The High Court’s decision in Abcor Finance Securities Ltd v Binomia Ltd [2025] EWHC 2374 (Ch) illustrates the risks of using a winding-up petition to pursue a debt which is not clearly and unequivocally due. The judgment reinforces the importance of clarity in contractual repayment terms and strict compliance with notice provisions.

Background

Abcor Finance Securities Ltd (Abcor) presented a winding-up petition against Binomia Ltd (Binomia) in respect of an alleged debt of £305,811.91 arising under a parent company guarantee (the Guarantee). Binomia had given the Guarantee in relation to the obligations of its subsidiary, Circular Tech Solutions Ltd (CTS), pursuant to a trade finance facility provided by another Abcor group company to CTS (the Loan Agreement).

CTS made multiple drawdowns under the terms of the Loan Agreement. The repayment terms set out in the Loan Agreement were unclear. The relevant clause stated that repayment was to be made either by a single repayment upon sale of all goods purchased, or by instalments. No details of the amount or timing of such instalments were set out. The Loan Agreement also provided that each loan was for a term of “up to 90 days” from drawdown. Abcor contended that the facility therefore operated on 90-day repayment terms and that certain sums were overdue. It seized stock from the premises of another company in Binomia’s group, in purported enforcement of its security. It subsequently served a statutory demand and the petition on Binomia.

Binomia opposed the petition on three grounds:

• The repayment clause was ambiguous, and the loan could not therefore be said to be due and payable (and therefore Binomia had no liability under the Guarantee).
• Notice given to CTS purportedly declaring the loan immediately due and payable was invalid (and therefore Binomia had no liability under the Guarantee). The notice did not contain the details required under the loan agreement, and was delivered by email, while the loan agreement mandated delivery by hand or post.
• Abcor’s seizure of stock was, it said, unlawful and gave rise to a cross-claim (albeit from CTS or its associate rather than Binomia) exceeding the petition debt, such that the court should not make a winding-up order.

Court’s decision

The petition was dismissed. The judge applied the well-established principle that “the court will dismiss a winding up petition where it is satisfied the debt on which the petition is based is disputed on genuine and substantial grounds.” He emphasised that the court must take a realistic approach - a bare assertion of a dispute will not suffice, and there is a minimum evidential threshold to be met by the debtor.

Here, the judge considered that this evidential threshold was plainly met. The repayment provisions in the Loan Agreement were “problematic” – the judge found that they were internally inconsistent and could not be interpreted without a full examination of the surrounding circumstances, likely requiring disclosure and oral evidence. There was clearly a genuine dispute on substantial grounds, which could not be resolved in the context of insolvency proceedings.

Furthermore, there was a genuine and substantial dispute as to whether notice had properly been given under the Loan Agreement. Again, this was not a matter suitable for determination by way of winding up proceedings.

Although the judge did not consider it necessary to decide the ground relating to the seizure of stock by Abcor, he observed that it would be inappropriate to make a winding up order when Abcor’s actions in seizing property were allegedly unlawful. The substance of that issue, the judge noted, was a matter for separate proceedings.

Practical lessons for creditors

The judgment underscores the importance of clarity and precision in contractual drafting, particularly for terms which go to the heart of the contract such as repayment provisions. Where multiple repayment mechanisms are referenced, they must be consistent and complete. The principle of contra proferentem means that ambiguous terms are likely to be construed against the lender, adding further uncertainty.

Creditors should also ‘plan for the worst, hope for the best’ at the documentation stage. Loan and security agreements and guarantees should be drafted with enforcement in mind, ensuring that enforcement triggers and demand mechanics are workable in practice. Enforcement strategies should be stress-tested against the possibility of ambiguity in contractual terms. Where guarantees are involved, creditors must confirm that the principal obligation has crystallised and if necessary that the correct steps have been taken to accelerate the underlying debt, before proceeding.

Finally, creditors should beware of using winding-up petitions as a pressure tactic. The court views this as an abuse of process. If a petition fails, the creditor may be held liable for the debtor’s costs on an indemnity basis. Where disputes are likely, ordinary litigation may be the safer and more effective option.