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11 January 12

Disputing a debt founding a winding-up petition

Recently the Court of Appeal in Argentum Lex Wealth Management Ltd v Giannotti [2011] EWCA Civ 1341 affirmed earlier case law that provided that a company must establish, when disputing the debt founding a winding-up petition, that the dispute is based on substantial grounds. The court went on to say that the test of substantial grounds was not very different from the test for granting judicial review applications in the administrative court or granting permission to appeal to the Court of Appeal, and what must exist is a realistic prospect of success ([17]).

See further: Commentary to Rule 125 of the Insolvency Act 1986 in Insolvency Legislation: Annotation and Commentary Online, Louis Doyle and Andrew Keay (2012).


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11 January 12

Provisional liquidation

It is well accepted that if an applicant for the appointment of a provisional liquidator can establish that the directors and/or shareholders might dissipate the assets, disadvantaging the creditors should the company eventually be wound up, he or she is likely to succeed. In this regard ‘dissipation’ does not just mean the directors and/or others making away with the assets, it can also refer to the fact that there is a serious risk that the assets may not continue to be available to the company: The Commisioners for HMRC v Rochdale Drinks Distributors Ltd [2011] EWCA Civ 1116 at [99]. This could be where, notwithstanding the presentation of a petition, the directors continue to trade a loss-making company without securing an order under s 127 (at [99]).

See further: Commentary to Rule 135 of the Insolvency Act 1986 in Insolvency Legislation: Annotation and Commentary Online, Louis Doyle and Andrew Keay (2012).


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11 January 12

Wrongful trading

A liquidator who seeks an order against directors on the basis that they have engaged in wrongful trading must plead a date on which this conduct occurred. Recently courts seemed to accept that liquidators can nominate dates in the alternative (Roberts v Frohlich [2011] EWHC 257 (Ch) [2011] 2 BCLC 635; Re Kudos Business Solutions [2011] EWHC 1436 (Ch) at [53])). Furthermore dates can be estimates. For instance, in Roberts v Frohlich the case pleaded was that the wrongful trading occurred ‘around 1 July 2004 (or alternatively on or around 1 September 2004)’. In this case the judge found that wrongful trading had occurred by 14 September 2004 and allowed the liquidator’s claim.

See further: Commentary to Rule 214 of the Insolvency Act 1986 in Insolvency Legislation: Annotation and Commentary Online, Louis Doyle and Andrew Keay (2012).


To receive a FREE 14 day online trial to Insolvency Law Online click here.