England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN MANCHESTER
BUSINESS LIST

		Royal Courts of Justice Strand, London, WC2A 2LL
		19/12/2017

MR JUSTICE BARLING:

Introduction

1. This is the final hearing of the application by Chinatown Development Co Ltd ("the Company"), represented by Mr Berragan of counsel, for an injunction to restrain Liverpool City Council ("the Council") from presenting or advertising a winding up petition.
2. The application, which is opposed by the Council, represented by Mr Mohyuddin QC, was issued on 9 August 2017. At the first hearing on 11 August 2017 before HH Judge Hodge QC, the Council gave an undertaking not to present a petition until the final hearing. Directions were then made by consent.
3. I heard the application on 23 November 2017. We did not finish submissions then, and it was agreed that Mr Berragan's reply would be sent to me in writing, which it was.

Background

4. The salient features of the background can be relatively briefly stated. In 2006 the Council entered an agreement ("the Development Agreement") with a company called Urban Splash Limited ("Urban Splash") to grant to the latter leases of land at Great George Estate, Liverpool in three phases. In 2008 the Council leased land representing one of the three phases to Urban Splash for a term of 150 years ("the Phase 3 land"). By a licence to assign of 11 August 2015 between the Council, Urban Splash and the Company, the Council permitted Urban Splash to assign the Development Agreement and the lease of the Phase 3 land to the Company. The assignment of the Development Agreement took place on 24 July 2015. The lease itself was ultimately assigned for about £3.5 million. On 29 July 2015 the Council and the Company entered into what was called an Exclusivity Agreement, whereby the Council granted the Company a period of exclusivity with a view to entering into an agreement for a lease, and leases, of the land at Great George Street.
5. On 26 November 2015 the Council and the Company entered into an agreement for a lease ("AFL"). Much of the argument before me has revolved around the terms of this agreement. In summary: the Company agreed to pay by way of premium a total of £2,500,000. This sum was derived from valuations as follows: £500,000 for a Phase 1 lease and £2 million for Phase 2. A deposit of 5%, or £125,000, was payable upon completion of the AFL, and the balance by five instalments of £475,000. The first instalment was due on "Completion Date Phase 1". This meant that what the Company contends is the full premium of £500,000 for Phase 1 (a deposit of £25,000 and the balance of £475,000) would be paid on completion of the Phase 1 lease. The four remaining instalments, totalling £1,900,000, represented the balance of what the Company contends is the premium due for Phase 2. The grant of the leases was subject to 3 conditions precedent: the Planning Condition, the Funding Condition and the Possession Condition.
6. In clause 1, the following terms are defined (amongst others):

"Completion Date Phase 1: the date that is 12 weeks after the Unconditional Date"

"Completion Date Phase 2: the date that is the first anniversary of this agreement [viz 26 November 2016]"

"Development: means the redevelopment of the Property and the erection of a mixed use development in the manner set out in Planning Application of the Tenant…"

"Property means: land at Great George Street and St James Street in Liverpool and as more particularly defined in the Phase 1 Lease and the Phase 2 Lease…"

"Funding Condition: means funding for the Development being in place to the Landlord and Tenant's satisfaction acting reasonably"

"Possession Condition: means the securing of vacant possession of the Phase 3 Land, free of occupiers and occupational interests by the Tenant"

"Premium: means the sum of £2,500,000… payable by the Tenant to the Landlord for the Phase 1 Lease and the Phase 2 Lease and comprising for the Phase 1 Lease the sum of £500,000… and for the Phase 2 Lease the sum of £2 million…"

"Unconditional Date: means the date on which the last of the Conditions Precedent has been satisfied (or the Possession Condition waived by the Tenant) pursuant to this agreement" [NB the Phase 1 Completion Date is defined as occurring 12 weeks after this date. On the face of it, this very arguably indicates that the Phase 1 Lease cannot be granted until all the conditions precedent have been satisfied (or the Possession Condition waived).

7. Clause 2.3 (under the heading "Planning Consent") provides:

"2.3 Completion of each Lease shall take place following the grant of Planning Consent to the Tenant as hereinafter provided and on satisfaction of the Conditions Precedent."

8. Clause 3 provides:

"3.1 The Tenant shall from the date of this agreement at its own cost use all reasonable endeavours to satisfy the Possession Condition in relation to the Phase 3 Land.

3.2 the Tenant shall keep the Landlord promptly and reasonably informed of the progress being made relating to the satisfaction of the Possession Condition.

3.3 the Landlord shall co-operate with the Tenant in relation to satisfying the Possession Condition including if necessary using its compulsory purchase powers if reasonably requested by the Tenant but for the avoidance of doubt the Tenant shall be responsible for any and all costs in relation to the satisfaction of the Possession Condition including compulsory possession indemnity costs if required.

[NB This was a reversal of the original agreement with Urban Splash, under which the Council bore responsibility for satisfying this requirement.]

3.4 Notwithstanding the provisions of this clause, the Tenant may request that the Landlord complete the Phase 1 Lease at any time after the grant of the Planning Consent provided the Tenant acknowledges the waiver of the Possession Condition, if this remains unsatisfied, and for the avoidance of doubt, the Funding Condition shall always be required to be satisfied."

9. Clause 5 provides:

"5.1 Clauses 2, 3 and 4 are conditional on the occurrence of the Unconditional Date and shall come into force on the Unconditional Date.

5.2 In consideration of the Tenant's obligations under this agreement, the Landlord will grant to the Tenant and the Tenant will accept from the Landlord Leases in respect of the Phase 1 Land and the Phase 2 Land on the terms set out in this agreement.

5.3 On completion of this agreement, a deposit of 5% of the Premium being the sum of £125,000… ("Deposit") shall be paid by the Tenant to the Landlord.

5.4 Further, the Premium shall be paid by the Tenant to the Landlord promptly and without delay at all times, and in the following manner and tranches:

(a) on the Completion Date Phase 1, the sum of £475,000… [The clause then provides that further instalments of £475,000 are to be paid by the Tenant on 17 February 2016, 25 May 2016, 31 August 2016 and 7 December 2016. The clause then continues:]

"together with interest thereon at the Base Rate for all the sums referred to at clauses 5.4 (a) to 5.4 (e)… PROVIDED that if any of the sums referred to at clauses 5.4 (a) to 5.4 (e) remain outstanding on the Completion Date Phase 2 for the Phase 2 Lease [26 November 2016] then all sums due shall be paid to the Landlord immediately prior to or on completion of the Phase 2 Lease and the Landlord shall be under no obligation to complete the Phase 2 Lease without these payments being made…"

10. Having referred to the completion dates for the Phase 1 and the Phase 2 Leases, clause 14 provides:

"14.4 If any completion date is delayed due to the Tenant's default or the Tenant fails to pay any sum due under this agreement in full on completion or on the date set out in clause 5, then the Tenant will pay interest in addition to damages for losses incurred by the Landlord as a result of the delayed completion.

14.5 The interest will be payable at the Contract rate [4% above Barclays Base Rate] on any unpaid amount for the period from the Completion Date to the date of actual payment."

11. It is common ground that the Planning Condition was duly satisfied. This included detailed consent for the proposed Phase 1 development and outline consent for Phase 2 and Phase 3.
12. It is common ground that the Funding Condition was satisfied in respect of Phase 1 on or shortly before 16 March 2017, and that the only information supplied was in respect of the Phase 1 land. It is also common ground that since only outline consent was granted for Phase 2, it would not be possible to cost the work on Phase 2. (See the witness statement of Claire Slinger, a solicitor for the Council, at paragraph 27.)
13. It is common ground, too, that the Company waived the Possession Condition in March 2016, although there is an issue whether that removed the application of the Condition altogether.
14. The Phase 1 Lease was completed on 29 March 2016. The parties agreed to bring the completion date forward, as the AFL defined "Completion Date Phase 1" as 12 weeks after the "Unconditional Date". The instalment of £475,000 due on completion of Phase 1 was duly paid.
15. The Company paid the next two instalments, as required by the AFL, so that it has paid a total of £1,550,000 (including the deposit of £125,000). There is a balance due of £950,000. This should have been paid in two instalments of £475,000 each on 31 August 2016 and 7 December 2016. By the time these payments became due, the Company was in negotiations with a third party, Your Housing Group Limited ("YHG") for the sale of the entire development including Phases 1, 2, and 3. The Company alleges, and the Council has not denied, that the Council was involved in, and supportive of, these negotiations. The Company also states that the parties envisaged that the outstanding payment would be made out of the purchase monies paid to the Company by YHG.
16. The negotiations with YHG (which had been in train from about the autumn of 2016 until April 2017) terminated without any agreement being reached. On 3 May 2017, the Company served a formal notice on the Council to complete the Phase 2 Lease pursuant to the terms of the AFL and Condition 8.8 of the Standard Commercial Property Conditions (second edition) which were incorporated (with variations) into the AFL.
17. The Council responded by email on 4 May 2017. The email is headed "Without Prejudice", but it is common ground that it contained no admission or proposals. The Council refused to complete, on the ground that the Company had "failed to comply with its contractual conditions." In particular, it stated that £950,000 of the premium remained outstanding, that the Company had failed to satisfy the Possession Condition and the Funding Condition for the "drawing down" of the Phase 2 Lease, and that as the Phase 2 Lease had failed to complete by 26 November 2016 the Company had breached the AFL and was "out of time".
18. On 14 July 2017 the Council served a forfeiture notice on the Company in respect of the Phase 1 Lease for breach of contract in failing to pay the two instalments totalling £950,000. The notice demanded a remedy by payment of that sum plus interest by 31 October 2017. Also on 14 July 2007 the Council served a statutory demand on the Company in respect of the same debt. The statutory demand cited the terms of the Phase 1 Lease dated 29 March 2016, and alleged that the two outstanding instalments were part of the Premium of £2.5 million due under that lease. Interest of about £30,000 was also claimed.
19. On 3 August 2017 the Council served a forfeiture notice on the Company in respect of the Phase 3 Lease of which the Company was the assignee from Urban Splash. This notice claimed that the Company was in breach of that lease by failing to complete certain work by the "long stop date". The notice required the breach to be remedied by 28 February 2018.
20. I am not concerned with the two forfeiture notices. The reason for the present application is the threat of presentation of a winding-up petition on the basis of the statutory demand. As I have said, the application for an injunction was issued on 9 August 2017 and the Council gave an undertaking not to present a winding-up petition until this application is resolved.

Legal principles

21. There was no real difference between Mr Berragan and Mr Mohyuddin as to the legal principles to be applied in a case such as this. If a company can demonstrate that an alleged debt on which a petition is based is genuinely disputed on substantial grounds, then the court will strike out the petition. It is not the function of the Companies Court to try the issue. Nor should the court conduct a long and elaborate hearing examining the case made on each side in minute detail: see Tallington Lakes Limited and another v Ancasta Boat Sales Limited [2012] EWCA Civ 1712 [2014] BCC 327, per David Richards J (as he then was), at paragraphs 4 to 5, and 39 to 41. Further, in Tallington Lakes Limited v South Kesteven District Council [2012] EWCA Civ 443, Etherton LJ, dismissing an application for permission to appeal against a refusal to grant an injunction restraining presentation of a petition, said:

"I have to emphasise, however, in this context that it is well established that the threshold for establishing that a debt is disputed on substantial grounds in the context of a winding up petition is not a high one for restraining the presentation of the winding up petition, and may be reached even if, on an application for summary judgment, the defence could be regarded as "shadowy"."

22. A creditor will also be restrained from presenting a petition if the company establishes that it has a serious and genuine cross-claim exceeding the amount alleged to be outstanding: see Re Bayoil SA [1999] 1WLR 147, per Nourse LJ at paragraphs 154-5, per Ward LJ at paragraphs 156-7; and Wilson and Sharp Investments Ltd v Harbour View Developments Ltd [2015] EWCA Civ 1030, per Gloster LJ at paragraph 62.
23. The issue between the parties here is one of construction. In Al Sanea v Saad Investments Co Ltd [2012] EWCA Civ 313, Gross LJ at paragraph 31 summarised the correct approach to contractual construction, in the light of the decision of the Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900:

"(i) The ultimate aim of contractual construction is to determine what the parties meant by the language used, which involves ascertaining what a reasonable person would have understood the parties to have meant. The reasonable person is taken to have all the background knowledge which would reasonably have been available to the parties in the situation in which they were in at the time of the contract.

(ii) The Court has to start somewhere and the starting point is the wording used by the parties in the contract.

(iii) It is not for the Court to rewrite the parties' bargain. If the language is unambiguous, the Court must apply it.

(iv) Where a term of a contract is open to more than one interpretation, it is generally appropriate for the Court to adopt the interpretation which is most consistent with the business common sense. A Court should always keep in mind the consequences of a particular construction and should be guided throughout by the context in which the contractual provision is located.

(v) A contract is to be read as a whole, and an "iterative process" is called for:

"… involving checking each of the rival meanings against other provisions of the document and investigating its commercial consequences."

24. In Arnold v Britton [2015] AC 1619, Lord Neuberger said, at paragraph 15:

"When interpreting a written contract, the Court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean" and it does so by focusing on the meaning of the relevant words… in their documentary, factual and commercial context. That meaning has to be assessed in the light of, (i) the natural and ordinary meaning of the clause, (ii) any other relevant provision of the [contract], (iii) the overall purpose of the clause and [contract], (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions."

The basis of the application

25. Mr Berragan's submissions have two alternative strands:

(1) He submits that, on the true construction of the Phase 1 Lease, the premium for that lease is £500,000, not £2.5 million; alternatively the Company is entitled to have the Phase 1 Lease rectified to have that effect. Since the statutory demand is based on a debt of £950,000 allegedly due as premium under the Phase 1 Lease, and since more than £500,000 (in fact £1,550,000) has admittedly been paid by the Company pursuant to the AFL, if the Company's submission is even arguably correct, the statutory demand has no proper foundation, as no such debt as alleged would be due under the Phase 1 Lease.

(2) Alternatively, Mr Berragan submits that on the true construction of the AFL, and in the circumstances which have occurred, payment of the outstanding sums of £950,000 plus contractual interest is a concurrent condition with the grant of the Phase 2 Lease. He submits that the negotiations with the third party purchaser YHG between the autumn of 2016 and April 2017, in which the Council participated, must be taken into account. The Council could have served a statutory demand for payment of the August 2016 instalment of £475,000, and if that sum had been paid the Company would have had the Phase 2 Lease, which under the AFL was due to be granted on 26 November 2016, notwithstanding that there was a further instalment of £475,000 due in December 2016. As things turned out, the negotiations with the third party continued beyond that point, and although the Council raised the outstanding payment issue with the Company, no steps of the kind with which we are now concerned were taken until May 2017, after the Company had given notice to the Council that it was ready and able to complete the Phase 2 Lease. The Council then refused to grant the lease, and said the Company was "out of time".

26. Mr Berragan submits that the Council was and is wrong, or at least arguably wrong, about the failure to satisfy the conditions precedent; and that if this submission is correct then, since the Company has tendered the outstanding funds and has produced evidence that the funds are available, and since under the Standard Conditions incorporated into the AFL payment and completion are concurrent conditions, the Council cannot now claim the outstanding sum whilst asserting that it is unwilling to grant the Phase 2 Lease.
27. Mr Mohyuddin submits that these submissions are hopeless and unarguable, and that the simple truth is that the Company is unable to pay the outstanding sum.
28. On 7 September 2017, the Company issued Part 7 proceedings against the Council, together with detailed Particulars of Claim. In that claim the Company seeks, amongst other relief, specific performance of the AFL by completion of the Phase 2 Lease, and an order requiring the Council to complete that lease on payment by the Company of £950,000 together with contractual interest. It also claims various declarations coinciding with submissions made in support of the application for an injunction, including a declaration that, on a true construction of the Phase 1 Lease, the premium for the letting of the Phase 1 land is £500,000, alternatively rectification of the lease to produce that effect.

Discussion and conclusions

29. Mr Mohyuddin did not shrink from the logical conclusion of his argument, which is that the Council is entitled to the whole of the £2.5 million as premium, even though it is not willing to grant the Phase 2 Lease, and even though it is not really disputed that £2 million of the £2.5 million is attributable to that lease – if only in terms of the underlying valuations of the two plots of land, as made clear in an email exchange between the parties in September/October 2015 (see below).
30. Notwithstanding that somewhat counter–intuitive result, Mr Mohyuddin understandably relies upon the terms of the Phase 1 Lease itself, and in particular the reference in clause 1, under the heading "Premium", to "the sum of £2.5 million payable on the dates specified at clause 5 in the AFL in relation to leases for the Phase 1 and Phase 2 land." He also referred to clause 2.3 which states:

"The grant is made with the Tenant paying the following as rent…

(a) the Premium…"

and to clause 6 (1) which states:

"The Tenant shall pay the Premium and any VAT in respect of it"

and to clause 6 (3) which states:

"The Premium shall be paid on the dates specified in the AFL…"

31. In these circumstances, he contends that the Premium of £2.5 million is indivisible and is the Premium for Phase 1 and for Phase 2.
32. Mr Berragan, however, in urging both what he contends is the true construction of the Phase 1 Lease and his alternative rectification argument, points to the following:

(1) The definition in clause 1 of the AFL of "Premium" as meaning "the sum of £2.5 million payable by the Tenant to the Landlord for the Phase 1 Lease and the Phase 2 Lease and comprising for the Phase 1 Lease the sum of £500,000 and for the Phase 2 Lease the sum of £2 million."

(2) The fact that under the terms of clause 5.4 of the AFL, the sum of £500,000 is required to be paid before the date for completion of the Phase 1 Lease.

(3) Emails between the parties in September/October 2015 prior to the entry into the AFL and the Phase 1 Lease. In an email to the Council on 24 September 2015 the Company stated:

"As promised I am writing in connection with our purchase of Phase 1 and 2 on New China Town.

My proposal to get to the figure you require of £2.5 million GBP is the following

Phase 1

We will exchange as a matter of urgency with 5% deposit and complete in full within 12 weeks of receiving full planning permission for a total price of £500,000

Phase 2

We will exchange with 5% deposit. The remainder of funds will be split into four equal payments. The first payment after exchange will be 12 weeks and the other three payments will be every 14 weeks thereafter. I agree to pay an agreed interest rate for the remaining funds that are outstanding. Purchase price excluding interest £2 million."

The Council replied by email the next day:

"Thanks for your email and your payment proposal for Phase 1 and Phase 2 and on this basis I am happy to accept this proposal."

(4) The commercial unattractiveness, if not absurdity, of the argument that the requirement to pay the Premium of £2.5 million was a free-standing obligation, not dependent upon the completion of the Phase 1 Lease and the Phase 2 Lease. Mr Berragan referred to the statement of Scrutton LJ in Hill v Booth [1930] 1 KB 382, at p.387, that:

"Ordinarily a premium is paid to obtain a lease, and it does not matter what happens to the lease afterwards."

In the same case, Greer LJ said at p.389:

"The consideration for the premium was given by the lessor once and for all on the execution of the lease, and, consequently he is entitled to the whole £1000, and not merely the first instalment of it. The fact that the premium is made payable by instalments makes no difference to the proper description of the £1000 as a "premium" payable for the granting of the lease."

And Slesser LJ said, at p.391:

"The view that the premium is a consideration for which the lease itself is granted, as appears clear on the face of the lease itself, is made even more clear by the fact that…"

33. In my view, it is difficult to avoid the conclusion that the £2.5 million was the consideration for which the Council agreed in the AFL to grant two leases. It would be odd if the fact that the Phase 1 Lease (made after and pursuant to the AFL) referred to the Premium as the whole of the £2.5 million, had the effect of discharging the Council's obligation under the AFL to grant the Phase 2 Lease in consideration of payment of the remainder of the £2.5 million.
34. The Particulars of Claim in the Part 7 proceedings record that on the grant of the Phase 1 Lease the Company paid stamp duty land tax on £500,000 (not £2.5 million). The Company would clearly pay tax on a sum of £2 million on the grant of the Phase 2 Lease. Yet, as I have said, the statutory demand is based on a failure to pay the whole £2.5 million in respect of the Phase 1 Lease.
35. Mr Mohyuddin submitted that the Premium of £2.5 million and the mechanism for payment of it were to be distinguished. The latter was a separate arrangement in the AFL, which did not affect the free-standing character of the obligation relating to the Premium.
36. This is certainly well arguable, but on the other hand, the three phases of the development have long been clearly defined: apportionment of the premium between the leases was referred to in the Exclusivity Agreement between the parties; the planning application submitted in July 2015 distinguished between the phases; and the emails in September 2015, to which I have referred, provide evidence of an express agreement between the parties that the price paid should be apportioned as to £500,000 for Phase 1 and £2 million for Phase 2, as does the AFL itself in the definition of "Premium" in clause 1. Further, the machinery in clause 5 of the AFL ensures that £500,000 would be paid on completion of the Phase 1 Lease, and clause 5 as a whole precisely reflects the agreement reached in the September 2015 emails. I also note that in the Council's email of 13 September 2016 chasing the outstanding instalment which was to be paid on 31 August 2016, the Council refer to it as being due in respect of "the Agreement for Lease on Phase 2".
37. In these circumstances, and having regard to the principles of construction to which I referred earlier, I am unable to conclude that the Company's argument as to the construction of the Phase 1 Lease does not raise a genuine dispute on substantial grounds. It is properly arguable that, on the true construction of the AFL and the Phase 1 Lease, the premium for the grant of the latter is £500,000 and for the Phase 2 Lease is £2 million. This is certainly not a hopeless submission.
38. The alternative claim, that the Company is arguably entitled to rectification of the Phase 1 Lease, only becomes relevant if I am wrong on the arguability of the primary point of construction. In relation to rectification, both sides referred me to the following passage in the judgment of Peter Gibson LJ in Swainland Builders Ltd v Freehold Properties Ltd [2002] 2 EGLR 71, at pages 74-5:

"The party seeking rectification must show that:

(1) the parties had a common continuing intention, whether or not amounting to an agreement, in respect of a particular matter in the instrument to be rectified;

(2) there is an outward expression of accord;

(3) the intention continued at the time of the execution of the instrument sought to be rectified;

(4) by mistake, the instrument did not reflect that common intention.

I would add the following points derived from the authorities:

(1) The standard of proof required if the court is to order rectification is the ordinary standard of the balance of probabilities.

"But as the alleged common intention ex hypothesi contradicts the written instrument, convincing proof is required in order to counteract the cogent evidence of the parties' intention displayed by the instrument itself." …

(2) While it must be shown what was the common intention, the exact form of words in which the common intention is to be expressed is immaterial if, in substance and in detail, the common intention can be ascertained: Co-operative Insurance Society Ltd the Centremoor Ltd [1983] 2 EGLR 52, at page 54, per Dillon LJ, with whom Kerr and Eveleigh LJJ agreed.

(3) The fact that a party intends a particular form of words in the mistaken belief that it is achieving its intention does not prevent the court from giving effect to the true common intention: See Centremoor at p.55A-B, and Re Butlin's Settlement Trusts (Rectification) [1976] Ch 251, at page 260, per Brightman J."

39. For the reasons which I found valid in relation to the true construction of the Phase 1 Lease, I consider that it is properly arguable that each of these criteria is satisfied here: the September 2015 emails, together with the other factors which I have identified, provide a basis for the properly arguable existence of an outward expression of a continuing common intention as to an apportionment of the premium which has mistakenly not been carried through into the wording of the Phase 1 Lease.
40. If either argument is correct, the statutory demand claiming £950,000 is wrongly based on the Phase 1 Lease, and is defective.
41. Those are sufficient grounds on which to make the order sought, but I should also deal with the Company's alternative basis for relief, namely, that on payment of the outstanding amount of £950,000 it is entitled to the grant of the Phase 2 Lease, and that the Council is (at least arguably) wrong in declining to complete on the ground that the conditions precedent are not satisfied.
42. I have already referred to the extent of the common ground on this aspect of the case. To summarise:

(1) It is common ground that the Planning Condition is satisfied, and that this was achieved on the basis of detailed planning permission for Phase 1, and outline consent for Phases 2 and 3. So, the issue between the parties relates to the Possession Condition and the Funding Condition.

(2) It is common ground that the Funding Condition was satisfied for Phase 1 as long ago as March 2016.

(3) It is also accepted by the Council that funding information (costings) cannot be provided on the basis of mere outline planning permission, which is what satisfied the Planning Condition. Nor does it appear that the Council has sought any further costing information from the Company.

(4) It is also common ground that the Possession Condition was waived by the Company when the Phase 1 Lease was granted in March 2016.

43. The Council's submission is that the Possession and Funding Conditions have only been satisfied for the Phase 1 Lease, and must be satisfied again before the Phase 2 Lease can be granted. This is said to be the correct interpretation of the AFL.
44. It may well be that the Council's construction is arguable, but I cannot conclude that the Company's counter-construction is not. Indeed, there are several features of the AFL which favour it. For example, in clause 1.1 Completion Date Phase 1 is defined as 12 weeks after the Unconditional Date. Unconditional Date is defined as the date on which "the last of the Conditions Precedent has been satisfied (or the Possession Condition waived by the [Company]) pursuant to this agreement". This clearly implies that all the conditions precedent must be satisfied (or the Possession Condition waived) before the Phase 1 Lease is granted.
45. I do not propose to go through every indication for and against their respective constructions which was relied upon by counsel. Suffice to say that in my judgment there is nothing in the AFL which could be said to indicate clearly that the conditions in question are to be treated as divisible in the manner suggested by the Council, so that, for example, the Possession Condition, having been waived at the stage of Phase 1, pops up again alive and well at Phase 2. Nor do I need to decide which of the rival constructions is correct. In my view, it is sufficiently arguable for present purposes that the conditions precedent are to be treated as satisfied in relation to Phase 2. The points of construction involved are by no means straightforward, and there are respectable arguments on both sides.

Decision

46. In the light of my findings, insolvency proceedings are not the appropriate vehicle for resolving what I consider to be a genuine dispute on substantial grounds. If the Council consider that, despite the evidence adduced by the Company, it is not able to pay the sum alleged to be outstanding, then it could apply for the sum in question to be paid into an escrow account or into court, pending resolution of the issues raised in the Part 7 proceedings. Whether the court seised of those proceedings could or should make an order to that effect, I do not say. As far as the present application is concerned, my conclusion is that the Council should be restrained from presenting a winding-up petition in respect of the sums referred to in the statutory demand of 14 July 2017. I invite the parties to seek to agree a form of order, which should be submitted to the court for approval. Failing such agreement rival versions may be submitted.