A recent decision has sent a stark warning to creditors seeking to collect debts by way of serving a statutory demand or presenting a winding up petition.

In Moorwand Ltd v K Wearables Ltd [2023] EWHC 410 (Ch), the Court was asked to dismiss a winding up petition on grounds that the debtor disputed the debt and had crossclaims. In making its decision, the Court had to decide whether the debt was disputed on “substantial grounds” (requiring the Court to consider whether the debtor genuinely considered that it had a crossclaim, whether the crossclaim was only raised after the creditor commenced enforcement action, and the reasons why the debtor had delayed in pursuing any crossclaim). Fortunately for the debtor, it was held that their crossclaims were genuine, and the winding up petition was dismissed accordingly.

In an increasingly volatile economic climate, this decision serves as a timely reminder to creditors that whilst there are tools available to assist with debt collection, one needs to be careful when selecting the right tool for the job. Choosing the wrong tool may not only delay or torpedo the debt collection process, but may even expose the creditor to wasted costs which outweigh the debt in question.