Can debtor companies re-run the same arguments? (EDF Energy Customers Ltd v Re-Energised Ltd)

The High Court has reaffirmed that a court will not allow a debtor company to run the same arguments at a winding-up petition hearing that have already been adjudicated upon at a hearing of an application to restrain advertisement. Daisy Brown, barrister at Guildhall Chambers, who represented the respondent in EDF Energy Customers Ltd (formerly EDF Energy Customers plc) v Re-Energised Ltd, looks at the implications of the case for practitioners.

EDF Energy Customers Ltd (formerly EDF Energy Customers plc) v Re-Energised Ltd [2018] EWHC 652 (Ch), [2018] All ER (D) 02 (Apr)

The High Court has reaffirmed that a court will not allow a debtor company to run the same arguments at a winding-up petition hearing that have already been adjudicated upon at a hearing of an application to restrain advertisement. Daisy Brown, barrister at Guildhall Chambers, who represented the respondent in EDF Energy Customers Ltd (formerly EDF Energy Customers plc) v Re-Energised Ltd, looks at the implications of the case for practitioners.

EDF Energy Customers Ltd (formerly EDF Energy Customers plc) v Re-Energised Ltd

What are the practical implications of this case?

The case reaffirms the principle (adopted by analogy from personal insolvency cases including Harvey v Dunbar Assets [2017] EWCA Civ 60, [2017] All ER (D) 127 (Feb)) that, absent exceptional circumstances, a court will not allow a debtor company to run the same arguments at a winding-up petition hearing that have already been adjudicated upon at a hearing of an application to restrain advertisement. This principle extends to arguments that the company had the opportunity to run at the earlier stage and failed to. To permit the company to do so would be a waste of court resources and potentially res judicata.

The case may affect the approach to advising a debtor company before making an application to restrain presentation or the advertisement of the petition—there is a high degree of risk in making a rushed application when all the possible arguments are not yet known or documents unavailable. However, the case is fact-sensitive and the court found that the new arguments being run by the company did not have merit.

It remains to be seen whether, in a case where the company has an extremely compelling and determinative argument that it omitted to run at an earlier stage, this might be an exceptional circumstance as envisaged by Neuberger J in Atherton v Ogunlende [2001] Lexis Citation 1383, [2001] All ER (D) 33 (Apr), which would justify a departure from the rule.

The appeal was a review of the district judge’s decision and not a re-hearing, and the fact that the company had been a litigant in person at the hearing of the winding-up petition did not alter this. The court set out in detail the extent to which it was appropriate to give latitude to litigants in person, applying the recent Supreme Court decision in Barton v Wright Hassall [2018] UKSC 12, [2018] All ER (D) 109 (Feb)—there is a general duty to assist litigants in person, but it is not in and of itself a reason to disapply the procedural rules or excuse non-compliance (save perhaps where the rule is difficult to understand or ambiguous). The judge also dismissed the argument that the combination of a permissive adjudication clause and the wording of the liquidated damages clause were such as to prohibit the use of collective creditor proceedings.

What was the background?

The debtor company had breached the terms of a government platform contract to provide energy saving measures to EDF, the petitioning creditor. EDF relied on the liquidated damages clause in the contract and presented a winding-up petition. The company issued an application to restrain advertisement of the petition arguing, inter alia, that the clause was a penalty clause and that EDF had suffered no loss. The court heard the application and dismissed it, finding that the debt was not genuinely disputed.

At the petition hearing, the company attempted to run the same (or very similar) arguments, and the district judge asked whether there were any new arguments other than those run before the judge at the application to restrain advertisement. The answer appeared to be that there were not. A winding-up order was made. The company appealed.

At the appeal hearing, it attempted to run arguments that had not been raised at the petition hearing and expand on those run at the application to restrain advertisement. It also argued that, had it known that it could not run the same arguments again, it would have appealed the decision at the application to restrain advertisement. Reliance was placed on the fact that, until the appeal, the company had been acting as a litigant in person.

What did the court decide?

The court found that unless the facts were exceptional, or there had been a change of circumstance, an appeal hearing had to be a review of the district judge’s decision. The district judge could not be criticised for not giving a long judgment—his judgment made clear that the creditor had satisfied him that he was entitled to the winding-up order.

The district judge’s approach of not re-hearing the same arguments which had already been adjudicated upon at the hearing of the application to restrain advertisement could also not be faulted. Unless there were exceptional circumstances or a change in circumstances, the court would not allow the debtor to run the same arguments again or to run arguments which it had the opportunity to run and failed to. The fact that the company had been acting in person could not affect the application of those general principles, and was not in itself an exceptional circumstance.

In any event, the new arguments being run, namely that the adjudication clause and the liquidated damages clause could be construed in such a way as to limit the creditor’s options for enforcement of the debt, were rejected. Furthermore, the court was entitled at the petition hearing to take into account the fact that a further liability for costs had been incurred, since the petition was presented which the company had not paid.

Interviewed by Evelyn Reid.

The views expressed by our Legal Analysis interviewees are not necessarily those of the proprietor.

Further reading

If you are a LexisPSL subscriber, click the links below for further information on liquidation see:

Liquidation—an introductory guide (Subscriber access only)

When a winding-up petition can be issued and a company wound up by the court (Subscriber access only)

Not a subscriber? Find out more about how LexisPSL can help you and click here for a free trial of LexisPSL Restructuring and Insolvency.

First published on LexisPSL Restructuring and Insolvency

Relevant Articles
Area of Interest