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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> PME Cake Ltd, Re  EWHC 1783 (Ch) (20 July 2022)
Cite as:  EWHC 1783 (Ch)
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BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INSOLVENCY AND COMPANIES LIST (ChD)
In the matter of PME Cake Limited
And in the matter of the Insolvency Act 1986
B e f o r e :
| PME Cake Limited
|- and -
|(1) June Penny Craig (a Protected Party by her Litigation Friend Barry Woods)
(2) Loraine Julie Craig
(3) Stepanie Alice Woods
Simon Lane (instructed by Stephen Rimmer LLP) for the Respondents
Hearing dates: 16 June 2022
Crown Copyright ©
Deputy Insolvency and Company Court Judge Kyriakides :
"The Guarantor COVENANTS AND GUARANTEES with and to the Landlord that at all times during the Liability Period while the Tenant is bound by the tenant covenants of this Lease the Tenant shall punctually pay the rents and perform and observe the covenants and other terms of this Lease and if at any such time the Tenant shall make any default in payment of said rents or in performing or observing any of the covenants or other terms of this Lease the Guarantor will pay the rents and perform or observe the covenants or terms in respect of which the Tenant shall be in default and make good to the Landlord on demand and indemnify the Landlord against all losses, damages, costs and expenses arising or incurred by the Landlord as a result of such non-payment, non-performance or non-observance ..." ("the Guarantee")
"In the case of Knightsbridge Bakeware Centre (UK) Limited the period during which Precision Machining Engineers (Harrow) Limited is bound by the tenant covenants of this Lease .".
"On or before 4pm on 5 January 2022, the Defendant shall pay the Claimants the sum of £245,000 (inclusive of VAT) in full and final settlement of all claims against the Defendant in respect of its lease dated 31 October 2001 of 3 Brember Road, South Harrow HAZ BAX".
"[11.] The court will restrain the presentation of a winding-up petition where it is satisfied that the company would succeed in establishing that the proceedings constitute an abuse of process. A petition founded on a debt that is disputed on genuine and substantial grounds would constitute an abuse of process. The Companies Court practice was clearly set out by Hildyard J in Coilcolor v Camtrex  EWHC 3202 (Ch):
[32.] The Court will restrain a company from presenting a winding-up petition if the company disputes, on substantial grounds, the existence of the debt on which the petition is based. In such circumstances, the would-be petitioner's claim to be, and standing as, a creditor is in issue. The Companies Court has repeatedly made clear that where the standing of the petitioner, and thus its right to invoke what is a class remedy on behalf of all creditors, is in doubt, it is the Court's settled practice to dismiss the petition. That practice is the consequence of both the fact that there is in such circumstances a threshold issue as to standing, and the nature of the Companies Court's procedure on such petitions, which involves no pleadings or disclosure, where no oral evidence is ordinarily permitted, and which is ill-equipped to deal with the resolution of disputes of fact. The Court will also restrain a company from presenting a winding-up petition in circumstances where there is a genuine and substantial cross-claim such that the petition is bound to fail and is an abuse of process: see e.g. Re Pan Interiors  EWHC 3241 (Ch) at  . If the cross-claim amounts to a set-off, the same issue as to the standing of the would-be petitioner arises as in the case where liability is entirely denied".
[12.] The learned judge continued at paragraphs 34 and 35:
 Further, it is an abuse of process to present a winding-up petition against a company as a means of putting pressure on it to pay a debt where there is a bona fide dispute as to whether that money is owed: Re a Company (No 0012209 of 1991)  BCLC 865 . However, the practice that the Companies Court will not usually permit a petition to proceed if it relates to a disputed debt does not mean that the mere assertion in good faith of a dispute or cross-claim in excess of any undisputed amount will suffice to warrant the matter proceeding by way of ordinary litigation. The Court must be persuaded that there is substance in the dispute and in the Company's refusal to pay: a "cloud of objections" contrived to justify factual inquiry and suggest that in all fairness cross-examination is necessary will not do".
[13.] Consequently, if the court decides that there is a substantial ground for the dispute, it will usually prevent a winding-up petition from being presented and will usually take the same approach where there is a genuine and substantial cross claim or set-off."
The grounds relied upon by the Company in support of its application
The effect of the Tomlin Order
"An unimpeached compromise represents the end of the dispute or disputes from which it arose. Any issues of fact or law that may have formed the subject matter of the original dispute are buried beneath the surface of the compromise. The court will not permit them to be raised afresh in the context of a new action" (see also: Prudential Assurance Co. Ltd v McBains Cooper  1 WLR 2000 at 2005F-G and Knowles v Roberts (1888) 38 ChD 263 at 272);
What effect, if any, did the Tomlin Order have on the Guarantee?
"There are two reasons for this rule:(1) As a matter of basic principle, since the contract is one of guarantee (as opposed to indemnity), the surety's obligation being to pay the debt or perform the obligation of another, once the payment or the obligation has been released, there is nothing left in respect of which the surety can be liable.
(2) The effect of the release would deprive the surety of his right to pay off the creditor and sue the principal in the creditor's name."
"7. The Surety as principal covenantor and not merely as collateral covenantor in consideration of the demise hereinbefore contained being made at his instance and request hereby covenants with and guarantees to the Lessor that during the term hereby granted and any statutory or other continuation thereof (hereafter called 'the total period' ) the rents reserved hereby and any increased or higher rents payable during any such statutory or other continuation of the term hereby granted shall at all times be paid and in the manner and at the times herein appointed for the payment thereof And also that during the total period all the covenants and stipulations on the part of the lessee and conditions herein contained shall be duly observed performed and kept And that the Surety will at all times hereafter pay and make good to the Lessor on demand all losses costs damages and expenses occasioned to it by the non-payment of the said rents or any part thereof or the breach non-observance or non-performance of any of the said covenants stipulations and conditions".
"It seems to me impossible to escape from the view that this sum, which may have been reduced by credit being given for the counterclaim of Jukebox, must have been a payment in satisfaction of sums due under the lease, a payment to discharge obligations of Jukebox under the lease either by way of breach of the underletting covenant or by way of interim rent during the extended period for which those obligations existed. That being so, it is hard to see how they can prevent the consent order from being an order which, at any rate on its face, dealt with matters covered by the appellant's guarantee under the lease."
"The conceptual problems which may arise in this field are of some complexity. There is a number of variations of fact which may affect them. Supposing the action in the Bloomsbury County Court for interim rent had run its course and the judge had given judgment in favour of the landlords: no-one doubts that the sum that was ordered to be paid by Jukebox would be a liability of the guarantor of Jukebox to pay. If during the course of hearing Jukebox decided to throw its hand in and accept judgment for a particular sum of rent, plainly the same consequences as regards the guarantor must follow. If Jukebox without admission of liability agreed that the action should be discontinued upon the payment of a certain sum, I find it very difficult to see how a different view could be taken in relation to a guarantor in any ordinary case. Here, of course, we go one step further - and this is Mr. Livingston's second point - and have an agreement which, however little it may draw upon other actions, is on any view a new contract and one to which the guarantor is not a party. But the answer to that submission as it seems to me, at any rate in the circumstances of the present case, lies in the breadth of the language of clause 7 of the lease. I repeat that it is, as its terms plainly show, not one limited to obligations directly to be found in the lease itself, but to make good to the lessor on demand all losses, costs, damages and expenses occasioned to the lessors by the non-payment of rent or the breach of any covenants. Those terms seem to me to be amply wide enough to impose upon the guarantor an obligation to reimburse the lessor for loss sustained through the non-payment to the lessor of the £10,000, which quite plainly on the evidence was due in respect of rent and possibly breach of covenants under the lease, and nothing else."
The Liability Period
The doctrine of election
"(i) Where an election has been made between rights, it cannot be retracted. Thus, where a contract has been affirmed by the innocent party, following repudiatory breach by the other party, the innocent party cannot later go back upon his affirmation. His decision stands, and so does the contract. For this purpose, election, whether intended or not, by an unequivocal act communicated to the other party, is conclusive; Scarf v Jardine , pages 359-361, per Lord Blackburn. It is, therefore, possible for the making of a claim against one party, even though it does not proceed to judgment, to represent an unequivocal manifestation of an election between inconsistent rights which might affect a claim against another party; see Scarf v Jardine, per Lord Blackburn at page 362.
(ii) The entry of a judgment, at least a final one, against one person in an action against two persons in a case of alternative liability, will constitute such a conclusive step; Morel v Earl of Westmorland , pages 76-77 in the Court of Appeal, per Collins MR, later affirmed in the House of Lords.
(iii) A claimant cannot have both alternative and inconsistent remedies. He must elect between them, when judgment is given, but need not do so before; United Australia , at pages 18-19, and 29-30, respectively per Viscount Simon LC, and Lord Atkin. See also Tang Man Sit , at pages 521-522, per Lord Nicholls.
(v) In the case of cumulative remedies, against the same or several parties, a claimant is not obliged to choose between them; he can pursue them against all relevant parties to judgment, and by enforcement, until the judgment has been fully satisfied; United Australia , page 30, per Lord Atkin, and Tang Man Sit, at page 522, per Lord Nicholls. It is only when full satisfaction has been received that the claimant will be barred; United Australia , page 21, per Viscount Simon."