Mulalley and Company Ltd v Regent Building Services Ltd & Anor [2017] EWHC 2962 (Ch)

Case No CR-2017-004702[2017] EWHC 2962 (Ch)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF MULALLEY AND COMPANY LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Venue 7 Rolls Buildings, Fetter LaneDate 23 November 2017
London, EC4A 1NL
Before
DAVID STONE(sitting as a Deputy High Court Judge)
Between
MULALLEY AND COMPANY LIMITEDApplicant(1) REGENT BUILDING SERVICES LIMITEDRespondents(2) CHRISTOPHER WHITE
Mr David Sawtell (instructed by Silver Shemmings Ash LLP) for Applicant for The Respondents were not represented and did not appearHearing Hearing date: 16 November 2017
JudgmentDavid Stone (sitting as Deputy High Court Judge) :
[1]Before the Court is an adjourned application of Mulalley & Company Limited (Mulalley) for injunctions to restrain the Respondents, Regent Building Services Limited (Regent) and Mr Christopher White (Mr White) from presenting a petition to wind up Mulalley on the basis of the debts set out in a statutory demand dated 9 June 2017. Those debts are disputed.[2]Mulalley is represented in these proceedings by Mr David Sawtell of counsel. Regent, at least, has previously had the benefit of counsel and a firm of solicitors. The Respondents are currently not represented in these proceedings, although Mr White says in correspondence that he now represents both Regent and himself. For reasons that will become clear, Mr White did not appear at the hearing before me. Mr Sawtell advanced Mulalley’s case carefully, scrupulously and fairly. He also assisted the Court by pointing out, in detail, those matters which Mr White might have raised had he attended the hearing, and which Regent might have raised had it been represented. I am grateful to him and to those instructing him for the careful, detailed and helpful way in which that was done.[3]Because of Mr White’s absence from the hearing, I have thought it best to give this written judgment, rather than to require him and Regent to go to the trouble and expense of obtaining a transcript of an orally-delivered judgment. As will become clear, at the hearing I indicated that I would deny Mr White’s application for an adjournment: this judgment includes my reasons for so doing. Having declined the adjournment application, I went on to hear: a) Mulalley’s adjourned application for injunctive relief against Regent and Mr White; and b) Mulalley’s application for costs against Regent and Mr White.[4]The evidence before the Court consisted of: a) two witness statements of Teresa Taylor, a director of Mulalley and its Financial Director; b) two witness statements of Christopher James Coveney, a solicitor at Silver Shemmings Ash LLP, who act for Mulalley; and c) a witness statement of Mr White.[5]None of these witnesses was cross-examined, and I accept their evidence.[6]I also had the benefit of Mr Sawtell’s skeleton argument prepared for the adjourned 29 June 2017 hearing, and an updated skeleton argument prepared for this hearing. I also had before me a skeleton argument prepared by Regent’s then counsel for the hearing on 29 June 2017. Background[7]Mulalley is a construction company, in good financial standing. The disputed debt arises from building works conducted for Mulalley by its subcontractor, Crest Contracting Limited (Crest), which provided subcontracted ceramic tiling services to Mulalley. Mr White was, at the relevant times, a director of Crest, and Mulalley’s point of contact at that company. Mulalley’s Subcontract General Terms and Conditions, which applied as between Mulalley and Crest, prohibited the assignment of the subcontract by the subcontractor (Crest) without the written consent of the main contractor (Mulalley).[8]A third party presented a winding up petition against Crest on 28 September 2016. The petition was advertised on 16 October 2016. On 21 December 2016 Crest’s name was changed to Acquisition 395326831 Limited (Acquisition). On that day, Mr White resigned as a director of Crest/Acquisition. The affairs of Crest/Acquisition are now in the hands of the Official Receiver.[9]Regent/Mr White served a first statutory demand on Mulalley dated 9 March 2017. That demand was signed by Mr White. The Particulars of Debt note “The assigned creditor, Regent Building Services Limited (Christopher White), demands payment.” The demand was for £30,915.29, made up of a number of smaller debts alleged to be owed by Mulalley to Crest.[10]On 20 March 2017, Mulalley provided a detailed description of why each of the relevant debts was disputed, and attached approximately 60 pages of documentary evidence to support its disputation. Mr White responded on behalf of Regent noting:
“Your letter of today’s date is noted, but again the contents have no significance and do not address the demand issued. Your comments and attitude are without merit (or in litigation terms vexatious). Please again note that this action is for unpaid amounts due and not for orders of work agreed and complete, the deed of assignment is a legal document and holds its own merits. If payment is not made in full by the deadline of the demand we reserve the right to take action without further notice to yourselves.”
[11]Through its solicitors, and after further correspondence, Mulalley made an application to this court to restrain Regent from presenting a petition to wind up Mulalley on the basis of the 9 March 2017 statutory demand. A hearing was set for 3 April 2017, but Regent then agreed to withdraw the statutory demand, and Mulalley’s application to the court was withdrawn.[12]Shortly thereafter, on 29 May 2017, Mr White made further threats to present a winding up petition against Mulalley. He also noted: “We would also confirm that we will be following up with an official complaint against the Officers / Directors of Mulalley & Company Limited to the Investigations and Enforcement Services and HMRC as to their activities”.[13]Regent/Mr White served a second statutory demand by email of 10 June 2017. This was again signed by Mr White, was for the same sum of £30,915.29, and included the same claim in the Particulars of Debt as is set out in paragraph 9 above. The email attaching the statutory demand recorded:
“A copy of this document will be forwarded to your bankers [name and address omitted] for their information and or action.”
The email was signed “Regards Chris White”.[14]Throughout, Mulalley has clearly set out its contest to the debt. First, it says any debt to Crest/Acquisition was not assignable without its consent, which it has never given. Second, some of the amounts that made up the debt had been paid, or were not at that stage due. Third, Mulalley contested Regent’s ability to claim the debt on behalf of Crest/Acquisition. Correspondence between Mulalley’s solicitors and Mr White has lead to Mr White producing three versions of an Asset Purchase Agreement between “Acquisition 395326821 (formerly Crest Contracting) Limited” and Regent. The first of these to be produced is dated 21 December 2016, the date that Crest changed its name to Acquisition. The second is dated 3 August 2017, which date had not yet passed when it was produced by Mr White and which in any event post-dates the relevant statutory demand the subject of these proceedings. The third is dated 3 August 2016. The three versions of the Asset Purchase Agreement were produced to Mulalley’s solicitors in that order and in the case of the 3 August 2017 and 3 August 2016 versions in response to criticisms of the previous version. Other than the date on the front and second pages, the three versions are relevantly identical - for example, the signature pages of each are identical, that is, the same signature page has been used for each agreement. Other than the different dates the only other difference I have been able to find is that the price is redacted in the 21 December 2016 version of the agreement. I say more about this below.[15]Stating that they were concerned about potential fraud, Mulalley’s solicitors have on a number of occasions asked Regent/Mr White in writing to produce for inspection the originals of the three versions of the Asset Purchase Agreement. Regent/Mr White have consistently refused to do so, offering only to produce them before the Court.[16]Mulalley’s solicitors have also been in contact with the Official Receiver, responsible for the affairs of Crest/Acquisition. The Official Receiver has been clear in written communications that Mulalley should not make any payments to Regent of monies due to Crest/Acquisition, because(a) any asset assignment post-dating the presentation of the winding up petition against Crest on 28 September 2016 would be void under section 127 of the Insolvency Act 1986 and(b) in any event a third party has a fixed and floating charge over the assets of Crest/Acquisition. The Official Receiver has also brought its views to the attention of Regent/Mr White.[17]Mulalley’s application to this Court for injunctions was initially listed for hearing on 29 June 2017 before Barling J. At that hearing, Regent and Mr White were represented by counsel and solicitors – counsel’s skeleton argument records that she appeared for both Respondents. It has since become apparent that Mr White denies that he was ever represented by counsel or solicitors, and instead claims always to have represented himself. He accepts that Regent was previously represented.[18]At the hearing on 29 June 2017, on behalf of Regent and on the face of the documents on behalf of Mr White, counsel sought an adjournment of 14 days on the basis of Mr White’s ill health. Mr White has inoperable cancer, and at the time was undergoing chemotherapy. Mr White gave undertakings on behalf of both Regent and himself not to take any steps to present a winding up petition against Mulalley until after the disposal of the application. An order was made to that effect. Counsel for Regent also sought to have Mr White removed from the proceedings: no order was made to that effect.[19]The matter was then listed for hearing floating on 15-17 November 2017.[20]The records of Companies House record that on 8 September 2017, Mr White became a director of Regent, as well as becoming its secretary. The other directors, Emma Louise White and Victoria Kathleen White, all resigned on that day.[21]Having discovered that Mr White had disinstructed his and/or Regent’s solicitors, Mr Coveney of Mulalley’s solicitors corresponded directly with Mr White. This included a telephone conversation on 31 October 2017 in which Mr Coveney reminded Mr White that the matter was listed for hearing in a window 15-17 November 2017.[22]Mulalley’s solicitors wrote to Mr White on 2 November 2017, noting the adjournment of the 29 June hearing and stating “The matter is now listed in a three day window from 15 November 2017”. That letter was sent by email, to which Mr White responded that same day with “Your correspondence is received and noted”.[23]On 14 and 15 November 2017 Mr Coveney and Mr White exchanged a number of emails – of the email chain I have seen, nine were sent to Mr Coveney on those two days from contact@regentbuildingservices.co.uk and are variously signed “Regent Building Services Limited and Christopher White”, “For Regent Building Services Limited”, “Chris White” or are unsigned.[24]Late on 15 November 2017, the Court received by email a letter on Regent Building Services Limited headed paper which I set out here in full:[25]Date: 16th November 2017. “We respectfully request that the hearing of the application for injunction be adjourned for the following reasons:[1]We only had notification of the hearing from the Applicant under email on th16th [sic] November 2017, timed at 13.57, no other documentation or notice had been received prior to this, therefore, this has not allowed us sufficient time to arrange legal representation, given that our previous legal advisors are no longer on the record, this notice was sent to the court on 1st September 2017.[2]Christopher White’s medical condition does not recommend that he attend any stressful or strenuous meetings, see attached previous witness statement and letter from his Doctors. We would also request on the behalf of Mr Christopher White that he be removed from the record as his dealings in this matter are as a representative only of Regent Building Services Limited and due to his current terminal medical condition, see paragraph 8 of Mr White’s witness statement dated 28th June 2017.[3]I respectfully apologise to the court for not being able to attend the hearing in Person, no disrespect is intended through my non-attendance but I will be unable to do so for reasons of my poor health, chemotherapy treatment and my general poor mobility.[4]We would ask that costs be reserved in the matter. We, trust the court will take or [sic] representations in all good faith and confirm that on our behalf no action will be pursued against the Applicant [sic] in respect of the statutory demand.”[26]The email also attached Mr White’s earlier witness statement of 28 June 2017, which attaches a report dated 7 March 2017 from the Cancer Division and Haematology Directorate, noting Mr White’s diagnosis in 2014, and his treatment up to 2 March 2017.[27]Mr White’s email also attached a letter from Newport Surgery dated 29 September 2017 which reads:
“I can confirm that Mr White is under the care of this practice. Mr White is under considerable stress due to metastatic bowel cancer. He is under going treatment at Addenbrookes Hospital which is lengthy. It would be detrimental to Mr White's health to travel or to attend any stressful meetings at this time.”
[28]Mr White’s email and its attachments were also sent to Mulalley’s representatives. Application for an Adjournment[29]Although the letter by email requesting an adjournment does not express itself to be from both Regent and Mr White, I have treated it as an application for an adjournment from both Respondents. a) Very late notice of the hearing; and b) Mr White's medical incapacity. I deal with each in turn.[31]In relation to inadequate notice, I do not accept that Regent/Mr White had inadequate notice of the hearing. No evidence was adduced as to whether, and if so, when, Regent’s/Mr White’s then solicitors informed it/him of the new listing window. However, in my judgment, Mr White at least knew that the hearing of 29 June 2017 had been adjourned, as he had requested, and he should therefore have been on the lookout for a new hearing date. At the latest, he was orally made aware of the hearing window by Mulalley’s solicitors’ call of 31 October 2017 and he was made aware in writing by Mulalley’s solicitors’ letter by email of 2 November 2017, to which he responded “Your correspondence is received and noted”. I therefore place no reliance on Mr White’s claim in his letter of 15 November 2017 that he only received notification of the proceedings the day before.[32]Turning to the medical grounds, the principles to be applied to an application for adjournment are helpfully set out by Warby J in Decker v Hopcraft [2015] EWHC 1170 (QB), which, in light of Regent's/Mr White’s not being represented, I set out in full: “21. The decision whether to adjourn a hearing, and the decision whether to proceed with a hearing in the absence of a party, are both case management decisions. The court is required to exercise discretion, in accordance with the overriding objective, in the light of the particular circumstances of the individual case. The authorities provide valuable guidance, however.[22]A court faced with an application to adjourn on medical grounds made for the first time by a litigant in person should be hesitant to refuse the application (Fox v Graham Group Ltd, The Times, 3 August 2001 per Neuberger J, as he then was). This, however, is subject to a number of qualifications. I focus on those which seem to be of particular relevance in the present case.[23]First, the decision is always one for the court to make, and not one that can be forced upon it. As Norris J observed in Levy v Ellis-Carr [2012] EWHC 63 (Ch) at [32]. “Registrars, Masters and district judges are daily faced with cases coming on for hearing in which one party either writes to the court asking for an adjournment and then (without waiting for a reply) does not attend the hearing, or writes to the court simply to state that they will not be attending. Not infrequently "medical” grounds are advanced, often connected with the stress of litigation. Parties who think that they thereby compel the Court not to proceed with the hearing or that their non-attendance somehow strengthens the application for an adjournment are deeply mistaken. The decision whether or not to adjourn remains one for the judge.”[24]Secondly, the court must scrutinise carefully the evidence relied on in support of the application. In Levy v Ellis-Carr at [36] Norris J said this of the evidence that is required:
“Such evidence should identify the medical attendant and give details of his familiarity with the party's medical condition (detailing all recent consultations), should identify with particularity what the patient's medical condition is and the features of that condition which (in the medical attendant's opinion) prevent participation in the trial process, should provide a reasoned prognosis and should give the court some confidence that what is being expressed is an independent opinion after a proper examination. It is being tendered as expert evidence. The court can then consider what weight to attach to that opinion, and what arrangements might be made (short of an adjournment) to accommodate a party's difficulties. No judge is bound to accept expert evidence: even a proper medical report falls to be considered simply as part of the material as a whole (including the previous conduct of the case).”
[25]Norris J's approach in Levy v Ellis-Carr was expressly approved by Lewison LJ in Forrester Ketley v Brent [2012] EWCA Civ 324 [26], upholding a decision of Morgan J to dismiss an application to adjourn on medical grounds. It was followed by Vos J (as he then was) in refusing an application to adjourn the trial in Governor and Company of the Bank of Ireland v Jaffery [2012] EWHC 734 (Ch) [49].[26]In the context of what amounts to proper medical evidence it is pertinent to note two points made by Vos J in the Bank of Ireland case. At [19], referring to a GP's letter running to some 11 lines which confirmed that the defendant had been signed off work for three weeks, he said this:
“It is important to note that a person's inability to work at a particular job is not necessarily an indication of his inability to attend court to deal with legal proceedings. It may be but it may also not be.”
At [58] Vos J indicated that he took into account the contents of the defendant's litigation correspondence, observing that he “has been communicating with the court and with the claimants over a lengthy period in the most coherent fashion. He is plainly perfectly capable of expressing his point of view, taking decisions and advancing his case”.[27]The third main qualification to Neuberger J's observations in Fox v Graham is one that is implicit, if not explicit in what Norris J said in Levy v Ellis-Carr: the question of whether the litigant can or cannot participate in the hearing effectively does not always have a straightforward yes or no answer. There may be reasonable accommodations that can be made to enable effective participation. The court is familiar with the need to take this approach, in particular with vulnerable witnesses in criminal cases. A similar approach may enable a litigant in poor health to participate adequately in civil litigation. But the court needs evidence in order to assess whether this can be done or not and, if it can, how.[28]Fourthly, the question of whether effective participation is possible depends not only on the medical condition of the applicant for an adjournment but also, and perhaps critically, on the nature of the hearing: the nature of the issues before the court, and what role the party concerned is called on to undertake. If the issues are straightforward and their merits have already been debated in correspondence, or on previous occasions, or both, there may be little more that can usefully be said. If the issues are more complex but the party concerned is capable, financially and otherwise, of instructing legal representatives in his or her place and of giving them adequate instructions, their own ill-health may be of little or no consequence. All depends on the circumstances, as assessed by the court on the evidence put before it.[29]The fifth point that may be of significance here is that, sometimes, it may appear to the court at the outset or after hearing some at least of the rival arguments that in truth the matter before it is one on which one or other side is bound to succeed. The closer the case appears to one or other of these extremes the less likely it is that proceeding will represent an injustice to the litigant. Thus, in Boyd & Hutchinson (A Firm) v Foenander [2003] EWCA Civ 1516 the Court of Appeal proceeded with the hearing of an appeal on the basis that it would refuse an adjournment if it concluded, as it did, that the appeal had no real prospect of success. This appears consistent with the conclusions of Neuberger J in Fox v Graham that where the court refuses a litigant in person an adjournment it may proceed in his absence if satisfied either(a) that it is right to grant the applicant the relief sought or(b) that the application is plainly hopeless.[30]I accept the point made by Ms Wilson, in order to assist the court, that when considering an adjournment application the court's approach should to an extent be affected by whether the matter involves applications of a case management nature, or final determinations on the merits such as an order striking out a statement of case or part of it, where Article 6 of the Convention is engaged. The court will need to be more cautious in cases falling within the second category. Nonetheless, the factors I have identified above are relevant in both contexts.” “Registrars, Masters and district judges are daily faced with cases coming on for hearing in which one party either writes to the court asking for an adjournment and then (without waiting for a reply) does not attend the hearing, or writes to the court simply to state that they will not be attending. Not infrequently "medical” grounds are advanced, often connected with the stress of litigation. Parties who think that they thereby compel the Court not to proceed with the hearing or that their non-attendance somehow strengthens the application for an adjournment are deeply mistaken. The decision whether or not to adjourn remains one for the judge.” “Such evidence should identify the medical attendant and give details of his familiarity with the party's medical condition (detailing all recent consultations), should identify with particularity what the patient's medical condition is and the features of that condition which (in the medical attendant's opinion) prevent participation in the trial process, should provide a reasoned prognosis and should give the court some confidence that what is being expressed is an independent opinion after a proper examination. It is being tendered as expert evidence. The court can then consider what weight to attach to that opinion, and what arrangements might be made (short of an adjournment) to accommodate a party's difficulties. No judge is bound to accept expert evidence: even a proper medical report falls to be considered simply as part of the material as a whole (including the previous conduct of the case).”[33]I note that paragraph 22 of Decker v Hopcraft discusses the position in relation to a first application for an adjournment on medical grounds. As is apparent from my recitation of the relevant facts set out above, this is Regent's/Mr White’s second application for an adjournment.[34]I accept the medical evidence presented by Mr White, as far as it goes. It is clear from Mr White’s witness statement and its attachments that he has been undergoing chemotherapy for inoperable cancer. However, the evidence of his diagnosis and chemotherapy treatment is from March and is now out of date. The more recent document, a brief report from Newport Surgery, appears to be from general practitioners (rather than oncology specialists), is general in its terms, and is itself now six weeks old. It is addressed “TO WHOM IT MAY CONCERN”: it is possible that it was obtained for other purposes. If it had been obtained for the purposes of these proceedings, the adjournment request ought to have been made at that time. Further, there is no mention of the “reasoned prognosis” that Norris J suggests in Levy v Ellis-Carr. There is also nothing to assist the court in understanding what arrangements might be made short of an adjournment to accommodate Mr White – for example, as suggested by Mr Sawtell, his attendance by videolink.[35]I also gratefully adopt the words of Vos J (as he then was) in the Bank of Ireland case, observing that the defendant “has been communicating with … the claimants over a lengthy period in the most coherent fashion. He is plainly perfectly capable of expressing his point of view, taking decisions and advancing his case”. The same can readily be said of Mr White. I can see nothing in the evidence to suggest that Mr White is not capable of instructing legal professionals to represent him/Regent, nor any financial evidence to suggest impecuniosity on behalf of either Regent or Mr White which would prevent legal professionals being retained. Indeed, Mr White has been most active during the period of his illness: he has issued two statutory demands, and engaged in lengthy correspondence with Mulalley’s solicitors and the Official Receiver. He has also become the sole director of Regent. He wrote nine emails to Mulalley’s solicitors in the 48 hours prior to the hearing. I have no doubt that Mr White is and has been very sick. I also have no doubt that chemotherapy can be debilitating, and I have every sympathy with any patient undergoing such treatment. But I have seen no evidence that Mr White is unable to conduct his affairs – indeed, the evidence points in the other direction. Nor have I seen sufficiently detailed, recent evidence to enable me to assess what steps might be taken to alleviate Mr White’s concerns.[36]I am also mindful of the nature of the hearing and the remedies sought against Regent and Mr White. Mulalley seeks to prevent the presentation of a winding up petition. Whilst Mulalley is the Applicant in these proceedings, it is, in reality, responding to the statutory demand issued by Regent/Mr White. Mulalley has brought the proceedings because of the threat to wind it up, made by Regent/Mr White. The option has always been available to Regent/Mr White to pursue a contested debt in the usual way under Part 7, rather than using the statutory demand procedure for uncontested debts. Any injunctions issued will not remove that option. On the other hand, Mulalley faces what Mr Sawtell described as a “sword of Damacles” hanging over its head – whilst it had and has the benefit of undertakings from Regent/Mr White until the disposal of its application, it suffers in the meantime the prejudice of an outstanding statutory demand against it and on-going threats to inform its bankers, as well as the costs of having to prepare for two hearings.[37]I also take into account Warby J’s fifth point. It did appear to me having read the papers and heard from Mr Sawtell the rival arguments that an adjournment would merely be delaying the inevitable. For the reasons set out below, I consider that Mulalley is entitled to injunctions, because of the three grounds open to it to contest the debt claimed to be owed to Regent/Mr White.[38]In reaching my decision, I have also been mindful of the overriding objective to deal with cases justly and at proportionate cost. Whilst the current application is one for injunctions, the case overall relates to an alleged debt of just over £30,000. It is thus particularly important that the matter should be managed efficiently and without avoidable delay.[39]For the reasons set out above, at the hearing I refused the application for an adjournment. Applying the principles set out above, I also proceeded in Mr White’s absence. Mulalley’s Application for Injunctions[40]The principles to be applied on an application for injunctions to prevent the presentation of a winding up petition are well known.[41]The court’s power to grant an injunction in these circumstances stems from its jurisdiction to prevent an abuse of process: Coulon Sanderson & Ward Limited v John Francis Ward (1986) 2 BCC 99207.[42]As Park J said in Argyle Crescent Limited v Definite Finance Co Limited [2004] EWHC 3422 (Ch) at paragraph 9:
“On an injunction application such as that before me, the court does not have to decide whether a dispute to the petitioner’s debt or a cross-claim against the position is valid. Indeed I would go further and say that the court ought to stop short of deciding those questions. However, the court does have to go into the argument sufficiently to be able to form a view about whether the dispute to the debt or to the cross-claim is put forward in good faith and has sufficient substance to justify it being determined in a normal civil action.”
[43]Further, as Etherton LJ (as he then was) said in Tallington Lakes Limited v South Kesteven District Council [2012] EWCA Civ 443:
“I have to emphasise, however, in this context that it is well established that the threshold for establishing that a debt is disputed on substantial grounds in the context of a winding-up petition is not a high one for restraining the presentation of the winding-up petition, and may be reached even if, on an application for summary judgment, the defence could be regarded [as] ‘shadowy’.”
[44]So the hurdle is a low one. Winding up proceedings should not be pursued on the basis of a debt which is disputed in good faith, and where that dispute is of sufficient substance to warrant determination in the usual way.[45]Mulalley raises three bases on which it disputes the debt. I deal with each in turn.[46]First, Mulalley submits that under its written agreement with Crest, any debt it owes to Crest/Acquisition is not assignable without Mulalley’s consent in writing, which was never given. In my judgment, this is a substantial dispute put forward in good faith.[47]Second, Mulalley submits that a number of the smaller debts that make up the amount of the statutory demand are in dispute. Several are alleged to have been paid already. Further, one of the smaller debts had not become payable as at the date of the statutory demand. That amount, Mulalley says, is retention monies, held back after completion of a building or renovation job to ensure that any defects discovered following completion are corrected by the contractor. The retention money allegedly owed in relation to Ladderswood was not due until 7 October 2017, that is, after the 9 June 2017 date of the statutory demand. In my judgment, this is a substantial dispute put forward in good faith. a) The 21 December 2017 version of the agreement was presented first to Mulalley, on 6 April 2017. 21 December 2016 was the date that Mr White resigned as a director of Crest, and its name was changed. But a winding up petition had been presented earlier on 28 September 2016, and so, according to the Official Receiver (whose correspondence was in evidence), Crest/Acquisition was unable lawfully to assign its assets at that time. The Official Receiver's response was forwarded to Mr White. b) The Official Receiver's position having been pointed out to Mr White, on 1 June 2017, Mr White presented to Mulalley an electronic copy of the second version of the agreement, relevantly identical to the 21 December 2017 version, but with text box overlays over the dates on the first and second pages. When the document is printed, it appears to be dated 3 August 2017. As at 1 June 2017, 3 August 2017 was in the future, so it would not have been possible for the agreement to be executed on that future date. c) That difficulty having been pointed out to Mr White, on 10 June 2017, he sent yet a third version of the agreement to Mulalley’s solicitors. Mulalley says that the 3 August 2016 agreement cannot be legitimate, because it records the seller as “Acquisition 395326821 (formerly Crest Contracting) Limited”. As the records of Companies House show, Crest was renamed Acquisition on 21 December 2016, some four months after the alleged date of 3 August 2016. On 3 August 2016, Crest was still called Crest, and any agreement it entered into would have been in the name of Crest, not Acquisition. a) The name of the seller ends with 821, whereas the full name of Acquisition (formerly Crest) ends with 831; b) The “Agent” is listed in the document at Rigil Kent Corporate Rescue Limited. Companies House records show that that entity had changed its name on 28 November 2016 to Rigil Kent Corporate Acquisitions and Turnaround Limited. It was therefore incorrectly recorded in the versions of the agreement dated 21 December 2016 and 3 August 2017; c) The “business” defined in the agreement is listed as “the business of manufacture of electronic measuring and testing equipment”. This was not the business carried out by Crest/Acquisition, which provided ceramic tiling services; and d) Books debts are not listed amongst the assets assigned by the agreement. Following page 7 of the agreement, which is headed “Part 1 Debtors List (Book debts)”, the following page which includes Mulalley in the list has not been paginated. The page after that is numbered 8. Mulalley suggests that this means the page including Mulalley has been interpolated into an existing document.[50]In my judgment, this is a substantial dispute put forward in good faith: Mulalley is right to be concerned about the existence of these three versions of the Asset Purchase Agreement.[51]In my judgment, any of these three disputes on its own would have been sufficient to grant an injunction to restrain Regent/Mr White from presenting a winding up petition against Mulalley. Together, they are compelling. Injunctions should issue in the terms set out in the application notice dated 23 June 2017. Costs[52]Mr Sawtell seeks Mulalley's costs as against both Regent and Mr White. Mr Sawtell had raised this request in his skeleton argument prepared for the adjourned 29 June 2017 hearing when at least Regent was represented by solicitors and counsel. In my judgment, he had sufficient notice of Mulalley's application for costs against him personally.[53]Whilst Mr Sawtell valiantly attempted to raise arguments that might exempt Mr White from costs, I do not find any of those arguments persuasive. It is clear that Mr White has driven all actions against Mulalley both on behalf of Regent (of which he is now the sole director) and on his own behalf. It was Mr White who signed the statutory demand relied on. That statutory demand states that the debt is claimed on behalf of the “assigned creditor, Regent Building Services Limited (Christopher White)”. It is Mr White who has produced three versions of the Asset Purchase Agreement relied on. He has engaged throughout in pursuing the statutory demand against Mulalley in circumstances where it ought to have been clear to him that the debt was contested. Having withdrawn the first statutory demand, he was well aware of Mulalley’s position, set out at length in correspondence and in telephone calls with Mulalley’s solicitors.[54]I am conscious that an injunction against Regent would have applied to its servants and agents, and thereby prevented Mr White, a director of Regent, from petitioning for winding up in that capacity. But it may not have prevented a further purported assignment of the alleged debts to yet another corporate entity to be pursued in that way. As Mr Sawtell submitted, Mr White has already tried statutory demands twice and the Asset Purchase Agreement thrice: an injunction is required to prevent his trying again. In my judgment, Mr White is a proper party to the proceedings, and hence is also properly liable for costs.[55]Further, Mr Sawtell requests Mulalley’s costs on an indemnity basis. In this regard, he cites Hoffmann J (as he then was) in In re A Company (No 0012209 of 1991) [1992] 1 WLR 351, where

the judge said this:

“The basis upon which the injunction is granted is that presentation of the petition is an abuse of the process of the court. I think that it should be made clear that abuse of the petition procedure in these circumstances is a high risk strategy, and consequently I think the appropriate order is that the petitioner should pay the company’s costs on an indemnity basis.”
[56]This conclusion was approved, obiter, by Lord Wilson in BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL plc [2013] 1 WLR 1408 at [24]. I also note that in In Re A Company (No 006798 of 1995) [1996] 1 WLR 491, referred to above, the costs order made was one of indemnity costs.[57]There is a helpful passage in the judgment of Steven Jourdan QC sitting as a Deputy High Court Judge in Richmond Pharmacology Limited v. Chester Overseas Limited, Levine and Levine [2014] EWHC 3418 (Ch):
“The applicable principles, in a case where indemnity costs are claimed on the ground that the paying party's conduct was unreasonable, so far as relevant to this claim, are as follows: a) As the very word 'standard' implies, the standard basis will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. For there to be an order for assessment on the indemnity basis, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement. b) Dishonesty or moral blame does not have to be established to justify indemnity costs. But indemnity costs are appropriate only where the conduct of the paying party was unreasonable to a high degree. “Unreasonable” in this context does not mean merely wrong or misguided in hindsight. c) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs. d) The discretion to award indemnity costs is a wide one and must be exercised taking into account all the circumstances and considering the matters complained of in the context of the overall litigation. Cases vary very considerably and each case is highly fact-dependent. e) It is important not to lose sight of the essential requirement of unreasonable or inappropriate conduct overall and not to treat examples of such which may amount to such conduct as necessarily constituting it. The essential question is whether the relevant conduct makes it just as between the parties to remove from the paying party the twofold benefit of an order on the standard basis, as compared with an order on the indemnity basis, that is to say, to enable the receiving party to recover its costs, reasonably incurred and reasonable in amount, with the benefit of the doubt being given to the receiving party and without the receiving party having to address (and persuade the court upon) the subject of proportionality. f) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. However, the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may lead to such an order. In Wates Construction Ltd v HGP Greentree Alchurch Evans Ltd [2006] BLR 45 at [27] HHJ Coulson QC said: “I consider that to maintain a claim that you know, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify an order for indemnity costs.” g) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there may be no injustice in denying the claimant the benefit of an assessment on a proportionate basis or in the claimant forfeiting its normal right to the benefit of the doubt on reasonableness. h) The making of a grossly exaggerated claim may be a ground for indemnity costs. i) The rejection of reasonable attempts to settle will not normally, by itself, justify an award of indemnity costs. In Kiam v MGN Ltd (No. 2) [2002] EWCA Civ 66, [2002] 1 WLR 2810 at [13], Simon Brown LJ said: “… it will be a rare case indeed where the refusal of a settlement offer will attract under Part 44 not merely an adverse order for costs, but an order on an indemnity rather than standard basis.”
However, if coupled with other factors, it may do so: for an example see Barr v Biffa Waste Services Ltd (Costs) [2011] EWHC 1107 (TCC); 137 Con. L.R. 268 (Coulson J).” a) As the very word 'standard' implies, the standard basis will be the normal basis of assessment where the circumstances do not justify an award on an indemnity basis. For there to be an order for assessment on the indemnity basis, there must be some conduct or some circumstance which takes the case out of the norm. That is the critical requirement. b) Dishonesty or moral blame does not have to be established to justify indemnity costs. But indemnity costs are appropriate only where the conduct of the paying party was unreasonable to a high degree. “Unreasonable” in this context does not mean merely wrong or misguided in hindsight. c) The court must therefore decide whether there is something in the conduct of the action, or the circumstances of the case in general, which takes it out of the norm in a way which justifies an order for indemnity costs. d) The discretion to award indemnity costs is a wide one and must be exercised taking into account all the circumstances and considering the matters complained of in the context of the overall litigation. Cases vary very considerably and each case is highly fact-dependent. e) It is important not to lose sight of the essential requirement of unreasonable or inappropriate conduct overall and not to treat examples of such which may amount to such conduct as necessarily constituting it. The essential question is whether the relevant conduct makes it just as between the parties to remove from the paying party the twofold benefit of an order on the standard basis, as compared with an order on the indemnity basis, that is to say, to enable the receiving party to recover its costs, reasonably incurred and reasonable in amount, with the benefit of the doubt being given to the receiving party and without the receiving party having to address (and persuade the court upon) the subject of proportionality. f) The pursuit of a weak claim will not usually, on its own, justify an order for indemnity costs, provided that the claim was at least arguable. However, the pursuit of a hopeless claim (or a claim which the party pursuing it should have realised was hopeless) may lead to such an order. In Wates Construction Ltd v HGP Greentree Alchurch Evans Ltd [2006] BLR 45 at [27] HHJ Coulson QC said:
“I consider that to maintain a claim that you know, or ought to know, is doomed to fail on the facts and on the law, is conduct that is so unreasonable as to justify an order for indemnity costs.” g) If a claimant casts its claim disproportionately wide, and requires the defendant to meet such a claim, there may be no injustice in denying the claimant the benefit of an assessment on a proportionate basis or in the claimant forfeiting its normal right to the benefit of the doubt on reasonableness. h) The making of a grossly exaggerated claim may be a ground for indemnity costs. i) The rejection of reasonable attempts to settle will not normally, by itself, justify an award of indemnity costs. In Kiam v MGN Ltd (No. 2) [2002] EWCA Civ 66, [2002] 1 WLR 2810 at [13], Simon Brown LJ said: “… it will be a rare case indeed where the refusal of a settlement offer will attract under Part 44 not merely an adverse order for costs, but an order on an indemnity rather than standard basis.”
However, if coupled with other factors, it may do so: for an example see Barr v Biffa Waste Services Ltd (Costs) [2011] EWHC 1107 (TCC); 137 Con. L.R. 268 (Coulson J).”[58]As set out above, Regent and Mr White were well aware of Mulalley’s solvency, and that Mulalley contested the debt on which Regent/Mr White relied. I have held above that the three bases on which Mulalley disputes the debt are substantial, and are put forward in good faith. In all the circumstances, if this was not obvious to Regent/Mr White, who at least for a period of approximately two months including the first hearing of this application had the benefit of professional legal advice, then it ought to have been. This is particularly so given the earlier set of proceedings which were settled. Regent/Mr White knew or ought to have known that Mulalley had grounds for contesting the debt. An award of indemnity costs is appropriate.[59]Mr Sawtell asks that I assess those costs summarily. I have been provided with a schedule of costs totalling £16,128.28. Once again Mr Sawtell placed himself in the shoes of counsel for Regent/Mr White, and put fairly and with conviction arguments for reducing that amount. In my judgment, it is not appropriate to reduce the amount claimed. Given the level of correspondence between Mulalley’s solicitors and Mr White that I have reviewed, as well as the preparation of four witness statements dealing with the three Asset Purchase Agreements put forward, as well as preparation for two hearings, including two applications for adjournment, I consider the costs put forward to be reasonable. I therefore summarily assess Mulalley’s costs at £16,128.28.[60]If I am wrong, and instead should have assessed costs on the usual party/party basis, I would not have discounted significantly the reasonable costs set out in the costs schedule. I would have summarily assessed costs on a party/party basis at £15,000.00. Conclusion[61]As I said at the hearing on 16 November 2017, I did not consider it appropriate to grant Regent/Mr White’s request for an adjournment, for the reasons I have now set out above.[62]Having conducted the hearing, I have concluded that Mulalley’s contest to the debts alleged in the statutory demand dated 9 June 2017 are substantial and honestly held. Injunctions should issue in the form set out in the application notice dated 23 June 2017. Regent and Mr White should pay Mulalley’s costs, summarily assessed on an indemnity basis at £16,128.28.

Cited in 3 later judgments