Medlock Products Limited v SCC Construction Limited
The case of Medlock Products Limited v SCC Construction Limited provides further confirmation that, in the right circumstances, a winding up petition can be the appropriate remedy where monies are due under a construction contract and there is no valid notice of withholding and no genuine cross-claim exceeding the debt to the contractor. There were issues in this case over whether Medlock Projects Limited or its subsidiary was the proper debtor, which we will ignore.
SCC was engaged as sub-contractor to Medlock on three different projects. On one contract, the Congleton contract, a settlement was reached whereby payment was to be made in two stages of £50,000 and £25,000. The first payment was made but the second was not made on time. Invoices rendered on the two other contracts were also not paid.
SCC commenced winding up proceedings. One of the procedures on winding up is to advertise the winding up petition. The advertisement of the petition can be financially damaging. Medlock applied to restrain the advertisement of the petition on the grounds that there was a bona fide dispute or cross claims which Medlock had not been able to litigate, exceeding the petition debt.
The court dismissed the application to restrain the advertisement of the petition. The court said that, to defeat a petition the dispute has to be a genuine one on substantial grounds and the cross claim has to be a bona fide cross-claim with a genuine prospect of success.
Very importantly the court took into account the fact that the contracts were construction contracts with the requirement of a written withholding notice if monies were to be set-off. The judge stated “I rely on the absence of any withholding notice therefore to support my conclusion that the cross-claims are not substantial and serious claims”.
