The High Court dismissed a petition by Haier Electrical Appliances Company Limited to wind up Mares Associates Limited, finding that the alleged debt was bona fide disputed on substantial grounds and was already being litigated in Italy.
In a judgment delivered on 23 February 2006, Miss Justice Laffoy said the court’s task was not to decide whether Mares would ultimately succeed in its claim. It had to decide whether there was a genuine dispute that should be determined through the ordinary court process without putting the company’s existence at risk.
Haier’s petition claimed that Mares owed €1,973,721 from a €2 million advance paid under agreements made in August 2003. Haier said a guarantee required repayment after Mares’s subsidiary, Mares (GB) Limited, sold assets in July 2004 without Haier’s prior consent. It said the balance became immediately payable and that Mares had failed to satisfy a formal demand for payment.
Mares admitted receiving the advance and that its subsidiary had agreed to sell aspects of its undertaking. But in an affidavit, Frans Jamry, who described himself as the company’s attorney and owner of companies in the Mares Group, disputed that the claimed balance was due. He argued that commission underpayments should be credited against the advance and that, after proper adjustments, Mares was owed more than €1 million. He also said the sale had been forced by Haier’s conduct.
Mares had begun proceedings in Italy in December 2004 against Haier and other companies, seeking, among other relief, rescission of agreements and damages of at least €15 million. Haier disputed the relevance of that litigation to its winding-up application.
The judge accepted that the subsidiary’s asset sale without Haier’s prior written consent triggered immediate repayment under the guarantee, to the extent any amount remained due. However, she found the guarantee was interconnected with other agreements between the parties. The Italian proceedings had been initiated before Haier served its statutory demand, which the judge said established that Mares’s dispute was made in good faith.
The only basis advanced for Mares’s alleged insolvency was its failure to comply with the demand. Because the debt was disputed on substantial grounds, the judge dismissed the winding-up petition. The court did not determine the parties’ competing claims in the Italian litigation.