The Court of Appeal (CoA) was faced with a ‘deceptively simple’ question of when a winding-up petition is to be presented.
Background:
The appellant company and the respondent petitioner entered into an agreement in June 2022 for the supply of mobile phones and services. The agreement was terminated in October 2022 by the petitioner for non-payment of invoices amounting to a sum of around £73,000. A statutory demand was served on the company on 13 December 2023 in the sum of £84,149.69.
On the 3rd of January 2024, the company submitted an application by email to the Business and Property Courts (the BPC) in Birmingham for an injunction restraining a creditor from presenting a petition for the winding-up of the company based on Rule 7.24(1) of the Insolvency (England and Wales) Rules 2016. The BPC office accepted the filing of the application on the 5th of January 2024 and returned a sealed copy to the company on Monday 15th of that same month. The company posted a copy of the application to the petitioner’s solicitors on the very same day.
Unbeknownst to the company, the petitioner’s solicitors had submitted a winding-up petition on Friday the 12th of January 2024 to the BPC in Manchester using the Court's electronic CE-File system and also sent a cheque for the Official Receiver's deposit to the BPC in Manchester on the 15th January 2024.
On the 17th of January 2024, the petitioner's solicitors received a copy of the application by post. The company’s director, Mr. Mulhall, talked with the petitioner’s solicitor. Mr. Mulhall emailed the BPC office in Manchester to alert them to the fact that he had made the application which was awaiting a hearing in Birmingham. Later that day, Mr. Mulhall managed to speak by telephone to a court officer in Manchester who confirmed that the petition had not been sealed or issued by the Court office, due to lack of payment.
The cheque was received on the 18th of January 2024, so the BPC office in Manchester uploaded a sealed copy of the petition to CE-File. The same day, Mr. Mulhall was contacted by a third party telling him that the petition was on the Court’s list of pending petitions. The BPC office in Birmingham delivered the First Order electronically to the parties at 12:32 on the 18th of January 2024. Upon receipt of the First Order, Mr. Mulhall contacted the BPC office in Manchester to notify it that the First Order had been made the previous day and to protest that the petition had been issued.
A Second Order was made at 15:49 on the 18th of January 2024 dismissing the injunction. The company made an application to the BPC in Manchester seeking an injunction to restrain advertisement of the petition. The company sought to appeal the Second Order. The primary issue of this fact-heavy case was determining the exact moment a winding-up petition is considered to have been ‘presented’ under the Insolvency Act 1986.
Decision:
The CoA upheld the decision to dismiss the appellant's appeal. The Court noted that the “concept of presentation of a winding-up petition has been a feature of the insolvency legislation for over 150 years. By its very nature, however, the presentation of a petition is connected to the procedural law which applies in the courts.” The Court rejected the argument that the presentation of a winding-up petition is the mere delivery of the relevant documents. Instead, the Judge noted that the ‘presentation’ of a winding-up petition occurs only after the petition has been properly delivered to the Court and all statutory and procedural requirements fulfilled. The fact that the deposit for the Official Receiver’s fees was not paid when the petition was submitted electronically rendered the initial petition invalid. The practice direction on insolvency proceedings was pivotal in reinforcing the fact that, without the deposit, the petition does not stand as presented.
Electronic working may be used to start insolvency proceedings according to Paragraph 2 of Civil Procedure Rules (CPR) Practice Direction 51O. However, paragraph 5.3 makes it clear that the Court officer will then either reject or accept it.
Implications:
The CoA did its very best to provide a clear and simple answer “given the importance which the Insolvency Act 1986 attaches to the date of presentation of a winding-up petition”. As the Court put it, “a winding-up petition is only presented when a petition has been delivered to the Court, and the requirements of any statute, rules or practice direction which apply to presentation have been complied with.”
This decision clarifies the procedural requirements for presenting winding-up petitions, particularly in the context of electronic filings. It is clear that the presentation of a winding-up petition through an electronic submission is not sufficient in itself and the timely payment of the Official Receiver’s deposit is crucial.