A Company v Andy Thornton Contracts Ltd

On an application to restrain presentation or advertisement of a winding-up petition, the court will not determine a genuinely disputed debt. The applicant must show a bona fide dispute on substantial grounds and, where appropriate, a realistic prospect that the indisputable debt is below the statutory threshold. A cross-claim is treated differently: the petitioner remains a creditor, but the court may restrain the petition where the company has a genuine and serious cross-claim exceeding the undisputed debt, absent special circumstances. The company must provide a properly evidenced and sufficiently quantified basis for the dispute or cross-claim. Mere disagreement with a final account, unexplained marked-up schedules, or unquantified allegations of defects and delay is insufficient.

The claimant company operated a restaurant fitted out by the respondent contractor. The contractor claimed approximately £443,000 plus VAT under a final account and issued a statutory demand followed by a winding-up petition. The company applied to restrain further steps.

The company argued that the debt was disputed on substantial grounds and that it had cross-claims for incomplete and defective work and delay. It also relied on an alleged arbitration clause in an unsigned JCT contract. The central questions were whether the parties were bound by that arbitration provision, whether the claimed debt was substantially disputed, and whether the company had a genuine and substantial cross-claim exceeding the undisputed debt.

1. Application dismissed. The evidence did not establish that the parties were bound by the unsigned JCT contract or its arbitration clause. There was no substantial evidence that the draft contract had been agreed in another manner.
2. There was nevertheless a contract for the fitting-out works. Agreed works were payable at agreed prices, while unpriced works were potentially payable on a quantum meruit basis. The absence of a signed formal contract did not mean that no debt existed.
3. Following Angel Group Ltd v British Gas Trading Ltd [2012] EWHC 2702 (Ch), the question was whether a debt exceeding the statutory minimum was not bona fide disputed on substantial grounds. The court was not required to conduct a mini-trial or determine the precise final account, but the company had to identify an arguable basis on which the debt could be reduced below the threshold.
4. The company’s objections to electrical works, plumbing, preliminaries, the balustrade and other account items were insufficiently particularised or unsupported. Even taking the objections at their highest, the respondent had demonstrated that a substantial sum remained due.
5. A cross-claim differs from a disputed debt. Under Re Bayoil [1999] 1 WLR 147, the court may exercise its discretion to dismiss or stay a petition where there is a genuine and serious cross-claim exceeding the petition debt. The company had not adequately quantified claims for non-completion, defective workmanship or delay. The evidence also showed that substantial parts of the delay were attributable to other contractors or design changes.
6. The company therefore failed to show either that the debt was substantially disputed or that its cross-claims exceeded the undisputed debt. The application was dismissed.