In the recent case of Foxholes Nursing Home v Accora Limited  EWHC 3712 (Ch) the Companies Court granted an injunction restraining the presentation of a winding-up petition where there was evidence of a substantial dispute between the parties regarding performance of a contract. The Court held that the evidence clearly demonstrated that there were real and genuine grounds for disputing the debt.
Genuinely and Substantially Disputed Debt
A statutory demand can be used to ask for payment of a debt from an individual or company. When an individual or company gets a statutory demand, they have 21 days to either settle the debt or reach an agreement to pay. Three weeks after a statutory demand is served, a winding up petition can be presented on the individual or the debtor company if the debt has not been paid.
Once the statutory demand has been received, the company can apply to the High Court for an injunction preventing the presentation and/or restraining the advertisement of a winding up petition. Generally, the Court will not allow a winding up petition to be presented where there are real and substantive grounds for disputing the debt. There must be sufficient evidence to persuade the Court that there is a genuine dispute as to the company’s liability to pay the debt.
Facts in Foxholes Nursing Home v Accora Limited
In this case, the applicant, Foxholes Nursing Home, applied for an order restraining the presentation of a winding up petition brought against it by the respondent, Accord Limited. The alleged debt owed was for the amount of £53,148.
The applicant ran a nursing home. As part of a refurbishment, the applicant contracted with the respondent to provide furniture and soft furnishings. The applicant paid two of three instalments and the respondent began delivering the goods.
The applicant was unhappy with the goods which were delivered alleging that many of the items delivered were not ordered, and as for the goods which were delivered, they did not conform with the agreed specification (for example size, colour and fabric).
The respondent took the view that the goods were delivered and submitted its invoice for the final instalment. After numerous discussions and correspondence, the applicant paid part of the final invoice, however the final bill reminded outstanding. As a result, Accora Limited served Foxholes Nursing Home with a statutory demand under section 123(1) (a) of the Insolvency Act 1986.
Grounds of Injunction to Restrain Petition
The applicant made an application to restrain the respondent from presenting a winding up petition on the grounds that:
- the debt was not yet due because under the contract the respondents obligation constituted an “entire obligation”, meaning that it could not recover under the contract until it had completed the performance of its obligations; and
- it had a substantial dispute raised on bona fide grounds in respect of the amount claimed.
Companies Court Injunction
The court ruled that there was clear evidence of a substantial dispute between the parties regarding the respondent’s performance of the contract and that is sufficient grounds for disputing the debt. The learned Judge Edward Murray stated the following:
“…the purpose of Accora threatening to present a winding up petition when it served its statutory demand on Foxholes on 19 November 2012 was indeed to pressure Foxholes into paying the amount invoiced despite there being a substantial dispute between Foxholes and Accora in relation to Accora’s performance of the contract.”
This decision demonstrates that if there are substantive grounds for disputing the debt, the Court will grant an injunction preventing the presentation and/or restraining the advertisement of a winding up petition. However, sufficient evidence must be submitted in order to persuade the Court that there are genuine grounds for disputing the debt.
Successful Winding-up Petition Legal Advice
If you have received a winding up petition our legal experts are able to provide legal advice and representation. Our team of solicitors and barristers can obtain a court adjournment, CVA’s or obtain an injunction restraining the presentation of the winding-up petition.