Can a director and a shareholder of a company make an application to restrain the presentation of a winding-up petition against the company? In Shorts Gardens LLP v London Borough of Camden Council [2020] EWHC 1001 (Ch) the High Court held that simply being a director or shareholder of a company does not give an individual sufficient personal interest to apply for an injunction to prevent winding-up proceedings against the company.
What are the facts of Shorts Gardens LLP v London Borough of Camden Council?
The case is in relation to two applications to restrain presentation of two separate winding-up petitions against Saint Benedict’s Land Trust Limited (“SBLT”) and Shorts Gardens LLP (“Shorts Gardens”) by the Respondent councils (“Camden” and “Preston”). The petitions relate to unpaid liability orders in respect of National Non-Domestic Rates (“NNDR”) and certain unpaid costs orders arising out of earlier litigation involving the parties.
The Director’s standing to apply for the injunction
The application to restrain the SBLT Petition was made in the name of Christine Harper, who was the direction/trustee of SBLT. The Court considered whether an application for the injunction can be made by Ms Harper instead of SBLT.
Ms Harper’s application expressly states that it is made under r.7.24(1) Insolvency (England and Wales) Rules 2016, which provides:
Injunction to restrain presentation or notice of petition
(1) An application by a company for an injunction restraining a creditor from presenting a petition for the winding up of the company must be made to a court having jurisdiction to wind up the company.
(2) An application by a company for an injunction restraining a creditor from giving notice of a petition for the winding up of a company must be made to the court or hearing centre in which the petition is pending.
r.7.24(1) Insolvency (England and Wales) Rules 2016
Mr Justice Snowden noted the following at paragraph 16 of his judgment:
Rule 7.24(1) does not envisage an application for an injunction being made by any person other than the company. That is not surprising. In general, an injunction will only be granted where there is a threat to do an act which constitutes an invasion of a legal or equitable right of the applicant: see e.g. Fourie v Le Roux [2007] 1 WLR 320 at [25]-[30].
Ms Harper argued that as a director and shareholder of the Company, she would be affected by a petition to wind-up the company and that she should therefore be regarded as having a sufficient interest in the subject-matter of the case so as to justify the grant of an injunction.
Mr Justice Snowden address Ms Harper’s case at paragraph 19 of his Judgment and stated that:
I do not consider that the mere holding of office as a director or the holding of shares in a company gives an individual a sufficient personal interest to apply for an injunction to prevent winding up proceedings being commenced against the company.
Abuse of process
The Judge noted that Ms Harper was unable to explain the nature of her interest in the subject-matter and failed to point to any additional factors that went beyond the mere holding of office as a director or the holding of shares.
At paragraph 39 of his Judgment, the Judge noted the following:
Whatever Ms. Harper’s alleged motivation, in my judgment her application was a clear abuse of process.
The Judge therefore refused the application for an injunction on grounds of lack os standing and dismissed it as an abuse of process.
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