New Judgment: Salford Estates overturned

The Board has issued a direction overruling the English Court of Appeal’s decision in Salford Estates v Altomart (No 2) [2014] EWCA Civ 1575 and has directed the Companies Court to abandon its current practice in relation to winding up petitions and arbitration.

This is an unusual case where the Privy Council has exercised its power (see Willers v Joyce (No 2) [2016] UKSC 44) to direct the English courts that an English Court of Appeal decision was wrongly decided and that the Board’s decision instead represents the law of England and Wales.

The law of England and Wales and the BVI is now that the correct test for the court to apply to the exercise of its discretion whether to make an order for the liquidation of a company where the debt on which the application is based is subject to an arbitration agreement or an exclusive jurisdiction clause and is said to be disputed is whether the debt is disputed on genuine and substantial grounds.

The practice in England and Wales of staying or dismissing the winding up petition if there was dispute subject to an arbitration agreement, unless there were exceptional circumstances, no longer represents the law and should not be followed. The Board also resolved the uncertainty at first instance as to what approach should be adopted where there is an exclusive jurisdiction clause.

The Board also held that a creditor’s winding up petition does not satisfy the criteria for an appeal as of right under section 3(1)(a) of the Virgin Islands (Appeals to Privy Council) Order 1967. A creditor’s winding up petition does not satisfy the value threshold.

Paul Fradley appeared for the Appellant led by James Morgan KC of Radcliffe Chambers and instructed by Harneys (Phillip Kite, André McKenzie and Jhneil Stewart) and Seladore Legal (Simon Bushell and Kevin Kilgour).

Read the full judgement here.