The recent Court of Session decision in the petition of Nicholas Parkin for an order to wind up Ayres Wynd Developments Limited highlights two key points: the value of having caveats lodged with the courts, and that a liquidation petition is not the appropriate forum to resolve a disputed debt.
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Caveats are documents which are lodged at court. They act as an early warning system and alert the caveat holder if a party raises an action seeking certain interim orders - such as an interim interdict - or initiates insolvency proceedings, including winding-up or administration of a company, or sequestration of an individual.
If a court action which seeks appropriate interim orders is raised and a caveat is in place, the caveat will trigger and there will be the opportunity for a hearing (known as a caveat hearing) before the court grants any such orders. Without a caveat, interim orders or orders for service and advertisement of insolvency proceedings may be granted without notice, leaving the affected party unaware until after the fact.
This early warning gives the caveat holder and their legal team the chance to act swiftly and potentially prevent orders from being granted.
Caveats are available to all Scottish businesses and certain individuals. Our Litigation and Dispute Resolution team can simplify the process, handle all filing, and ensure you're prepared and protected. Please get in touch to find out how we can help. |
Background
Mr Parkin raised a petition in the Court of Session seeking the liquidation of Ayres Wynd Developments Limited (the “Company”). The Company had a caveat lodged. A caveat hearing was fixed.
The petition had an unusual background. The Company had previously been in administration and moved into voluntary liquidation on 11 June 2025. However, the validity of the administrator’s appointment had been contested in both Sheriff Court and Court of Session proceedings. If the appointment was invalid, the move to voluntary liquidation would not have occurred. The court was advised that one of the reasons for the liquidation petition by Mr Parkin was to provide some clarity on the position of the Company.
- Mr Parkin's position was:
That two of the respondents (directors of the Company) had no standing to address the court at the caveat hearing, as only the Company had lodged a caveat; - That, as the Company was in voluntary liquidation, the directors no longer had authority to instruct legal advisors to attend at the caveat hearing on its behalf;
- That the court should grant first orders for intimation, service and advertisement unless it was inevitable the petition would fail.
Decision of the court
On the preliminary points, the court held:
- The caveat entitled the Company to be heard, necessitating a hearing. The directors were aware of the hearing and had instructed Counsel to attend. The petition procedure and the hearing were public, any interested party present or represented at the hearing had the right to be heard.
- Counsel was validly instructed on behalf of both the Company and the two directors.
On whether to grant first orders, the court confirmed:
- It has discretion in whether to grant first orders at a caveat hearing.
- A petition won’t be dismissed solely because a debt is disputed. However, a winding-up petition is not the correct forum to resolve a substantial dispute raised on bona fide grounds.
In this case, the debt was subject to a long-running and substantial dispute and this was not a matter to be resolved in a petition for winding up. The petition could not succeed because the existence of the debt is a critical element for the petition. It was inevitable that the Company and directors would succeed in opposing the petition and it was not appropriate to grant first orders.
The court noted that Mr Parkin, as a director and shareholder of the Company, could have sought winding-up on the basis that it was just and equitable to do so - an approach that would not have hinged on the disputed debt. However, the petition was based on the Company's inability to pay its debts as they fell due and first orders could not be granted.
Key Takeaways
This decision underscores the value of caveats in providing early warning and enabling parties to respond before orders are granted. Here, the caveat allowed the Company and directors to prevent first orders - something unlikely to have been the case had the caveat not triggered allowing the Company and directors to address the court at the hearing.
It also serves as a reminder that a liquidation petition is not appropriate where the debt is genuinely disputed. Raising a petition in such circumstances will likely lead to a refusal to grant first orders (if a caveat triggers) or dismissal of the petition if served and answered which could have adverse expenses consequences.
