LM1 Limited v Seacroft Film Investments Limited [2026] EWHC 2212 (Ch)

[2026] EWHC 2212 (Ch)Case No CR-2026-LDS-000154Date 21 August 2026
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
INSOLVENCY AND COMPANIES LIST (ChD)
Venue The Business and Property Courts in Leeds
Westgate House
6 Grace Street
Venue Leeds
LS1 2RP
Before
Her Honour Judge Kelly sitting as a Judge of the High Court
Between
LM1 LIMITEDApplicantSEACROFT FILM INVESTMENTS LIMITEDRespondentMr Stuart Roberts (instructed by Best Solicitors) for ApplicantMr Steven Fennell (instructed by Walker Morris LLP) for RespondentAPPROVED JUDGMENT
[1]This judgment follows a hearing on 12 May 2026. The hearing was listed that day for determination of an application made by LM1 Limited (“LM1”) to restrain Seacroft Film Investments Limited (“Seacroft”) from presenting a winding up petition following service of a statutory demand and for Seacroft to pay LM1's costs of the application.[2]The application was first listed on 20 February 2026. It was then relisted on 12 May 2026 and directions were given. LM1 was represented by counsel Mr Stuart Roberts at both hearings, Seacroft was represented by counsel Mr Steven Fennell. In addition, LM1 was represented throughout by Best solicitors (“Best”) and Seacroft was represented throughout by Walker Morris LLP (“Walker Morris”).[3]Before the hearing, the Court was informed that the only dispute was as to costs. The Respondent agreed there was a substantial dispute about the debt after the Applicant had filed and served the witness statement of Mr Thomas Tilbrook dated 31 March 2026 exhibiting a revised Bill of Costs.

Background

[4]Background I had read the hearing bundle and the skeleton argument of Mr Roberts for the first hearing. I read all the skeleton arguments filed before the hearing on 12 May 2026 together with the various documents to which I was directed in those skeleton arguments and during the hearing.[5]It is necessary to set out some of the background details and law relating to the application itself in order to consider the conduct of the parties when considering costs. A key issue is at what stage a triable issue was raised by the Applicant to justify the acceptance now by the Respondent that a petition cannot be presented on the basis of the statutory demand.[6]The following chronology is of assistance: 28 February 2024 An agreement (“the Settlement Agreement”) was reached between the parties in case numberJ00LS572 (“the claim”) which was proceeding in the County Court at Leeds. Seacroft was the Claimant and LM1 was the Defendant in the claim. The relevant clause in the Settlement Agreement was clause 2 which provided that:
“Seacroft will pay LM1: (a) The Settlement Sum within 14 days of the Effective Date; (b) The Costs Contribution within 14 days of the Effective Date (c) LM1's costs of the Proceedings to be assessed on the standard basis, if not agreed, less the Costs Contribution”
The Settlement Sum was defined as “£30,000 inclusive of VAT”, the Costs Contribution was defined as “£20,000 inclusive of VAT” and the Proceedings were defined as “the Counterclaim issued by LM1 against Seacroft under claim number J00LS572”. The Settlement Agreement was subsequently annexed to a Tomlin Order which provided:
“1. The Trial listed to commence on 5 March 2024 be vacated. 2. All further proceedings in this action be discontinued upon the terms set out in the schedule, except for the purpose of enforcing those terms. 3. The Defendant’s Part 20 Claim against the Part 20 Defendant shall stand dismissed with no order for costs. 4. Each party shall have permission to apply to the court to enforce those terms without the need to bring a new claim.” 28 March 2024 Seacroft paid the settlement sum of £30,000 and the Costs Contribution of £20,000. 20 January 2025 LM1 served its Bill of Costs on Seacroft’s solicitors. 11 February 2025 Seacroftserved its Points of Dispute. Various points were taken in the points of dispute including the Medway Oil point [see below], whether the indemnity principle had been applied to the Bill, and lack of basic information such as the seniority and experience of the fee earners involved in the case, a lack of counsel's fee notes and a failure properly to apportion the costs claimed. 12 March 2025 LM1 responded to the Points of Dispute. 16 October 2025 Provisional Assessment of the Bill of Costs. The court identified a fundamental dispute as to the way to apportion costs in the light of the Medway Oil case and adjourned the case for a Detailed Assessment. 2 December 2025 Detailed Assessment before District Judge Josling. The Judge accepted the arguments made by Seacroft “…determining that the Defendant is entitled to the additional costs of the counterclaim only”
. He made the following

The Law

[7]The Law Happily, counsel largely agree on the legal principles. The relevant rules of the Insolvency Rules 2016 (“IR”) are:(1) IR10.5(5) applies in relation to an application to set aside a statutory demand “(5) The court may grant the application if— (a)the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt specified in the statutory demand; (b)the debt is disputed on grounds which appear to the court to be substantial…” (a)the debtor appears to have a counterclaim, set-off or cross demand which equals or exceeds the amount of the debt specified in the statutory demand; (b)the debt is disputed on grounds which appear to the court to be substantial…”(2) IR7.24 allows the court to make an injunction restraining a creditor from presenting a petition for the winding up of the company.[8]CPR 44.2 sets out the discretion of the court as to costs:
“(1) The court has discretion as to— (2) If the court decides to make an order about costs— (4) In deciding what order (if any) to make about costs, the court will have regard to all the circumstances, including— (5) The conduct of the parties includes— (a) whether costs are payable by one party to another; (b) the amount of those costs; and (c) when they are to be paid. (a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but (b) the court may make a different order. (a) the conduct of all the parties; (b) whether a party has succeeded on part of its case, even if that party has not been wholly successful; and (c) any admissible offer to settle made by a party which is drawn to the court’s attention, and which is not an offer to which costs consequences under Part 36 apply. (a) conduct before, as well as during, the proceedings and in particular the extent to which the parties followed the Practice Direction - Pre-Action Conduct or any relevant pre-action protocol; (b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue; (c) the manner in which a party has pursued or defended its case or a particular allegation or issue; (d) whether a claimant who has succeeded in the claim, in whole or in part, exaggerated its claim; and (e) whether a party failed to comply with an order for alternative dispute resolution, or unreasonably failed to engage in alternative dispute resolution.”
[9]CPR 47 deals with the rules concerning a detailed assessment of a Bill of Costs. CPR 47.7 provides that the receiving party has 3 months after the right to costs arose during which detailed assessment proceedings must be commenced. The sanction for delay is contained within CPR 47.8:(1) Where the receiving party fails to commence detailed assessment proceedings within the period specified— (a) in rule 47.7; or (b) by any direction of the court, the paying party may apply for an order requiring the receiving party to commence detailed assessment proceedings within such time as the court may specify.(2) On an application under paragraph (1), the court may direct that, unless the receiving party commences detailed assessment proceedings within the time specified by the court, all or part of the costs to which the receiving party would otherwise be entitled will be disallowed.(3) If— (a) the paying party has not made an application in accordance with paragraph (1); and (b) the receiving party commences the proceedings later than the period specified in rule 47.7, the court may disallow all or part of the interest otherwise payable to the receiving party under— (i) section 17 of the Judgments Act 1838; or (ii) section 74 of the County Courts Act 1984,(4) but will not impose any other sanction except in accordance with rule 44.11 (powers in relation to misconduct).[10]Considering when a statutory demand may be set aside and when the court may order an injunction to prevent a winding up petition from being presented, the following principles apply:(1) The court will not permit a winding up petition to be used for the purpose of deciding a substantial dispute which is raised on bona fide grounds. Insolvency processes should not be used to put pressure on a company to pay rather than to litigate, nor to improve a creditor’s negotiating position (see Re Company(No. 006685 of 1996) [1997] BCC 830);(2) The test to apply is whether substantial grounds exist as to a triable issue (see Crossley-Cooke v Europanel (UK) Ltd [2010] EWHC 124 (Ch));(3) A petition will not be restrained just because the company asserts a debt is disputed. The company must satisfy the court that there is a genuine dispute founded on substantial grounds (see Re Bayoil SA [1998] BCC 988, Tallington Lakes Ltd v Ancasta International Boat Sales Ltd [2012] EWCA Civ 1712 and Angel Group Ltd v British Gas Trading Ltd [2012] EWHC 2702 (Ch)).(4) Norris J summarised the principles to be applied in the Angel Group case: "The principles to be applied in the exercise of this jurisdiction are familiar and may be summarised as follows: a) A creditor's petition can only be presented by a creditor, and until a prospective petitioner is established as a creditor he is not entitled to present the petition and has no standing in the Companies Court: Mann v Goldstein [1968] 1WLR 1091. b) The company may challenge the petitioner's standing as a creditor by advancing in good faith a substantial dispute as to the entirety of the petition debt (or at least so much as will bring the indisputable part below £750). c) A dispute will not be "substantial" if it has really no rational prospect of success: in Re A Company No.0012209 [1992] 1WLR 351 at 354B. d) A dispute will not be put forward in good faith if the company is merely seeking to take for itself credit which it is not allowed under the contract: ibid. at 354F. e) There is thus no rule of practice that the petition will be struck out merely because the company alleges that the debt is disputed. The true rule is that it is not the practice of the Companies Court to allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds, because the effect of presenting a winding up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary action: in Re A Company No.006685 [1997] BCC 830 at 832F. But the court will not allow this rule of practice itself to work injustice and will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute exists which cannot be determined without cross-examination (ibid. at 841C). The court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment: (ibid at 837B)."(5) A Respondent runs the risk of being ordered to pay the costs of an application to restrain the advertisement of a winding up petition if the Applicant provides further evidence of the debtor company’s solvency and proper reasons for disputing the debt. The fact that the Respondent was then prepared to give an undertaking not to present a petition on the basis of that statutory demand or serve a fresh demand is relevant. The giving of an undertaking recognises that there is a bona fide dispute about the debt (see Re A Company No 007356/98 (ITC Infotech Ltd) [2000] BCC 214 (1999)).(6) The general rule is that an unsuccessful party will be ordered to pay the costs of the successful party, but the court may make a different order and the principles on which it may depart from the usual order are set out in CPR 44.3(3), (4) and (5). The question for the court is whether any of the factual circumstances of the case mean the normal costs rule should not be applied, not just whether a party has done something unreasonable. In a case where both parties had acted unreasonably, no order as to costs was an appropriate order to make (see Frank Saul (Fashion ) Limited v Her Majesty’s Revenue & Customs [2012] EWHC 2702 (Ch) per Vos J (as he then was).[11]When considering the costs of a counterclaim, Medway Oil and Storage Co Ltd v Continental Contractors Ltd [1929] AC 88 (“Medway Oil”) is the key case. The notes in the White Book at 44.2.14 set out the principle distilled from it: “In short, the party who is awarded the costs of the counterclaim will, on assessment, be allowed only those costs which are specifically referable to the counterclaim. All of the other costs will be costs of the claim and will not be apportioned between claim and counterclaim. The party who is awarded the costs of the counterclaim but ordered to pay the costs of the claim may therefore be at a particular disadvantage if the same issues arise in both the claim and the counterclaim."

LM1’s submissions

[12]Mr. Roberts relied heavily for the Applicant on the fact that LM1 had succeeded and the usual order therefore was that the Respondent should pay the Applicant's costs. In fact, Mr. Roberts went further and argued that on the facts of this case, the Respondent should pay the Applicant's costs on the indemnity basis because it was always clear that the Applicant had a genuine dispute relating to the statutory demand and therefore the statutory demand should never have been issued.[13]In particular, Mr. Roberts relied upon the accepted position that it is not permissible to use insolvency proceedings to decide substantial disputes raised properly, nor to improve the negotiating position of a creditor. Mr Robert's position was that the plain wording of clause 2.2(c) meant at most that unless and until the costs position was resolved between the parties in relation to the claim that LM1 was entitled to retain the Costs Contribution of £20,000.[14]Mr. Roberts went further. He argued that the Settlement Agreement was a self-contained agreement and nowhere within that document does it state that any of the cost Contribution is to be repaid. Nor does the agreement state that the Costs Contribution is a payment on account. If it did state that it was a payment on account, it would not be in dispute that any balance overpaid would be repaid once the costs had been determined. However, there is no reference nor any possible inference to be drawn from the Settlement Agreement that the £20,000 paid would be repaid if there was an overpayment once the costs of the counterclaim were assessed.[15]Mr. Roberts submitted that Walker Morris had wrongly and falsely asserted in correspondence that the initial bill which had been struck out was assessed at £0 and that it was part of the order of 2 December 2025 that the £20,000 Costs Contribution must be repaid. Whilst it was correct that the initial bill had been struck out as a result of the Respondent succeeding in its Medway Oil argument, that was the equivalent of an interim skirmish. There was no basis on which it could be argued that the Costs Contribution had to be repaid. He asserted that the “unjustified and outrageous” conduct of Walker Morris was underlined and emphasised by the fact that Best solicitors had requested on 23 December 2025 that Walker Morris explain the justification for asserting repayment of the £20,000 should be made, and that correspondence was ignored.[16]In addition, he argued that the order made on 2 December 2025 by District Judge Josling did not order repayment of the Costs Contribution. In those circumstances, there was no requirement to repay, and the issue of the statutory demand was wholly improper and totally unjustified. If Seacroft wanted repayment of the £20,000, it would have to ask the court for an order. It did not ask for an order. In any event, Mr. Roberts argued that such an order could not have been made by the court in any event because to do so would go behind the face of the Settlement Agreement.[17]The lack of any debt was asserted time and again by Best solicitors in their correspondence as shown in the chronology. Throughout, no explanation was given as to why the money was said to be repayable. It was simply demanded. The reality was that Seacroft’s director had a personal vendetta against LM1’s director and this aggressive action was part of that vendetta when it was known that LM1 was solvent.[18]LM1 had no choice but to issue the application. The fact that offers to resolve this matter by Walker Morris all involved repayment of some or all of the Costs Contribution of £20,000 demonstrated an improper motive. The issue of the statutory demand was clearly an abuse of process. LM1 was not insolvent.[19]No concession was given by Seacroft that it would not proceed to issue a winding up petition until the letter from Walker Morris dated 24 April 2026. Mr Roberts argued that the ITC case was on all fours with this case. Evidence was provided after an application to prevent advertisement of a winding up petition had been issued. That evidence was then accepted by Respondent to the application and despite the late evidence, that Respondent was ordered to pay the costs. The Respondent had started the ball rolling by the issue of a statutory demand. Whilst the issue was understandable on the basis of the then available information, there was a risk that the alleged debtor would be able to prove a bona fide dispute. That had happened in the ITC case and for the same reasons, Seacroft should be ordered to pay the costs in this case. Whilst indemnity costs were not ordered in the ITC case, Seacroft should be ordered here to pay indemnity costs because there was never any doubt that there was a substantial dispute between the parties about the £20,000.[20]In addition, Mr. Roberts argued that in order for Seacroft to be able to rely on the fact that LM1 had not provided approximate figures which would be claimed in respect of the counterclaim costs or indeed a revised bill, Seacroft or their solicitors would have to make a formal demand for that information. No such request was ever made and Walker Morris instead chose to issue a statutory demand. That demand was issued within the three months permitted by CPR 47 and so was premature in any event without any correspondence.

Seacroft’s submissions

[21]Seacroft’s submissions Mr Fennell accepted at the start of his submissions that the starting point was that the usual order would be for costs to be ordered against Seacroft and that he needed to persuade the court why it should not make that order.[22]The first matter of substance raised by Mr Fennell was the allegation of misconduct made during oral submissions by Mr. Roberts that Seacroft’s solicitors had made a false statement in correspondence that the bill which had been struck out had been assessed at £0 and that it was part of the order that LM1 repaid the £20,000 to Seacroft. If that was to be the allegation, that was not something which should be permitted to be raised in oral submissions. To make an allegation that a solicitor has deliberately made a false statement was a very serious matter and one which should be properly particularised to enable the solicitors to meet the allegations against them.[23]In any event, when the relevant letters from Walker Morris were read properly, no allegation was made either falsely or improperly. The wording was important and Walker Morris had chosen their words carefully. They did not falsely state that the assessment of the bill was £0. Walker Morris stated that the effect of the strike out of the bill of costs was that the bill “has essentially been assessed at £0.00, this results in a balancing payment our client in the sum of £20,000”. They had not asserted that the court had ordered repayment of the £20,000. They asserted that the effect of the strikeout was that LM1 had to make a balancing payment to Seacroft in the sum of £20,000.[24]The initial letter from Walker Morris to Best solicitors dated 8 December 2025 making the demand for repayment of the £20,000 and the chase letter dated 23 December 2025 both made it absolutely clear that the claim for the repayment of the Costs Contribution of £20,000 was based on clause 2.2(c) of the Settlement Agreement. No further explanation was needed.[25]Mr Fennell went on to argue that the wording of the Settlement Agreement plainly provided the contractual basis for the Costs Contribution of £20,000 to be returned. Indeed, although it had been argued today by Mr. Roberts that no part of the Costs Contribution was contractually due to be repaid in the absence of clear wording, the natural meaning of the words used in the Settlement Agreement plainly showed that repayment of any balance had been the understanding between the parties.[26]Further, on the natural reading of the correspondence throughout, Best implicitly or explicitly had accepted that any balance in excess of whatever was awarded by the court on assessment would be repaid to Seacroft. For example, the wording of the email from Best dated 23 December 2025 can only be read as accepting any overpayment would be refundable. It was never asserted in correspondence that the £20,000 Costs Contribution was for LM1 to keep regardless. Further, if that was the argument, one would have expected to see that asserted within the application itself. It was telling that no such assertion was made.[27]The background to this matter was important in that if one read the pleadings, the counterclaim of LM1 is in fact a mirror claim of what is claimed in the particulars of claim by Seacroft. As was noted in the note to the White Book, a party obtaining an order or an agreement for the payment of the costs relating to a counterclaim may well find themselves at a disadvantage. That position however was what LM1 had agreed.[28]The reason Seacroft should not be ordered to pay the costs of LM1 was because it was plain that Seacroft had a contractual entitlement to repayment of some or all of the £20,000 Costs Contribution, depending upon the court's assessment of the costs relating to the counterclaim.[29]The initial claim for costs was £74,075.60. No indication was given by LM1 after the initial bill was struck out as to when a new bill would be provided nor when an application for assessment would be made. In the application to prevent the presentation of a winding-up petition, the evidence of Mr. Jones was wholly inadequate.[30]Despite the fact that the witness statement was about six weeks after the initial bill had been struck out, all that was said was that a costs draughtsman had been instructed and Mr. Jones expected that he “expected to have the bill of costs for service shortly”. No indication was given as to the approximate amount which was now expected to be recovered in respect of the costs of the counterclaim, nor any evidence as to what steps have been taken in respect of the redrawn bill nor when those steps had been taken to progress matters.[31]Even at the initial hearing of the application on 20 February 2026, there was no information available to the court about when the redrawn bill would be available nor what the anticipated level of costs in respect of the counterclaim would be. All of that information should have been made available to the court.[32]At that hearing, an order was made for a redrawn bill to be served supported by a witness statement so that Seacroft was aware of the claim being made. That statement and bill were to be served by 31 March 2026. They were served on 31 March 2026 with no explanation as to why it had taken until the very last day permitted without any other correspondence or information being provided. Again, this was indicative of the attitude of LM1 and Best that they could take their time without consequence.[33]Although LM1 had been granted an indulgence by the court in that despite the initial bill being struck out, the court permitted LM1 to submit a further Bill of Costs and “to recommence assessment proceedings in accordance with CPR47”, LM1 appeared to suggest that it could take its time and essentially draw and serve a new bill whenever it saw fit. Further, it was astonishing that the amount of costs claimed to be counterclaim costs was so high at £46,755.35. That figure appeared grossly excessive when the issues in the claim and counterclaim were essentially the same.[34]Whilst it is correct that the deadline for commencing detailed assessment proceedings pursuant to CPR 47.7 was three months, the plain import of the rule was that parties should get on with making claims for cost to be assessed. That was even more important in the circumstances here where the initial bill had been struck out as it was totally inadequate. The court had granted an indulgence to enable LM1 to recommence costs proceedings “in accordance with CPR 47”.[35]Although it was correct that the statutory demand had been issued within a three month period from the order of 2 December 2025 permitting LM1 to recommence cost proceedings, no information had been given in the eight weeks before the statutory demand was issued about those intended costs proceedings. Indeed, the three months anticipated in CPR 47 came and went in any event. In addition, even after making the application, no Bill of Costs nor any evidence about the anticipated costs was provided until it was ordered by the court and then only at the very last possible moment.[36]In the circumstances, it was quite proper for the court not to make the usual order in respect of costs. This was not a case of abuse of process by Seacroft. None of the matters which the court would have to consider when deciding if there was a substantial dispute in respect of the statutory demand, as set out by Norris J in the Angel case had been dealt with at any point by Best. Further, although Mr. Roberts heavily relied upon the ITC case, that case does not assist them in the circumstances.[37]The guidance given by Vos J (as he then was) in the Frank Saul case is of much more assistance to the court in exercising its discretion pursuance to CPR 44. The court has a wide discretion when it comes to costs. Mr Fennell acknowledged that he had not been able to find a case where a court had ordered that a respondent in an application of this kind recovered its costs, nonetheless it was certainly open to the court to make no order as to costs.[38]In addition, Mr Fennell submitted that Mr. Roberts was missing the point in terms of the solvency or otherwise of LM1. Seacroft did not have to provide evidence of the insolvency of LM1. As was well established and accepted, the fact of failure to pay a statutory demand was evidence itself of insolvency. That is why if there is a substantial dispute in respect of whether or not the money is owed, a statutory demand can be set aside.

Decision

[39]Decision In my judgment, no order is the appropriate order for costs. Although LM1 was successful in its application, I accept the submissions made by Mr Fennell that the circumstances in this case require a different order.[40]In effect, the counterclaim in respect of which LM1 is entitled to recover its costs was a mirror claim of the claim itself. I accept there were some minor differences. In those circumstances, I also accept Mr Fennell's submission that it was an entirely reasonable position for Seacroft to take that the costs of the counterclaim would be likely to be minimal.[41]It was plain from the initial bill which was struck out that LM1 wrongly sought to claim the entirety of the costs of the whole action in the bill. That was impermissible. Although LM1 was permitted to recommence cost proceedings, it did not do so with any sense of urgency or transparency. Walker Morris wrote to Best within a week of the original bill being struck out asserting that the effect of the strikeout was the equivalent of the costs having been assessed at £0.00.[42]Whilst no specific deadline had been given in the order of 2 December 2025 for the recommencement of costs proceedings, it was ordered that they would be dealt with in accordance with CPR 47. They were not. Although it might have been argued that the issue of the statutory demand was premature, I do not accept that argument assists LM1 given the actual timetable. Not only was a bill not prepared or served within the three month period anticipated in CPR 47. It was only served when a deadline was imposed by the court and then at the very last possible moment for compliance with that order.[43]In those circumstances, I do not accept that Walker Morris either can or should be criticised for only waiting 8 weeks when there was no, or no meaningful, correspondence from Best about the costs. No meaningful information was given about the amount of likely costs of the counterclaim to be claimed nor when it was proposed to recommence costs proceedings in the witness statement of Mr. Jones.[44]I do not accept that blame should be attributed to Walker Morris for failing to respond to the query of Best in its email of 23 December 2025. The basis for seeking repayment of the Costs Contribution was plainly set out in Walker Morris’s letter.[45]I accept that there was technical compliance with the order dated 20 February 2026 to provide a witness statement and exhibit the proposed redrawn bill in the witness statement of Mr Tilbrook dated 31 March 2026. However, it is notable and entirely consistent with the manner in which LM1 and Best have approached this matter that no useful information was given nor reasoning for the delays before the bill was served on 31 March 2026.[46]Taking into account all the matters set out above, the appropriate order is one of no order for costs.

order

1. The Defendant's bill served on 13 January 2025 is hereby struck out. 2. The Defendant is permitted to redraw their bill of costs in accordance with the Courts (sic) application of Medway and interpretation of the Settlement Agreement as outlined within the above recital. 3. The Defendant be permitted to recommence assessment proceedings in accordance with CPR47. 4. The Defendant do pay the Claimant’s costs of the costs proceedings to date, summarily assessed in the sum of £20,449.56 inclusive of VAT within 21 days, being on or before 23 December 2025.” 8 December 2025 Walker Morris wrote to Best. The letter noted that the Bill of Costs was struck out and LM1 was due to pay the costs awarded on or before 23 December 2025. The letter also noted clause 2.2(c) of the Settlement Agreement and asserted: “Our Client has made that Costs contribution as defined within the Settlement Agreement to the value of £20,000. On the basis that your Client's Bill of Costs was struck and has essentially been assessed at £0.00, this results in balancing payment to our Client in the sum of £20,000. Our Client's costs in the sum of £20,449.56 together with the Costs Contribution of £20,000 are to be paid to this firm's account on or before 23 December 2025, to the below set out account details.” 23 December 2025 LR1 paid the costs ordered but did not repay the £20,000 Costs Contribution. Walker Morris replied the same day by email at 14.58, noting that the Costs Contribution had not been repaid and stating: “…we require your client to remit our client with our Client's costs together with the Costs Contribution of £20,000 pursuant to Clause 2.2(c) of the Settlement Agreement dated 28 February 2024… In the absence of remittance by 2 p.m. 24 December 2025, we expect our client will instruct us to take enforcement action without further notice.” Best responded by e-mail at 15.49 stating: “The order of 2 December 2025 only entitles your client [sic] payment of £20,449.56. Our client is now entitled to redraw their bill and serve the same on your client takin [sic] into consideration the Medway oil [sic] point on which you client was successful. There is no order that the payment contribution of £20,000 is to be returned as this is still in part payment of costs which our client can continue with and which he [sic] will be. Clause 2 states: The Defendant is permitted to redraw their of [sic] costs in accordance with the court’s application of Medway and interpretation of the Settlement Agreement as outlined within the above recital. Please identify what part of the Settlement Agreement you are relying on and or what part of the order?” Walker Morris did not respond to that email. 23 January 2026 Seacroft issues its statutory demand against LM1. The statutory demand referred to the previous claim, the Settlement Agreement dated 24 February 2024 and specifically to clause 2.2(c), and the order made on 2 December 2025. The statutory demand referred to the payment made of the £20,000 Costs Contribution and then stated: “Upon the Debtor's Bill of Costs being struck out at the Detailed Costs Assessment on 2 December 2025, the assessment of that Bill of Costs was £0.00… Accordingly, a balancing payment to the Creditor is owed in the sum of £20,000, being the return of the Costs Contribution… The Creditor's solicitor has written to the Debtor's solicitor on 8 December 2025 and 23 December 2025 requesting the payment of the Costs Contribution of £20,000 to the Creditor's solicitor's account on or before 23 December 2025. As of the date of this demand, the £20,000 has not been received by the Creditor or the Creditor's solicitor.” 2 February 2026 Best wrote to Walker Morris stating that the statutory demand was disputed and that it was: “…subject to a counterclaim so should rightly be withdrawn along with a solicitor’s undertaking provided to confirm that a winding up petition will not be presented to court. The Demand itself is an abuse of process and is served contrary to any proper reading of the order dated 2 December 2025” The letter went on to assert that LM1 was still entitled to recover costs from Seacroft in accordance with the Settlement Agreement. The letter stated that: “those costs have not been resolved, rather your client has been successful on an interim point”. The letter asked for Walker Morris to set out the basis for stating that Seacroft remained entitled to recover the Costs Contribution from LM1, if that was asserted. The letter also stated that the costs would be greater than the £20,000 claimed. The letter asserted a personal vendetta against the director of LM1 by the director of Seacroft and asserted that: “The conceptual basis of the statutory demand is so grotesque that the service of the same is an abuse of process.” If no undertaking was received by 12 noon on 5 February 2026, Best asserted that an application to the court to restrain presentation of a winding up petition would be made and costs sought on the indemnity basis. Walker Morris did not reply to this letter. 12 February 2026 LM1 issued this application to restrain presentation of a winding up petition by Seacroft. The application was supported by the witness statement of Steven Jones (director of LM1) dated 12 February 2026. In that statement, Mr. Jones set out the history of the matter, including the fact that the initial bill of costs had been struck out at detailed assessment. He then stated at paragraph 21: “Whilst I am disappointed with the outcome of the hearing the Order still provide [sic] that I am entitled to recover my costs in accordance with the Settlement Agreement and that a new bill of costs has to be drawn in accordance with the ‘Medway’ point. My reading of this Order affirms that LM1’s entitlement to costs is still in dispute as a new bill can be served, as such there is still a genuine and legitimate dispute on the [sic] LM1's entitlement to costs.” The witness statement went on to say that he had instructed a costs draughtsman to redraw the bill and he “expected to have a bill of costs for service shortly”. The application was listed for hearing on 20 February 2026. 18 February 2026 Walker Morris wrote to Best asserting Seacroft's right to have the £20,000 Costs Contribution repaid stating: “Our client continues to maintain that it is quite clear that following the Order made at the Hearing of 2 December 2025 that your client was required to remit to our client its costs in the sum of £20,449.56 together with the Costs Contribution of £20,000 pursuant to Clause 2.2(c) of the Settlement Agreement dated 28 February 2024, especially in circumstances where your client has failed to and seemingly has no intention to redraw their bill of costs and recommence detailed assessment proceedings. However, our client is willing to engage in commercial discussions with your client as to the balance owing and on this basis is willing to agree to withdraw the Demand. Please provide a draft consent order to that effect. Thereafter, we look forward to receiving your client's proposals towards a scheduled instalment plan for the remittance of the Costs Contribution.” Best responded in a without prejudice letter setting out some of the history of the matter and rule 6.5(4) of the Insolvency Rules 1986 before stating: “8. With reference to the Order, the issue of costs has not been resolved. Our client is entitled to redraw his bill and recommence cost assessment proceedings and intends to do so. 9. We cannot discern any reasonable basis why the demand was served and as such the only logical basis was to threaten (without merit) bankruptcy proceedings against our client. Such conduct being an abuse of process.” Best then offered to agree to a consent order where the statutory demand was set aside, Seacroft paid the costs within seven days of LM1 which costs, until 12 noon the following day, would be restricted to £4000 inclusive of VAT and disbursements. Walker Morris did not reply to this letter. 20 February 2026 Hearing before Her Honour Judge Kelly. Seacroft had not filed any evidence in response to the application. LM1 had not served a new Bill of Costs and counsel did not have any information to say when that was likely to occur. The application was adjourned with Seacroft undertaking not to present any winding up petition against LM1 based on the statutory demand or the underlying claim until the matter was heard. LM1 was ordered to file a witness statement exhibiting the redrawn bill of costs (without commencing further detailed assessment proceedings to enable discussions) by 4pm 31 March 2026 and costs were reserved. 2 March 2026 Walker Morris made a without prejudice offer to resolve the application. The letter set out:(1) the various concerns about the preparation and transparency of LM1's previous bill of costs which was struck out;(2) the fact that it was only after the statutory demand was received by LM1 that it indicated it would recommence detailed assessment proceedings;(3) no evidence had been provided that a cost draughtsman had in fact been instructed or when;(4) as LM1 was only entitled to the costs of the counterclaim, the costs would plainly be less than £20,000. In light of all of those concerns, LM1 was invited to make an offer which returned the Costs Contribution of £20,000 (after deduction of whatever “modest costs” were incurred by the counterclaim) and in addition to pay the costs of Seacroft incurred by the application which were currently £6,630 plus VAT. 31 March 2026 Best responded to the letter with its own without prejudice letter. The letter asserted that in the substantive claim, the majority of the work and costs had been incurred in relation to the counterclaim. A counter offer was made for Seacroft to withdraw its statutory demand and pay LM1's cost of the application in the sum of £12,000 including VAT within 14 days. 9 April 2026 Walker Morris wrote a further without prejudice letter maintaining that it was correct in its interpretation of the Settlement Agreement that LM1 was required in the circumstances to repay the Costs Contribution of £20,000 and denying any abuse of process by the issue of the statutory demand. However, to try to resolve the matter, the letter offered (in full and final settlement of everything including the set aside application and matters arising from the Settlement Agreement and costs) that LM1 retained £10,000 of the Costs Contribution, LM1 returned £10,000 of the Costs Contribution to Seacroft within 14 days, Seacroft would withdraw their statutory demand and the parties would pay their own costs in respect of the main proceedings, Settlement Agreement and the set aside application. Best did not respond to that offer. 24 April 2026 Walker Morris reiterated the without prejudice offer to resolve all of the issues between the parties which it had made in its letter of 9 April 2026. The letter noted the criticism which had been made in December 2025 of the initial Bill of Costs which was struck out and the delay in providing any redrawn Bill of Costs until 31 March 2026. The letter anticipated significant criticism being made of LM1 in the application to restrain presentation of the statutory demand and that Seacroft would recover its costs. 8 May 2026 Best wrote a further without prejudice letter denying any improper conduct and asserting any delay was caused by Walker Morris or Seacroft as a result of the failure to respond to Best's letter dated 23 December 2025 which asked for clarification of the basis on which it was asserted that the Costs Contribution of £20,000 was repayable immediately. The offer contained in the letter of 24 April 2026 was rejected on the basis that LM1 had made offers and Seacroft had failed to take the opportunity to resolve matters earlier. Costs had increased and counsel had been instructed. Notwithstanding that, Best offered to settle the matter on the basis that the statutory demand was set aside and Seacroft paid LM1’s costs in the sum of £16,000 including VAT within seven days of written acceptance of the offer. 12 May 2026 Adjourned hearing of the application to restrain the petition before Her Honour Judge Kelly.