Winding up petition for rent arrears dismissed

However, before the adjourned hearing, the landlord purported to forfeit the lease by peaceable re-entry and locked the school gates and doors. The company was unable to continue running the school and ceased trading.

The petition was adjourned again to allow the company to take advice. At the next hearing the company further claimed that the forfeiture had been unlawful, giving rise to a substantial counterclaim against the landlord. Directions were given for the company to file and serve evidence in support of its counterclaim.

The company filed its supporting evidence out of time. It applied for relief from sanctions on the grounds that the company had been unable to use its own funds to instruct solicitors and that its director had had to raise the funds himself, which had taken some time.

At the final hearing, Judge Barber granted relief from sanctions. She held that, although the failure to comply with the order for filing evidence was serious and significant, by the time of the final hearing the petitioners had been fully aware of the basis of the cross-claim argument for over five months. To shut out the company from presenting its best evidence in such circumstances would be wholly unjust and disproportionate to the breach in issue.

In dismissing the winding up petition, the judge held that the respondent had demonstrated a strongly arguable case on both its dispute of the debt and its counterclaim. The dispute around the validity/enforceability of the rent arrears payment agreement raised complex issues of fact and law, rendering it unsuitable for disposal by way of winding-up proceedings. The counterclaim (that the purported forfeiture of the lease by physical re-entry was unlawful) was also strongly arguable in a sum, totalling at least £546,000, so comfortably exceeding the petition debt.

Tanfield v Meadowbrook Montessori Ltd [2024] EWHC 1759 (Ch)