Re A Company (number 1299 of 2001)
Tuesday, 15 May 2001
Key terms: Winding-up petition - Impact of s111 HGCRA 1996 on the criteria “undisputed debt” under the Insolvency Act 1986 - Absence of a withholding notice - Abatement
This case concerned the use of a Winding Up Petition to enforce an adjudicator’s decision. The applicant, CCL, sought to obtain an injunction by which the respondent, GAL, would have been estopped from presenting and advertising a winding-up petition based on the non-compliance with a Statutory Demand.
CCL as main contractor had entered into a sub-contract with GAL for roofing works. GAL rendered an application for an interim payment amounting to £9,702.47 for works done. CCL did not serve a withholding notice in time. After the final date for payment, CCL discovered various defects in GAL’s work which were made good by another sub-contractor. CCL refused to pay the Statutory Demand issued by GAL arguing CCL had a bona fide defence to the sub-contractor's claim upon the basis of an abatement entitlement in respect of the defects.
The court refused to restrain the winding-up petition on the grounds that, firstly, the debt was an undisputed debt and, secondly, the grant of an injunction could not otherwise be justified. As to the first matter, the court emphasised the impact of s110 and s111 HGCRA 1996. In absence of a withholding notice, s111 required CCL to pay the sum without deduction regardless of any cross-claim and abatement in respect of alleged defects in the works. The rule “pay now, litigate later” had to prevail. GAL was therefore deemed a creditor of CCL with the entitlement to present a winding-up petition.
The court refused to exercise its discretion to dismiss the petition because the main contractor had failed to take any steps to pursue its cross claim for set off and/or abatement in adjudication or other proceedings.
CCL as main contractor had entered into a sub-contract with GAL for roofing works. GAL rendered an application for an interim payment amounting to £9,702.47 for works done. CCL did not serve a withholding notice in time. After the final date for payment, CCL discovered various defects in GAL’s work which were made good by another sub-contractor. CCL refused to pay the Statutory Demand issued by GAL arguing CCL had a bona fide defence to the sub-contractor's claim upon the basis of an abatement entitlement in respect of the defects.
The court refused to restrain the winding-up petition on the grounds that, firstly, the debt was an undisputed debt and, secondly, the grant of an injunction could not otherwise be justified. As to the first matter, the court emphasised the impact of s110 and s111 HGCRA 1996. In absence of a withholding notice, s111 required CCL to pay the sum without deduction regardless of any cross-claim and abatement in respect of alleged defects in the works. The rule “pay now, litigate later” had to prevail. GAL was therefore deemed a creditor of CCL with the entitlement to present a winding-up petition.
The court refused to exercise its discretion to dismiss the petition because the main contractor had failed to take any steps to pursue its cross claim for set off and/or abatement in adjudication or other proceedings.