Re A Company (No. 0012209 of 1991), 1992, 1 WLR 351
Citation:Re A Company (No. 0012209 of 1991), 1992, 1 WLR 351
Link to case on WorldLII (reference).
Rule of thumb: Can an insolvency action be raised for a small debt which there is no response to? No, an insolvency action for a small debt can be defended as an abuse of process.
Judgment:
The Court in this case established the important precedent that insolvency petitions when companies do not pay small debts will be generally be refused. This is generally based on the rationale that this could otherwise be used as a tool to unfairly damage and discredit the financial reputation of a person or business, Hoffman J, ‘It does seem to me that a tendency has developed... to present winding up petition against solvent companies as a way of putting pressure upon them to make payments of money which is bona fide disputed rather than to invoke procedures which the rules provide for summary judgment... If ... it appears that the defence of the company has a prospect of success and the company is solvent, then I think that the Court should give the company the benefit of the doubt and not fo anything which would encourage the use of the Companies Court as an alternative to the summary Judgement procedure’, (at page 354F).
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.