Retailer Escapes Winding Up Petition in Unique COVID-19 Ruling

Retailer Escapes Winding Up Petition in Unique COVID-19 Ruling

The COVID-19 crisis has heralded such an avalanche of emergency legislation that it cannot be passed into law quickly enough. In a unique insolvency case on point, the High Court blocked a commercial landlord from presenting a winding up petition against a high-street retailer in respect of alleged rent arrears.

The landlord had e-filed the petition in court but it had yet to be formally presented. When that occurred, the matter would become public knowledge and the retailer would be likely to suffer serious damage. In those circumstances, the retailer sought an emergency injunction to restrain presentation.

The retailer argued that a winding up order would harm the interests of its creditors generally and would confer no benefit on the landlord. It was submitted that the petition had been filed for a collateral purpose, that it was an abuse of the legal process and that it was in any event bound to fail.

In a highly unusual move, the retailer also pointed to the Corporate Insolvency and Governance Bill 2020. Although the Bill has yet to receive royal assent, it is intended to place tight restrictions on the presentation of winding up petitions during the COVID-19 pandemic.

If it becomes law, the Bill will, amongst other things, prevent presentation of such a petition for non-compliance with a statutory demand where the demand has been served between 1 March 2020 and 30 June 2020. The Bill is not expected to make it onto the statute book until the end of June 2020, but states that it is to be regarded as having come into force on 27 April 2020.

Ruling on the matter, the Court took into account the likelihood of the Bill bringing about an imminent change in the law. The policy of the Bill was self-evident and there was a high degree of confidence that it would in due course become law in more or less its current form.

The ultimate failure of the landlord’s petition appeared inevitable in that, even if it were presented immediately, it would be most unlikely to be heard before the Bill was enacted. The retailer had a strong case that, had it not been for the serious impact of the pandemic on its finances, the petition would not have been issued. The Court granted the retailer an interim injunction restraining presentation of the petition pending a full hearing of the matter.

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