Winding-Up Petition Restrained: Serving a Statutory Demand

Winding-Up Petition Restrained: Serving a Statutory Demand for a Disputed Debt

On 21 August 2026 the Business and Property Courts in Leeds gave a judgment that shows why a winding-up petition cannot be used to collect a debt the debtor genuinely disputes. In LM1 Limited v Seacroft Film Investments Limited [2026] EWHC 2212 (Ch), Her Honour Judge Kelly, sitting as a judge of the High Court, dealt with an application to restrain a creditor from presenting a petition after it had served a statutory demand for a sum that was in dispute.

The facts behind the winding-up petition

The parties had settled earlier county court proceedings in February 2024 on terms recorded in a Tomlin order. Part of that settlement dealt with the assessment of one party’s costs, and the schedule allowed either side to return to court to enforce it. At a detailed assessment on 2 December 2025 the district judge struck out LM1’s bill of costs, permitted it to be redrawn, and ordered LM1 to pay Seacroft’s costs of the assessment, summarily assessed at £20,449.56.

Seacroft then treated the struck-out bill as assessed at nil and, on 23 January 2026, served a statutory demand for £20,000, described as the return of a costs contribution it had already paid. LM1 said the sum was genuinely disputed and subject to a cross-claim, and that the demand was an abuse of process. On 12 February 2026 it issued an application to restrain Seacroft from presenting a winding-up petition.

The question the court answered

By the time of the hearing the live issue was costs, because Seacroft accepted, once LM1 had filed a witness statement and a revised bill, that there was a substantial dispute about the debt and that no petition could be presented on the strength of the statutory demand. To decide who should bear the costs of the application, the judge had to identify when a triable dispute had been raised and whether the demand should ever have been served at all.

 

What the court decided about the statutory demand

A statutory demand is the gateway to insolvency, not a debt-recovery device for contested sums. Where a debt is disputed on genuine and substantial grounds, or is met by a cross-claim of equal or greater value, the proper forum is an ordinary money claim, not the winding-up jurisdiction. The court restated the settled principle that presenting, or threatening to present, a petition founded on such a demand is an abuse of the process of the court and can be restrained by injunction. The judge also underlined that a creditor cannot side-step a genuine dispute by dressing a contested balance up as a simple debt; the label put on the sum in the demand does not decide whether the insolvency jurisdiction is open. Seacroft’s concession reflected that position, and the judge’s analysis of the chronology fixed the point at which the dispute was properly raised.

When a winding-up petition will be restrained

The wider reminder for creditors is that the statutory route to wind up a company depends on the debt being clear. A debtor faced with a demand over a disputed sum can apply to restrain a petition before it is advertised, and a creditor who presses on regardless risks paying costs. Serving the demand is the straightforward part; being sure the debt is undisputed is what protects the creditor. A record of how and when the demand was served and proved matters, but it does not cure a demand that should never have been issued.

If you need a statutory demand or winding-up petition served correctly and provably on the right party, complete the form below and the Tremark team will be in touch.

Frequently Asked Questions

Can a winding-up petition be based on a disputed debt?

No. Where the debt is genuinely disputed on substantial grounds or subject to a cross-claim, the court treats a petition as an abuse of process and can restrain it. The creditor should pursue an ordinary claim instead.

How is a statutory demand served?

A statutory demand should be brought to the debtor’s attention by a method that can later be proved. For a company that usually means the registered office, and for an individual it usually means personal service, recorded in a certificate of service.

What happens if a demand is served for a sum that is later disputed?

The debtor can apply to set aside the demand or to restrain presentation of a petition. If the dispute is genuine, the creditor may face an injunction and a costs order.