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Court enforces ban on statutory demands before Bill is passed

England and Wales
05/06/2020
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The government recently published its Corporate Insolvency and Governance Bill which includes a temporary “ban” on statutory demands. In its current form, the ban will prevent landlords and other creditors from relying on statutory demands served between 1 March and 1 month after the Bill becomes law. The Bill also includes provision to prevent the winding up of companies where their inability to pay is due to Covid 19.

The Bill is still making its way through Parliament but the High Court has already given effect to the ban in a recent case given the Bill is expected to be passed shortly.

In the case of Re A Company ([2020] EWHC 1406 (Ch)) the High Court granted an injunction to an unnamed retail tenant to prevent its landlord from relying on a statutory demand served in April 2020 in relation to rent and service charge arrears. The court was confident that the Bill will be passed and the ban will come into force before any petition by the landlord to wind up the tenant company can be heard.

In addition, the court also took into account evidence that Covid 19 had affected the tenant’s finances and that the presentation of a winding up petition by the landlord would in itself be damaging to the tenant’s business even though any petition would be subsequently overtaken by the ban.

As the Bill also includes provisions for a company to be restored to its position prior to presentation of a petition or prior to a winding up order if Covid 19 has had a financial effect on the company, allowing a petition to be presented (or a winding up order made) where the company cannot pay due to Covid 19 does seem futile.

The case is a warning to creditors that the courts are willing to block attempts to circumvent the ban by taking action before it becomes law. Landlords should look at other remedies if appropriate and available, though seeking to engage with tenants is always a good start and (whilst voluntary) may soon be formally codified (https://www.cms-lawnow.com/ealerts/2020/06/government-to-publish-temporary-code-of-practice-with-commercial-sector-for-rental-payments?cc_lang=en).

If you would like advice on these issues, please contact Julie Gattegno or Edward Gamble.

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