Gardner Leader recently acted for the applicant and petition respondent in the matter of Glocin Limited v Bancibo SE [2022] EWHC 1858 (Ch). The matter concerned an application made by Glocin Limited (“G”) to strike out the winding-up petition presented to the Court by Bancibo SE (“B”) on the basis that the petition debt was genuinely disputed on substantial grounds.
The petition was presented on the basis of unpaid invoices pursuant to three contracts between the parties which concerned the investment by G into various subsidiary undertakings of B. The contracts were all on substantially the same material terms and contained clauses which (i) appointed Czech law as the governing law of the contracts; and (ii) confirmed that any disputes born out of the contracts were subject to the jurisdiction of the courts of the Czech Republic.
Pursuant to the contacts, G was required to make payments to B for the operational costs of the subsidiary companies sufficient for their maintenance. The contracts also stated that ‘the amount of contribution shall be determined by mutual agreement of the Parties’. The parties went on to perform their contractual obligations for a number of months before a dispute emerged in relation to the sums contained on three invoices raised by B. G disputed those invoices, claiming that they were in excess of the sums sufficient to the maintenance of the subsidiaries, and refused to pay. B maintained that they were due and owing and proceeded to serve a statutory demand upon G.
G wrote to B requesting undertakings not to present a winding-up petition as the debt was disputed on substantial grounds, as the sums demanded had not been mutually agreed and reflected sums in excess of the maintenance of the subsidiaries. Despite a number of requests for such undertakings, B proceeded to present a petition for the compulsory liquidation of G.
B argued that G had provided tacit agreement to the sums contained in the invoices, whereas, the position of G was that the mutual agreement between the parties required by the contracts must be in writing and, alternatively, if any agreement could be tacit the mere payment of previous invoices did not amount to such tacit agreement.
The test for whether a petition debt is genuinely disputed on substantial grounds is well established and is explained by Hildyard J in Coilcolour Ltd v Camtrex Ltd [2015] EWHC 3202 (Ch).
Both parties adduced expert evidence on Czech law concerning the contractual interpretation of the relevant clauses. The instructed experts both formed different views on whether agreement needed to be in writing and whether G had provided tacit agreement to the sums invoiced by B.
Having reviewed the evidence, ICCJ Barber concluded that G had established a strongly arguable case that there was no agreement between the parties, tacit or otherwise, that was in accordance with the terms of the contracts. The Judge further noted, as was submitted by G, that expert evidence on foreign law is treated by Courts in this jurisdiction as evidence of fact. As the experts were in substantial disagreement between themselves in relation to a number of material issues, this also amounted to a further reason why the matter was ‘entirely unsuitable for disposal by way of petition’. Accordingly, G’s application succeeded and the petition was struck out as an abuse of process.
The two most important factors to take away from this judgment are:
- The requesting of undertakings to prevent presentation and advertisement of petitions has long been an important step to take when faced with a petition, not least because of the costs protection that it provides in the event that a petition is found to be an abuse of process. However, a party from whom the undertakings are requested must not disregard such requests as frivolous and must ensure that they properly review the merits and potential pitfalls of their own case to ensure that there is not a genuine dispute on substantial grounds. Failure to do so can have serious costs implications further down the line; and
- That where a petition debt is based upon the interpretation of a foreign law, one must be certain as to the interpretation of any foreign law elements. If there are potential disputes over the interpretation of foreign law contractual clauses then those issues will likely require determination at trial. The Court, when faced with an application to strike out a winding-up petition, is not in a position to make a finding of fact on the correct interpretation of the foreign law. That determination is for a different Court.