Astra Resources Plc v Credit Veritas USA LLC

A winding-up petition should be restrained where the alleged debt is genuinely disputed on substantial grounds. A contractual retainer is not contingent on successful transactions or the availability of funds where the agreement contains no such qualification. Rectification requires convincing evidence that the written agreement fails to record the parties’ common intention. Presenting a petition to achieve a restructuring through the proper insolvency processes is not an abuse of process, provided the restructuring would operate for the benefit of creditors generally.

Astra Resources Plc applied to restrain Credit Veritas USA LLC from presenting a winding-up petition based on a statutory demand for US$1,535,000. The demand included claims for historic fees, a payment relating to the Stanley Meyer project and fees connected with MidOil litigation.

The company argued that the debt was genuinely disputed on substantial grounds and that the proposed petition would pursue a collateral purpose, namely obtaining control of the company through a reorganisation. The central issues were whether any part of the demand represented an undisputed debt and whether the proposed purpose made presentation of a petition an abuse of process.

1. The application for an injunction was dismissed. Credit Veritas was declared entitled to present a winding-up petition based on unpaid retainer fees of US$600,000.
2. The governing principle, stated in Tallington Lakes Ltd v Ancasta International Boat Sales Ltd [2012] EWCA Civ 1712, [2014] BCC 327, is that a petition will be struck out where the alleged debt is genuinely disputed on substantial grounds. The US$75,000 MidOil claim had no clear contractual basis, and the US$500,000 Stanley Meyer claim was unsupported by a completed transaction or binding settlement. Those claims could not support a petition.
3. The historic US$480,000 claim under paragraph 10 of schedule B was also genuinely disputed because payment was conditional on the company raising the necessary funds.
4. Paragraph 8 of schedule B imposed an unconditional monthly retainer. It was not expressed to depend on a transaction, successful performance or the raising of funds. The company’s suggested rectification had no substantial evidential basis. There was no evidence that Credit Veritas shared the alleged intention, and the negotiation history made an overlooked drafting error unlikely.
5. The collateral-purpose objection failed. Applying the approach in Ebbvale Ltd v Hosking [2013] UKPC 1, a purpose connected with achieving a scheme of arrangement or company voluntary arrangement through the liquidation process was materially different from the improper purpose considered in Re a Company (No 001573 of 1983) [1983] BCLC 492. Such a restructuring could proceed only through proper processes and with regard to unsecured creditors as a whole.
6. The company’s possible Australian centre of main interests did not prevent a petition in England. In the absence of insolvency proceedings in Australia, the company could be wound up in its country of incorporation.