Braganza Duties, Lay Representation and Winding‑Up Petitions in Scots Law: Commentary on Innovate UK Loans Ltd v Wootzano Ltd [2025] CSOH 106

1. Introduction

This commentary examines the opinion of Lord Lake in the Outer House of the Court of Session in Innovate UK Loans Ltd for an order to wind up Wootzano Ltd [2025] CSOH 106, a Scottish winding‑up petition brought by Innovate UK Loans Ltd (“the petitioner”) against Wootzano Ltd (“the respondent”).

The case raises two principal issues:

The scope and operation of lay representation for companies under section 97 of the Courts Reform (Scotland) Act 2014 and the Act of Sederunt (Lay Representation for Non‑Natural Persons) 2016, in particular the “interests of justice” test and the significance of the company’s prospects of success.
The application (and limits) of the so‑called Braganza duty in a commercial loan/investment context, and its interaction with insolvency law tests for a company’s inability to pay its debts under sections 122 and 123 of the Insolvency Act 1986.

The petitioner sought a winding‑up order on the basis that Wootzano was unable to pay its debts following non‑payment of sums demanded under an investment agreement. After service of the petition, Wootzano’s director, Dr Atif Syed, applied to appear as a lay representative on behalf of the company. His motion was refused on an earlier date; a second motion was then lodged with further material. At the same hearing, the petitioner moved for decree in terms of the prayer of the petition.

Lord Lake refused the renewed motion for lay representation and granted the winding‑up order. The opinion is significant for:

Clarifying how Scottish courts assess the “interests of justice” under section 97, with particular emphasis on the merits of the company’s proposed defence.
Indicating a cautious approach to implying Braganza-type duties into commercial lending or investment contracts, especially where the discretion relates to core repayment rights rather than fact‑finding.
Reaffirming the threshold for disputing a debt in the context of a winding‑up petition (“substantial grounds” test).

2. Summary of the Judgment

2.1 Procedural posture

The court was dealing with two motions:

A renewed motion by Dr Syed under section 97 of the 2014 Act to act as lay representative for Wootzano Ltd.
The petitioner’s motion to grant the prayer of the winding‑up petition on the basis of the company’s inability to pay its debts.

An earlier application by Dr Syed to appear as lay representative had been refused on 4 October 2025. The fresh motion was supported by additional material, but Lord Lake noted that there did not appear to be any relevant change of circumstances; the new motion might therefore be incompetent. Nonetheless, he heard full submissions and determined to issue a reasoned opinion.

2.2 Section 97: lay representation

Section 97 of the Courts Reform (Scotland) Act 2014 allows a “non‑natural person” (including companies) to be represented by a lay person (e.g. a director), if three cumulative conditions are met:

The company is unable to pay for the services of a legal representative.
The proposed lay representative is “suitable”, which includes not having a disqualifying “personal interest” in the subject matter of the proceedings.
It is in the interests of justice to grant permission, having particular regard to the complexity of the proceedings and the company’s prospects of success.

Lord Lake accepted that the company could not afford legal representation. He also considered whether Dr Syed’s status as both director and shareholder meant he had a prohibited “personal interest” in the subject matter of the proceedings. He acknowledged Hastings v Day 41 Ltd [2025] SAC (Civ) 26, where a shareholder was held to have a disqualifying personal interest, but noted that case also involved other factors making the proposed representative unsuitable. He flagged that a shareholder’s general financial interest in the company might not always be the same as a “personal interest in the subject matter of the proceedings” under section 97(4)(d), but he ultimately found it unnecessary to decide this point and left it open.

The decision instead turned on the third requirement: whether it was in the interests of justice to appoint a lay representative. On this, section 97(6) requires the court to have regard “in particular” to:

the likely complexity of the proceedings, and
the non‑natural person’s prospects of success in the proceedings.

Lord Lake was satisfied that complexity did not bar lay representation: having heard Dr Syed on two occasions, he considered that Dr Syed was capable of handling the level of complexity involved. However, he concluded that the company’s prospects of success were poor, for reasons tied closely to the underlying dispute about the debt (discussed below). On that basis, he held that it was not in the interests of justice to grant the section 97 motion.

2.3 The insolvency question and the Braganza argument

The petition was brought under section 122(1)(f) of the Insolvency Act 1986 on the ground that the company was unable to pay its debts. The petitioner relied on section 123(1)(a): a statutory demand had been served and not satisfied within three weeks.

However, failure to comply with a statutory demand is not conclusive of insolvency. Relying on BNY Corporate Trustee Services Ltd v Eurosail‑UK 2007‑3BL Ltd [2013] UKSC 28, Lord Lake noted that if the debt underlying the statutory demand is disputed on reasonable grounds, the petition may be dismissed. The question thus became whether the debt claimed under the investment agreement was genuinely and substantially disputed.

The investment agreement had three phases: an availability period, an extension period and a repayment period. All parties accepted that the extension period had begun. The key issue was whether the repayment period had started, which turned on the construction of clause 2.2. Under that clause, during the extension period the lender may give written notice commencing up to 90 days of consultation, during which it could decide to convert the debt into equity in the borrower. It was common ground that no notice under clause 2.2 had been served.

On the face of the agreement, the absence of such a notice meant the repayment period had commenced, instalments had fallen due, and Wootzano had defaulted, entitling the petitioner to demand repayment of the full outstanding balance. To avoid this conclusion, Dr Syed argued that the petitioner’s discretion under clause 2.2 was constrained by a Braganza-type duty (from Braganza v BP Shipping Ltd [2015] UKSC 17): the lender was obliged to exercise its discretion rationally and in good faith and, in effect, was “bound” to give the clause 2.2 notice so as to enter consultation and potentially convert the loan rather than trigger the repayment period.

After an extensive review of Braganza, Lord Lake held:

On the proper construction of the investment agreement, the lender’s discretion under clause 2.2 was fundamentally different from the type of fact‑finding discretion at issue in Braganza.
The relationship was not one, like employment, where mutual trust and confidence supported implying such a limitation on discretion.
The lender’s discretion concerned a choice between commercially different courses (conversion to equity versus repayment) in relation to a core term of a loan—the right to have its money repaid—rather than determining a “right” factual answer.
In those circumstances, he was not persuaded that any Braganza-type duty applied.
Even if such a duty did apply, there was no basis for concluding that the decision not to serve a clause 2.2 notice was arbitrary, capricious or Wednesbury unreasonable; it was plainly rational for a lender to prefer repayment over an equity stake.

Accordingly, the debt was not disputed on substantial grounds: the repayment period had commenced, instalments were due, default had occurred, and the petitioner was entitled to accelerate the loan and serve the statutory demand.

Using the language from Mac Plant Lifting Services v Contract Lifting Services (Scotland) Ltd [2008] CSOH 158, Lord Lake held that there were no “substantial grounds for disputing the debt”. The company’s prospects of success were therefore “poor”, undermining both the lay representation motion and the defence to the petition.

On that basis, he:

Refused Dr Syed’s renewed motion under section 97, and
Granted the petitioner’s motion and ordered that the prayer of the winding‑up petition be given effect.

3. Detailed Analysis

3.1 Statutory and procedural framework

3.1.1 Lay representation for companies: section 97 and the 2016 Act of Sederunt

Section 97 of the Courts Reform (Scotland) Act 2014 permits “non‑natural persons” (companies, partnerships, etc.) to be represented by suitably qualified lay persons in civil proceedings. The detailed conditions are crucial to the reasoning in this case:

Section 97(3): The court may grant permission if satisfied that—
(a) the non‑natural person is unable to pay for the services of a legal representative to conduct the proceedings,
(b) the lay representative is a suitable person to conduct the proceedings, and
(c) it is in the interests of justice to grant permission.

Section 97(4) (in part): For the purposes of subsection (3)(b), a lay representative is a suitable person to conduct the proceedings if—
…
(d) the lay representative does not have a personal interest in the subject matter of the proceedings…

Section 97(5): In subsection (4)(d), “personal interest” means an interest other than one that anyone holding the position that the lay representative holds with the non-natural person would have.

Section 97(6): For the purposes of subsection (3)(c), in deciding whether it is in the interests of justice to grant permission, the court must have regard, in particular, to—
(a) the non-natural person's prospects of success in the proceedings, and
(b) the likely complexity of the proceedings.

The Act of Sederunt (Lay Representation for Non-Natural Persons) 2016 works together with section 97 to define who may act as a lay representative—typically a director or company secretary—and sets out procedural requirements, such as authorisation and lodging appropriate documentation.

Lord Lake notes that a director and a company secretary are the two principal categories enabling a person to qualify as a lay representative. It is common in small companies for directors also to be shareholders, raising the question of whether such shareholding is a disqualifying “personal interest”.

3.1.2 Insolvency test: inability to pay debts and statutory demands

The winding‑up petition is founded on section 122(1)(f) of the Insolvency Act 1986: a company may be wound up by the court if it “is unable to pay its debts”. Section 123 elaborates the circumstances in which a company will be deemed unable to pay its debts, including:

Non‑compliance with a statutory demand for a debt of a specified minimum amount within three weeks (section 123(1)(a)).

However, reliance on a statutory demand is not absolute. If the debt is bona fide disputed on substantial grounds, the court will not ordinarily use winding‑up procedures as a means of resolving a genuine dispute. This principle underlies the references in the judgment to Eurosail and Mac Plant.

3.2 Precedents cited and their influence

3.2.1 Hastings v Day 41 Ltd [2025] SAC (Civ) 26

The Sheriff Appeal Court decision in Hastings v Day 41 Ltd is the only authority explicitly cited in relation to section 97. There, permission under section 97 was refused where the proposed lay representative was a shareholder of the company. Sheriff Principal Anwar considered that shareholding constituted a personal and financial interest in the financial position of the company.

In Innovate UK Loans v Wootzano, Lord Lake acknowledges Hastings, but distinguishes it on two bases:

In Hastings, there were “a number of other difficulties” that made the proposed representative unsuitable; thus, the shareholding was one factor among several.
Hastings did not conclusively determine how narrowly or broadly to construe “personal interest in the subject matter of the proceedings” under section 97(4)(d).

Lord Lake suggests that:

“… it is relevant to note that section 97(4) says that the issue is whether or not the person has a personal interest ‘in the subject matter of the proceedings’. That may be different from simply having a personal interest in the fortunes of the company as one of its shareholders.”

This observation may indicate a slightly more nuanced or restrictive approach to “personal interest” than a blanket rule disqualifying shareholder‑directors. However, he expressly declines to decide the point and instead resolves the case on “interests of justice” grounds. Any development of the law on this issue therefore remains tentative and obiter.

3.2.2 BNY Corporate Trustee Services Ltd v Eurosail‑UK 2007‑3BL Ltd [2013] UKSC 28

Eurosail is cited for the proposition that failure to comply with a statutory demand does not automatically mean that a winding‑up order must follow. Lord Walker, at paragraph 24, recognised that:

If the debt is disputed on reasonable grounds, the petition may be dismissed.

This principle informs Lord Lake’s approach: he asks whether the debt claimed in the statutory demand is genuinely disputed on reasonable—or, in Scots authority, “substantial”—grounds. If so, the winding‑up petition should not succeed.

His subsequent analysis, applying Mac Plant and rejecting the Braganza argument, leads him to conclude that there are no such substantial grounds.

3.2.3 Braganza v BP Shipping Ltd [2015] UKSC 17

Braganza is central to the company’s defence. In that case, a contractual term gave the employer (or its insurers) the power to decide whether a death resulted from a seaman’s “wilful act, default or misconduct”, which would exclude a death benefit payment. The Supreme Court held that where a contract confers on one party a power to make decisions or judgments affecting the other’s rights, that discretion can be subject to an implied constraint—often called a Braganza duty:

The discretion must be exercised rationally, in good faith and not arbitrarily or capriciously.
The court can review the decision using standards analogous to public law “Wednesbury” reasonableness, though adapted to the contractual context.

Lord Lake’s treatment of Braganza is careful and contextual. He highlights key elements of the majority reasoning (particularly Lord Hodge and Baroness Hale):

The decision under review was not a judicial determination; the employer was not expected to provide full judicial reasoning.
Nevertheless, when one party is given power to determine facts that have direct consequences for the other party’s contractual rights, the law may imply a term restricting the exercise of that power.
Such implication depends on the nature of the contract (there, an employment contract with an established implied term of trust and confidence) and the kind of discretion involved (a determination of a factual state, where there is a “correct” answer).

He also references Baroness Hale’s reliance on Lord Sumption’s dictum in British Telecommunications plc v Telefonica O2 UK Ltd [2014] Bus LR 765:

“As a general rule, the scope of a contractual discretion will depend on the nature of the discretion and the construction of the language conferring it. But it is well established that in the absence of very clear language to the contrary, a contractual discretion must be exercised in good faith and not arbitrarily or capriciously.”

Lord Lake then contrasts this with the present case, emphasising that:

The agreement at issue is a loan or investment agreement, not a contract of employment.
No general implied duty of mutual trust and confidence arises in such a context.
The lender is not tasked with determining disputed facts; rather, it has a commercial choice whether to initiate a consultation that could lead to equity conversion versus allowing the repayment period to commence.
Repayment of sums advanced is a “core term” of a loan, and the lender’s discretion goes to how that core term is exercised.

On that basis, Lord Lake finds Braganza distinguishable and declines to extend it to the lender’s discretion in this contract.

3.2.4 British Telecommunications plc v Telefonica O2 UK Ltd [2014] Bus LR 765

Telefonica is not analysed in depth but is cited via Baroness Hale’s reference in Braganza. Lord Sumption’s general formulation—that contractual discretion must be exercised in good faith and not arbitrarily or capriciously unless clearly excluded—underpins the modern English (and by influence, Scots) approach to contractual discretions.

Lord Lake’s analysis implicitly recognises this line of authority, but stresses that whether and how such a duty applies depends heavily on:

The nature of the discretion (fact‑finding vs. choice between economic options), and
The overall contractual and relational context.

3.2.5 Mac Plant Lifting Services v Contract Lifting Services (Scotland) Ltd [2008] CSOH 158

Mac Plant (Lord Hodge) provides the Scottish formulation that a winding‑up petition should not succeed where “there are substantial grounds for disputing the debt.” Lord Lake adopts this language at paragraph [11], expressly concluding that such substantial grounds are absent here.

This case law ensures that winding‑up remains a remedy of last resort and is not used as a weapon to pressure payment in genuinely disputed matters better resolved in ordinary civil actions.

3.3 The Court’s legal reasoning

3.3.1 Section 97: suitability and personal interest

Section 97(4)(d) requires that the lay representative “does not have a personal interest in the subject matter of the proceedings.” Section 97(5) clarifies that “personal interest” means an interest greater than that which any holder of that position (e.g. any director) would ordinarily have.

The logical structure is:

Is the person in a qualifying position (director or secretary) and properly authorised?
Do they have any additional, particularised interest in the dispute beyond their ordinary role-based interest?

In many small companies, a director is also a shareholder. At first glance, shareholding gives a financial interest in the company’s fortunes, which are invariably affected by a winding‑up petition. However, if every shareholder‑director were treated as having a disqualifying personal interest, section 97’s utility for small companies would be greatly curtailed, as Lord Lake notes:

“If being a shareholder does disqualify a person from being appointed as the company's lay representative, it is a substantial limitation on the power available under section 97.”

He also notes the statutory focus on “the subject matter of the proceedings” rather than the company’s fortunes more broadly. That could allow a future court to distinguish between:

A mere financial stake in the company as such (typical of many directors), and
A specific, personal stake in the contested issue (e.g. where the proceedings concern alleged misconduct by the director, or a transaction from which the director personally profited).

Nonetheless, because he disposes of the motion on “interests of justice” grounds, he does not resolve this doctrinal point. For now, Hastings remains the more direct authority on shareholder “personal interest”, but Innovate UK Loans introduces a note of caution and suggests the possibility of a more refined analysis in future cases.

3.3.2 Section 97: interests of justice and prospects of success

The decisive factor is section 97(3)(c), fleshed out by section 97(6): the court must consider the company’s prospects of success and the likely complexity of the proceedings.

On complexity, Lord Lake is satisfied there is no problem:

He has heard Dr Syed’s submissions twice.
He is not concerned that complexity alone would prevent Dr Syed from conducting the case effectively.

On prospects of success, the position is starkly different. To determine whether Wootzano has any real prospect of resisting the winding‑up petition, the court necessarily examines:

Whether the statutory demand is properly based on a due and payable debt.
Whether the company has any substantial defence, such as the alleged Braganza duty.

By concluding that the Braganza argument is weak and that the debt is not disputed on substantial grounds, Lord Lake finds that the company’s prospects are poor. Because section 97 requires the court to have regard in particular to prospects of success when assessing the interests of justice, poor prospects militate strongly against granting lay representation.

The reasoning here is important: section 97 is not a mechanism to facilitate the airing of hopeless defences by companies which cannot afford lawyers. The court must ensure that permission is not granted where the underlying merits do not justify the continuation of the litigation.

3.3.3 The investment agreement and clause 2.2

The underlying contract is an investment/loan agreement with three distinct periods:

Availability period – during which funds are available to be drawn down.
Extension period – a further period following availability, during which certain options exist.
Repayment period – when the borrower must repay the loan in instalments.

There is no dispute that the extension period had begun. Clause 2.2 confers on the lender a discretionary power: it may give written notice that it will commence up to 90 days of consultation with the borrower. During that consultation, the lender may choose to convert the debt into equity.

Crucially:

Both parties accept that no clause 2.2 notice was served.
On the face of the agreement, this means the extension period runs its course and the repayment period commences, triggering instalment payments.

Once instalments are due, the borrower’s failure to pay constitutes default, entitling the lender to accelerate the loan (call for repayment of all outstanding sums) and to issue a statutory demand.

Dr Syed’s argument attempts to break this chain by contending that the lender’s discretion under clause 2.2 is not unfettered: he says Innovate UK Loans was under a duty—derived from Braganza—to consider and, in effect, to exercise the option to consult and consider equity conversion, rather than allow the repayment period to begin unilaterally.

3.3.4 Limits of Braganza duties in commercial lending

Lord Lake’s rejection of the Braganza argument operates at two levels: (1) whether such a duty exists at all in this context, and (2) whether it has been breached.

(a) Existence of a Braganza duty

The opinion draws a crucial distinction emphasised in Braganza:

There, the employer had a fact‑finding function—deciding whether a death resulted from suicide or accident.
Here, the lender has a commercial choice between alternative economic options: initiate a consultation that may lead to equity conversion, or simply allow the repayment period to commence and insist on repayment.

In the Braganza context:

There is a “right” answer as to what actually happened.
The party making the decision (the employer) stands in a relation of trust and confidence to the employee.
The employee has little control or procedural protection over the employer’s fact‑finding, justifying judicial control over arbitrary decisions.

In the present lending context:

There is no “right” answer about whether consultation and potential equity conversion should occur; it is a matter of commercial strategy.
The relationship lacks the special features of employment; no general implied term of mutual trust and confidence exists.
Repayment terms are central to the loan’s bargain; the lender’s right to be repaid is a core contractual term.

On this basis, Lord Lake concludes:

The factors which justified implying a Braganza constraint in the employment case do not translate readily to the present loan/investment agreement.
He is “not satisfied that the duty in Braganza applies” to the lender’s decision whether to trigger clause 2.2.

This is a significant clarification: Scottish courts will be cautious about extending Braganza duties to commercial lenders where the discretion involves core repayment options rather than ancillary or fact‑finding functions.

(b) Breach of a Braganza duty (even if it existed)

Lord Lake goes further, conducting a “fallback” analysis: even if a Braganza duty applied, would the lender’s choice be unlawful?

He answers clearly in the negative:

There is no evidential basis to regard the decision not to serve a clause 2.2 notice as arbitrary, capricious or unreasonable in the Wednesbury sense.
It is entirely rational for a lender, even one with a public‑sector or developmental mandate, to prefer repayment of a loan over accepting the risks of an equity stake.

Dr Syed’s references to the petitioner’s public sector backing and its stated focus on risk‑bearing in innovative ventures (as evidenced in its accounts) do not transform a discretionary commercial choice into something the lender was “bound” to exercise in the borrower’s favour.

Thus, on either view:

No Braganza duty arises on these facts, or
If it does, it is not breached.

3.3.5 Disputed debt and the “substantial grounds” test

With the Braganza argument rejected, the court returns to the insolvency framework:

The repayment period had begun.
Instalments were due but unpaid.
The lender was contractually entitled to accelerate the loan and serve a statutory demand.
The statutory demand remained unsatisfied for more than three weeks.

Under Eurosail and Mac Plant, the critical question is whether there are “reasonable” or “substantial” grounds to dispute the debt claimed. Lord Lake concludes there are none:

“It therefore appears to me that it cannot be said that ‘there are substantial grounds for disputing the debt’…”

Once the existence and enforceability of the debt are established, and no substantial defence is shown, the statutory criteria in sections 122 and 123 of the Insolvency Act 1986 are satisfied. The company is unable to pay its debts within the statutory meaning, and the petitioner is a creditor. A winding‑up order is therefore appropriate.

3.4 Impact and significance

3.4.1 On lay representation of companies

The decision confirms and emphasises two key principles about section 97 applications:

Merits-based assessment: The court will actively scrutinise the company’s underlying defence when deciding whether lay representation is “in the interests of justice”. If prospects are poor, permission may be refused even where the company genuinely cannot afford a lawyer and the proposed representative is otherwise suitable.
No ruling (yet) on shareholder-directors: While Hastings suggested that shareholding can be a disqualifying personal interest, Innovate UK Loans signals that this may not be automatic. The focus on “subject matter of the proceedings” and the need to avoid unduly limiting section 97 for small, owner-managed companies leaves room for future development.

Practically, this means:

Directors seeking section 97 permission should be prepared to demonstrate at least an arguable defence on the merits; a wholly speculative or weak defence will undermine an application.
Lenders or petitioners can oppose section 97 motions by showing that the company’s proposed case is hopeless, thereby arguing that allowing lay representation would not serve the interests of justice.

3.4.2 On Braganza duties in commercial contracts

The judgment contributes to a growing body of case law delimiting the reach of Braganza-style duties in commercial contracts. Its key messages are:

The existence of a contractual discretion does not automatically attract a Braganza duty.
Courts will look closely at:
- the nature of the discretion (fact‑finding vs. strategic/economic choice),
- the type of contract (employment, consumer, relational contract vs. standard commercial loan), and
- whether there is a power imbalance or a relationship of trust that justifies additional protection.
In commercial lending, especially concerning core repayment rights, the court is reluctant to imply obligations that would significantly fetter a lender’s ability to choose between legitimate contractual options.

This has particular resonance for public or quasi‑public lenders like Innovate UK Loans, which operate with a policy or developmental remit. The judgment indicates that such lenders are not thereby transformed into fiduciaries or public authorities for the purpose of their contractual discretions: they remain commercial counterparties entitled to act in their own financial interests unless the contract clearly provides otherwise.

3.4.3 On insolvency practice

From an insolvency perspective, the decision:

Reaffirms that a winding‑up petition is not to be used to litigate genuinely arguable contractual disputes; the court will assess whether the debt is disputed on “substantial grounds”.
Demonstrates that where a defence rests on a speculative extension of legal doctrine (here, Braganza into a commercial lending setting) and is found wanting, the court will treat the debt as undisputed and proceed to winding‑up if the statutory conditions are met.
Highlights that directors’ attempts to resist winding‑up by invoking modern doctrinal arguments must be grounded in a sound reading of both the contract and the case law; otherwise, they will not prevent the company being found unable to pay its debts.

4. Complex concepts explained

Non‑natural person

A legal entity that is not a human being, such as a company, limited liability partnership or other corporate body.

Lay representative (for non‑natural persons)

A person who is not a qualified lawyer but is permitted by the court to represent a company or other non‑natural person in legal proceedings. Under Scottish law (section 97 and the 2016 Act of Sederunt), this is typically a director or company secretary who meets various suitability and “interests of justice” criteria.

Personal interest (section 97)

An interest in the subject matter of the proceedings that is greater than the interest that any other person holding the same position would ordinarily have. For example, if a director personally stands to benefit from a particular transaction under challenge, that might be a personal interest. Whether simple shareholding is enough is not definitively resolved in this judgment.

Interests of justice (section 97)

A broad, discretionary test used by the court when deciding whether to allow lay representation. The statute directs the court to pay particular attention to (a) the likely complexity of the proceedings, and (b) the company’s prospects of success. Poor prospects of success can justify refusal even if other conditions are met.

Statutory demand

A formal written demand for payment of a debt, served in a prescribed form on a company. Under section 123(1)(a) of the Insolvency Act 1986, if the company does not pay the demanded sum or reasonably secure or compound it within three weeks, this can be evidence that it is unable to pay its debts.

Unable to pay its debts

In insolvency law, a statutory concept indicating that a company cannot meet its financial obligations as they fall due. It can be shown by non‑compliance with a statutory demand, by execution of a judgment debt being returned unsatisfied, or by demonstrating cash‑flow or balance‑sheet insolvency.

Winding‑up petition

A court application by a creditor, shareholder or other entitled party seeking an order that a company be wound up (liquidated). If granted, the company’s assets are collected and distributed to creditors under the supervision of a liquidator.

Braganza duty

An implied contractual duty, derived from Braganza v BP Shipping Ltd, which requires a party who is given a discretionary power under a contract (especially to decide on matters affecting the other party’s rights) to exercise that discretion rationally, in good faith and not arbitrarily or capriciously. The decision can be reviewed on a standard akin to public law “Wednesbury” reasonableness, though tailored to the contractual context.

Wednesbury unreasonableness

A public law standard originating from Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. A decision is Wednesbury unreasonable if it is so irrational that no reasonable decision‑maker could have made it. In the contractual context (via Braganza), it serves as a benchmark for reviewing the exercise of contractual discretion.

Acceleration (of a loan)

A contractual mechanism whereby, following certain events (such as default in payment), the lender becomes entitled to demand immediate repayment of the entire outstanding balance of the loan, not just overdue instalments.

Availability, extension and repayment periods

Stages often found in investment or loan agreements:

Availability period: time during which the borrower can draw down funds.
Extension period: an interim period, sometimes allowing for renegotiation or consideration of alternatives (such as equity conversion).
Repayment period: the period in which the borrower must repay capital and interest, usually in instalments.

5. Conclusion

Innovate UK Loans Ltd v Wootzano Ltd [2025] CSOH 106 is a notable Outer House decision at the intersection of insolvency, contract and procedural law. It provides clear guidance on three key fronts:

Lay representation and the interests of justice: The court confirms that a company’s inability to afford legal representation does not of itself justify lay representation. The merits matter: if the company’s defence lacks real prospects of success, permission under section 97 may properly be refused. This anchors the “interests of justice” test firmly in an assessment of the underlying case.
Limits on Braganza duties in commercial lending: By declining to extend Braganza to a lender’s discretion to initiate an equity‑conversion consultation under a loan/investment agreement, Lord Lake underlines that not all contractual discretions are subject to Braganza-style constraints. Where the discretion concerns core repayment rights and reflects a commercial choice rather than fact‑finding, courts will be reluctant to imply duties that significantly curtail the lender’s contractual freedom.
Disputed debts in winding‑up petitions: The judgment reaffirms that a winding‑up petition is inappropriate where a debt is genuinely disputed on substantial grounds—but also illustrates that speculative doctrinal arguments, unsupported by the contract’s terms or by case law, will not meet that threshold. Here, the debt was clearly due and payable; the company was unable to pay; and a winding‑up order was correctly granted.

While some aspects—most notably the treatment of shareholder‑directors’ “personal interest” under section 97—are left open for future clarification, the decision sets an important precedent on how Scottish courts will approach lay representation in insolvency proceedings and how far they will go in importing public law‑style controls into commercial lending contracts. For practitioners, it underscores the need to ground both procedural applications and substantive defences firmly in established principles and realistic interpretations of modern case law.