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Abuse of Process - Injunction to Prevent a Winding up Petition

Astra Resources plc v Credit Veritas USA LLC [2015] EWHC 1830 (Ch)

In December 2014, Credit Veritas served Astra Resources plc with a statutory demand claiming the sum of USD$ 1,530,000 in unpaid fees. Astra applied for an injunction to prevent the issuing of a winding up petition on the basis that it amounted to an abuse of process, because the petitioning creditor's purpose in presenting the petition was not to ensure the equitable winding-up of the company's affairs, but its ulterior motive of taking control of the company from its directors and thereby implement a creditor-led restructuring plan.

Astra relied on the previous ruling in which a petition was dismissed because the petitioner issued it with the purpose of causing the forfeiture of a company's leasehold premises, which the petitioner intended to rent for itself.  In that case, the High Court held that the issue of a petition for a purpose other than to ensure the equitable winding-up of the debtor company was an abuse of process.

In this case, the High Court ruled there was no abuse of process on the grounds that the collateral purpose of the petitioner in this case was to implement a restructuring plan, which was for the benefit of creditors as a whole which meant that the purpose of a winding-up petition was to achieve an outcome consistent with the proper process of a winding-up, it was not an abuse of process.

It is clear from this ruling that the court will refuse an injunction if the underlying objective is one which will be of benefit to the creditors as a whole.

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