“Cloud of objections” insufficient to dispute winding up

In SKS Justa & Co Ltd and another company v Justa Ltd [2025] EWHC 2120 (Ch), the court considered a so-called “cloud of objections” raised by the debtor in a hopeless attempt to restrain a winding-up petition.

The applicants, SKS Justa & Co Ltd (1) and SKS Business Services Ltd (2) issued an application on 6 November 2024 to restrain the presentation of a winding-up petition by Justa Limited, the petitioner.

By way of an Asset Purchase Agreement (APA) dated 31 March 2021 entered into between the petitioner and the applicants, the parties had agreed that the petitioner would sell the properties, rights, and assets comprising in its business to the first applicant for the amount of £1,187,906.29. Of which, £593,953.15 was to be paid upfront, with the remainder paid as deferred consideration in two lump sums payable over the following two years and subject to an adjustment mechanism provided for under the APA.

In accordance with the terms of the APA, the petitioner issued a “turnover statement” in May 2024 seeking payment of £378,818 in relation to the first tranche of the deferred consideration.

This amount was unpaid by the applicants and on 16 October 2024 the petitioner issued a statutory demand in relation to the debt. On 6 November 2024 the applicants applied to restrain the petitioner from presenting a winding-up petition on the basis that the debt was “bona fide disputed on substantial grounds.”

The applicants raised 3 lines of argument:

1. That the turnover statement had not been approved by their board and was therefore only in draft form.
2. That the applicants had concerns as to the accuracy of the headcount calculations used in preparing the turnover statement.
3. That the applicants had a crossclaim in the amount of £200,000.

On consideration of the arguments presented by the applicants, the court recognised that the APA was “a lengthy and detailed document, professionally-prepared by an experienced firm of solicitors” and noted that the APA fixed no requirement for the turnover statement to be approved by the board, nor did it provide any mechanism for challenge of the turnover statement on the basis of the headcount calculations. 

The court did not need to consider in detail the applicant’s third argument, ”even if that cross-claim is valid, the net amount owing to the respondent would substantially exceed the insolvency limit and this therefore provides no grounds for restraining a winding-up petition.”

In finding against the applicants, the court described their application as “an example of a case where a “cloud of objections” has been raised to “obfuscate the real issues”” and where court resources were improperly employed as part of a strategy to delay payment. 

This case reiterated that the law does not protect the merely unwilling debtor, and the relevant question for the court when asked to restrain a winding-up petition is whether the debtor has provided evidence to show that the debt is bona fide disputed on substantial grounds.