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Developer nets injunction preventing council from presenting winding up petition

A developer has secured a final injunction from the High Court preventing Liverpool City Council from presenting or advertising a winding up petition.

In July this year the local authority began legal action against Chinatown Development Company Ltd, the tenant company of the stalled £200m New Chinatown development.

The local authority said it had instructed solicitors to start legal proceedings to forfeit two leases on the city centre site.

A statutory demand was also issued for the outstanding sum of £950,000 said to be owed to the council by the developer Chinatown Development Company Ltd. A forfeiture notice on two leases for phases 1 and 3 was deemed served as well.

The council warned that if Chinatown Development Company did not make the payment by 10 August, the authority would apply to court to ‘wind up’ the company.

The developer applied to the court on 9 August for an injunction preventing the council from taking that step.

In China Town Development Company Ltd v Liverpool City Council [2017] EWHC 3347 Mr Justice Barling concluded that insolvency proceedings were not the appropriate vehicle for resolving what he considered 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.”

The judge added: “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.

A spokesman for Liverpool City Council said: “The injunction application submitted by Chinatown Development Company is a preliminary technical point which does not address the overall legal arguments. The judge may have found for them on this occasion but the wider substantive issues have yet to be heard. The city council feels that this application is a delaying tactic and is draining both public funds and the judiciary’s time.”

The spokesman said the judge’s decision was disappointing “but the fact remains that Chinatown Development Company has failed to pay the debt which it owes to the city council and, most critically of all , has failed to deliver the scheme which it has promoted”.

He added that the city council remained fully committed to regaining control of the site and was would be returning to court in the New Year to prove that the company had failed in its contractual obligations.

“The city council is confident in its legal position on the substantive issues in this matter but cannot expand further to protect the integrity of proceedings,” the spokesman said.

Responding to the ruling, Craig Griffiths, director of Chinatown Development Company, told the Liverpool Echo: “The Council’s intention here seems to be to take Chinatown back into their ownership but quite simply this is never ever going to happen.

“They have sold their interests in the project to Chinatown Development Company and no matter the public money they seem intent on wasting, no court proceedings are ever going to give them the land back.

“No doubt Liverpool City Council will attempt to make light of this judgement by Mr Justice Barling but it sends a clear message to them that the courts will not tolerate inappropriate litigation.”

Griffiths added: “The directors have made it clear that it is their intention to dispose of their interest in the Chinatown project. They can either do this harmoniously and in tandem with Liverpool City Council (thereby better assuring delivery of the development to the overseas buyers and the city) or whilst mired in expensive and unnecessary litigation (which will only cost the City’s tax payers more).

“It is their hope that the council choose the former option but if not then further proceedings will also be vigorously defended.”

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