Towsey V Highgrove Homes Ltd
Chancery Division, Companies Court
Mr Registrar Baister
6th November 2012
The builders brought an adjudication against the developer for unpaid work. The developer company contested the adjudication on the basis of its jurisdictional challenge that it was not the company in the group of companies which contracted with the builders and was therefore not the proper responding party. The adjudicator ruled that the developer company was the contracting party by what he described as his non-binding ruling to that effect and awarded the builders a specified sum. The builders issued a winding up petition against the developer company and applied for a winding up order on the basis that it was insolvent.
Mr Registrar Baister in dismissing the winding up petition the judge stated that the power to wind up a company involves the exercise of a discretion. This discretion will not generally be exercised where the petition debt is disputed on bona fide or substantial grounds. Whilst winding up proceedings were not the forum for the court to seek to reach a definitive view as to the status of an adjudicator's decision as a matter of general proposition, it was not necessary to reach such a view in the circumstances of the instant case. Whilst it is not enough merely to assert that the debt is disputed (with the result that an unwilling debtor seeking to raise “a cloud of objections” in order to claim the debt is disputed will not prevail over a creditor with a good debt), the matters raised by the developer in opposition to the winding up petition were plainly issues of substance warranting a trial and raised a bona fide defence of substance as to the adjudicator’s jurisdiction in relation to a debt that was not a judgment debt.
The existence of an adjudicator's decision does not trump the considerations that normally inform the manner in which the discretion to make a winding up order will be exercised where the decision has not been through the TCC filter and turned into a binding judgment. The adjudicator and the Companies Court had different tasks to perform and operated in different régimes to which different policies and considerations applied. In by-passing the TCC filter process and proceeding directly to the winding up process the builders had assumed the risks attendant on invoking this jurisdiction and had adopted what Hoffmann J once called “a high risk strategy”.