It is an abuse of the process of the court to make a statutory demand or present a winding-up petition based on a claim to which there is a triable defence. Where a statutory demand is made but disputed on reasonable grounds, the creditor may find himself liable to indemnity costs on its dismissal.
Hoffmann J said: ‘It does seem to me that a tendency has developed, possibly since the decision in Cornhill Insurance plc v Improvement Services Ltd [1986] BCLC 26, [1986] 1 WLR 114, to present petitions against solvent companies as a way of putting pressure upon them to make payments of money which is bona fide disputed rather than to invoke the procedures which the rules provide for summary judgment. I do not for a moment wish to detract from anything which was said in the Cornhill Insurance case, which indeed followed earlier authority, to the effect that a refusal to pay an indisputable debt is evidence from which the inference may be drawn that the debtor is unable to pay. It was, however, a somewhat unusual case in which it was quite clear that the company in question had no grounds at all for its refusal. Equally it seems to me that if the court comes to the conclusion that a solvent company is not putting forward any defence in good faith and is merely seeking to take for itself credit which it is not allowed under the contract, then the court would not be inclined to re-strain presentation of the petition. But, if, as in this case, it appears that the defence has a prospect of success and the company is solvent, then I think that the court should give the company the benefit of the doubt and not do anything which would encourage the use of the Companies Court as an alternative to the RSC Ord 14 procedure.’
Hoffmann J
[1992] 2 All ER 797, [1992] 1 WLR 351, [1992] BCLC 865
England and Wales
Cited by:
Cited – Ridehalgh v Horsefield; Allen v Unigate Dairies Ltd CA 26-Jan-1994
Guidance for Wasted Costs Orders
Guidance was given on the circumstances required for the making of wasted costs orders against legal advisers. A judge invited to make an order arising out of an advocate’s conduct of court proceedings must make full allowance for the fact that an . .
Cited – BNY Corporate Trustee Services Ltd and Others v Neuberger SC 9-May-2013
Potential Insolvency effect under guarantee
The various parties had entered into complex and substantial financial arrangements incorporating guarantees. The guarantees were conditional upon the guaranteed party being solvent. The parties disputed whether a party which would otherwise be . .
Lists of cited by and citing cases may be incomplete.
Legal Professions, Company, Insolvency
Updated: 09 January 2022; Ref: scu.278997