Can winding-up proceedings be stayed under the Arbitration Act 1996?

Can winding-up proceedings be stayed under the Arbitration Act 1996?

Where a party presents a winding-up petition against another party, where the debt upon which the petition is based arises out of a contract containing an arbitration agreement, can the stay provisions contained in the Arbitration Act 1996, s 9 (AA 1996) be invoked?

Original news

Salford Estates (No.2) Ltd v Altomart Ltd [2014) EWCA Civ 1575, [2014] All ER (D) 102 (Dec)

On appeal from the decision of His Honour Judge Nigel Bird QC, the Court of Appeal (Sir Terence Etherton (Chancellor of the High Court), Longmore and Kitchin LJJ) was faced with the issue of whether a winding-up petition was capable of being stayed pursuant to AA 1996, s 9 in circumstances where the petition debt arose pursuant to an underlease that incorporated an arbitration agreement.

The Chancellor, with whom Longmore and Kitchin LJJ agreed, held that AA 1996, s 9 did not apply to a winding-up petition where the ground of the petition is that the company is unable to pay its debts and what is in dispute is that issue generally or, more specifically, whether there is outstanding and due a particular debt mentioned in the petition. However, when considering the legislative policy behind AA 1996, s 9, it was right that the winding-up petition in the current case should be stayed.

Why is this case of interest?

It is common for arbitration agreements to be incorporated into all kinds of commercial agreements. Therefore, this case provides some useful guidance on whether winding-up proceedings are available where the petition debt is not admitted and where the dispute comes within the scope of a prior arbitration agreement entered into between the parties.

What does AA 1996, s 9 say?

Where parties enter into an agreement, they are free to include provisions dealing with how disputes arising under that agreement can and should be determined. One such option is for the dispute to be referred to arbitration, where an

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.