In a recent petition heard by ICC Judge Barber in the Insolvency and Companies List a set of facts arose which are worthy of consideration by those faced with winding-up petitions and supporting creditors.
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Background to Petition Judgment
In Re A Company, a creditor – who was also a shareholder in the Respondent company – presented a petition to wind up the Company. A few days after presenting that petition, the petitioner gave a solicitor undertaking not to advertise the petition. The Company paid the petition in full during the lifetime of the undertaking and the petition was never advertised.
Despite the fact that the petition was not advertised, the petitioner refused to apply for leave to withdraw the petition; instead demanding that the hearing take place. At the said hearing, the Company was faced with two supporting creditors who applied to take carriage of the petition; despite the fact that the petition had been paid prior to advertisement and despite the fact that the petitioner had undertaken not to advertise the petition.
The Company argued that the petition ought to be dismissed; and that the supporting creditors’ application to take carriage of the petition equally ought to be dismissed as there had been a breach of the solicitors’ undertaking not to advertise the petition.
What does it mean to undertake not to advertise a winding-up petition?
The petitioner sought to argue that the undertaking not to advertise meant not to advertise in the London Gazette. ICC Judge Barber was quick to reject that submission holding, in line with well-established case law, that an undertaking not to advertise meant not to take any step to notify third parties of the existence of the petition. Clearly, in this scenario, the petitioner had notified third parties.
What made the position stranger still was that the petitioner was also a director of one of the supporting creditors, and the joint executor of the other. Thus, argued the petitioner, she had not ‘notified’ anyone she was using her own knowledge of the petition. Again, ICC Judge Barber rejected her plea to allow one of the supporting creditors to take carriage, reaffirming her earlier conclusion that no notice to a third party ought to have been given during the lifetime of the undertaking.
Petition Dismissed with Costs Sanctions
In those circumstances the petition was dismissed as was the supporting creditors’ application to take carriage of the petition as a direct result of the breach of the undertaking not to advertise. Moreover, the petitioner’s costs were severely curtailed. The petitioner was not entitled to any costs which she had incurred after the date on which the petition debt had been fully paid.
This case serves as a useful reminder that it is possible to challenge an application to take carriage of a petition; and also serves as a reminder that an undertaking not to advertise the petition means that no steps – at all – ought to be taken to notify third parties of the existence of the petition.
Facing a winding up petition? Need Legal Advice?
If your company is concerned about a winding-up petition or statutory demand from a creditor your company can potentially challenge that petition. For further details on how a company can obtain an injunction to restrain presentation of a winding-up petition, see our page here.
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