Winding Up Petition - Petition Debt Paid - Costs

Author: Simon Hill
In: Bulletin Published: Tuesday 17 May 2022

Share

Where a company/debtor subject to a creditors winding up petition, pays the petition debt, and the petition is dismissed (or would be, but for petitioner substitution, be dismissed[1]), the (original) petitioner will likely apply for an adverse costs order against the company/debtor, for its costs of presenting and pursuing the creditors winding up petition.

This article will consider the principle of costs in such a situation, with consideration of the cases of: (i) Reliance Wholesale Limited v AM2PM Feltham Limited [2019] EWHC 1079 (Ch) ('Reliance Wholesale') - Morgan J, (ii) Re Nowmost Company Limited [1997] BCC 105 ('Nowmost') - Lindsay J; (iii) Fitzgerald & Law (A firm) v Ralph [1998] BPIR 49 ('Fitzgerald & Law') - Evans-Lombe J; and (iv) Oben v Blackman [1999] BCC 446 (also known as Re Blackman (a debtor) or Debtor (No.510 of 1997) ('Blackman') - Stanley Burnton QC sitting as a Deputy High Court Judge.

Principle of Costs

The principle of costs was recently considered by Morgan J in Reliance Wholesale, wherein:

(i) Morgan J said 'The principles to be applied were set out in detail with full explanation by Lindsay J in the Nowmost case.' (paragraph 22) - a case which, at paragraph 20, Morgan J described as 'the most important'[2a]and

(ii) Morgan J adopted[2b] counsel for the petitioner's summary of the principles, at paragraph 22 of Reliance Wholesale. That summary being 5 propositions:

(1) In dismissing a winding-up petition by consent where the company have made late payment of the petition debt, the usual practice is for the court in its discretion to order the company to pay the petitioner's costs.

(2) The onus is on the company to lay before the court any material upon which it intends to rely to displace the normal order for costs in the petitioner's favour.

(3) Whilst such material does not necessarily have to be formal evidence properly so described, and the court is not barred from adopting a pragmatic approach to the acceptability of such material, disputed averments and or submissions unsupported by evidence, formal or otherwise, is (sic) not sufficient to displace the ordinary order which the petitioner could expect to be made in its favour.

(4) It is for the court in each case to judge whether the company has satisfied the onus upon it such that the usual order should be displaced.

(5) On being told that the issue of costs was disputed, the court should either in a pragmatic way have whatever material sought to be relied up by the company handed up to it to see if a quick solution can be arrived at, or should invite the company to consider whether it wished to ask for a brief adjournment in order that the material which was being referred to could be put into evidence and be considered as necessary by the petitioner's advisers."

The above summary will be sufficient for many purposes. However, the authorities will be considered in more detail, for those readers who want a bit more indepth.

Nowmost case

In the Nowmost case, Lindsay J summarised the appeal before him; that it was an appeal '...which concerns the practice of the Companies Court as to the costs of a winding-up petition dismissed following a late payment in full of the petition debt but where there has been no provision by the company for the petitioner's costs.' (491).

In Nowmost, the petitioner had presented (29.3.96) a petition founded upon a partly unsatisfied judgment debt (492). The petition was served (9.4.96) and advertised (24.4.96) and listed for 1st hearing (8.5.96). Prior to the 1st hearing, the petition debt was paid (3.5.96). At the 1st hearing, counsel for the petitioner asked that 'the petition should be dismissed but with an order for the petitioner's costs to be paid by the company.' (493). The 1st hearing judge dismissed the petition, and after hearing submissions[3] in resistance to an adverse costs order against the respondent/company, made no order as to costs (492). In due course, the petitioner appealed the decision to refuse to award the petitioner an adverse costs order against the company - seeking an order that the costs order be '...varied so that the company should be required to pay the petitioner's costs.' (493) That was the only issue on the appeal.

Lindsay J, at 493, set out[4] how the practice on costs orders had changed over time. After dealing with the position originally (costs orders in petitioner's favour), and how by 1957 at the latest, this had changed (to no order as to costs), Lindsay J came to the decision of Templeman J in Re Universal Display Fittings Co Ltd (No 003073 of 1977) (31 October 1977, unreported). Unusually, Lindsay J referred to his own note of the judgment - that he had taken down as a barrister, while sitting in the courtroom when Templeman J had handed down judgment. Lindsay J said, at 494: 'I noted the fly leaf of my 1957 Buckley at the time as follows:

'Costs ordered to be paid by company even though petition dismissed (on payment in full) and no-one appearing for the company. Universal Display Fittings Co Ltd 31/10/77, Templeman J.'

Then I added a quote from Templeman J on that day; it says: 'I never saw the reason for not allowing costs in such cases'.

Lindsay J relied upon a further authority, Re FGJ Motors (Fulham) Ltd (31 October 1977, unreported)[5], another Templeton J decision, which had a similar outcome, before Lindsay J said, at 495:

'The new practice was more in line with the perception of most practitioners of the time that a petition which had been met with payment in full could be regarded as a success, so that the event which costs could be expected to follow was the success of the petition.

After further considering how practice has changed[6]), Lindsay J said, at 496:

'It follows...from the modern practice that, where the court is truthfully told that the debt has recently been paid in full and that the company does not appear, the petitioner ordinarily can, in the absence of other considerations properly put before the court, expect an order for costs in his favour. He is regarded as having succeeded and has the benefit of that inclination, when costs are discussed, towards costs following the event. The event is seen as his success and so there is a disposition to reward that success with an order for costs in his favour. If the company is silent then an order for costs in the petitioner's favour as against the company will usually be made.'

The effect of this is that, there is an onus on the company, to show why the usual order (that the company pay the petitioner's costs) should not be made. Lindsay J in Nowmost said at 496:

'When there has been a late payment of the petition debt so that the petitioner is content with a dismissal, then, although the discretion as to costs which the court has is unfettered, that inclination towards costs following the event, coupled with the modern practice of, in effect, regarding a petition which has led to payment in full as being successful, leads to a position in which such onus as exists is nowadays upon the company to lay before the court the material upon which it intends to rely to displace what will otherwise be ordered, namely, an order for costs in the petitioner's favour.'

Making essentially the same point on onus, Lindsay J in Nowmost said, at 496:

'..in so far as there is an onus in these cases it is...in my view upon the company to displace that order which, under the modern practice, will otherwise ordinarily be made. It will be for the court in each case to judge whether the inclination in such cases in favour of an order for costs in the petitioner's behalf has been sufficiently displaced.'

As to the formality / flexibility the Court can show to the company tendered evidence/material, to displace the inclination (coupled with the modern practice) to impose the usual order, Lindsay J said in Nowmost, at 496:

''...I do not suggest that the material to be laid before the court by the company has necessarily to be formal evidence properly so described. A court can have regard, and would be likely to pay regard, for example, to a material but undisputed letter handed up by a director of the company, even though not formally put in evidence and without, in most cases, even extracting an undertaking that it be formally put in evidence. Quite often a requirement for formal evidence would serve only to incur needless expense and involve a needless waste of time. Nothing I say here is intended to bar the court from adopting a pragmatic approach to the acceptability of whatever material is put before it where an order for costs other than in the petitioner's favour and upon payment of the debt in full is sought....'

On the facts of Nowmost, Lindsay J set aside the no order as to costs provision because the 1st instance judge (registrar) had not undertaken 'a proper exercise of the discretion as to costs' (497)[7]). Lindsay J exercised the discretion again[8a]), and replacing the original costs order '...with an order that the costs of the petition should be paid by the company to the petitioner...' (499), stating:

'...it seems to me perfectly proper that the petitioner should have presented the petition on [29.3.96] and should have moved on in the ordinary way with the service of the petition and the advertisement of the petition....it was not until [3.5.96], very shortly before the hearing of the petition, that eventually such sum as was paid was paid.'

and that,

'I find nothing sufficient to displace the order towards which the modern practice points, namely, that the petition should have been dismissed but with an order for costs in the petitioner's favour. Even without regarding the modern practice as pointing towards that order, the material put in front of me seems to me sufficient to justify such an order on the grounds that the petitioner was not paid, that it was not premature with its presentation and that the matter took an ordinary course until it was very late in the day, long after the vast proportion of the costs of the petition were incurred, that it came ultimately to be paid.'

Normal Inference from Company Paying off the Petition Debt

The foundation of the above approach is that an inference is being drawn from the fact that the company paid off the petition debt. In Blackman, the deputy judge said, at 447:

'When the debt is paid following service of a petition, the normal inference is that it was due and payable at the date of the statutory demand. Accordingly, the debtor may be regarded as having been the cause of the insolvency proceedings in question, by his having delayed paying a (subsequently admitted) debt. In obtaining payment, the creditor has in substance succeeded in his proceedings against the debtor. However, these inferences may be displaced in a particular case.'[8b])

Whether the inference is displaced depends on the facts of the case:

(1) In Reliance Wholesale - Morgan J noted that in the company's email (30.11.18; paragraph 9) to the petitioner 4 days before the company paid the petition debt (3.12.18; paragraph 2), the email made a statement that the company was prepare to pay the alleged debt, but also made it 'absolutely clear' (paragraph 9) 'that that preparedness to make the payment is reluctant and under what is called severe protest.' (paragraph 9) and that it would be '...without any admission of liability...' and that '...the position is reserved as to proceedings to recover the payment in due course.' (paragraph 9). Then Morgan J said:

(i) 'In the light of that statement it is simply not possible to draw the inference that might be drawn in another case. It is not possible to say that because the petition debt is paid by the company, that indicates that the petition debt was all the time due and owing. The payment in this case is made under protest, reserving a right to recover it. I cannot infer an acceptance by the company that the money was properly due to the petitioner.' (paragraph 11) and later,

(ii) '...some of the comments in the cases indicate that if there is a winding-up petition based upon a petition debt, and the debt is paid before the hearing of the petition, it is normally right to infer that the payment indicates that the money was after all due. That is said in [Blackman] at p.448D; and again in [Yell.com v Internet Business Centres Limited [2003] SLT (Sheriff Court) 80] at para.12. I do not think I can draw that inference in this case, in a case where the money is paid under protest with reservation of a right to seek its recovery. So, that is a feature of the case it is right to acknowledge.' (paragraph 21)

(2) In Blackman, after considering various points[9]), the deputy judge said, at 447: 'I think that I should infer from the ultimate payment of the debt that the debtor did not have a bona fide defence to the entirety of the creditors' claim.'

Where Normal Inference is Displaced

Where the normal inference is displaced, the Court will need to go into what was the validity/merits of the petition, as against the grounds of opposition, in order to determine the principle of costs. By way of example, Morgan J in Reliance Wholesale went through such an exercise, at paragraphs 29-31[10]). Morgan J held that the company's contention that:

(1) the petition had been pursued for an illegitimate collateral purpose and so was an abuse of process, was unpersuasive (paragraph 30); and

(2) it had raised a bona fide dispute on substantial grounds, against the petition debt, did not extend (even giving the company the benefit of an assumption on its asserted defence) to the whole petition debt but left £6,000 unaddressed and so undisputed.

Consequently, the creditor/petitioner in Reliance Wholesale had been entitled to present and pursue the winding up petition on that £6,000 (at least), until (at least) the £6,000 was paid off - which was not until the whole petition debt was paid off on 3.12.18. As a result, the creditor/petitioner was entitled to its costs of the petition.

Petition Hearing Adjournments due to Petitioner's Procedural Defects

An additional feature in Blackman was that the 1st hearing (at least) had to be adjourned, due to defect in the creditor/petitioner's proceedings against the company/debtor - for the petitioner to serve further evidence (448). The deputy judge said, at 447: 'The costs of those adjournments would normally be the debtor's, they having been caused by the creditors' failure to comply with the rules.'[11]) Morgan J said, at 447:

'In my judgment, the appropriate order for costs must reflect the ultimate success of the creditors, but also the fact that the avoidable defects in the creditors' proceedings led to adjournments and costs being incurred quite unnecessarily by the debtor. In the ordinary case, I should give the creditors their costs, save that the debtor would have the costs of and occasioned by the adjournments.'

Blending this: (i) general award of costs; with (ii) the countervailing award of costs for the adjournments, the deputy judge concluded, at 447: 'Given the substantial costs involved in the adjournments, in my judgment the proper order to have made was that there should be no order for costs' (449)

SIMON HILL © 2022

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. No attempt has been made to provide an exhaustive survey of the law.

[1] Strictly speaking, it is not that the petition must actually be dismissed, just that the petition would be dismissed. This is because another (alleged) creditor (or contributory) of the company/debtor, may apply to be substituted as petitioner to the petition, under Insolvency Rules 2016, r.7.17 entitled ' Substitution of creditor or contributory for petitioner'. Where that application for substitution is successful, the applicant will become the substituted petitioner and will be directed to file and serve an amended petition, founded upon the debt/basis the substituted petitioner says the substituted petitioner is entitled to pursue the petition (as amended).

Where the petition is taken over by a substituted petitioner, the original petitioner will still be entitled to claim costs (as if the petition had simply been dismissed in the normal way). However, procedurally, the original petitioner will have to wait until the petition is finally determined, before the Court will determine the original petitioner's claim for costs against the company/debtor.

Insolvency Rules 2016, r.7.18, entitled 'Order for substitution of petitioner', reads (so far as presently relevant):

'An order for substitution of a petitioner must contain -

...

(e) the following orders -

...

(vi) that the question of the costs of the original petitioner and of the statutory deposit (if appropriate) be reserved until the final determination of the amended petition;'

[2a] In the personal insolvency of Oben v Blackman [1999] BCC 446, Stanley Burton QC (sitting as a deputy High Court Judge) confirmed, at 447:

'The normal rule in winding-up proceedings in the Companies Court...are clearly set out by Lindsay J, ... in [Nowmost]'

As an aside, the deputy judge confirmed that the same approach applies to personal insolvency cases. He stated, at 447:

'...I see no reason why the practice of the court in bankruptcy proceedings should differ from that in winding-up proceedings.' (447).

[2b] In Reliance Wholesale Limited v AM2PM Feltham Limited [2019] EWHC 1079 (Ch), Morgan J said, at paragraph 24, 'Those being the principles...', after stating, at paragraphs 22-23:

'The principles to be applied were set out in detail with full explanation by Lindsay J in the Nowmost case. [Counsel] for the petitioner summarised the principles which one finds in Nowmost in five propositions, and I will quote what is said in [Counsel for the petitioner's] skeleton argument...'

[3] In Re Nowmost Company Limited [1997] BCC 105 ('Nowmost'), a curious situation was allowed to take place in relation to submissions for the respondent/company. Lindsay J sets this out, at 492:

'No counsel or solicitor appeared on that day for the company but there did appear a Mr Stevens, who is the father, I am told, of a director of the company....Mr Stevens on 8 May sought to resist an order for costs on the basis that genuine attempts had been made by the company to settle the matter without the need for a petition. He said that he could produce documents to the court to show that an order for costs in the petitioner's favour should not be made. The registrar, on hearing Mr Stevens, dismissed the petition with no order as to costs.'

Quite what Mr Steven's right to make submissions for the respondent/company, is left unclear. Mr Steven did attend 'for' the respondent/company on the appeal before Lindsay J. Lindsay J recorded that '...Mr Stevens, the father of a director of the company, appears before me. He has, of course, no right, to speak on the company's behalf but has been most helpful in addressing me and I have put no obstacle in his way.'

It is unclear why, if Mr Steven had not right to speak on the respondent/company's behalf,  he was able/allowed to address the court at all.

Later, Lindsay J says, at 497:

'I did what in my view the registrar should have done on 8 May and extended to the company, by Mr Stevens, the opportunity either to lay in front of me material on which I could rule here and now or to consider whether it needed an adjournment in order to put in front of me such material as it chose. Mr Stevens indicated that the material was not extensive and that it could be ruled upon here and now and [counsel] for the petitioner supplemented that material with some further letters. But, between them, they are content, as I understand it, that I rule on the issue of costs here and now in the light of the material informally put in front of me, and so I do.'

Implicitly, Mr Stevens was to be elevated to a person who did have authority to speak and represent the company at the hearing.

[4] In Re Nowmost Company Limited [1997] BCC 105 ('Nowmost'), Lindsay J said, at 493-4:

'It is plain that, upon payment of the petition debt, dismissal of the petition with an order for costs in the petitioner's favour was once the habitual practice of the Companies Court: see Re Flagstaff Silver Mining Co of Utah (1875) LR 20 Eq 268. However, by 1957 at the latest, a different practice had developed in the Companies Court. Dismissals of petitions, unless the company appeared and consented to an order for costs or unless by letter from it or its solicitors the company indicated that it was willing to accept an order for costs against itself, were, by 1957, habitually made with no order as to costs. The supposed reasoning behind such a practice was, I apprehend, that on a dismissal, albeit upon payment of the debt in full, the petitioner obtained none of the principal relief that he had asked for. He did not get a usual compulsory order. On the face of things, therefore, it could in a sense be said that he had not succeeded. There being no apparent success on the petition, it could not be said that the petitioner should be awarded costs as following the event as the event was not, on the face of things, the success of the petitioner. Conversely, as the debt had been paid in full, the petition could hardly be described as a failure such that the company could be given costs. So it was, it seems to me, that the practice became that, on a dismissal without more, there should be no order as to costs.

A refined form of argument to the same conclusion was that by accepting a dismissal of his petition the petitioner put it out of the court's power to investigate further the relative merits of the parties' arguments on the substance of the petition and hence that no order as to costs would be made.

Coupled with that then-conventional approach was the view, then widely held, that a petitioner could, if he chose, obtain a winding-up order where his debt had been paid but not his costs. It was then common for a petitioner, naturally more anxious to obtain money than a compulsory winding-up order, not to seek dismissal with an order for costs in his favour, but rather to invite the court to stand the petition for seven days so that arrangements could be made for the payment of costs or for the making of satisfactory arrangements for their payment. If no arrangements were made the petitioner could press for a compulsory order.

The system did have advantages. The fact that the petitioner could still obtain a winding-up order even when his debt had been paid led to companies almost invariably making satisfactory arrangements for the costs of the petitioner because the threat against them at that time was that, unless they did so, the company would be wound up notwithstanding that it had managed to pay the debt.

Accordingly, petitioners, without having to await taxation of costs or to involve themselves in any expense in taxation of costs, commonly got their costs and were then unconcerned with questions such as whether an order for costs would be honoured because they already had an agreed sum for the costs in hand. One can see that has advantages over the alternative position, namely that the petitioner would get only an order for costs as that order might not ultimately be honoured and the petitioner would then be left in the unattractive position of having to consider the presentation of a second petition in order merely to obtain payment of the costs of the first.

The then-practice was also a convenient practice from the court's point of view because the court had relatively few disputes as to costs before it. It was generally unconcerned with taxation of costs and it was untroubled by the presentation of subsequent petitions whose object was merely to obtain payment of the costs of former petitions. The practice of those days can be seen summarised in Buckley on the Companies Acts (13th edn, 1957), pp 469–473.

However, on 31 October 1977 an application was made to Templeman J in Re Universal Display Fittings Co Ltd (No 003073 of 1977) (31 October 1977, unreported) for the dismissal of a petition upon payment of the petition debt in full but with no one having appeared for the company and, as I would think, without there having been any indication on the company's part that it consented to an order for costs.'

[5] In Re Nowmost Company Limited [1997] BCC 105, Lindsay J said, at 494-5:

'My contemporary note indicates that, as counsel appearing for another petitioner on the same day, I obtained a similar order in Re FGJ Motors (Fulham) Ltd (31 October 1977, unreported). In those days the Companies List was heard on Mondays, turn by turn in rotation by that half of the Chancery Bench then described as 'Group A'. Templeman J was in Group A and the change of practice that his decision of 31 October 1977 indicated was not reported but, as time passed, I have no doubt but that the judges of Group A began, if asked to do so, to dismiss petitions with an order for costs in the petitioner's favour where debts had been paid in full, even in the absence of any appearance or consent from the company concerned.'

[6] In Re Nowmost Company Limited [1997] BCC 105, Lindsay J said, at 495-6:

'By the time of the 14th edition of Buckley on the Companies Acts in 1981 the position could be described as follows (p 547):

'Costs of petition dismissed by consent. If the company wishes to get rid of the petition, it must not only pay the petitioner's debt, but his costs of the petition as well. Sometimes the petitioner is content with an order for costs, but there is no guarantee that they will be paid, so that the petitioner may have to present another petition to recover them. The alternative is to ask for a winding-up order, on the ground that the failure to pay an agreed sum for costs indicates inability to pay. Such orders have occasionally been made, but the threat is usually enough.'

A note to p 547 includes the following:

'Until recently an order for costs against the company was never made in such circumstances unless the company appeared (including appearances by a consent brief), but in the unreported case of Re Universal Display Fittings Co Ltd (No 003073 of 1977) Templeman J, on 31 October 1977, made such an order and since then many such orders have been made. Even if

(eg because the petition has not been advertised) the petition is struck out, instead of being dismissed, such an order can be made.'

By 1983 the new possibility, as it seemed to be, introduced by Templeman J had become recognised as firm practice. In Re Shusella Ltd [1983] BCLC 505 at 506 Nourse J says:

'In recent years it has become the practice of the court in a case where a petitioner who has duly complied with all the provisions of the Rules has received payment of his debt but no provision for the costs of the petition to dismiss the petition with an order for costs against the company, even if the company does not appear. That course is often acceptable to the petitioner on grounds of convenience, although there can be no certainty that the order for costs will be satisfied. The modern practice, which seems to have originated in Re Universal Display Fittings Co Ltd (31 October 1977), an unreported decision of Templeman J, is recognised in Buckley on the Companies Acts (14th edn) vol 1, p 547, note 11.'

As to that last sentence, there is, in Nourse J's judgment, a reference to an unreported case of Oliver J (Re a company (No 001083 of 1978) (19 June 1978)) which in effect Shusella failed to follow. Since then the practice, I think, has been that indicated in Shusella rather than in the unreported case of Oliver J.

Petitions not known to be contested on substantial grounds are not now heard by a judge, but are heard by the registrars on and from Wednesdays. I have spoken to Mr Registrar Buckley, the Companies Court Registrar who most commonly hears the list, as to the 'modern practice' referred to by Nourse J in that 1983 decision. I gather that it still represents the usual day-to-day practice of the registrar. Indeed, so entrenched is it as a modern practice that it is now unknown, or virtually unknown, I am told, for a petitioner to press on with his petition asking for a compulsory order after payment of his debt. The threat by a petitioner who has been paid the petition debt that, if not satisfied as to costs, he would none the less press on with his petition and could none the less get a compulsory order would nowadays, it seems, be likely to be regarded as an idle threat. That threat which in earlier times was very effective to avoid the airing of disputes as to costs, to avoid taxation of costs and to avoid the risk of failure to honour an order for costs has in practice (I say nothing about the legal position under the Insolvency Act 1986) now ceased to be a truly effective threat, at all events for the time being.'

[7] In Re Nowmost Company Limited [1997] BCC 105, Lindsay J said, at 497:

'What happened here, as I have indicated, is that the registrar was told on 8 May by the father of a director of the company that attempts had been made by the company to settle the matter without the need for a petition and that he could produce documents to the court to show that such an order for costs in the petitioner's favour should not be made. However, that was, as I understand it, there and then disputed by the petitioner's counsel. The attempts that had been made by the company to settle the matter without need for a petition were not further explained or substantiated and the documents said to be capable of being produced were not in fact produced. It is not that they were not capable of being produced but that the registrar went on, I am told, to dismiss the petition without them being produced.

I cannot regard the mere disputed averments made by the father of a director of the company as sufficient to displace the ordinary order which the petitioner could expect to be made in its favour had the company been silent. It may be that the registrar on 8 May was harking back, unconsciously perhaps, to the practice as it had been before the change that followed Templeman J's decision in 1977. I do not regard his order of 8 May as representing a proper exercise of the discretion as to costs which he undoubtedly had. On being told that the issue of costs was disputed, he could either, in the pragmatic way that I have indicated, have had whatever material that was sought to be relied on by the company handed up to him to see if a quick conclusion one way or another could be arrived at on the subject or he could have invited the company to consider whether it wished to ask for a brief adjournment of, say, seven days, in order that the material which was being referred to could be put into evidence and be considered as necessary by the petitioner's advisers. He took neither course, but simply went on immediately to the dismissal of the petition.

I therefore set aside his order as to costs.'

[8a] The parties were content for Lindsay J to determine the question of costs there and then. After finding that the 1st instance judge (registrar) had not exercise his discretion on costs property, and having stated that he would set aside the order on costs made, Lindsay J in Re Nowmost Company Limited [1997] BCC 105 said, at 497:

'Have I got material sufficient for me to exercise the discretion which falls now to me, his exercise having been deficient? I did what in my view the registrar should have done on 8 May and extended to the company...the opportunity either to lay in front of me material on which I could rule here and now or to consider whether it needed an adjournment in order to put in front of me such material as it chose. [The Company's 'representative'] indicated that the material was not extensive and that it could be ruled upon here and now and [counsel] for the petitioner supplemented that material with some further letters. But, between them, they are content, as I understand it, that I rule on the issue of costs here and now in the light of the material informally put in front of me, and so I do.'

In Reliance Wholesale Limited v AM2PM Feltham Limited [2019] EWHC 1079 (Ch), Morgan J said, at paragraph 23:

'The way in which Nowmost Co Limited and Fitzgerald & Law were dealt with is illustrative of the practical questions which arise on applications of this kind. In Nowmost Lindsay J hearing an appeal was prepared to receive in a pragmatic way somewhat informal evidence on behalf of the company and, having done so, came to the view that the company had not discharged the onus of avoiding the usual default order against it. In Fitzgerald & Law, Evans-Lombe J considered the material before him, but reached the conclusion that he simply could not make a decision which was a judicial and fair decision between the rival parties on that material, and he then directed the issue to be dealt with.'

[8b] Note, there is no requirement in corporate insolvency, to first serve a statutory demand (i.e. a section 123(1)(a) of the Insolvency Act 1986 statutory demand), before presenting a creditors winding up petition. A simple demand can be served. The position is different in personal insolvency. 

[9] In Oben v Blackman [1999] BCC 446, the deputy judge said, at 447:

'In the present case, the debt related to building work carried out by the creditors. The statutory demand, dated 3 March 1997, stated that the work had been carried out in 1996. The debtor did not apply to set aside the demand, but in her affidavit sworn on 6 November 1997 set out facts which, if correct, established that the debt was bona fide disputed in its entirety. Her affidavit was not answered on behalf of the creditors. In June 1997 an agreement was reached for remedial work to be carried out by the creditors on the debtor depositing with her solicitors the amount of the debt. This agreement seems to be a recognition that there were defects in the creditors' work; and if so, the debt could not have been due in full at the date of the statutory demand. However, nothing came of that agreement, because the debtor did not deposit the money with her solicitors. The creditors therefore proceeded with their petition. After the first hearing resulted in an adjournment for the creditors to serve further evidence, and when it seemed to the debtor's solicitors that the formal points which they had raised would not prevent a bankruptcy order being made, the debtor paid the debt under cover of her solicitors' letter of 11 November 1997.

In these circumstances, given the paucity of evidence before me, I think that I should infer from the ultimate payment of the debt that the debtor did not have a bona fide defence to the entirety of the creditors' claim.'

[10] In Reliance Wholesale Limited v AM2PM Feltham Limited [2019] EWHC 1079 (Ch), Morgan J said, at paragraphs 29-31:

'It is said that the petition was not justified, and the petitioner should not have its costs because the petition was very much wrapped up with or confused with other proceedings under s.994, and it is possible to infer that the purpose behind the petition was a collateral purpose, making the petition an abuse of the process of the court. I am not persuaded that the company has done anything like enough to get a case of that kind on its feet. I am not persuaded that that is the approach I should take on the material before me.

Equally, as I have said more than once, this is not a case where I infer that there is a virtual admission by the company that it owed the money as in some of the cases to which I have referred. It seems to me that the case all turns on my assessment on the material before me as to whether the company raised a bona fide dispute on substantial grounds in relation to the petition debt. I will assume in the company's favour that they would have a lot to say, possibly persuasively, in relation to the part of the petition debt which was up to £33,059.26, however I have been unable to see anywhere a bona fide defence on substantial grounds to the part of the petition debt represented by the £6,000 paid by the petitioner to the company.

On that basis the petitioner was entitled to present its petition, at any rate based on a petition debt of £6,000. The petition is not invalidated because the petition debt was said to be more than £6,000. Accordingly, if the company had not paid £6,000 on the [3.12.08] the petitioner would have been entitled to continue with its petition and seek the winding-up of the company. On that basis, it seems to me that the petition was justified, and I can find that to be the case on the material before me. The petition was dismissed but that was because the full amount of the petition debt was paid before the hearing. But the ordinary order should be made, which is that the company should pay the petitioner's costs of the petition.'

[11] In Oben v Blackman [1999] BCC 446, the deputy judge found, on the facts, that there was insufficient evidence to displace this usual order in relation to adjournments. He said, at 448

'I have too little information as to how the adjournments came to be granted, and at whose request, to be able to deal with those costs otherwise than on the usual basis.'

Note: the deputy judge also said the petitioner should be denied '...their costs of the service of the statutory demand, and of the drafting of the petition.' (447)