06 December 2013

Whenever there is an apparent monetary debt, common practice is for a claimant to threaten a winding up petition as part of the tactics to get a potential defendant to pay up. Three weeks after a statutory demand letter is sent where an apparent debt for £750 or more exists, a winding up petition can be issued against a company which has not paid (the actual financial wellbeing of the payer is irrelevant as long as they have not paid). Whenever an apparent debt is in dispute this can be a powerful tool to unsettle a defendant.

If such a demand is received the only safe option for the payer (other than paying) is to attend the companies court to obtain an injunction preventing a winding up petition before expiry of the 21 days.

Generally the companies Court will not allow a winding up petition where the debt is genuinely in dispute. Payers often therefore raise arguments about fitness for purpose of the goods etc.

Foxholes Nursing Home v Accora (29 November 2013) is an example of the companies court injuncting a party from bringing a winding up petition.

Things to note about this decision include the following:

  • The whole of the debt must be disputed. If there is part of the debt which is not disputed and it exceeds £750 a winding up petition can still be brought.
  • Set offs etc can often be argued to prevent the debt being payable. However, you need to be sure that the set off is legally available.
  • The Sale of Goods Act provides that (in most circumstances) payment must be made for goods accepted even if not all goods are accepted in a consignment etc. Hence if part of the delivery is acceptable and the rest is rejected, the payer must normally pay for those parts accepted.

The potential defendant in the above case came close, but managed to show there were arguable set-offs against the remaining unpaid sums to prevent a petition being brought against it until after the dispute had been heard at trial.

Key contact

David Hall

David Hall Partner

  • Dispute Resolution
  • Banking Disputes
  • Business Crime and Regulatory Investigations

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