There is a low threshold for the granting of an injunction to prevent the presentation of a winding up petition.
The challenge against the debt in the statutory demand must be in good faith and have sufficient substance.
The Respondents served a statutory demand on Mulalley & Company Limited (the “Company“), on the basis of debts which had allegedly been assigned to one of the Respondents by a sub-contractor of the Company, who had, prior to the purported assignment, had a winding up petition presented against it.
The Company disputed the debts on the grounds that pursuant to the written agreement between the Company and the sub-contractor, the assignment of the debt could not take place without the Company’s consent, that some of the debts had been paid already and that some had not fallen due at the date of the statutory demand. Furthermore the authenticity of the agreements purporting to assign the debt was disputed. The Company sought an injunction against the Respondents presenting a winding up petition against the Company based on the statutory demand.
The High Court noted that the threshold for the granting of an injunction to prevent the presentation of a winding up petition was low and that the court did not need to determine if the dispute to the debt was valid. The challenge to the debt must merely be in good faith and have sufficient substance to justify it being determined in normal civil action.
The court held that each of the grounds for dispute were sufficiently substantial and that the arguments were put forward in good faith. As such an injunction was granted.