Abuse of process – inappropriate use of the threat of insolvency

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The Solicitors acting for the Creditor should have known better than to use the threat of insolvency for debt collection purposes,

Author: Howard Tilney
Published:
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This article is 5 years old.

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A client company was recently served with a Statutory Demand threatening to wind it up in default of payment of the sum demanded.

First, we noted that the claim was for an ‘unliquidated’ sum.

Such categorisation applies to sums of money not established in advance by the contracting parties as compensation for a breach of contract, but determined by a court after such breach occurs.

Secondly, the claim arose from a cause of action previously the subject of defended litigation, which the Creditor had discontinued some months earlier.

Accordingly, we determined that service of the statutory demand and the threat of winding up proceedings in respect of a hitherto disputed unliquidated claim was wholly inappropriate and amounted to an abuse of the Court Process.

In this regard, we cited the authorities of Re a Company (No. 001573 of 1983)[1983] BCLC 492, Re a Company (No. 0012209 of 1991)[1992] 2 All ER 797, and Coilcolor Ltd v Camtrex [2015] EWHC 3202 (Ch), [2015] All ER (D) 90 (Nov).

Notice was duly given to the Creditors solicitors that unless the Statutory Demand was withdrawn by the end of the day then our client would make an application to the Court for an injunction restraining the presentation of a petition and advertisement thereof, without further notice.

Frankly, the Solicitors acting for the Creditor should have known better than to use the threat of insolvency for debt collection purposes, particularly when the purported claim was already disputed. They were duly told in terms.

Suffice to say that the Demand was withdrawn within the hour!

Howard Tilney

Legal Advisor

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