A Company v The Respondent (A Company (Injunction to Restrain Presentation of a Petition), Re)

The court may restrain presentation of a winding-up petition where the alleged debt is disputed on substantial grounds or where the debtor has a genuine and substantial cross-claim which exceeds the petitioner's claim. The evidence must show more than a bare assertion or a contrived cloud of objections. It must demonstrate a genuine dispute or cross-claim with real prospects of success. Delay in advancing a cross-claim does not necessarily indicate bad faith. The court may assess affidavit evidence without cross-examination where it is not inherently implausible, contradicted by documents or otherwise incredible. Presenting a petition to exert pressure for payment of a debt subject to a bona fide dispute is an abuse of process.

The Applicant sought a final injunction restraining the Respondent from presenting a winding-up petition based on a statutory demand. The parties had worked together on two building projects. The Applicant disputed the Respondent’s invoices, alleging substantial overcharging, underqualified operatives and defective electrical work. It also advanced a cross-claim in contract and misrepresentation.

Interim relief had been granted and continued pending the final hearing. By the hearing, the Respondent accepted that most of the debt was substantially disputed but maintained that £16,889.25 remained due. The central issue was whether the Applicant had demonstrated a genuine and substantial cross-claim exceeding that amount.

1. Final injunction granted. The Respondent was restrained from presenting a winding-up petition based on any sum claimed in the statutory demand.
2. The Applicant was permitted to rely on its reply evidence, although it went beyond evidence strictly described as reply evidence. The Respondent had filed evidence in response and had declined an adjournment.
3. The timing of the cross-claim did not justify an inference of bad faith. The Applicant had intimated a cross-claim in correspondence, and the evidence explaining the claim became available only when the Respondent disclosed qualification records for the operatives.
4. The minimum evidential threshold was met. The Applicant showed a genuine and strongly arguable claim in contract and misrepresentation, with real prospects of success, based on evidence that approximately 40% of the operatives were materially underqualified and had not possessed qualifications represented by the Respondent.
5. The evidence of defective work, including contemporaneous third-party correspondence, photographs and the Applicant’s evidence linking the defects to the Respondent’s operatives, provided cogent support for causation and loss. The cross-claim substantially exceeded the residual sum claimed.
6. Accordingly, all but £16,889.25 of the statutory-demand debt was disputed on substantial grounds, and the cross-claim exceeded the balance. Presentation of a petition was therefore liable to be an abuse of process.

Costs were to be addressed on handing down.