Winding Up Petitions Not To Be Used for Enforcing Disputed Debts

Winding up petitions are an extremely serious matter for any company and must not be used as a means to apply pressure to pay disputed debts. The Companies Court made that point in granting an injunction that restrained the presentation of a petition in the midst of an ongoing building contract dispute.

CraneA subcontractor who had been employed to carry out ground works claimed to have been underpaid by more than £100,000 for work that it had performed. It served a statutory demand on the contractor and, when that was not satisfied, threatened to launch a winding up petition.

In ruling on the case, the Court noted that it was not its function to try such disputed claims. Winding up petitions were damaging to corporate reputations and seriously impacted on their freedom to carry on business. There was a real risk that petitions might be issued to improperly apply pressure for payment of disputed debts.

In granting the injunction, the Court noted that there was a genuine and substantial dispute between the subcontractor and the contractor as to the value of the works carried out and as to whether any money was in fact owed. There was also a real question as to whether the subcontractor had issued a valid payment application and the contractor had put forward a substantial counterclaim.