Cautionary tale: Wind-up goes wrong

People that are owed money by a company will often consider commencing winding up proceedings as a way of applying pressure.  Sometimes the threat of such action is effective in prompting payment.  However, a recent judgment in England reiterates that such action will backfire if the debtor can show a serious basis to dispute the debt.

 In Ro-Bal Steel Fabrications Ltd v G Jones Site Services Ltd [2016] EWHC 292 (Ch), the applicant presented a winding-up petition in respect of an alleged unpaid debt of ￡6,500.  The Companies Court dismissed the winding-up petition, on the basis that there was a dispute on substantial grounds about whether the debt was really owed.  The Court found that it was not appropriate to resolve that dispute in the context of winding-up proceedings and the matter should instead be dealt with in civil litigation before the Technology and Construction Court.

In addition to paying its own legal fees, the applicant was ordered to pay the respondent’s legal fees – summarily assessed on an indemnity basis at ￡13,750 – and is (legally) no closer to recovering its alleged debt of ￡6,500.