When a contractor failed to pay certain agreed invoices the sub-contractor issued a winding up petition. The contractor applied to halt the advertising of the petition on the grounds that the debts were bona fide disputed on substantial grounds as there was a cross claim which exceeded the amount claimed. The court refused to halt proceedings because the absence of a withholding notice under the HGCRA meant that there were no substantial grounds for disputing the petition.
Failure to serve a valid withholding notice will prevent the raising of cross claims in subsequent winding up proceedings.
Medlock Products Ltd v SCC Construction Ltd (13/7/2006)