Vertex Trading Sarl v Infinity Holdings Ltd

Relief restraining the advertisement or further prosecution of a winding-up petition is discretionary. The normal practice is not to entertain a petition founded on a debt that is bona fide disputed. That practice is not automatic where the company is insolvent, particularly where it is not trading and the alleged debt can be resolved through the liquidation proof process. The court must manage its process by balancing the interests of the company, the petitioning creditor and other creditors. It may also consider the public and commercial purposes of advertisement, the company’s actual trading position, the evidence of prejudice and any delay in seeking relief. Where the company is insolvent and non-trading, reputational prejudice may carry little weight, and the petition may properly proceed notwithstanding the dispute.

Vertex Trading Sarl applied on short notice to restrain Infinity Holdings Ltd from further prosecuting and advertising a winding-up petition. The petition was based on an alleged debt of approximately £3 million. Evidence suggested that the debt might be substantially disputed because the underlying transactions and goods were potentially fictitious, but there was also evidence that the company had acknowledged the debt and had no money. The application was made after the petition had been presented and shortly before its proposed advertisement. The central issues were whether the delay justified refusing relief and whether the petition should be restrained despite the alleged dispute and the company’s asserted reputational prejudice.

1. Application refused. The court declined to restrain the further prosecution or advertisement of the winding-up petition. The petition was allowed to run its course.
2. The usual practice is that a creditor’s winding-up petition will not be entertained where the debt is bona fide disputed. Whether that practice applies depends on the evidence and on the court’s assessment of the dispute.
3. The court must manage its own process having regard to the interests of the company, the petitioner and all other creditors. Relevant considerations included the lateness of the application, the opportunity previously available to seek relief, the company’s financial position, its trading status and the likely prejudice caused by advertisement.
4. Advertisement serves not only to publicise the petition but also to notify persons considering dealings with the company and other creditors who may support or oppose the petition. Those purposes carried less weight in relation to a company that was not trading, while the evidence of reputational damage was insufficiently explained.
5. Where a company is shown to be insolvent and is not trading, it may be appropriate to wind it up notwithstanding a disputed debt, because the dispute can be resolved through the proof-of-debt process and the company would suffer no injustice. Similar considerations may arise where a company continues trading while unquestionably insolvent.
6. On the evidence, it was not established that advertisement should be restrained. If the debt remained properly disputed at the hearing, the winding-up court could decide whether the company should nevertheless be wound up.