Debt Recovery and Winding Up Proceedings – a High Court Cautionary Tale


If you are having trouble recovering a debt from a company, it is open to you to issue a statutory demand and, if it is not satisfied, to apply to a judge to have the company wound up. As a High Court ruling showed, however, attempting to wield such a big legal stick without first taking professional advice is almost never wise.

After being made redundant from a senior position, a man issued a statutory demand against his corporate former employer, asserting that it owed him over £40,000. Most of that sum was made up of a bonus payment which he claimed was due to him. The company denied that it owed him anything and responded by seeking an order restraining him from applying to wind it up.

Ruling on the matter, the Court noted that, after being selected for redundancy, the man had signed a settlement agreement with the company whereby he received a payment of £97,600. The agreement was reached without any admission of liability by the company and stated in terms that it was, with a few exceptions, in full and final settlement of any claims or causes of action he might have against the company.

The man, who appeared in court without legal representation, had made a number of disputed allegations about the circumstances leading up to the execution of the settlement agreement and the circumstances in which it was signed. The Court noted, however, that he had accepted that he was bound by its terms.

The Court found that he had an arguable case that a bonus would have been due to him. Whatever his original bonus entitlement may have been under his employment contract, however, the settlement agreement now governed his position vis-à-vis the company. It seemed to the Court that the terms of the agreement provided a complete answer to his bonus claim.

At the very least, the Court found that the bonus claim, together with other elements of the alleged debt, were disputed by the company on bona fide and substantial grounds. The dispute was therefore wholly unsuited to resolution in insolvency proceedings. The man was restrained indefinitely from applying to wind up the company and was ordered to pay its reasonable legal costs.

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