure Market Exchange Ltd; the 'Company') for an order to strike out, or dismiss, a winding-up petition presented by Quantum Climate Services Ltd (‘Quantum’) against it. The petition was founded upon a debt allegedly due from the Company to the petitioning (putative) creditor Quantum for loft insulation services rendered by Quantum under a standard service agreement made between the two companies[8]. The Company disputed the sum was due and, pursuant to an arbitration agreement in the service agreement (in respect to “any dispute arising out of or relating to this agreement”[9]), confirmed that it wished to refer the dispute to arbitration.  

In determining the strike out/dismiss application, the Deputy High Court Judge first considered Salford Estates. Summarizing the guidance in Salford Estates, at paragraph 10, he said:

The result of [Salford Estates]…is to place a very heavy obstacle in the way of a party who presents a petition claiming sums due under an agreement that contains an arbitration clause. The problem for such a petitioner is that the company is entitled to have the petition dismissed without having to show, as would normally be the case, that the debt upon which the petition is based is, to use the time-hallowed expression, bona fide disputed on substantial grounds. What the Court of Appeal decided in clear terms in the [Salford Estates] case was that, where there is an arbitration clause, it is sufficient to show that the debt is “disputed” and for that it is sufficient to show that the debt is not admitted.[10]

No 'Indisputably Due’ Exception 

The Deputy High Court Judge then rejected a submission that the winding up petition could proceed on the basis that the Quantum’s claims were ‘indisputably due’ (paragraph 11). He held, at paragraph 12, that:

‘…the fact of the matter is that there is undoubtedly, a dispute which it is for the arbitrator and not for the court to determine…and it would be quite wrong, it seems to me, with the guidance that I have from the Court of Appeal, for this court to cast any view as to the merits of the submissions that have been made to me on behalf of Quantum by [counsel for Quantum] because, as it seems to me, that is a matter for the arbitrator. It will be for the arbitrator to decide what the terms of payment are, it would be for the arbitrator to decide whether there are sums that are indisputably due…These are not matters for the court…’

From this it is clear that there is no merits-based threshold for a ‘dispute’ to be a qualifying dispute for the purposes of an arbitration agreement. Whatever the merits, or apparent lack of merits to a defence contending that the alleged debt founding the petition isn't due, once a dispute has arisen about it, all merits based issues become issues left exclusively for the arbitral tribunal to determine; they are not for a judge to determine. Accordingly, in Eco Measure, the Court acceded to the application to dismiss the winding up petition; the winding up petition was dismissed. 

The decision in Eco Measure that there is no exception to the Salford Estates guidance, for debts ‘indisputably due’, is consistent with the meaning and scope of ‘dispute’ in arbitration agreements, as set down in Halki Shipping Corp v Sopex Oils Ltd [1998] 1 WLR 726 ('Halki Shipping'). In Halki Shipping, the Court of Appeal was held that until the company positively admits[11]that the sum is due and payable (silence will not be enough), there is a dispute for the purposes of an arbitration agreement.

Conclusion

Where a contract contains an arbitration agreement, and a dispute covered by the arbitration agreement arises between the parties, and one party petitions for a winding up order against the other (corporate) party, founding the petition upon a debt allegedly due in respect to the contract but unpaid, the Court ought to dismiss the petition (or stayed if there is a substitute would-be petitioner willing to take carriage) in the exercise of its discretion under section 122(1) of the Insolvency Act 1986, unless there are wholly exceptional circumstances. Or to put it another way, a winding up petition will normally be dismissed if founded upon an allegedly due but unpaid debt arising from a dispute covered by an arbitration agreement. Parliament enacted the Arbitration Act 1996 with the intention to extend the exclusionary scope of arbitration to cover the Court's jurisdiction to grant summary judgment. It would be anomalous, in such circumstances, for the Court to conduct a summary judgment type analysis of liability for an unadmitted debt on a winding-up petition, when the creditor had agreed to refer any dispute relating to the debt to arbitration. The proper forum for resolution of all arguments about the merits of a dispute caught by an arbitration agreement, is arbitration, not the Court, and this is notwithstanding any misgivings the Court might have about the apparent merits of the one side’s position. The Court ought not to stray into the impermissible investigation. The Court will give effect to the legislative intent behind the Arbitration Act 1996 at the section 122(1) of the Insolvency Act 1986 discretionary stage. Effect is not given through section 9(1) of the Arbitration Act 1996 and its mandatory stay on claims, since a winding up petition based on allegedly due but unpaid debt is not a ‘claim’ within the meaning of that section. 

SIMON HILL © 2018

BARRISTER

33 BEDFORD ROW

NOTICE: This article is provided free of charge for information purposes only; it does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of Chambers or by Chambers as a whole.


[1]There are constraints on contractual freedom. The Court retains certain limited powers in respect of matters that affect the public interest or public policy (though they overlap, public interest and public policy are not the same thing). In the Arbitration Act 1996, section 1 sets down the principles founding Part I, and subsection 1 (b) reads:  

the parties should be free to agree how their disputes are resolved, subject only to such safeguards as are necessary in the public interest.’

As will be apparent, unfettered contractual freedom is curtailed by the proviso ‘subject only to such safeguards as are necessary in the public interest’.

On arbitrability, the authors of Russell on Arbitration, 23rdEdition, state at paragraph 2-081:

‘The Act does recognize the right of the court to refuse recognition or enforcement of an award that is in respect of a matter which is not capable of settlement by arbitration. There are also well-recognized categories of dispute that may not be capable of being resolved by arbitration and certain underlying principles that can be identified in determining whether a matter is arbitrable. In particular, a dispute will generally not be arbitrable if it involves an issue of public policy, public rights or the interests of third parties, or where the dispute in question is clearly covered by a statutory provision which provides for inalienable access to the courts. In these cases, as the Court of Appeal has confirmed, “even the most widely drafted arbitration agreement will have to yield”.’

It should be noted that the ‘public policy’ element also comes into play at the arbitral award enforcement stage, where enforcement of the arbitral award can be opposed on the basis that it is contrary to public policy. See Arbitration Act 1996, section 103(3). 

[2]The arbitration provisions in the main contract are known as the ‘arbitration agreement’, rather than, say, the arbitration clauses or clause. This is because, under the doctrine of separability, the arbitration provisions are actually separate from the main/underlying contract. The ‘arbitration agreement’ forms an agreement within the main/underlying agreement. In Union of India v McDonnell Douglas Corp [1993] 2 Lloyd’s Rep 48, Saville J said, 49-50:

‘An arbitration clause in a commercial contract…is an agreement inside an agreement. The parties make their commercial bargain…but in addition agree on a private tribunal to resolve any issues that may arise between them.’

An effect of this separability, is the arbitration agreement's ability to survive the termination of the main/underlying agreement. This attribute was briefly touched on in Eco Measure Market Exchange Ltd [2015] BCC 877, at paragraph 9, where Alan Steinfield QC sitting as a Deputy High Court Judge said:

‘At one stage it seems that there was being put forward on behalf of [petitioning putative creditor] an argument that the arbitration clause somehow did not survive what was contended was a termination of the agreement by what was contended was the wrongful repudiation of the agreement accepted by [petitioning putative creditor] by reason of the non-payment of amounts which it claims were due to it. But [counsel for the petitioning putative creditor] very correctly, in his submissions to me, did not advance that submission as it is clearly established on the authorities that an arbitration clause in an agreement will ordinarily encompass arguments as to whether or not an agreement has been properly terminated and disputes as to what the consequences of that wrongful termination, if there was any, might be.’

[3]As to what amounts to a ‘dispute’, see Halki Shipping Corp v Sopex Oils Ltd [1998] 1 W.L.R. 726 (‘Halki Shipping’), in which the majority were Henry LJ and Swinton-Thomas LJ (Hirst LJ dissenting). In short, a ‘dispute’ exists if any claim for a sum is not admitted. Silence did not mean consent and that until the alleged debtor admits that a sum is due and payable there is usually a ‘dispute’ within the meaning of the arbitration clause. Ellerine Bros Pty Ltd v Klinger [1982] 1 W.L.R. 1375 (‘Ellerine Bros’) is authority for the proposition that where a party simply does nothing, there is a dispute, which the other party is both entitled, and limited, to referring to arbitration rather than the Courts. Lord Templeman in Ellerine Bros stated, at 1380-1381:

‘…it seems to me that section 1(1) is not limited either in content or in subject matter; that if letters are written by the plaintiff making some request or some demand and the defendant does not reply, then there is a dispute. It is not necessary, for a dispute to arise, that the defendant should write back and say ‘I don't agree.’ If, on analysis, what the plaintiff is asking or demanding involves a matter on which agreement has not been reached and which falls fairly and squarely within the terms of the arbitration agreement, then the applicant is entitled to insist on arbitration instead of litigation.’

Swinton-Thomas LJ in Halki Shipping, at 757, agreed with this passage.

[4]Presumably, the application was made to the arbitral tribunal, requesting that it exercise its powers under Arbitration Act 1996, section 34(3), to extend the deadline for compliance with the arbitral tribunal’s earlier directions. Section 34(3) reads: 

‘The tribunal may fix the time within which any directions given by it are to be complied with, and may if it thinks fit extend the time so fixed (whether or not it has expired).’

[5]The Lessee Altomart Ltd also argued that it was solvent on both a cash flow basis and on a balance sheet basis, see Salford Estates (No.2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; [2015] B.C.C. 306, paragraph 17.

[6]Section 123(1)(e) of the Insolvency Act 1986 is the last of 5 grounds for engaging the deeming provision in section 123(1). At least one of these 5 grounds needs to be satisfied for section 122(1)(f) of the Insolvency Act 1986 to be satisfied, which in turn grants the Court jurisdiction to make a winding up order against the company. Section 122(1) of the Insolvency Act 1986 makes clear by using the word ‘may’ that this jurisdiction is discretionary. Section 122 (1) of the Insolvency Act 1986 reads: ‘The company may be wound up by the court if …’ [bold added]

[7]Etherton C said in Salford Estates (No.2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; [2015] B.C.C. 306, at paragraph 42: 

‘The judge stayed the Petition because, contrary to my conclusion, he thought that the mandatory stay provisions in section 9 were engaged. I consider that it would have been better to have dismissed the Petition rather than to stay it in the absence of any evidence that there was another creditor of Altomart who was willing to be substituted as the petitioner. That is not, however, a point taken by Salford Estates on this appeal.’

Given it was not a point taken in the appeal, the point might be considered obiter, though this guidance is still highly persuasive. 

[8]In Eco Measure Market Exchange Ltd [2015] BCC 877, the services rendered were said to be loft installation work in furtherance of a government scheme whereby households received grants for energy efficiency programs – to reduce carbon emissions. The company was a broker, with Quantum undertaking the relevant loft installation work. Quantum apparently did work on 47 properties, submitted invoices to the company, which went unpaid, as the company rejected any obligation to pay in regard to any of the properties, as in turn a 3rd party had rejected its obligation to pay the company because the 3rd party had discovered problems with the loft installation work.

[9]From clause 25 of the service agreement between the Company and Quantum.

[10]An additional summary of Salford Estates (No.2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; [2015] B.C.C. 306 was given by the Court of Appeal in Enta Technologies Ltd v Revenue and Customs Commissioners [2015] 1 W.L.R. 3911 (Vos LJ, Longmore LJ and Patten LJ). After hearing argument touching on Salford Estates, Vos LJ said at paragraph 48:

At para 26, Sir Terence Etherton C made clear that section 9 did not apply to a winding up petition where what was in issue was whether a debt was outstanding and due. In that case, however, the debt fell within the wide ambit of the arbitration clause, and Sir Terence Etherton C thought it was right as a matter of discretion for the court to stay or dismiss the petition so as to compel the parties to resolve their dispute, as to whether, in effect, summary judgment on the debt was appropriate, by their chosen method of dispute resolution rather than requiring the court to investigate whether the debt was disputed in good faith on substantial grounds: paras 40–41. In my judgment, the decision in the Salford Estates case supports the conclusion I have reached. Section 9 did not operate to deprive the Companies Court of jurisdiction. But the fact that the parties had agreed an alternative method of dispute resolution was, as a matter of discretion, relevant to whether it was appropriate to allow the petitioner to proceed with a winding up before having it determined that the debt was due by the method that it had agreed.Section 9 did not operate to deprive the Companies Court of jurisdiction. But the fact that the parties had agreed an alternative method of dispute resolution was, as a matter of discretion, relevant to whether it was appropriate to allow the petitioner to proceed with a winding up before having it determined that the debt was due by the method that it had agreed.’

Nugee J in Fieldfisher LLP v Pennyfeathers Ltd [2016] BCC 697 also gave a summary of Salford Estates (No.2) Ltd v Altomart Ltd [2014] EWCA Civ 1575; [2015] B.C.C. 306, adopting (seemingly) that put forward by counsel for the company, at paragraphs 15 and 16:

‘…the Court of Appeal held that where an alleged act was (a) disputed, and (b) subject to an arbitration provision, then although an application to wind up a company on the basis of such a debt was not barred by s.9 of the Arbitration Act 1996, the petition to wind up not being a claim within the meaning of s.9, nevertheless…

“It is entirely appropriate that the court should, save in wholly exceptional circumstances … exercise its discretion consistently with the legislative policy embodied in the 1996 Act.”

It should, therefore, in practice, in general, refuse to entertain an application for winding up.

Nugee J in Fieldfisher here is quoting a passage from Etherton C's judgment in Salford Estates, paragraph 39.

[11]In Halki Shipping Corp v Sopex Oils Ltd [1998] 1 WLR 726, Henry LJ said at 753:

In my judgment Clarke J. was right to follow the line of authority from Tradax Internacional S.A. v. Cerrahogullari T.A.S. [1981] 3 All E.R. 344 to Ellerine Bros. (Pty.) Ltd. v. Klinger [1982] 1 W.L.R. 1375, which focused on the meaning of dispute in the arbitration agreement. As he put it in this case at first instance, at p. 1277:

“In Ellerine Bros. (Pty.) Ltd. v. Klinger the Court of Appeal was also considering a question of construction of an arbitration agreement, in which it was agreed that all disputes or differences whatsoever should be referred to arbitration. The plaintiffs claimed an account. The defendants had simply done nothing. The Court of Appeal expressly followed the decision in [Tradax Internacional S.A. v. Cerrahogullari T.A.S. [1981] 3 All E.R. 344] and held that silence did not mean consent and that, as Kerr J. said, until the defendant admits that a sum is due and payable there is a dispute within the meaning of the arbitration clause. Even in such a case I can see an argument for saying that a claimant would be entitled to an award if the respondent then refused to pay. But, however that might be, the Ellerine Bros. case is authority for the proposition that where a party simply does nothing there is a dispute which the claimant is both entitled and bound to refer to arbitration. It follows that there is binding Court of Appeal authority in favour of the defendant's case on construction of the clause. It is true that the Nova (Jersey) Knit case [1977] 1 W.L.R. 713 was not directly referred to the Court of Appeal in that case, but it is expressly referred to by Kerr J. in [Tradax Internacional S.A. v. Cerrahogullari T.A.S. [1981] 3 All E.R. 344 ] so that it cannot possibly be held that it was overlooked or that the Ellerine Bros  case was decided per incuriam. Both Kerr and Saville JJ. regarded the second point in the Nova (Jersey) Knit Ltd. case as depending on the meaning of the final words of section 1(1) of the Act of 1975 and not upon the true construction of the contract. It may well be that the Court of Appeal did the same. In these circumstances the correct approach for a judge of first instance is to follow the reasoning of the Court of Appeal, so far as construction of the contract is concerned”

I agree with that, and that decision is equally binding on this court.’

Swinton-Thomas LJ in Halki Shipping said, at 761:

‘In my view…there is a dispute once money is claimed unless and until the defendants admit that the sum is due and payable….In my judgment if a party has refused to pay a sum which is claimed or has denied that it is owing then in the ordinary use of the English language there is a dispute between the parties.’