When companies are faced with winding up petitions it is often asserted on their behalf that their alleged debts are genuinely disputed. However, as a High Court decision showed, judges were not born yesterday and tend to take a critical approach when assessing the credibility of such claims.
The case concerned a man who launched winding up proceedings against his former employer, a company, on the basis that he was owed more than £15,000 in salary arrears. The company insisted that it did not owe him a penny. It argued that it was the one who was owed money in that it had loaned the man £25,000 which had not been repaid.
After a hearing, however, a judge rejected that assertion as manifestly incredible. He found that the company had failed to show that the existence of the salary arrears was the subject of a bona fide dispute on substantial grounds. The company’s application for an order restraining the man from presenting a winding up petition against it was dismissed.
Rejecting the company’s appeal against that outcome, the Court noted the complete absence of documentary evidence in support of its claim that payments to the man had been made by way of loan. The judge was entitled to be sceptical and to cast a critical eye on the merits of the company’s case. The Court’s ruling opened the way for the man to formally present his petition.