Introduction
- This is the final hearing of the application by the Applicant (the Company) seeking an injunction to restrain the advertisement of the winding up petition against it. The petition was issued on 2 April 2024 detailing sums owed totalling £106,914.25 relating to electricity charges which the Petitioning Creditor (the Creditor) asserts are due and owing by the Company as is set out below.
- On behalf of the Company, Mr Kwok raised several issues which he submitted established that the debts were disputed on substantial grounds. The main issue as between the parties is a matter of statutory interpretation in relation to paragraph 3(1) of Schedule 6 to the Electricity Act 1989 (the construction issue), but in summary the issues raised are as follows:-
Issue 1: Is the claimed debt in the Petition flawed on its face for a failure to apportion alleged electricity charges between Units 8A, 9A and 12 on the one hand, and common areas on the other?
Issue 2: Did the Meter record the electricity supplied to Units 8A, 9A and 12?
Issue 3: Was there was an express contract between Karwan and the Petitioner? As to this, has the Petitioner effectively admitted that Karwan is the liable entity for the electricity charges?
Issue 4: As a matter of statutory interpretation, must there be a single person or entity in occupation of the whole Supply Premises, failing which the owner remains liable under the Electricity Act 1989?
Issue 5: Have demands for payment been validly made under the invoices?
- I will deal in this judgment with issue 4 first before dealing in summary with the other issues raised, which, for the reasons I have set out below, do not appear to be to be capable of establishing that the debt is disputed on grounds which are substantial.
The Law
- The parties are agreed on the appropriate test relating to whether a debt is disputed on substantial grounds. Equally, in relation to the issue of statutory interpretation which arises under issue 4, both parties were also agreed that this was an issue I could deal with along the same lines as those adopted in relation to summary judgment applications where a discrete point of law arises. In relation to the approach to be taken, I need only set out the following passage from Angel Group Limited v British Gas Trading Ltd [2012] EWHC 2702 (Ch), a decision of Mr Justice Norris :-
'22. The principles to be applied in the exercise of this jurisdiction are familiar and may be summarised as follows:—
a) A creditor's petition can only be presented by a creditor, and until a prospective petitioner is established as a creditor he is not entitled to present the petition and has no standing in the Companies Court: Mann v Goldstein [1968] 1WLR 1091.
b) The company may challenge the petitioner's standing as a creditor by advancing in good faith a substantial dispute as to the entirety of the petition debt (or at least so much as will bring the indisputable part below £750):
c) A dispute will not be "substantial" if it has really no rational prospect of success: in Re A Company No.0012209 [1992] 1WLR 351 at 354B.
d) A dispute will not be put forward in good faith if the company is merely seeking to take for itself credit which it is not allowed under the contract: ibid. at 354F.
e) There is thus no rule of practice that the petition will be struck out merely because the company alleges that the debt is disputed. The true rule is that it is not the practice of the Companies Court to allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds, because the effect of presenting a winding up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary action: in Re A Company No.006685 [1997] BCC 830 at 832F.
f) But the court will not allow this rule of practice itself to work injustice and will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute exists which cannot be determined without cross-examination ... ibid . at 841C).
g) The court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment: (ibid at 837B).'
- As to the approach adopted in summary judgment applications and the court being able to determine a short point of law, I was referred to the following passage from ICI Chemicals v TTE Training Ltd [2007] EWCA Civ 725 (Lord Justice Moore -Bick):-
'12. In my view the judge should have followed his original instinct. It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better.'
- I turn to consider the background before dealing with the statutory construction point arising in issue 4 in accordance with the approach set out above.
Background
- The cCmpany is the freehold owner of 1 to 9 Odeon Arcade, Leicester LE1 5HJ ('the Arcade') since 13 July 2021. The Arcade is divided into various commercial units. The Creditor is a supplier of electricity and in particular has supplied electricity to the Arcade. The petition claims charges for the supply of electricity for the period 13 July 2021 to 30 April 2023 in relation to Units 8A, 9A and 12 of the Arcade. It appears from the evidence that there is one meter for the supply of electricity at the Arcade, at least in relation to Units 8A, 9A and 12, despite the Arcade being divided up into various units. According to the Company, those three units were occupied by commercial tenants during the supply period as follows:-
(1) Unit 8A (referred to in the office copy entry as unit 8) was occupied by and leased to Mitchell Bray since 25 June 2021. The tenancy is now a rolling periodic tenancy after the expiry of the fixed period under the terms of the lease.
(2) Unit 9A (referred to as Unit 9 in the office copy entry) was leased to a commercial tenant with the fixed term expiring on 20 November 2021 and thereafter the Unit is leased up to 1 May 2022. As from that date, Scapers Limited have occupied and rented the Unit until July 2023.
(3) Unit 12 is leased to Karwan Foods Limited ( Karwan) over the supply period set out in the petition. Its lease began before the supply period, on 25 June 2021 and it remain in occupation of the unit.
- According to Mr Jake Bell in his witness statement dated 13 May 2024 on behalf of the Creditor, there was one meter which supplied the electricity to Units 8A, 9A and 12 of the Arcade. The supply was disconnected on 20 February 2023 because the Creditor had not received payment for the supply from the period 13 July 2021 to 20 February 2023. According to Mr Bell, the Creditor's position is that none of these tenants can be described as a single 'occupier' of the supply of electricity to the premises. He states that these tenants 'merely occupy or occupied' discrete units within the supply premises. Accordingly, it does not appear that there is any dispute that there are tenants occupying certain units as described in the leases which I have referred to above. The argument between the parties relates to who is liable for the charges which arise from the supply of electricity to the units which form part of the Arcade. I have no evidence relating to other units in the Arcade and whether in fact those units have their own separate supply of electricity. Demands for payment of the electricity charges were made at some stage to Karwan, but thereafter demands for payments were made to the Company as the freeholder, as the owner of the Arcade.
- The issue of who is liable for the electricity charges is based not on the terms of any contract between the various parties, but arises solely from the deemed contract which the Creditor states has arisen under paragraph 3(1) of Schedule 6 of the Electricity Act 1989. The Creditor submits that as there is no single occupier for the entire premises, then under that provision, the owner, being the company, is liable. This is disputed by the Company which asserts no such deemed contract has arisen as between itself and the Creditor.
The statutory provisions
- Paragraph 3(1) of Schedule 6 of the Electricity Act 1989 states as follows:-
"Where an electricity supplier supplies electricity to any premises otherwise than in pursuance of a contract, the supplier shall be deemed to have contracted with the occupier (or the owner if the premises are unoccupied) for the supply of electricity as from the time ("the relevant time") when he began so to supply electricity."
- There are other statutory provisions which I was referred to, paragraph 2(1) of Schedule 6 to the Electricity Act 1989:-
"2.— Non-payment of suppliers' charges
(1) Where a customer has not, within the requisite period, [made all the relevant payments] , the supplier may–
(a) install a pre-payment meter on the premises; or
(b) disconnect the premises,
and the supplier may recover any expenses incurred in so doing from the customer."
- Paragraphs 1(1)-(3) of Schedule 7 of the Electricity Act 1989 set out the requirement to provide electricity supply through a meter:-
"(1) Where a customer of an [authorised supplier] is to be charged for his supply wholly or partly by reference to the quantity of electricity supplied, the supply shall be given through, and the quantity of electricity shall be ascertained by, an appropriate meter.
(2) If the [authorised supplier] agrees, the meter may be provided by the customer [ (who may provide a meter which belongs to him or is made available otherwise than in pursuance of arrangements made by the supplier)]; but otherwise it shall be provided by the [authorised supplier] [(who may provide a meter which belongs to him or to any person other than the customer)].
(3) The meter shall be installed on the customer's premises in a position determined by the [authorised supplier], unless in all the circumstances it is more reasonable to place it outside those premises or in some other position."
- The Creditor's position is that a deemed contract has arisen pursuant to this provision whereby the Company is liable for the supply of electricity at the premises. I will need to consider the meaning of 'premises'. The company submits that no deemed contract can arise because as the evidence demonstrates, the units are occupied and therefore any deemed contract would be with the occupiers rather than with the Company as owner of the premises.
- The Creditor submits that the purpose behind paragraph 3(1) is to enable a deemed contract to come into existence when a new occupier arrives on the premises. The Creditor's case is that 'occupier' in paragraph 3(1) must be read as referring to the occupier of the entire premises. As there is in this case no single occupier of the entire premises, then the owner becomes the party to the deemed contract under paragraph 3(1).
- Effectively Mr MacLachlan on behalf of the Creditor, submits that a reading of this paragraph asks two questions, (1) what premises are being supplied the electricity and (2) who is the occupier of those premises. This is in reality another way to argue that premises in paragraph 3(1) must be defined as the entire premises. This leads to the submission that the entire premises are not occupied by one occupier but by several occupiers and therefore this means that the owner is liable, relying upon the second part of paragraph 3(1).
- Mr MacLachlan submits that this construction is supported by certain canons of construction. He submits that an alternative interpretation that all tenants are liable produces absurd or unworkable results. He submits that this could not have been Parliament's intention that occupants of one unit which is part of the 'premises' would be liable for the supply to other units which form part of the entire premises. In my judgment, this unfairness only really exists in so far as 'premises' in paragraph 3(1) refers to the entire premises. If the reference to premises is only to the premises which are the subject matter of the lease and the tenant's occupation, the unfairness asserted would not arise.
- Secondly, Mr MacLachlan submits that the interpretation of all the tenants being liable for the electricity supply to the entire premises cannot be reconciled with the supplier's statutory right to 'disconnect the premises' where the customer has not, within the requisite period, made all the relevant payments. This arises pursuant to paragraph 2(1) of Schedule 6. He submits that the construction that all the tenants are liable for the electricity charges would mean that if part of a bill remains unpaid, then even those who have paid their share would be disconnected. He submits this is an absurd outcome. In my judgment, this point again depends upon the construction of 'premises' being a reference to the entire premises. As with the earlier point, Mr MacLachlan's construction strains the natural language used in paragraph 3(1) which refers to premises and not to entire premises. It is agreed by the parties that in accordance with the Interpretation Act 1978 the singular refers also to the plural so the provision is to be read as referring to occupier or occupiers. This therefore means that paragraph 3(1) envisages occupiers of premises. Moreover, the ability of the Creditor to disconnect when the bill has not been paid is exactly what occurred in this case. It does not lead to an unfair outcome, but allows the Creditor to disconnect due to non-payment of the electricity charges to the premises. That is what has occurred in this case.
- The Creditor submits that the purpose of the deeming provision is to address an inefficiency in the energy market which would arise if suppliers have to formally contract with new occupants of buildings every time a building gained a new occupant. There would be a wait before a new occupant could be guaranteed a supply of electricity because of having to wait for a contract with a supplier. I am not persuaded that the mischief is to promote market efficiency or importantly, that the more natural construction which the Creditor argues against in some way fails to promote market efficiency. Mr MacLachlan did not provide any real justification to support his purpose and mischief argument as in some way meaning that deeming was necessary in all cases and that a failure to be able to deem in certain cases was against the purpose of the provision. In certain cases deeming may not be appropriate and the supplier would seek to negotiate express contracts. The provision enables contacts to be deemed in certain circumstances which can assist both the supplier and also the occupier, but this will depend on the factual circumstances. In every case, it seems to me, actual contracts can be entered into by way of an alternative. Meters could be installed to the separate units. In this particular case, as the outstanding electricity bill which covered separate units has not been paid for a considerable period of time, the supply was disconnected. It is no part of the Creditor's case that in some way it is not possible to install separate meters.
- In my judgment, the Creditor's construction does not accord with the natural meaning of the paragraph. The clause operates primarily to deem a contract between the supplier and the occupiers or occupier of premises. Premises, here, in my judgment, relates to the premises which are occupied by the relevant occupier. There is no justification to seek to read premises as having to relate to the entire premises over which an owner is the freeholder. Under the terms of the paragraph, the owner is only liable under a deemed contract if the premises are unoccupied. That is clearly not the case here. The premises are clearly occupied and therefore that part of the provision does not apply. Mr MacLachlan attempted to argue that it made sense that if the clause was construed as being the entire premises, as no one party occupied the entire premises, then the owner was liable. In my judgment, this proposed construction strains the language used and goes against what is actually written. The proposed construction would mean that despite the premises being occupied, the clause required there to be a fiction that the premises were unoccupied in order to create a deemed contract with the owner.
- In my judgment, the deemed contract relates to the party who is using the supply. If the premises are occupied, that will be the occupiers. If not occupied, then the owner will be liable under a deemed contract. In a case where there is one adopted meter but many occupiers of different units of the premises, then the supplier has its usual entitlements to disconnect the supply if payment is not made. That is what occurred here after a lengthy period of time. It forms no part of the purpose of the legislation to deem a contract with an owner even though the premises are occupied. That would be, in my judgment, an absurd result.
- In conclusion, I reject the proposed construction of the Creditor and determine that no deemed contract arose between the owner and the supplier. The premises were occupied at all the relevant times and I reject the strained construction relied upon by the Creditor for the reasons I have set out above.
The remaining issues
- On the basis of the construction point above, it is unnecessary for me to deal with the other issues raised by the Company because the injunction sought is granted (and the petition to be dismissed) based on the construction issue alone. However, I will deal with them briefly below.
Issue 1 – is the claimed debt in the petition flawed on its face for a failure to apportion electricity charges between Units 8A, 9A and 12 and the common areas on the other hand?
- In my judgment, had I found in favour of the Creditor on the construction issue, then this issue has no merit because there would clearly remain a debt owing by the Company to the Creditor even if there was a failure to specify any apportionment relating to the common areas. On the evidence, it is clear that the common parts are much smaller than the units themselves and therefore the majority of the debt would relate to the units.
Issue 2 – did the meter record the electricity to units 8A, 9A and 12 (or any units within the Arcade at all)?
- In my judgment, this issue also lacks merit. The evidence demonstrates that there was one meter and that the supply to that meter was recorded and properly charged. Whilst much was made about the different address set out in the invoices, taking the evidence as a whole, it is clear that the invoices related to the correct meter number and therefore the supplier has charged for the correct and only meter at these premises. There is on the evidence no other adopted meter and accordingly this issue falls into being alongside the others, a 'cloud of objections' lacking merit.
Issue 3 – was there an express contract between Karwan and the Creditor? Has the Creditor admitted that Karwan Ltd is the liable entity for the electricity charges?
- In my judgment, the evidence does not demonstrate an issue on this point which creates any bona fide dispute. Had the Creditor succeeded on the construction point, then there would be a deemed contract with the Company. There is no evidence that Karwan actually signed any actual contract for the electricity and the Company is, in my judgment, simply speculating on this issue. At its highest, the Creditor sent invoices to Karwan, but this, in my judgment is not capable of displacing the terms of the deemed contract had I found in favour of the Creditor on its construction point.
Issue 5 – Have demands for payment been validly made under the invoices?
- In my judgment, there is evidence that the invoices were sent to an address where the Company clearly received correspondence. This is another one of those attempts to create a dispute when there is none. The errors on the invoices do not, in my judgment, invalidate the invoices. The Company clearly was aware of what was being claimed from it.
- In conclusion, the Company succeeds on the construction issue. In those circumstances, the injunction is granted and the petition will be dismissed.
