Getting Wound Up!
 
Tue, 23rd September 2008
 
 

Getting Wound Up!

 

As I write this month’s article I am feeling pretty annoyed by one of our clients.  I won’t bore you with the details.  Suffice to say that we have conducted several adjudications for this particular client over the last year with considerable success.

 
The client concerned is half a million pounds better off as a result but has now decided that it either can’t pay or won’t pay our last fee invoice.  Now that’s gratitude for you!
 
 
So what am I going to do?  Should we adjudicate?  That may be difficult if there is no dispute or the client says it simply can’t pay?  Should we litigate?  I don’t think so.  By the time we have been through the pre-action protocol route and the other hoops I have a sneaky feeling that our client will have long since packed its bags and bought a one way ticket to Never Never Land.  No, what I have decided we are going to do is issue a winding up petition in the Courts.
 
 
Compulsory winding-up is a legal process by which a liquidator is appointed by order of the court to 'wind up' the affairs of a limited company.  At the end of the process the company ceases to exist.  Winding up does not mean that the creditors of the company will necessarily get paid.  The purpose of winding up a company is to ensure that all the company's affairs have been dealt with properly. 
 
This involves:
 
  • ensuring all company contracts (including employee contracts) are completed, transferred or otherwise brought to an end;
  • ceasing the company's business;
  • settling any legal disputes;
  • selling any assets;
  • collecting in money owed to the company; and
  • distributing any funds to creditors and returning share capital to the shareholders (any surplus after repayment of all debts and share capital can be distributed to shareholders).
 
When these things have been done the liquidator applies to have the company removed from the register at Companies House and dissolved, which means the company ceases to exist.
 
In summary and in layman’s terms, issuing a winding up petition is the first step towards (metaphorically) punching a debtor’s lights out.
 
Now this non-paying Client of ours (oh, by the way and before I forget, it says we “are the best thing since sliced bread” and has no complaints with the job we have done but prefers to pay other creditors at this time) has obviously been through the mill in the past because it says it will challenge any petition we serve by telling the court that it has a dispute with us, have the petition struck out and give us “a bloody nose” on costs.  Now that really is gratitude for you!
 
 
So is it as easy as our client says to get a court to strike out a winding up petition?  Well if the Court of Appeal judgement in Collier -v- P & MJ Wright (Holdings) Limited 2007 is anything to go by, the answer is a definite ‘no’.
 
In this case the Court of Appeal compared the standard of proof to set aside statutory winding up petitions to that required to resist a summary judgement application, namely that a debtor (one just like our client) must show that it has a reasonable prospect of success at any subsequent trial.
 
So the winding up petition is now on its way and, as Arnie nearly said in The Terminator, I have already said to the ungrateful client, “Don’t mess with us!”
 
Peter Vinden is a practising adjudicator, mediator, expert and conciliator. He is Managing Director of The Vinden Partnership and can be contacted by email at pvinden@vinden.co.uk
 
 
category Press  |  source Peter Vinden, Managing Director