Porter Dodson’s Commercial Dispute Resolution team are celebrating a win in the companies and insolvency division of the High Court on behalf of a client facing threats of a winding up petition.

A creditor had served a statutory demand on the basis of an unpaid invoice but our client disputed the debt because the creditor was in breach of contract. The creditor refused to resolve the matter by agreement and threatened to issue a winding up petition once the statutory demand expired.

In these circumstances it’s vital to take prompt and decisive action given that once issued, a winding up petition has catastrophic consequences for a company including loss of access to bank accounts and defaulting on loan agreements. The value of the disputed debt can be insignificant in comparison to the impact on the company.

We issued an urgent application and the court listed the hearing with less than a day’s notice.

The court found that the statutory demand was an abuse of process because the debt was genuinely disputed in good faith and our client’s obvious solvency justified making an order. The client obtained a final injunction to prevent the presentation of the winding up petition and crucially, an order that the creditor pay our client’s legal costs on an indemnity basis.

The outcome demonstrates how ill-advised it is to use the threat of a winding up as a debt recovery tactic in respect of disputed debts and if faced with one, solvent companies may take urgent action with some confidence.

Our Commercial Dispute Resolution team are dedicated to advising companies and partnerships across the South West on business insolvency matters, please get it touch to discuss your case with our litigation experts.