LEGAL PRINCIPLE: COMPANY LAW — Winding-Up — Inability to Pay Debts — What Constitutes Bona Fide Dispute of Debt
PRINCIPLE STATEMENT
The dispute must be genuine, not a sham, but a real one based on substantial grounds.
RATIO DECIDENDI (SOURCE)
Per Onu, JSC, in Air Via Ltd. v. Oriental Airlines Ltd. (2004) NLC-132000(SC) at p. 11; Para B.
"The courts have held that such dispute must be genuine, not a sham but a real one based on substantial grounds."
EXPLANATION / SCOPE
A bona fide dispute must be genuine and based on substantial grounds. The principle applies to company law. A sham or frivolous dispute does not suffice. The rule prevents abuse. The court will examine the basis of the dispute. The principle is well-established.