Coilcolor Ltd v Camtrex Ltd

A winding-up petition should be restrained where the debt is disputed on substantial grounds or the debtor has a genuine and substantial cross-claim exceeding the petitioning debt, save in exceptional circumstances. The court must assess whether the dispute has real substance rather than accept a contrived collection of objections.

Solvency alone is no answer to an undisputed debt. Where a solvent company has an arguable defence, however, solvency forms part of the court’s assessment of whether the petition is being used improperly as leverage. Difficult questions about contractual incorporation, construction, waiver and statutory control should ordinarily be resolved through an ordinary action. A petition pursued to secure payment first and adjudication later may constitute an abuse of process.

The company applied to restrain Camtrex Ltd from presenting a winding-up petition founded on unpaid invoices for steel coils. It maintained that the steel was defective or unfit for purpose and that it had substantial defences, rights of set-off and cross-claims. Camtrex relied principally upon its standard terms and conditions, which it said had been incorporated through a long course of dealing and excluded set-off, late defect claims and consequential losses.

The central questions were whether the proposed petition would be an abuse of process and whether the disputes about incorporation, contractual construction, waiver, defects and statutory control had sufficient substance to require determination in an ordinary action.

1. Application granted, subject to the terms of the final order. The proposed winding-up petition would be an abuse of process. Unless suitable undertakings were offered instead, the court would restrain its presentation. The court reserved whether the company should make a payment into court pending resolution of the dispute and also reserved costs.

2. A petition may be restrained where it would be bound to fail or would constitute an abuse. A creditor whose alleged debt is disputed on substantial grounds lacks an established standing to invoke the class remedy of winding up. The petition procedure, which ordinarily lacks pleadings, disclosure and oral evidence, is unsuitable for resolving substantial factual disputes. A genuine and substantial cross-claim exceeding the petitioning debt will likewise ordinarily prevent the petition from proceeding, save in exceptional circumstances.

3. The court must examine whether the asserted dispute has real substance. A good-faith assertion or a contrived collection of objections does not automatically require a trial. Credible evidence may nevertheless disclose issues that cannot fairly be resolved through the summary procedure of the Companies Court.

4. Solvency is not a defence to a petition based on an undisputed debt. Where a solvent company advances a defence with a prospect of success, however, solvency may form part of a composite answer showing why the Companies Court is an inappropriate forum. The court should also consider whether winding up is being threatened to exert pressure rather than to obtain the class remedy. Re a Company (No 0012209 of 1991) [1992] 1 WLR 351 was adopted on that point. Cornhill Insurance plc v Improvement Services Ltd [1986] 1 WLR 114 and Re Taylor’s Industrial Flooring Ltd [1990] BCC 44 concerned undisputed or indisputable debts and were distinguishable.

5. Camtrex had a strong case that its standard terms were incorporated through the parties’ course of dealing. Objective conduct may establish acceptance of known printed conditions even if the receiving party did not read them. Incorporation was not, however, the only issue.

6. Substantial questions remained about whether the relevant terms were appropriate to goods whose defects might emerge only after processing; how the exclusions of liability, set-off and implied terms should be construed; the effect of the Unfair Contract Terms Act; and whether the terms had been varied or waived through performance and established practice. The factual defect claims also had sufficient substance for investigation. Those matters required ordinary proceedings and could not properly be determined under the threat and procedural consequences of winding up.

The judgment describes earlier procedural steps in the same first-instance application. An interim injunction was granted on 11 September 2015 after the company undertook to pay the undisputed sum. On 18 September 2015, Camtrex undertook not to present a petition pending the adjourned hearing. No appellate history is stated.