Abbey Court Limited v Sarah Johns

The court dismissed the application to set aside the order of HHJ Pearce of 13 January 2023 restraining presentation of a winding up petition founded on a statutory demand. The central legal principle applied was that an insolvency court, when asked to restrain a winding up petition or to determine a challenge to such a restraint, considers whether the underlying debt is disputed in good faith and on substantial (reasonable) grounds. The judge found that the claim for fees was disputed in good faith and on substantial grounds because the vehicle inspection reports were produced under a trading name rather than by the person purporting to produce them, giving rise to potential defences of fraudulent misrepresentation or total failure of consideration.

The court also held that, as a practical matter, the statutory demand was very old and could not reliably found a petition for insolvency. The earlier order of HHJ Pearce was left in force but varied under CPR 3.1(7) to clarify it restrained presentation of any winding up petition founded on the statutory demand by the respondent or her servants, agents, corporate entities or assigns (including a successor trader).

Background and parties:

• The applicant company, Abbey Court Ltd (trading as Abbey Court Solicitors), applied to restrain presentation of a winding up petition founded on a statutory demand allegedly served by Costella Inspections Group (respondent: Miss Sarah Johns).
• The statutory demand, dated 28 November 2022, sought £9,320 for vehicle inspection reports. It was addressed to a slightly different corporate name (Abbey Court Solicitors Limited) although it quoted the company registration number of Abbey Court Ltd.

Procedural posture and relief sought:

• HHJ Pearce heard the applicant's insolvency application on 13 January 2023 and made an order restraining the respondent from presenting a winding up petition and awarding indemnity costs against her; that order was sealed on 11 May 2023.
• The respondent later applied (February 2025) to set aside Judge Pearce's order; the present judgment determines that application.

Issues framed by the court:

• Whether the respondent had proper notice of the earlier hearing before HHJ Pearce (procedural irregularity/absence of service).
• Whether, on the merits, the debt in the statutory demand was disputed in good faith and on substantial grounds such that a winding up petition should be restrained.

Material facts and evidence:

• One vehicle inspection report in evidence purported to be prepared by a "Steven Marshall"; the respondent's representatives admitted the reports were in fact produced by Mr Adrian Mantle (the respondent's father) who used a trading name because insurers allegedly would not accept reports under his true name.
• The applicant alleged inducement by misrepresentation and alternatively a failure of consideration, and argued the debt was disputed.
• There were certificates of service evidencing post to the Hayes address before the 13 January 2023 hearing; the respondent said she did not receive those documents and only became aware of the order in November 2024.

Court's reasoning and decision:

• The court treated the matter as a first instance application and applied the established test (as illustrated by Tallington Lakes Ltd v South Kesteven District Council [2012] EWCA Civ 443) that the insolvency court decides whether the debt is disputed in good faith and on substantial grounds, on the papers rather than by oral evidence.
• The judge found the dispute was bona fide and substantial because the reports had been prepared under a pseudonym and there were arguable defences of fraudulent misrepresentation and total failure of consideration; such issues should be resolved in ordinary civil proceedings rather than by insolvency process.
• The statutory demand was also materially out of date (served in November 2022) which further undermined its utility as a foundation for a winding up petition.
• Accordingly the court dismissed the respondent's application to set aside the order and left HHJ Pearce's order in force, with a minor variation under CPR 3.1(7) to make clear it extends to servants, agents, corporate entities or assigns (including a successor trader).

Wider context: The court noted that the insolvency jurisdiction is not the forum to determine the substantive civil disputes about the validity of invoices and the authenticity of reports; those matters belong in ordinary civil litigation, particularly given the modest sums involved.

This first instance application is dismissed. The court held that the debt identified in the statutory demand is disputed in good faith and on substantial grounds because the vehicle inspection reports were produced under a trading name rather than by the person purporting to make them, giving rise to arguable defences of fraudulent misrepresentation and total failure of consideration. The original order of HHJ Pearce (13 January 2023) restraining presentation of any winding up petition founded on the statutory demand remains in full force but is varied under CPR 3.1(7) to extend to the respondent's servants, agents, corporate entities or assigns (including any successor trader).