CR-2024-005081 - [2025] EWHC 2374 (Ch)

It is a well-settled rule of practice (and not disputed between the parties) that the court will dismiss a winding up petition where it is satisfied the debt on which the petition is based is disputed on genuine and substantial grounds. In Angel Group Ltd v British GasTrading Ltd [2012] EWHC 2702 (Ch), Norris J said at [22]:

“The principles to be applied in the exercise of this jurisdiction are familiar and may be summarised as follows:-

a)

A creditor’s petition can only be presented by a creditor, and until a prospective petitioner is established as a creditor he is not entitled to present the petition and has no standing in the Companies Court: Mann v Goldstein [1968] 1WLR 1091.

b)

The company may challenge the petitioner’s standing as a creditor by advancing in good faith a substantial dispute as to the entirety of the petition debt (or at least so much as will bring the indisputable part below £750).

c)

A dispute will not be “substantial” if it has really no rational prospect of success: in Re A Company No.0012209 [1992] 1WLR 351 at 354B.

d)

A dispute will not be put forward in good faith if the company is merely seeking to take for itself credit which it is not allowed under the contract: ibid. at 354F.

e)

There is thus no rule of practice that the petition will be struck out merely because the company alleges that the debt is disputed. The true rule is that it is not the practice of the Companies Court to allow a winding up petition to be used for the purpose of deciding a substantial dispute raised on bona fide grounds, because the effect of presenting a winding up petition and advertising that petition is to put upon the company a pressure to pay (rather than to litigate) which is quite different in nature from the effect of an ordinary action: in Re A Company No.006685 [1997] BCC 830 at 832F.

But the court will not allow this rule of practice itself to work injustice and will be alert to the risk that an unwilling debtor is raising a cloud of objections on affidavit in order to claim that a dispute exists which cannot be determined without cross-examination (ibid. at 841C).

The court will therefore be prepared to consider the evidence in detail even if, in performing that task, the court may be engaged in much the same exercise as would be required of a court facing an application for summary judgment: (ibid at 837B).”

Further, the court has a discretion and may decline to order winding up where there is a genuine and serious cross-claim that the respondent to the petition has been unable to litigate that equals or exceeds the amount of the petition debt: see Re Bayoil SA [1999] 1 All ER 374.

When considering whether to make a winding-up order in the face of opposition, it is not practical or appropriate for the court to conduct a long and elaborate hearing, examining in minute detail the case made on each side: Re Swan Campden Hill Limited [2021] EWHC 2470 (Ch) per ICC Judge Burton at [10]. The Judge then cited Re Bayoil, where Ward LJ said at p.383e:

“a winding-up order is a draconian order. If wrongly made, the company has little commercial prospect of reviving itself and recovering its former position. If there is any doubt about the claim or the cross-claim, that seems to me to require that the court should proceed cautiously.”

The Court must take a realistic view of whether a company is likely to establish a genuine and substantial dispute, taking into account that bare assertions will not suffice. There is a minimum evidential threshold: see Swan Campden Hill Limited at [11].