Winding-up petition not permitted for disputed debts in UK

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By David Johnson

A winding-up petition is not appropriate for a debt that is disputed on substantial and bona fide grounds. A ‘no set-off’ clause in a contract may not be as effective against the debtor if counterclaims are evident.

The debtor had engaged the creditor to provide furniture and soft furnishings to a care home. The debtor withheld payment of part of the total price on the basis that items contracted for had not been delivered or were defective. The creditor presented a statutory demand and the debtor applied for an injunction to restrain presentation of a winding-up petition.

The judge held that the debtor had a real prospect of success in establishing set-offs or counterclaims sufficient to off set the whole of the debt claimed by the creditor. The issues raised by the debtor were not merely ‘a cloud of objections raised… in order to claim that a dispute of fact exists… so that the petition cannot be allowed to proceed’. Accordingly, the injunction was granted…

Click on the link below to read the rest of the Taylor Wessing briefing.