Insolvency proceedings as a permitted method of debt collection (Sell Your Car With Us Limited v Sareen)

Restructuring & Insolvency analysis: The applicant company applied for an injunction to restrain the presentation of a winding-up petition. Its primary assertion was that the debt was subject to a genuine and substantial cross claim. Insolvency and Companies Court Judge Burton found that the alleged cross claim had no prospect of success.

The company’s secondary position was that the petition ought to be restrained in any event since it could pay the debt, and the threat of insolvency proceedings should not be used as a method of debt collection. The judge held that, despite an historic line of authority that looked dimly upon the use of such proceedings for debt collection, a creditor owed an undisputed debt has a right to petition the court for winding up.

Written by Faith Julian, barrister at 9 Stone Buildings.
Sell Your Car With Us Ltd v Sareen [2019] EWHC 2332 (Ch)

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