Companies Court wrong forum for debt disputes

Posted: 11th January 2013

In upholding a decision to strike out a winding up petition brought by a dissatisfied yacht purchaser, the Court of Appeal has emphasised that the Companies Court is not the correct forum for trying disputed debt claims.

YachtsTallington Lakes Limited had paid Ancasta International Boat Sales Limited more than £300,000 for a sailing yacht. The vessel was alleged to have suffered from a number of defects and Tallington lodged a winding-up petition in respect of £103,000 said to have been incurred in repair and other costs.

The petition was struck out at first instance on the basis that Tallington’s claim to be a creditor of Ancasta within the meaning of section 124 of the Insolvency Act 1986 was genuinely disputed on substantial grounds.

In dismissing Tallington’s appeal against that decision, the court underlined that, for sound reasons, the role of the Companies Court does not extend to the resolution of disputed debt claims which properly fall within the remit of the county courts or, in appropriate cases, the High Court.

The court noted that, otherwise, the threat of winding up proceedings could be used to place improper pressure on a company to pay a disputed debt. The inevitable delay in resolving such issues could also be unacceptably damaging to a company, whose freedom to carry on business may be severely curtailed by the existence of a pending winding-up petition.

It was ‘very unfortunate’ that Tallington had not brought its claim in county court proceedings and the court observed that, had it done so, the dispute would have been resolved in the proper forum long ago. If Tallington had succeeded in obtaining a monetary judgment in the county court, which Ancasta had failed to satisfy, it would have been justified in presenting a winding-up petition.